Justia Department Of Health And Human Services Centers For Medicare & Medicaid Services Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program, 49853-50449 [2014-18545]

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program, 49853-50449 [2014-18545]

Download as PDF Vol. 79 Friday, No. 163 August 22, 2014 Book 2 of 2 Books Pages 49853–50536 Part II Department of Health and Human Services tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Center for Medicare & Medicaid Services 42 CFR Parts 405, 412, 413, et al. Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program; Final Rule VerDate Mar 15 2010 20:48 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\BOOK2.XXX BOOK2 49854 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488 [CMS–1607–F and CMS–1599–F3] RINs 0938–AS11; 0938–AR12; and 0938– AR53 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program Centers for Medicare and Medicaid Services (CMS), HHS. ACTION: Final rule. AGENCY: We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capitalrelated costs of acute care hospitals to implement changes arising from our continuing experience with these systems. Some of these changes implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act), the Protecting Access to Medicare Act of 2014, and other legislation. These changes are applicable to discharges occurring on or after October 1, 2014, unless otherwise specified in this final rule. We also are updating the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The updated rate-of-increase limits are effective for cost reporting periods beginning on or after October 1, 2014. We also are updating the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and implementing certain statutory changes to the LTCH PPS under the Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 and the tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV SUMMARY: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Protecting Access to Medicare Act of 2014. In addition, we discuss our proposals on the interruption of stay policy for LTCHs and on retiring the ‘‘5 percent’’ payment adjustment for colocated LTCHs. While many of the statutory mandates of the Pathway for SGR Reform Act apply to discharges occurring on or after October 1, 2014, others will not begin to apply until 2016 and beyond. In addition, we are making a number of changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments. We are establishing new requirements or revising requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare. We are updating policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. In addition, we are making technical corrections to the regulations governing provider administrative appeals and judicial review; updating the reasonable compensation equivalent (RCE) limits, and revising the methodology for determining such limits, for services furnished by physicians to certain teaching hospitals and hospitals excluded from the IPPS; making regulatory revisions to broaden the specified uses of Medicare Advantage (MA) risk adjustment data and to specify the conditions for release of such risk adjustment data to entities outside of CMS; and making changes to the enforcement procedures for organ transplant centers. We are aligning the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions. In this document, we are finalizing two interim final rules with comment period relating to criteria for disproportionate share hospital uncompensated care payments and extensions of temporary changes to the payment adjustment for low-volume hospitals and of the MedicareDependent, Small Rural Hospital (MDH) Program. PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Effective Date: These final rules are effective on October 1, 2014. Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835 are applicable to appeals based on untimely contractor determinations that are pending or were filed on or after August 21, 2008, subject to the rules of administrative finality and reopening at 42 CFR 405.1807 and 405.1885. The provisions discussed in section IV.I.4.c. of the preamble of this final rule are applicable on or after July 1, 2015; and the provisions discussed in section IV.I.5.a. of the preamble of this final rule are applicable on or after January 1, 2015. DATES: FOR FURTHER INFORMATION, CONTACT: Ing-Jye Cheng, (410) 786–4548 and Donald Thompson, (410) 786–4487, Operating Prospective Payment, MS– DRGs, Hospital-Acquired Conditions (HAC), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues. Michele Hudson, (410) 786–4487, and Judith Richter, (410) 786–2590, LongTerm Care Hospital Prospective Payment System and MS–LTC–DRG Relative Weights Issues. Siddhartha Mazumdar, (410) 786–6673, Rural Community Hospital Demonstration Program Issues. James Poyer, (410) 786–2261, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing— Program Administration, Validation, and Reconsideration Issues. Pierre Yong, (410) 786–8896, Hospital Inpatient Quality Reporting— Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues. Elizabeth Goldstein, (410) 786–6665, Hospital Inpatient Quality Reporting—Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues. Mary Pratt, (410) 786–6867, LTCH Quality Data Reporting Issues. Kim Spalding Bush, (410) 786–3232, Hospital Value-Based Purchasing Efficiency Measures Issues. James Poyer, (410) 786–2261, PPSExempt Cancer Hospital Quality Reporting Issues. Kellie Shannon, (410) 786–0416, Administrative Appeals by Providers and Judicial Review Issues. Amelia Citerone, (410) 786–3901, and Robert Kuhl (410) 786–4597, E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided in Providers. Anne Calinger, (410) 786–3396, and Jennifer Harlow, (410) 786–4549, Medicare Advantage Risk Adjustment Data Issues. Thomas Hamilton, (410) 786–6763, Organ Transplant Center Issues. Jennifer Phillips, (410) 786–1023, 2Midnight Rule Benchmark Issues. SUPPLEMENTARY INFORMATION: Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at: https://www.gpo.gov/fdsys. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Tables Available Only Through the Internet on the CMS Web site In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables are no longer published in the Federal Register. Instead, these tables are available only through the Internet. The IPPS tables for this final rule are available only through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/medicareFee-for-Service-Payment/ AcuteInpatientPPS/. Click on the link on the left side of the screen titled, ‘‘FY 2015 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. The LTCH PPS tables for this FY 2015 final rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/LongTermCareHospitalPPS/ index.html under the list item for Regulation Number CMS–1607–F. For complete details on the availability of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this final rule. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Michael Treitel at (410) 786–4552. Acronyms 3M 3M Health Information System AAMC Association of American Medical Colleges ACGME Accreditation Council for Graduate Medical Education ACoS American College of Surgeons VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 AHA American Hospital Association AHIC American Health Information Community AHIMA American Health Information Management Association AHRQ Agency for Healthcare Research and Quality AJCC American Joint Committee on Cancer ALOS Average length of stay ALTHA Acute Long Term Hospital Association AMA American Medical Association AMGA American Medical Group Association AMI Acute myocardial infarction AOA American Osteopathic Association APR DRG All Patient Refined Diagnosis Related Group System APRN Advanced practice registered nurse ARRA American Recovery and Reinvestment Act of 2009, Pub. L. 111–5 ASCA Administrative Simplification Compliance Act of 2002, Pub. L. 107–105 ASITN American Society of Interventional and Therapeutic Neuroradiology ATRA American Taxpayer Relief Act of 2012, Pub. L. 112–240 BBA Balanced Budget Act of 1997, Pub. L. 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106–554 BLS Bureau of Labor Statistics CABG Coronary artery bypass graft [surgery] CAH Critical access hospital CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument] CART CMS Abstraction & Reporting Tool CAUTI Catheter-associated urinary tract infection CBSAs Core-based statistical areas CC Complication or comorbidity CCN CMS Certification Number CCR Cost-to-charge ratio CDAC [Medicare] Clinical Data Abstraction Center CDAD Clostridium difficile-associated disease CDC Center for Disease Control and Prevention CERT Comprehensive error rate testing CDI Clostridium difficile (C. difficile) CFR Code of Federal Regulations CLABSI Central line-associated bloodstream infection CIPI Capital input price index CMI Case-mix index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99–272 COLA Cost-of-living adjustment CoP [Hospital] condition of participation COPD Chronis obstructive pulmonary disease CPI Consumer price index CQM Clinical quality measure CRNA Certified registered nurse anesthetist PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 49855 CY Calendar year DACA Data Accuracy and Completeness Acknowledgement DPP Disproportionate patient percentage DRA Deficit Reduction Act of 2005, Pub. L. 109–171 DRG Diagnosis-related group DSH Disproportionate share hospital EBRT External Bean Radiotherapy ECI Employment cost index eCQM Electronic clinical quality measure EDB [Medicare] Enrollment Database EHR Electronic health record EMR Electronic medical record EMTALA Emergency Medical Treatment and Labor Act of 1986, Pub. L. 99–272 EP Eligible professional FAH Federation of American Hospitals FDA Food and Drug Administration FFY Federal fiscal year FPL Federal poverty line FQHC Federally qualified health center FR Federal Register FTE Full-time equivalent FY Fiscal year GAF Geographic Adjustment Factor GME Graduate medical education HAC Hospital-acquired condition HAI Healthcare-associated infection HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HCFA Health Care Financing Administration HCO High-cost outlier HCRIS Hospital Cost Report Information System HHA Home health agency HHS Department of Health and Human Services HICAN Health Insurance Claims Account Number HIPAA Health Insurance Portability and Accountability Act of 1996, Pub. L. 104– 191 HIPC Health Information Policy Council HIS Health information system HIT Health information technology HMO Health maintenance organization HPMP Hospital Payment Monitoring Program HSA Health savings account HSCRC [Maryland] Health Services Cost Review Commission HSRV Hospital-specific relative value HSRVcc Hospital-specific relative value cost center HQA Hospital Quality Alliance HQI Hospital Quality Initiative IBR Intern- and Resident-to-Bed Ratio ICD–9–CM International Classification of Diseases, Ninth Revision, Clinical Modification ICD–10–CM International Classification of Diseases, Tenth Revision, Clinical Modification ICD–10–PCS International Classification of Diseases, Tenth Revision, Procedure Coding System ICR Information collection requirement IGI IHS Global Insight, Inc. IHS Indian Health Service IME Indirect medical education I–O Input-Output IOM Institute of Medicine IPF Inpatient psychiatric facility IPFQR Inpatient Psychiatric Facility Quality Reporting [Program] E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49856 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations IPPS [Acute care hospital] inpatient prospective payment system IRF Inpatient rehabilitation facility IQR Inpatient Quality Reporting LAMCs Large area metropolitan counties LOS Length of stay LTC–DRG Long-term care diagnosis-related group LTCH Long-term care hospital LTCHQR Long-Term Care Hospital Quality Reporting MA Medicare Advantage MAC Medicare Administrative Contractor MAP Measure Application Partnership MCC Major complication or comorbidity MCE Medicare Code Editor MCO Managed care organization MDC Major diagnostic category MDH Medicare-dependent, small rural hospital MedPAC Medicare Payment Advisory Commission MedPAR Medicare Provider Analysis and Review File MEI Medicare Economic Index MGCRB Medicare Geographic Classification Review Board MIEA–TRHCA Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Pub. L. 109– 432 MIPPA Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110–275 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108–173 MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111–309 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110–173 MRHFP Medicare Rural Hospital Flexibility Program MRSA Methicillin-resistant Staphylococcus aureus MSA Metropolitan Statistical Area MS–DRG Medicare severity diagnosisrelated group MS–LTC–DRG Medicare severity long-term care diagnosis-related group MU Meaningful Use [EHR Incentive Program] NAICS North American Industrial Classification System NALTH National Association of Long Term Hospitals NCD National coverage determination NCHS National Center for Health Statistics NCQA National Committee for Quality Assurance NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NHSN National Healthcare Safety Network NOP Notice of Participation NQF National Quality Forum NQS National Quality Strategy NTIS National Technical Information Service NTTAA National Technology Transfer and Advancement Act of 1991, Pub. L. 104–113 NVHRI National Voluntary Hospital Reporting Initiative OACT [CMS] Office of the Actuary OBRA 86 Omnibus Budget Reconciliation Act of 1986, Pub. L. 99–509 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 OES Occupational employment statistics OIG Office of the Inspector General OMB [Executive] Office of Management and Budget OPM [U.S.] Office of Personnel Management OQR [Hospital] Outpatient Quality Reporting O.R. Operating room OSCAR Online Survey Certification and Reporting [System] PAMA Protecting Access to Medicare Act of 2014, Pub. L. 113–93 PCH PPS-exempt cancer hospital PCHQR PPS-exempt cancer hospital quality reporting PMSAs Primary metropolitan statistical areas POA Present on admission PPI Producer price index PPS Prospective payment system PRM Provider Reimbursement Manual ProPAC Prospective Payment Assessment Commission PRRB Provider Reimbursement Review Board PRTFs Psychiatric residential treatment facilities PSF Provider-Specific File PSI Patient safety indicator PS&R Provider Statistical and Reimbursement [System] PQRS Physician Quality Reporting System QIG Quality Improvement Group [CMS] QIO Quality Improvement Organization QRDA Quality Reporting Data Architecture RCE Reasonable compensation equivalent RFA Regulatory Flexibility Act, Pub. L. 96– 354 RHC Rural health clinic RHQDAPU Reporting hospital quality data for annual payment update RNHCI Religious nonmedical health care institution RPL Rehabilitation psychiatric long-term care (hospital) RRC Rural referral center RSMR Risk-standardized mortality rate RSRR Risk-standard readmission rate RTI Research Triangle Institute, International RUCAs Rural-urban commuting area codes RY Rate year SAF Standard Analytic File SCH Sole community hospital SCIP Surgical Care Improvement Project SFY State fiscal year SIC Standard Industrial Classification SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSI Surgical site infection SSI Supplemental Security Income SSO Short-stay outlier SUD Substance use disorder TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248 TEP Technical expert panel THA/TKA Total hip arthroplasty/Total knee arthroplasty TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Pub. L. 110–90 TPS Total Performance Score UHDDS Uniform hospital discharge data set PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 UMRA Unfunded Mandate Reform Act, Pub. L. 104–4 VBP [Hospital] Value Based Purchasing [Program] VTE Venous thromboembolism Table of Contents I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) 2. Hospitals and Hospital Units Excluded From the IPPS 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) 4. Critical Access Hospitals (CAHs) 5. Payments for Graduate Medical Education (GME) C. Summary of Provisions of Recent Legislation Discussed in This Final Rule 1. Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152) 2. American Taxpayer Relief Act of 2012 (Pub. L. 112–240) 3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113– 67) 4. Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) D. Issuance of Notice of Proposed Rulemaking E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS Proposed Rule F. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the MDH Program G. Finalization of Interim Final Rule With Comment Period Related to Changes to Certain Cost Reporting Procedures for Disproportionate Share Hospital Uncompensated Care Payments II. Changes to Medicare Severity DiagnosisRelated Group (MS–DRG) Classifications and Relative Weights A. Background B. MS–DRG Reclassifications C. Adoption of the MS–DRGs in FY 2008 D. FY 2015 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS–DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Pub. L. 110–90 2. Adjustment to the Average Standardized Amounts Required by Pub. L. 110–90 a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L. 110–90 b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Pub. L. 110–90 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Pub. L. 110–90 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Pub. L. 110–90 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) 7. Prospective Adjustment for the MS–DRG Documentation and Coding Effect Through FY 2010 E. Refinement of the MS–DRG Relative Weight Calculation 1. Background 2. Discussion for FY 2015 F. Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections for FY 2015 1. Background 2. HAC Selection 3. Present on Admission (POA) Indicator Reporting 4. HACs and POA Reporting in Preparation for Transition to ICD–10–CM and ICD– 10–PCS 5. Current HACs and Previously Considered Candidate HACs 6. RTI Program Evaluation 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines G. Changes to Specific MS–DRG Classifications 1. Discussion of Changes to Coding System and Basis for MS–DRG Updates a. Conversion of MS–DRGs to the International Classification of Diseases, 10th Edition (ICD–10) b. Basis for FY 2015 MS–DRG Updates 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Intracerebral Therapies: Gliadel® Wafer b. Endovascular Embolization or Occlusion of Head and Neck 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Exclusion of Left Atrial Appendage b. Transcatheter Mitral Valve Repair: MitraClip® c. Endovascular Cardiac Valve Replacement Procedures d. Abdominal Aorta Graft 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Shoulder Replacement Procedures b. Ankle Replacement Procedures c. Back and Neck Procedures 6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyria Metabolism 7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period) 8. Medicare Code Editor (MCE) Changes 9. Changes to Surgical Hierarchies 10. Changes to the MS–DRG Diagnosis Codes for FY 2015 a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CCs) Severity Levels for FY 2015 b. Coronary Atherosclerosis Due to Calcified Coronary Lesion 11. Complications or Comorbidity (CC) Exclusions List a. Background of the CC List and the CC Exclusions List VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 b. CC Exclusions List for FY 2015 12. Review of Procedure Codes in MS– DRGs 981 Through 983, 984 Through 986, and 987 Through 989 a. Moving Procedure Codes From MS– DRGs 981 Through 983 or MS–DRGs 987 Through 989 Into MDCs b. Reassignment of Procedures Among MS– DRGs 981 Through 983, 984 Through 986, and 987 Through 989 c. Adding Diagnosis or Procedure Codes to MDCs 13. Changes to the ICD–9–CM Coding System a. ICD–10 Coordination and Maintenance Committee b. Code Freeze 14. Public Comments on Issues Not Addressed in the Proposed Rule a. Request for Review and MS–DRG Assignment for ICD–9–CM Diagnosis Code 784.7 Reported with Procedure Code 39.75 b. Coding for Extracorporeal Membrane Oxygenation (ECMO) Procedures c. Adding Severity Levels to MS–DRGs 245 Through 251 H. Recalibration of the FY 2015 MS–DRG Relative Weights 1. Data Sources for Developing the Relative Weights 2. Methodology for Calculation of the Relative Weights 3. Development of National Average CCRs 4. Bundled Payments for Care Improvement (BPCI) Initiative I. Add-On Payments for New Services and Technologies 1. Background 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments 3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments a. Glucarpidase (Trade Brand Voraxaze®) b. DIFICIDTM (Fidaxomicin) Tablets c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft d. KcentraTM e. Argus® II Retinal Prosthesis System f. Zilver® PTX® Drug Eluting Stent 4. FY 2015 Applications for New Technology Add-On Payments a. Dalbavancin (Durata Therapeutics, Inc.) b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.) c. CardioMEMSTM HF (Heart Failure) System d. MitraClip® System f. Responsive Neurostimulator (RNS®) System III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Core-Based Statistical Areas for the Hospital Wage Index 1. Background 2. Implementation of New Labor Market Area Delineations a. Micropolitan Statistical Areas b. Urban Counties That Became Rural Under the New OMB Delineations c. Rural Counties That Became Urban Under the New OMB Delineations d. Urban Counties That Moved to a Different Urban CBSA Under the New OMB Delineations PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 49857 e. Transition Period C. Worksheet S–3 Wage Data for the FY 2015 Wage Index 1. Included Categories of Costs 2. Excluded Categories of Costs 3. Use of Wage Index Data by Suppliers and Providers Other Than Acute Care Hospitals Under the IPPS D. Verification of Worksheet S–3 Wage Data E. Method for Computing the FY 2015 Unadjusted Wage Index F. Occupational Mix Adjustment to the FY 2015 Wage Index 1. Development of Data for the FY 2015 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index 3. Calculation of the Occupational Mix Adjustment for FY 2015 G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2015 Occupational Mix Adjusted Wage Index 1. Analysis of the Occupational Mix Adjustment and the Occupational Mix Adjusted Wage Index 2. Application of the Rural, Imputed, and Frontier Floors a. Rural Floor b. Imputed Floor and Alternative, Temporary Methodology for Computing the Rural Floor for FY 2015 c. Frontier Floor 3. FY 2015 Wage Index Tables H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General Policies and Effects of Reclassification and Redesignation 2. FY 2015 MGCRB Reclassifications a. FY 2015 Reclassification Requirements and Approvals b. Effects of Implementation of New OMB Labor Market Area Delineations on Reclassified Hospitals c. Applications for Reclassifications for FY 2016 3. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act a. New Lugar Areas for FY 2015 b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB c. Rural Counties No Longer Meeting the Criteria to be Redesignated as Lugar 4. Waiving Lugar Redesignation for the Out-Migration Adjustment 5. Update of Application of Urban to Rural Reclassification Criteria I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees J. Process for Requests for Wage Index Data Corrections K. Notice of Change to Wage Index Development Timetable L. Labor-Related Share for the FY 2015 Wage Index IV. Other Decisions and Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs A. Changes to MS–DRGs Subject to the Postacute Care Transfer Policy (§ 412.4) E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49858 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations B. Changes in the Inpatient Hospital Updates for FY 2015 (§§ 412.64(d) and 412.211(c)) 1. FY 2015 Inpatient Hospital Update 2. FY 2015 Puerto Rico Hospital Update C. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index (CMI) and Discharge Criteria (§ 412.96) 1. Case-Mix Index (CMI) 2. Discharges D. Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background 2. Provisions of the Protecting Access to Medicare Act of 2014 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015 E. Indirect Medical Education (IME) Payment Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2015 2. IME Add-On Payments for Medicare Part C Discharges to Sole Community Hospitals (SCHs) That Are Paid According to Their Hospital-Specific Rates and Change in Methodology in Determining Payment to SCHs 3. Other Policy Changes Affecting IME F. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background 2. Impact on Medicare DSH Payment Adjustment of Implementation of New OMB Labor Market Area Delineations 3. Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) under Section 3133 of the Affordable Care Act (§ 412.106) a. General Discussion b. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments c. Empirically Justified Medicare DSH Payments d. Uncompensated Care Payments e. Limitations on Review G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) and Sole Community Hospitals § 412.92) 1. Background for the MDH Program 2. PAMA of 2014 Provisions for FY 2015 3. Expiration of the MDH Program 4. Effects on MDHs of Adoption of New OMB Delineations 5. Effects on SCHs of Adoption of New OMB Delineations H. Hospital Readmissions Reduction Program: Changes for FY 2015 Through FY 2017 (§§ 412.150 Through 412.154) 1. Statutory Basis for the Hospital Readmissions Reduction Program 2. Regulatory Background 3. Overview of Policies for the FY 2015 Hospital Readmissions Reduction Program 4. Refinement of the Readmissions Measures and Related Methodology for FY 2015 and Subsequent Years Payment Determinations a. Refinement of Planned Readmission Algorithm for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort c. Anticipated Effect of Refinements on Measures 5. No Expansion of the Applicable Conditions for FY 2016 6. Expansion of the Applicable Conditions for FY 2017 To Include Patients Readmitted Following Coronary Artery Bypass Graft (CABG) Surgery Measure a. Background b. Overview of the CABG Readmissions Measure: Hospital-Level, 30-Day, AllCause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery c. Methodology for the CABG Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery 7. Maintenance of Technical Specifications for Quality Measures 8. Waiver From the Hospital Readmissions Reduction Program for Hospitals Formerly Paid under Section 1814(b)(3) of the Act (§ 412.152 and § 412.154(d)) 9. Floor Adjustment Factor for FY 2015 (§ 412.154(c)(2)) 10. Applicable Period for FY 2015 11. Inclusion of THA/TKA and COPD Readmissions Measures to Calculate Aggregate Payments for Excess Readmissions Beginning in FY 2015 12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions I. Hospital Value-Based Purchasing (VBP) Program 1. Statutory Background 2. Overview of Previous Hospital VBP Program Rulemaking 3. FY 2015 Payment Details a. Payment Adjustments b. Base Operating DRG Payment Amount Definition for Medicare-Dependent, Small Rural Hospitals (MDHs) 4. Measures for the FY 2017 Hospital VBP Program a. Measures Previously Adopted b. Changes Affecting Topped-Out Measures c. New Measures for the FY 2017 Hospital VBP Program d. Adoption of the Current CLABSI Measure (NQF #0139) for the FY 2017 Hospital VBP Program e. Summary of Previously Adopted and New Measures for the FY 2017 Hospital VBP Program 5. Additional Measures for the FY 2019 Hospital VBP Program a. Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) b. PSI–90 Measure 6. Possible Measure Topics for Future Program Years a. Care Transition Measure (CTM–3) Items for HCAHPS Survey b. Possible Future Efficiency and Cost Reduction Domain Measure Topics 7. Previously Adopted and Final Performance Periods and Baseline PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 Periods for the FY 2017 Hospital VBP Program a. Background b. Previously Adopted Baseline and Performance Periods for the FY 2017 Hospital VBP Program c. Clinical Care—Process Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program d. Patient and Caregiver-Centered Experience of Care/Care Coordination Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program e. Performance Period and Baseline Period for NHSN Measures in the Safwety Domain for the FY 2017 Hospital VBP Program f. Efficiency and Cost Reduction Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program g. Summary of Previously Adopted and Finalized Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program 8. Previously Adopted and Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program a. Previously Adopted and Finalized Performance Period and Baseline Period for the FY 2019 Hospital VBP Program for Clinical Care—Outcomes Domain Measures b. Performance Period and Baseline Period for the PSI–90 Safety Domain Measure for the FY 2019 Hospital VBP Program c. Summary of Previously Adopted and Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program 9. Performance Period and Baseline Period for the Clinical Care—Outcomes Domain for the FY 2020 Hospital VBP Program 10. Performance Standards for the Hospital VBP Program a. Background b. Performance Standards for the FY 2016 Hospital VBP Program c. Previously Adopted Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs d. Additional Performance Standards for the FY 2017 Hospital VBP Program e. Performance Standards for the FY 2019 and FY 2020 Hospital VBP Programs f. Technical Updates Policy for Performance Standards g. Solicitation of Public Comments on ICD– 10–CM/PCS Transition 11. FY 2017 Hospital VBP Program Scoring Methodology a. General Hospital VBP Program Scoring Methodology b. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals That Receive a Score on All Domains c. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals Receiving Scores on Fewer Than Four Domains 12. Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program’s Quality Domains E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations a. Previously Adopted Minimum Numbers of Cases and FY 2016 Minimum Numbers of Cases b. Minimum Number of Measures—Safety Domain c. Minimum Number of Measures— Clinical Care Domain d. Minimum Number of Measures— Efficiency and Cost Reduction Domain e. Minimum Number of Measures—Patient and Caregiver Centered Experience of Care/Care Coordination (PEC/CC) Domain 13. Applicability of the Hospital VBP Program to Maryland Hospitals 14. Disaster/Extraordinary Circumstance Exception under the Hospital VBP Program J. Hospital-Acquired Condition (HAC) Reduction Program 1. Background 2. Statutory Basis for the HAC Reduction Program 3. Implementation of the HAC Reduction Program for FY 2015 a. Overview b. Payment Adjustment Under the HAC Reduction Program, Including Exemptions c. Measure Selection and Conditions, Including Risk Adjustment Scoring Methodology d. Criteria for Applicable Hospitals and Performance Scoring Policy e. Reporting Hospital-Specific Information, Including the Review and Correction of Information f. Limitation on Administrative and Judicial Review 4. Maintenance of Technical Specifications for Quality Measures 5. Extraordinary Circumstances Exceptions/Exemptions 6. Implementation of the HAC Reduction Program for FY 2016 a. Measure Selection and Conditions, including a Risk-Adjustment Scoring Methodology b. Measure Risk Adjustment c. Measure Calculation d. Applicable Time Period e. Criteria for Applicable Hospitals and Performance Scoring f. Rules To calculate the Total HAC Score for FY 2016 7. Future Consideration for the Use of Electronically Specified Measures K. Payments for Indirect and Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 through 413.83) 1. Background 2. Changes in the Effective Date of the FTE Resident Cap, 3-Year Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for New Programs in Teaching Hospitals 3. Changes to IME and Direct GME Policies as a Result of New OMB Labor Market Area Delineations a. New Program FTE Cap Adjustment for Rural Hospitals Redesignated as Urban b. Participation of Redesignated Hospitals in Rural Training Track 4. Clarification of Policies on Counting Resident Time in Nonprovider Settings VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Under Section 5504 of the Affordable Care Act 5. Changes to the Review and Award Process for Resident Slots Under Section 5506 of the Affordable Care Act a. Effective Date of Slots Awarded Under Section 5506 of the Affordable Care Act b. Removal of Seamless Requirement c. Revisions to Ranking Criteria One, Seven, and Eight for Applications Under Section 5506 d. Clarification to Ranking Criterion Two Regarding Emergency Medicare GME Affiliation Agreements 6. Regulatory Clarification Applicable To Direct GME Payments to Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for Training Residents in Approved Programs L. Rural Community Hospital Demonstration Program 1. Background 2. FY 2015 Budget Neutrality Offset Amount M. Requirement for Transparency of Hospital Charges Under the Affordable Care Act 1. Overview 2. Transparency Requirement Under the Affordable Care Act N. Medicare Payment for Short Inpatient Hospital Stays O. Suggested Exceptions to the 2-Midnight Benchmark P. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges Through March 31, 2014 1. Background 2. Summary of the Provisions of the Interim Final Rule With Comment Period Q. Finalization of Interim Final Rule With Comment Period on Changes to Certain Cost Reporting Procedures Related to Disproportionate Share Hospital Uncompensated Care Payments V. Changes to the IPPS for Capital-Related Costs A. Overview B. Additional Provisions 1. Exception Payments 2. New Hospitals 3. Hospitals Located in Puerto Rico C. Annual Update for FY 2015 VI. Changes for Hospitals Excluded From the IPPS A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2015 B. Report on Adjustment (Exception) Payments C. Updates to the Reasonable Compensation Equivalent (RCE) Limits on Compensation for Physician Services Provided in Providers (§ 415.70) 1. Background 2. Overview of the Current RCE Limits a. Application of the RCE Limits b. Exceptions to the RCE Limits c. Methodology for Establishing the RCE Limits 3. Changes to the RCE Limits D. Critical Access Hospitals (CAHs 1. Background PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 49859 2. Proposed and Final Policy Changes Related to Reclassifications as Rural for CAHs 3. Revision of the Requirements for Physician Certification of CAH Inpatient Services VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2015 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority 2. Criteria for Classification as an LTCH a. Classification as an LTCH b. Hospitals Excluded From the LTCH PPS 3. Limitation on Charges to Beneficiaries 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights for FY 2015 1. Background 2. Patient Classifications into MS–LTC– DRGs a. Background b. Changes to the MS–LTC–DRGs for FY 2015 3. Development of the FY 2015 MS–LTC– DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights b. Development of the MS–LTC–DRG Relative Weights for FY 2015 c. Data d. Hospital-Specific Relative Value (HSRV) Methodology e. Treatment of Severity Levels in Developing the MS–LTC–DRG Relative Weights f. Low-Volume MS–LTC–DRGs g. Steps for Determining the FY 2015 MS– LTC–DRG Relative Weights C. LTCH PPS Payment Rates for FY 2015 1. Overview of Development of the LTCH Payment Rates 2. FY 2015 LTCH PPS Annual Market Basket Update a. Overview b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act c. Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate Under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background 2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate under the LTCHQR Program d. Market Basket Under the LTCH PPS for FY 2015 e. Annual Market Basket Update for LTCHs for FY 2015 3. Adjustment for the Final Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate under § 412.523(d)(3) D. Revision of LTCH PPS Geographic Classifications 1. Background 2. Use of New OMB Labor Market Area Delineations (‘‘New OMB Delineations’’) a. Micropolitan Statistical Areas E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49860 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations b. Urban Counties That Became Rural Under the New OMB Labor Market Area Delineations c. Rural Counties That Became Urban Under the New OMB Labor Market Area Delineations d. Urban Counties That Moved to a Different Urban CBSA Under the New OMB Labor Market Area Delineations e. Transition Period E. Reinstatement and Extension of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment 1. Background 2. Implementation of Section 1206(b)(1) of Pub. L. 113–67 F. Discussion of the ‘‘Greater Than 3-Day Interruption of Stay’’ Policy and the Transfer to Onsite Providers Policies Under the LTCH PPS G. Moratoria on the Establishment of LTCHs and LTCH Satellite Facilities and on the Increase in the Number of Beds in Existing LTCHs or LTCH Satellite Facilities H. Evaluation and Treatment of LTCHs Classified Under Section 1886(d)(1)(B)(iv)(II) of the Act I. Description of Statutory Framework for Patient-Level Criteria-Based Payment Adjustment Under the LTCH PPS Under Pub. L. 113–67 1. Overview 2. Additional LTCH PPS Issues J. Technical Change VIII. Administrative Appeals by Providers and Judicial Review A. Proposed and Final Changes Regarding the Claims Required in Provider Cost Reports and for Provider Administrative Appeals B. Proposed and Final Changes to Conform Terminology From ‘‘Intermediary’’ to ‘‘Contractor’’ C. Technical Correction to § 405.1835 of the Regulations and Corresponding Amendment to § 405.1811 of the Regulations 1. Background and Technical Correction to §§ 405.1811 and 405.1835 of the Regulations 2. Waiver of Notice of Proposed Rulemaking 3. Effective Date and Applicability Date; Finality and Reopening IX. Quality Data Reporting Requirements for Specific Providers and Suppliers A. Hospital Inpatient Quality Reporting (IQR) Program 1. Background a. History of the Hospital IQR Program b. Maintenance of Technical Specifications for Quality Measures c. Public Display of Quality Measures 2. Removal and Suspension of Hospital IQR Program Measures a. Considerations in Removing Quality Measures From the Hospital IQR Program b. Removal of Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program 5. Previously Adopted Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years 6. Refinements and Clarification to Existing Measures in the Hospital IQR Program a. Refinement of Planned Readmission Algorithm for 30-Day Readmission Measures b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures c. Anticipated Effect of Refinements to Existing Measures d. Clarification Regarding Influenza Vaccination for Healthcare Personnel 7. Additional Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years a. Hospital 30-day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery b. Hospital 30-day, All-Cause, Riskstandardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery c. Hospital-Level, Risk-Standardized 30Day Episode-of-Care Payment Measure for Pneumonia d. Hospital-Level, Risk-Standardized 30Day Episode-of-Care Payment Measure for Heart Failure e. Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500) f. Electronic Health Record-Based Voluntary Measures g. Readoption of Measures as Voluntarily Reported Electronic Clinical Quality Measures h. Electronic Clinical Quality Measures 8. Possible New Quality Measures and Measure Topics for Future Years a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018 Payment Determination b. Possible Future Electronic Clinical Quality Measures 9. Form, Manner, and Timing of Quality Data Submission a. Background b. Procedural Requirements for the FY 2017 Payment Determination and Subsequent Years c. Data Submission Requirements for Chart-Abstracted Measures d. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines e. Sampling and Case Thresholds for the FY 2017 Payment Determination and Subsequent Years f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years g. Data Submission Requirements for Structural Measures for the FY 2017 Payment Determination and Subsequent Years PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN 10. Submission and Access of HAI Measures Data Through the CDC’s NHSN Web Site 11. Modifications to the Existing Processes for Validation of Chart-Abstracted Hospital IQR Program Data a. Eligibility Criteria for Hospitals Selected for Validation b. Number of Charts To Be Submitted per Hospital for Validation c. Combining Scores for HAI and Clinical Process of Care Topic Areas d. Processes To Submit Patient Medical Records for Chart-Abstracted Measures e. Plans To Validate Electronic Clinical Quality Measure Data f. Data Submission Requirements for Quality Measures That May Be Voluntarily Electronically Reported for the FY 2017 Payment Determination 12. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2017 Payment Determination and Subsequent Years 13. Public Display Requirements for the FY 2017 Payment Determination and Subsequent Years 14. Reconsideration and Appeal Procedures for the FY 2017 Payment Determination and Subsequent Years 15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 1. Statutory Authority 2. Covered Entities 3. Previously Finalized PCHQR Program Quality Measures 4. Update to the Clinical Process/Oncology Care Measures Beginning With the 2016 Program 5. New Quality Measures Beginning With the FY 2017 Program a. Considerations in the Selection of Quality Measures b. New Quality Measure Beginning With the FY 2017 Program 6. Possible New Quality Measure Topics for Future Years 7. Maintenance of Technical Specifications for Quality Measures 8. Public Display Requirements Beginning With the FY 2014 Program 9. Form, Manner, and Timing of Data Submission Beginning With the FY 2017 Program a. Background b. Reporting Requirements for the Proposed New Measure: External Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning With the FY 2017 Program c. Reporting Options for the Clinical Process/Cancer Specific Treatment Measures Beginning With the FY 2015 Program and the SCIP and Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program d. New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 10. Exceptions From Program Requirements C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program 3. Policy for Retention of LTCHQR Program Measures Adopted for Previous Payment Determinations 4. Policy for Adopting Changes to LTCHQR Program Measures 5. Previously Adopted Quality Measures a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years 6. Revision to Data Collection Timelines and Submission Deadlines for Previously Adopted Quality Measures a. Revisions to Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) b. Revisions to Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674) 7. New LTCHQR Program Quality Measures for the FY 2018 Payment Determination and Subsequent Years a. New LTCHQR Program Functional Status Quality Measures for the FY 2018 Payment Determination and Subsequent Years b. Quality Measure: National Healthcare Safety Network (NHSN) VentilatorAssociated Event (VAE) Outcome Measure 8. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determinations and Subsequent Years a. Background b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 and FY 2017 Payment Determinations (Except NQF #0680 and NQF #0431) c. Revision to the Previously Adopted Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #680) for the FY 2016 Payment Determination and Subsequent Years d. Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for New LTCHQR Program Quality Measures and for Revision to Previously Adopted Quality Measure e. Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2018 Payment Determination VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 f. Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674) Measure for the FY 2018 Payment Determination and Subsequent Years g. Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2019 Payment Determination 10. LTCHQR Program Data Completion Threshold for the FY 2016 Payment Adjustment and Subsequent Years a. Overview b. LTCHQR Program Data Completion Threshold for the Required LTCH CARE Data Set (LCDS) Data Items c. LTCHQR Program Data Completion Threshold for Measures Submitted Using the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) d. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Completion Thresholds 11. Data Validation Process for the FY 2016 Payment Determination and Subsequent Years a. Data Validation Process b. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Accuracy Threshold 12. Public Display of Quality Measure Data for the LTCHQR Program 13. LTCHQR Program Submission Exception and Extension Requirements for the FY 2017 Payment Determination and Subsequent Years 14. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years a. Previously Finalized LTCHQR Program Reconsideration and Appeals Procedures for the FY 2014 and FY 2015 Payment Determinations b. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years 15. Electronic Health Records (EHR) and Health Information Exchange (HIE) D. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 1. Background 2. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2015 4. Electronically Specified Clinical Quality Measures (CQMs) Reporting for 2015 5. Clarification Regarding Reporting Zero Denominators X. Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data A. Background B. Regulatory Changes 1. Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 49861 2. Conditions for CMS Release of Data 3. Technical Change XI. Changes to Enforcement Provisions for Organ Transplant Centers A. Background B. Basis for Changes 1. Expansion of Mitigating Factors Based on CMS’ Experience 2. Coordination With Efforts of the Organ Procurement and Transplantation Network (OPTN) and Health Resources and Services Administration C. Provisions of the Proposed and Final Regulations 1. Expansion of Mitigating Factors List, Content, and Timeframe 2. Content and Timeframe for Mitigating Factors Requests 3. System Improvement Agreements (SIAs) a. Purpose and Intent of an SIA b. Description and Contents of an SIA c. Effective Period for an SIA XII. MedPAC Recommendations XIII. Other Required Information A. Requests for Data from the Public B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments 2. ICRs for Add-On Payments for New Services and Technologies 3. ICRs for the Occupational Mix Adjustment to the FY 2015 Wage Index (Hospital Wage Index Occupational Mix Survey) 4. Hospital Applications for Geographic Reclassifications by the MGCRB 5. ICRs for Application for GME Resident Slots 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 8. ICRs for Hospital Value-Based Purchasing (VBP) Program 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 10. ICR Regarding Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) 11. ICR Regarding Revision of Regulations Governing Use and Release of Medicare Advantage (MA) Risk Adjustment Data (§ 422.310(f)) Regulation Text Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-ofIncrease Percentages Effective with Cost Reporting Periods Beginning on or After October 1, 2014 and Payment Rates for LTCHs Effective With Discharges Occurring on or After October 1, 2014 I. Summary and Background II. Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2015 A. Calculation of the Adjusted Standardized Amount B. Adjustments for Area Wage Levels and Cost-of-Living C. Calculation of the Prospective Payment Rates III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2015 A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49862 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2015 C. Capital Input Price Index IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2015 V. Updates to the Payment Rates for the LTCH PPS for FY 2015 A. LTCH PPS Standard Federal Rate for FY 2015 1. Background 2. Development of the FY 2015 LTCH PPS Standard Federal Rate B. Adjustment for Area Wage Levels under the LTCH PPS for FY 2015 1. Background 2. Geographic Classifications Based on the New OMB Delineations 3. LTCH PPS Labor-Related Share 4. LTCH PPS Wage Index for FY 2015 5. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background 2. Determining LTCH CCRs Under the LTCH PPS 3. Establishment of the LTCH PPS FixedLoss Amount for FY 2015 4. Application of the Outlier Policy to SSO Cases E. Update to the IPPS Comparable/ Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2015 VI. Tables Referenced in This Final Rule and Available Through the Internet on the CMS Web site Appendix A—Economic Analyses I. Regulatory Impact Analysis A. Introduction B. Need C. Objectives of the IPPS D. Limitations of Our Analysis E. Hospitals Included in and Excluded From the IPPS F. Effects on Hospitals and Hospital Units Excluded From the IPPS G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates 2. Analysis of Table I 3. Impact Analysis of Table II H. Effects of Other Policy Changes 1. Effects of Policy on MS–DRGs for Preventable HACs, Including Infections 2. Effects of Policy Relating to New Medical Service and Technology AddOn Payments 3. Effects of Changes to List of MS–DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy 4. Effects of Payment Adjustment for LowVolume Hospitals for FY 2015 5. Effects of Policy Changes Related to IME Medicare Part C Add-On Payments to SCHs Paid According to Their HospitalSpecific Rates VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 6. Effects of the Extension of the MDH Program for the First Half of FY 2015 7. Effects of Changes Under the FY 2015 Hospital Value-Based Purchasing (VBP) Program 8. Effects of the Changes to the HAC Reduction Program for FY 2015 9. Effects of Policy Changes Relating to Payments for Direct GME and IME 10. Effects of Implementation of Rural Community Hospital Demonstration Program 11. Effects of Changes Related to Reclassifications as Rural for CAHs 12. Effects of Revision of the Requirements for Physician Certification of CAH Inpatient Services 13. Effects of Changes Relating to Administrative Appeals by Providers and Judicial Review for Appropriate Claims in Provider Cost Reports I. Effects of Changes to Updates to the Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided to Providers J. Effects of Changes in the Capital IPPS 1. General Considerations 2. Results K. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS 1. Introduction and General Considerations 2. Impact on Rural Hospitals 3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy Changes 4. Effect on the Medicare Program 5. Effect on Medicare Beneficiaries L. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program M. Effects of Requirements for the PPSExempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2015 N. Effects of Requirements for the LTCH Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2019 O. Effects of Policy Changes Regarding Electronic Health Record (EHR) Incentive Program and Hospital IQR Program P. Effects of Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data Q. Effects of Changes to Enforcement Provisions for Organ Transplant Centers II. Alternatives Considered III. Overall Conclusion A. Acute Care Hospitals B. LTCHs IV. Accounting Statements and Tables A. Acute Care Hospitals B. LTCHs V. Regulatory Flexibility Act (RFA) Analysis VI. Impact on Small Rural Hospitals VII. Unfunded Mandate Reform Act (UMRA) Analysis VIII. Executive Order 12866 Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2015 A. FY 2015 Inpatient Hospital Update B. Update for SCHs for FY 2015 C. FY 2015 Puerto Rico Hospital Update D. Update for Hospitals Excluded From the IPPS for FY 2015 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E. Update for LTCHs for FY 2015 III. Secretary’s Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority This final rule makes payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). It also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. Under various statutory authorities, we are making changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2015 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following: • Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS). • Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children’s hospitals; cancer hospitals; and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. • Sections 123(a) and (c) of Pub. L. 106–113 and section 307(b)(1) of Public Law 106–554 (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv) of the Act. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations • Sections 1814(l), 1820, and 1834(g) of the Act, which specify that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost. • Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as ‘‘PPS-Exempt Cancer Hospitals.’’ • Section 1886(d)(4)(D) of the Act, which addresses certain hospitalacquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are complications or comorbidities (CCs) or major complications or comorbidities (MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not POA. • Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. A payment for indirect medical education (IME) is made under section 1886(d)(5)(B) of the Act. • Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase in payments to a subsection (d) hospital for a fiscal year if the hospital does not submit data on measures in a VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 form and manner, and at a time, specified by the Secretary. • Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. • Section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, which establishes an adjustment to hospital payments for hospital-acquired conditions (HACs), or a HospitalAcquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospitalacquired conditions. • Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act, which establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions. • Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act now requires that, for ‘‘fiscal year 2014 and each subsequent fiscal year,’’ ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share hospital payment . . . made under subsection (d)(5)(F)’’ will receive two separate payments: (1) 25 percent of the amount they previously would have received under subsection (d)(5)(F) for DSH (‘‘the empirically justified amount’’), and (2) an additional payment for the DSH hospital’s proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under subsection (d)(5)(F); (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital’s uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage. • Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 49863 Pathway for SGR Reform Act of 2013, which provided for the establishment of patient criteria for payment under the LTCH PPS for implementation beginning in FY 2016. • Section 1206(b)(1) of the Pathway for SGR Reform Act of 2013, which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, by retroactively reestablishing and extending the statutory moratorium on the full implementation of the 25percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for ‘‘grandfathered’’ hospitalwithin-hospitals (HwHs), which are permanently exempt from this policy); and section 1206(b)(2) (as amended by section 112(b) of Pub. L. 113–93), which together further amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish a new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities beginning January 1, 2015 and ending on September 30, 2017; and section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings. • Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206 (c) of the Pathway for SGR Reform Act of 2013, which provides for the establishment, no later than October 1, 2015, of a functional status quality measure under the LTCHQR Program for change in mobility among inpatients requiring ventilator support. In this final rule, we are making technical and conforming changes and nomenclature changes to the regulations regarding the claims required in provider cost reports and for provider administrative appeals to conform terminology from ‘‘intermediary’’ to ‘‘contractor’’ We are aligning the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our E:\FR\FM\22AUR2.SGM 22AUR2 49864 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions. In addition, this final rule contains several provisions that are not directly related to these Medicare payment systems, such as regulatory revisions to broaden the specified uses and reasons for disclosure of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS and changes to the enforcement procedures for organ transplant centers. The specific statutory authority for these other provisions is discussed in the relevant sections below. 2. Summary of the Major Provisions tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. MS–DRG Documentation and Coding Adjustment Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112–240) amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS–DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimated that a –9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we made a -0.8 percent recoupment adjustment to the standardized amount in FY 2014. We are making an additional –0.8 percent recoupment adjustment to the standardized amount in FY 2015. b. Reduction of Hospital Payments for Excess Readmissions We are making changes in policies to the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Program requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we established additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also established additional readmissions measures, Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be used in the Hospital Readmissions Reduction Program for FY 2015 and future years. We are expanding the readmissions measures for FY 2017 and future years by adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery. We also are refining the readmission measures and related methodology for FY 2015 and subsequent years payment determinations. In addition, we are providing that the readmissions payment adjustment factors for FY 2015 can be no more than a 3-percent reduction in accordance with the statute. We also are revising the calculation of aggregate payments for excess readmissions to include THA/ TKA and COPD readmissions measures beginning in FY 2015. c. Hospital Value-Based Purchasing (VBP) Program Section 1886(o) of the Act requires the Secretary to establish a Hospital ValueBased Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. In this final rule, we are adopting quality measures for the FY 2017, FY 2019, and FY 2020 Hospital VBP Program years and establishing performance periods and performance standards for measures we are adopting for those fiscal years. We are also adopting additional policies related to performance standards and revising the domain weighting previously adopted for the FY 2017 Hospital VBP Program. d. Hospital-Acquired Condition (HAC) Reduction Program In this final rule, we are making a change in the scoring methodology with the addition of a previously finalized measure for the FY 2016 payment adjustment under the HAC Reduction PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges beginning on October 1, 2014 and for subsequent program years. This 1-percent payment reduction applies to a hospital whose ranking is in the top quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital’s discharges for the specified fiscal year. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. e. DSH Payment Adjustment and Additional Payment for Uncompensated Care Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period. In this final rule, we are updating the uncompensated care amount to be distributed for FY 2015, and we are making changes to the methodology for calculating the uncompensated care payment amounts such that we will combine uncompensated care data for hospitals that have merged in order to calculate the relative share of uncompensated care for the surviving hospital. f. Hospital Inpatient Quality Reporting (IQR) Program Under section 1886(b)(3)(B)(viii) of the Act, hospitals are required to report data on measures selected by the Secretary for the Hospital IQR Program in order to receive the full annual percentage increase. In past rules, we E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV have established measures for reporting and the process for submittal and validation of the data. We are finalizing a total of 63 measures (47 required and 16 voluntary electronic clinical quality measures) in the Hospital IQR Program measure set for the FY 2017 payment determination and subsequent years. In this final rule, we are finalizing 11 new measures (1 chart-abstracted, 4 claims-based, and 6 voluntary electronic clinical quality measures). We proposed to remove 20 measures, but are only finalizing the removal of 19. The SCIP–INF–4 measure was proposed for removal, but will be retained as it was recently retooled for the 2014 collection period. Ten of these 19 measures are topped-out, chartabstracted measures that are being retained as voluntary electronic clinical quality measures. While we are finalizing our proposal to align the reporting and submission timelines of the Medicare EHR Incentive Program with those of the Hospital IQR Program on the calendar year for CQMs that are reported electronically for 2015, we are not finalizing the proposal to require quarterly submission of CQM data. Hospitals can voluntarily submit one calendar year (CY) quarter of data for Q 1, Q 2, or Q3 of 2015 by November 30, 2015, in order to partially fulfill requirements for both programs for CY 2015. In addition, we are finalizing a number of new policies related to the administration of the program, including access to specific NHSN data, updates to validation, and an electronic clinical quality measures validation pilot test. g. Changes to the LTCH PPS Section 1206(b) of the Pathway for SGR Reform Act provides for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment under the LTCH PPS established under section 114(c) of the MMSEA, as further amended by subsequent legislation. In keeping with this mandate, we are reinstating this payment adjustment retroactively for LTCH cost reporting periods beginning on or after July 1, 2013, or October 1, 2013. Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, provides for new statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities (subject to certain defined exceptions) and a new statutory moratorium on bed increases in existing LTCHs effective for the period VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 beginning April 1, 2014 and ending September 30, 2017. In accordance with section 1206(d) of the Pathway for SGR Reform Act of 2013, we are applying a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that will result in payments to this type of LTCH resembling reasonable cost payments under the TEFRA payment system model. We also discuss our proposed changes to the LTCH interruption of stay policy, which is a payment adjustment that is applied when, during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by readmittance to the same LTCH. In addition, we are finalizing our proposal to remove the 5-percent payment threshold policy for patient transfers between LTCHs and onsite providers. 3. Summary of Costs and Benefits • Adjustment for MS–DRG Documentation and Coding Changes. We are making a ¥0.8 percent recoupment adjustment to the standardized amount for FY 2015 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110–90. While our actuaries estimated that a ¥9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases and the adjustment we made for FY 2014, we are making a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2015. We estimated that this level of adjustment, combined with leaving the ¥0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 49865 • Reduction to Hospital Payments for Excess Readmissions. The provisions of section 1886(q) of the Act which establishes the Hospital Readmissions Reduction Program are not budget neutral. For FY 2015, a hospital’s readmissions payment adjustment factor is the higher of a ratio of a hospital’s aggregate payments for excess readmissions to its aggregate payments for all discharges, or 0.97 (that is, or a 3-percent reduction). In this final rule, we estimate that the reduction to a hospital’s base operating DRG payment amount to account for excess readmissions of selected applicable conditions under the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease in payments to hospitals for FY 2015 relative to FY 2014. • Value-Based Incentive Payments under the Hospital Value-Based Purchasing (VBP) Program. We estimate that there will be no net financial impact to the Hospital VBP Program for FY 2015 in the aggregate because, by law, the amount available for valuebased incentive payments under the program in a given fiscal year must be equal to the total amount of base operating DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating DRG payment amount reductions for FY 2015 and, therefore, the estimated amount available for value-based incentive payments for FY 2015 discharges is approximately $1.4 billion. We believe that the program’s benefits will be seen in improved patient outcomes, safety, and in the patient’s experience of care. However, we cannot estimate these benefits in actual dollar and patient terms. • Payment Adjustment under the HAC Reduction Program for FY 2015. Under section 1886(p) of the Act, (as added by section 3008 of the Affordable Care Act), the incentive to reduce hospital-acquired conditions with a payment adjustment to applicable hospitals under the HAC Reduction Program is made beginning FY 2015. We estimate that, under this provision, overall payments will decrease approximately 0.3 percent or $369 million. • Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share hospital payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment is made to eligible hospitals beginning in FY 2014. Hospitals that receive Medicare DSH E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49866 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for determining the additional payments for uncompensated care after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives Medicare DSH payments will receive an additional payment based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral. For FY 2015, we are providing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 76.19 percent of the amount for changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, our estimate of Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act is adjusted to approximately 57.1 percent (the product of 75 percent and 76.19 percent) and the resulting payment amount is used to create an additional payment to hospitals for their relative share of the total amount of uncompensated care. We project that Medicare DSH payments and additional payments for uncompensated care made for FY 2015 will reduce payments overall by 1.3 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2014. The additional payments have redistributive effects based on a hospital’s uncompensated care amount relative to the uncompensated care amount for all hospitals that are estimated to receive Medicare DSH payments, and the final payment amount is not tied to a hospital’s discharges. • Hospital Inpatient Quality Reporting (IQR) Program. In this final rule, we are finalizing 11 new measures (1 chart-abstracted, 4 claims-based, and 6 voluntary electronic clinical quality measures). We proposed to remove 20 measures, but are only finalizing the removal of 19. The SCIP–INF–4 measure was proposed for removal, but will be retained as it was recently retooled for the 2014 collection period. 10 of these 19 measures are topped-out, chartabstracted measures that are being retained as voluntary electronic clinical quality measures. We estimate that the adoption and removal of these measures VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 will decrease hospital costs by $39.8 million. • Update to the LTCH PPS Standard Federal Rate and Other Payment Factors. Based on the best available data for the 423 LTCHs in our database, we estimate that the changes to the payment rates and factors we are presenting in the preamble and Addendum of this final rule, including the update to the standard Federal rate for FY 2015, the changes to the area wage adjustment for FY 2015, and the expected changes to short-stay outliers and high-cost outliers, will result in an increase in estimated payments from FY 2014 of approximately $62 million (or 1.1 percent). In addition, we estimate that net effect of the projected impact of certain other LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25 percent threshold’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the revocation of onsite discharges and readmissions policy; and the payment adjustment for ‘‘subclause (II)’’ LTCHs) is estimated to result in an increase in LTCH PPS payments of approximately $116 million. The impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other LTCH PPS policy changes will result in a net increase of $178 million to LTCH providers. Additionally, we estimate that the costs to LTCHs associated with the completion of the data for the LTCHQR Program to be approximately $4.7 million more than FY 2014. B. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these ‘‘subsection (d) hospitals.’’ Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 into a labor-related share and a nonlabor-related share. The laborrelated share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for a new additional Medicare payment that considers the amount of uncompensated care beginning on October 1, 2013. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospitalspecific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. Through and including FY 2006, a Medicare-dependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospitalspecific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before April 1, 2015, an MDH will receive the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the statutory provision for payments to MDHs expires on March 31, 2015, under current law.) SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR Part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric hospitals and units; children’s hospitals; certain cancer hospitals; and short-term acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105–33), the Medicare, Medicaid and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106–113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106–554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children’s hospitals, certain cancer hospitals, short-term acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs, as updated annually by the percentage increase in the IPPS operating market basket. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR Parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 49867 was established under the authority of section 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH’s payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with FY 2009, annual updates to the LTCH PPS are published in the same documents that update the IPPS (73 FR 26797 through 26798). 4. Critical Access Hospitals (CAHs) Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR Part 413. 5. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital’s number of residents in that period and the hospital’s costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR Part 413. C. Summary of Provisions of Recent Legislation Discussed in This Final Rule The Patient Protection and Affordable Care Act (Pub. L. 111–148), enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), enacted on March 30, 2010, made a number of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111–148 and Pub. L. 111–152 are collectively referred to as the ‘‘Affordable Care Act.’’) A number of the provisions of the Affordable Care Act affect the updates to the IPPS and the LTCH PPS and providers and E:\FR\FM\22AUR2.SGM 22AUR2 49868 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010 Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51476). The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240), enacted on January 2, 2013, also made a number of changes that affect the IPPS. We announced changes related to certain IPPS provisions for FY 2013 in accordance with sections 605 and 606 of Public Law 112–240 in a document that appeared in the Federal Register on March 7, 2013 (78 FR 14689). The Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, also made a number of changes that affect the IPPS and the LTCH PPS. We implemented changes related to the low-volume hospital payment adjustment and MDH provisions for FY 2014 in accordance with sections 1105 and 1106 of Public Law 113–67 in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022). The Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, also made a number of changes that affect the IPPS and LTCH PPS. 1. The Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152) In this final rule, we are making policy changes to implement (or, as applicable, continue to implement in FY 2015) the following provisions (or portions of the following provisions) of the Affordable Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt cancer hospitals for FY 2015: • Section 3001(a) of Public Law 111– 148, which requires the establishment of a hospital inpatient value-based purchasing program under which valuebased incentive payments are made in a fiscal year to hospitals that meet performance standards for the performance period for that fiscal year. • Section 3004 of Public Law 111– 148, which provides for the submission of quality data by LTCHs in order for them to receive the full annual update to the payment rates beginning with the FY 2014 rate year. • Section 3005 of Public Law 111– 148, which provides for the establishment of a quality reporting VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 program for PPS-exempt cancer hospitals beginning with FY 2014, and for subsequent program years. • Section 3008 of Public Law 111– 148, which establishes the HospitalAcquired Condition (HAC) Reduction Program and requires the Secretary to make an adjustment to hospital payments for applicable hospitals, effective for discharges beginning on October 1, 2014, and for subsequent program years. • Section 3025 of Public Law 111– 148, which establishes a hospital readmissions reduction program and requires the Secretary to reduce payments to applicable hospitals with excess readmissions effective for discharges beginning on or after October 1, 2012. • Section 3133 of Public Law 111– 148, as amended by section 10316 of Public Law 111–148 and section 1104 of Public Law 111–152, which modifies the methodologies for determining Medicare DSH payments and creates a new additional payment for uncompensated care effective for discharges beginning on or after October 1, 2013. • Section 3401 of Public Law 111– 148, which provides for the incorporation of productivity adjustments into the market basket updates for IPPS hospitals and LTCHs. • Section 10324 of Public Law 111– 148, which provides for a wage adjustment for hospitals located in frontier States. • Sections 3401 and 10319 of Public Law 111–148 and section 1105 of Public Law 111–152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2015. • Section 5506 of Public Law 111– 148, which added a provision to the Act that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital’s FTE resident caps. 2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112–240) In this final rule, we are making policy changes to implement section 631 of the American Taxpayer Relief Act of 2012, which amended section 7(b)(1)(B) of Public Law 110–90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary’s estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied). 3. Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) In this final rule, we are making policy changes to implement, or discuss the need for future policy changes, to carry out provisions under section 1206 of the Pathway for SGR Reform Act of 2013. These include: • Section 1206(a), which provides the establishment of patient criteria for ‘‘site neutral’’ payment rates under the LTCH PPS, portions of which will begin to be implemented in FY 2016. • Section 1206(b)(1), which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act by retroactively reestablishing, and extending, the statutory moratorium on the full implementation of the 25percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for grandfathered hospitalswithin-hospitals (HwHs), which are permanently exempt from this policy). • Section 1206(b)(2), which amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities. • Section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings. 4. Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) In this final rule, we are making policy changes to implement, or making conforming changes to regulations in accordance with, the following provisions (or portions of the following provisions) of the Protecting Access to Medicare Act of 2014 that are applicable to the IPPS and the LTCH PPS for FY 2015: • Section 105, which extends the temporary changes to the Medicare inpatient hospital payment adjustment for low-volume subsection (d) hospitals through March 31, 2015. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations • Section 106, which extends the MDH program through March 31, 2015. • Section 112, which makes certain changes to Medicare LTCH provisions, including modifications to the statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities. • Section 212, which prohibits the Secretary from requiring implementation of ICD–10 code sets before October 1, 2015. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV D. Issuance of Notice of Proposed Rulemaking Earlier this year, we published a proposed rule that set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals for FY 2015. The proposed rule appeared in the Federal Register on May 15, 2014 (79 FR 27978). In the proposed rule, we also set forth proposed changes relating to payments for IME and GME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in the proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015. Below is a summary of the major changes that we proposed to make: 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of the proposed rule, we included— • Proposed changes to MS–DRG classifications based on our yearly review, including a discussion of the conversion of MS–DRGs to ICD–10 and the status of the implementation of the ICD–10–CM and ICD–10–PCS systems. • Proposed application of the documentation and coding adjustment for FY 2015 resulting from implementation of the MS–DRG system. • Proposed recalibrations of the MS– DRG relative weights. • Proposed changes to hospitalacquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS–DRG payments for FY 2015. • A discussion of the FY 2015 status of new technologies approved for addon payments for FY 2014 and a presentation of our evaluation and analysis of the FY 2015 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108–173, obtained in a town hall meeting). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble to the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed included the following: • Proposed changes in CBSAs as a result of new OMB labor market area delineations and proposed policies related to the proposed changes in CBSAs. • The proposed FY 2015 wage index update using wage data from cost reporting periods beginning in FY 2011. • Analysis and implementation of the proposed FY 2015 occupational mix adjustment to the wage index for acute care hospitals, including the proposed application of the rural floor, the proposed imputed rural floor, and the proposed frontier State floor. • Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications. • The proposed adjustment to the wage index for acute care hospitals for FY 2015 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index. • The timetable for reviewing and verifying the wage data used to compute the proposed FY 2015 hospital wage index and proposed revisions to that timetable. • Determination of the labor-related share for the proposed FY 2015 wage index. 3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs In section IV. of the preamble of the proposed rule, we discussed proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR Parts 412 and 413, including the following: • Proposed changes in postacute care transfer policies as a result of proposed new MS–DRGs. • Proposed changes to the inpatient hospital updates for FY 2015, including incorporation of the adjustment for hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. • The proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • Proposed payment adjustment for low-volume hospitals for FY 2015. • The statutorily required IME adjustment factor for FY 2015 and proposed IME add-on payments for PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 49869 Medicare Part C discharges to SCHs that are paid according to their hospitalspecific rates. • Effect of expiration of the MDH program on April 1, 2015. • Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care. • Proposed changes to the measures and payment adjustments under the Hospital Readmissions Reduction Program. • Proposed changes to the requirements and provision of valuebased incentive payments under the Hospital Value-Based Purchasing Program. • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2015. • Proposed IME and direct GME policy changes regarding the effective date of the FTE resident cap, 3-year rolling average, and IRB ratio cap in new programs in teaching hospitals; effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas; clarification of effective date of provisions on counting resident time in nonprovider settings; proposed changes to the process for reviewing applications for and awarding slots made available under section 5506 of the Affordable Care Act by teaching hospitals that close; and clarification regarding direct GME payment to FQHCs and RHCs that train residents in approved programs. • Discussion of the Rural Community Hospital Demonstration Program and a proposal for making a budget neutrality adjustment for the demonstration program. • Discussion of the requirements for transparency of hospital charges under the Affordable Care Act. • Discussion of and solicitation of comments on an alternative payment methodology under the Medicare program for short inpatient hospital stays. • Discussion of the process for submitting suggested exceptions to the 2-midnight benchmark. 4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs In section V. of the preamble to the proposed rule, we discussed the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2015 and other related proposed policy changes. E:\FR\FM\22AUR2.SGM 22AUR2 49870 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 5. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages In section VI. of the preamble of the proposed rule, we discussed— • Proposed changes to payments to certain excluded hospitals for FY 2015. • Proposed updates to the RCE limits and proposed changes to the methodology for determining such limits for services furnished by physicians to IPPS-excluded hospitals and certain teaching hospitals. • Proposed CAH related changes regarding reclassifications as rural. • Proposed changes to the physician certification requirements for services furnished in CAHs. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 6. Proposed Changes to the LTCH PPS In section VII. of the preamble of the proposed rule, we set forth— • Proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015. • Proposed revisions to the LTCH PPS geographic classifications based on the new OMB delineations. • Proposals to implement section 1206(b)(1) of the Pathway for SGR Reform Act, which provides for the retroactive reinstatement and extension, for an additional 4 years, of the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment established under section 114(c) of the MMSEA, as further amended by subsequent legislation. • Proposals to implement section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, which provides for moratoria (subject to certain defined exceptions) on the establishment of new LTCHs and LTCH satellite facilities and a moratorium on bed increases in LTCHs effective for the period beginning April 1, 2014, and ending September 30, 2017. • Proposed changes to the LTCH interruption of stay policy by revising the fixed-day thresholds under the ‘‘greater than 3-day interruption of stay policy’’ to apply a uniform 30-day threshold as an ‘‘acceptable standard’’ for determining a linkage between an index discharge and a readmission. • Proposal to remove the discharge and readmission requirement, ‘‘Special Payment Provisions for Patients Who are Transferred to Onsite Providers and Readmitted to an LTCH’’ (the ‘‘5 percent payment threshold’’) beginning in FY 2015. • Proposal to apply a payment adjustment under the LTCH PPS to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 subclause (II) LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling reasonable cost payment under the TEFRA payment system model, consistent with the provisions of section 1206(d) of the Pathway for SGR Reform Act of 2013. 7. Proposed Changes to Regulations Governing Administrative Appeals by Providers and Judicial Review of Provider Claims In section VIII. of the preamble of the proposed rule, we set forth proposals to revise the regulations governing administrative appeals and judicial review of provider claims in Medicare cost reports. 8. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers In section IX. of the preamble of the proposed rule, we addressed— • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program as a condition for receiving the full applicable percentage increase. • Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program). • Proposed changes to the requirements under the LTCH Quality Reporting (LTCHQR) Program. 9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data In section X. of the preamble of the proposed rule, we set forth proposed regulatory revisions to broaden the specified uses of Medicare Advantage (MA) risk adjustment data and to specify the conditions for release of such risk adjustment data to entities outside of CMS. 10. Proposed Changes to Enforcement Provisions for Organ Transplant Centers In section XI. of the preamble of the proposed rule, we proposed to revise the regulations governing organ transplant centers that request approval, based on mitigating factors for initial approval and re-approval, for participation in Medicare when the centers have not met one or more of the conditions of participation. 11. Determining Prospective Payment Operating and Capital Rates and Rate-ofIncrease Limits for Acute Care Hospitals In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 prospective payment rates for operating costs and PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 capital-related costs for acute care hospitals. We also proposed to establish the threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rateof-increase limits for cost reporting periods beginning in FY 2015 for certain hospitals excluded from the IPPS. 12. Determining Prospective Payment Rates for LTCHs In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 LTCH PPS standard Federal rate. We proposed to establish the adjustments for wage levels (including proposed changes to the LTCH PPS labor market area delineations based on the new OMB delineations), the labor-related share, the cost-of-living adjustment, and highcost outliers, including the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS. 13. Impact Analysis In Appendix A of the proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected acute care hospitals, LTCHs, and PCHs. 14. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2015 for the following: • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs). • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS. • The standard Federal rate for hospital inpatient services furnished by LTCHs. 15. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC’s March 2014 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2014 report or to obtain a copy of the report, contact MedPAC at (202) 220–3700 or visit MedPAC’s Web site at: https://www.medpac.gov. E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS Proposed Rule We received approximately 653 timely pieces of correspondence containing multiple comments on the FY 2015 IPPS/LTCH PPS proposed rule. We note that some of these public comments were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed in the policy responses in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate headings. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV F. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges Through March 31, 2014 In an interim final rule with comment period (CMS–1599–IFC2) that appeared in the Federal Register on March 18, 2014, we implemented the extension of the temporary changes to the payment adjustment for low-volume hospitals and the MDH program under the IPPS for FY 2014 (through March 31, 2014) in accordance with sections 1105 and 1106, respectively, of the Pathway for SGR Reform Act of 2013 (79 FR 15022 through 15030). We received four timely pieces of correspondence on this interim final rule with comment period. In section IV.P. of the preamble of this final rule, we summarize the provisions of the interim final rule, summarize and respond to the public comments received, and finalize the provisions of the interim final rule with comment period. G. Finalization of Interim Final Rule With Comment Period on Changes to Certain Cost Reporting Procedures Related to Disproportionate Share Hospital Uncompensated Care Payments In an interim final rule with comment period (CMS–1599–IFC) that appeared in the Federal Register on October 13, 2013 (78 FR 61191), we revised certain operational considerations for hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 49871 with Medicare cost reporting periods that span more than one Federal fiscal year and also made chnges to the data that will be used in the uncompensated care payment calculation in order to ensure that data from Indian Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of that calculation (78 FR 61191 through 61197). We received 12 timely pieces of correspondence in response to this interim final rule with comment period. In section IV.Q. of the preamble of this final rule, we summarize the provisions of the interim final rule with comment period, summarize and respond to the public comments received, and finalize the provisions of the interim final rule with comment period. 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50512). II. Changes to Medicare Severity Diagnosis-Related Group (MS–DRG) Classifications and Relative Weights In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS–DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS–DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. (In FY 2014, there are 751 MS– DRGs.) By increasing the number of MS–DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS–DRGs encourage hospitals to improve their documentation and coding of patient diagnoses. In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we indicated that the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries estimated that maintaining budget neutrality required an adjustment of ¥4.8 percent to the national standardized amount. We provided for phasing in this ¥4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010. On September 29, 2007, Congress enacted the TMA [Transitional Medical A. Background Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary’s stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital’s payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. B. MS–DRG Reclassifications For general information about the MS–DRG system, including yearly reviews and changes to the MS–DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 through PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 C. Adoption of the MS–DRGs in FY 2008 For information on the adoption of the MS–DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189). D. FY 2015 MS–DRG Documentation and Coding Adjustment 1. Background on the Prospective MS– DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Pub. L. 110–90 E:\FR\FM\22AUR2.SGM 22AUR2 49872 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007 (Pub. L. 110–90). Section 7(a) of Public Law 110–90 reduced the documentation and coding adjustment made as a result of the MS– DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009, and we finalized the FY 2008 adjustment through rulemaking, effective October 1, 2007 (72 FR 66886). For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent, and we finalized that adjustment through rulemaking effective October 1, 2008 (73 FR 48447). The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, which reflected the amendments made by section 7(a) of Public Law 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding adjustment for FY 2009 was in addition to the ¥0.6 percent adjustment for FY 2008, yielding a combined effect of ¥1.5 percent. 2. Adjustment to the Average Standardized Amounts Required by Pub. L. 110–90 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L. 110–90 Section 7(b)(1)(A) of Public Law 110– 90 requires that, if the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Pub. L. 110–90 If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110–90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 matched the changes that occurred in those years. Public Law 110–90 requires that the Secretary only make these recoupment or repayment adjustments for discharges occurring during FYs 2010, 2011, and 2012. 3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data In order to implement the requirements of section 7 of Public Law 110–90, we performed a retrospective evaluation of the FY 2008 data for claims paid through December 2008 using the methodology first described in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 through 43772). We performed the same analysis for FY 2009 claims data using the same methodology as we did for FY 2008 claims (75 FR 50057 through 50068). The results of the analysis for the FY 2011 IPPS/LTCH PPS proposed and final rules, and subsequent evaluations in FY 2012, supported that the 5.4 percent estimate accurately PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 reflected the FY 2009 increases in documentation and coding under the MS–DRG system. We were persuaded by both MedPAC’s analysis (as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own review of the methodologies recommended by various commenters that the methodology we employed to determine the required documentation and coding adjustments was sound. As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files are available to the public to allow independent analysis of the FY 2008 and FY 2009 documentation and coding effects. Interested individuals may still order these files through the CMS Web site at: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-forOrder/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)Hospital (National). This CMS Web page describes the file and provides directions and further detailed instructions for how to order. Persons placing an order must send the following: A Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check (refer to the Web site for the required payment amount) to: Mailing address if using the U.S. Postal Service: Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. Mailing address if using express mail: Centers for Medicare & Medicaid Services, OFM/Division of Accounting—RDDC, 7500 Security Boulevard, C3–07–11, Baltimore, MD 21244–1850. 4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Pub. L. 110–90 In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777), we opted to delay the implementation of any documentation and coding adjustment until a full analysis of case-mix changes based on FY 2009 claims data could be completed. We refer readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50073), we found a total prospective documentation and coding effect of 5.4 percent. After accounting for the ¥0.6 percent and the ¥0.9 percent documentation and coding adjustments in FYs 2008 and 2009, we found a remaining documentation and coding E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations effect of 3.9 percent. As we have discussed, an additional cumulative adjustment of ¥3.9 percent would be necessary to meet the requirements of section 7(b)(1)(A) of Public Law 110–90 to make an adjustment to the average standardized amounts in order to eliminate the full effect of the documentation and coding changes that do not reflect real changes in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law 110–90, section 7(b)(1)(A) does not specify when we must apply the prospective adjustment, but merely requires us to make an ‘‘appropriate’’ adjustment. Therefore, as we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we believed the law provided some discretion as to the manner in which we applied the prospective adjustment of ¥3.9 percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our practice to moderate payment adjustments when necessary to mitigate the effects of significant downward adjustments on hospitals, to avoid what could be widespread, disruptive effects of such adjustments on hospitals. Therefore, we stated that we believed it was appropriate to not implement the ¥3.9 percent prospective adjustment in FY 2011 because we finalized a ¥2.9 percent recoupment adjustment for that fiscal year. Accordingly, we did not propose a prospective adjustment under section 7(b)(1)(A) of Public Law 110–90 for FY 2011 (75 FR 23868 through 23870). We noted that, as a result, payments in FY 2011 (and in each future fiscal year until we implemented the requisite adjustment) would be higher than they would have been if we had implemented an adjustment under section 7(b)(1)(A) of Public Law 110–90. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we indicated that, because further delay of this prospective adjustment would result in a continued accrual of unrecoverable overpayments, it was imperative that we implement a prospective adjustment for FY 2012, while recognizing CMS’ continued desire to mitigate the effects of any significant downward adjustments to hospitals. Therefore, we implemented a ¥2.0 percent prospective adjustment to the standardized amount instead of the full ¥3.9 percent. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53276), we completed the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 by finalizing a ¥1.9 percent adjustment to the standardized amount for FY 2013. We stated that this adjustment would VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 remove the remaining effect of the documentation and coding changes that do not reflect real changes in case-mix that occurred in FY 2008 and FY 2009. We believed that it was imperative to implement the full remaining adjustment, as any further delay would result in an overstated standardized amount in FY 2013 and any future fiscal years until a full adjustment was made. We noted again that delaying full implementation of the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110–90 until FY 2013 resulted in payments in FY 2010 through FY 2012 being overstated. These overpayments could not be recovered by CMS as section 7(b)(1)(B) of Public Law 110–90 limited recoupments to overpayments made in FY 2008 and FY 2009. 5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Pub. L. 110–90 Section 7(b)(1)(B) of Public Law 110– 90 requires the Secretary to make an adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2008 and FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110–90. This determination must be based on a retrospective evaluation of claims data. Our actuaries estimated that there was a 5.8 percentage point difference resulting in an increase in aggregate payments of approximately $6.9 billion. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined that an aggregate adjustment of ¥5.8 percent in FYs 2011 and 2012 would be necessary in order to meet the requirements of section 7(b)(1)(B) of Public Law 110–90 to adjust the standardized amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of the increase in aggregate payments (including interest) in FYs 2008 and 2009. It is often our practice to phase in payment rate adjustments over more than one year in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an adjustment to the standardized amount of ¥2.9 percent, representing approximately half of the aggregate adjustment required under section 7(b)(1)(B) of Public Law 110–90, for FY 2011. An adjustment of this PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 49873 magnitude allowed us to moderate the effects on hospitals in one year while simultaneously making it possible to implement the entire adjustment within the timeframe required under section 7(b)(1)(B) of Public Law 110–90 (that is, no later than FY 2012). For FY 2012, in accordance with the timeframes set forth by section 7(b)(1)(B) of Public Law 110–90, and consistent with the discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the recoupment adjustment by implementing the remaining ¥2.9 percent adjustment, in addition to removing the effect of the ¥2.9 percent adjustment to the standardized amount finalized for FY 2011 (76 FR 51489 and 51498). Because these adjustments, in effect, balanced out, there was no yearto-year change in the standardized amount due to this recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a final +2.9 percent adjustment to the standardized amount, completing the recoupment portion of section 7(b)(1)(B) of Public Law 110–90. We note that with this positive adjustment, according to our estimates, all overpayments made in FY 2008 and FY 2009 have been fully recaptured with appropriate interest, and the standardized amount has been returned to the appropriate baseline. 6. Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment or adjustments totaling $11 billion by FY 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. As discussed earlier, this delay in implementation resulted in overstated payment rates in FYs 2010, 2011, and 2012. The resulting overpayments could not have been recovered under Public Law 110–90. Similar to the adjustments authorized under section 7(b)(1)(B) of Public Law 110–90, the adjustment required under section 631 of the ATRA is a one-time recoupment of a prior overpayment, not a permanent reduction to payment rates. Therefore, any adjustment made to reduce payment rates in one year would eventually be offset by a positive adjustment, once the necessary amount of overpayment is recovered. As we stated in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50515 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49874 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations through 50517), our actuaries estimate that a ¥9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014. It is often our practice to phase in payment rate adjustments over more than one year, in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, and after consideration of the public comments we received, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we implemented a ¥0.8 percent recoupment adjustment to the standardized amount in FY 2014. We stated that if adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we estimate that the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As estimates of any future adjustments are subject to slight variations in total savings, we did not provide for specific adjustments for FYs 2015, 2016, or 2017 at that time. We stated that we believed that this level of adjustment for FY 2014 was a reasonable and fair approach that satisfies the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again noted that this ¥0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized. Consistent with the approach discussed in the FY 2014 rulemaking for recouping the $11 billion required by section 631 of the ATRA, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27997 through 27998), we proposed an additional ¥0.8 percent recoupment adjustment to the standardized amount for FY 2015. We estimated that this level of adjustment, combined with leaving the ¥0.8 percent adjustment made for FY 2014 in place, would recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this would leave approximately $8 billion remaining to be recovered by FY 2017. Comment: Several commenters restated their previous position, as set forth in comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS overstated the impact of documentation and coding effects for prior years. Commenters cited potential deficiencies in the CMS methodology VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 and disagreed that the congressionally mandated adjustment is warranted. However, the majority of these commenters conceded that CMS is required by section 631 of the ATRA to recover $11 billion by FY 2017, and supported CMS’ policy to phase in the adjustments over a 4-year period. Response: We appreciate the commenters’ support. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for our response to the commenters’ position that CMS overstated the impact of documentation and coding effects. After consideration of the public comments we received, we are finalizing the proposal to make an additional ¥0.8 percent adjustment to the standardized amount for FY 2015. Considering the ¥0.8 percent adjustment made in FY 2014, we expect the combined impact of these adjustments will be to recover $2 billion dollars in overpayments in FY 2015. Combined with the estimated $1 billion adjustment made in FY 2014, we estimate that $3 billion of the $11 billion in overpayments required to be recovered by section 631 of the ATRA will be accounted for. We continue to believe that if adjustments of approximately ¥0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As we explained in the FY 2014 IPPS/LTCH PPS final rule, estimates of any future adjustments are subject to slight variations in total savings. Therefore, we have not yet addressed specific adjustments for FY 2016 and FY 2017. We continue to believe that the ¥0.8 percent adjustment for FY 2015 is a reasonable and fair approach that will help satisfy the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again note that this ¥0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized. 7. Prospective Adjustment for the MS– DRG Documentation and Coding Effect Through FY 2010 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we discussed the possibility of applying an additional prospective adjustment to account for the cumulative MS–DRG documentation and coding effect through FY 2010. In that final rule, we stated that if we were to apply such an PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 adjustment, we believed the most appropriate additional adjustment was ¥0.55 percent. However, we decided not to apply such an adjustment in FY 2014, in light of the need to make the retrospective adjustments required by the ATRA. We continue to believe that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, the most appropriate additional adjustment is ¥0.55 percent. However, we did not propose such an adjustment for FY 2015, in light of the ongoing recoupment required by the ATRA. We will consider whether such an additional adjustment is appropriate in future years’ rulemaking. Comment: Commenters reiterated their concern, as set forth in comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS overstated the adjustment factor for documentation and coding, including the revised ¥0.55 percent factor to adjust for documentation and coding that occurred in FY 2010. Commenters believed that adjustments related to FY 2010 documentation and coding are not required under section 631 of the ATRA. Commenters urged CMS to not consider additional adjustments, other than those required by section 631 of the ATRA. Response: We appreciate the commenters’ concerns. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for our response to the commenters’ position that CMS overstated the impact of documentation and coding effects. We did not propose to make any additional prospective adjustment to address the cumulative documentation and coding effect through FY 2010 for FY 2015. We will consider these comments in future years’ rulemaking. E. Refinement of the MS–DRG Relative Weight Calculation 1. Background Beginning in FY 2007, we implemented relative weights for DRGs based on cost report data instead of charge information. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed discussion of our final policy for calculating the costbased DRG relative weights and to the FY 2008 IPPS final rule with comment period (72 FR 47199) for information on how we blended relative weights based on the CMS DRGs and MS–DRGs. As we implemented cost-based relative weights, some public E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations commenters raised concerns about potential bias in the weights due to ‘‘charge compression,’’ which is the practice of applying a higher percentage charge markup over costs to lower cost items and services, and a lower percentage charge markup over costs to higher cost items and services. As a result, the cost-based weights would undervalue high-cost items and overvalue low-cost items if a single costto-charge ratio (CCR) is applied to items of widely varying costs in the same cost center. To address this concern, in August 2006, we awarded a contract to the Research Triangle Institute, International (RTI) to study the effects of charge compression in calculating the relative weights and to consider methods to reduce the variation in the CCRs across services within cost centers. For a detailed summary of RTI’s findings, recommendations, and public comments that we received on the report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452 through 48453). In addition, we refer readers to RTI’s July 2008 final report titled ‘‘Refining Cost to Charge Ratios for Calculating APC and MS–DRG Relative Payment Weights’’ (https:// www.rti.org/reports/cms/HHSM–500– 2005–0029I/PDF/Refining_Cost_to_ Charge_Ratios_200807_Final.pdf). In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in response to the RTI’s recommendations concerning cost report refinements, we discussed our decision to pursue changes to the cost report to split the cost center for Medical Supplies Charged to Patients into one line for ‘‘Medical Supplies Charged to Patients’’ and another line for ‘‘Implantable Devices Charged to Patients.’’ We acknowledged, as RTI had found, that charge compression occurs in several cost centers that exist on the Medicare cost report. However, as we stated in the FY 2009 IPPS final rule, we focused on the CCR for Medical Supplies and Equipment because RTI found that the largest impact on the MS–DRG relative weights could result from correcting charge compression for devices and implants. In determining the items that should be reported in these respective cost centers, we adopted the commenters’ recommendations that hospitals should use revenue codes established by the AHA’s National Uniform Billing Committee to determine the items that should be reported in the ‘‘Medical Supplies Charged to Patients’’ and the ‘‘Implantable Devices Charged to Patients’’ cost centers. Accordingly, a new subscripted line for ‘‘Implantable Devices Charged to Patients’’ was VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 created in July 2009. This new subscripted cost center has been available for use for cost reporting periods beginning on or after May 1, 2009. As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527), in addition to the findings regarding implantable devices, RTI also found that the costs and charges of computed tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and the OPPS relative weights would better estimate the costs of those services if CMS were to add standard cost centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRIs, and cardiac catheterization, and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS–2552–10. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed discussion of the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization.) The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS–2552–10. In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due to what is typically a 3-year lag between the reporting of cost report data and the availability for use in ratesetting, we anticipated that we might be able to use data from the new ‘‘Implantable Devices Charged to Patients’’ cost center to develop a CCR for ‘‘Implantable Devices Charged to Patients’’ in the FY 2012 or FY 2013 IPPS rulemaking cycle. However, as noted in the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43782), due to delays in the issuance of the revised cost report Form CMS 2552– 10, we determined that a new CCR for ‘‘Implantable Devices Charged to Patients’’ might not be available before FY 2013. Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule to add new cost centers PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 49875 for CT scans, MRIs, and cardiac catheterization, we explained that data from any new cost centers that may be created will not be available until at least 3 years after they are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH PPS rulemaking, we checked the availability of data in the ‘‘Implantable Devices Charged to Patients’’ cost center on the FY 2009 cost reports, but we did not believe that there was a sufficient amount of data from which to generate a meaningful analysis in this particular situation. Therefore, we did not propose to use data from the ‘‘Implantable Devices Charged to Patients’’ cost center to create a distinct CCR for ‘‘Implantable Devices Charged to Patients’’ for use in calculating the MS–DRG relative weights for FY 2012. We indicated that we would reassess the availability of data for the ‘‘Implantable Devices Charged to Patients’’ cost center for the FY 2013 IPPS/LTCH PPS rulemaking cycle and, if appropriate, we would propose to create a distinct CCR at that time. During the development of the FY 2013 IPPS/LTCH PPS proposed and final rules, hospitals were still in the process of transitioning from the previous cost report Form CMS–2552– 96 to the new cost report Form CMS– 2552–10. Therefore, we were able to access only those cost reports in the FY 2010 HCRIS with fiscal year begin dates on or after October 1, 2009, and before May 1, 2010; that is, those cost reports on Form CMS–2552–96. Data from the Form CMS–2552–10 cost reports were not available because cost reports filed on the Form CMS–2552–10 were not accessible in the HCRIS. Further complicating matters was that, due to additional unforeseen technical difficulties, the corresponding information regarding charges for implantable devices on hospital claims was not yet available to us in the MedPAR file. Without the breakout in the MedPAR file of charges associated with implantable devices to correspond to the costs of implantable devices on the cost report, we believed that we had no choice but to continue computing the relative weights with the current CCR that combines the costs and charges for supplies and implantable devices. We stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do have the necessary data for supplies and implantable devices on the claims in the MedPAR file to create distinct CCRs for the respective cost centers for supplies and implantable devices, we hoped that we would also have data for an analysis of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49876 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations creating distinct CCRs for CT scans, MRIs, and cardiac catheterization, which could then be finalized through rulemaking. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that, prior to proposing to create these CCRs, we would first thoroughly analyze and determine the impacts of the data, and that distinct CCRs for these new cost centers would be used in the calculation of the relative weights only if they were first finalized through rulemaking. At the time of the development of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27506 through 27507), we had a substantial number of hospitals completing all, or some, of these new cost centers on the FY 2011 Medicare cost reports, compared to prior years. We stated that we believed that the analytic findings described using the FY 2011 cost report data and FY 2012 claims data supported our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we saw no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in FY 2014, we proposed to calculate the MS–DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization (78 FR 27509). We refer readers to the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27507 through 27509) and final rule (78 FR 50518 through 50523) in which we presented data analyses using distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/LTCH PPS final rule also set forth our responses to public comments we received on our proposal to implement these CCRs. As explained in more detail in the FY 2014 IPPS/ LTCH PPS final rule, we finalized our proposal to use 19 CCRs to calculate MS–DRG relative weights beginning in FY 2014—the then existing 15 cost centers and the 4 new CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Therefore, beginning in FY 2014, we calculated the IPPS MS–DRG relative weights using 19 CCRs, creating distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. 2. Discussion of Policy for FY 2015 As we stated in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 27999), to calculate the MS–DRG relative VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 weights for FY 2015, we used two data sources: the MedPAR file as the claims data source and the HCRIS as the cost report data source. We adjusted the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the 19 CCRs and the MS–DRG relative weights for FY 2015 is included in section II.H. of the preamble of this final rule. Comment: One commenter supported CMS’ plans to continue to use data from the implantable devices cost center to create a distinct CCR for implantable devices in the calculation of the FY 2015 relative weights. The commenter also urged CMS to promote transparency by making detailed data from the implantable device cost center available to the public so that hospitals could evaluate these costs in the context of overall hospital charges. Response: We did not propose any changes to the methodology or data sources for the FY 2015 CCRs and relative weights. Regarding the commenter’s request to make data from the implantable devices cost center available to the public, we note that hospital cost report data, via HCRIS, are available to the public. For more information, we refer to readers to the CMS Web site at: https://www.cms.gov/ Research-Statistics-Data-and-Systems/ Files-for-Order/CostReports/? redirect=/costReports. F. Adjustment to MS–DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections for FY 2015 1. Background Section 1886(d)(4)(D) of the Act addresses certain hospital-acquired conditions (HACs), including infections. This provision is part of an array of Medicare tools that we are using to promote increased quality and efficiency of care. Under the IPPS, hospitals are encouraged to treat patients efficiently because they receive the same DRG payment for stays that vary in length and in the services provided, which gives hospitals an incentive to avoid unnecessary costs in the delivery of care. In some cases, conditions acquired in the hospital do not generate higher payments than the hospital would otherwise receive for cases without these conditions. To this extent, the IPPS encourages hospitals to avoid complications. However, the treatment of these conditions can generate higher Medicare PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 payments in two ways. First, if a hospital incurs exceptionally high costs treating a patient, the hospital stay may generate an outlier payment. Because the outlier payment methodology requires that hospitals experience large losses on outlier cases before outlier payments are made, hospitals have an incentive to prevent outliers. Second, under the MS–DRG system that took effect in FY 2008 and that has been refined through rulemaking in subsequent years, certain conditions can generate higher payments even if the outlier payment requirements are not met. Under the MS–DRG system, there are currently 261 sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a complication or comorbidity (CC) or a major complication or comorbidity (MCC). The presence of a CC or an MCC generally results in a higher payment. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidencebased guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with the CDC, from time to time as long as the list contains at least two conditions. Effective for discharges occurring on or after October 1, 2008, under the authority of section 1886(d)(4)(D) of the Act, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected condition is not present on admission (POA). Thus, if a selected condition that was not POA manifests during the hospital stay, it is considered a HAC and the case is paid as though the secondary diagnosis was not present. However, even if a HAC manifests during the hospital stay, if any nonselected CC or MCC appears on the claim, the claim will be paid at the higher MS–DRG rate. In addition, Medicare continues to assign a discharge to a higher paying MS–DRG if a selected condition is POA. When a HAC is not POA, payment can be affected in a manner shown in the diagram below E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 2. HAC Selection Beginning in FY 2007, we have set forth proposals, and solicited and responded to public comments, to implement section 1886(d)(4)(D) of the Act through the IPPS annual rulemaking process. For specific policies addressed in each rulemaking cycle, including a detailed discussion of the collaborative interdepartmental process and public input regarding selected and potential candidate HACs, we refer readers to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR 24716 through 24726) and final rule with comment period (72 FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) and final rule (73 FR 48471); the FY 2010 IPPS/ RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 through 53303); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and final rule (78 FR 50523 through 50527). A complete list of the 11 current categories of HACs is included on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/Hospital-Acquired_ Conditions.html. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 3. Present on Admission (POA) Indicator Reporting Collection of POA indicator data is necessary to identify which conditions were acquired during hospitalization for the HAC payment provision as well as for broader public health uses of Medicare data. In previous rulemaking, we provided both CMS and CDC Web site resources that are available to hospitals for assistance in this reporting effort. For detailed information regarding these sites and materials, including the application and use of POA indicators, we refer the reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 51507). Currently, as we have discussed in the prior rulemaking cited under section II.I.2. of the preamble of this final rule, the POA indicator reporting requirement only applies to IPPS hospitals because they are subject to this HAC provision. Non-IPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children’s hospitals, RNHCIs, and the Department of Veterans Affairs/Department of Defense hospitals, are exempt from POA reporting. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50524 through 50525), we noted that hospitals in Maryland operating under a statutory waiver were not paid under the IPPS, but rather were paid under the provisions of section 1814(b)(3) of the Act, and therefore prior to FY 2014 these hospitals were exempt from reporting POA indicators. However, we believed it was appropriate to require them to use POA indicator reporting on their claims so that we could include their data and PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 49877 have as complete a dataset as possible when we analyze trends and make further payment policy determinations, such as those authorized under section 1886(p) of the Act. Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we finalized our policy that hospitals in Maryland that formerly operated under section 1814(b)(3) of the Act were no longer exempted from the POA indicator reporting requirement beginning with claims submitted on or after October 1, 2013, including all claims for discharges on or after October 1, 2013. We noted that, while this requirement was not effective until October 1, 2013, hospitals in Maryland could submit data with POA indicators before that date with the expectation that these data would be accepted by Medicare’s claims processing systems. (We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50707 through 50712) for a discussion of our FY 2014 final policies to implement section 1886(p) of the Act that are applicable to Maryland hospitals.) Subsequent to our FY 2014 rulemaking, the State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.’’ Section 1115A of the Act E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.000</GPH> Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49878 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare make payments to Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to section 1814(b)(3) hospitals. Although CMS has waived certain provisions of the Act for Maryland hospitals, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement, CMS has not waived the POA indicator reporting requirement. In other words, the changes to the status of Maryland hospitals under section 1814(b)(3) of the Act as described above do not in any way change the POA indicator reporting requirement for Maryland hospitals. There are currently four POA indicator reporting options, ‘‘Y’’, ‘‘W’’, ‘‘N’’, and ‘‘U’’, as defined by the ICD– 9–CM Official Guidelines for Coding and Reporting. We note that prior to January 1, 2011, we also used a POA indicator reporting option ‘‘1’’. However, beginning on or after January 1, 2011, hospitals were required to begin reporting POA indicators using the 5010 electronic transmittal standards format. The 5010 format removes the need to report a POA indicator of ‘‘1’’ for codes that are exempt from POA reporting. We issued CMS instructions on this reporting change as a One-Time Notification, Pub. No. 100–20, Transmittal No. 756, Change Request 7024, effective on August 13, 2010, which can be located at the following link on the CMS Web site: https:// www.cms.gov/manuals/downloads/ Pub100_20.pdf.) The current POA indicators and their descriptors are shown in the chart below: Indicator Descriptor Y ......................................... W ........................................ Indicates that the condition was present on admission. Affirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the onset of the condition occurred. Indicates that the condition was not present on admission. Indicates that the documentation is insufficient to determine if the condition was present at the time of admission. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV N ......................................... U ......................................... Under the HAC payment policy, we treat HACs coded with ‘‘Y’’ and ‘‘W’’ indicators as POA and allow the condition on its own to cause an increased payment at the CC and MCC level. We treat HACs coded with ‘‘N’’ and ‘‘U’’ indicators as Not Present on Admission (NPOA) and do not allow the condition on its own to cause an increased payment at the CC and MCC level. We refer readers to the following rules for a detailed discussion of POA indicator reporting: the FY 2009 IPPS proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525). In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53324), the 5010 format allows the reporting and, effective January 1, 2011, the processing of up to 25 diagnoses and 25 procedure codes. As such, it is necessary to report a valid VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 POA indicator for each diagnosis code, including the principal diagnosis and all secondary diagnoses up to 25. 4. HACs and POA Reporting in Preparation for Transition to ICD–10– CM and ICD–10–PCS In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in preparation for the transition to the ICD–10–CM and ICD–10–PCS code sets, we indicated that further information regarding the use of the POA indicator with the ICD–10–CM/ICD–10–PCS classifications as they pertain to the HAC policy would be discussed in future rulemaking. At the March 5, 2012 and the September 19, 2012 meetings of the ICD–9–CM Coordination and Maintenance Committee, an announcement was made with regard to the availability of the ICD–9–CM HAC list translation to ICD–10–CM and ICD– 10–PCS code sets. Participants were informed that the list of the ICD–9–CM selected HACs has been translated into codes using the ICD–10–CM and ICD– 10–PCS classification system. It was recommended that the public review this list of ICD–10–CM/ICD–10–PCS code translations of the selected HACs available on the CMS Web site at: https:// www.cms.gov/Medicare/Coding/ICD10/ ICD-10-MS-DRG-ConversionProject.html. The translations can be found under the link titled ‘‘ICD–10– PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 CM/PCS MS–DRG v30 Definitions Manual Table of Contents—Full Titles— HTML Version in Appendix I— Hospital-Acquired Conditions (HACs).’’ This CMS Web site regarding the ICD– 10–MS–DRG Conversion Project is also available on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalAcqCond/ icd10_hacs.html. We encouraged the public to submit comments on these translations through the HACs Web page using the CMS ICD–10–CM/PCS HAC Translation Feedback Mailbox that was set up for this purpose under the Related Links section titled ‘‘CMS HAC Feedback.’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated that the final HAC list translation from ICD–9– CM to ICD–10–CM/ICD–10–PCS would be subject to formal rulemaking. We encouraged readers to review the educational materials and draft code sets available for ICD–10–CM/ICD–10– PCS on the CMS Web site at: https:// www.cms.gov/ICD10/. In addition, we stated that the draft ICD–10–CM/ICD– 10–PCS Coding Guidelines could be viewed on the CDC Web site at: https://www.cdc.gov/nchs/icd/ icd10cm.htm. The HACs code translation list from ICM–9–CM to ICD–10–CM/ICD–10–PCS is available to the public on the CMS Web site at: https://www.cms.gov/ Medicare/Coding/ICD10/ICD-10-MS- E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations DRG-Conversion-Project.html. We note that Appendix I of the ICD–10–CM/PCS MS–DRG V31R Definitions Manual Table of Contents—Full Titles files (available in both text and HTML formats) are posted on the Web site and contain the DRA HACs translated to ICD–10. We note that section 212 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, provides that the Secretary may not adopt ICD–10 prior to October 1, 2015. This effectively delayed the transition from ICD–9–CM to ICD–10. The Secretary expects to release a final rule in the near future that will include a new compliance date for use of ICD– 10. 5. Current HACs and Previously Considered Candidate HACs In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28002), we did not propose to add or remove categories of the HACs. However, we indicated that we continue to encourage public dialogue about refinements to the HAC list by written stakeholder comments about both previously selected and potential candidate HACs. We refer readers to section II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for detailed discussion supporting our determination regarding each of these conditions. We also refer readers to section II.F.5. of the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27892 through 27898), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013, and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50523 through 50527) for the HAC policy for FY 2014. Comment: Some commenters stated they were pleased the CMS did not propose to expand the list of categories or conditions subject to the Deficit Reduction Act of 2005 provisions that would reduce payment for HACs not present on admission. However, one commenter suggested that CMS remove ‘‘falls and trauma’’ from the categories of conditions to which the HAC policy applies. Another believed that iatrogenic pneumothorax with thoracentesis and accidental puncture/ bleeding with paracentesis are two conditions that meet the HAC criteria for inclusion and urged CMS to expand the HAC program in FY 2015 to include them. Response: We value and appreciate these public comments, and we will take the comments and suggestions into consideration in future rulemaking. Comment: One commenter recognized the importance of targeting HACs, but stated that the DRA HAC program does not recognize that certain conditions are not 100 percent preventable, despite adherence to evidence-based practices. The commenter noted that facilities that treat patients with greater comorbidities and complex conditions are at a greater risk for penalties. Specifically, the commenter reiterates concerns about the inclusion of Surgical Site Infections (SSI) Following Cardiac Implantable Electronic Device (CIED) as a HAC category. The commenter stated that there are many variables that may contribute to the risk of CIED-related infections and that the implanting physician may not be able to control all circumstances (for example, preoperative white blood cell count, fever within 24 hours, and timing of perioperative antibiotic administration). Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51510 through 51511), we addressed commenters’ concerns regarding the preventability of DRA HACs and noted that the statute does not require that a condition be ‘‘always preventable’’ in order to qualify as an HAC. We stated that the statute indicated that the condition be ‘‘reasonably preventable,’’ which necessarily implies something less than 100 percent. 49879 Comment: One commenter recommended that CMS address the question that its hospital customers have posed regarding the effect of the DRA HAC policy when a patient is discharged from a hospital and then returns to a hospital to have a foreign object removed. Specifically, the commenter stated that hospitals need to be better informed about how Medicare payment changes if the hospital removing the foreign object is the same hospital at which the foreign object was left or is a different hospital, and if the foreign object is removed during an outpatient procedure or during an inpatient procedure. Response: Questions related to payment for HACs are dependent upon how the conditions are coded and reported with ICD–9–CM and the corresponding POA indicator. The American Hospital Association (AHA) Central OfficeTM is the national clearinghouse for medical coding advice. Coding inquiries can be directed to the following AHA Web site: https:// www.CodingClinicAdvisor.com. Instructions for how to assign the correct POA indicator can be found in the ICD–9–CM Official Guidelines for Coding and Reporting located at the CDC Web site: https://www.cdc.gov/ nchs/icd/icd9cm_addenda_ guidelines.htm. Also, illustrations of how to assign POA indicators are included in the Present on Admission (POA) Indicator Reporting by Acute Inpatient Prospective Payment System (IPPS) Hospitals Fact Sheet located on the CMS Hospital-Acquired Conditions Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/HospitalAcqCond/ EducationalResources.html in the ‘‘Downloads’’ section. Table 1: CMS POA Indicator Reporting Options, Description, and Payment contains an explanation of when payment for a condition is made or not made, based on the POA indicator assigned, as shown below. Description Medicare payment Y .................................. Diagnosis was present at time of inpatient admission ........ N .................................. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV POA indicator Diagnosis was not present at time of inpatient admission .. U .................................. Documentation insufficient to determine if condition was present at the time of inpatient admission. Clinically undetermined. Provider unable to clinically determine whether the condition was present at the time of inpatient admission. Payment made for condition by Medicare, when an HAC is present. No payment made for condition by Medicare, when an HAC is present. No payment made for condition by Medicare, when an HAC is present. Payment made for condition by Medicare, when an HAC is present. W ................................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 49880 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 6. RTI Program Evaluation On September 30, 2009, a contract was awarded to RTI to evaluate the impact of the Hospital-Acquired Condition-Present on Admission (HAC– POA) provisions on the changes in the incidence of selected conditions, effects on Medicare payments, impacts on coding accuracy, unintended consequences, and infection and event rates. This was an intra-agency project with funding and technical support from CMS, OPHS, AHRQ, and CDC. The evaluation also examined the implementation of the program and evaluated additional conditions for future selection. The contract with RTI ended on November 30, 2012. Summary reports of RTI’s analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC–POA program evaluation were included in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292 through 53302). Summary and detailed data also were made publicly available on the CMS Web site at: https://www.cms.gov/ HospitalAcqCond/01_Overview.asp and the RTI Web site at: https://www.rti.org/ reports/cms/. In addition to the evaluation of HAC and POA MedPAR claims data, RTI also conducted analyses on readmissions due to HACs, the incremental costs of HACs to the health care system, a study of spillover effects and unintended consequences, as well as an updated analysis of the evidence-based guidelines for selected and previously considered HACs. Reports on these analyses have been made publicly available on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalAcqCond/ index.html. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines The RTI program evaluation includes a report that provides references for all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. Guidelines were primarily identified using the AHRQ National Guidelines Clearing House (NGCH) and the CDC, along with relevant professional societies. Guidelines published in the United States were used, if available. In the absence of U.S. guidelines for a specific condition, international guidelines were included. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Evidence-based guidelines that included specific recommendations for the prevention of the condition were identified for each of the selected conditions. In addition, evidence-based guidelines also were found for the previously considered candidate conditions. RTI prepared a final report to summarize its findings regarding evidence-based guidelines. This report can be found on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/Downloads/EvidenceBased-Guidelines.pdf. Subsequent to this final report, RTI was awarded an FY 2014 EvidenceBased Guidelines Monitoring contract. Under the contract, RTI was to provide a summary report of all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. This report is usually delivered to CMS annually in a May/June timeframe. We received the updated 2014 report and have made it available to the public on the CMS Hospital-Acquired Conditions Web page in the ‘‘Downloads’’ section at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ HospitalAcqCond/?redirect=/ HospitalAcqCond/. G. Changes to Specific MS–DRG Classifications 1. Discussion of Changes to Coding System and Basis for MS–DRG Updates a. Conversion of MS–DRGs to the International Classification of Diseases, 10th Revision (ICD–10) Providers use the code sets under the ICD–9–CM coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS–DRG system. A later coding edition, the ICD–10 coding system, includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD–10–CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding, as well as the Official ICD–10–CM and ICD–10–PCS Guidelines for Coding and Reporting. The ICD–10 coding system was initially adopted for transactions conducted on or after October 1, 2013, as described in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Administrative Simplification: Modifications to Medical Data Code Set Standards to Adopt ICD–10–CM and ICD–10–PCS Final Rule published in the Federal PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 Register on January 16, 2009 (74 FR 3328 through 3362) (hereinafter referred to as the ‘‘ICD–10–CM and ICD–10–PCS final rule’’). However, the Secretary of Health and Human Services issued a final rule that delayed the compliance date for ICD–10 from October 1, 2013, to October 1, 2014. That final rule, entitled ‘‘Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for ICD–10–CM and ICD–10–PCS Medical Data Code Sets,’’ CMS–0040–F, was published in the Federal Register on September 5, 2012 (77 FR 54664) and is available for viewing on the Internet at: https://www. gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/ 2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113–93) was enacted, which specified that the Secretary may not adopt ICD–10 prior to October 1, 2015. Section 212 of Public Law 113–93, titled ‘‘Delay in Transition from ICD–9 to ICD–10 Code Sets,’’ provides that ‘‘[t]he Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD–10 code sets as the standard for code sets under section 1173(c) of Act. On May 1, 2014, the Secretary announced plans to release an interim final rule in the near future that will include a new compliance date to require the use of ICD–10 beginning October 1, 2015. The rule will also require HIPAA covered entities to continue to use ICD–9–CM through September 30, 2015. The anticipated move to ICD–10 necessitated the development of an ICD–10–CM/ICD–10–PCS version of the MS–DRGs. CMS began a project to convert the ICD–9–CM-based MS–DRGs to ICD–10 MS–DRGs. In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on the creation of the ICD–10 version of the MS–DRGs, which will be implemented at the same time as ICD–10 (75 FR 50127 and 50128). While we did not propose an ICD–10 version of the MS– DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that we have been actively involved in converting current MS–DRGs from ICD–9–CM codes to ICD–10 codes and sharing this information through the ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee. We undertook this early conversion project to assist other payers and providers in understanding how to implement their own conversion projects. We posted ICD–10 MS–DRGs based on Version 26.0 (FY 2009) of the MS–DRGs. We E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations also posted a paper that describes how CMS went about completing this project and suggestions for other payers and providers to follow. Information on the ICD–10 MS–DRG conversion project can be found on the ICD–10 MS–DRG Conversion Project Web site at: https:// cms.hhs.gov/Medicare/Coding/ICD10/ ICD-10-MS-DRG-ConversionProject.html. We have continued to keep the public updated on our maintenance efforts for ICD–10–CM and ICD–10–PCS coding systems, as well as the General Equivalence Mappings that assist in conversion through the ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee. Information on these committee meetings can be found on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD9Provider DiagnosticCodes/. During FY 2011, we developed and posted Version 28.0 of the ICD–10 MS– DRGs based on the FY 2011 MS–DRGs (Version 28.0) that we finalized in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD–10 MS– DRGs Version 28.0 also included the CC Exclusion List and the ICD–10 version of the hospital-acquired conditions (HACs), which was not posted with Version 26.0. We also discussed this update at the September 15–16, 2010 and the March 9–10, 2011 meetings of the ICD–9–CM Coordination and Maintenance Committee. The minutes of these two meetings are posted on the CMS Web site at: https://www.cms.hhs. gov/Medicare/Coding/ICD9Provider DiagnosticCodes/. We reviewed comments on the ICD– 10 MS–DRGs Version 28.0 and made updates as a result of these comments. We called the updated version the ICD– 10 MS–DRGs Version 28–R1. We posted a Definitions Manual of ICD–10 MS– DRGs Version 28–R1 on our ICD–10 MS–DRG Conversion Project Web site. To make the review of Version 28–R1 updates easier for the public, we also made available pilot software on a CD ROM that could be ordered through the National Technical Information Service (NTIS). A link to the NTIS ordering page was provided on the CMS ICD–10 MS– DRGs Web page. We stated that we believed that, by providing the ICD–10 MS–DRGs Version 28–R1 Pilot Software (distributed on CD ROM), the public would be able to more easily review and provide feedback on updates to the ICD– 10 MS–DRGs. We discussed the updated ICD–10 MS–DRGs Version 28–R1 at the September 14, 2011 ICD–9–CM Coordination and Maintenance Committee meeting. We encouraged the public to continue to review and provide comments on the ICD–10 MS– VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 DRGs so that CMS could continue to update the system. In FY 2012, we prepared the ICD–10 MS–DRGs Version 29.0, based on the FY 2012 MS–DRGs (Version 29.0) that we finalized in the FY 2012 IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD–10 MS–DRGs Version 29.0 on our ICD–10 MS–DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 28.0 to Version 29.0 to facilitate a review. The ICD–10 MS–DRGs Version 29.0 was discussed at the ICD–9–CM Coordination and Maintenance Committee meeting on March 5, 2012. Information was provided on the types of updates made. Once again the public was encouraged to review and comment on the most recent update to the ICD– 10 MS–DRGs. CMS prepared the ICD–10 MS–DRGs Version 30.0 based on the FY 2013 MS– DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS final rule. We posted a Definitions Manual of the ICD–10 MS–DRGs Version 30.0 on our ICD–10 MS–DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 29.0 to Version 30.0 to facilitate a review. We produced mainframe and computer software for Version 30.0, which was made available to the public in February 2013. Information on ordering the mainframe and computer software through NTIS was posted on the ICD–10 MS–DRG Conversion Project Web site. The ICD–10 MS–DRGs Version 30.0 computer software facilitated additional review of the ICD– 10 MS–DRGs conversion. We provided information on a study conducted on the impact of converting MS–DRGs to ICD–10. Information on this study is summarized in a paper entitled ‘‘Impact of the Transition to ICD–10 on Medicare Inpatient Hospital Payments.’’ This paper was posted on the CMS ICD–10 MS–DRGs Conversion Project Web site and was distributed and discussed at the September 15, 2010 ICD–9–CM Coordination and Maintenance Committee meeting. The paper described CMS’ approach to the conversion of the MS–DRGs from ICD– 9–CM codes to ICD–10 codes. The study was undertaken using the ICD–9–CM MS–DRGs Version 27.0 (FY 2010) which was converted to the ICD–10 MS–DRGs Version 27.0. The study estimated the impact on aggregate payment to hospitals and the distribution of payments across hospitals. The impact of the conversion from ICD–9–CM to ICD–10 on Medicare MS–DRG hospital payments was estimated using FY 2009 Medicare claims data. The study found PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 49881 a hospital payment increase of 0.05 percent using the ICD–10 MS–DRGs Version 27.0. CMS provided an overview of this hospital payment impact study at the March 5, 2012 ICD–9–CM Coordination and Maintenance Committee meeting. This presentation followed presentations on the creation of ICD–10 MS–DRGs Version 29.0. A summary report of this meeting can be found on the CMS Web site at: https:// www.cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ index.html. At this March 2012 meeting, CMS announced that it would produce an update on this impact study based on an updated version of the ICD–10 MS– DRGs. This update of the impact study was presented at the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting. The study found that moving from an ICD– 9–CM-based system to an ICD–10 MS– DRG replicated system would lead to DRG reassignments on only 1 percent of the 10 million MedPAR sample records used in the study. Ninety-nine percent of the records did not shift to another MS–DRG when using an ICD–10 MS– DRG system. For the 1 percent of the records that shifted, 45 percent of the shifts were to a higher weighted MS– DRG, while 55 percent of the shifts were to lower weighted MS–DRGs. The net impact across all MS–DRGs was a reduction by 4/10000 or minus 4 pennies per $100. The updated paper is posted on the CMS Web site at: https:// cms.hhs.gov/Medicare/Coding/ICD10/ ICD-10-MS-DRG-ConversionProject.html under the ‘‘Downloads’’ section. Information on the March 5, 2013 ICD–9–CM Coordination and Maintenance Committee meeting can be found on the CMS Web site at: https:// cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ICD-9CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD–10 MS–DRG Version 30.0 software provided additional information to the public who were evaluating the conversion of the MS–DRGs to ICD–10 MS–DRGs. CMS prepared the ICD–10 MS–DRGs Version 31.0 based on the FY 2014 MS– DRGs (Version 31.0) that we finalized in the FY 2014 IPPS/LTCH PPS final rule. In November 2013, we posted a Definitions Manual of the ICD–10 MS– DRGs Version 31.0 on the ICD–10 MS– DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We also prepared a document that described changes made from Version 30.0 to Version 31.0 to facilitate a review. We E:\FR\FM\22AUR2.SGM 22AUR2 49882 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations produced mainframe and computer software for Version 31.0, which was made available to the public in December 2013. Information on ordering the mainframe and computer software through NTIS was posted on the CMS Web site at: https://cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the ‘‘Related Links’’ section. This ICD–10 MS–DRGs Version 31.0 computer software facilitated additional review of the ICD–10 MS–DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD–10 MS–DRGs did not accurately reflect grouping logic found in the ICD–9–CM MS–DRGs Version 31.0. We reviewed comments received and developed an update of ICD–10 MS– DRGs Version 31.0, which we called ICD–10 MS–DRGs Version 31.0–R. We have posted a Definitions Manual of the ICD–10 MS–DRGs Version 31.0–R on the ICD–10 MS–DRG Conversion Project Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We also prepared a document that describes changes made from Version 31.0 to Version 31.0–R to facilitate a review. We will continue to share ICD–10–MS–DRG conversion activities with the public through this Web site. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV b. Basis for FY 2015 MS–DRG Updates CMS encourages input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014. The comments that were submitted in a timely manner for FY 2015 are discussed below in this section. Following are the changes we proposed to the MS–DRGs for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28004), we invited public comment on each of the MS– DRG classification proposed changes described below, as well as our proposals to maintain certain existing MS–DRG classifications, which also are discussed below. In some cases, we proposed changes to the MS–DRG classifications based on our analysis of claims data. In other cases, we proposed to maintain the existing MS–DRG classification based on our analysis of claims data. For the FY 2015 proposed rule, our MS–DRG analysis was based on claims data from the December 2013 update of the FY 2013 MedPAR file, which contains hospital bills received through September 30, 2013, for discharges occurring through September 30, 2013. In our discussion of the proposed MS–DRG reclassification changes that follows, we refer to our analysis of claims data from the ‘‘December 2013 update of the FY 2013 MedPAR file.’’ As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modification to the MS–DRGs for particular circumstances brought to our attention, we considered whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients in the MS– DRG. We evaluated patient care costs using average costs and lengths of stay and relied on the judgment of our clinical advisors to decide whether patients are clinically distinct or similar to other patients in the MS–DRG. In evaluating resource costs, we considered both the absolute and percentage differences in average costs between the cases we selected for review and the remainder of cases in the MS–DRG. We also considered variation in costs within these groups; that is, whether observed average differences were consistent across patients or attributable to cases that were extreme in terms of costs or length of stay, or both. Further, we considered the number of patients who will have a given set of characteristics and generally preferred not to create a new MS–DRG unless it would include a substantial number of cases. 2. MDC 1 (Diseases and Disorders of the Nervous System) a. Intracerebral Therapies: Gliadel® Wafer During the comment period for the FY 2014 IPPS/LTCH PPS proposed rule, we received a public comment that we considered to be outside the scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The commenter requested that a new MS–DRG be created for intracerebral therapies, including implantation of chemotherapeutic agents. Specifically, the commenter referred to the Gliadel® Wafer for the treatment of High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors originating in the brain. The Gliadel® Wafer has been discussed in prior rulemaking, including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule (68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005 IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR 48957 through 48971); and the FY 2008 IPPS/ LTCH PPS final rule (72 FR 47252 through 47253). We refer readers to these prior discussions for further background information regarding the Gliadel® Wafer. Effective October 1, 2002, ICD–9–CM procedure code 00.10 (Implantation of chemotherapeutic agent) was created to identify and describe insertion of the Gliadel® Wafer. This procedure code is assigned to MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in MDC 1. According to the commenter, this current MS–DRG assignment does not compensate providers adequately for the expenses incurred to perform the surgery and implantation of the wafer device. The commenter noted that MS– DRG 023 has a national average payment rate of approximately $28,016. However, the commenter stated, ‘‘the acquisition cost for 1 box of the Gliadel® Wafer alone (typical utilization per procedure is 8 wafers or 1 box) is $29,035.’’ We conducted an analysis using claims data from the December 2013 update of the FY 2013 MedPAR file. Our findings are shown in the table below. Number of cases MS–DRG MS–DRG 023—All cases ............................................................................................................ MS–DRG 023—Cases with procedure code 00.10 .................................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 5,383 158 22AUR2 Average length of stay 10.98 7.0 Average costs $36,982 34,027 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations As shown in the table above, there were a total of 5,383 cases in MS–DRG 023 with an average length of stay of 10.98 days and average costs of $36,982. The number of cases reporting procedure code 00.10 in MS–DRG 023 totaled 158, with an average length of stay of 7.0 days and average costs of $34,027. The data clearly demonstrate that the volume of cases reporting procedure code 00.10 within MS–DRG 023 have a shorter average length of stay and are lower in average costs in comparison to all the cases in the MS–DRG. As we stated in the proposed rule, given the low volume of cases, shorter average length of stay, and lower average costs, the data do not support the creation of a new MS–DRG for cases utilizing the Gliadel® Wafer. In addition, our clinical advisors determined that cases reporting procedure code 00.10 are appropriately assigned within MS–DRG 023. As discussed in the FY 2005 IPPS final rule (69 FR 48959), Gliadel® Wafer cases were assigned to a new DRG that was clinically coherent and reflected the resources used to treat those cases, which appropriately addressed the concerns of commenters who raised questions regarding DRG assignment for those cases at that time. Subsequently, with the adoption of the MS–DRGs, in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47252 through 47253), we assigned all cases utilizing the Gliadel® Wafer technology to MS–DRG 023, the higher severity level, and revised the title of this MS–DRG in recognition of the complexity and costs associated with the implantation. Our clinical advisors continue to support this assignment for these same reasons. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to create a new MS–DRG for FY 2015 for cases where ICD–9–CM procedure code 00.10 is reported. We invited public comments on our proposal to maintain the current MS–DRG structure. Comment: Several commenters supported CMS’ proposal to maintain cases reporting procedure code 00.10 in MS–DRG 23, stating it was reasonable given the data and information provided. Response: We appreciate the commenters’ support. Comment: Some commenters believed that MS–DRG 23 does not provide adequate payment to hospitals that perform craniotomies with insertion of the Gliadel® Wafer. These commenters suggested the MedPAR data are flawed for a number of reasons. The commenters indicated that, upon conducting their own analysis of FY 2012 MedPAR data, there appears to be VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 confusion among providers on how to accurately report procedure code 00.10. The commenters reported that, during their analysis, they encountered claims where procedure code 00.10 was reported for diagnoses of several other types of cancers (small and large bowel, pancreatic, and liver) that were completely unrelated to the brain. One commenter suggested that several providers who have reported procedure code 00.10 did not ever purchase the Gliadel® Wafer product. This commenter noted that it is unclear if the product should be classified as an implant or a drug within the revenue codes and that this uncertainty results in additional confusion. The same commenter urged CMS to consider more input from the professional community and Medicare beneficiaries, as well as data sources other than the MedPAR file when evaluating MS–DRG assignments for low volume procedures so as not to restrict access to care for patients in need of this intracerebral therapy. Response: We acknowledge the commenters’ concerns. With regard to confusion on how to accurately report procedure code 00.10 and concern that the code is being reported for other types of cancers besides brain cancer, we point out that the AHA’s Coding Clinic for ICD–9–CM has provided coding instruction and examples for how to appropriately assign and report this code. Specifically, Coding Clinic Fourth Quarter, 2002, explains how the chemotherapy wafer is utilized in brain cancer and that chemotherapy wafers also have been used to treat the liver and bladder as well as other sites. We also note that the terms associated with procedure code 00.10 within ICD–9–CM are not restricted solely for use of the Gliadel® Wafer product. The ICD–9–CM coding classification system is not device specific. With respect to the comment that providers are confused as to assigning an implant or drug revenue code to the Gliadel® Wafer product, we note that where explicit instructions are not provided, providers should report their charges under the revenue code that will result in the charges being assigned to the same cost center to which the cost of those services are assigned in the cost report. We appreciate the commenter’s suggestion to obtain additional input from the professional community. Comment: One commenter recommended that a new MS–DRG be created specifically for the Gliadel® Wafer product. The commenter stated that it is unacceptable for CMS to state there are too few cases to do so. Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 49883 analysis of the claims data and our clinical advisors did not support creation of a new MS–DRG. Furthermore, the MS–DRGs are a classification system intended to group together those diagnoses and procedures with similar clinical characteristics and utilization of resources. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS– DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. Moreover, our clinical advisors have examined this issue and continue to advise us that the procedure code 00.10 cases are appropriately classified within MS–DRG 23 because they are clinically similar based on both the craniotomy and the insertion of the device, among other reasons. Our advisors reaffirmed their assessment that the groupings were not overly broad or heterogeneous, reiterating that the clinical flexibility of both physicians and hospitals is maximized when larger cohorts of clinically similar patients are grouped and the costs averaged. They note that many factors are considered when comparing groups of patients, including such factors as length of stay, cost of specific devices, type of device, type of procedure, and anatomical location, among others, and stated that the commenter did not identify any factors that would necessitate an atypical small, separate grouping when these cases are categorized. Our clinical advisors do not support creating a new MS DRG for such a small number of cases but would not support creating a separate DRG even if the volume of cases was large. After consideration of the public comments we received, we are finalizing our proposal to maintain the current structure for MS–DRG 23 for FY 2015. b. Endovascular Embolization or Occlusion of Head and Neck We received a request to change the MS–DRG assignment for the following three ICD–9–CM procedure codes representing endovascular embolization or occlusion procedures of the head and neck: • 39.72 (Endovascular (total) embolization or occlusion of head and neck vessels); • 39.75 (Endovascular embolization or occlusion of vessel(s) of head or neck using bare coils); and • 39.76 (Endovascular embolization or occlusion of vessel(s) of head or neck using bioactive coils). E:\FR\FM\22AUR2.SGM 22AUR2 49884 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations These three procedure codes are currently assigned to the following eight MS–DRGs under MDC 1. Cases assigned to MS–DRGs 020, 021, and 022 require a principal diagnosis of hemorrhage. Cases assigned to MS–DRGs 023 and 024 require the insertion of a major implant or an acute complex central nervous system (CNS) principal diagnosis. Cases assigned to MS–DRGs 025, 026, and 027 do not have a principal diagnosis of hemorrhage, an acute complex CNS principal diagnosis, or a major device implant. • MS–DRG 020 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with MCC) • MS–DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with CC) • MS–DRG 022 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage without CC/MCC) • MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant) • MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without MCC) • MS–DRG 025 (Craniotomy & Endovascular Intracranial Procedures with MCC) • MS–DRG 026 (Craniotomy & Endovascular Intracranial Procedures with CC) • MS–DRG 027 (Craniotomy & Endovascular Intracranial Procedures without CC/MCC) The requestor recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved from MS– DRGs 025, 026, and 027 to MS–DRGs 023 and 024, even when there is no reported acute complex CNS principal diagnosis or a major device implant. The requestor stated that unruptured aneurysms can be treated by a minimally invasive technique utilizing endovascular coiling. The requester noted that a microcatheter is inserted into a groin artery and navigated through the vascular system to the location of the aneurysm. The coils are inserted through the microcatheter into the aneurysm in order to occlude (fill) the aneurysm from inside the blood vessel. Once the coils are implanted, the blood flow pattern within the aneurysm is altered. The requestor stated that these cases do not have a principal diagnosis of hemorrhage because the treatment is for an unruptured aneurysm which has not hemorrhaged. Furthermore, the requestor stated that only a few of these cases without hemorrhage have a complex CNS principal diagnosis. Therefore, the requester believed that most of the cases should be assigned to MS–DRGs 025, 026, and 027. The requestor stated that the average costs of coil cases captured by procedure codes 39.72, 39.75, and 39.76 are significantly higher than other cases within MS–DRGs 025, 026, and 027 where most of the coil cases are Number of cases MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 23—All cases .............................................................................................................. 24—All cases .............................................................................................................. 25—All cases .............................................................................................................. 25—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ 26—All cases .............................................................................................................. 26—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ 27—All cases .............................................................................................................. 27—Cases with procedure code 39.72, 39.75, or 39.76 ............................................ Our clinical advisors reviewed the results of our examination and determined that the endovascular embolization or occlusion of head and neck procedures are appropriately classified within MS–DRGs 025, 026, and 027 because they do not have an acute complex CNS principal diagnosis or a major device implant which would add to their clinical complexity. Cases in MS–DRG 024 have average costs that are $4,049 higher than cases in MS–DRG 027 with procedure code 39.72, 39.75, or 39.76. We acknowledge that the 1,245 cases with procedure code 39.72, 39.75, or 39.76 in MS–DRGs 025 and 026 have VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 average costs that are closer to those in MS–DRGs 023 and 024. However, these cases are 1,245 of the total 2,976 cases that would be involved if we moved all MS–DRGs 025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to MS–DRGs 023 and 024, even if they did not have an acute complex CNS principal diagnosis or a major device implant. Based on these findings and the recommendations from our clinical advisors, we determined that proposing to move endovascular embolization or occlusion of head and neck procedures from MS–DRGs 025, 026, and 027 to MS–DRGs 023 and 024 was not PO 00000 assigned. As stated earlier, the requester recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved to MS–DRGs 023 and 024, even when there is not an acute complex CNS principal diagnosis or a major device implant reported. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular embolization or occlusion of head and neck. The table below shows our findings. For MS–DRGs 025, 026, and 027, the cases identified by procedure code 39.72, 39.75, or 39.76 (endovascular embolization or occlusion of head and neck) have higher average costs and shorter lengths of stay in comparison to all the cases within each of those respective MS–DRGs. The average costs of cases in MS–DRG 024 are $4,049 higher than the average costs of the 1,731 endovascular embolization or occlusion of head and neck procedures cases in MS–DRG 027 ($26,250 versus $22,201). The findings also show that the 524 cases with procedure code 39.72, 39.75, or 39.76 with average costs of $41,030 in MS– DRG 025 are closer to the average costs of $36,982 for cases in MS–DRG 023. Lastly, we found that the 721 endovascular embolization or occlusion of head and neck procedure cases in MS–DRG 026 have average costs of $27,998 compared to average costs of $26,250 for cases in MS–DRG 024. Frm 00032 Fmt 4701 Sfmt 4700 5,383 1,745 15,937 524 8,520 721 10,326 1,731 Average length of stay 10.98 6.30 9.68 7.97 6.16 3.14 3.30 1.66 Average costs $36,982 26,250 29,722 41,030 21,194 27,998 16,389 22,201 warranted. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to maintain the current MS– DRG assignments for endovascular embolization or occlusion of head and neck procedures. We invited public comments on our proposal. Comment: A number of commenters supported CMS’ proposal to maintain the current MS–DRG assignment for codes 39.72, 39.75, or 39.76 in MS– DRGs 025, 026, and 027. The commenters stated this was reasonable, given the data and information provided. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations A number of commenters objected to the proposal to maintain the current MS–DRG assignments for endovascular embolizations captured in codes 39.72, 39.75 and 39.76. The commenters recommended that CMS move the three codes to MS–DRGs 023 and 024. The commenters stated that the coils used in the endovascular embolizations are expensive and the endovascular procedures require substantial additional resources. The commenters stated that their hospitals are significantly underpaid for these cases. The commenters recommended that endovascular embolization codes 39.72, 39.75 and 39.76 be classified a ‘‘Major Device Implants’’ and therefore assigned to MS–DRGs 023 and 024. Several commenters recommended that CMS create new severity subgroups within MS–DRG 024 to indicate cases with CC and cases without CC/MCC. The commenters recommended a threelevel severity split as follows: • MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant); • MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with CC); and • MS–DRG XXX (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without CC/ MCC) The commenters recommended that endovascular embolizations captured in codes 39.72, 39.75 and 39.76 be added to these three recommended MS–DRGs as part of the Major Device Implant group. One of the commenters recommended the creation of a new set of MS–DRGs to capture intracranial endovascular embolization procedures if CMS decided not to modify the current MS– DRGs by moving codes 39.72, 39.75, and 39.76 to MS–DRGs 023 and 024. The commenter suggested the following titles for the recommended new MS– DRGs: • Recommended new MS–DRG 043 (Intracranial Endovascular Embolization Procedures with MCC) • Recommended new MS–DRG 044 (Intracranial Endovascular Embolization Procedures with CC) • Recommended new MS–DRG 045 (Intracranial Endovascular Embolization Procedures with Device Implant without CC/MCC). The commenter acknowledged that there were a limited number of other intracranial endovascular procedures that could also be considered for inclusion in the new base MS–DRG with this new option. The commenter supported including any additional intracranial endovascular embolization procedures that CMS deemed to be clinically appropriate. 49885 Response: We appreciate the commenters’ support of our proposal to maintain the current MS–DRG assignment. We examined the commenters’ recommendation of subdividing MS–DRG 024 by adding an additional severity level (with CC and without CC/MCC). The findings from the examination of the claims data in the December 2013 update of the FY 2013 MedPAR file on endovascular embolization or occlusion of head and neck procedures are shown in the first table below. We applied the following criteria established in FY 2008 (72 FR 47169) to determine if the creation of a new CC or MCC subgroup within a base MS–DRG was warranted: • A reduction in variance of costs of at least 3 percent. • At least 5 percent of the patients in the MS–DRG fall within the CC or MCC subgroup. • At least 500 cases are in the CC or MCC subgroup. • There is at least a 20 percent different in average costs between subgroups. • There is a $2,000 difference in average costs between subgroups. In order to warrant creation of a CC or MCC subgroup within a base MS– DRG, the subgroup must meet all five of the criteria. ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF HEAD AND NECK PROCEDURES Number of cases MS–DRG MS–DRG 23—All cases .............................................................................................................. MS–DRG 24—All cases .............................................................................................................. The following table shows the number of cases that would be within each of the new requested three MS–DRGs, 5,383 1,745 Number of cases tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG 23 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant) .................................................................................................. Proposed MS–DRG 24 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with CC or Chemo Implant) .................................................................................... Proposed MS–DRG XX (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without CC/MCC or Chemo Implant) ............................................................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 10.98 6.30 Average costs $36,982 26,250 including the two proposed severity levels. MS–DRG We determined that the requested new severity subdivision of with CC and without CC/MCC would meet only four of the five criteria. The requested new with CC and without CC/MCC severity levels do not meet the criterion that Average length of stay there is at least a 20 percent difference in average costs between subgroups. Because the requested new severity level does not meet all five criteria, we are not modifying MS–DRG 024 to create severity levels for cases with CC and cases without CC/MCC. PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 Average length of stay Average costs 5,383 10.98 $36,982 1,211 7.65 27,360 534 3.25 23,733 We also evaluated the request to add endovascular embolizations captured by codes 39.72, 39.75 and 39.76 to the group labeled ‘‘Major Device Implants’’ within MS–DRGs 023 and 024. Major Device Implants within MS–DRGs 023 and 024 include the following three sets E:\FR\FM\22AUR2.SGM 22AUR2 49886 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of intracranial neurostimulator procedures. Each of the three is composed of the implantation of an intracranial neurostimulator pulse generator which is implanted in the patient, as well as the insertion of a neurostimulator lead which is inserted through a burr hole in the skull into the patient’s brain. • 01.20 (Cranial implantation or replacement of neurostimulator pulse generator) and 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) • 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) and 86.95 (Insertion or replacement of multiple array neurostimulator pulse generator, not specified as rechargeable) • 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) and 86.98 (Insertion or replacement of multiple array (two or more) rechargeable neurostimulator pulse generator) Our clinical advisors reviewed this issue and advised us not to classify endovascular embolization procedures in the same manner as patients who receive intracranial neurostimulators. They advised against classifying endovascular embolizations as Major Device Implants for several reasons. First, the endovascular embolization device itself is a simple mechanical device, such as a wire, not a complex electronic device. The work involved in configuring the neurostimulator device to the patient, both before and after insertion, is significantly different from that of the endovascular embolizations. Second, endovascular embolizations are not devices implanted through an open procedure as are intracranial neurostimulator pulse generators and neurostimulator leads. Our clinical advisors stated that open procedures, including open procedures to implant the generator but especially including open skull procedures, from a clinical standpoint are significantly different than endovascular procedures, both in terms of the work, the facilities, the risks, and recovery rates (length of stay). Our clinical advisors specifically stated that the insertion of coils through an endovascular approach is not similar to the insertion of a complex electronic device. Endovascular embolizations do not match the clinical complexity and severity of the intracranial neurostimulators which have greater lengths of stay. Our clinical advisors stated that care of patients who receive endovascular embolizations is not at the same severity level as for those patients who have a major device implant such as an intracranial neurostimulator or those patients with an acute complex central nervous system principal diagnosis. Therefore, our clinical advisors recommended not moving endovascular embolizations to MS– DRGs 023 or 024. They recommended maintaining their current assignments in MS–DRGs 025, 026, and 027. We evaluated the request to create a new set of MS–DRGs to capture intracranial endovascular embolization procedures. The requestor recommended including codes 39.72, 39.75, and 39.76 and any other procedures which CMS deemed appropriate. Our clinical advisors stated that codes 39.72, 39.75, and 39.76 were appropriately assigned to MS–DRGs 025, 026, and 027 because they are clinically similar to other cases in MS– DRGs 025, 026, and 027. In addition, as stated earlier, these cases do not match the clinical complexity and severity of the intracranial neurostimulators within MS–DRGs 023 and 024. For these reasons, our clinical advisors did not support creating a new set of MS–DRG for these codes and any additional intracranial endovascular embolization procedures. After consideration of public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignments for codes tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 163—All cases ............................................................................................................ 163—Cases with procedure code 34.85 .................................................................... 164—All cases ............................................................................................................ 164—Cases with procedure code 34.85 .................................................................... 165—All cases ............................................................................................................ 165—Cases with procedure code 34.85 .................................................................... There were only 48 cases of diaphragmatic pacemakers within MS– DRGs 163, 164, and 165. The average costs of these diaphragmatic pacemaker cases ranged from $22,977 for the single VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 case in MS–DRG 165 to $29,406 for the cases in MS–DRG 163, compared to the average costs for all cases in MS–DRGs 163, 164, and 165, which range from $13,081 to $34,308. The average cost for PO 00000 3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System We received a request to create a new MS–DRG for the Avery Breathing Pacemaker System. This system is also called a diaphragmatic pacemaker and is captured by ICD–9–CM procedure code 34.85 (Implantation of diaphragmatic pacemaker). The requestor stated that the diaphragmatic pacemaker is indicated for adult and pediatric patients with chronic respiratory insufficiency that would otherwise be dependent on ventilator support. The procedure consists of surgically implanted receivers and electrodes mated to an external transmitter by antennas worn over the implanted receivers. The external transmitter and antennas send radiofrequency energy to the implanted receivers under the skin. The receivers then convert the radio waves into stimulating pulses sent down the electrodes to the phrenic nerves, causing the diaphragm to contract. The requestor stated that this normal pattern is superior to mechanical ventilators that force air into the chest. The requestor also stated that the system is expensive; the device cost is approximately $57,000. According to the requestor, given the cost of the device, hospitals are reluctant to use it. The requestor did not make a specific MS–DRG reassignment request. When used for a respiratory failure patient, procedure code 34.85 is assigned to MS–DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively). We examined claims data from the December 2013 update of the FY 2013 MedPAR file for diaphragmatic pacemaker cases. The following table shows our findings. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 39.72, 39.75 and 39.76 in MS–DRGs 025, 026, and 027. Frm 00034 Fmt 4701 Sfmt 4700 11,766 13 16,087 34 9,207 1 Average length of stay 13.13 2.23 6.58 1.71 3.91 1.00 Average costs $34,308 $29,406 $18,352 $23,406 $13,081 $22,977 diaphragmatic pacemaker cases in MS– DRG 163 was lower than that for all cases in MS–DRG 163, $29,406 compared to $34,308 for all cases. The average cost for diaphragmatic E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations pacemaker cases was higher for MS– DRG 164, $23,406 compared to $18,352 for all cases. While the average cost for the single diaphragmatic pacemaker case was significantly higher for MS– DRG 165, $22,977 compared to $13,081, we were unable to determine if additional factors might have impacted the higher cost for this single case. We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, given the small number of diaphragmatic pacemaker cases that we found, we did not believe that there was justification for creating a new MS–DRG. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS–DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. We noted that, as discussed in section II.G.4.c. of the preamble of the proposed rule, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS–DRG is whether there are at least 500 cases in the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS–DRG, applying it here suggests that creating a new MS–DRG for only 48 cases would not be appropriate. Although the average costs of these diaphragmatic pacemaker cases are higher than the average costs of all cases in MS–DRG 164, the average costs are lower than all cases in MS–DRG 163. We believe the current MS–DRG assignment is appropriate and that the data do not support creating an MS– DRG because there are so few cases. Our clinical advisors reviewed this issue and determined that the diaphragmatic pacemaker cases are appropriately classified within MS– DRGs 163, 164, and 165 because they are clinically similar to other cases of patients with major chest procedures within MS–DRGs 163, 164, and 165. Our clinical advisors did not support creating a new MS–DRG for such a small number of cases. Based on the results of the examination of the claims data, the recommendations from our clinical advisors, and the small number of diaphragmatic pacemaker cases, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to create a new MS– DRG for diaphragmatic pacemaker cases for FY 2015. We proposed to maintain the current MS–DRG assignments for diaphragmatic pacemaker cases. We invited public comments on our proposal. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Comment: A number of commenters supported CMS’ proposal to maintain the current MS–DRG assignment for diaphragmatic pacemakers. The commenters stated that the proposal was reasonable given the data and information presented. Another commenter expressed appreciation for the analysis performed on this issue, but disagreed with the conclusion to leave diaphragmatic pacemakers in MS–DRGs 163, 164, and 165. The commenter stated that, although the number of cases identified (48) is small, they are unique in both their costs and their length of stay. The commenter stated that these cases do not represent the full universe of Medicare beneficiaries who would be good candidates for the diaphragmatic pacemaker. The commenter expressed surprise at the average cost data presented in the table in the proposed rule. The commenter stated that it sells this system directly to hospitals and does not know what insurance plan covers the procedure. However, in investigating systems hospitals reported with code 34.85, the commenter stated that it discovered that this code covers systems provided by other manufacturers and that the cost of devices by other manufacturers is lower than the Avery system and is closer to the costs in CMS’ claims data. The commenter stated that the Avery system is fully implantable, whereas other systems are not. The commenter asserted that one other system has percutaneous lead wires that leave the patients; therefore, the other system is not totally implantable. The commenter made inquiries of hospitals and found that a majority of those hospitals contacted were using a lower priced system. The commenter stated that by grouping multiple manufacturers’ devices into the same MS–DRG, with the same payment rate, CMS was limiting physician and patient choice of a device. The commenter recommended that MS–DRG payments be made based on the equipment provided and allow hospitals to recoup the costs of each system used. The commenter stated that inadequate payment discourages hospitals from offering the service to patients. The commenter also stated that these cases are anomalies in the current MS–DRGs to which they are assigned and should be classified into a single, unique MS– DRG that would be clinically and financially coherent. The commenter believed that such a correction could increase the number of eligible Medicare beneficiaries who would benefit from use of the device, allowing them to stop using mechanical PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 49887 ventilation, which would greatly improve their overall health and quality of life. The commenter also stated that the average costs for 35 of the cases with procedure code 34.85 exceed the average costs of the other cases in the MS–DRG to which they are assigned. The commenter stated that it found the average length of stay for all 48 cases to be substantially less than the average length of stay for all of the other cases. Therefore, the commenter stated that the costs for the hospital are related primarily to the device and not to the direct hospital care provided to the patients. The commenter stated that the small number of diaphragmatic pacemaker cases compared to the large volume of other cases in each MS–DRG means that the unique cost factors of most of the pacemaker cases will never be reflected in the payment for these MS–DRGs. The commenter stated that hospitals have no incentive to make the service available to patients who could use the system. The commenter stated that the number of individuals who can use the pacemaker is small because of the comparatively small volume of individuals who suffer from the conditions that make the pacemaker necessary, but there are more than 48 Medicare beneficiaries who could benefit from the device. The commenter further questioned the rationale for not basing a new MS– DRG on such a small number of cases. The commenter questioned the reference to the use of 500 cases, which is one of the criteria for a severity level, when the requestor did not want a severity level, but instead was requesting a new MS–DRG for these Avery Diaphragmatic Pacemaker cases. In conclusion, the commenter urged CMS to create a new MS–DRG for procedure code 34.85. Response: We appreciate the commenters’ support for our proposal not to change the MS–DRG for diaphragmatic pacemakers. As noted by one commenter, the ICD–9–CM procedure codes capture the procedure performed, in this case the implantation of a diaphragmatic pacemaker. The codes are not manufacturer specific. This is the case for all types of implanted devices such as cardiac pacemakers, defibrillators, and orthopedic devices. The procedure codes are grouped into clinically appropriate MS–DRGs. MS–DRGs were not created to capture a device by a single manufacturer. It is assumed that hospitals and their physician staff will select the appropriate devices. CMS makes Medicare payments to hospitals for groups of similar patients within E:\FR\FM\22AUR2.SGM 22AUR2 49888 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations each MS–DRG. The average costs provided in the tables above were based on Medicare patients reported to have received a diaphragmatic pacemaker. Hospitals have been receiving payments by diagnosis-related groups for several decades and are aware that average payments will exceed the costs of some cases and be less than the costs of other cases. They are aware that the selection of a particular manufacturer, or a particular device made by one manufacturer, should be consistent with the needs of the patient. Our data do not identify which manufacturer’s devices the hospitals and physicians chose to utilize. As stated earlier, given the small number of diaphragmatic pacemaker cases, we do not believe there is justification for creating a new MS– DRG. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS–DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS DRG provides greater stability for annual updates to the relative payment weights. Our clinical advisors reviewed this issue and the public comments received and continue to advise that that the diaphragmatic pacemaker cases are appropriately classified within MS– DRGs 163, 164, and 165 because they are clinically similar to other cases of patients with major chest procedures within MS–DRGs 163, 164, and 165. They stated that the clinical flexibility of both physicians and hospitals is maximized when larger cohorts of clinically similar patients are grouped and the costs averaged. Our clinical advisors note that many factors are considered when comparing groups of patients, including such factors as length of stay, cost of specific devices, type of device, type of procedure, and anatomical location, among others. They stated that the commenter did not identify any factors that they had failed to consider when categorizing these cases. Our clinical advisors do not support creating a new MS DRG for such a small number of cases. After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignments for diaphragmatic pacemaker cases within MS–DRGs 163, 164, and 165. 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Exclusion of Left Atrial Appendage We received a request to move the exclusion of the left atrial appendage procedure, which is a non-O.R. procedure and captured by ICD–9–CM procedure code 37.36 (Excision, destruction or exclusion of left atrial appendage (LAA)), from MS–DRGs 250 (Percutaneous Cardiovascular without Number of cases MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 250—All cases ............................................................................................................ 250—Cases with procedure code 37.36 .................................................................... 251—All cases ............................................................................................................ 251—Cases with procedure code 37.36 .................................................................... 237—All cases ............................................................................................................ 238—All cases ............................................................................................................ The data in the table above show that, while the average costs of the atrial appendage exclusion procedures are higher ($29,637) than those for all cases ($21,319) within MS–DRG 250 and are higher ($18,298) than for all cases ($14,614) within MS–DRG 251, they are lower than those in MS–DRGs 237 ($35,642) and 238 ($24,511). Our clinical advisors reviewed this issue and recommended not moving these standalone percutaneous cases to MS–DRGs 237 and 238 because they do not consider them to be major cardiovascular procedures. Our clinical advisors stated that cases reporting ICD– 9–CM procedure code 37.36 are appropriately assigned within MS–DRG 250 and 251 because they are VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 percutaneous cardiovascular procedures and are clinically similar to other procedures within the MS–DRG. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to reassign exclusion of atrial appendage procedure cases from MS–DRGs 250 and 251 to MS–DRGs 237 and 238 for FY 2015. We invited public comments on our proposal to maintain the current MS–DRG structure for the exclusion of the left atrial appendage. Comment: Several commenters supported CMS’ proposal to maintain the current MS–DRGs 250 and 251 assignment for exclusion of the left atrial appendage. Several commenters disagreed with the proposal and recommended that CMS assign PO 00000 Coronary Artery Stent with MCC) and 251 (Percutaneous Cardiovascular without Coronary Artery Stent without MCC) to MS–DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC). The requestor stated that the exclusion of the left atrial appendage procedure code 37.36 is not clinically coherent with the other procedures in MS–DRGs 250 and 251 and that this current assignment to MS–DRGs 250 and 251 does not compensate providers adequately for the expenses incurred to perform this procedure and placement of the device. The exclusion of the left atrial appendage procedure involves a percutaneous placement of a snare/ suture around the left atrial appendage to close it off. The exclusion of the left atrial appendage procedure takes place in the cardiac catheterization laboratory under general anesthesia and is a catheter based closed-chest procedure instead of an open heart surgical technique to treat the same clinical condition, with the same intended results. The procedure can be performed by either an interventional cardiologist or an electrophysiologist. We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS– DRGs 250 and 251 and MS–DRGs 237 and 238. Our findings are shown in the table below. Frm 00036 Fmt 4701 Sfmt 4700 9,174 61 26,331 341 17,813 33,644 Average length of stay 6.90 7.21 3.01 3.01 9.66 3.73 Average costs $21,319 29,637 14,614 18,298 35,642 24,511 exclusion of the left atrial appendage to MS–DRG 237 and 238 because the procedure can be performed as a standalone percutaneous procedure or in combination with an open chest procedure such as cardiac bypass surgery. The commenters stated that when the procedure is performed in conjunction with an open chest procedure, the procedure is performed in a surgical suite. Therefore, the commenters recommended that exclusion of the left atrial appendage be assigned to MS–DRGs 237 and 238 when it is a standalone procedure. Response: We appreciate the commenters’ support for our proposal to maintain the current MS–DRG assignment for the exclusion of atrial E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations appendage procedures. We are not accepting the commenters’ recommendation to move the cases to MS–DRGs 237 and 238. Our clinical advisors reviewed these public comments and continue to maintain that cases reporting ICD–9–CM procedure code 37.36 are appropriately assigned within MS–DRG 250 and 251 because they are percutaneous cardiovascular procedures and are clinically similar to other procedures within the MS–DRGs. They also stated that when performed with an open chest procedure, these procedures would map to a clinically appropriate open chest MS–DRG under the current MS–DRG logic. Our clinical advisors confirmed that although these are not insignificant procedures, the procedures are not considered to be major cardiovascular procedures on the same scale and with similar characteristics as cases grouped together in MS–DRGs 237 and 238. After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignment for exclusion of atrial appendage in MS– DRGs 250 and 251 for FY 2015. b. Transcatheter Mitral Valve Repair: MitraClip® The MitraClip® System (hereafter referred to as MitraClip®) for transcatheter mitral valve repair has been discussed in extensive detail in previous rulemaking, including the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR 51528 through 51529) and the FY 2013 IPPS/ LTCH PPS proposed rule (77 FR 27902 through 27903) and final rule (77 FR 53308 through 53310), in response to requests for MS–DRG reclassification, as well as, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552) under the new technology addon payment policy. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50575), the application for a new technology add-on payment for MitraClip® was unable to be considered further due to lack of FDA approval by the July 1, 2013 deadline. Subsequently, on October 24, 2013, MitraClip® received FDA approval. As a result, the manufacturer has submitted new requests for both an MS–DRG reclassification and new technology add-on payment for FY 2015. We refer readers to section II.I. of the preamble of the proposed rule and this final rule for a discussion regarding the application for MitraClip® under the new technology add-on payment policy. Below we discuss the MS–DRG reclassification request. The manufacturer’s request for MS– DRG reclassification involves two components. The first component consists of reassigning cases reporting a transcatheter mitral valve repair using the MitraClip® from MS–DRGs 250 and 251 (Percutaneous Cardiovascular tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG MS–DRG MS–DRG MS–DRG 250—All cases ............................................................................................................ 250—Cases with procedure code 35.97 .................................................................... 251—All cases ............................................................................................................ 251—Cases with procedure code 35.97 .................................................................... As displayed in the table above, the data demonstrate that, for MS–DRG 250, there were a total of 9,174 cases with an average length of stay of 6.90 days and average costs of $21,319. The number of cases reporting the ICD–9–CM procedure code 35.97 in MS–DRG 250 totaled 67 with an average length of stay of 8.48 days and average costs of $39,103. For MS–DRG 251, there were a total of 26,331 cases with an average length of stay of 3.01 days and average costs of $14,614. There were 127 cases found in MS–DRG 251 reporting the procedure code 35.97 with an average length of stay of 3.94 days and average costs of $25,635. We recognize that the cases reporting procedure code 35.97 have a longer length of stay and higher average costs in comparison to all the cases within MS–DRGs 250 and 251. However, as stated in prior rulemaking (77 FR 53309), it is a fundamental principle of an averaged payment 216—All 217—All 218—All 219—All 220—All VerDate Mar<15>2010 cases cases cases cases cases ............................................................................................................ ............................................................................................................ ............................................................................................................ ............................................................................................................ ............................................................................................................ 18:25 Aug 21, 2014 Jkt 232001 PO 00000 9,174 67 26,331 127 Frm 00037 Fmt 4701 Sfmt 4700 Average length of stay 6.90 8.48 3.01 3.94 Average costs $21,319 39,103 14,614 25,635 system that half of the procedures in a group will have above average costs. It is expected that there will be higher cost and lower cost subsets, especially when a subset has low numbers. We also evaluated the claims data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 216 through 221. Our findings are shown in the table below. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG Procedure without Coronary Artery Stent with MCC and without MCC, respectively) to MS–DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/MCC). The second component of the manufacturer’s request was for CMS to examine the creation of a new base MS– DRG for transcatheter valve therapies. Effective October 1, 2010, ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant) was created to identify and describe the MitraClip® technology. To address the first component of the manufacturer’s request, we conducted an analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS–DRGs 250 and 251. The table below shows our findings. Number of cases MS–DRG 49889 10,131 5,374 882 17,856 21,059 E:\FR\FM\22AUR2.SGM 22AUR2 Average length of stay 15.41 9.51 6.88 11.63 7.13 Average costs $65,478 44,695 39,470 54,590 38,137 49890 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Number of cases MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG 221—All cases ............................................................................................................ The data in our findings did not warrant reassignment of cases reporting use of the MitraClip®. We stated in the proposed rule that if we were to propose reassignment of cases reporting procedure code 35.97 to MS–DRGs 216 through 221, they would be significantly overpaid, as the average costs range from $34,310 to $65,478 for those MS– DRGs. In addition, our clinical advisors did not support reassigning these cases. They noted that the current MS–DRG assignment is appropriate for the reasons stated in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53309). To reiterate, our clinical advisors noted that the current MS–DRG assignment is reasonable because the operating room resource utilizations of percutaneous procedures, such as those found in MS– DRGs 250 and 251, tend to group together, and are generally less costly than open procedures, such as those found in MS–DRGs 216 through 221. Percutaneous procedures by organ system represent groups that are reasonably clinically coherent. More significantly, our clinical advisors stated that postoperative resource utilization is significantly higher for open procedures with much greater morbidity and consequent recovery needs. Because the equipment, technique, staff, patient populations, and physician specialty all tend to group by type of procedure (percutaneous or open), separately grouping percutaneous procedures and open procedures is more clinically consistent. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to modify the current MS– DRG assignment for cases reporting procedure code 35.97 from MS–DRGs 250 and 251 to MS–DRGs 216 through 221 for FY 2015. We invited public comments on our proposal to not make any modifications to the current MS– DRG logic for these cases. Comment: Several commenters supported the proposal to maintain cases reporting procedure code 35.97 in MS–DRGs 250 and 251, stating it was reasonable given the data and information provided. Response: We acknowledge and appreciate the commenters’ support. Comment: Some commenters suggested that cases utilizing the MitraClip® should be compensated similarly to mitral valve procedures that are performed with an open approach due to the time, staff and resources involved. Commenters reported that this VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 novel technology has improved the quality of life for patients suffering from congestive heart failure. However, the commenters indicated that due to inadequate payment, their respective facilities are not able to offer the MitraClip® to the entire population that is eligible for it. The commenters also indicated that patients do not have access to this life-saving technology not only due to the lack of adequate payment to providers but also due to the cost of the device. Another commenter reported that ‘‘the price of the device should be reduced to a level that is feasible for both sponsor and hospital.’’ Commenters also suggested that congestive heart failure readmissions would be reduced if patients could be treated with the MitraClip®. Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our clinical advisors believe that the current MS–DRG assignment for the MitraClip® is reasonable because the operating room resource utilizations of percutaneous procedures, such as those found in MS–DRGs 250 and 251, tend to group together, and are generally less costly than open procedures. In addition, the data do not support reassignment. We stated in the proposed rule that if we were to propose reassignment of cases reporting procedure code 35.97 to MS–DRGs 216 through 221, they would be significantly overpaid, as the average costs range from $34,310 to $65,478 for those MS– DRGs and the average costs for cases reporting procedure code 35.97 are $30,286 for MS–DRGs 250 and 251. Comment: One commenter suggested an alternative option regarding MS–DRG reassignment for the MitraClip® and requested that CMS reassign cases reporting procedure code 35.97 from MS–DRGs 250 and 251 to MS–DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively) with concurrent approval of the new technology add-on payment application. The commenter stated that this would allow the MitraClip® to be recognized in MS– DRGs involving a major cardiovascular procedure with an implantable device. Response: We did not propose to reassign cases reporting procedure code 35.97 from MS–DRGs 250 and 251 to MS–DRGs 237 and 238. Therefore, we consider this comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. We note that, as PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 4,586 Average length of stay 5.32 Average costs 34,310 referenced in section II.G.1.b. of the preamble of this final rule, we encourage input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014. We note that the MitraClip® technology is discussed in section II.I. of the preamble of this final rule under the new technology add-on payment policy. After consideration of the public comments we received, we are finalizing our proposal to not modify the current MS–DRG assignment for cases reporting procedure code 35.97 from MS–DRGs 250 and 251 to MS– DRGs 216 through 221 for FY 2015. As indicated above, the second component of the manufacturer’s request involved the creation of a new base MS–DRG for transcatheter valve therapies. We also received a similar request from another manufacturer recommending that CMS create a new MS–DRG for procedures referred to as endovascular cardiac valve replacement procedures. We reviewed each of these requests using the same data analysis, as set forth below. The discussion for endovascular cardiac valve replacement procedures is included in section II.G.4.c. of the preamble of this final rule and includes findings from the analysis and our proposals and final policies for each of these similar, but distinct requests. c. Endovascular Cardiac Valve Replacement Procedures As noted in the previous section related to the MitraClip® technology, we received two requests to create a new base MS–DRG for what was referred to as ‘‘transcatheter valve therapies’’ by one manufacturer and ‘‘endovascular cardiac valve replacement’’ procedures by another manufacturer. Below we summarize the details of each request and review results of the data analysis that was performed. Transcatheter Valve Therapies The request related to transcatheter valve therapies consisted of creating a new MS–DRG that would include the MitraClip® technology (ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant)), along E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations with the following list of ICD–9–CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique: • 35.05 (Endovascular replacement of aortic valve); • 35.06 (Transapical replacement of aortic valve); • 35.07 (Endovascular replacement of pulmonary valve); • 35.08 (Transapical replacement of pulmonary valve); and • 35.09 (Endovascular replacement of unspecified valve). We performed analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for both the percutaneous mitral valve repair and the transcatheter/endovascular cardiac valve replacement codes in their respective MS–DRGs. The percutaneous mitral valve repair with implant 49891 (MitraClip®) procedure code is currently assigned to MS–DRGs 250 and 251, while the transcatheter/endovascular cardiac valve replacement procedure codes are currently assigned to MS– DRGs 216, 217, 218, 219, 220, and 221. As illustrated in the table below, the data demonstrate that, for MS–DRGs 250 and 251, there were a total of 194 cases reporting procedure code 35.97, with an average length of stay of 5.5 days and average costs of $30,286. MS–DRG Number of cases Average length of stay Average costs MS–DRG 250 through 251—Cases with procedure code 35.97 ................................................ 194 5.5 $30,286 Upon analysis of cases in MS–DRGs 216 through 221 reporting the cardiac valve replacement procedure codes, we found a total of 7,287 cases with an average length of stay of 8.1 days and Number of cases MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ MS–DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ The data clearly demonstrate that the volume of cases for the transcatheter/ endovascular cardiac valve replacement procedures is much higher in comparison to the volume of cases for the percutaneous mitral valve repair (MitraClip®) procedure (7,287 compared to 194). In addition, the average costs of the transcatheter/endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair with implant ($53,802 compared to $30,286). Our clinical advisors did not support grouping a percutaneous valve repair procedure with transcatheter/ endovascular valve replacement procedures. They do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClip® technology identified by procedure code 35.97 is utilized for a percutaneous mitral valve repair, while the other technologies, identified by procedure codes 35.05 through 35.09, are utilized for transcatheter/endovascular cardiac valve replacements. Consequently, the data analysis and our clinical advisors did not support the creation of a new MS–DRG. Therefore, for FY 2015, we did not propose to create a new MS– DRG to group cases reporting the percutaneous mitral valve repair (MitraClip®) procedure with transcatheter/endovascular cardiac VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 valve replacement procedures. We invited public comments on our proposal. Comment: One commenter recommended reassignment of procedure code 35.97 to a more appropriate MS–DRG. However, the commenter did not offer a specific recommendation as to which MS–DRG would be more appropriate. Response: We appreciate the commenter’s recommendation. However, as the commenter did not provide a specific MS–DRG to which procedure code 35.97 should be reassigned, we were unable to evaluate the recommendation. As we noted earlier, and as referenced in section II.G.1.b. of the preamble of this final rule, we encourage input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014. Comment: One commenter urged CMS to reassign procedure code 35.97 from its current assignment in MS– DRGs 250 and 251 to a more appropriate MS–DRG that would better recognize case complexity as a major cardiovascular procedure with a permanent implant. This commenter PO 00000 average costs of $53,802, as shown in the table below. Frm 00039 Fmt 4701 Sfmt 4700 Average length of stay Average costs 7,287 8.1 $53,802 52,601 10.1 47,177 specifically recommended the inclusion of transcatheter mitral valve repair (TMVR) within the newly proposed MS–DRGs 266 and 267, and to subsequently retitle these MS–DRGs, ‘‘Endovascular Transcatheter Valve Therapy with Implant.’’ Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule, our analysis did not support including cases reporting procedure code 35.97 for percutaneous mitral valve repair procedures together with transcatheter/ endovascular cardiac valve replacement procedures in a new MS–DRG. The average costs of the transcatheter/ endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair procedures with implant ($53,802 compared to $30,286). In addition, our clinical advisors did not support grouping a percutaneous valve repair procedure with transcatheter/endovascular valve replacement procedures. They do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClip® technology identified by procedure code 35.97 is utilized for a percutaneous mitral valve repair, while the other technologies, identified by procedure codes 35.05 through 35.09, are utilized for transcatheter/ endovascular cardiac valve replacements. E:\FR\FM\22AUR2.SGM 22AUR2 49892 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: One commenter disagreed with the CMS analysis that transcatheter mitral valve repair (TMVR) is significantly different than transcatheter aortic valve replacement (TAVR). The commenter asserted that ‘‘unlike alternative open repair and replacement procedures, a heart valve prosthesis is being manipulated/modified from a Transcatheter approach; whether the prosthesis serves to ‘replace’ or ‘repair’ an existing valve is irrelevant in regards to resource consumption.’’ The commenter urged CMS to consider all transcatheter valve procedures equally with respect to DRG assignment. Response: We disagree with the commenter that TMVR and TAVR are not significantly different. As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our analysis of the claims data and the recommendation from our clinical advisors do not support treating TMVR and all transcatheter valve procedures equally with respect to MS– DRG assignment. As noted previously, the average costs of the transcatheter/ endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair procedures with implant ($53,802 compared to $30,286). After consideration of the public comments we received, we are finalizing our proposal to not create a new MS–DRG to group cases reporting the percutaneous mitral valve repair (MitraClip®) procedure with transcatheter/endovascular cardiac valve replacement procedures. Endovascular Cardiac Valve Replacement The similar but separate request relating to endovascular cardiac valve replacement procedures consisted of creating a new MS–DRG that would only include the various types of cardiac valve replacements performed by an endovascular or transcatheter technique. In other words, this request specifically did not include the MitraClip® technology (ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant)) and only included the list of ICD–9–CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique (ICD–9–CM Number of cases MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ MS–DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.09 ........................................................................................................................................ As the data appear to indicate support for the creation of a new base MS–DRG, based on our evaluation of resource consumption, patient characteristics, volume, and costs between the cardiac valve replacements performed by an endovascular or transcatheter technique and the open surgical technique, we then applied our established criteria to determine if these cases would meet the requirements to create subgroups. We use five criteria established in the FY 2008 IPPS final rule (72 FR 47169) to review requests involving the creation of a new CC or an MCC subgroup within a base MS–DRG. As outlined in the FY 2012 IPPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS–DRG, this subgroup must meet all of the following five criteria: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • A reduction in variance of costs of at least 3 percent. • At least 5 percent of the patients in the MS–DRG fall within the CC or the MCC subgroup. • At least 500 cases are in the CC or the MCC subgroup. • There is at least a 20-percent difference in average costs between subgroups. • There is a $2,000 difference in average costs between subgroups. In applying the five criteria, we found that the data support the creation of a new MS–DRG subdivided into two severity levels. We also consulted with our clinical advisors. Our clinical advisors stated that patients receiving endovascular cardiac valve replacements are significantly different from those patients who undergo an open chest cardiac valve replacement. They noted that patients receiving endovascular cardiac valve replacements are not eligible for open chest cardiac valve procedures because PO 00000 procedure codes 35.05 through 35.09) as described earlier in this section. The human heart contains four major valves—the aortic, mitral, pulmonary, and tricuspid valves. These valves function to keep blood flowing through the heart. When conditions such as stenosis or insufficiency/regurgitation occur in one or more of these valves, valvular heart disease may result. Cardiac valve replacement surgery is performed in an effort to correct these diseased or damaged heart valves. The endovascular or transcatheter technique presents a viable option for high-risk patients who are not candidates for the traditional open surgical approach. We reviewed the claims data from the December 2013 update of the FY 2013 MedPAR file for cases in MS–DRGs 216 through 221. Our findings are shown in the chart below. The data analysis shows that cardiac valve replacements performed by an endovascular or transcatheter technique represent a total of 7,287 of the cases in MS–DRGs 216 through 221, with an average length of stay of 8.1 days and higher average costs ($53,802 compared to $47,177) in comparison to all of the cases in MS– DRGs 216 through 221. Frm 00040 Fmt 4701 Sfmt 4700 Average length of stay Average costs 7,287 8.1 $53,802 52,601 10.1 47,177 of a variety of health constraints. This highlights the fact that peri-operative complications and post-operative morbidity have significantly different profiles for open chest procedures compared with endovascular interventions. This is also substantiated by the different average lengths of stay demonstrated by the two cohorts. Our clinical advisors further noted that separately grouping these endovascular valve replacement procedures provides greater clinical cohesion for this subset of high-risk patients. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create the following MS–DRGs for endovascular cardiac valve replacements: • Proposed new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC); and • Proposed new MS–DRG 267 (Endovascular Cardiac Valve Replacement without MCC). E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Number of cases Proposed new MS–DRGs for endovascular cardiac valve replacement Proposed New MS–DRG 266 with MCC .................................................................................... Proposed New MS–DRG 267 without MCC ............................................................................... We invited public comments on our proposal to create these new MS–DRGs for FY 2015. Comment: Several commenters supported the proposal to create new MS–DRGs for endovascular cardiac valve replacement procedures. One commenter noted that ‘‘the endovascular or transcatheter approach presents a viable option for high-risk patients who are not candidates for the traditional open chest surgical approach. The proposed MS–DRGs better align the more extensive cardiac valve procedures based on clinical coherence and similar resource costs.’’ Another commenter stated that, by establishing these new MS–DRGs, ‘‘CMS will continue to be able to collect the necessary information that will help assure appropriate payment in the future as these technologies evolve.’’ Other commenters supported creation of the new MS–DRGs, noting it was reasonable given the data and information provided. Another commenter applauded CMS for proposing the two new MS–DRGs, noting that ‘‘this decision will allow patients, particularly women, to have increased access to innovative therapies that will ease their suffering from the debilitating effects of severe aortic stenosis.’’ Response: We appreciate the commenters’ support. Comment: One commenter commended CMS for proposing new MS–DRGs to identify endovascular/ transcatheter valve procedures. However, the commenter suggested that CMS reconsider the title of the proposed MS–DRGs. The commenter noted that the accepted nomenclature is ‘‘transcatheter’’ and not ‘‘endovascular’’. Response: We acknowledge that many individuals prefer the use of the term ‘‘transcatheter’’, such as occurs in the frequently used acronym TAVR (transcatheter aortic valve replacement). However, we note that this nomenclature is by no means universal. ‘‘Endovascular’’ is also used to describe these procedures. The current ICD–9– CM procedure code for TAVR, for example, is 35.05 (Endovascular replacement of aortic valve). Recognizing that universal agreement on medical nomenclature is still an unachievable goal at the present time, we have elected to retain the term ‘‘endovascular’’ to maintain consistency with the current ICD–9–CM terminology. After consideration of the public comments we received, we are finalizing our proposal to create new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and MS– DRG 267 (Endovascular Cardiac Valve Replacement without MCC). d. Abdominal Aorta Graft We received a request that we change the MS–DRG assignment for procedure code 39.71 (Endovascular implantation tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 237—All cases ............................................................................................................ 237—Cases with procedure code 39.71 .................................................................... 238—All cases ............................................................................................................ 238—Cases with procedure code 39.71 .................................................................... 228—All cases ............................................................................................................ 229—All cases ............................................................................................................ 230—All cases ............................................................................................................ As this table shows, endovascular abdominal aorta graft implantation cases have higher average costs and shorter lengths of stay than all cases within MS–DRGs 237 and 238. The average cost for endovascular abdominal aorta graft implantation cases in MS–DRG 237 is $9,256 greater than that for all cases in MS–DRG 237 ($44,898 compared to $35,642). The average cost for endovascular abdominal aorta graft VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 implantation cases in MS–DRG 238 is $3,973 higher than that for all cases in MS–DRG 238 ($28,484 compared to $24,511). Cases in MS–DRG 228 have average costs that are $7,417 higher than the endovascular abdominal aorta graft implantation cases in MS–DRG 237 ($52,315 compared to $44,898). MS– DRG 228 and MS–DRG 237 both contain cases with MCCs. Cases in MS–DRG 229, which contain a CC, have average PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 Average length of stay Average costs 10.6 5.7 $61,891 46,259 of other graft in abdominal aorta), which is assigned to MS–DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively). The requestor asked that we reassign procedure code 39.71 to MS–DRGs 228, 229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is significantly higher than other cases in MS–DRGs 237 and 238. The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is closer to those in MS–DRGs 228, 229, and 230. The requestor stated that the goal of endovascular repair for abdominal aneurysm is to isolate the diseased, aneurismal portion of the aorta and common iliac arteries from continued exposure to systemic blood pressure. The procedure involves the delivery and deployment of endovascular prostheses, also referred to as a graft, as required to isolate the aneurysm above and below the extent of the disease. The requestor stated that this significantly reduces patient morbidity and death caused by leakage and/or sudden rupture of an untreated aneurysm. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular abdominal aorta graft implantations. The following table shows our findings. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 3,516 3,771 49893 17,813 2,093 33,644 15,483 1,543 2,003 493 Average length of stay Average costs 9.66 8.30 3.73 2.30 13.48 7.47 4.95 $35,642 44,898 24,511 28,484 52,315 32,070 29,281 costs that are $3,586 higher than average costs of the endovascular abdominal aorta graft implantation cases in MS– DRG 238, which do not contain an MCC ($32,070 compared to $28,484). Cases in MS–DRG 230, which have neither an MCC nor a CC, have average costs that are $797 higher than the endovascular abdominal aorta graft implantation cases in MS–DRG 238 ($29,281 compared to $28,484). While the average costs were E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49894 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations higher for endovascular abdominal aorta graft implantation cases compared to all cases within MS–DRGs 237 and 238, each MS–DRG has some cases that are higher and some cases that are lower than the average costs for the entire MS– DRG. MS–DRGs were developed to capture cases that are clinically consistent with similar overall average resource requirements. This results in some cases within an MS–DRG having costs that are higher than the overall average and other cases having costs that are lower than the overall average. This may be due to specific types of cases included within the MS–DRGs or to the fact that some cases will simply require additional resources on a specific admission. However, taken as a whole, the hospital will be paid an appropriate amount for the group of cases that are assigned to the MS–DRG. We believe the endovascular abdominal aorta graft implantation cases are appropriately grouped with other procedures within MS–DRGs 237 and 238. Our clinical advisors reviewed this issue and determined that the endovascular abdominal aorta graft implantation cases are appropriately classified within MS–DRGs 237 and 238 because they are clinically similar to the other procedures in MS–DRGs 237 and 238, which include other procedures on the aorta. While the endovascular abdominal aorta graft implantation cases have higher average costs than the average for all cases within MS–DRGs 237 and 238, our clinical advisors do not believe this justifies moving the cases to MS–DRGs 228, 229 and 230, which involve a different set of cardiothoracic surgeries. As we stated in the FY 2015 IPPS/ LTCH PPS proposed rule, based on the results of examination of the claims data and the recommendations of our clinical advisors, we did not believe that proposing to reclassify endovascular abdominal aorta graft implantation cases from MS–DRGs 237 and 238 was warranted. We proposed to maintain the current MS–DRG assignments for endovascular abdominal aorta graft implantation cases. We invited public comments on our proposal. Comment: A number of commenters supported CMS’ proposal to maintain the current MS–DRG assignments for endovascular abdominal aorta graft implantation cases. The commenters stated that the proposal was reasonable given the data and information provided. One commenter disagreed with the proposal and stated that endovascular abdominal aorta graft implantation cases should be reassigned to MS–DRGs 228, 229, and 230. The VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 commenter stated that neither MS– DRGs 237 and 238 nor MS–DRGs 228, 229, and 230 have absolute clinical coherence and that there are a mix of procedures in both set of MS–DRGs. The commenter also expressed concern that CMS was prioritizing clinical coherence over total resource cost in deciding not to approve this request to assign procedure code 39.71 to MS–DRGs 228, 229, and 230. The commenter stated that if CMS is concerned about the perception regarding clinical coherence of the MS–DRG assignment for procedures represented by code 39.71, CMS should change the titles for these five MS–DRGs to accommodate the evolution of these procedures while also allowing for new indications of various types of grafts in the aorta and its branches. The commenter did not suggest specific new MS–DRG titles for MS–DRGs 228, 229, 230, 237, and 238. Response: We appreciate the commenters’ support for our proposal to maintain the current assignments for endovascular abdominal aorta graft implantation cases in MS–DRGs 237 and 238. We are not accepting the commenter’s suggestion that we modify the titles of MS–DRGs 228, 229, 230, 237, and 238 in order to justify the reassignment of abdominal aorta graft procedures to MS–DRGs 228, 229, and 230. Our clinical advisors reviewed this issue and disagree with the commenters’ statement that CMS puts too high a priority on the clinical coherence of the MS–DRGs. MS–DRGs were developed based on clinical similarities of groups of medical and surgical patients. We also consider average costs of these patients in evaluating the need to make modifications to the MS–DRGs. However, for the reasons described previously, we do not believe that the higher average costs for the endovascular abdominal aorta graft implantation cases as compared to the average for all cases within MS–DRGs 237 and 238 warrant reassigning these cases to MS–DRGs 228, 229, and 230. We will continue to evaluate the need to make updates to the MS–DRGs to better capture procedures of the aorta and its branches. We welcome any specific recommendations for refinements to better capture changes in medical treatment. Any requests for MS–DRG updates must be received by December 7, 2014, in order to be considered for the FY 2016 proposed rule. After consideration of the public comments we received, we are finalizing our proposal to maintain the current assignments for endovascular abdominal aorta graft implantation cases in MS–DRGs 237 and 238. PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Shoulder Replacement Procedures We received a request to change the MS–DRG assignment for shoulder replacement procedures. This request involved the following two procedure codes: • 81.88 (Reverse total shoulder replacement); and • 81.97 (Revision of joint replacement of upper extremity). With respect to procedure code 81.88, the requestor asked that reverse total shoulder replacements be reassigned from MS–DRGs 483 and 484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC and without CC/MCC, respectively) to MS– DRG 483 only. The reassignment of procedure code 81.88 from MS–DRGs 483 and 484 was discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536). The result of reassigning reverse shoulder replacements from MS–DRGs 483 and 484 to MS–DRG 483 only would be that this procedure would be assigned to MS–DRG 483 whether or not the case had a CC or an MCC. The requestor stated that reverse shoulder replacement procedures are more clinically cohesive with higher severity MS–DRGs due to the complexity and resource consumption of these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536) for a discussion of the reverse total shoulder replacement. The requestor also recommended that we reassign what it described as another shoulder procedure involving procedure code 81.97, which is assigned to MS– DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), to MS–DRG 483. We point out that MS– DRG 483 contains upper joint replacements, including shoulder replacements. MS–DRG 483 does not contain any joint revision procedures. Similar to the request for reassignment of procedure code 81.88, this would mean that procedure code 81.97 would be assigned to MS–DRG 483 whether or not the case had a CC or an MCC. If CMS did not support this recommendation for moving procedure code 81.97 to MS–DRG 483, the requestor recommended an alternative reassignment to MS–DRG 515 (Other Musculoskeletal System and Connective Tissue O.R. procedures with MCC) even if the case had no MCC. We point out that, while the requestor refers to procedure code 81.97 as a E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations shoulder procedure, the code description actually includes revisions of joint replacements of a variety of upper extremity joints, including those in the elbow, hand, shoulder, and wrist. As stated earlier, reverse shoulder replacements are assigned to MS–DRGs 483 and 484. Revisions of upper joint replacements are assigned to MS–DRGs 515, 516, and 517. We examined claims MS–DRG MS–DRG MS–DRG MS–DRG Proposed 483—All cases ............................................................................................................ 483—Cases with procedure code 81.88 .................................................................... 484—All cases ............................................................................................................ 484—Cases with procedure code 81.88 .................................................................... Revised MS–DRG 483 with all severity levels included ............................................. As the above table shows, MS–DRG 484 reverse shoulder replacement cases have similar average costs to those in MS–DRG 483 ($18,719 for reverse shoulder replacements in MS–DRG 484 compared to $18,807 for all cases in MS–DRG 483). However, in reviewing the data, we observed that the claims data no longer support two severity levels for MS–DRGs 483 and 484. We use the five criteria established in FY 2008 (72 FR 47169) to review requests involving the creation of a new CC or MCC subgroup within a base MS– DRG. As outlined in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS–DRG, the subgroup must meet all of the following five criteria: • A reduction in variance of costs of at least 3 percent. • At least 5 percent of the patients in the MS–DRG fall within the CC or MCC subgroup. • At least 500 cases are in the CC or MCC subgroup. • There is at least a 20-percent difference in average costs between subgroups. • There is a $2,000 difference in average costs between subgroups. We found through our examination of the claims data from the December 2013 update of the FY 2013 MedPAR file that the two severity subgroups of MS–DRG 483 and 484 no longer meet the fourth criterion of at least a 20-percent difference in average costs between subgroups. We found that there is a $2,453 difference in average costs between MS–DRG 483 and MS–DRG 484. The difference in average costs would need to be $3,761 to meet the fourth criterion. Therefore, our claims data support collapsing MS–DRGs 483 and 484 into a single MS–DRG. Our tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 515—All cases ............................................................................................................ 515—Cases with procedure code 81.97 .................................................................... 516—All cases ............................................................................................................ 516—Cases with procedure code 81.97 .................................................................... 517—All cases ............................................................................................................ 517—Cases with procedure code 81.97 .................................................................... 483—All cases ............................................................................................................ Cases identified by code 81.97 in MS– DRGs 515, 516, and 517 have lower average costs and shorter lengths of stay than all cases in MS–DRG 515. The average costs of cases in MS–DRG 515 are $3,977 higher than the average costs of the cases with procedure code 81.97 in MS–DRG 516 ($22,191 compared to $18,214). The average costs of cases in MS–DRG 515 are $6,271 higher than cases with procedure code 81.97 in MS– DRG 517 ($22,191 compared to $15,920). The table above shows that the average costs of cases in MS–DRG 483 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 are $3,278 lower than the average costs of cases with procedure code 81.97 in MS–DRG 515 ($18,807 compared to $22,085). The average costs of cases in MS–DRG 483 are $593 higher than the average costs of cases with procedure code 81.97 in MS–DRG 516 ($18,807 compared to $18,214). The average costs of cases in MS–DRG 483 are $2,887 higher than the average costs of cases with procedure code 81.97 in MS–DRG 517 ($18,807 compared to $15,920). The claims data did not support moving all procedure code 81.97 cases to MS–DRG 515 or MS–DRG 483, PO 00000 14,220 7,086 23,183 9,633 37,403 Frm 00043 Fmt 4701 Sfmt 4700 Average length of stay Average costs 3.20 3.19 1.95 2.03 2.4 $18,807 20,699 16,354 18,719 17,287 clinical advisors reviewed this issue and agreed that there is no longer enough difference between the two severity levels to justify separate severity subgroups for MS–DRGs 483 and 484, which include a variety of upper joint replacements. Therefore, our clinical advisors supported our recommendation to collapse MS–DRGs 483 and 484 into a single MS–DRG. In the FY 2015 IPPS/LTCH PPS proposed rule, based on the results of examination of the claims data and the advice of our clinical advisors, we proposed to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities’’. The following table shows our findings of cases of revisions of upper joint replacement from the December 2013 update of the FY 2013 MedPAR file. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 483 and 484. The following table shows our findings of cases of reverse shoulder replacement. Number of cases MS–DRG 49895 3,407 88 8,502 799 5,794 1,256 14,220 Average length of stay Average costs 9.22 5.66 5.34 2.84 3.28 2.07 3.20 $22,191 22,085 14,356 18,214 12,172 15,920 18,807 whether or not there is a CC or an MCC. We also pointed out once again that procedure code 81.97 is a nonspecific code that captures revisions to not only the shoulder, but also a variety of upper extremity joints including those in the elbow, hand, shoulder, and wrist. Therefore, we have no way of determining how many cases reporting procedure code 81.97 were actually shoulder procedures as opposed to procedures on the elbow, hand, or wrist. Our clinical advisors reviewed this issue and determined that the revisions of upper joint replacement procedures E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49896 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations are appropriately classified within MS– DRGs 515, 516, and 517, which include other joint revision procedures. They did not support moving revisions of upper joint replacement procedures to MS–DRG 515, whether or not there is an MCC. They supported the current classification, which bases the severity level on the presence of a CC or an MCC. They also did not support moving revisions of upper joint replacement procedures to MS–DRG 483, whether or not there is a CC or an MCC, because these revisions are not joint replacements. Based on the results of our examination and the advice of our clinical advisors, in the FY 2015 IPPS/ LTCH PPS proposed rule, we did not propose moving revisions of upper joint replacement procedures to MS–DRG 515 or MS–DRG 483, whether or not there is a CC or an MCC. In summation, we proposed to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities’’. We proposed to maintain the current MS–DRG assignments for revisions of upper joint replacement procedures in MS DRGs 515, 516, and 517. We invited public comments on our proposals. Comment: A number of commenters supported the proposal to collapse MS– DRGs 483 and 484 into a single MS– DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities.’’ The commenters stated that the proposal was reasonable given the data and information provided. One commenter stated that collapsing the two MS–DRGs is supported by claims data indicating little cost difference between cases in the current two severity levels. Several commenters stated that the new, single MS–DRG represented clinically cohesive procedures with similar complexity and resource consumption. Response: We appreciate the commenters’ support for our proposal to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb Reattachment Procedure of Upper Extremities’’. After consideration of the public comments we received, we are adopting as final, without modification, our proposal to collapse MS–DRGs 483 and 484 into a single MS–DRG by deleting MS–DRG 484 and revising the title of MS–DRG 483 to read ‘‘Major Joint/Limb VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Reattachment Procedure of Upper Extremities’’. Comment: A number of commenters supported the proposal to maintain the MS–DRG assignment for code 81.97 in MS–DRGs 515, 516, and 517. The commenters stated that the recommendation was reasonable give the data and information provided. One commenter disagreed with the proposal and stated that code 81.97 would be more accurately classified in MS–DRG 483 (Major Joint/Limb Reattachment of Upper Extremities with CC/MCC) because MS–DRG 483 includes upper extremity procedures. Response: We appreciate the commenters’ support for our proposal to maintain the current MS–DRG assignment for code 81.97 in MS–DRGs 515, 516, and 517. We disagree with the commenter that code 81.97 is similar to other procedures currently assigned to MS–DRG 483. MS–DRG 483 contains replacements, not revisions, of the wrist, shoulder, and elbow as well as reattachments of the forearm. Revision of the joint could include a variety of procedures to joints of the upper extremity. Procedure code 81.97 is a nonspecific code that captures revisions to not only the shoulder, but also a variety of upper extremity joints including those in the elbow, hand, shoulder, and wrist. Therefore, we have no way of determining how many cases reporting procedure code 81.97 were actually shoulder procedures as opposed to procedures on the elbow, hand, or wrist. Our clinical advisors reviewed this issue and continue to advise that code 81.97 not be reassigned to MS–DRG 483 because the procedure is neither a replacement nor a reattachment procedure as are the current procedures within MS–DRG 483. In addition, the code captures a variety of joint revisions of the upper extremities and is not clinically similar to the replacements and reattachment procedures in MS– DRG 483. Our clinical advisors recommend that code 81.97 continue to be assigned to MS–DRG 515, 516, and 517. After consideration of the public comments we received, we are finalizing our proposal to maintain the current assignment of code 81.97 in MS–DRG 515, 516, and 517. b. Ankle Replacement Procedures We received a request to change the MS–DRG assignment for two ankle replacement procedures. The request involved the following two procedure codes: • 81.56 (Total ankle replacement); and PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 • 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified). The reassignment of procedure code 81.56 from MS–DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with MCC and without MCC, respectively) to a new MS–DRG or, alternatively, to MS– DRG 469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50536 through 50537). We refer readers to this final rule for a discussion of ankle replacement procedures. The requestor asked that we again evaluate reassigning total ankle replacement procedures. The requestor also asked that we reassign what it referred to as another ankle replacement revision procedure captured by procedure code 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified), which is assigned to MS–DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor asked that we reassign procedure code 81.56 from MS–DRGs 469 and 470 to MS–DRG 483 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC) and rename the MS–DRG to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS–DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the case did not have a CC or an MCC. If CMS did not find this acceptable, the requestor made an alternative recommendation of assigning procedure code 81.56 to MS– DRG 469 and renaming the MS–DRG to better capture the additional cases. Cases would be assigned to the highest severity level whether or not the case had an MCC. The requestor also recommended that procedure code 81.59, which is assigned to MS–DRGs 515, 516, and 517, be reassigned to MS–DRG 483 and that the MS–DRG be given a new title to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS–DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the patient did not have a CC or an MCC. If CMS did not support this recommendation, the requestor suggested two additional recommendations. One involves moving procedure code 81.59 to MS–DRG 515 even when the case had no MCC. The other recommendation was to move E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations procedure code 81.59 to MS–DRG 469, whether or not the case had a MCC. We point out that while the requestor refers to procedure code 81.59 as a revision of an ankle replacement, the code actually includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe. The following table shows the number of total ankle replacement cases, average length of stay, and average costs for tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 469—All cases ............................................................................................................ 469—Cases with procedure code 81.56 .................................................................... 470—All cases ............................................................................................................ 470—Cases with procedure code 81.56 .................................................................... 483 .............................................................................................................................. In summary, the requestor asked us to reassign procedure code 81.56 in MS– DRGs 469 and 470 to one of the following two options: MS–DRG 483 (highest severity level); or MS–DRG 469 (highest severity level). As the table for total ankle replacement above shows, the average cost of cases with procedure code 81.56 in MS–DRG 469 is $27,419 and $19,332 in MS–DRG 470. This compares with the average costs of all cases in MS– DRGs 469 and 470 of $22,548 and $15,119, respectively. While the average cost of cases reporting procedure code 81.56 in MS–DRG 469 is $4,871 higher than the average cost for all cases in MS–DRG 469, we point out that there were only 32 cases. The relatively small number of cases may have been impacted by other factors such as complications or comorbidities. Several expensive cases could impact the average costs for a very small number of patients. The average cost of cases reporting procedure code 81.56 in MS– DRG 470 is $4,213 higher than the average cost for all cases in MS–DRG 470. While the average costs are higher, within all MS–DRGs, some cases have higher and some cases have lower average costs. MS–DRGs are groups of clinically similar cases that have similar overall costs. Within a group of cases, one would expect that some cases have costs that are higher than the overall average and some cases have costs that are lower than the overall average. MS–DRG 469 ankle replacement cases have average costs that are $8,612 higher than the average costs of all cases in MS–DRG 483 ($27,419 compared to $18,807). Moving these cases (procedure code 81.56) to MS–DRG 483 would result in payment below average costs compared to the current MS–DRG assignment in MS–DRG 469. Furthermore, as noted earlier, moving total ankle replacement cases to MS– DRG 483 would result in a lower extremity procedure being added to what is now an upper extremity MS– VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 DRG. This would significantly disrupt the clinical cohesion of MS–DRG 483. The average costs of all cases in MS– DRG 469 are $3,216 higher than the average costs of those cases with procedure code 81.56 in MS–DRG 470 ($22,548 compared to $19,332). The data did not support moving procedure code 81.56 cases to MS–DRG 483 or 469 because it would not result in payments that more accurately reflect their current average costs. Our clinical advisors reviewed this issue and determined that the ankle replacement cases are appropriately classified within MS– DRGs 469 and 470 with the severity level leading to the MS–DRG assignment. They did not support moving these cases to MS–DRG 483 because ankle replacements, which are lower joint procedures, are not clinically similar to upper joint replacement procedures. Based on the results of examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to move total ankle procedures to MS– DRG 483 or MS–DRG 469 when there is no MCC. We proposed to maintain the current MS–DRG assignments for ankle replacement cases. We invited public comments on our proposal. Comment: A number of commenters supported the proposal to maintain the current MS–DRG assignments for ankle replacement cases. The commenters stated the proposal was reasonable given the data and information provided. Several other commenters urged CMS to reconsider its decision and to create a new MS–DRG for total ankle replacements for FY 2015 that is more appropriate both in terms of resource utilization and clinical cohesiveness, and reassign ICD–9–CM procedure code 81.56 to the new MS– DRG. The commenters stated that, despite evidence that the current Medicare assignment results in payments to hospitals below the average PO 00000 procedure code 81.56 in MS–DRGs 469 and 470 found in claims data from the December 2013 update of the FY 2013 MedPAR file compared to all cases within MS–DRGs 469, 470, and 483. Number of cases MS–DRG Frm 00045 Fmt 4701 Sfmt 4700 49897 25,916 32 406,344 1,379 14,220 Average length of stay Average costs 7.22 6.19 3.25 2.13 3.20 $22,548 27,419 15,119 19,332 18,807 costs for total ankle replacement procedures, and the greater clinical complexity of total ankle replacements relative to other procedures that map to these same MS–DRGs, CMS proposed to maintain the current MS–DRG assignment for total ankle replacement procedures. The commenters stated that total ankle replacement is a complex surgical procedure involving the replacement of the damaged parts of three bones (talus, tibia, and fibula) that make up the articulations of the ankle, as compared to two bones in most other total joint replacement procedures, including hips and knees. The commenters stated that the resources involved with total ankle replacement procedures are not comparable to other procedures in the major joint MS–DRG and that failure to establish a new MS– DRG that more appropriately reflects the higher cost will likely comprise patient access to this procedure. One commenter acknowledged that there are a relatively small volume of total ankle replacement procedures compared to total hip and total knee replacements. However, the commenter suggested that this imbalance in case volume of total ankle replacements compared to total hip and knee replacements dampens the influence of actual hospital cost data for the total ankle replacements. The commenter recommended that all total ankle replacements be assigned to MS–DRG 469 even if the case does not have a MCC. This commenter acknowledged that the average cost of cases with procedure code 81.56 in MS–DRG 470 is $19,332 compared to average cost of $22,548 for all cases in MS–DRG of 469. However, the commenter suggested that moving all total ankle replacements to MS–DRG 469 was more appropriate than having cases assigned to MS–DRGs 469 and 470 based on the presence of an MCC. The commenter also acknowledged CMS’ statement that under the MS–DRG system in general, some cases will have average costs E:\FR\FM\22AUR2.SGM 22AUR2 49898 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations higher than the overall average costs for the MS–DRG, while other cases will have lower average costs. However, the commenter stated that this was an insufficient rationale to apply to total ankle replacements. The commenter disagreed with the determination of the CMS clinical advisors that ankle replacement cases are appropriately classified within MS–DRGs 469 and 470, based on severity level. The commenter stated that total ankle replacement is a complicated surgery that involves the replacement of the damaged parts of the three bones that make up the ankle joint, as compared to two bones in hip and knee replacement procedures. The commenter stated that this surgery required a specialized skill set, operative technique, and level of operating room resource utilization that is vastly dissimilar from that of total hip and total knee replacements. The commenter recommended that CMS create a new MS–DRG for total ankle replacements or move all total ankle replacements to MS–DRG 469. Response: We appreciate the commenters’ support for our proposal to maintain the current MS–DRG assignment for total ankle replacements. We are not accepting the commenter’s recommendation to create a new MS– DRG for total ankle replacements or to move all cases to MS–DRG 469. We point out that there were only 1,411 total ankle replacements with 32 cases in MS–DRG 469 and 1,379 cases in MS– DRG 470. Creating a new MS–DRG for this single procedure would not be appropriate. MS–DRGs were created to provide payment to hospitals for groups of clinically similar conditions and procedures. MS–DRGs were not created to provide payment for each single procedure. MS–DRGs 469 and 470 contain replacement and reattachment procedures of the lower extremity, including those of the hip, knee, ankle, foot, lower leg, and thigh. Within each MS–DRG, there will be cases with costs higher than the average costs and others with costs below the average costs. Basing a new MS–DRG on a small number of cases could lead to distortions in the relative payment weights for the MS DRG because several expensive cases could impact the overall relative payment weight. Having larger clinically cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. We also point out that combining total ankle replacements into a single new MS–DRG would result in the same payment for cases with an MCC as those without an MCC. As indicated above, total ankle replacements with MCCs have average costs of $27,419 and those without MCCs have average costs of $19,332. Combining all total ankle replacements into a single, newly created MS–DRG would reduce the payment accuracy of cases with different severity levels. We also disagree with the recommendation to move all total ankle replacement to MS–DRG 469. As stated earlier, total ankle replacements with MCCs have average costs of $27,419 and those without MCCs have average costs of $19,332. The average cost of all cases in MS–DRG 469 (which includes cases with MCCs) is $22,548. We point out again that, under the MS–DRGs, some cases will have average costs higher than the overall average costs for the MS–DRG while other cases will have lower average costs. The total ankle replacements are appropriately assigned to MS–DRGs 469 and 470 based on the presence of a MCC. Our clinical advisors reviewed the public comments and clinical data and continue to support maintaining the current MS–DRG assignment for total ankle replacements. They advised that total ankle replacements are appropriately assigned to MS–DRGs 469 and 470 along with other major joint replacement and reattachment procedures of the lower extremities because they are all replacement and reattachment procedures of the lower extremities. Our clinical advisors noted that, whereas they consider average cost as one element of the decision, they Number of cases tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 515—All cases ............................................................................................................ 515—Cases with procedure code 81.59 .................................................................... 516—All cases ............................................................................................................ 516—Cases with procedure code 81.59 .................................................................... 517—All cases ............................................................................................................ 517—Cases with procedure code 81.59 .................................................................... 483—All cases ............................................................................................................ 469—All cases ............................................................................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 expect the average cost of any subset to be different than the average cost of the MS–DRG, as that is inherent in a system of averages. They note that average length of stay, another metric of resource usage, is lower than the MS– DRG average for this subgroup. Even more importantly, they further noted that leaving these procedures in a MS– DRG with other lower extremity procedures promotes greater clinical consistency than could be achieved by moving the ankle procedures into an upper extremity DRG. They noted that, for the inpatient prospective system, clinical consistency includes not just technical considerations of the surgery or device costs but also consideration of pre- and post-operative patient care needs, medications, and care for common comorbid conditions, among other factors. Finally, our clinical advisors also pointed out that creating a new MS–DRG for total ankle replacements would result in combining cases with average length of stay of 6.19 days for cases with MCC and 2.13 days for cases without MCC. The cases are more appropriately assigned to MS– DRGs 469 and 470 with the two severity levels. Our clinical advisors do not support creating a new MS–DRG which would contain only total ankle replacements. After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignment for total ankle replacements in MS–DRGs 469 and 470. The following table shows our findings from examination of the claims data from the December 2013 update of the FY 2013 MedPAR file for the number of cases reporting procedure code 81.59 in MS–DRGs 515, 516, and 517 (revision of joint replacement of lower extremity) and their average length of stay and average costs as compared to all cases within MS–DRGs 515, 516, and 517 (where procedure code 81.59 is currently assigned), as well as data for MS–DRGs 469 and 483. Frm 00046 Fmt 4701 Sfmt 4700 3,407 5 8,502 16 5,794 40 25,916 14,220 E:\FR\FM\22AUR2.SGM 22AUR2 Average length of stay Average costs 9.22 6.00 5.34 3.00 3.28 1.80 722 3.20 $22,191 16,988 14,356 16,998 12,172 13,704 22,548 18,807 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations The requestor asked that all cases with procedure code 81.59 in MS–DRGs 515, 516, and 517 be assigned to one of the following three choices: • MS–DRG 483 (highest severity level); • MS–DRG 515 (highest severity level) whether or not there is an MCC; or • MS–DRG 469 (highest severity level). Our review of data from the above revision of joint replacement of lower extremity table shows that cases in MS– DRG 483 have average costs that are $5,560 higher than the average costs of cases with procedure code 81.59 in MS– DRG 515; $5,550 greater than those in MS–DRG 516; and $8,844 greater than those in MS–DRG 517 ($22,548 compared to $16,988; $22,548 compared to $16,998, and $22,548 compared to $13,704, respectively). As mentioned earlier, MS–DRG 483 is currently composed of only upper extremity procedures. Moving lower extremity procedures into this MS–DRG would disrupt the clinical cohesiveness of MS– DRG 483. The average costs of all cases in MS– DRG 469 are $18,807, compared to average costs of $16,988, $16,998, and $13,703 for procedure code 81.59 cases in MS–DRGs 515, 516, and 517, respectively. The data did not support moving all procedure code 81.59 cases to MS–DRG 469 even when there is no MCC. We also point out that moving cases with procedure code 81.59 to MS– DRG 469 would disrupt the clinical cohesiveness of MS–DRG 469, which currently captures major joint replacement or reattachment procedures of the lower extremity. Procedure code 81.59 includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe. This nonspecific code would not be considered a major joint procedure. The code captures revisions of an ankle replacement as well as a more minor revision of the toe. Our clinical advisors reviewed this issue and determined that the revision of joint replacement of lower extremity cases are appropriately classified within MS–DRGs 515, 516, and 517 where revisions of other joint replacements are captured. They supported the current severity levels in MS–DRGs 515, 516, and 517, which allow the presence of a CC or an MCC to determine the severity level assignment. They did not support moving these cases to MS–DRG 483, which is applied to upper extremity procedures because these procedures are not clinically consistent with revisions of lower joint procedures. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 They also did not support moving these cases to MS–DRG 469 when there is no MCC because these procedures are not joint replacement procedures. Based on the findings of our examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to move the revision of joint replacement of lower extremity cases to MS–DRGs 483 or 469, whether or not there is an MCC. We proposed to maintain the current MS–DRG assignments for revision of joint replacement of lower extremity cases. In summary, we proposed to maintain the current MS–DRG assignment for total ankle replacements in MS–DRGs 469 and 470 and revision of joint replacement of lower extremity procedures in MS–DRGs 515, 516, and 517. We invited public comments on our proposals. Comment: A number of commenters supported the proposal to maintain the current MS–DRG assignment for code 81.59. One commenter agreed with this proposal given the lack of specificity for this code which does not identify the specific joint being revised. The commenter recommended that CMS create the following new ICD–9–CM procedure code: 81.58 (Revision of ankle replacement, not otherwise specified). Once this code is created, the commenter recommended that this new code be assigned to MS–DRGs 466, 467, and 468 and that these MS–DRGs be renamed Revision of Hip, Knee or Ankle (with MCC, with CC, and without CC/ MCC, respectively). Response: We appreciate the commenters’ support for our proposal not to change the MS–DRG assignment for code 81.59. We agree with the commenter who pointed out that code 81.59 does not identify the joint being revised and, therefore, code 81.59 should continue to be assigned to MS– DRGs 515, 516, and 517. ICD–10–PCS codes provide greater detail than do ICD–9–CM codes and provide the ability to identify the joint being revised. As mentioned earlier, the Secretary announced plans to release an interim final rule in the near future that will include a new compliance date to require the use of ICD–10 beginning October 1, 2015. The interim final rule will also require HIPAA covered entities to continue to use ICD–9–CM through September 30, 2015. Given this timeline, it will not be possible to create a new ICD–9–CM procedure code for the next annual update on October 1, 2015 because ICD–10 will be implemented on PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 49899 that date. However, ICD–10–PCS will provide the necessary level of detail. After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS–DRG assignment for total ankle replacements in MS–DRGs 469 and 470 and revision of joint replacement of lower extremity procedures in MS–DRGs 515, 516, and 517. c. Back and Neck Procedures We received a request to reassign cases identified with a complication or comorbidity (CC) in MS–DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/ Neurostimulator) to MS–DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/ Neurostimulator). The requester suggested that we create a new MS–DRG that would be subdivided based solely on the ‘‘with MCC or Disc Device/ Neurostimulator’’ and the ‘‘without MCC’’ (and no device) criteria. For the FY 2008 rulemaking cycle, we performed a comprehensive analysis of all the spinal DRGs as we proposed (72 FR 24731 through 24735) and finalized (72 FR 47226 through 47232) adoption of the MS–DRGs. With the revised spinal MS–DRGs, we were better able to identify a patient’s level of severity, complexity of service, and utilization of resources. This was primarily attributed to the new structure for the severity level designations of ‘‘with MCC,’’ ‘‘with CC,’’ and ‘‘non-CC’’ (or without CC/MCC). Another contributing factor was that we incorporated specific procedures and technologies into the GROUPER logic for some of those spinal MS–DRGs. Specifically, as noted above, in the title of MS–DRG 490, we accounted for disc devices and neurostimulators because the data demonstrated that the procedures utilizing those technologies were more complex and required greater utilization of resources. According to the requester, since that time, concerns have been expressed in the provider community regarding inadequate payment for MS–DRG 490 when these technologies are utilized. An analysis conducted by the requester alleged that the subset of patients identified in the ‘‘with MCC or disc device/neurostimulator’’ group are different with regard to resource use from the ‘‘without CC/MCC’’ (and no device) patient group. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for MS–DRGs 490 and 491. The table below shows our findings. E:\FR\FM\22AUR2.SGM 22AUR2 49900 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Number of cases MS–DRG MS–DRG 490—All cases ............................................................................................................ MS–DRG 491—All cases ............................................................................................................ As shown in the table above, there were a total of 16,930 cases in MS–DRG 490 with an average length of stay of 4.53 days and average costs of $13,727. For MS–DRG 491, there were a total of 25,778 cases with an average length of stay of 2.20 days and average costs of $8,151. We then analyzed the data for MS– DRGs 490 and 491 by subdividing cases based on the ‘‘with MCC or Disc Device/ Neurostimulator’’ and the ‘‘without MCC’’ (and no device) criteria. We found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493 in the ‘‘with MCC or Disc Device/Neurostimulator’’ group and a total of 39,329 cases with an average length of stay of 2.8 days and average costs of $9,405 in the ‘‘without MCC’’ and no device group. Due to the wide range in the volume of cases, Average length of stay 16,930 25,778 4.53 2.20 Average costs $13,727 8,151 length of stay, and average costs between these two subgroups, we concluded that further analysis of the data using a separate ‘‘with CC’’ (and no device) subset of patients was warranted. Therefore, we evaluated the data using a three-way severity level split that consisted of the three subgroups shown in the table below. ADDITIONAL ANALYSIS FOR BACK & NECK PROCEDURES EXCEPT SPINAL FUSION: DISC DEVICE/NEUROSTIMULATOR Severity level split Number of cases tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV —With MCC or disc device/neurostimulator ................................................................... —With CC ........................................................................................................................ —Without CC/MCC .......................................................................................................... For the first subgroup, ‘‘with MCC or Disc Device/Neurostimulator,’’ we found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493. In the second subgroup, ‘‘with CC’’ (no device), we found a total of 13,551 cases with an average length of stay of 3.9 days and average costs of $11,791. In the third subgroup, ‘‘without CC/MCC’’ (no device), we found a total of 25,778 cases with an average length of stay of 2.2 days and average costs of $8,151. The results of this additional data analysis demonstrate a better distribution of cases with regard to length of stay and average costs. Our clinical advisors agreed that a patient’s severity of illness is captured more appropriately with this subdivision. The data also meet the established criteria for creating subgroups within a base MS–DRG as discussed earlier. As the subdivision of the claims data based on these subgroups better captures a patient’s severity level and utilization of resources and is supported by our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create three new MS–DRGs and to delete MS–DRGs 490 and 491. We proposed that these proposed new MS–DRGs would be titled as follows and would be effective as of October 1, 2014: • Proposed new MS–DRG 518 (Back & Neck Procedures Except Spinal Fusion with MCC or Disc Device/ Neurostimulator); VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • Proposed new MS–DRG 519 (Back & Neck Procedures Except Spinal Fusion with CC); and • Proposed new MS–DRG 520 (Back & Neck Procedures Except Spinal Fusion without CC/MCC). We invited public comments on our proposal to create these proposed new MS–DRGs for FY 2015. Comment: Several commenters supported the proposal to delete MS– DRGs 490 and 491 and to create three new MS–DRGs that better account for a patient’s severity of illness and utilization of resources when disc devices and neurostimulators are involved. One commenter stated that the new MS–DRGs would enable CMS to assess utilization of resources for these services and ensure that ‘‘important innovation in device dependent neurosurgical procedures is adequately accounted for and reimbursed appropriately.’’ Another commenter expressed its appreciation for CMS’ careful data analysis that resulted in the development of the proposal. This commenter noted ‘‘that the data presented by CMS make a compelling case for the proposed three subdivisions, because it would more appropriately compensate hospitals for the costs associated with implantation of a disc device or neurostimulator than the current two-division framework.’’ Another commenter applauded CMS’ past efforts to assure MS–DRGs 490 and 491 reflect the most appropriate payment amounts for these procedures. This commenter stated ‘‘the proposed PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 Average length of stay 3,379 13,551 25,778 6.6 3.9 2.2 Average costs $21,493 11,791 8,151 three-way split of cases in current MS– DRGs 490 and 491 demonstrates a better distribution of cases with regard to resource use. CMS should proceed with its proposed change to this MS–DRG category to improve the accuracy of the payments, consistent with its criteria for establishing severity levels within the MS–DRGs.’’ Another commenter noted that ‘‘subdividing the code set into three distinct MS–DRGs is not only a more accurate representation of the clinical condition experienced by the patient, but also better categorizes the resources expended by the facility, as evidenced by the supporting claims data.’’ Response: We thank the commenters for their support. As noted in the FY 2015 IPPS/LTCH PPS proposed rule, the additional data analysis demonstrated a better distribution of cases with regard to length of stay and average costs. Our clinical advisors also agreed that a patient’s severity of illness is captured more appropriately with this subdivision. Lastly, the data also meet the established criteria for creating subgroups within a base MS–DRG as discussed earlier. After consideration of the public comments we received, for FY 2015 we are adopting as final our proposal to create new MS–DRG 518 (Back & Neck Procedures Except Spinal Fusion with MCC or Disc Device/Neurostimulator); MS–DRG 519 (Back & Neck Procedures Except Spinal Fusion with CC); and MS–DRG 520 (Back & Neck Procedures Except Spinal Fusion without CC/MCC). E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyrin Metabolism We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule that we considered out of scope for the proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The request was for the creation of a new MS–DRG to better identify cases where patients with disorders of porphyrin metabolism exist, to recognize the resource requirements in caring for these patients, to ensure appropriate payment for these cases, and to preserve patient access to necessary treatments. This issue has been discussed previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and 27905) and final rule (77 FR 53311 through 53313). Porphyria is defined as a group of rare disorders (‘‘porphyrias’’) that interfere with the production of hemoglobin that is needed for red blood cells. While some of these disorders are genetic (inborn) and others can be acquired, they all result in the abnormal accumulation of hemoglobin building blocks, called porphyrins, which can be deposited in the tissues where they particularly interfere with the functioning of the nervous system and the skin. Treatment for patients suffering from disorders of porphyrin MS–DRG tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV As shown in the table above, we found a total of 1,486 cases in MS–DRG 642, with an average length of stay of 4.61 days and average costs of $8,151. We then analyzed the data for cases reporting diagnosis code 277.1 as the principal diagnosis in this same MS– DRG. We found a total of 299 cases, with an average length of stay of 5.98 days and average costs of $13,303. While the data show that the average costs for the 299 cases reporting a principal diagnosis code of 277.1 were higher than the average costs for all cases in MS–DRG 642 ($13,303 compared to $8,151), the number of cases is small. In the FY 2015 IPPS/ LTCH PPS proposed rule, we stated that, given the small number of porphyria cases, we did not believe there is justification for creating a new MS–DRG. Basing a new MS–DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS–DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS–DRG provides greater stability for annual updates to the relative payment weights. In addition, as discussed earlier, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS–DRG is whether there are at least 500 cases in the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS–DRG, applying it here suggests that creating a new MS–DRG for cases reporting a principal diagnosis of code 277.1 would not be appropriate. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 metabolism consists of an intravenous injection of Panhematin® (hemin for injection). In 1984, this pharmaceutical agent became the first approved drug for a rare disease to be designated under the Orphan Drug Act. The requestor stated that it is the only FDA-approved prescription treatment for acute intermittent porphyria. ICD–9–CM diagnosis code 277.1 (Disorders of porphyrin metabolism) describes these cases, which are currently assigned to MS–DRG 642 (Inborn and Other Disorders of Metabolism). We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS– DRG 642. Our findings are shown in the table below. Number of cases MS–DRG 642—All cases ................................................................................................ MS–DRG 642—Cases with principal diagnosis code 277.1 ........................................... Our clinical advisors reviewed this issue and recommended no MS–DRG change for porphyria cases because they fit clinically within MS–DRG 642. In summary, in the FY 2015 IPPS/ LTCH PPS proposed rule, we did not propose to create a new MS–DRG for porphyria cases. We invited public comments on our proposal to maintain porphyria cases in MS–DRG 642. Comment: Several commenters supported the proposal to maintain porphyria cases in MS–DRG 642 and to not create a new MS–DRG for these cases. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to maintain porphyria cases in MS–DRG 642 and to not create a new MS–DRG for these cases. 7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period) We received a request to evaluate the MS–DRG assignment of seven ICD–9– CM diagnosis codes in MS–DRG 794 (Neonate with Other Significant Problems) under MDC 15. The requestor stated that these codes have no bearing on the infant, and are not representative of a neonate with a significant problem. The requestor recommended that we change the MS–DRG logic so that the following seven ICD–9–CM codes would not lead to assignment of MS–DRG 794. The requestor recommended that the diagnoses be added to the ‘‘only secondary diagnosis’’ list under MS– PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 49901 Average length of stay 1,486 299 4.61 5.98 Average costs $8,151 13,303 DRG 795 (Normal newborn) so that the case would be assigned to MS–DRG 795 (Normal newborn). • V17.0 (Family history of psychiatric condition) • V17.2 (Family history of other neurological Diseases) • V17.49 (Family history of other cardiovascular diseases) • V18.0 (Family history of diabetes mellitus) • V18.19 (Family history of other endocrine and metabolic diseases) • V18.8 (Family history of infectious and parasitic diseases) • V50.3 (Ear piercing) In the case of a newborn with one of these diagnosis codes reported as a secondary diagnosis, the case would be assigned to MS–DRG 794. The commenter believed that any of these seven diagnosis codes (noted above), when reported as a secondary diagnosis for a newborn case, should be assigned to MS–DRG 795 instead of MS–DRG 794. Our clinical advisors reviewed this request and concurred with the commenter that the seven ICD–9–CM diagnosis codes noted above should not continue to be assigned to MS–DRG 794, as there is no clinically usable information reported in those codes identifying significant problems. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28017), we proposed to reassign these following seven diagnoses to the ‘‘only secondary diagnosis list’’ under MS–DRG 795 so that the case would be assigned to MS– DRG 795. E:\FR\FM\22AUR2.SGM 22AUR2 49902 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations • V17.0 (Family history of psychiatric condition) • V17.2 (Family history of other neurological diseases) • V17.49 (Family history of other cardiovascular diseases) • V18.0 (Family history of diabetes mellitus) • V18.19 (Family history of other endocrine and metabolic diseases) • V18.8 (Family history of infectious and parasitic diseases) • V50.3 (Ear piercing) We invited public comments on this proposal. Comment: Several commenters supported the proposal to reassign the identified seven diagnoses to the ‘‘only secondary diagnosis’’ list under MS– DRG 795 so that the case would be assigned to MS–DRG 795. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to reassign the following seven diagnoses to the ‘‘only secondary diagnosis list’’ under MS– DRG 795 so that the case would be assigned to MS–DRG 795: • V17.0 (Family history of psychiatric condition) • V17.2 (Family history of other neurological diseases) • V17.49 (Family history of other cardiovascular diseases) • V18.0 (Family history of diabetes mellitus) • V18.19 (Family history of other endocrine and metabolic diseases) • V18.8 (Family history of infectious and parasitic diseases) • V50.3 (Ear piercing) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 8. Medicare Code Editor (MCE) Changes The Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into an MS– DRG. As discussed in section II.G.1.a. of the preamble of this final rule, we developed an ICD–10 version of the current MS–DRGs, which are based on ICD–9–CM codes. We refer to this version of the MS–DRGs as the ICD–10 MS–DRGs Version 31.0–R. In November 2013, we also posted a Definitions of Medicare Code Edits Manual of the ICD–10 MCE Version 31.0 on the ICD– 10 MS–DRG Conversion Project Web VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 site at: https://www.cms.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We produced mainframe and computer software for Version 31.0 of the MS–DRG GROUPER with Medicare Code Editor, which was made available to the public in December 2013. Information on ordering the mainframe and computer software through NTIS was posted on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the ‘‘Related Links’’ section. This ICD–10 MS–DRG GROUPER with Medicare Code Editor Version 31.0 computer software facilitated additional review of the ICD–10 MS–DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD–10 MS–DRG GROUPER and MCE did not accurately reflect the logic and edits found in the ICD–9–CM MS–DRG GROUPER and MCE Version 31.0. We also have posted an ICD–10 version of the current MCE, which is based on ICD–9–CM codes, and refer to that version of the MCE as the ICD–10 MCE Version 31.0–R. Both of these documents are posted on our ICD–10 MS–DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. We will continue to share ICD–10 MS–DRG and MCE conversion activities with the public through this Web site. In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we proposed to remove extracranialintracranial (EC–IC) bypass surgery from the ‘‘Noncovered Procedure’’ edit code list for Version 32.0 of the MCE. This procedure is identified by ICD–9–CM procedure code 39.28 (Extracranialintracranial (EC–IC) vascular bypass). Because of the complexity of appropriately classifying the circumstances under which the EC–IC bypass surgery may, or may not, be considered reasonable and necessary for certain conditions, we proposed to remove the MCE ‘‘Noncovered Procedure’’ edit for EC–IC bypass surgery from the ‘‘Noncovered Procedure’’ edit code list for Version 32.0 of the MCE. We invited public comments on this proposal. Comment: Several commenters supported the proposal to remove the MCE ‘‘Noncovered Procedure’’ edit for EC–IC bypass surgery (procedure code 39.28) from the ‘‘Noncovered Procedure’’ edit code list for Version 32.0 of the MCE. The commenters stated that the proposal was reasonable given the information that was provided. Commenters also agreed that because of PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 the complexity of appropriately classifying the circumstances under which the EC–IC bypass surgery may be considered reasonable and necessary for certain conditions, the Medicare noncovered procedure edit for EC–IC bypass surgery should be removed. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to remove procedure code 39.28 (Extracranialintracranial (EC–IC) vascular bypass) from the noncovered procedure edit effective FY 2015. 9. Changes to Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS–DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS–DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS–DRG associated with the most resource-intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of MS–DRG reclassification and recalibrations, for FY 2015, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization. A surgical class can be composed of one or more MS–DRGs. For example, in MDC 11, the surgical class ‘‘kidney transplant’’ consists of a single MS–DRG (MS–DRG 652) and the class ‘‘major bladder procedures’’ consists of three MS–DRGs (MS–DRGs 653, 654, and 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS–DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS–DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS–DRGs 001 and 002 and surgical class B includes MS–DRGs 003, 004, and 005. Assume also that the average costs of MS–DRG 001 are higher than that of MS–DRG 003, but the average costs of MS–DRGs 004 and 005 are higher than the average costs of MS– E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS–DRG in the class by frequency (that is, by the number of cases in the MS–DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of ‘‘other O.R. procedures’’ as discussed below. This methodology may occasionally result in assignment of a case involving multiple procedures to the lowerweighted MS–DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the ‘‘other O.R. procedures’’ surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS–DRG or MS–DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The ‘‘other O.R. procedures’’ class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higherordered surgical class has lower average costs than the class ordered below it. Code 414.4 ........ VerDate Mar<15>2010 Diagnosis description Coronary atherosclerosis due to calcified lesion. 18:25 Aug 21, 2014 Jkt 232001 Based on the changes that we proposed to make for FY 2015, as discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to revise the surgical hierarchy for MDC 5 (Diseases and Disorders of the Circulatory System) and MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) as follows: In MDC 5, we proposed to sequence proposed new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and proposed new MS–DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS–DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC). In MDC 8, we proposed to delete MS– DRGs 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and MS– DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/Neurostimulator) from the surgical hierarchy. We proposed to sequence proposed new MS–DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/ Neurostimulator), proposed new MS– DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), and proposed new MS–DRG 520 (Back & Neck Procedure Except Spinal Fusion without CC/MCC) above MS–DRG 492 (Lower Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC). We invited public comments on our proposals. Comment: We did not receive any public comments opposing our proposals for the surgical hierarchy. Commenters expressed general support for the proposals, noting they were reasonable given the information that was provided. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal for MDC 5 to sequence new MS–DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and new MS– DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS– CC level Cnt 1 Non-CC PO 00000 Frm 00051 1,796 Fmt 4701 Cnt 1 impact Sfmt 4700 DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/ HF/Shock with MCC). We also are finalizing our proposal for MDC 8 to delete MS–DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/ Neurostimulator) and MS–DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/ Neurostimulator) from the surgical hierarchy. We are sequencing new MS– DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator), new MS–DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), and new MS– DRG 520 (Back & Neck Procedure Except Spinal Fusion without CC/MCC) above MS–DRG 492 (Lower Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC), effective FY 2015. 10. Changes to the MS–DRG Diagnosis Codes for FY 2015 a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CC) Severity Levels for FY 2015 A complete updated MCC, CC, and Non-CC Exclusion List is available via the Internet on the CMS Web site at: https://cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/ AcuteInpatientPPS/ as follows: • Table 6I (Complete MCC list); • Table 6J (Complete CC list); and • Table 6K (Complete list of CC Exclusions). b. Coronary Atherosclerosis Due to Calcified Coronary Lesion We received a request that we change the severity level for ICD–9–CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified coronary lesion) from a non-CC to an MCC. This issue was previously discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50541 through 50542). We examined claims data from the December 2013 update of the FY 2013 MedPAR file for ICD–9–CM diagnosis code 414.4. The following chart shows our findings. Cnt 2 1.16 49903 3,056 E:\FR\FM\22AUR2.SGM Cnt 2 impact 2.18 22AUR2 Cnt 3 2,835 Cnt 3 impact 3.01 49904 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We ran the above data as described in the FY 2008 IPPS final rule with comment period (72 FR 47158 through 47161). The C1 value reflects a patient with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 value reflects a patient with at least one other secondary diagnosis that is a CC, but none that is an MCC. The C3 value reflects a patient with at least one other secondary diagnosis that is an MCC. The chart above shows that the C1 finding is 1.16. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.18. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.16 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As stated earlier, a value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not support reclassifying this diagnosis code to an MCC. Our clinical advisors reviewed the data and evaluated this condition. They Code tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 414.2 ........ CC level Diagnosis description Chronic total occlusion of coronary artery. 18:25 Aug 21, 2014 Jkt 232001 Cnt 1 Non-CC The chart above for diagnosis code 414.2 shows that the C1 finding is 1.25. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.09. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.25 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As VerDate Mar<15>2010 recommended that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. They did not believe that this diagnosis would increase the severity level of patients. They pointed out that a similar code, diagnosis code 414.2 (Chronic total occlusion of coronary artery), is a nonCC. Our clinical advisors believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2. Considering the C1 and C2 ratings of diagnosis code 414.4 and the input from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to reclassify diagnosis code 414.4 to an MCC; the diagnosis code would continue to be considered a non-CC. Therefore, based on the data and clinical analysis, we proposed to maintain diagnosis code 414.4 as a nonCC. We invited public comments on our proposal. Comment: Several commenters supported the proposal to keep diagnosis code 414.4 as a non-CC. One commenter requested that diagnosis code 414.4, when present as a secondary diagnosis, be included on the MCC list. The commenter believed that treating calcified coronary lesions with atherectomy is underpaid by the Medicare program for patients requiring percutaneous coronary intervention when calcified coronary lesions prevent successful angioplasty and placement of coronary stents. The commenter further stated that treating coronary calcification is significantly more 15,814 Cnt 1 impact Cnt 2 1.25 Frm 00052 Fmt 4701 Sfmt 4700 Cnt 2 impact 21,483 stated earlier, a value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.09 also does not support reclassifying this diagnosis code to an MCC. Our clinical advisors reviewed the data and evaluated the severity level for both diagnosis code 414.4 and 414.2. They continue to recommend that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. Furthermore, they recommend that we not change the severity level for diagnosis code 414.2. They do not believe that the diagnosis represented by either code would increase the severity level of patients. After reviewing the commenter’s justification for changing diagnosis code 414.4 from PO 00000 difficult to treat, requires more time and equipment, and has clinical outcomes that are much worse compared to treating noncalcified or mildly calcified coronary obstructions. Consequently, the commenter believed it costs hospitals more to treat patients with calcified coronary lesions and that hospitals should be compensated for their expense to treat coronary atherosclerosis in Medicare beneficiaries. The commenter recognized the opinion of our clinical advisors that patients with a code 414.4 diagnosis are less severe than those with a code 414.2 diagnosis, but disagreed with that opinion. The commenter believed that both disease states add substantial treatment time and costs to the providers, health care systems, and society and both are worthy of classification as an MCC. Response: We appreciate the commenters’ support for our proposal to maintain code 414.4 as a non-CC. We are not accepting the commenter’s recommendation to change this code to an MCC because our clinical data do not support such a change. The data continue to support keeping diagnosis code 414.4 as a non-CC and do not support changing the code to an MCC, for the reasons described above. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for ICD–9–CM diagnosis code 414.2. The following chart shows our findings. 2.09 Cnt 3 19,955 Cnt 3 impact 3.04 a non-CC to an MCC, our clinical advisors continue to recommend that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. They again pointed out that diagnosis code 414.2 is a similar code and is a non-CC. As noted, they also recommend maintaining diagnosis code 414.2 as a non-CC. Our clinical advisors continue to believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2. After consideration of the public comments we received, the C1 and C2 ratings in our claims data, and the input from our clinical advisors, we are finalizing our proposal to not reclassify diagnosis code 414.4 from a non-CC to an MCC; the diagnosis code will continue to be considered a non-CC. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 11. Complications or Comorbidity (CC) Exclusions List tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Background of the CC List and the CC Exclusions List Under the IPPS MS–DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS–DRGs we adopted for FY 2008 (72 FR 47152 through 47171). b. CC Exclusions List for FY 2015 In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As we indicated above, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list. In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 diagnoses were established using the following five principles: • Chronic and acute manifestations of the same condition should not be considered CCs for one another; • Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another; • Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/ unobstructed, and benign/malignant, should not be considered CCs for one another; • Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and • Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC.1 In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we did not propose any changes to the CC Exclusion List. Therefore, we did not develop or publish Tables 6G (Additions to the CC Exclusion List) or Table 6H (Deletions from the CC 1 We refer readers to the FY 1989 final rule (53 FR 38485, September 30, 1988) for the revision made for the discharges occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September 4, 1990) for the FY 1991 revision; the FY 1992 final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782, September 1, 1995) for the FY 1996 revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 51542); the FY 2013 final rule (77 FR 53315); and the FY 2014 final rule (78 FR 50541). In the FY 2000 final rule (64 FR 41490, July 30, 1999), we did not modify the CC Exclusions List because we did not make any changes to the ICD–9–CM codes for FY 2000. PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 49905 Exclusion List). We developed Table 6K (Complete List of CC Exclusions), which is available only via the Internet on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ index.html. Because of the length of Table 6K, we are not publishing it in the Addendum to this final rule. Each of these principal diagnosis codes for which there is a CC exclusion is shown with an asterisk and the conditions that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. Beginning with discharges on or after October 1 of each year, the indented diagnoses are not recognized by the GROUPER as valid CCs for the asterisked principal diagnoses. A complete updated MCC, CC, and Non-CC Exclusions List is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/. Because there were no proposed new, revised, or deleted diagnosis or procedure codes for FY 2015, we have not developed Table 6A (New Diagnosis Codes), Table 6B (New Procedure Codes), Table 6C (Invalid Diagnosis Codes), Table 6D (Invalid Procedure Codes), Table 6E (Revised Diagnosis Code Titles), and Table 6F (Revised Procedure Codes) to the final rule and they are not published as part of this final rule. We did not propose any additions or deletions to the MS–DRG MCC List for FY 2015 nor any additions or deletions to the MS–DRG CC List for FY 2015. Therefore, as we proposed, for this final rule, we have not developed Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions to the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions to the CC List), and they are not published as part of this final rule. Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current MS– DRG Definitions Manual, Version 31.0, is available on a CD for $225.00. This manual may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949–0303, or by obtaining an order form at the Web site: https://www.3MHIS.com. Please specify the revision or revisions requested. Version 32.0 of this manual, which includes the final FY 2015 MS–DRG changes, is available on a CD for E:\FR\FM\22AUR2.SGM 22AUR2 49906 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV $225.00. This manual may be obtained by writing 3M/HIS at the address provided above; or by calling (203) 949– 0303; or by obtaining an order form at the Web site at: https://www/3MHIS.com. Please specify the revision or revisions requested. 12. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 986; and 987 Through 989 Each year, we review cases assigned to former CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS–DRGs that we adopted for FY 2008, CMS DRG 468 was split three ways and became MS–DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 476 became MS–DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 477 became MS–DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). MS–DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These MS–DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS–DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: • 60.0 (Incision of prostate); • 60.12 (Open biopsy of prostate); • 60.15 (Biopsy of periprostatic tissue); • 60.18 (Other diagnostic procedures on prostate and periprostatic tissue); • 60.21 (Transurethral prostatectomy); • 60.29 (Other transurethral prostatectomy); • 60.61 (Local excision of lesion of prostate); • 60.69 (Prostatectomy, not elsewhere classified); • 60.81 (Incision of periprostatic tissue); VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • 60.82 (Excision of periprostatic tissue); • 60.93 (Repair of prostate); • 60.94 (Control of (postoperative) hemorrhage of prostate); • 60.95 (Transurethral balloon dilation of the prostatic urethra); • 60.96 (Transurethral destruction of prostate tissue by microwave thermotherapy); • 60.97 (Other transurethral destruction of prostate tissue by other thermotherapy); and • 60.99 (Other operations on prostate). All remaining O.R. procedures are assigned to MS–DRGs 981 through 983 and 987 through 989, with MS–DRGs 987 through 989 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.2 Our review of MedPAR claims data showed that there were no cases that merited movement or should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we did not propose to change the procedures assigned among these MS–DRGs. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS–DRGs 981 through 983, MS–DRGs 2 The original list of the ICD–9–CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), and the FY 1998 final rule (62 FR 45981), we moved several other procedures from DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468. No procedures were moved in FY 1999, as noted in the final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 final rule (67 FR 49999), we did not move any procedures from DRG 477. However, we did move procedure codes from DRG 468 and placed them in more clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 477 because the procedures are nonextensive. In the FY 2005 final rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In addition, we added several existing procedures to DRGs 476 and 477. In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, 2010, 2011, 2012, 2013, and 2014, no procedures were moved, as noted in the FY 2008 final rule with comment period (72 FR 46241), in the FY 2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR 43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012 final rule (76 FR 51549), in the FY 2013 final rule (77 FR 53321), and in the FY 2014 final rule (78 FR 50545). PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 984 through 986, and MS–DRGs 987 through 989 for FY 2015. a. Moving Procedure Codes From MS– DRGs 981 Through 983 or MS–DRGs 987 Through 989 Into MDCs We annually conduct a review of procedures producing assignment to MS–DRGs 981 through 983 (Extensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS– DRGs 987 through 989 (Nonextensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS–DRGs into one of the surgical MS–DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS–DRGs for the MDC in which the diagnosis falls. As noted above, there were no cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we did not propose to remove any procedures from MS–DRGs 981 through 983 or MS–DRGs 987 through 989 into one of the surgical MS–DRGs for the MDC into which the principal diagnosis is assigned. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not removing any procedures from MS–DRGs 981 through 983 or MS–DRGs 987 through 989 into one of the surgical MS–DRGs into which the principal diagnosis is assigned for FY 2015. b. Reassignment of Procedures Among MS–DRGs 981 Through 983, 984 Through 986, and 987 Through 989 We also annually review the list of ICD–9–CM procedures that, when in combination with their principal diagnosis code, result in assignment to MS–DRGs 981 through 983, 984 through 986 (Prostatic O.R. procedure unrelated to principal diagnosis with MCC, with CC, or without CC/MCC, respectively), and 987 through 989, to ascertain whether any of those procedures should be reassigned from one of these three MS–DRGs to another of the three MS– DRGs based on average costs and the length of stay. We look at the data for E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations trends such as shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS–DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data. There were no cases representing shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical, or that merited movement so that cases should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we did not propose to move any procedure codes among these MS–DRGs. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not moving any procedure codes among these MS–DRGs for FY 2015. c. Adding Diagnosis or Procedure Codes to MDCs Based on the review of cases in the MDCs, as described above in sections II.G.2. through 7. of the preamble of this final rule, we did not propose to add any diagnosis or procedure codes to MDCs for FY 2015. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not adding any diagnosis or procedure codes to MDCs for FY 2015. 13. Changes to the ICD–9–CM System tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. ICD–10 Coordination and Maintenance Committee In September 1985, the ICD–9–CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD–9–CM system. The final update to ICD–9–CM codes was to be made on October 1, 2013. Thereafter, the name of the Committee was changed to the ICD–10 Coordination and Maintenance Committee, effective with the March 19–20, 2014 meeting. The ICD–10 Coordination and Maintenance Committee will address updates to the ICD–10–CM, ICD–10–PCS, and ICD–9– CM coding systems. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the coding systems to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 promoting the use of Federal and nonFederal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system. The official list of ICD–9–CM diagnosis and procedure codes by fiscal year can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/ codes.html. The official list of ICD–10– CM and ICD–10–PCS codes can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Coding/ICD10/ index.html. The NCHS has lead responsibility for the ICD–10–CM and ICD–9–CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD–10–PCS and ICD–9–CM procedure codes included in the Tabular List and Alphabetic Index for Procedures. The Committee encourages participation in the above process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2015 at a public meeting held on September 18–19, 2013, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 15, 2013. The Committee held its 2014 meeting on March 19–20, 2014. It was announced at this meeting that any new ICD–10–CM/PCS codes for which there was consensus of public support and for which complete tabular and indexing changes would be made by May 2014 would be included in the October 1, 2014 update to ICD–10–CM/ICD–10– PCS. For FY 2015, there are no new, revised, or deleted ICD–10–CM diagnosis codes or ICD–10–PCS procedure codes, and no new, revised, or deleted ICD–9–CM diagnosis or procedure codes. PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 49907 Copies of the minutes of the procedure codes discussions at the Committee’s September 18–19, 2013 meeting and March 19–20, 2014 meeting can be obtained from the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ ICD9ProviderDiagnosticCodes/index. html?redirect=/icd9ProviderDiagnostic Codes/03_meetings.asp. The minutes of the diagnosis codes discussions at the September 18–19, 2013 meeting and March 19–20, 2014 meeting are found at: https://www.cdc.gov/nchs/icd/ icd9cm.html. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates. We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, CoChairperson, ICD–10 Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by email to: dfp4@cdc.gov. Questions and comments concerning the procedure codes should be addressed to: Patricia Brooks, CoChairperson, ICD–10 Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244–1850. Comments may be sent by email to: patricia.brooks2@cms.hhs.gov. In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October. Section 503(a) of Public Law 108–173 included a requirement for updating ICD–9–CM codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the ‘‘Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) . . . until the fiscal year that begins after such date.’’ This requirement improves the recognition of new technologies under the IPPS system by providing information on these new technologies at an earlier date. Data will E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49908 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations be available 6 months earlier than would be possible with updates occurring only once a year on October 1. While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes. The ICD–10 (previously the ICD–9– CM) Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all diagnosis and procedure coding changes, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee Meeting minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 new April update would have on providers. In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108–173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee’s public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April l, 2014 implementation of a code at the September 18–19, 2013 Committee meeting. Therefore, there were no new codes implemented on April 1, 2014. ICD–9–CM addendum and code title information is published on the CMS Web site at: https://www.cms.hhs.gov/ Medicare/Coding/ICD9Provider DiagnosticCodes/?redirect=/ icd9ProviderDiagnosticCodes/ 01overview.asp#TopofPage. ICD–10–CM and ICD–10–PCS addendum and code title information is published on the CMS Web site at https://www.cms.gov/ Medicare/Coding/ICD10/. Information on ICD–10–CM diagnosis codes, along with the Official ICD–10– CM Coding Guidelines, can also be found on the CDC Web site at: https:// www.cdc.gov/nchs/icd/icd10cm.html. Information on new, revised, and deleted ICD–10–CM/ICD–10–PCS codes is also provided to the AHA for publication in the Coding Clinic for ICD–10. AHA also distributes information to publishers and software vendors. CMS also sends copies of all ICD–9– CM coding changes to its Medicare contractors for use in updating their systems and providing education to providers. The code titles are adopted as part of the ICD–10 (previously ICD–9–CM) Coordination and Maintenance PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 Committee process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules. b. Code Freeze In the January 16, 2009 ICD–10–CM and ICD–10–PCS final rule (74 FR 3340), there was a discussion of the need for a partial or total freeze in the annual updates to both ICD–9–CM and ICD–10–CM and ICD–10–PCS codes. The public comment addressed in that final rule stated that the annual code set updates should cease l year prior to the implementation of ICD–10. The commenters stated that this freeze of code updates would allow for instructional and/or coding software programs to be designed and purchased early, without concern that an upgrade would take place immediately before the compliance date, necessitating additional updates and purchases. HHS responded to comments in the ICD–10 final rule that the ICD–9–CM Coordination and Maintenance Committee has jurisdiction over any action impacting the ICD–9–CM and ICD–10 code sets. Therefore, HHS indicated that the issue of consideration of a moratorium on updates to the ICD– 9–CM, ICD–10–CM, and ICD–10–PCS code sets in anticipation of the adoption of ICD–10–CM and ICD–10–PCS would be addressed through the Committee at a future public meeting. The code freeze was discussed at multiple meetings of the ICD–9–CM Coordination and Maintenance Committee and public comment was actively solicited. The Committee evaluated all comments from participants attending the Committee meetings as well as written comments that were received. The Committee also considered the delay in implementation of ICD–10 until October 1, 2014. There was an announcement at the September 19, 2012 ICD–9–CM Coordination and Maintenance Committee meeting that a partial freeze of both ICD–9–CM and ICD–10 codes will be implemented as follows: • The last regular annual update to both ICD–9–CM and ICD–10 code sets was made on October 1, 2011. • On October 1, 2012 and October 1, 2013, there will be only limited code updates to both ICD–9–CM and ICD–10 code sets to capture new technology and new diseases. • On October 1, 2014, there were to be only limited code updates to ICD–10 code sets to capture new technology and diagnoses as required by section 503(a) of Public Law 108–173. There were to E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations be no updates to ICD–9–CM on October 1, 2014. • On October 1, 2015, one year after the originally scheduled implementation of ICD–10, regular updates to ICD–10 were to begin. On May 15, 2014, CMS posted an updated Partial Code Freeze schedule on the CMS Web site at: https://www. cms.gov/Medicare/Coding/ICD10/ICD-9CM-Coordination-and-MaintenanceCommittee-Meetings.html. This updated schedule provided information on the extension of the partial code freeze until 1 year after the implementation of ICD– 10. As stated earlier, on April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113–93) was enacted, which specified that the Secretary may not adopt ICD–10 prior to October 1, 2015. On May 1, 2014, the Department announced that it expects to release a interim final rule in the near future that will include a new compliance date to require the use of ICD–10 beginning October 1, 2015. The rule will also require HIPAA covered entities to continue to use ICD–9–CM through September 30, 2015. Accordingly, the updated schedule for the partial code freeze is as follows: • The last regular annual updates to both ICD–9–CM and ICD–10 code sets were made on October 1, 2011. • On October 1, 2012, October 1, 2013, and October 1, 2014, there will be only limited code updates to both the ICD–9–CM and ICD–10 code sets to capture new technologies and diseases as required by section 1886(d)(5)(K) of the Act. • On October 1, 2015, there will be only limited code updates to ICD–10 code sets to capture new technologies and diagnoses as required by section 1886(d)(5)(K) of the Act. There will be no updates to ICD–9–CM, as it will no longer be used for reporting. • On October 1, 2016 (1 year after implementation of ICD–10), regular updates to ICD–10 will begin. The ICD–10 (previously ICD–9–CM) Coordination and Maintenance Committee announced that it would continue to meet twice a year during the freeze. At these meetings, the public will be encouraged to comment on whether or not requests for new 49909 diagnosis and procedure codes should be created based on the need to capture new technology and new diseases. Any code requests that do not meet the criteria will be evaluated for implementation within ICD–10 one year after the implementation of ICD–10, once the partial freeze is ended. Complete information on the partial code freeze and discussions of the issues at the Committee meetings can be found on the ICD–10 Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/ Coding/ICD9ProviderDiagnosticCodes/ meetings.html. A summary of the September 19, 2012 Committee meeting, along with both written and audio transcripts of this meeting, is posted on the Web site at: https://www.cms.hhs. gov/Medicare/Coding/ICD9Provider DiagnosticCodes/ICD-9-CM-C-and-MMeeting-Materials-Items/2012-09-19MeetingMaterials.html. This partial code freeze has dramatically decreased the number of codes created each year as shown by the following information. TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR ICD–9–CM codes Fiscal year No. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV FY 2009 (October 1, 2008): Diagnoses .......................................... Procedures ........................................ FY 2010 (October 1, 2009): Diagnoses .......................................... Procedures ........................................ FY 2011 (October 1, 2010): Diagnoses .......................................... Procedures ........................................ FY 2012 (October 1, 2011): Diagnoses .......................................... Procedures ........................................ FY 2013 (October 1, 2012): Diagnoses .......................................... Procedures ........................................ FY 2014 (October 1, 2013): Diagnoses .......................................... Procedures ........................................ FY 2015 (October 1, 2014): Diagnoses .......................................... Procedures ........................................ 18:25 Aug 21, 2014 Jkt 232001 Change Fiscal year 14,025 3,824 348 56 14,315 3,838 290 14 14,432 3,859 135 18 14,567 3,878 0 1 14,567 3,882 0 4 14,567 3,882 0 0 FY FY FY FY ICD–10–CM ...................................... ICD–10–PCS .................................... 2012: ICD–10–CM ...................................... ICD–10–PCS .................................... 2013: ICD–10–CM ...................................... ICD–10–PCS .................................... 2014: ICD–10–CM ...................................... ICD–10–PCS .................................... 2015: ICD–10–CM ...................................... ICD–10–PCS .................................... creating only a limited number of new ICD–9–CM and ICD–10 codes. At the September 18–19, 2013 and March 19–20, 2014 Committee meetings, we discussed any requests we had received for new ICD–10–CM diagnosis and ICD–10–PCS procedure codes that were to be implemented on October 1, 2014. We did not discuss ICD–9–CM codes. The public was given the opportunity to comment on whether or not new ICD–10–CM and ICD–10– PO 00000 Frm 00057 Fmt 4701 No. FY 2009: ICD–10–CM ...................................... ICD–10–PCS .................................... FY 2010: ICD–10–CM ...................................... ICD–10–PCS .................................... 117 21 14,567 3,877 As mentioned earlier, the public is provided the opportunity to comment on any requests for new diagnosis or procedure codes discussed at the ICD– 10 Coordination and Maintenance Committee meeting. The public has supported only a limited number of new codes during the partial code freeze, as can be seen by data shown above. We have gone from creating several hundred new codes each year to VerDate Mar<15>2010 ICD–10–CM and ICD–10–PCS codes Sfmt 4700 Change 68,069 72,589 +5 ¥14,327 69,099 71,957 +1,030 ¥632 69,368 72,081 +269 +124 69,833 71,918 +465 ¥163 69,832 71,920 ¥1 +2 69,823 71,924 ¥9 +4 69,823 71,924 0 0 PCS codes should be created, based on the partial code freeze criteria. The public was to use the criteria as to whether codes were needed to capture new diagnoses or new technologies. If the codes do not meet those criteria for implementation during the partial code freeze, consideration was to be given as to whether the codes should be created after the partial code freeze ends one year after the implementation of ICD– 10–CM/PCS. We invited public E:\FR\FM\22AUR2.SGM 22AUR2 49910 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations comments on any code requests discussed at the September 18–19, 2013 and March 19–20, 2014 Committee meetings for implementation as part of the October 1, 2014 update. The deadline for commenting on code proposals discussed at the September 18–19, 2013 Committee meeting was November 15, 2013. The deadline for commenting on code proposals discussed at the March 19–20, 2014 Committee meeting was April 18, 2014. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 14. Public Comments on Issues Not Addressed in the Proposed Rule We received three public comments regarding MS–DRG issues that were outside of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS proposed rule. Below we summarize these public comments. However, because we consider these public comments to be outside of the scope of the proposed rule, we are not responding to them in this final rule. As stated in section II.G.1.b. of the preamble of this final rule, we encourage individuals with comments about MS–DRG classifications to submit these comments no later than December 7 of each year so they can be considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process. a. Request for Review and MS–DRG Reassignment for ICD–9–CM Diagnosis Code 784.7 Reported With Procedure Codes 39.75 and 39.76 One commenter expressed concern regarding specific procedure codes that are assigned to MS–DRGs 981 through 983; 984 through 986; and 987 through 989 in relation to our discussion of the annual review of these MS–DRGs in section II.G.12. of the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28020). The commenter noted that the endovascular embolization of the arteries of the branches of the internal maxillary artery is frequently performed for intractable posterior epistaxis. The commenter stated that, currently, diagnosis code 784.7 (Epistaxis) reported with procedure codes 39.75 (Endovascular embolization or occlusion of vessel(s) of head or neck using bare coils) and 39.76 (Endovascular embolization or occlusion of vessel(s) of head or neck using bioactive coils) groups to MS– DRG 981(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC), MS–DRG 982 (Extensive O.R. Procedure Unrelated to Principal VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Diagnosis with CC), and MS–DRG 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis without CC/MCC). The commenter indicated that it also found this grouping with ICD–10 diagnosis code R04.0 (Epistaxis) reported with artery occlusion procedure codes. The commenter requested that CMS review these groupings and consider the possibility of reassigning these procedure codes into a more specific MS–DRG. We consider this public comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule and therefore are not addressing it in this final rule. However, we will consider this public comment for possible proposals in future rulemaking as part of our annual review process. b. Coding for Extracorporeal Membrane Oxygenation Procedures (ECMO) Several commenters expressed concern that hospitals may not be correctly reporting extracorporeal membrane oxygenation (ECMO) and percutaneous cardiopulmonary bypass procedures. The commenters requested that CMS inform hospitals that they should appropriately code each procedure separately because each code captures different procedures. We consider this coding issue to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. We refer commenters to the American Hospital Association’s Central Office on Coding, which has responsibility for providing coding advice on such specific coding issues through its publication Coding Clinic. c. Adding Severity Levels to MS–DRGs 245 through 251 One commenter recommended including additional severity levels under MS–DRG 245 (AICD Generator Procedures); MS–DRG 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS–DRG 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without MCC); MS–DRG 248 (Percutaneous Cardiovascular Procedure with NonDrug-Eluting Stent with MCC or 4+ Vessels/Stents); MS–DRG 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without MCC); MS–DRG 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent with MCC); and MS–DRG 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent without MCC). We consider this public comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule, and PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 therefore are not addressing it in this final rule. However, we will consider the comment for possible proposals in future rulemaking as part of our annual review process. H. Recalibration of the FY 2015 MS– DRG Relative Weights 1. Data Sources for Developing the Relative Weights In developing the FY 2015 system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2013 MedPAR data used in this final rule include discharges occurring on October 1, 2012, through September 30, 2013, based on bills received by CMS through March 31, 2014, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which at that time were under a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in calculating the relative weights includes data for approximately 10,090,385 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR ‘‘GHO Paid’’ indicator field on the claim record is equal to ‘‘1’’ or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR ‘‘Indirect Medical Education (IME)’’ payment field, indicating that the claim was an ‘‘IME only’’ claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the March 31, 2014 update of the FY 2013 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called ‘‘claim type.’’ Claim type ‘‘60’’ indicates that the claim was an inpatient claim paid as fee-for-service. Claim types ‘‘61,’’ ‘‘62,’’ ‘‘63,’’ and ‘‘64’’ relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the relative weights for FY 2015 also excludes claims with claim type values not equal to ‘‘60.’’ The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. We note that the FY 2015 relative weights are based on the ICD–9–CM diagnoses and procedures codes from the MedPAR E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV claims data, grouped through the ICD– 9–CM version of the FY 2015 GROUPER (Version 32). The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the March 31, 2014 update of the FY 2012 HCRIS for calculating the FY 2015 cost-based relative weights. 2. Methodology for Calculation of the Relative Weights As we explain in section II.E.2. of the preamble of this final rule, we are calculating the FY 2015 relative weights based on 19 CCRs, as we did for FY 2014. The methodology we used to calculate the FY 2015 MS–DRG costbased relative weights based on claims data in the FY 2013 MedPAR file and data from the FY 2012 Medicare cost reports is as follows: • To the extent possible, all the claims were regrouped using the FY 2015 MS–DRG classifications discussed in sections II.B. and II.G. of the preamble of this final rule. • The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicareapproved transplant centers that have cases in the FY 2012 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.) • Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS–DRG and before eliminating statistical outliers. • Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, special equipment charges, therapy services charges, operating VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood charges, and anesthesia charges were also deleted. • At least 92.2 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted. (We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50551) for the edit threshold related to FY 2014 and prior fiscal years). • Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS– DRG. • Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to ‘‘Y’’ for ‘‘Yes’’ for all claims that otherwise have an ‘‘N’’ (No) or a ‘‘U’’ (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field. Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a ‘‘Y’’ indicator is associated with the diagnosis on the claim), it is not a HAC, and the hospital is paid for the higher severity (and, therefore, the higher weighted MS–DRG). If the particular condition is not present on admission (that is, an ‘‘N’’ indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG GROUPER assigns the claim to a lower severity (and, therefore, the lower weighted MS–DRG) as a penalty for allowing a Medicare inpatient to contract a HAC. While the POA reporting meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. Because cases identified as HACs are PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 49911 likely to be more complex than similar cases that are not identified as HACs, the charges associated with HAC cases are likely to be higher as well. Therefore, if the higher charges of these HAC claims are grouped into lower severity MS–DRGs prior to the relative weight-setting process, the relative weights of these particular MS–DRGs would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS–DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost. To avoid these problems, we reset the POA indicator field to ‘‘Y’’ only for relative weight-setting purposes for all claims that otherwise have an ‘‘N’’ or a ‘‘U’’ in the POA field. This resetting ‘‘forced’’ the more costly HAC claims into the higher severity MS–DRGs as appropriate, and the relative weights calculated for each MS–DRG more closely reflect the true costs of those cases. Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-ofliving adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS–DRG for each of the 19 cost groups so that each MS– DRG had 19 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2012 cost report data. The 19 cost centers that we used in the relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center CCRs. E:\FR\FM\22AUR2.SGM 22AUR2 49912 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Cost center group name (19 total) MedPAR charge field Revenue codes contained in MedPAR charge field Cost report line description Routine Days ......... Private Room Charges. 011X and 014X ...... Intensive Days ....... Semi-Private Room Charges. Ward Charges ........ Intensive Care Charges. Coronary Care Charges. Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) Form CMS–2552–10 Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS–2552–10 Medicare charges from HCRIS (Worksheet D–3, Column & line number) Form CMS–2552–10 Pharmacy Charges C_1_C5_30 ....... C_1_C6_30 D3_HOS_C2_30 012X, 013X and 016X–019X. 015X ...................... 020X ...................... Intensive Care Unit C_1_C5_31 ....... C_1_C6_31 D3_HOS_C2_31 021X ...................... Coronary Care Unit C_1_C5_32 ....... C_1_C6_32 D3_HOS_C2_32 C_1_C5_33 ....... C_1_C6_33 D3_HOS_C2_33 C_1_C5_34 ....... C_1_C6_34 D3_HOS_C2_34 C_1_C5_35 ....... C_1_C6_35 D3_HOS_C2_35 025X, 026X and 063X. Burn Intensive Care Unit. Surgical Intensive Care Unit. Other Special Care Unit. Intravenous Therapy. C_1_C5_64 ....... C_1_C6_64 D3_HOS_C2_64 Drugs Charged To Patient. Drugs ..................... Adults & Pediatrics (General Routine Care). C_1_C5_73 ....... C_1_C7_64 C_1_C6_73 D3_HOS_C2_73 Medical/Surgical Supply Charges. 0270, 0271, 0272, Medical Supplies 0273, 0274, Charged to Pa0277, 0279, and tients. 0621, 0622, 0623. C_1_C5_71 ....... C_1_C7_73 C_1_C6_71 D3_HOS_C2_71 Durable Medical Equipment Charges. 0290, 0291, 0292 and 0294–0299. DME-Rented .......... C_1_C5_96 ....... C_1_C7_71 C_1_C6_96 D3_HOS_C2_96 Used Durable Medical Charges. 0293 ....................... DME-Sold ............... C_1_C5_97 ....... C_1_C7_96 C_1_C6_97 D3_HOS_C2_97 0275, 0276, 0278, 0624. Implantable Devices Charged to Patients. C_1_C5_72 ....... C_1_C7_97 C_1_C6_72 D3_HOS_C2_72 Physical Therapy Charges. 042X ...................... Physical Therapy ... C_1_C5_66 ....... C_1_C7_72 C_1_C6_66 D3_HOS_C2_66 Occupational Therapy Charges. 043X ...................... Occupational Therapy. C_1_C5_67 ....... C_1_C7_66 C_1_C6_67 D3_HOS_C2_67 Speech Pathology Charges. 044X and 047X ...... Speech Pathology C_1_C5_68 ....... C_1_C7_67 C_1_C6_68 D3_HOS_C2_68 Inhalation Therapy Inhalation Therapy Charges. 041X and 046X ...... Respiratory Therapy. C_1_C5_65 ....... C_1_C7_68 C_1_C6_65 D3_HOS_C2_65 Operating Room .... Operating Room Charges. 036X ...................... Operating Room .... C_1_C5_50 ....... C_1_C7_65 C_1_C6_50 D3_HOS_C2_50 071X ...................... Recovery Room ..... C_1_C5_51 ....... C_1_C7_50 C_1_C6_51 C_1_C7_51 C_1_C6_52 D3_HOS_C2_51 Supplies and Equipment. Implantable Devices Therapy Services ... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Labor & Delivery .... Operating Room Charges. 072X ...................... Delivery Room and Labor Room. C_1_C5_52 ....... Anesthesia ............. Anesthesia Charges 037X ...................... Anesthesiology ...... C_1_C5_53 ....... Cardiology .............. Cardiology Charges 048X and 073X ...... Electro-cardiology .. C_1_C5_69 ....... 0481 ....................... Cardiac Catheterization. 030X, 031X, and 075X. Laboratory .............. Cardiac Catheterization. Laboratory .............. VerDate Mar<15>2010 Laboratory Charges 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 D3_HOS_C2_52 C_1_C5_59 ....... C_1_C7_52 C_1_C6_53 C_1_C7_53 C_1_C6_69 C_1_C7_69 C_1_C6_59 D3_HOS_C2_59 C_1_C5_60 ....... C_1_C7_59 C_1_C6_60 D3_HOS_C2_60 E:\FR\FM\22AUR2.SGM 22AUR2 D3_HOS_C2_53 D3_HOS_C2_69 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Radiology Charges C_1_C5_61 ....... C_1_C7_60 C_1_C6_61 D3_HOS_C2_61 Electro-Encephalography. C_1_C5_70 ....... C_1_C7_61 C_1_C6_70 D3_HOS_C2_70 032X, 040X ............ Radiology—Diagnostic. C_1_C5_54 ....... C_1_C7_70 C_1_C6_54 D3_HOS_C2_54 028x, 0331, 0332, 0333, 0335, 0339, 0342. 0343 and 344 ........ Radiology ............... Cost report line description 074X, 086X ............ MedPAR charge field Cost from HCRIS (Worksheet C, Part 1, Column 5 and line number) Form CMS–2552–10 PBP Clinic Laboratory Services. Cost center group name (19 total) Radiology—Therapeutic. C_1_C5_55 ....... C_1_C7_54 C_1_C6_55 D3_HOS_C2_55 Radioisotope .......... C_1_C5_56 ....... Revenue codes contained in MedPAR charge field Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS–2552–10 49913 Medicare charges from HCRIS (Worksheet D–3, Column & line number) Form CMS–2552–10 Computed Tomography (CT) Scan. CT Scan Charges .. 035X ...................... Computed Tomography (CT) Scan. C_1_C5_57 ....... C_1_C6_56 C_1_C7_56 C_1_C6_57 Magnetic Resonance Imaging (MRI). MRI Charges .......... 061X ...................... Magnetic Resonance Imaging (MRI). C_1_C5_58 ....... C_1_C7_57 C_1_C6_58 D3_HOS_C2_58 Emergency Room .. Emergency Room Charges. 045x ....................... Emergency ............. C_1_C5_91 ....... C_1_C7_58 C_1_C6_91 D3_HOS_C2_91 Blood and Blood Products. Blood Charges ....... 038x ....................... C_1_C5_62 ....... C_1_C7_91 C_1_C6_62 C_1_C7_62 D3_HOS_C2_62 Blood Storage/Processing. 039x ....................... Whole Blood & Packed Red Blood Cells. Blood Storing, Processing, & Transfusing. C_1_C5_63 ....... C_1_C6_63 C_1_C7_63 D3_HOS_C2_63 Other Service Charge. 0002–0099, 022X, 023X, 024X, 052X, 053X. 055X–060X, 064X– 070X, 076X– 078X, 090X– 095X and 099X. 0800X .................... 080X and 082X– 088X. Renal Dialysis ........ C_1_C5_74 ....... C_1_C6_74 C_1_C7_74 D3_HOS_C2_74 Home Program Dialysis. C_1_C5_94 ....... C_1_C6_94 D3_HOS_C2_94 ASC (Non Distinct Part). C_1_C5_75 ....... C_1_C7_94 C_1_C6_75 D3_HOS_C2_75 Other Ancillary ....... C_1_C5_76 ....... Clinic ...................... C_1_C5_90 ....... Observation beds ... Other Services ....... Renal Dialysis ........ ESRD Revenue Setting Charges. Outpatient Service Charges. Lithotripsy Charge .. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Clinic Visit Charges 049X ...................... 079X ...................... 051X ...................... D3_HOS_C2_56 D3_HOS_C2_57 D3_HOS_C2_90 C_1_C5_92.01 .. C_1_C7_75 C_1_C6_76 C_1_C7_76 C_1_C6_90 C_1_C7_90 C_1_C6_92.01 D3_HOS_C2_76 D3_HOS_C2_ 92.01 Professional Fees Charges. Other Outpatient Services. C_1_C5_93 ....... C_1_C7_92.01 C_1_C6_93 D3_HOS_C2_93 Ambulance Charges. 054X ...................... Ambulance ............. C_1_C5_95 ....... C_1_C7_93 C_1_C6_95 D3_HOS_C2_95 Rural Health Clinic C_1_C5_88 ....... FQHC ..................... VerDate Mar<15>2010 096X, 097X, and 098X. C_1_C5_89 ....... 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM C_1_C7_95 C_1_C6_88 C_1_C7_88 C_1_C6_89 C_1_C7_89 22AUR2 D3_HOS_C2_88 D3_HOS_C2_89 49914 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We refer readers to the FY 2009 IPPS/ LTCH PPS final rule (73 FR 48462) for a discussion on the revenue codes included in the Supplies and Equipment and Implantable Devices CCRs, respectively. 3. Development of National Average CCRs We developed the national average CCRs as follows: Using the FY 2012 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicarespecific CCR was determined by taking the Medicare charges for each line item from Worksheet D–3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D–3. Once each hospital’s Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs. After we multiplied the total charges for each MS–DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 ‘‘costs’’ across each MS–DRG to produce a total standardized cost for the MS–DRG. The average standardized cost for each MS– DRG was then computed as the total standardized cost for the MS–DRG divided by the transfer-adjusted case count for the MS–DRG. The average cost for each MS–DRG was then divided by the national average standardized cost per case to determine the relative weight. The FY 2015 cost-based relative weights were then normalized by an adjustment factor of 1.645837 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. The 19 national average CCRs for FY 2015 are as follows: reasonable weight. In the FY 2015 IPPS/ LTCH PPS proposed rule, we proposed to use that same case threshold in recalibrating the MS–DRG relative weights for FY 2015. Using data from the FY 2013 MedPAR file, there were 8 MS–DRGs that contain fewer than 10 cases. Under the MS–DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients aged 0 to 17 years. With the exception of newborns, we previously separated some DRGs based on whether the patient was age 0 to 17 years or age 17 years and older. Other than the age split, cases grouping to these DRGs are identical. The DRGs for patients aged 0 to 17 years generally have very low volumes because children are typically ineligible for Medicare. In the past, we have found that the low volume of cases for the pediatric DRGs could lead to significant year-to-year instability in their relative weights. Although we have always encouraged non-Medicare payers to develop weights Group CCR applicable to their own patient Routine Days .................................... 0.489 populations, we have received frequent Intensive Days .................................. 0.407 complaints from providers about the use Drugs ................................................ 0.192 of the Medicare relative weights in the Supplies & Equipment ...................... 0.292 pediatric population. We believe that Implantable Devices ......................... 0.349 eliminating this age split in the MS– Therapy Services .............................. 0.344 DRGs will provide more stable payment Laboratory ......................................... 0.128 for pediatric cases by determining their Operating Room ............................... 0.212 Cardiology ......................................... 0.123 payment using adult cases that are Cardiac Catheterization .................... 0.133 much higher in total volume. Newborns Radiology .......................................... 0.165 are unique and require separate MS– MRIs ................................................. 0.087 DRGs that are not mirrored in the adult CT Scans .......................................... 0.043 population. Therefore, it remains Emergency Room ............................. 0.195 necessary to retain separate MS–DRGs Blood and Blood Products ................ 0.360 for newborns. All of the low-volume Other Services .................................. 0.405 MS–DRGs listed below are for Labor & Delivery ............................... 0.398 Inhalation Therapy ............................ 0.181 newborns. In FY 2015, because we do Anesthesia ........................................ 0.114 not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS–DRGs, we Since FY 2009, the relative weights proposed to compute relative weights have been based on 100 percent cost weights based on our MS–DRG grouping for the low-volume MS–DRGs by adjusting their final FY 2014 relative system. When we recalibrated the DRG weights by the percentage change in the weights for previous years, we set a average weight of the cases in other MS– threshold of 10 cases as the minimum DRGs. The crosswalk table is shown number of cases required to compute a below: MS–DRG title 768 ............... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Low-volume MS–DRG 791 ............... Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C. Neonates, Died or Transferred to Another Acute Care Facility. Extreme Immaturity or Respiratory Distress Syndrome, Neonate. Prematurity with Major Problems .............. 792 ............... Prematurity without Major Problems ......... 793 ............... Full-Term Neonate with Major Problems .. 789 ............... 790 ............... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Crosswalk to MS–DRG Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Final FY 2014 relative weight cases in other MS–DRGs). Frm 00062 Fmt 4701 Sfmt 4700 (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the (adjusted by percent change in average weight of the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49915 Low-volume MS–DRG MS–DRG title Crosswalk to MS–DRG 794 ............... Neonate with Other Significant Problems 795 ............... Normal Newborn ....................................... Final FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). Final FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV We did not receive any public comments on this proposal and, therefore, are finalizing it for FY 2015 as proposed. 4. Bundled Payments for Care Improvement (BPCI) Initiative The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS’ Center for Medicare and Medicaid Innovation’s Web site at https:// innovation.cms.gov/initiatives/BundledPayments/ and to section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343) for a discussion on the BPCI initiative. In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent fiscal years, we finalized a policy to treat hospitals that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to a hospital’s participation within these bundled payment models (that is, as if a hospital were not participating in those models under the BPCI initiative). Therefore, for FY 2015, we proposed to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in the BPCI initiative in our ratesetting process. Comment: One commenter was concerned about the policy to treat all providers that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 ratesetting process without regard to a hospital’s participation within these bundled payment models. The commenter stated that while it is unlikely to have a demonstrable effect in FY 2015, the BPCI initiative has just begun and has few participants compared to the total number of PPS hospitals. The commenter further stated that the cohort is expected to expand dramatically, given the additional round of applications, and it expected participants to focus their cost reduction activities in select MS–DRGs, which could skew specific weights and inappropriately shift payments to other MS–DRGs. The commenter added that providers that are not part of the initiative cannot be expected to reach the same performance levels without the same tools available within the BPCI. The commenter recommended that CMS reconsider removing BPCI participants from the IPPS relative weight setting process. Response: As the commenter stated, the BPCI initiative is unlikely to have a demonstrable effect for FY 2015. Accordingly, we are finalizing our proposal to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations for FY 2015. However, we will monitor the possible impact that hospitals enrolled in the BPCI initiative may have on the MS–DRG relative weights in future fiscal years. I. Add-On Payments for New Services and Technologies 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ‘‘new technologies’’) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, ‘‘based PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.’’ We note that beginning with discharges occurring in FY 2008, CMS transitioned from CMS– DRGs to MS–DRGs. The regulations at 42 CFR 412.87 implement these provisions and specify three criteria for a new medical service or technology to receive the additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. Below we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria as well as other information. For a complete discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574). Under the first criterion, as reflected in § 412.87(b)(2), a specific medical service or technology will be considered ‘‘new’’ for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS–DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a technology receives a new FDA approval, it may not necessarily be considered ‘‘new’’ for purposes of new technology add-on payments if it is ‘‘substantially similar’’ to a technology that was approved by FDA and has been on the market for more than 2 to 3 years. In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our policy regarding substantial similarity in detail. Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49916 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations new medical services or technologies, the MS–DRG prospective payment rate otherwise applicable to the discharge involving the new medical services or technologies must be assessed for adequacy. Under the cost criterion, to assess the adequacy of payment for a new technology paid under the applicable MS–DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. Table 10 that was released with the FY 2014 IPPS/LTCH PPS final rule contains the final thresholds that we use to evaluate applications for new technology add-on payments for FY 2015. We refer readers to the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/FY2014-IPPS-FinalRule-Home-Page.html for a complete viewing of Table 10 from the FY 2014 IPPS/LTCH PPS final rule. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed the issue of whether the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims information that providers submit with applications for new technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue. Under the third criterion, § 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents ‘‘an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.’’ For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule for a more detailed discussion of this criterion (66 FR 46902).) The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, if the costs of the discharge (determined VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 by applying cost-to-charge ratios (CCRs) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an addon payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology exceed Medicare’s payment); or (2) 50 percent of the difference between the full DRG payment and the hospital’s estimated cost for the case. Unless the discharge qualifies for an outlier payment, the additional Medicare payment is limited to the full MS–DRG payment plus 50 percent of the estimated costs of the new technology. Section 503(d)(2) of Public Law 108– 173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108–173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality. In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance for their new medical service or technology by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. The Council on Technology and Innovation (CTI) at CMS oversees the agency’s cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108–173. The Council is cochaired by the Director of the Center for Clinical Standards and Quality (CCSQ) and the Director of the Center for PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 Medicare (CM), who is also designated as the CTI’s Executive Coordinator. The specific processes for coverage, coding, and payment are implemented by CM, CCSQ, and the local claimspayment contractors (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, these processes by working to assure that all of these activities reflect the agency-wide priority to promote highquality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries. To improve the understanding of CMS’ processes for coverage, coding, and payment and how to access them, the CTI has developed an ‘‘Innovator’s Guide’’ to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS Web site, in a userfriendly format. This guide was published in August 2008 and is available on the CMS Web site at: https://www.cms.gov/CouncilonTech Innov/Downloads/InnovatorsGuide5_ 10_10.pdf. As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency’s coverage decisions for Medicare. The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare’s coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov. We note that applicants for add-on payments for new medical services or technologies for FY 2016 must submit a E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ newtech.html. To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2016, the CMS Web site also will post the tracking forms completed by each applicant. 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Public Law 108–173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to— • Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries; • Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending; • Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement; and • Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In order to provide an opportunity for public input regarding add-on payments for new medical services and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 technologies for FY 2015 prior to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published a document in the Federal Register on November 29, 2013 (78 FR 71555 through 71557), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 12, 2014. In the announcement notice for the meeting, we stated that the opinions and alternatives provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2015 new medical service and technology add-on payment applications before the publication of the FY 2015 proposed rule. Approximately 91 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. We also live-streamed the town hall meeting and posted the town hall on the CMS YouTube Web page at: https://www.youtube.com/ watch?v=WXyR_TILfKo&list=TLiu1B_ AxXsinTW6EEn4BVUdR4iEM61eV4. We considered each applicant’s presentation made at the town hall meeting, as well as written comments submitted on the applications that were received by the due date of January 21, 2014, in our evaluation of the new technology add-on payment applications for FY 2015 in the proposed rule. In response to the published document and the New Technology Town Hall meeting, we received written comments regarding the applications for FY 2015 new technology add-on payments. We summarized these comments in the preamble of the proposed rule or, if applicable, indicated that there were no comments received, at the end of each discussion of the individual applications in the proposed rule. A number of attendees at the New Technology Town Hall meeting provided comments that were unrelated to the ‘‘substantial clinical improvement’’ criterion. As explained above and in the Federal Register document announcing the New Technology Town Hall meeting (78 FR 71555 through 71557), the purpose of the meeting was specifically to discuss the substantial clinical improvement criterion in regard to pending new technology add-on payment applications for FY 2015. Therefore, we did not summarize those comments in the proposed rule. Commenters were informed that they were welcome to resubmit these comments during the comment period in response to PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 49917 proposals presented in the proposed rule. We summarize and respond to these comments under the applicable discussions within this final rule. We also received public comments in response to the proposed rule relating to topics such as marginal cost factors for new technology add-on payments, mapping new technologies to the appropriate MS–DRG, deeming a new technology a substantial clinical improvement if it receives HDE approval from the FDA, and the use of external data in determining the cost threshold. Because we did not request public comments nor propose to make any changes to any of the issues above, we are not summarizing these public comments nor responding to them in this final rule. Another commenter asked CMS to consider the implications of the new technology add-on payment policy on antibiotics that fall under the current IPPS and, in particular, the Hospital VBP Program for which the inclusion of the MRSA bacteremia measure and the C-difficile measure are proposed. The commenter was concerned that current payment policy will be inadequate and place further financial pressure on hospitals. The commenter stated that CMS must consider the evolving payment paradigm facing inpatient facilities (IQR, HAC, and VBP) and ensure that these various policies do not have competing goals. Although we agree with the commenter that CMS should consider the evolving payment paradigm facing inpatient facilities regarding payment reductions under the Hospital IQR Program, the HAC Reduction Program, and the Hospital VBP Program and ensure that these various policies do not have competing goals, we are not providing a detailed response because we did not present any policy proposals concerning these issues. Comment: One commenter expressed concern that services identified as appropriate for new technology add-on payments do not receive the new technology add-on payment even when the claims for these services are correctly submitted to the Medicare administrative contractors (MACs). The commenter stated that the MACs are often unable to explain the reason for the failure to include the new technology add-on payment or answer inquiries regarding this issue. The commenter recommended that CMS provide additional education to the MACs regarding CMS regulations related to services available for new technology add-on payments. Response: We encourage providers to work with their MACs to ensure that the E:\FR\FM\22AUR2.SGM 22AUR2 49918 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations new technology add-on payments are accurately and appropriately made. If MACs are having any issues, they can contact the CMS Central Office for further assistance. Also, the regulations at § 412.88 explain how the new technology add-on payments are made. We note that, under certain conditions, even if an approved new technology was billed on the claim, a new technology add-on payment may not be made, such as if the total payment for the claim without the new technology add-on payment exceeds the costs of the case. In addition, each year after the final rule, CMS issues a transmittal to the MACs listing the eligibility and maximum add-on payment for each approved new technology. 3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Glucarpidase (Trade Brand Voraxaze®) BTG International, Inc. submitted an application for new technology add-on payments for Glucarpidase (trade brand Voraxaze®) for FY 2013. Glucarpidase is used in the treatment of patients who have been diagnosed with toxic methotrexate (MTX) concentrations as of result of renal impairment. The administration of Glucarpidase causes a rapid and sustained reduction of toxic MTX concentrations. Voraxaze® was approved by the FDA on January 17, 2012. Beginning in 1993, certain patients could obtain expanded access for treatment use to Voraxaze® as an investigational drug. Since 2007, the applicant has been authorized to recover the costs of making Voraxaze® available through its expanded access program. We describe expanded access for treatment use of investigational drugs and authorization to recover certain costs of investigational drugs in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). Voraxaze® was available on the market in the United States as a commercial product to the larger population as of April 30, 2012. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we expressed concerns about whether Voraxaze® could be considered new for FY 2013. After consideration of all of the public comments received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we considered Voraxaze® to be ‘‘new’’ as of April 30, 2012, which is the date of market availability. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for Voraxaze® and consideration of the public comments we received in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze® for new technology add-on payments for FY 2013. Cases of Voraxaze® are identified with ICD–9– CM procedure code 00.95 (Injection or infusion of glucarpidase). The cost of Voraxaze® is $22,500 per vial. The applicant stated that an average of four vials is used per Medicare beneficiary. Therefore, the average cost per case for Voraxaze® is $90,000 ($22,500 × 4). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for Voraxaze® is $45,000 per case. As stated above, the new technology add-on payment regulations provide that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology (§ 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year (70 FR 47362). With regard to the newness criterion for Voraxaze®, as stated above, we consider the beginning of the newness period to commence when Voraxaze® was first available on the market on April 30, 2012. Because the 3-year anniversary date for Voraxaze® will occur in the latter half of FY 2015 (April 30, 2015), we proposed to continue new technology add-on payments for this technology for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: Several public commenters supported the proposal to continue new technology add-on payments for Voraxaze® for FY 2015. Response: We appreciate the commenters’ support. Because the 3year anniversary date for Voraxaze® will occur in the latter half of FY 2015 (April 30, 2015), we are finalizing our proposal to continue to make new technology add-on payments for Voraxaze® for FY 2015. PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 b. DIFICIDTM (Fidaxomicin) Tablets Optimer Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2013 for the use of DIFICIDTM tablets. As indicated on the labeling submitted to the FDA, the applicant noted that Fidaxomicin is taken twice a day as a daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The applicant asserted that Fidaxomicin provides potent bactericidal activity against C. Diff., and moderate bactericidal activity against certain other gram-positive organisms, such as enterococcus and staphylococcus. Unlike other antibiotics used to treat CDAD, the applicant noted that the effects of Fidaxomicin preserve bacteroides organisms in the fecal flora. These are markers of normal anaerobic microflora. The applicant asserted that this helps prevent pathogen introduction or persistence, which potentially inhibits the re-emergence of C. Diff., and reduces the likelihood of overgrowths as a result of vancomycinresistant Enterococcus (VRE). Because of this narrow spectrum of activity, the applicant asserted that Fidaxomicin does not alter this native intestinal microflora. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through 27941), we expressed concern that DIFICIDTM may not be eligible for new technology add-on payments because eligibility is limited to new technologies associated with procedures described by ICD–9–CM codes. We further stated that drugs that are only taken orally (such as DIFICIDTM) may not be eligible for consideration for new technology addon payments because there is no procedure associated with these drugs and, therefore, no ICD–9–CM code(s). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after consideration of the public comments received, we revised our policy to allow the use of National Drug Codes (NDCs) to identify oral medications that have no inpatient procedure for the purposes of new technology add-on payments. The revised policy is effective for payments for discharges occurring on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on this issue. With regard to the newness criterion, Fidaxomicin was approved by the FDA on May 27, 2011, for the treatment of CDAD in adult patients, 18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we established that the beginning of the newness period for this technology is its FDA approval date of May 27, 2011. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for DIFICIDTM and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICIDTM for new technology add-on payments for FY 2013. Cases of DIFICIDTM are identified with ICD–9– CM diagnosis code 008.45 (Intestinal infection due to Clostridium difficile) in combination with NDC code 52015– 0080–01. Providers must report the NDC on the 837i Health Care Claim Institutional form (in combination with ICD–9–CM diagnosis code 008.45) in order to receive the new technology add-on payment. According to the applicant, the cost of DIFICIDTM is $2,800 for a 10-day dosage. The average cost per day for DIFICIDTM is $280 ($2,800/10). Cases of DIFICIDTM within the inpatient setting typically incur an average dosage of 6.2 days, which results in an average cost per case for DIFICIDTM of $1,736 ($280 × 6.2). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum new technology add-on payment for DIFICIDTM is $868. As stated above, the new technology add-on payment regulations provide that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology (§ 412.87(b)(2)). The manufacturer commented through a letter to CMS, prior to the publication of the proposed rule, requesting that CMS extend the eligibility for a third year of new technology add-on payments for DIFICIDTM in FY 2015. The manufacturer maintained that the technology still meets all three criteria for new technology add-on payments. Regarding the substantial clinical improvement criterion, the applicant stated that DIFICIDTM continues to remain the only FDA-approved treatment to demonstrate substantial clinical improvement over existing therapies. No new treatments for CDAD have been approved by the FDA since DIFICIDTM. The applicant further stated that a third year of new technology addon payments for DIFICIDTM would continue to reduce access barriers in the acute care hospital inpatient setting, which would support the appropriate use of DIFICIDTM, a treatment that offers VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 a substantial clinical improvement over existing therapies. With respect to the cost criterion, the applicant stated that DIFICIDTM continues to meet the cost criterion. Using claims data from the FY 2012 MedPAR file, the applicant provided updated data from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), and demonstrated that the average case-weighted standardized charge per case exceeded the average case-weighted thresholds under both analyses. The applicant stated that the new technology add-on payment is intended to offer additional payments to support patient access and appropriate use of new technologies for a period of time until the MS–DRGs are adjusted to reflect the cost of the new technology. The applicant believed that the analyses conducted with the most recent MedPAR claims data available demonstrate that the MS–DRG recalibrations are insufficient to accommodate the cost associated with CDAD and new technologies to treat CDAD under the IPPS within the allotted timeframe of 2 years. According to the applicant, these payment amounts remain an obstacle for the appropriate use of new technologies for CDAD that demonstrate substantial clinical improvement over existing treatments, such as DIFICIDTM. The applicant concluded that a third year of new technology add-on payments for DIFICIDTM is needed to allow sufficient data for future MS–DRG recalibration analyses. With regard to newness criterion, the manufacturer commented that it believed that the technology still meets the newness criterion for the following reason: § 412.87(b)(2) states that ‘‘A medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9– CM) code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). After CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘new’ under the criterion of this section.’’ The manufacturer noted that DIFICIDTM was not assigned an ICD–9– CM procedure code and DIFICIDTM is the first product for which no inpatient procedure is associated to receive a new technology add-on payment since the PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 49919 implementation of the new technology add-on payment policy. The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule (77 FR 53352), which indicated that ‘‘Hospitals currently code and report procedures and more invasive services such as surgeries, infusion of drugs, and specialized procedures such as cardiac catheterizations. Hospitals neither code nor report self-administered drugs.’’ Therefore, the manufacturer contended that, as an oral therapy, neither DIFICIDTM nor its administration was assigned an ICD–9–CM procedure code and, therefore, the technology should still be eligible for the new technology add-on payments. The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS final rule, because an ICD–9–CM procedure code for the administration of an oral medication did not exist and hospitals had no other mechanism to report the use of DIFICIDTM, for FY 2013, CMS instructed hospitals to report the DIFICIDTM NDC on hospital inpatient claims to receive the new technology add-on payment for DIFICIDTM. Prior to October 1, 2012, hospitals did not use NDCs on hospital inpatient claims, which prevented CMS from isolating DIFICIDTM cases and their associated costs. The manufacturer further stated that the NDC methodology was a bold change in policy and inpatient billing processes, and it stands to reason that, because of hospitals unfamiliarity with reporting NDCs on inpatient claims, hospitals’ use of the DIFICIDTM NDC would greatly lag behind the traditional use of ICD–9–CM procedure codes. As such, the manufacturer reasoned that any lag in hospital reporting would directly impact CMS’ ability to track and analyze the cost data associated with DIFICIDTM cases. The manufacturer also noted that on August 31, 2012, CMS issued Transmittal 2539, which is a change request for MACs concerning updates for the upcoming fiscal year. The manufacturer stated that because the new technology add-on heading was omitted in the transmittal, this change request did not highlight the NDC billing approach to ensure that hospitals recognized the important change, which may have caused hospitals to overlook the claim reporting instructions for DIFICIDTM. The manufacturer added that Transmittal 2539 and a Medicare Learning Network® Matters (MLN) article were rescinded and replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted that among CMS’ reasons for replacing the transmittal was to insert the omitted E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49920 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations new technology add-on section heading. The manufacturer stated that, although the original transmittal further supports that collection of DIFICIDTM-specific data did not begin until at least October 1, 2012, CMS’ reissuance of the claims processing instructions, and the missing header in the initial instructions, effectively delayed implementation of the new technology add-on payments for 3 months past the October 2012 beginning date. The manufacturer also believed that the need to replace the transmittal underlies hospitals’ difficulties instituting claims’ reporting instructions to receive new technology add-on payments for DIFICIDTM at the hospital level. The manufacturer noted that anecdotal feedback from hospitals, which was shared with CMS during a meeting in June 2013, suggests that some hospitals faced challenges implementing the appropriate billing and coding processes. The manufacturer was concerned that that these challenges were, in part, caused by the missing header, and that these challenges may have impacted whether eligible cases were properly billed and coded to receive the new technology add-on payment for DIFICIDTM. The manufacturer was further concerned that the effects of any lag or delay caused by unfamiliarity with reporting NDCs and the missing header would also impact the data available to CMS to recalibrate the MS–DRGs and, separately, to evaluate the impact of the new technology add-on payment for DIFICIDTM. The manufacturer further explained that, while DIFICIDTM was available to hospitals after its launch in July 2011, hospitals had no experience reporting NDCs until October 2012, and may not have recognized the opportunity to, or understood the mechanism for doing so, until after January 2013. For the purposes of inpatient data collection and ratesetting, the manufacturer believed that this meant that 2 complete years of DIFICIDTM costs would not be fully reflected in the Medicare claims data for the FY 2015 MS–DRG recalibrations. The manufacturer also analyzed the 100 percent sample of the Standard Analytical File (SAF) for CY 2012, which contained first quarter claims data for FY 2013, the first 3 months that DIFICIDTM was eligible for the new technology add-on payments. The manufacturer found a total of 43,608 cases with a diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38 cases across 26 hospitals that reported new technology add-on payments for DIFICIDTM on submitted claims. The manufacturer stated that this VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 preliminary data suggests that the number of cases available for MS–DRG recalibrations for FY 2015 is limited. The manufacturer stated that it is currently attempting to secure FY 2013 MedPAR claims data and that it will likely provide further insights on these issues. In addition, the manufacturer noted that prior new technology add-on payment application approvals have involved technologies with much narrower patient populations compared to DIFICIDTM, allowing the costs of those technologies to influence the MS– DRG relative payment weights for the small number of MS–DRGs with which they are associated. The manufacturer explained that, unlike other technologies approved for new technology add on payments, the DIFICIDTM therapeutic value, while limited to patients with CDAD, is used in patients across a wide range of MS– DRGs due to it being reported as a secondary diagnosis in two-thirds of the cases compared to other technologies, which are assigned to a relatively small number of MS–DRGs. For example, cases involving the Spiration IBV® Valve System, which was granted approval for new technology add-on payments in FY 2010, primarily mapped to three MS–DRGs: 163 (Major Chest Procedures with MCC); 164 (Major Chest Procedures with CC); and 165 (Major Chest Procedures without CC/ MCC). In its analysis of the FY 2012 MedPAR data for the cost criterion, the manufacturer found cases using DIFICIDTM mapped to 544 unique MS– DRGs. Under the 100 percent sample of the SAF for CY 2012, the 38 cases mentioned above mapped to 20 different MS–DRGs. The manufacturer maintained that because of the diffuse nature of the DIFICIDTM cases mapping to many MS–DRGs, it believed an extension of the newness period is required for the costs to be adequately reflected in the MS–DRG relative payment weights. In the unique case of DIFICIDTM for the treatment of CDAD, the manufacturer stated that 2 years of new technology add-on payments is insufficient to allow the 544 MS–DRGs to be recalibrated to sufficiently reflect the cost of the use of DIFICIDTM, a treatment that offers significant clinical improvement over existing therapies. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28032 through 28033), we responded to the comments above. Specifically, with regard to the technology’s newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 begins when data become available. Section 412.87(b)(2) clearly states that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). Section 412.87(b)(2) also states that after CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘‘new’’ under the criterion of this section. Therefore, regardless of whether a technology can be individually identified by a separate ICD–9–CM code or whether it can only be identified using a NDC code, if the costs of the technology are included in the charge data, and the MS–DRGs have been recalibrated using that data, then the technology can no longer be considered ‘‘new’’ for the purposes of this provision. We further stated in that final rule that the period of newness does not necessarily start with the approval date for the medical service or technology, and does not necessarily start with the issuance of a distinct code. Instead, it begins with availability of the product on the U.S. market, which is when data become available. We have consistently applied this standard, and believe that it is most consistent with the purpose of new technology add-on payments. In addition, similar to our discussion in the FY 2006 IPPS final rule (70 FR 47349), we do not believe that case volume is a relevant consideration for making the determination as to whether a product is ‘‘new.’’ Consistent with the statute, a technology no longer qualifies as ‘‘new’’ once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population. Similarly, this same determination is applicable no matter how many MS–DRGs the technology is spread across. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS–DRG relative weights whether its use in the Medicare population has been frequent or infrequent. We recognize that using an NDC was a novel billing practice under the IPPS. Nevertheless, even though hospitals may not have coded all uses of DIFICIDTM with the NDC, hospital bills would still include charges for all items and services furnished to a Medicare patient, including use of DIFICIDTM. Therefore, even though we may be not be able to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations identify all uses of DIFICIDTM in the Medicare charge data, hospital charges for the MS–DRGs would continue to reflect use of this technology. With respect to the Transmittal 2539 omitting the header referenced above, as noted above, CMS corrected this issue as soon as possible by rescinding and reissuing this transmittal. Additionally, as noted by the manufacturer, this transmittal was meant for MACs and not hospitals. We believe the guidance issued in Transmittal 2539 clearly described to MACs how hospitals were to report the NDC on the inpatient claim in order to identify cases using DIFICIDTM for purposes of new technology add-on payments. Additionally, the MLN article that the manufacturer referred to above (MLN articles are typically a summary of transmittals for the general public) clearly indicated that DIFICIDTM was new for FY 2013 new technology addon payments and clearly described how to properly code DIFICIDTM on the inpatient bill in order to receive the new technology add-on payment for FY 2013. The MLN article can be downloaded from the CMS Web site at: https://www.cms.gov/Outreach-andEducation/Medicare-Learning-NetworkMLN/MLNMattersArticles/downloads/ MM8041.pdf. After considering the manufacturer’s comments above, as we explained in the FY 2015 IPPS/LTCH PPS proposed rule, we continue to consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. Because the 3-year anniversary date of the product’s entry on the U.S. market occurred in the second half of the fiscal year (after April 1, 2014), we continued new technology add-on payments for DIFICIDTM for FY 2014. However, for FY 2015, the 3-year anniversary date of the product’s entry on the U.S. market occurred on May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we proposed to discontinue new technology add-on payments for DIFICIDTM for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: One commenter stated that CMS has the authority to grant a third year of new technology add-on payments for DIFICIDTM. The commenter stated that if Congress intended for the Secretary to begin the data collection period described in the statute based on the date of FDA approval, Congress would have done so. The commenter added that it agrees that, as a threshold matter, a product must be ‘‘new.’’ Specifically, the commenter reasoned that Congress did VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 not intend to make available the new technology add-on payment for technologies that have been approved for years and received a unique code years later. The commenter believed that once a product is deemed ‘‘new,’’ the statute requires that data are to be collected for 2 to 3 years from the date of the ICD–9–CM code assignment. The commenter believed that CMS has the authority to first deem a product new and then collect data two to three years from the date of the inpatient code assignment. The commenter explained that sections 1886(d)(5)(K)(i) and 1886(d)(5)(K)(ii) of the Act mandate two separate legal requirements. The commenter further stated that this policy would mitigate the effect of older technologies that receive ICD–9–CM codes many years after their FDA approval date being eligible for new technology add-on payments. Therefore, the commenter stated that, under this policy, DIFICIDTM is eligible for a third year of new technology add-on payments. The commenter also quoted the FY 2005 IPPS final rule (69 FR 49002 through 49003) where CMS stated the following: ‘‘Using the ICD–9–CM code alone is not an appropriate test of newness because technologies that are new to the market are automatically placed into the closest ICD–9–CM category when they first come on the market, unless the manufacturer requests the assignment of a new ICD– 9–CM code because existing codes do not adequately reflect or describe the medical service or device. The services and technologies that have been placed into existing ICD–9–CM codes have been paid for using those descriptors.’’ The commenter believed that this policy is not relevant to oral drugs because hospitals do not typically code for oral medications. Therefore, the commenter stated that CMS must make a special exception for oral drugs and rely on the statutory authority to measure the length of time for data collection for new technology add-on payments based on the date of the ‘‘hospital inpatient code.’’ Response: As discussed above, and as we stated in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. We have consistently applied this standard, and believe that it is most consistent with the purpose of new technology add-on payments. We refer readers to the discussion above and the FY 2005 IPPS final rule (69 FR 49002 through 49003) for further details regarding this issue. For these reasons, we disagree PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 49921 with the commenter that DIFICIDTM is eligible for a third year of new technology add-on payments. With respect to the second comment, while oral drugs are not typically coded by hospitals, we maintain what we stated in the FY 2005 IPPS final rule that the services and technologies that have been assigned existing ICD–9–CM codes have been paid for using those descriptors. Although DIFICIDTM did not receive a specific ICD–9–CM code, it can be described or identified through additional ICD–9–CM procedure or diagnosis codes (such as diagnosis code 008.45, Intestinal infection due to Clostridium difficile). Moreover, as we noted above and in the proposed rule, hospital charges would include charges for all items and services furnished to a Medicare beneficiary, including use of DIFICIDTM. Therefore, we disagree with the commenter and continue to believe that DIFICIDTM is no longer new nor is any special exception warranted. Comment: Several commenters reiterated the arguments made by the manufacturer as explained above and in the proposed rule that DIFICIDTM should be eligible for new technology add-on payments in FY 2015. Response: After considering these comments, for the reasons stated above and in the proposed rule, we consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. The 3-year anniversary date of the product’s entry on the U.S. market occurred on May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we are finalizing our proposal to discontinue new technology add-on payments for DIFICIDTM for FY 2015. c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft Cook® Medical submitted an application for new technology add-on payments for the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft (Zenith® F. Graft) for FY 2013. The applicant stated that the current treatment for patients who have had an AAA is an endovascular graft. The applicant explained that the Zenith® F. Graft is an implantable device designed to treat patients who have an AAA and who are anatomically unsuitable for treatment with currently approved AAA endovascular grafts because of the length of the infrarenal aortic neck. The applicant noted that, currently, an AAA is treated through an open surgical repair or medical management for those patients not E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49922 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations eligible for currently approved AAA endovascular grafts. With respect to newness, the applicant stated that FDA approval for the use of the Zenith® F. Graft was granted on April 4, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we stated that because the Zenith® F. Graft was approved by the FDA on April 4, 2012, we believed that the Zenith® F. Graft met the newness criterion as of that date. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the Zenith® F. Graft and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved the Zenith® F. Graft for new technology add-on payments for FY 2013. Cases involving the Zenith® F. Graft that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 39.78 (Endovascular implantation of branching or fenestrated graft(s) in aorta). In the application, the applicant provided a breakdown of the costs of the Zenith® F. Graft. The total cost of the Zenith® F. Graft utilizing bare metal (renal) alignment stents was $17,264. Of the $17,264 in costs for the Zenith® F. Graft, $921 is for components that are used in a standard Zenith AAA Endovascular Graft procedure. Because the costs for these components are already reflected within the MS–DRGs (and are no longer ‘‘new’’), in the FY 2013 IPPS/LTCH PPS final rule, we stated that we do not believe it is appropriate to include these costs in our calculation of the maximum cost to determine the maximum add-on payment for the Zenith® F. Graft. Therefore, the total maximum cost for the Zenith® F. Graft is $16,343 ($17,264—$921). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Zenith® F. Graft is $8,171.50. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Zenith® F. Graft, as stated above, we consider the beginning of the newness period to commence when the Zenith® F. Graft was approved by the FDA on VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 April 4, 2012. Because the 3-year anniversary date of the entry of the Zenith® F. Graft on the U.S. market will occur in the second half of the fiscal year (April 4, 2015), we proposed to continue new technology add-on payments for this technology for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: Several commenters supported the proposal to continue new technology add-on payments for the Zenith® F. Graft ® for FY 2015. Response: We appreciate the commenters’ support. Because the 3year anniversary date for Zenith® F. Graft will occur in the latter half of FY 2015 (April 4, 2015), we are finalizing our proposal to continue to make new technology add-on payments for the Zenith® F. Graft for FY 2015. d. KcentraTM CSL Behring submitted an application for new technology add-on payments for KcentraTM for FY 2014. KcentraTM is a replacement therapy for fresh frozen plasma (FFP) for patients with an acquired coagulation factor deficiency due to warfarin and who are experiencing a severe bleed. KcentraTM contains the Vitamin K dependent coagulation factors II, VII, IX and X, together known as the prothrombin complex, and antithrombotic proteins C and S. Factor IX is the lead factor for the potency of the preparation. The product is a heat-treated, non-activated, virus filtered and lyophilized plasma protein concentrate made from pooled human plasma. KcentraTM is available as a lyophilized powder that needs to be reconstituted with sterile water prior to administration via intravenous infusion. The product is dosed based on Factor IX units. Concurrent Vitamin K treatment is recommended to maintain blood clotting factor levels once the effects of KcentraTM have diminished. KcentraTM was approved by the FDA on April 29, 2013. In the FY 2014 IPPS/ LTCH PPS final rule, we approved new ICD–9–CM procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate) which uniquely identifies KcentraTM. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted that we were concerned that KcentraTM may be substantially similar to FFP and/ or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS final rule, in response to comments submitted by the manufacturer, we stated that we agree that KcentraTM may be used in a patient population that is experiencing an acquired coagulation factor deficiency PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 due to Warfarin and who are experiencing a severe bleed currently but are ineligible for FFP, particularly for use by IgA deficient patients and other patient populations that have no other treatment option to resolve severe bleeding in the context of an acquired Vitamin K deficiency. In addition, FFP is limited because it requires special storage conditions while KcentraTM is stable for up to 36 months at room temperature thus allowing hospitals that otherwise would not have access to FFP (for example, small rural hospitals as discussed by the applicant in its comments) to keep a supply of KcentraTM and treat patients who would possibly have no access to FFP. We noted that FFP is considered perishable and can be scarce by nature (due to production and other market limitations) thus making some hospitals unable to store FFP, which limits access to certain patient populations in certain locations. Therefore, we stated that we believe that KcentraTM provides a therapeutic option for a new patient population and is not substantially similar to FFP. Also, we gave credence to the information presented by the manufacturer that KcentraTM provides a simple and rapid repletion relative to FFP and reduces the risk of a transfusion reaction relative to FFP because it does not contain ABO antibodies and does not require ABO typing. As a result, we concluded that KcentraTM is not substantially similar to FFP, and that it meets the newness criterion. After evaluation of the newness, cost, and substantial clinical improvement criteria for new technology add-on payments for KcentraTM and consideration of the public comments we received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we approved KcentraTM for new technology add-on payments for FY 2014 (78 FR 50575 through 50580). Cases involving KcentraTM that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 00.96. In the application, the applicant estimated that the average Medicare beneficiary would require an average dosage of 2500 International Units (IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases of KcentraTM would incur an average cost per case of $3,175 ($635 x 5). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS– DRG payment for the case. As a result, the maximum add-on payment for a E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations case of KcentraTM is $1,587.50 for FY 2014. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that new technology add-on payments for KcentraTM would not be available with respect to discharges for which the hospital received an add-on payment for a blood clotting factor administered to a Medicare beneficiary with hemophilia who is a hospital inpatient. Under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is ‘‘the amount of the payment with respect to the operating costs of inpatient hospital services (as defined in subsection (a)(4) of this section)’’ for discharges on or after April 1, 1988. Section 1886(a)(4) of the Act excludes from the term ‘‘operating costs of inpatient hospital services’’ the costs with respect to administering blood clotting factors to individuals with hemophilia. The costs of administering a blood clotting factor to a Medicare beneficiary who has hemophilia and is a hospital inpatient are paid separately from the IPPS. (For information on how the blood clotting factor add-on payment is made, we refer readers to Section 20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which can be downloaded from the CMS Web site at: https://cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/clm104c03.pdf.) In addition, we stated that if KcentraTM is approved by the FDA as a blood clotting factor, we believed that it may be eligible for blood clotting factor add-on payments when administered to Medicare beneficiaries with hemophilia. We make an add-on payment for KcentraTM for such discharges in accordance with our policy for payment of a blood clotting factor, and the costs would be excluded from the operating costs of inpatient hospital services as set forth in section 1886(a)(4) of the Act. Section 1886(d)(5)(K)(i) of the Act requires the Secretary to ‘‘establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under this subsection’’ beginning with discharges on or after October 1, 2001. We believe that it is reasonable to interpret this requirement to mean that the payment mechanism established by the Secretary recognizes only costs for those items that would otherwise be paid based on the prospective payment system (that is, ‘‘the payment system established under this subsection’’). As noted above, under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is the amount of payment for the operating costs of inpatient hospital VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 services, as defined in section 1886(a)(4) of the Act, for discharges on or after April 1, 1988. We understand this to mean that a new medical service or technology must be an operating cost of inpatient hospital services paid based on the prospective payment system, and not excluded from such costs, in order to be eligible for the new technology add-on payment. We pointed out that new technology add-on payments are based on the operating costs per case relative to the prospective payment rate as described in § 412.88. Therefore, we believe that new technology add-on payments are appropriate only when the new technology is an operating cost of inpatient hospital services and are not appropriate when the new technology is excluded from such costs. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that we believe that hospitals may only receive new technology add-on payments for discharges where KcentraTM is an operating cost of inpatient hospital services. In other words, a hospital would not be eligible to receive the new technology add-on payment when it is administering KcentraTM in treating a Medicare beneficiary who has hemophilia. In those instances, KcentraTM is specifically excluded from the operating costs of inpatient hospital services in accordance with section 1886(a)(4) of the Act and paid separately from the IPPS. However, when a hospital administers KcentraTM to a Medicare beneficiary who does not have hemophilia, the hospital would be eligible for a new technology add-on payment because KcentraTM would not be excluded from the operating costs of inpatient hospital services. Therefore, discharges where the hospital receives a blood clotting factor add-on payment are not eligible for a new technology add-on payment for the blood clotting factor. We refer readers to Chapter Three, Section 20.7.3 of the Medicare Claims Processing Manual for a complete discussion on when a blood clotting factor add-on payment is made. The manual can be downloaded from the CMS Web site at: https://www.cms. gov/Regulations-and-Guidance/ Guidance/Manuals/Downloads/ clm104c03.pdf. As stated above, the new technology add-on payment regulations provide that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology (§ 412.87(b)(2)). With regard to the newness criterion for KcentraTM, as stated above, we consider the beginning of the newness period to PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 49923 commence when KcentraTM was approved by the FDA on April 29, 2013. Because KcentraTM is still within the 3year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: Several commenters supported the proposal to continue new technology add-on payments for KcentraTM for FY 2015. Response: We appreciate the commenters’ support. Because the 3year anniversary date for KcentraTM will occur in the second half of FY 2016 (April 29, 2016), we are finalizing our proposal to continue to make new technology add-on payments for KcentraTM FY 2015. e. Argus® II Retinal Prosthesis System Second Sight Medical Products, Inc. submitted an application for new technology add-on payments for the Argus® II Retinal Prosthesis System (Argus® II System) for FY 2014. The Argus® II System is an active implantable medical device that is intended to provide electrical stimulation of the retina to induce visual perception in patients who are profoundly blind due to retinitis pigmentosa (RP). These patients have bare or no light perception in both eyes. The system employs electrical signals to bypass dead photo-receptor cells and stimulate the overlying neurons according to a real-time video signal that is wirelessly transmitted from an externally worn video camera. The Argus® II implant is intended to be implanted in a single eye, typically the worse-seeing eye. Currently, bilateral implants are not intended for this technology. According to the applicant, the surgical implant procedure takes approximately 4 hours and is performed under general anesthesia. The Argus® II System consists of three primary components: (1) An implant which is an epiretinal prosthesis that is fully implanted on and in the eye (that is, there are no percutaneous leads); (2) external components worn by the user; and (3) a ‘‘fitting’’ system for the clinician that is periodically used to perform diagnostic tests with the system and to custom-program the external unit for use by the patient. We describe these components more fully below. • Implant: The retinal prosthesis implant is responsible for receiving information from the external components of the system and electrically stimulating the retina to induce visual perception. The retinal E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49924 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations implant consists of: (a) A receiving coil for receiving information and power from the external components of the Argus® II System; (b) electronics to drive stimulation of the electrodes; and (c) an electrode array. The receiving coil and electronics are secured to the outside of the eye using a standard scleral band and sutures, while the electrode array is secured to the surface of the retina inside the eye by a retinal tack. A cable, which passes through the eye wall, connects the electronics to the electrode array. A pericardial graft is placed over the extra-ocular portion on the outside of the eye. • External Components: The implant receives power and data commands wirelessly from an external unit of components, which include the Argus II Glasses and Video Processing Unit (VPU). A small lightweight video camera and transmitting coil are mounted on the glasses. The telemetry coils and radio-frequency system are mounted on the temple arm of the glasses for transmitting data from the VPU to the implant. The glasses are connected to the VPU by a cable. This VPU is worn by the patient, typically on a belt or a strap, and is used to process the images from the video camera and convert the images into electrical stimulation commands, which are transmitted wirelessly to the implant. • ‘‘Fitting System’’: To be able to use the Argus® II System, a patient’s VPU needs to be custom-programmed. This process, which the applicant called ‘‘fitting’’, occurs in the hospital/clinic shortly after the implant surgery and then periodically thereafter as needed. The clinician/physician also uses the ‘‘Fitting System’’ to run diagnostic tests (for example, to obtain electrode and impedance waveform measurements or to check the radio-frequency link between the implant and external unit). This ‘‘Fitting System’’ can also be connected to a ‘‘Psychophysical Test System’’ to evaluate patients’ performance with the Argus® II System on an ongoing basis. These three components work together to stimulate the retina and allow a patient to perceive phosphenes (spots of light), which they then need to learn to interpret. While using the Argus® II System, the video camera on the patient-worn glasses captures a video image. The video camera signal is sent to the VPU, which processes the video camera image and transforms it into electrical stimulation patterns. The electrical stimulation data are then sent to a transmitter coil mounted on the glasses. The transmitter coil sends both data and power via radio-frequency (RF) telemetry to the implanted retinal VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 prosthesis. The implant receives the RF commands and delivers stimulation to the retina via an array of electrodes that is secured to the retina with a retinal tack. In patients with RP, the photoreceptor cells in the retina, which normally transduce incoming light into an electro-chemical signal, have lost most of their function. The stimulation pulses delivered to the retina via the electrode array of the Argus® II System are intended to mimic the function of these degenerated photoreceptors cells. These pulses induce cellular responses in the remaining, viable retinal nerve cells that travel through the optic nerve to the visual cortex where they are perceived as phosphenes (spots of light). Patients learn to interpret the visual patterns produced by these phosphenes. With respect to the newness criterion, according to the applicant, the FDA designated the Argus® II System a Humanitarian Use Device in May 2009 (HUD designation #09–0216). The applicant submitted a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA in May 2011 to obtain market approval for the Argus® II System. The HDE was referred to the Ophthalmic Devices Panel of the FDA’s Medical Devices Advisory Committee for review and recommendation. At the Panel’s meeting held on September 28, 2012, the Panel voted 19 to 0 that the probable benefits of the Argus® II System outweigh the risks of the system for the proposed indication for use. The applicant received the HDE approval from the FDA on February 14, 2013. Currently there are no other approved treatments for patients with severe to profound RP. The Argus® II System has an IDE number of G050001 and is a Class III device. In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50580 through 50583), we approved new ICD– 9–CM procedure code 14.81 (Implantation of Epiretinal Visual Prosthesis), which uniquely identifies the Argus® II System. The other two codes approved by CMS are for removal, revision, or replacement of the device. More information on these codes can be found on the CMS Web site at: https:// cms.gov/Medicare/Coding/ICD9Provider DiagnosticCodes/ICD-9-CM-C-and-MMeeting-Materials-Items/2013-03-05MeetingMaterials.html. After evaluation of the new technology add-on payment application and consideration of public comments received, we concluded that the Argus® II System met all of the new technology add-on payment policy criteria. Therefore, we approved the Argus® II System for new technology add-on payments in FY 2014 (78 FR 50580 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 through 50583). Cases involving the Argus® II System that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act, which makes no mention of any add-on payments for a new medical service or technology. Therefore, it is not appropriate to include capital costs in the add-on payments for a new medical service or technology. In the application, the applicant provided a breakdown of the costs of the Argus® II System. The total operating cost of the Argus® II System is $144,057.50. Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the Argus® II System for FY 2014 is $72,028.75. As stated above, the new technology add-on payment regulations provide that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology (§ 412.87(b)(2)). With regard to the newness criterion for the Argus® II System, as stated above, we consider the beginning of the newness period to commence when the Argus® II System was approved by the FDA on February 14, 2013. Because the Argus® II System is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: Several commenters supported the proposal to continue new technology add-on payments for the Argus® II System for FY 2015. Some commenters noted that, while the Argus® II System received FDA approval on February 14, 2013, it was not available on the U.S. market until December 20, 2013. The commenters explained that as part of this lengthy process, the manufacturer first had to submit a request to the Federal Communications Commission (FCC) for a waiver of section 15.209(a) of the FCC E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV rules to allow the manufacturer to then apply for FCC authorization to utilize this specific RF band. The FCC granted the request for a waiver of the rules on November 30, 2011. After receiving the FCC waiver of section 15.209(a), the manufacturer was required to obtain a Grant of Equipment Authorization to utilize the specific RF band, which the FCC issued on December 20, 2013. Therefore, the commenters stated that the date the Argus® II System first became available for commercial sale in the United States was December 20, 2013. Response: We appreciate the commenters’ input and support. We agree with the commenters that due to the delay described above, the date of newness for the Argus® II System is now December 20, 2013, instead of February 14, 2013. Because the 3-year anniversary date for the Argus® II System will occur in the first half of FY 2017 (December 20, 2016), we are finalizing our proposal to continue to make new technology add-on payments for the Argus® II System for FY 2015. f. Zilver® PTX® Drug Eluting Peripheral Stent Cook® Medical submitted an application for new technology add-on payments for the Zilver® PTX® Drug Eluting Peripheral Stent (Zilver® PTX®) for FY 2014. The Zilver® PTX® is intended for use in the treatment of peripheral artery disease (PAD) of the above-the-knee femoropopliteal arteries (superficial femoral arteries). According to the applicant, the stent is percutaneously inserted into the artery(s), usually by accessing the common femoral artery in the groin. The applicant stated that an introducer catheter is inserted over the wire guide and into the target vessel where the lesion will first be treated with an angioplasty balloon to prepare the vessel for stenting. The applicant indicated that the stent is selfexpanding, made of nitinol (nickel titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug approved for use as an anticancer agent and for use with coronary stents to reduce the risk of renarrowing of the coronary arteries after stenting procedures. The applicant received FDA approval on November 15, 2012, for the Zilver® PTX®. The applicant maintains that the Zilver® PTX® is the first drug-eluting stent used for superficial femoral arteries. The technology is currently described by ICD–9–CM procedure code 00.60 (Insertion of drug-eluting stent(s) of the superficial femoral artery). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 50585), after VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 evaluation of the new technology addon payment application and consideration of the public comments received, we approved the Zilver® PTX® for new technology add-on payments in FY 2014. Cases involving the Zilver® PTX® that are eligible for new technology add-on payments are identified by ICD–9–CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH PPS final rule, to determine the amount of Zilver® PTX® stents per case, instead of using the amount of stents used per case based on the ICD– 9–CM codes, the applicant used an average of 1.9 stents per case based on the Zilver® PTX® Global Registry Clinical Study. The applicant stated in its application that the anticipated cost per stent is approximately $1,795. Therefore, cases of the Zilver® PTX® would incur an average cost per case of $3,410.50 ($1,795 × 1.9). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case of the Zilver® PTX® is $1,705.25 for FY 2014. As stated above, the new technology add-on payment regulations provide that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD– 9–CM code assigned to the new service or technology’’ (§ 412.87(b)(2)). With regard to the newness criterion for the Zilver® PTX®, as stated above, we consider the beginning of the newness period to commence when the Zilver® PTX® was approved by the FDA on November 15, 2012. Because the Zilver® PTX® is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal. Comment: Several commenters supported the proposal to continue new technology add-on payments for the Zilver® PTX® for FY 2015. Response: We appreciate the commenters’ support. Because the 3year anniversary date for the Zilver® PTX® will occur in the first half of FY 2016 (November 12, 2015), we are finalizing our proposal to continue to make new technology add-on payments for the Zilver® PTX® FY 2015. 4. FY 2015 Applications for New Technology Add-On Payments We received seven applications for new technology add-on payments for FY PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 49925 2015, three of which were applications resubmitted from FY 2014. However, one applicant withdrew its application prior to the publication of the proposed rule. In addition, the applicant for the Watchman® System withdrew its application prior to the publication of this final rule. In accordance with the regulations under § 412.87(c), applicants for new technology add-on payments must have FDA approval by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. A discussion of the five remaining applications is presented below. Comment: One commenter stated that CMS was critical of evidence presented by the applicants to support their claims that the new technology represents a substantial clinical improvement. The commenter explained that CMS finds fault with peer-reviewed literature, registry data, meta-analysis of clinical trials, lack of long-term outcome data, age of clinical trial participants below the age of Medicare beneficiaries, single arm studies, non-inferiority studies, and weak primary efficacy results. The commenter urged CMS to avoid blanket judgments on what types of evidence are considered adequate and to carefully consider the totality of the circumstances associated with a particular product. The applicant concluded that, given the list of evidence cited by CMS, it would appear that only head to head trials are sufficient to show substantial clinical improvement over standard of care, but it is important to note that in the case of first in class products, such trials are not feasible. Another commenter shared similar concerns and stated that a study may be designed to measure noninferiority when compared to conventional treatment, but the results of the study may demonstrate superiority in terms of other measures, such as reduced pain, decreased recovery time or shorter hospitalizations. In addition, the commenter stated that study data that provide information regarding patient outcomes may be more important than whether the study was designed as a superiority trial or a noninferiority trial. The commenter concluded that a policy to require superiority studies, or at least to question noninferiority studies, could have negative results, including delaying patient access to innovative treatments, improved care outcomes, curtailing innovation, and discouraging competition. The commenter stated that CMS should give great weight to the totality of the evidence, including noninferiority studies and other methodological approaches, as it E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49926 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations considers approval of applications for new technology add-on payments. Some commenters stated that CMS has a precedent of accepting noninferiority studies to evaluate technologies under the substantial clinical improvement criterion. In particular, these commenters indicated that CMS approved new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350–53358) and KcentraTM in FY 2014 (78 FR 50575– 50580) and that both of these technologies submitted data from clinical trials demonstrating noninferiority. One commenter stated that CMS’ approval of Fidaxomicin for new technology add-on payments establishes a precedent for approval for a technology that shows non-inferiority for a primary end point in addition to the acceptance of other clinically important secondary analysis, and that precedent should be used to approve all technologies. Another commenter stated that CMS’ approval of KcentraTM for new technology add-on payments is an example of how a technology can use data from randomized controlled trials demonstrating noninferiority to show that the technology represents a substantial clinical improvement. One commenter stated that noninferiority trials are a well-established and appropriately accepted standard, and noninferiority designs are the only affordable and ethical option for drug developers in researching acute bacterial skin and skin structure infections. The commenter also stated that primary focus for developing new agents targeted for acute bacterial skin and skin structure infection patients is not to improve clinical cure rates, but to ‘‘enhance the efficiency and cost effectiveness of achieving clinical cures, ease therapeutic administration (and, therefore, improve compliance) and limit avoidable exposure to healthcare acquired infections (which, when they occur, significantly increase costs and create patient safety risks).’’ The commenter urged CMS to clarify that it has not suggested or proposed to adopt a blanket judgment approach against technologies studied on a noninferiority basis. Response: We appreciate the commenters’ input and support. CMS always considers the totality of the clinical evidence whenever it makes a substantial clinical improvement determination. We agree with the commenters that we approved new technology add-on payments for Fidaxomicin and KcentraTM by determining that both of these technologies not only met the newness and cost criteria for new technology VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 add-on payments, but also represented a substantial clinical improvement in the treatment options available for Medicare beneficiaries. We also appreciate that the commenter reviewed the policies we established in FY 2002 (66 FR 46902) with regard to the substantial clinical improvement criterion and clarified in FY 2008 (72 FR 47301). We continue to believe, as we did in FY 2008, that it is a reasonable concern that establishing specific data standards may make it more difficult for an applicant to qualify for a new technology add-on payment because such standards cannot account for the various types of new technologies that may become available in the future and the types of requirements that those novel technologies may or may not be able to meet. In other words, we clarify that we did not propose to establish nor are we establishing a blanket judgment approach against technologies studied on a non-inferiority basis. As we stated in the final rule that appeared in the Federal Register on September 7, 2001 (referred to hereinafter as the Inpatient New Technology Add-on Payment Final Rule), one of the ways to determine if a technology meets the substantial clinical improvement criterion is for the applicant to demonstrate that use of the technology significantly improves clinical outcomes for a patient population as compared with currently available treatments (66 FR 46914). In that rule, we finalized the policy that we would require applicants to submit evidence to demonstrate this. For the purposes of seeking additional payment from Medicare under the IPPS, we believe that it is preferable, when possible, for applicants to submit evidence that demonstrates superiority of the applicant technology as compared with currently available treatments. We note that this superiority can be derived, extrapolated, or inferred from noninferiority studies in which the results demonstrate a far greater delta than proposed in the power analysis. This belief is based on earlier experiences, which we described in the FY 2002 final rule: ‘‘[W]e would point out that various new technologies introduced over the years have been demonstrated to have been less effective than initially thought, or in some cases even potentially harmful. We believe it is in the best interest of Medicare beneficiaries to proceed very carefully with respect to the incentives created to quickly adopt new technology’’ (66 FR 46913). However, we point out that in that same rule, we provide two additional ways for an applicant technology to demonstrate substantial PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 clinical improvement: if the device offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments; or if the device offers the ability to diagnose a medical condition in a patient population where that medical condition is currently undetectable or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods. There must also be evidence that the use of the device to make a diagnosis affects the management of the patient’s care. (We refer readers to the Inpatient New Technology Add-on Payment Final Rule (66 FR 46914).) Similarly, for these two additional ways to meet the substantial clinical improvement criterion, we continue to believe that it is appropriate to require that applicants submit evidence that the technology in fact meets the criterion through one of these two ways. We do not require an applicant to meet the criterion in more than one of these ways, but emphasize that we require evidence to support an applicant’s claim. If an applicant chooses to demonstrate that use of its technology significantly improves clinical outcomes, we believe that it is appropriate for CMS to consider all of the evidence presented in determining whether there is sufficient objective clinical evidence to determine if a new technology meets the substantial clinical improvement criterion. a. Dalbavancin (Durata Therapeutics, Inc.) Durata Therapeutics, Inc. submitted an application for new technology addon payments for FY 2015 for the use of Dalbavancin. Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic administered as a onceweekly 30-minute infusion via a peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. According to the applicant, Dalbavancin’s unique pharmacokinetic profile demonstrates rapid bactericidal activity that is potent and sustained against serious gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA). With respect to the newness criterion, the applicant stated that Dalbavancin’s once-weekly dosing, a simpler regimen than the current standard of care (Vancomycin) of daily or multiple-times daily intravenous dosing, allows for the discontinuation of IV access with its attendant risks of line-related thrombosis and infection. The applicant submitted a New Drug Approval Application (NDA) on September 26, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2013, and as stated in the FY 2015 IPPS/ LTCH PPS proposed rule, anticipated FDA approval of Dalbavancin sometime in May of 2014. The applicant also applied for a new ICD–10–PCS code to describe the administration of Dalbavancin, which was presented at the March 19–20, 2014 ICD–10 Coordination and Maintenance Committee meeting. To date, no ICD– 10–PCS code specifically describes the administration of Dalbavancin. However, if approved, the new ICD–10– PCS code will be effective on October 1, 2014. We also note in section II.G. of the preamble of this final rule that, per section 212 of the PAMA (Pub. L. 113– 93), the Secretary announced plans to establish a new compliance date for ICD–10. We also discuss in that section the requests for ICD–10–PCS codes for FY 2015. We refer readers to section II.G. of the preamble of this final rule for a complete discussion of these issues. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the technology meets the newness criterion. However, we did not receive any public comments regarding whether the technology meets the newness criterion. After the publication of the FY 2015 IPPS/LTCH PPS proposed rule, we were informed that the applicant received FDA approval for the use of the technology on May 23, 2014. Therefore, for purposes of consideration for FY 2015 IPPS new technology add-on payments, we believe that the technology should be considered ‘‘new’’ as of May 23, 2014, when the technology received FDA approval. We note that in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically: (1) whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS–DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of the criteria above, it would be considered substantially similar to an existing technology and would not be considered ‘‘new’’ for purposes of new technology add-on payments. In evaluating the first criterion, the applicant stated that Dalbavancin’s mechanism of action is unique compared to other antibiotics as it involves the interruption of cell wall synthesis resulting in bacterial cell death. Furthermore, the applicant cited VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Dalbavancin’s long half-life as the factor that differentiates itself from existing antibacterial agents active against MRSA. With respect to the second criterion, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28036), we believe that cases of ABSSSI that use Dalbavancin or other antibiotics for treatment would be assigned to the same MS–DRGs. Finally, with respect to the third criterion, we believe that Dalbavancin and other antibiotics used to treat cases of ABSSSI treat the same disease and patient population. Based on evaluation of the substantially similarity criteria, we stated in the FY 2015 IPPS/LTCH PPS proposed rule, it appears that Dalbavancin is not substantially similar to other antibiotics for the treatment of ABSSSI because it does not use the same or a similar mechanism of action to achieve a therapeutic outcome. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments regarding whether Dalbavancin is substantially similar to existing antibiotics and whether Dalbavancin meets the newness criterion. However, we did not receive any public comments discussing whether Dalbavancin is substantially similar to existing antibiotics in the context of the newness criterion. After further evaluation of the new technology add-on payment application, we believe that Dalbavancin is not substantially similar to other antibiotics for the treatment of ABSSSI because it does not use the same or a similar mechanism of action to achieve a therapeutic outcome. According to the applicant, Dalbavancin is indicated to treat grampositive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These conditions may be a primary diagnosis, but are often secondary to an underlying condition such as diabetes, heart failure, and pressure ulcers, among others. Therefore, the technology is eligible to be used across all MS–DRGs. To demonstrate that it meets the cost criterion, the applicant searched the FY 2012 MedPAR file (across all MS–DRGs) for cases where at least one ABSSSI ICD–9–CM code was present on the claim, including those where MRSA was present on a claim with an ABSSSI diagnosis. Specifically, the applicant searched for cases with one of the following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and paronychia of finger); 681.10 (Cellulitis and abscess of toe, unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis and abscess of unspecified PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 49927 digit); 682.0–682.9 (Other cellulitis and abscess of face, neck, trunk, upper arm and forearm, hand except fingers and thumb, buttock, leg except foot, foot except toes, specified sites, unspecified sites); 686.00 (Pyoderma, unspecified); 686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic granuloma of skin and subcutaneous tissue); 686.8 (Other specified local infections of skin and subcutaneous tissue); 686.9 (Unspecified local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic wound infection not elsewhere classified); 998.51 (Infected postoperative seroma); and 998.59 (Other postoperative infection). The applicant believed that these cases represent potential cases eligible for the administration of Dalbavancin. The applicant found 570,698 cases across 682 MS–DRGs and noted that almost 25 percent of the total number of cases would map to MS–DRGs 603 (Cellulitis without MCC), while the top 10 MS–DRGs accounted for almost half (or 49 percent) of the total number of cases. Of the 682 MS–DRGs, only 90 of these MS–DRGs accounted for 1,000 cases or more. The applicant standardized the charges for all 570,698 cases, which equated to an average caseweighted standardized charge per case of $46,138. We note that the applicant did not inflate the charges nor did it include charges for Dalbavancin in the average case-weighted standardized charge per case. The applicant calculated an average case-weighted threshold of $44,255 across all MS– DRGs. Therefore, the applicant asserted the average case-weighted standardized charge per case (without inflating and including charges for Dalbavancin) exceeds the average case-weighted threshold of $44,255 (as indicated in Table 10 of the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant maintained that Dalbavancin meets the cost criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments regarding whether Dalbavancin meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. Comment: The applicant submitted a public comment maintaining that Dalbavancin meets the cost criterion requirement because the cost of the target cases exceeds the average caseweighted cost threshold requirement prior to accounting for an inflation factor, or including the costs of Dalbavancin. The applicant further stated that it also included the ‘‘costs of Dalbavancin in its analysis to further E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49928 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations demonstrate that Dalbavancin exceeds the established NTAP cost threshold.’’ Response: We appreciate the applicant’s response. We reviewed the applicant’s analysis. We note that, while the applicant’s analysis included the charges associated with Dalbavancin in their final cost estimate, the applicant did not remove the charges for the current therapy for treating acute bacterial skin and skin structure infections. We agree that the applicant’s analysis using data from all 570,698 cases across 682 MS–DRGs showed that Dalbavancin exceeds the average caseweighted threshold prior to the inclusion of inflation factors and charges associated with Dalbavancin. We note that it is unclear to what degree Dalbavancin would be used in each of these cases across the specific MS–DRGs, in part, because a procedure code has not been established to identify the technology’s use in the claims data. Therefore, we reviewed the additional analyses using the claims data submitted by the applicant to substantiate that the technology meets the cost criterion. For example, in the data submitted by the applicant, the top 10 MS–DRGs ranked by case volume constitute roughly half of the cases with at least one ICD–9–CM code associated with acute bacterial skin infections. These 10 MS–DRGs include: MS–DRG 0603 (Cellulitics Without MCC); MS– DRG 0602 (Cellulitics With MCC); MS– DRG 0871 (Septicemia or Severe Sepsis Without MV 96+ Hours With MCC); MS–DRG 0863 (Postoperative & PostTraumatic Infections Without MCC); MS–DRG 0872 (Septicemia or Severe Sepsis Without MV 96+ Hours Without MCC); MS–DRG 0300 (Peripheral Vascular Disorders With CC); MS–DRG 0292 (Heart Failure & Shock with CC); MS–DRG 0862 (Postoperative & PostTraumatic Infections With MCC); MS– DRG 0857 (Postoperative or PostTraumatic Infections With O.R. Procedure With CC); and MS–DRG 0853 (Infectious and Parasitic Diseases With O.R. Procedure With MCC). An average case-weighted threshold and standardized charges could be calculated using these MS–DRGs and compared to determine if the standardized charges exceed the average case-weighted threshold for these top 10 MS–DRGs. In summary, we agree with the applicant that the technology meets the cost criterion. With regard to substantial clinical improvement, as previously stated by the applicant, Dalbavancin is a new intravenous (IV) lipoglycopeptide antibiotic administered as a onceweekly 30 minute infusion via a VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. The applicant noted that, in the setting of continuing emergence of resistance among gram-positive pathogens worldwide, there is an increasing medical need for new antibacterial agents with enhanced gram-positive activity. The applicant cited the Infectious Diseases Society of America (IDSA),3 stating the need for a multipronged approach to address the impact of antibiotic resistance. In addition, the applicant stated the FDA has also designated MRSA as a pathogen of special interest which allows an antibiotic effective against this organism to be designated as a ‘‘Qualified Infectious Disease Product,’’ recognizing the medical need for drugs to treat infections caused by this pathogen. The applicant believed that having a medicinal agent with clinical efficacy against gram-positive pathogens, including MRSA and CA–MRSA, a favorable benefit/risk ratio, and a favorable pharmacokinetics profile allowing convenient dosing in inpatients and outpatients with the potential for minimizing patient noncompliance would be a valuable addition to the antibacterial armamentarium for the treatment of ABSSSI. The applicant also noted that, when taking Dalbavancin, there is no need for oral step-down therapy. The applicant suggested that Dalbavancin offers treatment advantages over other available options for therapy for skin infections as a result of the following: • Improved potency against key bacterial pathogens with the concentration of Dalbavancin required to kill key target pathogens lower relative to other antibiotics commonly used to treat such pathogens; • Retained activity against staphylococcus aureus resistant to other antibiotics; • Improved safety profile as Dalbavancin exhibits more favorable tolerability and safety than alternative approved antibacterial drugs in areas such as no evidence of thrombocytopenia as seen with linezolid and tedezolid, superior infusion related tolerability relative to other antibiotics, an absence or reduction of drug specific toxicities, and once a week dosing of IV Dalbavancin avoids pitfalls of patient noncompliance with an oral medication; • Lack of drug interactions due to metabolic profile which minimizes risk of unexpected adverse events when co3 ‘‘Bad PO 00000 Bugs, No Drugs,’’ July 2004. Frm 00076 Fmt 4701 Sfmt 4700 administered with other compounds as seen with linezolid and quinupristin/ dalfopristin; • Decreased requirement for therapeutic interventions, specifically the need for an intravenous catheter as Dalbavancin is administered once a week, thus reducing catheter related infection as well; • Reduced time to patient defined recovery; • Reduced mortality rate as demonstrated in the combined phase of the Discover 1 and Discover 2 clinical trials; • The potential for avoidance of admission to the hospital as Dalbavancin allows the utilization of a weekly treatment regimen, thus potentially increasing the convenience of outpatient therapy for patients. The applicant conducted three phase three randomized, controlled, double blinded clinical trials. The first was the pivotal VER001–9 study with a total of 873 patients with ABSSSIs, which compared the safety and efficacy of IV Dalbavancin with possible switch to oral placebo to IV Linezolid with possible switch to oral Linezolid. According to the applicant, the primary efficacy endpoint of clinical response at test of 14 days with a plus or minus of 2 days after completion of therapy demonstrated comparable clinical efficacy to linezolid and met the requirement of statistical demonstration of non-inferiority. In the clinically evaluable population, 88.9 percent of patients who received Dalbavancin compared to 91.2 percent of patients who received vancomycin/linezolid were clinical successes. The applicant also noted that Dalbavancin had an improved safety profile compared to Linezolid as the overall incidence and percentage of adverse events and deaths were lower in the Dalbavancin group, which was statistically significant. The second and third clinical trials were the Discover 1 and Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI and compared IV Dalbavancin with IV placebo every 12 hours to match Vancomycin with possible switch to oral Vancomycin to IV Vancomycin with IV placebo to match IV Dalbavancin with possible switch to oral Linezolid. The applicant reported that in both studies, the primary efficacy outcome measure was clinical response in 48 to 72 hours poststudy drug initiation and a secondary outcome measure was clinical status at the end of treatment visit (day 14) in the Intent to Treat (ITT) and clinically evaluable at End of Treatment populations. Clinical status was also E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations determined at the short-term follow-up and long-term follow-up visits. According to the applicant, the Discover 1 trial demonstrated that 83.3 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 81.8 percent of patients who received Vancomycin/Linezolid. The applicant also noted that Dalbavancin was noninferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): ¥4.6 percent; 7.9 percent). The applicant further noted that the Discover 2 trial showed similar results to the Discover 1 trial. Specifically, the trial demonstrated that 76.8 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 78.3 percent of patients who received Vancomycin/ Linezolid. The applicant again noted that Dalbavancin was non-inferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): ¥7.4 percent; 4.6 percent). The applicant found Dalbavancin to be effective against MRSA and other gram-positive bacteria associated with ABSSSI. The applicant stated that 25 percent of patients in the study were treated without an inpatient admission. We stated in the FY 2015 IPPS/LTCH PPS proposed rule that we are concerned with the details of the trial design and the primary efficacy endpoints used within those trials that were used to provide the clinical data supplied by the applicant. All of the trials were noninferiority studies, which prevent any determination as to substantial clinical improvement from the trial data. The primary efficacy endpoint was defined as having no increase in lesion size, and no fever 48 to 72 hours after drug initiation. The secondary endpoint was a >20 percent reduction in infection area at defined points in time. At neither endpoint is the patient oriented endpoint of resolution of infection increased. With these limitations in using efficacy data to establish substantial clinical improvement, the applicant suggested that the outpatient treatment, elimination of central lines and avoidance of hospitalization all may improve safety, avoid treatmentassociated infections and improve patient satisfaction, and that these factors demonstrate substantial clinical improvement. While the factors mentioned may be true, the applicant did not present any evidence to support its assertions. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We invited public comments on whether Dalbavancin meets the substantial clinical improvement criterion, including public comments in response to our concern that the applicant has only provided efficacy data of noninferiority, and no data for the other suggested benefits. Comment: Several commenters stated that Dalbavancin meets the substantial clinical improvement criteria and, therefore, CMS should approve the application for new technology add-on payments in FY 2015. Response: We appreciate the commenters’ input. We considered these public comments in our determination of whether this technology represents a substantial clinical improvement in the treatment options currently available to Medicare beneficiaries. Comment: As previously summarized, some of the commenters stated that CMS has a precedent of accepting noninferiority studies to evaluate technologies under the substantial clinical improvement criterion. In particular, these commenters indicated that CMS approved new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350 through 53358) and KcentraTM in FY 2014 (78 FR 50575 through 50580), and both of these technologies submitted data from clinical trials demonstrating noninferiority. One commenter stated that CMS’ approval of Fidaxomicin for new technology add-on payments establishes a precedent for approval for a technology that shows noninferiority for a primary end point in addition to the acceptance of other clinically important secondary analysis. The commenters believed that precedent should be used to approve the application for new technology add-on payments for Dalbavancin. Another commenter stated that CMS’ approval of KcentraTM for new technology add-on payments is an example of how a technology can use data from randomized controlled trials demonstrating noninferiority to show that technology represents a substantial clinical improvement. The applicant also provided additional data from its clinical trials on the degree to which patients who were improving were permitted to stop their treatment after 10 days. The data showed that patients randomized to Dalbavancin were more likely to stop therapy at 10 days, and less likely to continue treatment through 14 days. The applicant stated that by day 10 most patients were being treated on an outpatient basis on oral therapy (either with an oral placebo or oral linezolid), and that treatment was discontinued at PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 49929 the patient’s discretion. The applicant further stated that ‘‘the implication of this finding is that, from the patient’s perspective, resolution of the underlying infection was occurring more rapidly for those randomized to Dalbavancin.’’ Response: We refer readers to section II.I.4. of the preamble of this final rule for our detailed response to commenters’ concerns regarding noninferiority trials. We believe that our preliminary assessment (and final determination described later in this section) with regard to Dalbavancin is consistent with prior determinations made with regard to other approved technologies, including the two technologies identified by the commenters, Fidaxomicin and KcentraTM. With regard to Fidaxomicin, we note that we stated that we believed that it represented a treatment option with the potential to decrease utilization, reduce the recurrence of clostridium-difficile associated disease (CDAD), and improve quality of life. We also note that we considered the information the applicant provided with regard to the endpoints in its clinical trial, which as the commenters point out, were indeed to demonstrate that the effects of administering Fidaxomicin were noninferior to administering Vancomycin. (We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53357 through 53358).) Similarly, with regard to KcentraTM, we note that we stated that we believed that it provided a rapid beneficial resolution of the patient’s blood clotting factor deficiency, decreases the risk of exposure to blood borne pathogens, and reduces the rate of transfusion-associated complications. These conclusions also were based on information the applicant provided with regard to the endpoints in its clinical trial. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50578 through 50579).) However, we note that in their clinical trials, these applicants were able to show a wider margin of difference between the treatment and control groups. The small margin of difference between the groups in this study leads us to conclude that any additional analysis of the trial data would be unlikely to demonstrate superiority of the treatment group. With regard to the additional data the applicant provided regarding days of therapy, it is our understanding that most patients in both groups were on oral therapy by day 10 and that patients in both groups were allowed to discontinue their therapy at their discretion. The treatment group was more likely to discontinue use of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49930 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Dalbavancin by day 10. We believe that it is difficult to assess the degree to which this implied that resolution of the underlying infection was occurring more rapidly, or would meet our definition of substantial clinical improvement. However, in light of the data from the applicant’s non-inferiority trial, which did not show a wide margin of difference between the treatment and control groups, we do not believe that this is sufficient objective evidence to determine that Dalbavancin is a substantial clinical improvement in the treatment options available for Medicare beneficiaries. Comment: Many commenters described how they believed that Dalbavancin’s administration would improve patient safety and reduce adverse events, improve medication compliance, and reduce potential additional health care utilization. With regard to patient safety and adverse events, many commenters asserted that using Dalbavancin does not require an indwelling IV access, unlike treatments using Vancomycin and, therefore, it is self-evident that the potential for catheter-associated infections is eliminated. Some of these commenters emphasized the importance of reducing catheter-associated infections, and noted that Dalbavancin could help achieve this goal. In addition, with regard to patient safety and adverse events, the applicant provided references discussing the frequency of central venous catheter complications nationally. The applicant also provided data from their pivotal clinical trial showing the number and proportion of patients who died and those with adverse events, including drug-related adverse events and treatment-related serious adverse events. The applicant asserted that the data showed that fewer patients randomized to Dalbavancin died relative to the standard of care, showing that one patient (0.2 percent) treated with Dalbavancin died while 7 patients (1.1 percent) treated with Vancomycin/ Linezolid died. Notably, while these data showed with a p value of 0.05 that 33 percent of patients treated with Dalbavancin had an adverse event compared to 38 percent of patients treated with Vancomycin or Linezolid, the data also showed that it was difficult to distinguish between the two groups in terms of drug-related adverse events and treatment-related serious adverse event. The data showed that 12 percent of patients treated with Dalbavancin experienced a drug-related adverse event compared to 14 percent of patients treated with Vancomycin/ Linezolid with a p value of 0.45. The VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 data also showed that 0.3 percent of patients treated with Dalbavancin experienced a treatment-related serious adverse event compared to 0.6 percent of patients treated with Vancomycin/ Linezolid with a p value of 0.41. In addition to these data, the applicant also presented data collected in their clinical program that compared the infusionrelated adverse events of patients receiving Dalbavancin to those of patients receiving commonly used alternative agents. These data showed that 2.2 percent of patients treated with Dalbavancin experienced an infusionrelated adverse event, while 3.1 of comparator agent patients experienced an infusion-related adverse event. One commenter, having reviewed the applicant’s clinical trial data, concluded that while the safety profile to date of Dalbavancin appears similar to Vancomycin, the ultimate determination of safety must await broader clinical use. The commenter noted that future clinical trials are needed to define the safety profile of Dalbavancin. Response: We appreciate commenters’ input and the additional data submitted by the applicant. We disagree with commenters that it is self-evident that the technology eliminates the potential for catheterassociated infections, particularly with respect to indwelling catheters. It is not clear if these patients already would have had indwelling catheters in place, whether for antibiotic administration or other purposes. Therefore, it is not evident that simply having the option of an antibiotic that does not require an indwelling catheter would eliminate the potential for catheter-associated infections. We agree with the commenters that the administration of Dalbavancin could reduce the potential for these infections in patients that otherwise would not have an indwelling catheter, but note that it was not possible to discern the degree to which this potential reduction occurs based on the data and comments provided. As previously stated, we appreciate the applicant’s submission of additional data from its trials regarding safety and adverse events. We agree with the applicant that Dalbavancin appears to be associated with fewer infusionassociated adverse events and patient deaths relative to the comparator group. We note that the applicant’s data showed that drug-related and treatmentrelated serious adverse events appeared to be less frequent for patients treated with Dalbavancin relative to the comparator group, but that it was not clear to what degree the groups actually differed because the p values were in excess of 0.4. We also agree with the PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 commenter that stated that it would appear that more clinical use and data should be gathered to more fully develop Dalbavancin’s safety profile. Comment: Many commenters stated that they believed that Dalbavancin would improve medication compliance and reduce potential additional health care utilization. Some commenters noted that patients diagnosed with acute bacterial skin and skin structure infections are often treated as inpatients. One commenter noted that the rate of these skin and skin structure infections are higher than they have ever historically been. One commenter described these hospitalizations as unnecessary. Another commenter stated that while Dalbavancin is not more efficacious than Vancomycin, it is easier to administer. The commenter concluded that Dalbavancin would make it possible to treat patients with complicated skin and skin structure infections that might otherwise require hospitalization on an outpatient basis without compromising efficacy and without the need for either laboratory monitoring or an indwelling intravenous catheter. Several commenters noted that less pharmacist monitoring time was required for the administration of Dalbavancin relative to Vancomycin. Several commenters stated that no additional data beyond the pivotal trials are needed to show that a single infusion involves fewer administrations and requires less health care resources than a course of therapy that lasts a week or more. One commenter described the importance of medication compliance in the context of treating a patient population that faces socioeconomic hardships. Specifically, the commenter noted that noncompliant patients are more likely to present to the emergency department with worsening infections and that Dalbavancin’s dosing profile reduces the risk of noncompliance that is typically associated with oral therapy. Response: We appreciate the commenters’ input. We agree with the commenters that there is the possibility that Dalbavancin could make it possible for certain patients to be treated on an outpatient basis rather than as inpatients of a hospital. We further agree with commenters that there is the potential for treatment benefits for Medicare beneficiaries that would help avoid hospitalizations, including avoiding potential future iatrogenic events. However, we are concerned that neither the applicant, nor any of the commenters, provided specific information or data regarding the reduced resource use that they believe would occur. It is common that benefits E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV from events that appear to be ‘‘selfevident,’’ as suggested by the commenters, prove to not be beneficial events when subjected to the rigors of a clinical trial. After consideration of the public comments we received, we do not believe that Dalbavancin meets the substantial clinical improvement criterion to qualify the technology for new technology add-on payments under the IPPS in FY 2015. In particular, we do not believe there is sufficient objective clinical evidence to determine that Dalbavancin significantly improves clinical outcomes for Medicare beneficiaries in order for the technology to qualify for new technology add-on payments. While we recognize that Dalbavancin has met FDA standards for safety and effectiveness, the new technology add-on payment application process and approval requires a demonstration of a substantial clinical improvement, which is not inherent in the FDA’s regulatory process. We recognize that the technology is the first drug designated as a Qualified Infectious Disease Product (QIDP) to receive FDA approval and was granted QIDP designation because it is an antibacterial or antifungal human drug intended to treat serious or lifethreatening infections. We are equally committed to encouraging increased development and approval of new antibacterial drugs, providing physicians and patients with important new treatment options and will support this endeavor by providing payment for Dalbavancin through our prospective payment processes. However, in the case of this application, we do not believe that the technology meets the substantial clinical improvement criterion. Therefore, we are not approving new technology add-on payments for Dalbavancin for FY 2015. b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.) The Heli-FXTM EndoAnchor System is indicated for use in the treatment of patients whose endovascular grafts during treatment of aortic aneurysms have exhibited migrations or endoleaks, or in the treatment of patients who are at risk of such complications, and in whom augmented radial fixation and/or sealing is required to regain or maintain adequate aneurysm exclusion. The Heli-FXTM EndoAnchor System is comprised of the following three components: (1) The EndoAnchor Implant; (2) the Heli-FXTM Applier; and (3) the Heli-FXTM Guide with Obturator. The Heli-FXTM EndoAnchor System is a mechanical fastening device that is designed to enhance the long-term VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 durability and reduce the risk of repeat interventions in endovascular aneurysm repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By deploying a small helical screw (the Heli-FXTM EndoAnchors) to connect the endograft to the aorta, the Heli-FXTM System seeks to provide a permanent seal and fixation, similar to the stability achieved with an open surgical anastomosis. The original Heli-FXTM EndoAnchor System, designed for treating abdominal aortic aneurysms (AAA), was cleared by the FDA through the ‘‘de novo’’ 510(k) process on November 21, 2011 (reference K102333). The Heli-FXTM Thoracic System, which allows the expanded use of the Heli-FXTM EndoAnchor System technology to the treatment of thoracic aortic aneurysms (TAA), was cleared by the FDA on August 14, 2012 (reference K121168). The applicant submitted two applications for approval for new technology add-on payment in FY 2015: one for the treatment of AAAs and the other for the treatment of TAA repair. We note that, as stated in the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915), two applications are necessary in this instance, because patients that may be eligible for use of the technology under the first indication are not expected to be assigned to the same MS–DRGs as patients receiving treatment using the new technology under the second indication. Specifically, patients who have endovascular grafts implanted for the treatment of AAA map to MS–DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC), while patients who have endovascular grafts implanted for the treatment of TAA map to MS–DRGs 219 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter without CC/MCC). Each indication/application must also meet the cost criterion and the substantial clinical improvement criterion in order to be eligible for new technology add-on payments beginning in FY 2015. We discuss both of these applications below. (1) Heli-FXTM EndoAnchor System for the Treatment of AAA (Heli-FXTM AAA) As mentioned above, the original Heli-FXTM EndoAnchor System, designed for treating patients diagnosed with AAA, was cleared by the FDA PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 49931 through the ‘‘de novo’’ 510(k) process on November 21, 2011 (reference K102333). According to the applicant, the device became available to Medicare beneficiaries following the product launch at the Society of Vascular Surgery (SVS) Annual Meeting held on June 7–9, 2012. Therefore, the applicant maintained that the Heli-FXTM AAA meets the ‘‘newness’’ criterion because the technology was not available on the U.S. market until June 2012. The applicant explained that the delay in the general market availability of the original Heli-FXTM AAA, following initial FDA clearance, was mainly because of the regulatory uncertainty inherent in the ‘‘de novo’’ 510(k) process. This uncertainty prevented the manufacturer from being able to secure the venture capital funding that was necessary to prepare for commercialization before obtaining market clearance. The ability to secure venture capital through the fundraising process was dependent upon the FDA clearance. According to the applicant, funding to commercially market the technology was not obtained until June 2012. In subsequent discussions with the applicant, the applicant confirmed that the Heli-FXTM AAA was available on the U.S. market as of November 2011. Further, the applicant acknowledged that four implantations were performed on Medicare beneficiaries between November 2011 and June 2012. Therefore, the Heli-FXTM AAA is considered ‘‘new’’ as of November 2011 when the technology was cleared by the FDA and became available on the U.S. market. Section 412.87(b)(2) of the regulations state that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new service or technology. Our past practice has been to begin and end the eligibility for new technology addon payments on a fiscal year basis. We have generally followed a guideline that uses a 6-month window, before and after the beginning of the fiscal year, to determine whether to still consider a technology ‘‘new’’ and extend approved new technology add-on payments for an additional fiscal year. In general, a technology is still considered ‘‘new’’ (and eligible to receive new technology add-on payments) only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year. (We refer readers to 70 FR 47362.) With regard to the newness criterion for the Heli-FXTM AAA, as stated above, we consider the beginning E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49932 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of the newness period for the device to begin when the technology first became available on the U.S. market in November 2011. As previously stated, the applicant acknowledged that four implantations were performed on Medicare beneficiaries between November 2011 and June 2012. Therefore, the costs of the Heli-FXTM AAA are currently reflected in the MS– DRGs, and the 3-year anniversary date under the newness criterion for the product’s entry on the U.S. market will occur during November 2014 (the first half of FY 2015). As such, we do not believe that the Heli-FXTM AAA meets the newness criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the Heli-FXTM AAA meets the newness criterion. We note that the applicant requested an ICD–10–PCS code, and presented comments at the March 2014 ICD–10 Coordination & Maintenance Committee meeting. We also note in section II.G. of the preamble of this final rule that, per section 212 of the PAMA (Pub. L. 113– 93), the Secretary announced plans to establish a new compliance date for ICD–10–PCS. We also discuss in that section requests for ICD–10–PCS codes for FY 2015. We refer readers to section II.G. of the preamble of this final rule for a complete discussion of these issues. Comment: The applicant submitted a public comment in response to the concerns that CMS presented in the FY 2015 IPPS/LTCH PPS proposed rule regarding the newness criterion. The applicant noted that questions raised by CMS centered solely on whether the Heli-FXTM AAA was charged to Medicare prior to the product launch in June 2012. Additionally, the applicant asserted that CMS did not reference the relevance of the April 1 date for purposes of determining whether a technology meets the newness criterion. Based on CMS’ concerns presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28039), the applicant conducted another review of the data previously provided to CMS. As previously submitted, there were four cases where the applicant was able to determine that the Heli-FX AAA was implanted in Medicare beneficiaries, and where charges were submitted to Medicare, prior to the product launch. These procedures occurred on April 24, 2012, May 7, 2012, May 23, 2012, and June 4, 2012. The applicant stated that because all of these cases were completed after April 1, 2012, it believes that the Heli-FXTM AAA meets the newness criterion for FY2015. Response: In a further follow-up discussion to clarify the availability of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the Heli-FXTM AAA, the applicant’s representatives noted that, although not in large quantities, the Heli-FX AAA was available to patients prior to April 1, 2012. We appreciate the information the applicant provided regarding the newness criterion. As we explained in the FY 2015 IPPS/LTCH PPS proposed rule, in general, a new technology is still considered ‘‘new’’ (and eligible to receive new technology add-on payments) only if the 3-year anniversary date of the product’s entry on the market occurs in the latter half of the fiscal year. Although the applicant has stated that the initial four implantations were after April 1, 2012, the technology was still available prior to April 1, 2012. Therefore, we still consider the beginning of the newness period for the device to begin when the technology first became available on the U.S. market in November 2011, which is prior to April 1, 2012. As stated in the FY 2015 IPPS/LTCH PPS proposed rule, the 3-year anniversary date under the newness criterion for the product’s entry on the U.S. market will occur during November 2014 (the first half of FY 2015). As such, the Heli-FXTM AAA does not meet the newness criterion and, therefore, is not eligible for new technology add-on payments for FY 2015. To demonstrate that the technology meets the cost criterion, the applicant researched claims data from the 100 percent sample of the 2012 Inpatient Hospital Standard Analytical File (SAF) for cases reporting either procedure code 39.71 (Endovascular implantation of other graft in abdominal aorta), or procedure code 39.79 (Other endovascular procedures on other vessels) in the first or second procedure position on the claim, in combination with one of the following primary diagnosis codes: 441.4 (Abdominal aneurysm without mention of rupture); 996.1 (Mechanical complication of other vascular device, implant, and graft); or 996.74 (Other complications due to other vascular device, implant, and graft). The applicant believed that this combination of ICD–9–CM codes identifies cases treated for AAA. We note that the 2012 SAF dataset includes all claims submitted from hospitals paid under the IPPS for calendar year 2012. The applicant focused its analysis on MS–DRGs 237 and 238 because these are the MS–DRGs that cases treated with the implantation of endovascular grafts for AAAs would most likely map to. The applicant found a total of 8,142 cases, and noted that 9.35 percent of the total number of cases would map to MS–DRG 237, and 90.65 percent of the total number of cases would map to PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 MS–DRG 238. The applicant standardized the charges for all 8,142 cases. Using the inflation factor of 1.47329 published in the FY 2014 IPPS/ LTCH final rule (78 FR 50982), the applicant inflated the standardized charges by 14.88 percent (the applicant multiplied 1.47329 × 1.47329 × 1.47329 in order to inflate the charges from 2012 to 2015). The applicant then added the charges for the Heli-FXTM AAA to the standardized charges by dividing the cost of the Heli-FXTM AAA device by each individual hospital specific CCR from the FY 2012 impact file. This equated to an average case-weighted inflated standardized charge per case of $111,613. The applicant noted that the average case-weighted inflated standardized charge per case did not contain additional operating room charges that relate to the Heli-FXTM AAA. Therefore, the applicant determined that it was necessary to add an additional $1,440 for operating room charges, which was based on an additional half hour of operating room time from one hospital, to the average case-weighted standardized charge per case. This resulted in an average caseweighted standardized charge per case of $113,053. The applicant calculated an average case-weighted threshold of $86,278 across both MS–DRGs 237 and 238. The applicant noted that the average case-weighted standardized charge per case, computed without including the additional operating room charges that relate to the Heli-FXTM AAA, exceeded the average caseweighted threshold of $86,278. Therefore, the applicant maintained that the technology meets the cost criterion. The applicant also submitted claims data from the ANCHOR (Aneurysm Treatment Using the Heli-FX Aortic Securement System Global Registry) study to demonstrate that the technology meets the cost criterion. A total of 51 cases were submitted with 11.76 percent of all the cases mapping to MS–DRG 237, and 88.24 percent of all the cases mapping to MS–DRG 238. The applicant standardized the charges for all 51 cases, and determined an average case-weighted standardized charge per case of $128,196. The applicant calculated an average caseweighted threshold of $87,118 across MS–DRGs 237 and 238. Therefore, because the average case-weighted standardized charge per case exceeds the average case-weighted threshold, the applicant maintained that the technology meets the cost criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the Heli-FXTM AAA meets the cost criterion, E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV particularly with regard to the assumptions and methodology used in the applicant’s analyses. Comment: Some commenters believed that the high cost of the Heli-FXTM device would deter facilities from using it. Response: As discussed above, because the Heli-FXTM AAA does not meet the newness criterion, it is not eligible for new technology add-on payments for FY 2015. Therefore, we are not summarizing the details of this comment nor are we responding to the issues presented in this discussion. However, we do address this comment in the later discussion of the Heli-FXTM EndoAnchor System for the Treatment of Thoracic Aortic Aneurysms. We discuss whether the Heli-FXTM EndoAnchor System (for the treatment of AAA and TAA) represents a substantial clinical improvement over other treatments used for the repair of both abdominal and thoracic aortic aneurysms in one discussion below. (2) Heli-FXTM EndoAnchor System for the Treatment of Thoracic Aortic Aneurysms (Heli-FXTM TAA) The Heli-FXTM TAA, which allows the expanded use of the Heli-FXTM EndoAnchor System technology to TAA repair, was cleared by the FDA on August 14, 2012 (reference K121168). The new system consists of a longer delivery device with additional tip configurations to allow the helical EndoAnchor technology to treat TAA. A line extension to the original Heli-FXTM EndoAnchor System, allowing improved treatment of AAA patients with larger aortic neck diameters, was cleared by the FDA on April 12, 2013 (reference K130677). With regard to the newness criterion for the Heli-FXTM TAA, we consider the newness period for the device to begin when the technology was approved by the FDA on August 14, 2012. Because the 3-year anniversary date of the product’s entry on the U.S. market would occur in the second half of FY 2015 (August 14, 2015), we believe that the Heli-FXTM TAA meets the newness criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the Heli-FXTM TAA meets the newness criterion. As noted above, the applicant requested an ICD–10–PCS code, and presented comments at the March 2014 ICD–10 Coordination & Maintenance Committee meeting. We also note in section II.G. of the preamble of this final rule that, per section 212 of the PAMA (Pub. L. 113– 93), the Secretary announced plans to establish a new compliance date for the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 ICD–10–PCS. We also discuss in that section requests for ICD–10–PCS codes for FY 2015. We refer readers to section II.G. of the preamble of this final rule for a complete discussion these issues. We did not receive any public comments on whether the Heli-FXTM TAA meets the newness criterion. To demonstrate that the Heli-FXTM TAA meets the cost criterion, similar to the analysis performed for the HeliFXTM AAA, the applicant researched claims data from the 100 percent sample of the 2012 SAF for cases reporting procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) in the first or second procedure position on the claim, in combination with one of the following primary diagnosis codes: 404.93 (Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end-stage renal disease); 441.01 (Dissection of aorta, thoracic); 441.03 (Dissection of aorta, thoracoabdominal); 441.2 (Thoracic aneurysm without mention of rupture); 441.4 (Abdominal aneurysm without mention of rupture); 441.7 (Thoracoabdominal aneurysm, without mention of rupture); 996.1 (Mechanical complication of other vascular device, implant, and graft); or 996.74 (Other complications due to other vascular device, implant, and graft). The applicant believed that this combination of ICD–9–CM codes identifies cases treated for TAA. We note that the 2012 SAF dataset includes all claims submitted from hospitals paid under the IPPS for CY 2012. The applicant focused its analysis on MS–DRGs 219, 220, and 221 because these are the MS–DRGs to which cases treated with the implantation of endovascular grafts for TAA repair would most likely map. The applicant found a total of 642 cases, and noted that 27.88 percent of the total number of cases would map to MS–DRG 219, 40.50 percent of the total number of cases would map to MS–DRG 220, and 31.62 percent of the total number of cases would map to MS–DRG 221. The applicant standardized the charges for all 642 cases. Using the inflation factor of 1.47329 published in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982), the applicant inflated the standardized charges by 14.88 percent (the applicant multiplied 1.47329 × 1.47329 × 1.47329 in order to inflate the charges from 2012 to 2015). The applicant then added the charges for the Heli-FXTM TAA to the standardized charges by dividing the cost of the HeliFXTM TAA by each individual hospital specific CCR from the FY 2012 impact file. This equated to an average case- PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 49933 weighted inflated standardized charge per case of $156,625. The applicant noted that the average case-weighted inflated standardized charge per case did not contain additional operating room charges related to the use of this technology. Therefore, the applicant determined that it was necessary to add an additional $2,160 for operating room charges, which was based on an additional 45 minutes of operating room time from one hospital, to the average case-weighted standardized charge per case. This resulted in an average caseweighted standardized charge per case of $158,785. The applicant calculated an average case-weighted threshold of $141,194 across MS–DRGs 219, 220, and 221. The applicant noted that the average case-weighted standardized charge per case, without including charges for additional operating room time, exceeded the average caseweighted threshold of $141,194. Therefore, the applicant maintained that the technology meets the cost criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the Heli-FXTM TAA meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant’s analysis. Comment: Some commenters stated that the high cost of the Heli-FXTM device would deter facilities from using it. Therefore, the commenters supported the approval of the Heli-FXTM TAA for new technology add-on payment in order to assist with cost coverage so that more facilities would be willing to use the device in the treatment of their patients. Response: We appreciate the commenters’ input and support. We agree with the commenters that the Heli-FXTM TAA meets the cost criterion. (3) Evaluation of the Substantial Clinical Improvement Criterion for the HeliFXTM EndoAnchor System for the Treatment of Abdominal and Thoracic Aortic Aneurysms The applicant stated that the HeliFXTM EndoAnchor System represents a substantial clinical improvement for the following reasons: the technology improves overall rates of aneurysm exclusion and long-term success after EVAR by increasing the integrity and long-term durability of the proximal seal and fixation; the technology reduces the risk and rate of secondary interventions and readmissions due to aneurysmrelated complications (for example, endoleaks, migration, aneurysm enlargement) caused by failure of the proximal seal; the technology improves the general applicability of EVAR to E:\FR\FM\22AUR2.SGM 22AUR2 49934 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV patients with a broader spectrum of aortoiliac anatomy, including those with hostile proximal neck anatomy; and the technology reduces the rigor of life-long imaging follow-up for EVAR patients by reducing the rate of late failure and increasing the post-EVAR rates of aneurysm sac regression due to complete, endoleak-free durable aneurysm exclusion. While current devices and capabilities are greatly improved over the first generation of devices, the applicant noted that EVAR treatments using the first generation of devices has not proven to be as durable, anatomically applicable, or complication-free as open surgery.4 5 6 7 Several critical and lifethreatening limitations continue to require improvement to these devices and procedures, including the need to reduce serious early and late device and procedure-related complications, such as loss of stability, and integrity and robustness of the clinical proximal aortic landing zone, and to offer an alternative method of EVAR to a broader segment of the patient population. The applicant provided literature, analyses of data from the ‘‘STAPLE–2’’ clinical trial and the ANCHOR Registry, and a meta-analysis of EVAR trials to demonstrate that the Heli-FXTM EndoAnchor System represents a substantial clinical improvement above current treatments available. We summarize the information provided by the applicant that supports the clinically beneficial results of using the Heli-FXTM EndoAnchor System. The ‘‘STAPLE–2’’ clinical trial enrolled 155 patients at 25 U.S. centers between September 2007 and January 2009. Clinical (and imaging) data are available for 147, 139 and 125 patients at 1-year, 2-year, and 3-year follow-up, respectively, representing the complete data sets at these time points. Patients enrolled in the clinical trial and observed under the study will continue to be followed per protocol for 5 years following aneurysm repair. According to 4 Abbruzzese, T.A., Kwolek, C.J., Brewster, DC, et al, ‘‘Outcomes following endovascular abdominal aortic aneurysm repair (EVAR): An anatomic and device-specific analysis,’’ Journal of Vascular Surgery, 2008, Vol. 48, pp. 19–28. 5 Dangas, G., O’Connor, D., Firwana, B., et al, ‘‘Open Versus Endovascular Stent Graft Repair of Abdominal Aortic Aneurysms: A Meta-Analysis of Randomized Trials,’’ JACC, 2012, Vol. 5 (10), pp. 1072–1080. 6 De Bruin, J.L., Baas, A.F., Buth, J., et al, ‘‘LongTerm Outcome of Open or Endovascular Repair of Abdominal Aortic Aneurysm,’’ New England Journal of Medicine, May 2010, Vol. 362(20), pp.1881–1889. 7 Greenhalgh, R.M., Brown, L.C., Powell, J.T., et al, ‘‘Endovascular versus open repair of abdominal aortic aneurysm,’’ New England Journal of Medicine, May 2010, Vol. 362(20), pp. 1863–1871. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the applicant, the results of the trial and study demonstrate that the Heli-FXTM EndoAnchor System is associated with an extremely low rate of proximal neckrelated issues in long-term follow-up. The applicant maintained that this determination results in improved outcomes for aortic aneurysm patients, and reduced rate of re-interventions, which are associated with hospital admissions, procedural risks, and reversions to increased follow-up frequency requiring more physician visits and radiographic imaging studies. The data used for this analysis was extracted from the clinical database on February 1, 2013, and are identical to those used to generate the most recent Annual Progress Report (APR) submitted to the FDA, as required under the U.S. IDE regulations. While the ‘‘STAPLE–2’’ clinical trial was conducted exclusively with the Aptus AAA endograft (which remains investigational), the applicant believed that the use of the Heli-FXTM EndoAnchor System-related data is applicable to the use of the anchor with the compatible Cook, Gore, and Medtronic manufactured endografts in treatment anatomies for AAA and TAA cases. Through 3-year follow-up, the applicant noted that there have been no anchor fractures as observed by the core lab. Further, there have been no relative migrations of the Heli-FXTM EndoAnchor System as compared to other endografts reported by the core laboratory. In the analysis of the ‘‘STAPLE–2’’ clinical trial data at 1-year follow-up, the applicant noted that the core lab observed no proximal migrations, and a single case of Type I endoleak. A single secondary intervention was required to address the Type I endoleak in a patient with a circumferentially incomplete proximal neck within the 1-year followup period. The applicant further noted that no additional Type I endoleaks have been observed beyond the 1-year follow-up in any patient enrolled in the trial. In addition, there were no reported instances of aneurysm rupture, vessel perforation, vessel dissection, catheter embolization, enteric fistula, infection, Type III endoleak, conversion, allergic reactions, renal emboli, or patient death associated with the use of the Heli-FXTM EndoAnchor System. Further, there have been no reports of bleeding or hematoma at the EndoAnchor penetration locations in the aortic neck. Beyond the 1-year follow-up, three patients have demonstrated proximal migrations less than 1 cm. None of these PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 cases were associated with Type I endoleaks or aneurysm sac expansions. The applicant then compared migrations and Type I endoleaks data from the ‘‘STAPLE–2’’ clinical trial to analogous data from five compatible AAA endografts that were not anchored (data taken from published SSE data obtained from the FDA’s Web site). One year of data was compared because this timeframe is what is reported in a standard fashion from IDE trials of endografts. The applicant noted that the Heli-FXTM EndoAnchor System data compares favorably against the data obtained in U.S. pivotal trials of devices that did not employ discrete independent fixation means, particularly when viewed in light of the shorter average neck lengths treated in the ‘‘STAPLE–2’’ clinical trial versus those involving the Cook, Gore, and Medtronic manufactured endografts. According to the applicant, the number of proximal migrations were low across devices as reported in the SSE data, and an analysis using the Fisher’s exact method demonstrated no statistically significant differences when compared to the anchored endografts used in the ‘‘STAPLE–2’’ clinical trial (all p=NS). The incidence of Type I endoleaks and the need for secondary interventions to address them was significantly lower for the Heli-FXTM EndoAnchor System endografts analyzed under the ‘‘STAPLE–2’’ clinical trial versus the Medtronic, AneuRx, and Talent manufactured endografts (p=0.026 versus AneuRx and p=0.015 versus Talent). The applicant stated that the applicability of post-hoc statistical analyses is limited. However, the applicant believed that because the data being compared under the analyses were collected through similar protocols and with the same endpoint definitions, post-hoc comparisons were deemed appropriate. The applicant further believed that the comparison of this data demonstrates that the Heli-FXTM EndoAnchor System is associated with very low rates of Type I endoleaks and migrations. The applicant also provided data from the ANCHOR Registry, which is a postmarket, prospective, observational, multi-center, international, dual-arm study designed to capture real-world data on the usage patterns and clinical results associated with the use of the Heli-FXTM EndoAnchor System as a method of treatment for patients in need of EVAR. The applicant explained that the ANCHOR Registry represents a growing body of data on the application of the Heli-FXTM EndoAnchor System used as a method of endovascular aortic aneurysm repair. The applicant noted E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations that to its knowledge, the anatomical challenges present in the registry are greater than those in any large scale published series. The applicant further noted that, although long-term results are limited, the acute results demonstrate a high level of device safety, technical feasibility and acute success in a patient population with few viable options. Primary safety for the ANCHOR Registry is being measured as a composite of freedom from device or procedure-related serious adverse events through 1-year follow-up following the Heli-FXTM EndoAnchor System implantation. Primary effectiveness is being measured as a composite of acute technical success and freedom from Type Ia endoleaks and endograft migrations through 1-year follow-up. Inclusion and exclusion criteria are minimal, essentially following the IFU requirements. Patients are being followed in the registry by their physician’s standard of care for 5 years. Enrollment in the ANCHOR Registry began in March 2012. Through August 2013, a total of 258 patients were enrolled at 40 participating centers (29 located in the United States and 11 located in the European Union), and data are available in the registry’s database. Of these, 195 patients (76 percent) were enrolled in the primary arm, having the Heli-FXTM EndoAnchor System implanted at the time of their initial aneurysm treatment, either as a prophylactic measure, or to address an acute leak seen on completion arteriography. The remaining patients (63 or 24 percent) were enrolled in the revision arm, having the Heli-FXTM EndoAnchor Systems implanted at a secondary procedure to arrest migration, or address endoleaks discovered on follow-up in previously implanted endografts. The applicant noted that physicians are choosing to apply the Heli-FXTM EndoAnchor System in a subset of patients that are at a higher risk for proximal neck-related complications during follow-up. The large average sac diameter in the revision arm suggested that these patients’ initial treatments were unsuccessful and, as such, they have experienced continued sac expansion post-EVAR. These patients also represent a high-risk subset of patients. Acute results are measured in terms of technical success. In the primary arm, 193 of 194 procedures were successful, and in the revision arm, 57 of 63 procedures were successful. All technical failures were persistence of Type Ia endoleaks. There has been a VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 single re-intervention at 69 days postEndoanchor implantation for a persistent Type Ia endoleak in one patient in the revision arm, in which the Heli-FXTM EndoAnchor System combined with a proximal cuff were unable to completely resolve the endoleak. There have been no devicerelated serious adverse events. As mentioned above, because the ‘‘STAPLE–1’’,8 and ‘‘STAPLE–2’’ clinical trials were single-arm studies, no data are available from them to assess the impact of the Heli-FXTM EndoAnchor System on endograft performance. To make this assessment, a meta-analysis was conducted. The meta-analysis combined long-term AAA endograft performance from endografts marketed in the United States, and compared these measures to those from long-term follow-up in the ‘‘STAPLE–2’’ trial. According to the applicant, the key findings from the meta-analysis are as follows: • Heli-FXTM EndoAnchors reduced the proportion of treated aneurysms with enlargement greater than 5 mm at 3 years from 12.7 percent to 3.9 percent (p=.002). • Heli-FX EndoAnchor System reduced the proportion of leaks requiring treatment at 3 years from 12 percent to 1.3 percent (p.001). • Heli-FXTM EndoAnchor System reduced (all-cause) mortality at 3 years from 18.8 percent to 8.4 percent (p=.002). However, this does not appear to have been totally mediated by AAArelated mortality, which was reduced by the Heli-FXTM EndoAnchor System from 2.5 percent to 0.7 percent at 3 years (but was not statistically significant, p=.372). According to the applicant, in general, patients in the ANCHOR Registry were similar to the patients in the AAA endograft studies. The applicant noted that the results of the analysis using the Fisher’s Exact Tests were consistent between the All-Studies’ comparisons and the IDE-Studies’ comparisons: AllCause Mortality, Leaks requiring Treatment, and Enlargement were all significantly lower at 3 years in the endografts implanted with the HeliFXTM EndoAnchor System than in standard endografts. The applicant asserted that the metaanalysis shows that there is objective evidence that the Heli-FXTM EndoAnchor System effectively reduces well-documented problems with 8 Deaton, D.H., Mehla, M., Kasirajan, K., et al, ‘‘The Phase I Multi-center Trial (Staple-1) of the Aptus Endovascular Repair System: Results at 6 Months and 1 Year,’’ Journal of Vascular Surgery, 2009, Vol. 49, pp. 851–857 (discussion on pp. 857– 858.) PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 49935 endografts. By providing the endograft with better apposition to the native artery, the applicant noted that the HeliFXTM EndoAnchor System reduces the rates of enlargement and endoleaks requiring treatment. The applicant further noted that these results were consistent in the All-Studies’ and IDE Studies’ meta-analyses. The applicant believed that lower rates of leaks requiring intervention would save payers money over the long term. The applicant observed that, while there was no significant improvement in the rate of ruptures with the Heli-FXTM EndoAnchor System, this may be due to the fact that leaks were treated and, thereby, prevented any ruptures. The applicant believed that the higher rate of treated endoleaks in endografts implanted without the Heli-FXTM EndoAnchor System provides for this hypothesis. Also, migration did not appear to be significantly reduced by the Heli-FXTM EndoAnchor System (3.5 percent at 3 years in both groups; p=1.0). Finally, the applicant concluded that, overall, the lower complication rates seen with the Heli-FXTM EndoAnchor System in the meta-analysis provide evidence of the clinical benefits and likely economic benefits associated with the use of the Heli-FXTM EndoAnchor System. The applicant believed that the technology may be especially helpful in patients with difficult anatomy, and that it may be reasonable to consider using the Heli-FXTM EndoAnchor System prophylactically in the treatment of all such patients. In addition to the formal study data from the ‘‘STAPLE–2’’ trial, the Global ANCHOR Registry, and the metaanalysis based on these, the applicant provided published peer-reviewed literature that represent an early state of scientific data dissemination outside of non-company sponsored clinical studies, which is commensurate with the recent market approvals of the HeliFXTM EndoAnchor System technology. The applicant believed that these data demonstrate strong initial physician enthusiasm and resulting favorable clinical results in their experience to date. The applicant noted that the general body of scientific literature is considered meaningful and growing for this early stage of market introduction. However, the applicant asserted that the literature supports the study and metaanalysis data above that documents that improved clinical outcomes were observed, including outcomes in a broader range of patients that are often ineligible for, or at greatest risk with, EVAR. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49936 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we are concerned that the three sources of data, the ‘‘STAPLE–2’’ clinical trial, the Anchor registry, and the literature review that the applicant submitted to support their application are not high quality evidence. The ‘STAPLE–2’’ study was a single-arm study and only used one endograft, the registry is an observational study, and the literature review does not provide clinical data. Also, the meta-analysis of all the submitted data is only as good as the data used. While the clinical data submitted suggests that some outcomes such as EVAR failure are improved, we stated that we are concerned that there is not enough clinical evidence to support the substantial clinical improvement criterion. We invited public comments on whether the submitted data demonstrate that the Heli-FXTM EndoAnchor System represents a substantial clinical improvement in the treatment of Medicare beneficiaries, particularly in regard to the concerns we identified. Comment: Several commenters stated that the Heli-FXTM System meets the substantial clinical improvement criterion and, therefore, CMS should approve the Heli-FXTM System for new technology add-on payments in FY 2015. Response: We appreciate the commenters’ support. We considered these comments in our determination of whether the Heli-FXTM System represents a substantial clinical improvement in the treatment options available to Medicare beneficiaries. Comment: The applicant commented in response to CMS’ concerns presented in the FY 2015 IPPS/LTCH PPS proposed rule regarding the lack of enough high quality evidence to support the substantial improvement criterion because the three sources of data submitted by the applicant were not considered to be ‘high quality evidence.’ Specifically, CMS stated that it believed that the meta-analysis of submitted data is only as good as the data used, the STAPLE–2 Pivotal FDA Study was a single arm study and only used one Endograft, and the ANCHOR Registry is an observational study and the literature review does not provide clinical data. The applicant first outlined some basic background information into the EVAR regulatory process. With respect to the concerns regarding the meta-analysis of submitted data being only as good as the data used, the applicant asserted that it has not attempted to substantiate the finding of substantial clinical improvement through a single source of information. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 The applicant believed that the entirety of evidence demonstrated that this criterion was met as stated in its application. Specifically, the applicant stated that the Heli-FXTM EndoAnchor System offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments, including the primary cases with hostile necks and complex revisions (refer to the ANCHOR Registry data demonstrating 90.2 percent of hostile necks in the population). The technology has shown significantly improved clinical outcomes for the short proximal aortic neck patient population when compared to current available treatments (refer to STAPLE– 2 average neck length of 22.1mm, shorter than any conventional Endograft IDE Study), and has been shown to reduce aneurysm related mortality (refer to the meta-analysis results). The applicant further stated that the HeliFXTM has also been shown to reduce proximal neck related device complications and reduced subsequent therapeutic interventions (refer to STAPLE–2 where no late Type 1 endoleaks or proximal neck related revisions were required), and with previously unseen aneurysm sac regression (refer to STAPLE–2 which showed the highest reported at 81.7 percent at 3 years), indicating more rapid resolution of the disease process. Based on all of the above information, the applicant stated that it believes that the Heli-FXTM EndoAnchor System has met this evidentiary threshold for the substantial clinical improvement criterion. The applicant also addressed CMS’ concerns about the quality of evidence that the Aptus’ single arm STAPLE–2 study may provide, specifically, that the STAPLE–2 Pivotal FDA Study was a single arm study and only used one Endograft. According to the applicant, the STAPLE–2 Study was a two arm study of patients treated with the Aptus Stent Graft in conjunction with the EndoAnchors versus an historical open surgical control (SVS Lifeline database). The applicant stated that this kind of trial design is typical for U.S. premarket IDE EVAR Studies with current Endovascular stent grafts. According to the applicant, many of the recently approved endografts in the United States used a similar study design and the FDA has no requirement for a concurrent surgical control. The applicant noted that in no case for the device regulatory approval processes for recent endografts were randomization or blinding utilized. The applicant also addressed CMS’ concern that the STAPLE–2 Study PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 utilized a single type of Endograft. According to the applicant, while the STAPLE–2 Study utilized a single type of Endograft, this may provide a uniquely compelling indication of substantial clinical improvement based on two aspects relating to STAPLE–2. While the Endograft was an entirely conventional design utilizing Polyester fabric supported by a Nitinol stent structure with infrarenal fixation and an unsupported main body (eliminating any contribution of columnar strength to aid in fixation), the applicant stated that this Endograft has no other means of fixation beyond the Aptus EndoAnchors. Despite this, the applicant stated that results indicated highly favorable proximal seal related outcomes in this most challenging proximal neck anatomy patient population. In this cohort, the proximal necks in STAPLE–2 patients contained the shortest average neck length of any conventional (non-Fenestrated) Endograft evaluated in a U.S. PMA trial to date. The applicant further stated that unlike other endografts, such as the Medtronic Endurant or the Gore Excluder, being utilized with Heli-FX currently both in the ANCHOR trial and commercially worldwide, the graft studied in STAPLE–2 has no inherent fixation, active or otherwise. The applicant explained that this is because there are no integral hooks, barbs, suprarenal fixation, ‘‘anatomical fixation’’ or ‘‘anchor pins’’ or other means to secure the Aptus Endograft beyond the fixation provided by the Heli-FXTM EndoAnchors. In effect, because the Heli-FXTM is the only source of fixation for the graft studied, the applicant stated that it represents a ‘‘worst case’’ and significant performance challenge of the clinical effectiveness of the Heli-FXTM EndoAnchors. Despite this worst-case aspect of no inherent fixation in the STAPLE–2 Endograft other than HeliFXTM EndoAnchors for Endograft fixation and sealing to the aortic wall, the applicant reported that there were excellent clinical and technical results with respect to proximal neck seal and fixation. This was observed despite the very short proximal necks treated in the study cohort. The applicant noted that the aneurysm size regression is also among the most rapid and highest frequency seen with any Endograft U.S. IDE study. The applicant stated that in the setting of an Endograft with no means of fixation beyond the Heli-FXTM EndoAnchors, this is especially meaningful and indicative of the EndoAnchor capabilities with more advanced, current generation commercial Endografts. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations With respect to CMS’ concern that the ANCHOR Registry is an observational study, the applicant believed that the Anchor Registry provides important, highly valuable and meaningful evidence in support of the substantial clinical improvement criterion. The applicant stated that the ANCHOR Registry is a formal, Institutional Review Board (IRB) and Ethics Committee (EC) approved Post-Market Study that utilizes a Core Lab and a Safety Medical Reviewer for aneurysm related outcomes, anatomical adjudication for all patients at each follow-up time-point, as well as clinical outcomes acutely and in follow- up. The applicant further noted that the use of a Core Lab and a Safety Medical Reviewer in the setting of EVAR for both baseline and outcome data and the associated aneurysm anatomical aspects is extremely rare and, therefore, so far only the ANCHOR Registry has utilized this approach within the known EVAR Registries. The applicant stated that this optimizes the scientific rigor and robustness of this real-world study. The applicant further noted that there are currently 417 patients enrolled (there were 258 patients at the time of the application), with core lab analysis available for 311 subjects, and the data has continued to be highly favorable in what is now among the most hostile proximal necks studied in any Endograft population seen in the scientific literature. The applicant asserted that a key and applicable aspect where HeliFXTM is having significant patient impact (including as seen in the patients’ challenging proximal neck anatomy in STAPLE–2 and ANCHOR cohorts) is offering a treatment option for a patient population ineligible for currently available treatments. While the applicant acknowledged the important and favorable aneurysm exclusion results and expanded patient applicability provided by the recently FDA-approved Cook Zenith Fenestrated Endograft system, which expanded proximal neck capabilities as low as 4mm in length, there are situations affecting patients which limit access to this advanced Endograft technology. The applicant believed that these higher risk situations often require physicians to utilize Heli-FXTM EndoAnchors with conventional Endografts in sub-optimal proximal neck anatomy. The applicant asserted that this is especially applicable in patients deemed unsuitable for open surgical repair. With respect to CMS’ concern that the literature review did not provide clinical data, the applicant acknowledged that the non-STAPLE–2 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 and ANCHOR related Heli-FXTM peerreviewed scientific literature did not constitute formal clinical data in themselves, but nonetheless the applicant believed that the information provided the manuscripts to highlight the various applicability and utility of the Heli-FXTM in various settings, including primary revision, in AAA and TAA. Response: We appreciate the applicant’s response to our concerns presented in the proposed rule. While we recognize that Heli-FXTM EndoAnchor System has received regulatory approval for marketing, therefore meeting FDA standards for safety and effectiveness, the new technology add-on payment process requires demonstration of a substantial clinical improvement, which is not inherent in the FDA’s regulatory process. As previously stated, we believe that data used to support substantial clinical improvement should come from high quality evidence. For example, well-designed studies that compare the new technology to other similar services that the applicant is contending will be replaced by the new technology. We did not suggest that the comparative should have been an open, surgical procedure. The substantial clinical improvement criterion requires that technologies demonstrate substantial clinical improvement over existing technologies. In this case, we would have liked to have seen a randomized trial comparing the use of Heli-FXTM anchors with various endografts such as hooks, barbs, suprarenal fixation, anatomical fixation or anchor pins using the same brands of endografts. That data, if positive, would have been sufficient to demonstrate substantial clinical improvement over existing technologies. Further, we also believe that the alternatives just mentioned—hooks, barbs, supra-renal fixation, anatomical fixation, or anchor pins—are alternatives to the Heli-FXTM System and the data submitted does not support that patients have no other alternatives. Therefore, based on the reasoning above, we do not believe that the HeliFXTM System meets the substantial clinical improvement criterion. After consideration of the public comments we received, and as discussed above, we conclude that the Heli-FXTM AAA does not meet the newness criterion and, therefore, the technology is not eligible for new technology add-on payments for FY 2015. The Heli-FXTM TAA meets the newness and cost criteria. However, as discussed above, the Heli-FXTM AAA and TAA do not meet the substantial PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 49937 clinical improvement criterion. Therefore, we are not approving new technology add-on payments for the Heli-FXTM TAA because the technology does not meet the substantial clinical improvement criterion. c. CardioMEMSTM HF (Heart Failure) Monitoring System CardioMEMS, Inc. submitted an application for new technology add-on payment for FY 2015 for the CardioMEMSTM HF (Heart Failure) Monitoring System, which is an implantable hemodynamic monitoring system comprised of an implantable sensor/monitor placed in the distal pulmonary artery. Pulmonary artery hemodynamic monitoring is used in the management of heart failure. The CardioMEMSTM HF Monitoring System measures multiple pulmonary artery pressure parameters for an ambulatory patient to measure and transmit data via a wireless sensor to a secure Web site. The CardioMEMSTM HF Monitoring System utilizes radiofrequency (RF) energy to power the sensor and to measure pulmonary artery (PA) pressure and consists of three components: an Implantable Sensor with Delivery Catheter, an External Electronics Unit, and a Pulmonary Artery Pressure Database. The system provides the physician with the patient’s PA pressure waveform (including systolic, diastolic, and mean pressures) as well as heart rate. The sensor is permanently implanted in the distal pulmonary artery using transcatheter techniques in the catheterization laboratory where it is calibrated using a Swan-Ganz catheter. PA pressures are transmitted by the patient at home in a supine position on a padded antenna, pushing one button which records an 18-second continuous waveform. The data also can be recorded from the hospital, physician’s office or clinic. The hemodynamic data, including a detailed waveform, are transmitted to a secure Web site that serves as the Pulmonary Artery Pressure Database, so that information regarding PA pressure is available to the physician or nurse at any time via the Internet. Interpretation of trend data allows the clinician to make adjustments to therapy and can be used along with heart failure signs and symptoms to adjust medications. The applicant believed that a large majority of patients receiving the sensor would be admitted as an inpatient to a hospital with a diagnosis of acute or chronic heart failure, which is typically described by ICD–9–CM diagnosis code 428.43 (Acute or chronic combine systolic and diastolic heart failure) and the sensor would be implanted during E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49938 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the inpatient stay. The applicant stated that for safety considerations, a small portion of these patients may be discharged and the sensor would be implanted at a future date in the hospital outpatient setting. In addition, there would likely be a group of patients diagnosed with chronic heart failure who are not currently hospitalized, but who have been hospitalized in the past few months for which the treating physician believes that regular pulmonary artery pressure readings are necessary to optimize patient management. Depending on the patient’s status, the applicant stated that these patients may have the sensor implanted in the hospital inpatient or outpatient setting. The applicant received FDA approval on May 28, 2014. The CardioMEMSTM HF Monitoring System is currently described by ICD–9–CM procedure code 38.26 (Insertion of implantable pressure sensor without lead for intracardiac or great vessel hemodynamic monitoring). In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments regarding how the CardioMEMSTM HF System meets the newness criterion. We did not receive any public comments concerning how the CardioMEMSTM HF Monitoring System meets the newness criterion. Therefore, after evaluation of the information provided by the applicant, we believe that the CardioMEMSTM HF Monitoring System meets the newness criterion, and we consider the technology to be ‘‘new’’ as of May 28, 2014, when the technology received FDA approval. With respect to cost criterion, the applicant submitted actual claims from the CHAMPION 9 clinical trial. Of the 550 patients enrolled in the trial, the applicant received 310 hospital bills. The applicant excluded the following claims: incomplete or missing procedure codes, incomplete charge information and bills that were statistical outliers (three standard deviations away from the geometric mean). This resulted in a final cohort of 138 claims. The applicant noted that cases treated with the CardioMEMSTM HF Monitoring System would typically map to MS–DRG 264 (Other Circulatory System Operating Room Procedures). Using the 138 clinical trial claims, the applicant standardized the charges and 9 Abraham WT, Adamson PB, Bourge RC, Aaron MF, Costanzo MR, Stevenson LW, Strickland W, Neelagaru S, Raval N, Krueger S, Weiner S, Shavelle D, Jeffries B, Yadav JS; for the CHAMPION Trial Study Group. Wireless pulmonary artery hemodynamic monitoring in chronic heart failure: a randomized controlled trial, Lancet, February 19, 2011, Vol. 377(9766), pp:658–666. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 added charges for the CardioMEMSTM HF Monitoring System (because the clinical trial claims did not contain charges for the CardioMEMSTM HF Monitoring System). This resulted in an average case-weighted standardized charge per case of $79,218. Using the FY 2014 Table 10 thresholds, the threshold for MS–DRG 264 is $60,172. Because the average case-weighted standardized charge per case exceeded the threshold amount, the applicant maintained that the CardioMEMSTM HF Monitoring System would meet the cost criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether or not the CardioMEMSTM HF System meets the cost criterion. We did not receive any public comments regarding whether or not the CardioMEMSTM HF System meets the cost criterion. Based on the analysis above, we believe the CardioMEMSTM HF System meets the cost criterion. With regard to substantial clinical improvement, the applicant asserted that elevated PA pressures occur prior to signs and symptoms of heart failure and changes in PA pressures provide a sound physiologic basis for its management. The applicant also contended that, until the creation of the CardioMEMS wireless PA implant, knowledge of PA pressure was only feasible in the hospital with the performance of a right heart catheterization. According to the applicant, the CardioMEMS HF Monitoring System provides physicians knowledge of PA pressure while the patient is at home, allowing proactive management to prevent heart failure decompensation and hospitalization. The applicant cited clinical data from the CHAMPION trial. The trial is a prospective, multicenter, randomized, single-blinded clinical trial conducted in the United States, designed to evaluate the safety and efficacy of the CardioMEMSTM HF Monitoring System in reducing heart failure-related hospitalizations in a subset of subjects suffering from heart failure. The applicant shared several major findings from the CHAMPION trial as described below. The primary efficacy endpoint of the CHAMPION trial was the rate of HF hospitalizations during the first 6 months of randomized access. There were 84 heart failure hospitalizations in the treatment group compared with 120 heart failure hospitalizations in the control group. This difference between the groups represented a 28-percent reduction in the rate of hospitalization for heart failure in the treatment group PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 (0.32 hospitalizations per patient in the treatment group versus 0.44 hospitalizations per patient in the control group, p=0.0002). Although not a primary end point, the rate of HF hospitalizations after 18 months was 33 percent lower in the treatment group than in the control group. According to the applicant, secondary endpoints of the CHAMPION trial are changes in pulmonary artery pressures, proportion of subjects hospitalized, days alive outside of the hospital, quality of life (QOL), and heart failure management which demonstrated the following results: • Pulmonary Artery Pressures: At baseline, both treatment and control patients had similar PA mean pressures. The change in pressure over the first 6 months was evaluated by integrating the area under the pressure curve (AUC). At 6 months of follow-up, the treatment group had a significantly greater reduction in AUC of ¥155.7 mmHg days compared to the control group which had an increase in AUC of +33.1 mmHg-days; p=0.0077. • Proportion of Subjects Hospitalized: During the 6-month follow-up period, the proportion of subjects hospitalized for 1 or more HF hospitalizations was significantly lower in the treatment group (55 out of 270 patients) than in the control group (80 out of 280 patients) (20.4 percent versus 28.6 percent; p=0.0292). • Days Alive Outside of the Hospital: At 6 months, treatment patients had a nonsignificant and clinically not meaningful increase in days alive outside of the hospital (174.4 versus 172.1; p=0.0280) and fewer average days in the hospital (2.2 versus 3.8; p=0.0246) compared to control patients. • Quality of Life: The heart failure specific quality of life was assessed with the MLHFQ total score at 6 months. The average total score in the treatment group was 45.2 ± 26.4 which was significantly better than the average total score in the control group 50.6 ± 24.8 (p=0.0236). The difference in total quality of life was primarily due to the physical domain. The average physical score for the treatment group (19.8 ± 11.2) was significantly better than the control group (22.4 ± 10.9) (p=0.0096). There was also a significant difference in the emotional domain with an average score of 9.5 ± 8.1 for the treatment group and 11.0 ± 7.7 for the control group (p=0.0398). • Heart Failure Management: Physicians responded to treatment of patients’ elevated PA pressures by making medication changes to lower PA pressures and reduce the risk for HF hospitalization. Physicians documented E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations all medication changes for all patients and indicated whether the change was made in response to PA pressures or standard of care information. During the 6-month follow-up period, physicians made approximately one additional HF medication change per patient per month in the treatment group when compared to the control group. Specifically, treatment patients had 1.55 medication changes per month on average compared to control patients having 0.65 medication changes per month (p<0.0001). The difference in HF management between the treatment and control group was due to HF medication changes made in response to PA pressures. The study met the two primary safety endpoints: (1) freedom from device/ system related complications (DSRC); and (2) freedom from sensor failure. The protocol pre-specified objective performance criterion (OPC) were that at least 80 percent of patients were to be free from DSRC and at least 90 percent were to be free from pressure sensor failure. Of the 575 patients in the safety population, 567 (98.6 percent) were free from DSRC at 6 months (lower confidence limit 97.3 percent, p<0.0001). This lower limit of 97.3 percent is greater than the pre-specified OPC of 80 percent. There were no sensor explants or repeat implants and all sensors were operational at 6 months for a freedom from sensor failure of 100 percent (lower confidence limit 99.3 percent, p<0.0001). This lower limit of 99.3 percent is greater than the prespecified OPC of 90 percent. The applicant also noted that the CardioMEMSTM HF System reduces the occurrence of HF hospitalizations in NYHA Class III heart failure patients. According to the applicant, the device had very few device and system related complications occurring over the course of the clinical trial. All primary and secondary study endpoints were successfully achieved. In addition, the CHAMPION trial suggests the safety and effectiveness of the device was maintained during longer term followup. After reviewing the information provided by the applicant, we stated in the FY 2015 IPPS/LTCH PPS proposed rule that we have the following concerns. The applicant did not discuss long-term outcomes, specifically death. We stated that we believe additional long-term outcome information and information regarding how the technology changes long-term outcomes would further assist in our determination of whether the technology represents a substantial clinical improvement. With regard to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the clinical trial, information from the randomized access period and the open access period did not include the total number of deaths in each group. While the data support a reduction in total hospitalizations, the rate of hospitalization in each group (0.32 versus 0.44) does not appear to be clinically meaningful. This is supported by total days alive out of the hospital being virtually identical in both groups. Finally, we stated that we are concerned about the cause of the significant dropouts in the Kaplan Meier curves which further demonstrates lack of impact on survival. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether or not the CardioMEMSTM HF Monitoring System technology represents a substantial clinical improvement in the treatment options available to Medicare beneficiaries. Comment: Several commenters, including various physicians, supported the approval of new technology add-on payment for the CardioMEMSTM HF Monitoring System. Response: We appreciate the commenters’ support. We considered these comments in our determination of whether the CardioMEMSTM HF Monitoring System represents a substantial clinical improvement. Comment: The applicant submitted a public comment, which included responses to each of CMS’ concerns presented in the proposed rule. CMS’ major concern outlined in the FY 2015 IPPS/LTCH PPS proposed rule was the lack of mortality data to support the improvement seen in the specified endpoint, hospitalizations. The applicant provided information that the Randomized Access Period includes approximately 800 patient-years of follow-up, with an average patient follow-up of 18 months. The primary endpoint of the CHAMPION trial was HF hospitalizations because it remains a major clinical and public health problem, which is inadequately addressed by current treatment options. Although the trial was not powered to assess mortality, the applicant stated that the data showed strong favorable trends for reduced mortality, and a highly significant reduction for HF hospitalization or mortality. During the first 6 months of follow-up, the applicant stated that the proportion of patients who died that were enrolled in the treatment group (n=15, 5.6 percent) was lesser than in the proportion patients who died that were enrolled in the control Group (n=20, 7.1 percent), with a nonsignificant but favorable relative risk reduction rate of 23 percent PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 49939 (HR 0.77, 95 percent CI 0.40–1.51, p=0.4484). During the entire Randomized Access Period, the applicant stated that the proportion of patients who died that were enrolled in the treatment group (n=50, 18.5 percent) was lesser than the proportion of patients that were enrolled in the control group (n=64, 22.9 percent), with a nonsignificant but favorable relative risk reduction rate of 20 percent (HR 0.80, 95 percent CI 0.55–1.15, p=0.2303). The applicant further stated that in measuring the combined impact of mortality and HF hospitalizations on the study population, analysis of the time to death or first HF hospitalization is frequently used. During the first 6 months of the Randomized Access Period, the applicant noted that the proportion of patients who died or that had at least one HF hospitalization that were enrolled in the treatment group (n=63, 23.3 percent) was lesser than the proportion of patients who died or that had at least one HF hospitalization that were enrolled in the control group (n=91, 32.5 percent), with a significant relative risk reduction rate of 31 percent (HR 0.69, 95 percent CI 0.50–0.95; p=0.0239). During the entire Randomized Access Period, the applicant noted that the proportion of patients who died or had at least one HF hospitalization that were enrolled in the treatment group (n=121, 44.8 percent) was lesser than the proportion of patients who died or had at least one HF hospitalization that were enrolled in the control group (n=145, 51.8 percent), with a significant relative risk reduction rate of 23 percent (HR 0.77, 95 percent CI 0.60–0.98, p=0.0330). The applicant further noted that other endpoints other than time to event analyses are event rate analyses for repeat events, including HF hospitalization rates (primary efficacy endpoint) and all cause hospitalization rates. The applicant also indicated that event rate analyses for composite events also are frequently used to assess the impact of both mortality and HF hospitalizations (combined deaths and HF hospitalization rates) and total morbidity and mortality (combined deaths and all cause hospitalizations rates). According to the applicant, the large treatment effect size on long-term outcomes and the low number needed to treat and prevent hospitalizations and deaths demonstrated that CardioMEMSTM HF Monitoring System represents a substantial clinical improvement. CMS also was concerned that while the data supported a reduction in total hospitalizations, the rate of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49940 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospitalization in each group (0.32 versus 0.44) does not appear to be clinically meaningful. The applicant stated in response that the days alive outside of the hospital (DAOH) endpoint was a secondary endpoint in the CHAMPION trial. The applicant further stated that the endpoint is used in clinical trials as an alternative measure for evaluating the combined impact of mortality and hospitalizations on the study population. Endpoints that are traditionally used to measure this combined effect include time to event analyses (for example, time to death or first HF hospitalization) and composite event rate analyses (for example, rate of death and repeat HF hospitalizations). The applicant noted that, for many HF drug and device trials, these more traditional analyses are frequently used as the primary or co-primary efficacy endpoints. The applicant further stated that the DAOH endpoint is susceptible to many influences including variable follow-up time (that is, patients with longer follow-up time have the potential for more DAOH than patients with shorter follow-up time), the length of the study duration interval for which the DAOH endpoint is being analyzed, and differences in proportion of patients experiencing a mortality or hospitalization event relative to the proportion of patients not experiencing a mortality or hospitalization event (that is, a shorter duration interval will have a greater proportion of patients without any events when compared to a longer duration interval where the proportion of patients experiencing events increases over time). In response to CMS’ concerns in regard to the numerical similarity of DAOH between the treatment and control groups which is based on the shorter follow-up interval of 6 months, the applicant stated that during this shorter follow-up interval, approximately 70 percent of the patients did not experience a mortality or HF hospitalization event. The applicant stated that indication skews the dataset because these patients are experiencing 100 percent in measurement of DAOH. Despite this fact, the applicant stated that there was a statistically significant difference of 2.3 days in favor of the treatment group. The applicant asserted that a treatment effect that increases the number of DAOH by 2.3 days over a 6-month period is clinically meaningful to this patient population, as evidenced by the improved quality of life of the patients that were enrolled in the treatment group. DAOH rates were also analyzed over a longer period of follow-up during the Randomized Access Period. To VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reduce the effects of variable follow-up time and to have a consistent study duration interval, DAOH was analyzed over the first 12 months of follow-up. Patients enrolled in the treatment group being managed using the CardioMEMSTM HF Monitoring System experienced 6.1 more DAOH than the patients that were enrolled in the control group after 12 months of followup. The applicant believed that this increase represents a substantial clinical improvement with respect to current treatment options available to Medicare beneficiaries. In regard to CMS’ concern about the cause of the significant dropouts in the Kaplan Meier curves, which further demonstrates lack of impact on survival, the applicant provided the following information in response. According to the applicant, the dropout rates in the CHAMPION trial were low; the patients transitioning from Randomized to Open Access are being misconstrued as dropouts. The applicant reported that CHAMPION enrolled 550 patients from September 2007 to October 2009. In addition, all of the patients remained in their randomized groups until the last patient enrolled in the CHAMPION trial completed at least 6 months of followup. As result of this enrollment over time, the applicant stated that the average patient follow-up in the Randomized Access Period was significantly longer at 18 months. The applicant further indicated that patients with a lower enrollment number and implanted earlier in 2008 had the potential for longer follow-up times in the Randomized Access Period than patients with a higher enrollment number and implanted later in 2009. As a result, the applicant believed that these patients are being construed as dropouts on the Kaplan Meier curve, but actually are patients being censored at the time of their transition to the Open Access Period. According to the applicant, because the maximum follow-up for the Randomized Access Period was already achieved, patients in this category were not eligible or ‘‘at risk’’ for the longer follow-up periods represented in the Kaplan Meier curve understanding that the follow-up time is now part of the Open Access Period. In response to CMS’ invitation for public comments on whether or not the CardioMEMSTM HF Monitoring System technology represents a substantial clinical improvement in the Medicare population, the applicant stated that heart failure is a significant clinical burden to Medicare beneficiaries, their caregivers, and hospitals throughout the U.S. health care system. The applicant believed that rising HF hospitalizations PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 rates and the increasing cost of care for Medicare beneficiaries diagnosed with HF and the detrimental effect the condition is having on the U.S. health care system is not sustainable. The applicant believed that the CardioMEMSTM HF Monitoring System technology represents a substantial clinical improvement treatment options available to Medicare beneficiaries. In the CHAMPION trial, 245 patients (45 percent) were 65 years or older at the time of sensor implantation (120 in the treatment group and 125 in the control group). Patients who were enrolled in the treatment group and managed on the basis of PA pressure information obtained from the CardioMEMSTM HF Monitoring System had a significantly reduced HF hospitalization rate (0.34 events/patient-year) compared to patients who were enrolled in the control group (0.67 events/patient-year) and managed according to best available practices (HR 0.51, 95 percent CI 0.37– 0.70, p<0.0001). Response: We appreciate the applicant’s response to each of CMS’ concerns and the additional data provided. Other than data indicating that the primary endpoint of reduced hospitalizations was met, additional longer term data demonstrated improved mortality. Therefore, we believe that the data indicates that the CardioMEMSTM Monitoring System meets the substantial clinical improvement criterion. After consideration of the public comments we received, we believe that the CardioMEMSTM HF Monitoring System meets all of the new technology add-on payment policy criteria. Therefore, we are approving the CardioMEMSTM HF Monitoring System for new technology add-on payments in FY 2015. Cases involving the CardioMEMSTM HF Monitoring System that are eligible for new technology addon payments will be identified by ICD– 9–CM procedure code 38.26 (Insertion of implantable wireless pressure sensor for intracardiac or great vessel hemodynamic monitoring), which was effective October 1, 2011. With the new technology add-on payment application, the applicant stated that the total operating cost of the CardioMEMSTM HF Monitoring System is $17,750. Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum payment for a case involving the CardioMEMSTM HF Monitoring System is $8,875 for FY 2015. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations d. MitraClip® System Abbott Vascular submitted an application for new technology add-on payments for the MitraClip® System for FY 2015. (We note that the applicant submitted an application for new technology add-on payments for FY 2014 but failed to receive FDA approval by the July 1 deadline.) The MitraClip® System is a transcatheter mitral valve repair system that includes a MitraClip® device implant, a Steerable Guide Catheter, and a Clip Delivery System. It is designed to perform reconstruction of the insufficient mitral valve for highrisk patients who are not candidates for conventional open mitral valve repair surgery. Mitral regurgitation (MR), also referred to as mitral insufficiency or mitral incompetence, occurs when the mitral valve fails to close completely causing the blood to leak or flow backwards (regurgitate) into the left ventricle. If the amount of blood that leaks backwards into the left ventricle is minimal, then intervention is usually not necessary. However, if the amount of blood that is regurgitated becomes significant, this can cause the left ventricle to work harder to meet the body’s need for oxygenated blood. Severity levels of MR can range from grade 1+ through grade 4+. If left untreated, severe MR can lead to heart failure and death. The American College of Cardiology (ACC) and the American Heart Association (AHA) issued practice guidelines in 2006 that recommended intervention for moderate/severe or severe MR (grade 3+ to 4+). The applicant stated that the MitraClip® System is ‘‘indicated for percutaneous reduction of significant mitral regurgitation . . . in patients who have been determined to be at prohibitive risk for mitral value surgery by a heart team, which includes a cardiac surgeon experienced in mitral valve surgery and a cardiologist experienced in mitral valve disease and in whom existing comorbidities would not preclude the expected benefit from correction of the mitral regurgitation.’’ The MitraClip® System mitral valve repair procedure is based on the doubleorifice surgical repair technique that has been used as a surgical technique in open chest, arrested-heart surgery for the treatment of MR since the early 1990s. According to the applicant, in utilizing ‘‘the double-orifice technique, a portion of the anterior leaflet is sutured to the corresponding portion of the posterior leaflet using standard techniques and forceps and suture, creating a point of permanent cooptation (‘‘approximation’’) of the two VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 leaflets. When the suture is placed in the middle of the valve, the valve will have a functional double orifice during diastole.’’ With regard to the newness criterion, the MitraClip® System received a premarket approval from the FDA on October 24, 2013. The MitraClip® System is indicated ‘‘for the percutaneous reduction of significant symptomatic mitral regurgitation (MR ≥ 3+) due to primary abnormality of the mitral apparatus (degenerative MR) in patients who have been determined to be at prohibitive risk for mitral valve surgery by a heart team, which includes a cardiac surgeon experienced in mitral valve surgery and a cardiologist experienced in mitral valve disease, and in whom existing comorbidities would not preclude the expected benefit from reduction of the mitral regurgitation.’’ The MitraClip® System became immediately available on the U.S. market following FDA approval. The MitraClip® System is a Class III device, and has an investigational device exemption (IDE) for the EVEREST study (Endovascular Valve Edge-to-Edge Repair Study)—IDE G030061, and for the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip Percutaneous Therapy for Health Failure Patients with Functional Mitral Regurgitation)—IDE G120024. Effective October 1, 2010, ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant) was created to identify and describe the MitraClip® System technology. CMS received a formal National Coverage Decision (NCD) request from the Society of Thoracic Surgeons (STS), the American College of Cardiology Foundation (ACCF), the Society for Cardiovascular Angiography and Interventions (SCAI), and the American Association for Thoracic Surgery (AATS) jointly asking that CMS cover Transcatheter Mitral Valve Repair procedures using a system that has received FDA premarket approval (PMA) for the treatment of MR when performed according to an FDAapproved indication. We refer readers to the CMS Web site at: https:// www.cms.gov/medicare-coveragedatabase/details/nca-trackingsheet.aspx?NCAId=273 for information related to this ongoing NCD. The tracking sheet for this National Coverage Analysis (NCA) indicates an expected NCA completion date of August 13, 2014, which is after the FY 2015 IPPS/ LTCH PPS final rule is scheduled to be published. The processes for evaluation and determination of an NCD, and the processes for evaluation and approval of an application for new technology add- PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 49941 on payments are made independent of each other. However, any payment made under the Medicare program for services provided to a beneficiary would be contingent on CMS’ coverage of the item, and any restrictions on the coverage would apply. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on how the MitraClip® System meets the newness criterion for purposes of new technology add-on payments and the issues that may arise from concurrent NCD requests and new technology add-on payment application review and approval processes. Comment: The applicant stated that the technology is a first in kind and is not substantially similar to any FDA approved technology on the market. Therefore, the applicant believed that the technology meets the newness criterion. Several other public comments believed that the MitraClip® System meets the newness criterion. Response: We appreciate the commenters’ input. After consideration of the application, we agree with the commenters that the MitraClip® System meets the newness criterion. Therefore, for purposes of determining eligibility for FY 2015 IPPS new technology addon payments, we consider the technology to be ‘‘new’’ as of October 24, 2013, and will use ICD–9–CM procedure code 35.97 (Percutaneous mitral valve repair with implant) to identify the technology for new technology add-on payments. Comment: One commenter noted that the application to request a NCD was not made by the applicant, as stated in the proposed rule. Rather, the commenter stated that this request was made by a coalition of four national physician specialty societies that specialize in treating patients diagnosed with valve disease. Response: We appreciate the commenter’s input concerning this clarification. With regard to the cost criterion, the applicant conducted two analyses. The applicant noted that, while ICD–9–CM procedure code 35.97 maps to MS– DRGs 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with Major Complication or Comorbidity (MCC) or 4+ Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without MCC), 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI with E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49942 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations MCC), and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI without MCC), clinical experience with the MitraClip® System device has demonstrated that it is extremely rare for a patient to receive stents concurrently during procedures using the MitraClip® System device. The applicant further cited the FY 2013 IPPS/LTCH PPS final rule (77 FR 53308) which stated, ‘‘According to the Food and Drug Administration’s (FDA’s) terms of the clinical trial for MitraClip® System, the device is to be implanted in patients without any additional surgeries performed. Therefore, based on these terms, we stated that while the procedure code is assigned to MS–DRGs 246 through 251, the most likely MS– DRG assignments would be MS–DRGs 250 and 251.’’ As a result, the applicant stated that it conducted its analyses solely for MS–DRGs 250 and 251 to demonstrate that the cases involving the MitraClip® System device meet the incremental cost thresholds provided in Table 10 for those MS–DRGs. The applicant researched the FY 2012 MedPAR file for claims for cases reporting ICD–9–CM procedure code 35.97. Under the first analysis and methodology, the applicant noted that this search yielded actual claims for cases in which the MitraClip® System device was used in procedures performed in an IDE study type setting, and hospitals obtained the MitraClip® System device at a reduced investigational price. The applicant further stated that it is likely that hospitals did not report the charges for the investigational device, or submitted claims for charges that were significantly less than the actual device acquisition costs (we refer readers to the explanation below). The applicant found 57 cases in MS–DRG 250 (29.38 percent of the total number of cases), and 137 cases in MS–DRG 251 (70.61 percent of the total number of cases), which resulted in an average caseweighted standardized charge per case of $232,670. The applicant standardized the charges using the FY 2014 IPPS final rule impact file, and inflated the result using three different inflation factors. We note that, since the applicant used FY 2012 MedPAR data, we believe it is appropriate to use comparable data for standardization. Therefore, we believe use of the FY 2012 final rule impact file is more appropriate rather than the FY 2014 final rule impact file. The first analysis and methodology used an inflation factor of 4.57 percent, which was based on data from the BLS’ nonseasonally adjusted CPI for all urban VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 consumers between January 2011 and January 2013. This resulted in an average case-weighted standardized charge per case of $94,517. The second methodology under the first analysis used an inflation factor of 9.92 percent, which was based on the 2-year charge inflation factor listed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). This resulted in an average caseweighted standardized charge per case of $96,199. The third methodology used under the first analysis used an inflation factor of 4.63 percent, which was based on the Medicare Economic Index (MEI) from the IPPS market basket update between the third quarter of 2012 projected through the third quarter of 2014. This resulted in an average caseweighted standardized charge per case of $91,570. The applicant noted that all three methodologies used under the first analysis to determine each respective average case-weighted standardized charge per case were calculated without any adjustments to reflect the reduced investigational price, or inadequate hospital claim reporting and billing. Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRGs 250 and 251 is $71,467 (all calculations above were performed using unrounded numbers). Because the average case-weighted standardized charge per case for the applicable MS–DRGs calculated under each methodology under the first analysis discussed above exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion. Under the second analysis, which used the same premise as the first analysis, the applicant researched the FY 2012 MedPAR file for claims for cases reporting procedure code 35.97 that mapped to MS–DRGs 250 and 251, except that the applicant excluded charges related to the MitraClip® System by removing all charges from the claim that would map to the implantable cost center on the cost report. The applicant then standardized the charges, inflated the result using the three inflation factors above, and added a fixed amount of commercial charges based on post-FDA approval pricing. This resulted in an average case weighted standardized charge per case of $139,536 under the first inflation factor (4.57 percent), $142,364 under the second inflation factor (9.2 percent), and $139,568 under the third inflation factor (4.63 percent). Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRGs 250 and 251 is $71,467 (all calculations above were performed using unrounded numbers). PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 Because the average case-weighted standardized charge per case for the applicable MS–DRGs calculated under all three methodologies discussed above exceeds the average case-weighted threshold amount, the applicant maintained that the MitraClip® System meets the cost criterion. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether or not the MitraClip® System meets the cost criterion. In addition, we invited public comments on the methodologies used by the applicant in its two analyses. Comment: In response to CMS’ statement in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28049) that it believed use of the FY 2012 final rule impact file is more appropriate rather than the FY 2014 final rule impact file for standardization, the applicant submitted the following supplemental data updating its cost analyses. With regard to the second analysis, the applicant submitted revised data using the FY 2012 MedPAR file and the FY 2012 impact file to standardize the charges. We note that in the proposed rule we inadvertently listed $232,670 as the average case-weighted standardized charge per case. This amount is the average case-weighted non-standardized charge per case. Based on the revised data, the corrected average caseweighted standardized charge per case is $151,111. Using the same methodology described above and the FY 2012 impact file, under the second analysis, the applicant determined an inflated average case-weighted standardized charge per case of $136,479 under the first inflation factor (4.57 percent), $139,151 under the second inflation factor (9.2 percent), and $139,509 under the third inflation factor (4.63 percent). The applicant compared these amounts to the average case-weighted threshold of $71,467 for MS–DRGs 250 and 251 (all calculations above were performed using unrounded numbers). Because the inflated average case-weighted standardized charge per case for the applicable MS–DRGs calculated under all three methodologies discussed above exceeds the average case-weighted threshold amount of $71,467, the applicant maintained that the MitraClip® System meets the cost criterion. The applicant also revised the second analysis using FY 2013 MedPAR and the FY 2013 impact file. Based on this data, similar to above, the applicant searched the FY 2013 MedPAR file for claims for cases reporting ICD–9–CM procedure code 35.97. The applicant found 43 cases in MS–DRG 250 (28.66 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations percent of the total number of cases), and 107 cases in MS–DRG 251 (71.33 percent of the total number of cases), which resulted in an average caseweighted standardized charge per case of $149,725. The first methodology used an inflation factor of 3.20 percent, which was based on data from the BLS’ nonseasonally adjusted CPI for all urban consumers between January 2012 and January 2013. This resulted in an inflated average case-weighted standardized charge per case of $152,945 (which included a fixed amount of commercial charges based on post-FDA approval pricing). The second methodology used an inflation factor of 11.46 percent (second quarter of FY 2012 through first quarter of FY 2014), which was based on the outlier inflation factor in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). This resulted in an inflated average caseweighted standardized charge per case of $158,425 (which included a fixed amount of commercial charges based on post-FDA approval pricing). The third methodology used an inflation factor of 4.53 percent, which was based on the MEI from the IPPS market basket update between the third quarter of 2013 projected through the third quarter of 2015. This resulted in an average caseweighted standardized charge per case of $153,827 (which included a fixed amount of commercial charges based on post-FDA approval pricing). Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRGs 250 and 251 is $75,772 (all calculations above were performed using unrounded numbers). Because the inflated average caseweighted standardized charge per case for the applicable MS–DRGs calculated under each methodology under this analysis discussed above exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion. Several other commenters believed that the MitraClip® System meets the cost criterion. Response: We appreciate the applicant’s submission of the supplemental data. We agree with the commenters that the MitraClip® System meets the cost criterion. We note that in section II.I.4.b. of the preamble of this final rule, we denied the applicant’s request to reassign cases reporting a TMVR using the MitraClip® System from MS–DRGs 250 and 251 to MS– DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/ MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/ MCC). We also denied the applicant’s request to create a new base MS–DRG for transcatheter valve therapies. We refer readers to section II.G. for a complete discussion on these requests. The applicant asserted that the MitraClip® System meets the substantial clinical improvement criterion. Severe MR is associated with significant morbidity and mortality rates, and is a progressive condition. For symptomatic patients diagnosed with significant MR, surgical repair or replacement is considered the gold standard—offering improvements in symptoms and longer survival rates. However, the applicant explained that studies have indicated that a significant proportion of patients are not eligible for mitral valve repair and/or replacement surgery because of risk factors, including reduced left ventricular function, significant comorbidities, and advanced age. As a result, the applicant stated that there is a significant unmet clinical need for patients diagnosed with severe MR who are too high-risk for surgery, who are receiving palliative medical management. The applicant also stated that the MitraClip® System meets the substantial clinical improvement criterion based on clinical studies 10 11 12 13 14 15 16 17 18 that 10 Feldman, et al., ‘‘Percutaneous Repair or Surgery for Mitral Regurgitation,’’ New England Journal of Medicine, 2011, Vol. 364, pp. 1395–1406. 11 Foster, et al., ‘‘Percutaneous Mitral Valve Repair in the Initial EVEREST Cohort: Evidence of Reverse Left Ventricular Remodeling,’’ Circulation in Cardiovascular Imaging, July 2013, Vol. 6(4), pp. 522–530. 12 Grayburn, et al., ‘‘The Relationship between the Magnitude of Reduction in Mitral Regurgitation Severity and Left Ventricular and Left Atrial Reverse Remodeling after MitraClip Therapy,’’ Circulation in Cardiovascular Imaging, September 2013, epub, September 6, 2013. 13 Lim, et al., ‘‘Improved Functional Status and Quality of Life in Prohibitive Surgical Risk Patients With Degenerative Mitral Regurgitation Following Transcatheter Mitral Valve Repair with the MitraClip® System,’’ Journal of American College of Cardiology, 2013, In Press, Accepted Manuscript, Available online, October 31, 2013. 14 Maisano, F., et al., ‘‘Percutaneous Mitral Valve Interventions in the Real World: Early and One Year Results From the ACCESS–EU, a Prospective, Multicenter, Non-Randomized Post-Approval Study of the MitraClip Therapy in Europe,’’ Journal of American College of Cardiology, 2013, doi: 10.1016/ j.jacc.2013.02.094. PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 49943 have consistently shown that procedures performed using the MitraClip® System device lead to a significant reduction of MR; improvements in left ventricular (LV) function including LV volumes and dimensions; improved patient outcomes as measured by improvements in New York Heart Association (NYHA) functional class, improvement in healthrelated quality of life measures, and reductions in heart-failure related hospitalizations; and significantly lower mortality rates than predicted surgical mortality rates. The applicant cited clinical data from the EVEREST II High-Risk Study and the EVEREST II (REALISM) Continued Access Study/Registry. The applicant also cited clinical data from a high-risk cohort of patients (the EVEREST II HighRisk Cohort), which is an integrated analysis of the following: (1) patients within the EVEREST II High-Risk Study who met eligibility criteria for being too high-risk to undergo mitral valve repair surgery; and (2) patients within the EVEREST II (REALISM) Continued Access Study/Registry who were too high-risk for surgery using identical eligibility inclusion criteria. The applicant also cited data from the Prohibitive Risk Degenerative Mitral Regurgitation (DMR) Cohort, which is an analysis of retrospectively evaluated high-risk patients diagnosed with DMR enrolled in the EVEREST II studies that had 1-year follow-up available. In addition to the published clinical experience from the EVEREST studies, the applicant cited data on the use of the MitraClip® System device in a ‘‘realworld’’ setting published recently by a select number of European centers as part of their individual and/or multicenter commercial experience or enrollment in the MitraClip® System device group of the ACCESS–EU postapproval clinical trial in Europe. The European use of the MitraClip® System device is focused on patients who are 15 Mauri, et al., ‘‘4-Year Results of a Randomized Controlled Trial of Percutaneous Repair Versus Surgery for Mitral Regurgitation,’’ Journal of American College of Cardiology, Volume 62, Issue 4, 2013, p. 317–328. 16 Munkholm, et al., ‘‘Asystemic Review on the Safety and Efficacy of Percutaneousedge-to-edge Mitral Valve Repair with the MitraClip System for high surgical risk candidates,’’ Heart, June 27, 2013. 17 Reichenspurner, H., et al., ‘‘Clinical Outcomes Through 12 Months in Patients With Degenerative Mitral Regurgitation Treated With the MitraClip Device in the ACCESS-Europe Phase I Trial,’’ European Journal of Cardiology-and Thoracic Surgy, 2013, Vol. 15, pp. 919–927. 18 Whitlow, et al,. ‘‘Acute And 12-Month Results With Catheter-Based Mitral Valve Leaflet Repair: The EVEREST II (Endovascular Valve Edge-to-Edge Repair) High Risk Study,’’ Journal of American College of Cardiology, 2012, Vol. 59, pp. 130–139. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49944 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations too high-risk for surgery, and patients who are selected for therapy using a multi-disciplinary ‘‘heart team’’ approach. The applicant stated that published reports on the MitraClip® System device and the procedures in which the device was used have consistently demonstrated a significant reduction in MR incidents that have been durable out to 1, 2, 3, and 4 years. The applicant cited the EVEREST II High-Risk Study (an analysis of 78 patients diagnosed with degenerative or functional MR enrolled in the trial), which stated that ‘‘objective measures of MR grade improved in the MitraClipTM group, including MR grade of ≤2+ in 78 percent of surviving patients at 1 year. These patients also experienced clinically significant improvements in left ventricular volume measurements. The clinical significance of these improvements is reflected in the NYHA class improvements. At baseline, 89 percent of patients were NYHA III/IV, improving to Class I/II in 74 percent of surviving patients at 12 months. Quality of life scores also improved significantly. Finally, the number of admissions for heart failure was significantly reduced compared to the year prior to MitraClipTM therapy.’’ The applicant cited clinical outcomes from the Prohibitive Risk DMR cohort. These results are the basis of the FDA premarket approval. Major effectiveness endpoints evaluated at 12 months demonstrated clinically important improvements in MR severity, with MR severity grades of 3+/4+ decreasing from 90.4 percent at baseline to 16.7 percent at 1 year; NYHA Class III/IV decreasing from 86.6 percent at baseline to 13.1 percent at 1 year; and the SF–36 Physical/Mental scale measuring 33.4/ 46.6 at baseline increasing to 39.4/52.2 at 1 year. The applicant stated in its new technology add-on payment application that, ‘‘Heart failure hospitalizations were reduced by 73 percent in the 12 months post MitraClipTM procedure from the 12 month pre-MitraClipTM procedure . . .,’’ and ‘‘the primary safety analysis indicated low procedural (30-day) mortality (6.3 percent) after MitraClipTM in comparison with the STS predicted surgical mortality risk score for these patients (13.2 percent).’’ The applicant discussed published results 19 ‘‘assessing the relationship between the magnitude of reduction in 19 Grayburn, et al., ‘‘The Relationship between the Magnitude of Reduction in Mitral Regurgitation Severity and Left Ventricular and Left Atrial Reverse Remodeling after MitraClip Therapy,’’ Circulation in Cardiovascular Imaging, September 2013, epub, September 6, 2013. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 MR and left ventricular (LV) and left atrial (LA) remodeling after the MitraClipTM therapy.’’ In this study of patients diagnosed with significant (grade 3+ or 4+) DMR or functional MR (FMR), the authors found that, ‘‘even reduction of MR severity to moderate (2+) is associated with LV and LA reverse remodeling. In both DMR and FMR, reduction in left ventricular enddiastolic volume (LVEDV) and LA volumes were improved proportionally to the degree of MR reduction at one year.’’ In conclusion, the applicant cited data from the ACCESS–EU study, which noted improvement in disease-specific quality of life measures, including the Minnesota Living with Heart Failure Questionnaire and Six-Minute Walk Test. The applicant also provided data supporting the overall safety and effectiveness of the MitraClip® System device in European ‘‘real-world’’ outcome studies. We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, as noted in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552), we are concerned that the applicant revised its initial FDA request for the use of the MitraClip® System device in all patients diagnosed with significant MR, after learning that the FDA expressed concern that the initial study, EVEREST II, demonstrated that, while the MitraClip® System device had clinically meaningful improvements in LV volume and QOL, the surgical option had better outcomes than the MitraClip® System device in surgical candidates. The FDA then required a second trial focused on high surgical risk patients. We noted that the data evaluated by the FDA and presented by the applicant in its application for new technology add-on payments included information from the following: D EVEREST I feasibility trial; enrollment 2003–2006; 55 patients. D EVEREST II RCT; enrollment 2005– 2008; 279 patients. D EVEREST II High-Risk Study; enrollment 2007–2008; 78 patients. (A comparator group of 36 patients was identified from patients who were screened for the study, but did not meet the mitral valve anatomic criteria for placement of the device.) D EVEREST (REALISM) Continued Access Study and compassionate use; enrollment 2009–2013; 49 patients. The applicant provided comparisons of various outcomes prior to the procedure using the MitraClip® System device and outcomes 12 months later. MR severity, LV end diastolic volume, NYHA Class, SF36 Physical/Mental scale, and heart failure hospitalization PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 rates all had clinically meaningful improvements. For the EVEREST II HRS, the applicant provided analysis demonstrating a significant survival benefit (76 percent versus 55 percent/ p<0.047) over the comparator group. We stated in the FY 2015 IPPS/LTCH PPS proposed rule that in our review of the clinical trials’ data, we have the following key points of concern: • Post-hoc analyses of pooled data sets retain all of the individual shortcomings of the individual data sets; • Pooling does not enhance the utility and scientific value of uncontrolled single-arm registries with no comparators; and • Inappropriate pooling introduces additional confounders. We stated that it is also unclear if the appropriate target population for the MitraClip® System device has been identified because the clinical trials conducted by the applicant included patients diagnosed with both DMR and FMR. This makes it difficult to determine which group of patients may benefit more, or less, from the new technology. For example, in a subgroup analysis of the EVEREST II RCT, the authors concluded that, older patients and those patients diagnosed with FMR or abnormal left ventricular function had results more comparable to surgical repair. Data results from 2 years of the EVEREST II RCT also demonstrated that surgery reduced incidents of MR more than the procedures performed using the percutaneous MitraClip® System device. However, both the surgical patients and the patients who were treated using the MitraClip® System device showed comparable results for improved left ventricular function, NYHA functional class, and quality of life. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether this technology meets the substantial clinical improvement criterion, particularly in comparison to other surgical therapies, such as mitral valve repair or replacement, and the appropriate target population for this technology. Comment: A number of commenters agreed with the applicant that the MitraClip® System meets the substantial clinical improvement criterion. The commenters also recommended the approval of the MitraClip® System for new technology add-on payments in FY 2015. One commenter, an association of thoracic surgeons, expressed support for the approval of the MitraClip® System for new technology add-on payments. The commenter explained that the MitraClip® System provides a treatment option to Medicare beneficiaries that E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations represents a substantial clinical improvement for patients who are too high risk for surgical mitral valve repair or replacement. Other commenters indicated that they had experience using the MitraClip® System. Response: We appreciate the commenters’ support. Many of the commenters described their positive experiences using the MitraClip® System, which improved the clinical outcome of the patients treated. Furthermore, the commenters believed that most, if not all, of the cases treated using the MitraClip® System would have had no other treatment option available. In addition, the commenters asserted that the MitraClip® System helped to provide improvements to the quality of life of the patients treated with the technology. We considered the commenters’ positive experiences using the MitraClip® System in our determination of whether the MitraClip® System represents a substantial clinical improvement in the treatment options available to Medicare beneficiaries. Comment: The applicant submitted a public comment that stated peerreviewed evidence supported the belief that the MitraClip® System meets the substantial clinical improvement criterion. The applicant further noted that in previous rulemaking, CMS has indicated that new technologies represent a substantial clinical improvement if ‘‘the device offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatment.’’ The commenter believed that the MitraClip® System meets this criterion when used in accordance with the FDA-approved indication for the treatment of prohibitive risk degenerative mitral regurgitation (DMR). Specifically, the applicant stated that for those patients who are ineligible for surgery due to prohibitive surgical risk, the MitraClip® System offers the first available option to mechanically correct their mitral valve disease and, therefore, improve cardiac functioning and functional status and quality of life, while decreasing heart failure related hospitalizations and potentially reducing mortality. The applicant reiterated the opinion that the clinical evidence 20 21 demonstrated that the technology 20 Lim et al. Improved Functional Status and Quality of Life in Prohibitive Surgical Risk Patients With Degenerative Mitral Regurgitation Following Transcatheter Mitral Valve Repair with the MitraClip® System, JACC (2013), In Press, Accepted Manuscript, Available online 31 October 2013. 21 MitraClip® Clip Delivery System Instructions for Use, at abbottvascular.com/ifu. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 represents a substantial clinical improvement in the treatment options available to Medicare beneficiaries for the following reasons: • A majority of patients experience MR reduction from 3+/4+ to ≤2+ after the procedure. This improvement is sustained in 83 percent of patients at 12 months. Results at 2 years demonstrated that 82.5 percent of surviving patients remained at ≤2+, which demonstrated that there is no evidence of deterioration of MR severity between 1-year and 2year follow up. • Reduction in MR with the MitraClip therapy to ≤2+ has been shown to provide significant symptomatic DMR patients with meaningful clinical benefits including reduction of left ventricular volumes. • Patients experienced clinically important improvement in NYHA Functional Class at 12 months; roughly 87 percent of patients experienced NYHA Class III or Class IV symptoms at baseline, which improved to less than 15 percent at 12 months. • Despite the elderly and highly comorbid nature of the population, quality of life scores improved. The improvements in both the Physical Component Summary and Mental Component Summary scores exceeded the 2–3 point threshold generally considered to represent a minimum clinically important difference. • Heart failure hospitalizations were reduced by 73 percent in the 12 months post-MitraClip procedure from the 12 months pre-MitraClip procedure. The commenter concluded that, in recognition of these benefits, the 2014 AHA/ACC Guidelines for the Management of Patients with Valvular Heart Disease recommended the MitraClip therapy as a treatment option for the FDA-approved indication. The commenter noted that the guidelines state that TMVR may be considered for severely symptomatic patients (NYHA Class III to Class IV) with chronic severe primary MR (stage D) who have favorable anatomy for the repair procedure and a reasonable life expectancy, but who have a prohibitive surgical risk because of severe comorbidities and remain severely symptomatic despite optimal GDMT for HF. The applicant also addressed CMS’ concerns presented in the proposed rule. Specifically, with respect to the concern regarding the appropriate target population for this technology, the commenter believed that the target population has been clearly defined in the FDA approval indication and associated labeling for the MitraClip® System. The applicant noted that since PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 49945 the publication of the proposed rule, as stated above, the AHA/ACC has reviewed the MitraClip® System evidence and updated their guidelines to recommend consideration for the use of the MitraClip® System for patients meeting the FDA-approved indication. In addition, the applicant indicated that the CMS Coverage and Analysis Group has also reviewed the MitraClip® evidence and issued a proposed decision memorandum to extend coverage for the FDA-approved indication at highly experienced centers of excellence meeting specific criteria. Further, the applicant noted that detailed multi-society requirements have been published specifying operator and institutional criteria for performing the MitraClip® System procedure, and these have been incorporated by CMS into the proposed decision memorandum. Finally, the applicant stated that it has worked together with national societies and CMS to establish a new mitral module of the national TVT registry to systematically track adherence to these requirements by all health care centers using the MitraClip® System and to collect data on patient outcomes with linkage to the CMS claims database. With respect to CMS’ concerns regarding how the MitraClip® system compares to other surgical therapies, such as mitral valve repair or replacement, the applicant stated that clinical outcomes from the prohibitive risk DMR Cohort were determined by the FDA to adequately establish the safety, effectiveness, and positive benefit-risk profile of the MitraClip® System for the indicated population, and these data are the basis for Premarket Approval Application (PMA) approval. In conclusion of thought, the applicant stated that the FDA concluded that the totality of clinical evidence demonstrated the reasonable assurance of safety and effectiveness of the MitraClip® System to reduce MR and provide patient benefit in this discrete and specific patient population. The applicant also commented that the prohibitive risk DMR Cohort, on which FDA approval was granted, included 127 consecutively-enrolled patients who completed 12 months of follow-up after treatment with the MitraClip® System device. The applicant explained that this Cohort included 25 patients from the EVEREST II High Risk Registry (HRR) study, 98 patients from the high risk arm of the REALISM Continued Access study, and 4 Compassionate Use patients. The applicant further explained that the four Compassionate Use patients are included for analysis in the Prohibitive E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49946 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Risk DMR Cohort because they meet the definition of prohibitive risk and all valve anatomic criteria for eligibility. For inclusion in this Cohort, three physicians (two experienced mitral valve surgeons and one experienced mitral valve cardiologist) had to concur that the patient met the definition of prohibitive risk. The applicant further stated that patients in the prohibitive risk DMR Cohort were all enrolled under a highlyrigorous IDE clinical trial protocol that included pre-specified eligibility criteria and adjudicated endpoints. The applicant stated that pooling of the EVEREST II Continued Access Study (REALISM) data with EVEREST II HRR was intended and pre-specified in the REALISM protocol. The applicant noted that one of the REALISM protocol’s stated objectives was to gather additional safety and effectiveness data to support the PMA. The applicant further stated that the same device design was used, and care was taken to ensure the two studies had identical entry criteria, data collection, monitoring, and analysis methods. In addition, the applicant stated that the REALISM protocol defined the evaluation of poolability and specified clinically important baseline variables to be compared. The applicant stated that the majority (10/13) of these baseline characteristics, especially highrisk characteristics/comorbidities, was similar in REALISM and HRR, resulting in comparable average STS predicted mortality risk scores. The applicant stated that the findings from the prohibitive risk DMR Cohort were highly consistent with real-world evidence from a large number of published European studies that included similar groups of high-risk patients. The applicant concluded that despite some limitations in evaluating evidence from pooled datasets, it should be noted that all available evidence on the MitraClip® System consistently indicate that the use of this technology provides both mechanistic and clinical benefit for these high surgical risk patients. Response: We appreciate the applicant’s subsequent analysis of data. With respect to the substantial clinical improvement represented by this technology, we considered all the case specific clinical information presented by the applicant and the public to determine whether there is evidence to support a conclusion that the use of the MitraClip® System represents a substantial clinical improvement in the treatment options available to Medicare beneficiaries. Specifically, we considered the peer-reviewed medical VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 literature, clinical studies, and the clinically accepted use of the device. We believe that it is important that the MitraClip® System be used in the treatment of the appropriate target population and that the NCD will establish the appropriate Medicare patient population for this procedure. We agree with the applicant that the MitraClip® System offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatment; specifically those patients that have been determined to be at prohibitive risk for mitral valve surgery (per the FDA indications). In addition, we received positive comments from a major cardiovascular and a major thoracic society and from many physicians who indicated that the MitraClip® System helped to produce positive clinical outcomes by providing a treatment option for patients with no other available options, as well as resolving MR. Furthermore, the MitraClip® System is the only device currently available to mechanically correct mitral valve disease. Without the availability of this device, patients with DMR might otherwise receive general treatment to maintain their condition, which would eventually result in death rather than a treatment to resolve their condition. Also, the MitraClip® System can be an effective treatment option that improves quality of life and reduces heart failure symptoms and hospitalizations. Therefore, after reviewing the totality of the evidence, we believe that the MitraClip® System represents a substantial clinical improvement over existing therapies. We remain interested in seeing whether the clinical evidence will continue to find that the MitraClip® System will be effective. We will continue to monitor the clinical data as the data become available. After consideration of the public comments we received, we are approving the MitraClip® System for new technology add-on payments in FY 2015. As noted above, any payment made under the Medicare program for services provided to a beneficiary is contingent upon CMS’ coverage of the item, and any restrictions on the coverage apply. This approval is on the basis of using the MitraClip® consistent with any coverage decision that will be issued by CMS after the publication of this final rule. Subject to any coverage determinations made by CMS regarding the MitraClip® System, cases involving the MitraClip® System that are eligible for the new technology add-on payments will be identified by ICD–9– PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 CM procedure code 35.97. The average cost of the MitraClip® System is reported as $30,000. Under section 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS–DRG payment for the case. As a result, the maximum add-on payment for a case involving the MitraClip® System is $15,000 for FY 2015. e. Responsive Neurostimulator (RNS®) System NeuroPace, Inc. submitted an application for new technology add-on payments for FY 2015 for the use of the RNS® System. (We note that the applicant submitted an application for new technology add-on payments for FY 2014, but failed to receive FDA approval prior to the July 1 deadline.) Seizures occur when brain function is disrupted by abnormal electrical activity. Epilepsy is a brain disorder characterized by recurrent, unprovoked seizures. According to the applicant, the RNS® System is the first implantable medical device (developed by NeuroPace, Inc.) for treating persons diagnosed with epilepsy whose partial onset seizures have not been adequately controlled with antiepileptic medications. The applicant further stated that, the RNS® System is the first closed-loop, responsive system to treat partial onset seizures. Responsive electrical stimulation is delivered directly to the seizure focus in the brain when abnormal brain activity is detected. A cranially implanted programmable neurostimulator senses and records brain activity through one or two electrode-containing leads that are placed at the patient’s seizure focus/ foci. The neurostimulator detects electrographic patterns previously identified by the physician as abnormal, and then provides brief pulses of electrical stimulation through the leads to interrupt those patterns. Stimulation is delivered only when abnormal electrocorticographic activity is detected. The typical patient is treated with a total of 5 minutes of stimulation a day. The RNS® System incorporates remote monitoring, which allows patients to share information with their physicians remotely. With respect to the newness criterion, the applicant stated that some patients diagnosed with partial onset seizures that cannot be controlled with antiepileptic medications may be candidates for the vagus nerve stimulator (VNS) or for surgical removal of the seizure focus. According to the applicant, these treatments are not appropriate for, or helpful to, all E:\FR\FM\22AUR2.SGM 22AUR2 49947 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations patients. Therefore, the applicant believed that there is an unmet clinical need for additional therapies for partial onset seizures. The applicant further stated that the RNS® System addresses this unmet clinical need by providing a novel treatment option for treating persons diagnosed with medically intractable partial onset seizures. The applicant received FDA premarket approval in November 2013. The following ICD–9–CM procedure codes are used to identify this technology: 01.20 (Cranial implantation or replacement of neurostimulator pulse generator); 01.29 (Removal of cranial neurostimulator pulse generator); and 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)). In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the technology meets the newness criterion. However, we did not receive any public comments in response to the proposed rule regarding whether the technology meets the newness criterion. The applicant received FDA premarket approval on November 14, 2013. Therefore, for the purpose of evaluation for determinng eligibility for FY 2015 IPPS new technology add-on payments, we consider this technology to be ‘‘new’’ as of November 14, 2013, and we will use the following ICD–9–CM procedure codes to identify the technology for purposes of new technology add-on payments: 01.20 (Cranial implantation or replacement of neurostimulator pulse generator); 01.29 (Removal of cranial neurostimulator pulse generator); and 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)). With regard to the cost criterion, the applicant stated that substantially all cases eligible for the RNS® System would map to MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System Principal Diagnosis without MCC). The applicant further stated that, while it is possible for some cases to occur in MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System Principal Diagnosis with MCC or Chemotherapy Implant), it would be extremely rare because the applicant believed that these major complications and/or comorbidities would probably preclude a patient from receiving treatment using the RNS® System because the technology is an elective procedure. The applicant submitted two analyses to demonstrate that the technology meets the cost criterion. For the first analysis, the applicant used clinical trial claims data collected in the RNS® System Pivotal Clinical Investigation to calculate the anticipated average caseweighted standardized charge per case. The applicant maintained that this analysis best represents the anticipated FY 2012 calendar quarter charges for the technology because it is based on actual cases treated using this technology. The applicant analyzed 163 claims from 28 hospitals participating in the clinical trial. Five claims from one hospital were excluded because no hospital-specific information regarding standardization was available. The resulting 158 claims included dates of service ranging from May 2006 through May 2009. The average case-weighted standardized charge per case for these 158 claims was $54,691. The applicant then standardized the charges for each claim. The applicant noted that it was not necessary to remove any charges from these claims because the technology was provided at no charge in the trial. After standardizing the charges for each claim, the applicant inflated the charges reported on each claim using the BLS’ CPI–IP data covering the same period. Specifically, because the publicly available FY 2012 MedPAR data do not identify the month of the discharge on inpatient claims, but do identify the calendar quarter, the applicant used a mid-month convention to determine the relevant monthly CPI–IP for each calendar quarter. The applicant then calculated the percentage change from the relevant quarter to the quarter of the most recently available CPI–IP, which was the August 2013 CPI–IP. Specifically, the applicant used the following assumptions: Midpoint of quarter Q4 2011 ........................................................................ Q1 2012 ........................................................................ Q2 2012 ........................................................................ Q3 2012 ........................................................................ Most recent as of application ....................................... Nov-11 Feb-11 May-11 Aug-11 Aug-13 CPI IP .......................................................................... .......................................................................... .......................................................................... .......................................................................... .......................................................................... Percent change to August 2013 242.672 245.721 247.646 248.856 261.915 7.93 6.59 5.76 5.25 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Source as cited by applicant: Bureau of Labor Statistics’ Web site, accessed October 13, 2013; Base Period: December 1996 = 100. After inflating the charges, the applicant estimated charges for the RNS® System by multiplying the device cost to the hospital by an anticipated hospital markup of 100 percent, or conversely by dividing the device cost by a CCR of 0.50. The applicant based its estimated CCR on four analyses. First, the applicant reviewed the 2007 and 2008 reports prepared by RTI for CMS on charge compression, which found that the national aggregate CCR for devices and implants was 0.43 and 0.467, as presented in the respective reports. Second, the applicant queried hospitals participating in the RNS® System Pivotal trial, and these queries yielded a mean and median CCR for implantable devices of 0.37 and 0.36, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 respectively. Third, the applicant reviewed data from the (All Payor) Premier database for cases performed during 2000 through 2010 that reported ICD–9 CM procedure codes 02.93 and/ or 86.95 on a claim, and calculated a mean and median CCR for implanted leads and neurostimulators of 0.50 and 0.44, respectively. The applicant then reviewed other discussions of past new technology add-on payment applications published in the Federal Register, and noted that other applicants used lower CCRs (higher markups) for implanted devices than the CCR of 0.50 used in the applicant’s analyses. Using this approach, the applicant added the anticipated hospital charge PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 for the implantable RNS® System to the average case-weighted standardized charge per case, and determined a final average case-weighted standardized charge per case of $128,723. The anticipated hospital charge for the implantable RNS® System is $73,900. Using the FY 2014 IPPS Table 10 thresholds, the threshold for MS–DRG 024 is $91,197. Because the final average case-weighted standardized charge per case of $128,723 for MS–DRG 024 exceeds the average case-weighted threshold amount, the applicant maintained that the RNS® System meets the cost criterion. In the second analysis, which the applicant characterizes as supplementary, the applicant E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49948 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations researched the FY 2012 MedPAR file for cases reporting the following combinations of ICD–9–CM procedures codes: 02.93 and 86.95, or procedures codes 02.93 and 01.20 that mapped to MS–DRG 024. The applicant found 383 claims for cases reporting the combination of ICD–9–CM procedures codes 02.93 and 01.20, and pointed out that these cases were coded with procedure code 01.20 in error because no new RNS® System implantations occurred after May 2009. The applicant analyzed these 383 claims, and found that more than 90 percent of these cases had a primary or secondary diagnosis of Parkinson’s disease, essential tremor, or dystonia. These diagnoses are FDAapproved indications for deep brain stimulation (DBS). In addition, the applicant noted that the total covered charges for these cases were less than the estimated charges for a full DBS system, and hypothesized that these cases did not represent implantation of a full DBS system, but did represent the implantation of leads only. The applicant contacted two hospitals that reported claims for cases where total covered charges were less than the charges for a full DBS system, and the hospitals confirmed that their claims represented lead implantations only. Therefore, for the second analysis, the applicant included all of the cases assigned to MS–DRG 024 reporting a combination of ICD–9–CM procedures codes 02.93 and 86.95, and all of the cases assigned to MS–DRG 024 reporting a combination of ICD–9–CM procedures codes 02.93 and 01.20 where the covered charges were greater than, or equal to, the estimated charges of a full DBS system. The applicant maintained that 374 claims from 106 providers met this criterion, and data represented claims from the fourth calendar quarter of 2011 through the third calendar quarter of 2012. Based on this assumption, the applicant calculated an average case-weighted standardized charge per case of $65,555. The applicant then removed DBS charges from the average case-weighted standardized charge per case. The applicant estimated charges for a full DBS system, and maintained that the average cost for a full DBS system is $25,979. Similar to its first analysis, the applicant assumed a CCR of 0.50, or 100 percent markup, which resulted in estimated charges for a full DBS system of $51,958. After removing the DBS system charges, the applicant inflated the charges to the current period using the same methodology in the first analysis, added charges for the RNS® System, and determined a final average VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 case-weighted standardized charge per case of $130,233. As noted above, the anticipated hospital charge for the implantable RNS® System is $73,900. Using the FY 2014 IPPS Table 10 thresholds, the average case-weighted threshold for MS–DRG 024 is $91,197. Because the final average standardized charge per case of $130,233 for MS–DRG 024 exceeds the threshold amount, the applicant maintained that the RNS® System meets the cost criterion. Under either analysis, the applicant maintained that the final average caseweighted standardized charge per case would exceed the average case-weighted threshold. In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the RNS® System meets the cost criterion, particularly based on the assumptions and methodology used in the applicant’s analyses. However, we did not receive any public comments in response to the proposed rule regarding whether this technology meets the cost criterion. After further evaluation of the new technology add-on payment application, we believe that the technology meets the cost criterion. With regard to substantial clinical improvement, as previously stated, some patients diagnosed with partial onset seizures may not be able to control their seizures with antiepileptic medications, VNS, or with surgical removal of the seizure focus. The applicant stated that the RNS® System provides treatment for those patients diagnosed with partial onset seizures who fail treatment with antiepileptic medications, or VNS therapy, and who are ineligible for respective surgery because of the extent and/or location of the seizure focus, or patients who do not elect surgery. According to the applicant, the RNS® System clinical trials provide Class I evidence that treatment using the RNS® System substantially reduces disabling seizures in patients diagnosed with severe epilepsy, who have tried and failed treatment with antiepileptic medications, and in many cases, VNS or epilepsy surgery. The applicant maintained that the results from their clinical trials demonstrate significant and sustained improvements in health outcomes over the controlled period and over the long term. The applicant conducted a feasibility trial, which was designed to demonstrate adequate safety of its treatment, and provide evidence of effectiveness to support commencement of a randomized double-blinded pivotal trial. In addition, the applicant has an ongoing long-term treatment clinical investigation trial (LTT trial) to assess PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 the long-term safety and effectiveness of the treatment on patients who have completed either the Feasibility trial, or the RNS® System Pivotal trial for an additional seven years. The LTT trial started in April 2006, and the final patient is expected to complete the trial in 2018. The applicant noted that patients enrolled in the LTT trial continued to experience a reduction in seizures over several years of follow-up, further demonstrating the positive effect of responsive stimulation from the RNS® System is durable. The applicant stated that their pivotal trial met its primary effectiveness endpoint by proving that there was a statistically significant greater reduction in seizures in the treatment group compared to the control group (p = 0.012). Significant improvements at 1 and 2 years post-implant included: • A significant reduction in disabling seizures of 44 percent and 53 percent at 1 and 2 years, respectively; • Fifty-five percent of patients who reached 2 years post-implant experienced a 50 percent or greater reduction in seizures; and • Significant improvements in overall quality of life, as well as individual quality of life measures including memory, language, attention, concentration and medication effects. The applicant asserted that there was no negative effect of treatment using the RNS® System on neuropsychological function (including verbal functioning, visual spatial processing, and memory) or mood. The applicant concluded that the RNS® System Pivotal trial provides Class I evidence that responsive cortical stimulation is effective in significantly reducing seizure frequency in adults with one or two seizure foci who have failed two or more antiepileptic medication trials. The applicant stated that experience across all of the RNS® System trials demonstrates the reduction in seizure frequency of disabling partial onset seizures improves over time. In addition, the applicant noted that sustained improvements were also seen in quality of life. Finally, the applicant noted that safety and tolerability measures compare favorably to alternative treatments, such as antiepileptic medications, VNS, and epilepsy surgery. With regard to the substantial clinical improvement criterion, we stated in the proposed rule that we are concerned that the average age of the patients enrolled in the applicant’s trials was 35 years. Although the applicant maintained that 31 percent of the patients enrolled in the pivotal trial were Medicare beneficiaries, we are unsure of the extent to which this E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations technology would be used by Medicare beneficiaries because of the relatively young age of the majority of the patients enrolled in the pivotal trial. We also are concerned that further clarification on how the RNS® System compares to other neurostimulation treatments was not provided by the applicant. Because the applicant included claims with DBS charges in one of its cost analyses, we believe that the similarities and differences between DBS and the RNS® System may also be relevant under the substantial clinical improvement criterion. In addition, we stated in the proposed rule that we are concerned that the time period in the clinical trial may not be sufficient to confirm durability. In the RNS® System Pivotal Clinical Investigation, the primary effectiveness endpoint considered seizure frequency over the last 3 months of the blinded period of the trial. We note that the applicant is currently conducting a 5-year study. We invited public comments on whether the RNS® System meets the substantial clinical improvement criterion, particularly in regard to the degree in which the technology would be used by Medicare beneficiaries, the comparison to other neurostimulation treatments, and its durability. Comment: Commenters stated that the technology is currently used and will continue to be used in the treatment of Medicare beneficiaries who have been diagnosed with epilepsy. One commenter noted that 31 percent of individuals in the RNS® System clinical trial were Medicare beneficiaries, and all of these individuals were enrolled in the Medicare program because of a disability as opposed to being enrolled in the Medicare program because of their age. In addition, the commenter provided an analysis of data obtained from publicly available databases, specifically using the Premier Perspective all payor database for the time period from 2008 through 2013 and the CMS MedPAR database for FY 2012 and FY 2013. This analysis showed that, for Medicare beneficiaries who have been diagnosed with medically intractable partial epilepsy, 72 to 77 percent of the Medicare claims were submitted for payment of services provided to patients who were under the age of 65. The commenter also queried the public Web sites of the healthcare centers that participated in the RNS® System Pivotal trial, which included data on patients who have participated in specific programs directed by 120 adult comprehensive epilepsy centers, and found that these centers reported that 33 percent of their patients who have been diagnosed with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 epilepsy were enrolled in the Medicare program and 76 percent of these Medicare beneficiaries were under the age of 65. Several other commenters asserted that patients who have been diagnosed with epilepsy and receive treatment using this technology would be eligible for Medicare based on a disabling condition. The commenter provided examples of the types of patients that they have treated who are younger than the age of 65, but who are insured through the Medicare program based on a disabling condition. Response: We appreciate the information detailed within the commenter’s analysis. We agree with the commenters that this technology will be available for use by Medicare beneficiaries. Comment: Commenters provided comparison analyses for this technology and VNS therapy, DBS, surgical resection, and other medications, and also conducted assessments of the durability of the RNS® System. (We further discuss the results of the comparison analyses and assessments conducted by these commenters below.) Many of these commenters pointed out that this technology is capable of capturing and storing information regarding seizure activity, which could enable the use of this technology to initiate possible changes in medical management of patients treated with an implant over time. In comparison to VNS therapy, commenters stated that the RNS® System is a closed loop system that provides electrical stimulation in response to brain activity, while VNS therapy is an open loop system that provides electrical stimulation continuously or intermittently at programmed intervals. In addition, commenters stated that the RNS® System can be applied directly to the seizure focus or foci in the brain, while VNS therapy provides stimulation to the vagus nerve. The commenters noted that this distinction represents an improvement relative to VNS therapy because patients receive less stimulation using the RNS® System. The commenters also pointed out that the side effects of VNS therapy, such as hoarseness, coughing, and throat pain, are distressing and uncomfortable for patients and can make VNS therapy difficult to tolerate. These commenters also noted that these side effects do not emerge with the use of the RNS® System. One commenter provided data from the clinical trials for VNS therapy, which showed that more than half of the patients treated with VNS therapy ‘‘perceived’’ stimulation. The commenter also provided data from PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 49949 clinical trials for VNS therapy that showed that the side effects for VNS therapy included voice alternation, increased coughing, pharyngitis, dyspnea, dyspepsia, nausea, and laryngismus. The commenter compared the indications from the clinical trial data with data from the RNS® System trials, which indicate that there were no patients with ongoing complaints related to ‘‘perception of stimulation,’’ although some patients experienced symptoms such as flashing lights or focal muscle twitching. The commenter stated that stimulation with the RNS® System was adjusted for patients experiencing these symptoms, such that the symptoms became imperceptible. Many commenters stated that they were able to use the RNS® System to reduce the frequency of seizures in patients who have been diagnosed with epilepsy for whom VNS therapy did not reduce seizures. One commenter provided clinical trial data regarding VNS therapy that showed that in two studies in blinded periods VNS therapy reduced median seizures per day by 6 to 23 percent, and that over 3 years VNS therapy reduced median seizures per day by 31 to 41 percent. The commenter also provided clinical trial data regarding the RNS® System that showed in the blinded period a 28 percent reduction of median seizures per day compared to 19 percent for the control group. In addition, the commenter also provided clinical trial data regarding the RNS® System that showed that over 3 years the RNS® System reduced median seizures by 44 to 60 percent. The commenter also pointed out that 34 percent of patients enrolled in the RNS® System trial were previously treated with VNS therapy, but experienced positive outcomes with the RNS® System. In comparison to DBS, commenters stated that the RNS® System was not approved by the FDA for treatment of epilepsy, and DBS is not considered to be the standard of care for the treatment of epilepsy by the American Academy of Neurology or the American Epilepsy Society. The commenters stated that they did not have experience with the RNS® System to compare with DBS to because it is not typically used, or approved for, treating patients diagnosed with epilepsy. One commenter noted that DBS is only available to patients on an experimental or investigational basis for the treatment of epilepsy. Another commenter stated that no direct comparison trial has been conducted between DBS and the RNS® System. The commenter reviewed data from a clinical trial that studied the use E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49950 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of DBS treatment of the anterior nucleus of the thalamus in subjects with medically intractable partial seizures. While the commenter stated that some of the data appeared to be comparable to the results of the RNS® System trials in terms of seizure reduction and quality of life, differences existed in the construction of the trials, including inclusion and exclusion criteria and primary efficacy endpoints. The commenter also stated that, similar to VNS therapy, DBS provides continuous or intermittent stimulation at program intervals, resulting in more stimulation being delivered than delivered using the RNS® System. In comparison to surgical resection, commenters noted that the RNS® System can be used when surgical resection is not available as a treatment option. Commenters stated that some patients who have been diagnosed with epilepsy have seizure focus or foci area(s) in regions of the brain that should not be removed because removal would result in serious neurological defects. Therefore, commenters stated that the RNS® System represents a treatment option for patients who have been diagnosed with epilepsy for whom surgery is not an option. In addition, commenters stated that they were able to use the RNS® System to reduce the frequency of seizures in patients who had been treated with surgical resection and did not experience a reduction in seizures after surgery. In comparison to antiepileptic medications used to treat patients who have been diagnosed with epilepsy, commenters stated that the RNS® System offers a treatment option that does not have the unpleasant side effects associated with some of these medications. The commenters stated that these side effects include problems with cognition or coordination, depression, and fatigue. With regard to durability, one commenter provided data from the RNS® System clinical trial for 6 years. The results of the trial indicate that the median percent reduction in seizures compared to the baseline year was sustained or improved at 60 percent 3 years after implantation and 66 percent 6 years after implantation. The median follow-up time for this group of patients based on the trial’s data was 5.4 years. The commenter indicated that these results are comparable, or better, for the subset of patients who were enrolled in the RNS® System clinical trial and that were Medicare beneficiaries. The commenter further stated that the updated data showed that the proportion of patients who were enrolled in the RNS® System clinical VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 trial that experienced extended periods of seizure freedom of 3 or 6 months was slightly larger than previously shared in the November 1, 2012 new technology add-on payment application for the RNS® System. Response: We appreciate the commenters’ input. We agree with the commenters that the RNS® System offers a treatment option for a patient population that is unresponsive to currently available treatments. Specifically, we agree with the commenters that the RNS® System clinical trial data showed that the technology reduces seizure frequency in patients who have received treatment with VNS therapy or surgical resection and continued to have seizures subsequent to those treatments. We also agree with the commenters that the technology could be a treatment option for patients for whom surgical resection is not appropriate due to the location of the seizure focus or foci area(s). In addition, we agree with the commenters that use of the device improves clinical outcomes compared to currently available treatments. For example, it appears that seizure reduction over time using the RNS® System appears to be at least comparable with documented seizure reductions using VNS therapy, although no direct comparison of the two systems has been completed, and the RNS® System appears not to have the side effects that have been associated with VNS therapy. We agree with the commenters that it is inappropriate to compare the RNS® System to a technology that is not FDA approved for the same treatment. After consideration of the public comments we received, we believe that the RNS® System meets all of the new technology add-on payment criteria. Therefore, we are approving new technology add-on payments for the RNS® System for FY 2015. Cases involving the RNS® System that are eligible for new technology add-on payments will be identified using the following ICD–9–CM procedure codes: 01.20 (Cranial implantation or replacement of neurostimulator pulse generator) in combination with 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)). According to the applicant, cases using the RNS® System would incur an anticipated cost per case of $36,950. Under § 412.88(a)(2) of the regulations, new technology add-on payments are limited to the lesser of 50 percent of the average costs of the device or 50 percent of the costs in excess of the MS–DRG payment rate for the case. As a result, the maximum add-on payment for cases PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 involving the RNS® System is $18,475 for FY 2015. III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts ‘‘for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.’’ We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2015 hospital wage index based on the statistical areas appears under section III.B. of the preamble of this final rule. Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wagerelated costs of short-term, acute care hospitals. This provision also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The adjustment for FY 2015 is discussed in section II.B. of the Addendum to this final rule. As discussed in section III.H. of the preamble of this final rule, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The budget neutrality adjustment for FY 2015 is discussed in section II.A.4.b. of the Addendum to this final rule. Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are applying to the FY 2015 wage index E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations appears under section III.F. of the preamble of this final rule. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV B. Core-Based Statistical Areas for the Hospital Wage Index 1. Background The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by the Office of Management and Budget (OMB). The statistical areas used in FY 2014 are based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). For a discussion of OMB’s delineations of CBSAs and our implementation of the CBSA definitions, we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We also discussed in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51582) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013, OMB planned to announce new labor market area delineations based on new standards adopted in 2010 (75 FR 37246) and the 2010 Census of Population and Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at https://www.whitehouse.gov/sites/ default/files/omb/bulletins/2013/b-1301.pdf. According to OMB, ‘‘[t]his bulletin provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010, in the Federal Register (75 FR 37246 through 37252) and Census Bureau data.’’ In this FY 2015 IPPS/LTCH PPS final rule, when referencing the new OMB geographic boundaries of statistical areas, we are using the term ‘‘delineations’’ rather than the term ’’ definitions’’ that we have used in the past, consistent with OMB’s use of the terms (75 FR 37249). In order to implement these changes for the IPPS, it is necessary to identify VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the new labor market area delineation for each county and hospital in the country. While the revisions OMB published on February 28, 2013 are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, under the new OMB delineations, there would be new CBSAs, urban counties that would become rural, rural counties that would become urban, and existing CBSAs would be split apart. In addition, the effect of the new OMB delineations on various hospital reclassifications, the out-migration adjustment (established by section 505 of Pub. L. 108–173), and treatment of hospitals located in certain rural counties (that is, ‘‘Lugar’’ hospitals) provided for under section 1886(d)(8)(B) of the Act must be considered. These are just a few of the many issues that need to be reviewed regarding the effects of the new OMB labor market area delineations prior to proposing and establishing policies. However, because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications needed to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not implement changes to the wage index for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index based on the new OMB delineations in the FY 2015 IPPS/LTCH PPS proposed rule. As discussed below, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28064, we proposed to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. 2. Implementation of New Labor Market Area Delineations As discussed previously, CMS did not implement the new OMB labor market area delineations for FY 2014 because we needed sufficient time to assess the new changes. We believe it is important for the IPPS to use the latest labor market area delineations available as soon as is reasonably possible in order to maintain a more accurate and up-todate payment system that reflects the reality of population shifts and labor market conditions. While CMS and other stakeholders have explored potential alternatives to the current CBSA-based labor market system (we PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 49951 refer readers to the CMS Web site at: www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatient PPS/Wage-Index-Reform.html), no consensus has been achieved regarding how best to implement a replacement system. As discussed in the FY 2005 IPPS final rule (69 FR 49027), ‘‘While we recognize that MSAs are not designed specifically to define labor market areas, we believe they do represent a useful proxy for this purpose.’’ We further believe that using the most current delineations will increase the integrity of the IPPS wage index system by creating a more accurate representation of geographic variations in wage levels. We have reviewed our findings and impacts relating to the new OMB delineations, and find no compelling reason to delay implementation. Therefore, we proposed to implement the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28055), we also proposed to use these new delineations to calculate area wage indexes in a manner that is generally consistent with the CBSA-based methodologies finalized in the FY 2005 IPPS final rule, and refined in subsequent rulemaking. We also proposed a wage index transition period applicable to all hospitals that experience negative impacts due to the proposed implementation of the new OMB delineations. This transition is discussed in more detail below. Comment: Commenters were supportive of the proposal to adopt the new OMB delineations. One commenter, while supportive of CMS’ proposal to adopt the new OMB delineations, effective for FY 2015, recommended that CMS adopt an alternative hospital wage index system in future rulemaking. Another commenter suggested that CMS implement new labor market area definitions to distinguish ‘‘core’’ urban areas from surrounding areas within a CBSA. Response: We appreciate the support for our proposal to adopt the new OMB delineations. For FY 2015, we did not propose any modification to the current CBSA-based labor market area methodology, aside from proposing to adopt the new OMB labor market area delineations. However, we thank the commenters for their continued interest in examining alternative means for defining labor market areas. CMS presented an alternative wage index methodology in a Report to Congress on April 11, 2012 (https://www.cms.gov/ E:\FR\FM\22AUR2.SGM 22AUR2 49952 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ Downloads/Wage-Index-Reform-Reportto-Congress-2012.zip). As discussed in the report, implementation of such a reform would require revisions to several statutory provisions that provide various forms of wage index reclassification and redesignation. Until a consensus on wage index reform is achieved, we believe that implementing the most recent OMB delineations is critical in maintaining the efficacy and integrity of the Medicare hospital wage index system. We did not propose, nor will we finalize, any additional changes to the CBSA-based labor market area delineations, including the concept of defining core and noncore portions of a CBSA. After consideration of the public comments we received, we are finalizing the implementation of the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective beginning with the FY 2015 IPPS wage index. We received public comments on our proposals with respect to the use of these new OMB delineations to calculate the area wage indexes and the transition periods, which we address in sections III.B.2.a. through d. of the preamble of this final rule. We also finalize our policies in those sections. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Micropolitan Statistical Areas As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), CMS considered whether to use Micropolitan Statistical Areas to define the labor market areas for the purpose of the IPPS wage index. OMB defines a ‘‘Micropolitan Statistical Area’’ as a CBSA ‘‘associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000’’ (75 FR 37252). We refer to these areas as Micropolitan Areas. After extensive impact analysis, CMS determined the best course of action would be to treat all hospitals located in Micropolitan Areas as ‘‘rural’’ and include them in the calculation of each State’s rural wage index. Because Micropolitan areas tend to encompass smaller population centers and contain fewer hospitals than MSAs, we determined that if Micropolitan Areas were to be treated as separate labor market areas, the IPPS wage index would have included drastically more single-provider labor market areas. This larger number of labor market areas with fewer hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 could create instability in year-to-year wage index values for a large number of hospitals; could reduce the averaging effect of the wage index, thus lessening some of the efficiency incentive inherent in a system based on the average hourly wages for a large number of hospitals; and could arguably create an inequitable system when so many hospitals have wage indexes based solely on their own wage data while other hospitals’ wage indexes are based on an average hourly wage across many hospitals. For these reasons, we adopted a policy to include Micropolitan Areas in the State’s rural wage area, and have continued this policy through the present. Based upon the new 2010 Decennial Census data, a number of urban counties have switched status and have joined or became Micropolitan Areas, and some counties that once were part of a Micropolitan Area, under current OMB delineations, have become urban. Overall, there are fewer Micropolitan Areas (541) under the new OMB delineations based on the 2010 Census than existed under the latest data from the 2000 Census (581). We believe that the best course of action would be to continue the policy established in the FY 2005 IPPS final rule and include hospitals located in Micropolitan Areas in each State’s rural wage index. These areas continue to be defined as having relatively small urban cores (populations of 10,000–49,999). We do not believe it would be appropriate to calculate a separate wage index for areas that typically may include only a few hospitals for the reasons set forth in the FY 2005 IPPS/LTCH PPS final rule, as discussed above. Therefore, in conjunction with our proposal to implement the new OMB labor market area delineations beginning in FY 2015, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28055), we proposed to continue to treat Micropolitan Areas as ‘‘rural’’ and to include the Micropolitan Areas in the calculation of each State’s rural wage index. Comment: A number of commenters supported CMS’ proposal to continue to treat Micropolitan Areas as rural for hospital wage index purposes. Response: We appreciate the commenters’ support. After consideration of the public comments we received, in conjunction with our policy to implement the new OMB labor market area delineations PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 beginning in FY 2015, we are continuing to treat Micropolitan Areas as ‘‘rural’’ and to include the Micropolitan Areas in the calculation of each State’s rural wage index. b. Urban Counties That Became Rural Under the New OMB Delineations As previously discussed, we proposed to implement the new OMB labor market area delineations (based upon the 2010 Decennial Census data) beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28055 through 28056), we stated that our analysis shows that a total of 37 counties (and county equivalents) and 12 hospitals that were once considered part of an urban CBSA would be considered to be located in a rural area, beginning in FY 2015, under these new OMB delineations. In the proposed rule, we included a listing of the 37 urban counties that would be rural if we finalized our proposal to implement the new OMB delineations. We proposed that the wage data for all hospitals currently located in the 37 urban counties listed in the proposed rule would be considered rural under the new OMB delineations when calculating their respective State’s rural wage index. We stated that we recognize that rural areas typically have lower area wage index values than urban areas, and hospitals located in these counties may experience a negative impact in their IPPS payment due to the proposed adoption of the new OMB delineations. We refer readers to section III.B.2.e. of the preamble of this final rule for a discussion of the proposed and finalized wage index transition period, in particular, the discussion regarding the 3-year transition for hospitals located in these specific counties. Comment: Commenters were supportive of the proposal to adopt the new OMB delineations, including the proposed reassignment of counties from urban areas to rural areas. Response: We appreciate the commenters’ support. As discussed above, we are finalizing our proposal to adopt the new OMB delineations. After consideration of the public comments we received, we also are finalizing our proposed reassignment of counties from urban areas to rural areas based on these new OMB delineations. The following chart lists the 37 urban counties that are considered to be rural under this policy. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49953 COUNTIES THAT WILL LOSE URBAN STATUS AND BECOME RURAL County State Greene County ........................................................................... Anson County ............................................................................. Franklin County .......................................................................... Stewart County ........................................................................... Howard County ........................................................................... Delta County ............................................................................... Pittsylvania County ..................................................................... Danville City ................................................................................ Preble County ............................................................................. Gibson County ............................................................................ Webster County .......................................................................... Franklin County .......................................................................... Ionia County ............................................................................... Newaygo County ........................................................................ Greene County ........................................................................... Stone County .............................................................................. Morgan County ........................................................................... San Jacinto County .................................................................... Franklin County .......................................................................... Tipton County ............................................................................. Nelson County ............................................................................ Geary County ............................................................................. Washington County .................................................................... Pleasants County ....................................................................... George County ........................................................................... Power County ............................................................................. Cumberland County .................................................................... King and Queen County ............................................................. Louisa County ............................................................................. Washington County .................................................................... Summit County ........................................................................... Erie County ................................................................................. Franklin County .......................................................................... Ottawa County ............................................................................ Greene County ........................................................................... Calhoun County .......................................................................... Surry County ............................................................................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV c. Rural Counties That Became Urban Under the New OMB Delineations As previously discussed, we proposed to implement the new OMB labor market area delineations (based upon the 2010 Decennial Census data) beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28056 through 28058), we indicated that analysis of these OMB labor market area delineations shows that a total of 105 counties (and county equivalents) and 81 hospitals that were located in rural areas would be located in urban areas under the new OMB delineations. In the proposed rule, we included a listing of the 105 rural counties that would be urban if we finalized our proposal to implement the new OMB delineations. IN NC IN TN MO TX VA VA OH IN KY AR MI MI NC MS WV TX KS IN KY KS OH WV MS ID VA VA VA MO UT OH MA OH AL TX VA Previous CBSA No. 14020 16740 17140 17300 17860 19124 19260 19260 19380 21780 21780 22900 24340 24340 24780 25060 25180 26420 28140 29020 31140 31740 37620 37620 37700 38540 40060 40060 40060 41180 41620 41780 44140 45780 46220 47020 47260 CBSA Bloomington, IN. Charlotte-Gastonia-Rock Hill, NC–SC. Cincinnati-Middletown, OH–KY–IN. Clarksville, TN–KY. Columbia, MO. Dallas-Fort Worth-Arlington, TX. Danville, VA. Danville, VA. Dayton, OH. Evansville, IN–KY. Evansville, IN–KY. Fort Smith, AR–OK. Grand Rapids-Wyoming, MI. Grand Rapids-Wyoming, MI. Greenville, NC. Gulfport-Biloxi, MS. Hagerstown-Martinsburg, MD–WV. Houston-Sugar Land-Baytown, TX. Kansas City, MO–KS. Kokomo, IN. Louisville/Jefferson County, KY–IN. Manhattan, KS. Parkersburg-Marietta-Vienna, WV–OH. Parkersburg-Marietta-Vienna, WV–OH. Pascagoula, MS. Pocatello, ID. Richmond, VA. Richmond, VA. Richmond, VA. St. Louis, MO–IL. Salt Lake City, UT. Sandusky, OH. Springfield, MA. Toledo, OH. Tuscaloosa, AL. Victoria, TX. Virginia Beach-Norfolk-Newport News, VA–NC. We proposed that when calculating the area wage index, the wage data for hospitals located in these 105 rural counties would be included in their new respective urban CBSAs. Typically, hospitals located in an urban area would receive a higher wage index value than hospitals located in their State’s rural area. However, with regard to the wage index applicable to individual hospitals, we proposed to implement a transitional wage index adjustment for any hospital that would receive a lower wage index under the new OMB delineations than it would have received under the current CBSA definitions. We refer readers to section III.B.2.e. of the preamble of this final rule for further discussion of this transition. Comment: Commenters were supportive of the proposal to adopt the new OMB delineations, including the proposed reassignments of counties from rural areas to urban areas for purposes of the wage index. Response: We appreciate the commenters’ support. As discussed above, we are finalizing our proposal to adopt the new OMB delineations. After consideration of the public comments we received, we also are finalizing our proposed reassignment of counties from rural to urban for purposes of the wage index based on these new OMB delineations. The following chart lists the 105 rural counties that will be urban for purposes of the wage index for FY 2015 under this policy. COUNTIES THAT WILL LOSE RURAL STATUS AND BECOME URBAN County State Utuado Municipio ........................................................................ Linn County ................................................................................ Oldham County ........................................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00101 PR OR TX Fmt 4701 New CBSA No. 10380 10540 11100 Sfmt 4700 CBSA Aguadilla-Isabela, PR. Albany, OR. Amarillo, TX. E:\FR\FM\22AUR2.SGM 22AUR2 49954 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations COUNTIES THAT WILL LOSE RURAL STATUS AND BECOME URBAN—Continued tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV County State Morgan County ........................................................................... Lincoln County ............................................................................ Newton County ........................................................................... Fayette County ........................................................................... Raleigh County ........................................................................... Golden Valley County ................................................................. Oliver County .............................................................................. Sioux County .............................................................................. Floyd County .............................................................................. De Witt County ........................................................................... Columbia County ........................................................................ Montour County .......................................................................... Allen County ............................................................................... Butler County .............................................................................. St. Mary’s County ....................................................................... Jackson County .......................................................................... Williamson County ...................................................................... Franklin County .......................................................................... Iredell County ............................................................................. Lincoln County ............................................................................ Rowan County ............................................................................ Chester County ........................................................................... Lancaster County ....................................................................... Buckingham County ................................................................... Union County .............................................................................. Hocking County .......................................................................... Perry County ............................................................................... Walton County ............................................................................ Hood County ............................................................................... Somervell County ....................................................................... Baldwin County ........................................................................... Monroe County ........................................................................... Hudspeth County ........................................................................ Adams County ............................................................................ Hall County ................................................................................. Hamilton County ......................................................................... Howard County ........................................................................... Merrick County ........................................................................... Montcalm County ........................................................................ Josephine County ....................................................................... Tangipahoa Parish ..................................................................... Beaufort County .......................................................................... Jasper County ............................................................................ Citrus County .............................................................................. Butte County ............................................................................... Yazoo County ............................................................................. Crockett County .......................................................................... Kalawao County ......................................................................... Maui County ............................................................................... Campbell County ........................................................................ Morgan County ........................................................................... Roane County ............................................................................. Acadia Parish ............................................................................. Iberia Parish ............................................................................... Vermilion Parish ......................................................................... Cotton County ............................................................................. Scott County ............................................................................... Lynn County ............................................................................... Green County ............................................................................. Benton County ............................................................................ Midland County ........................................................................... Martin County ............................................................................. Le Sueur County ........................................................................ Mille Lacs County ....................................................................... Sibley County ............................................................................. Maury County ............................................................................. Craven County ............................................................................ Jones County .............................................................................. Pamlico County .......................................................................... St. James Parish ........................................................................ Box Elder County ....................................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00102 GA GA TX WV WV MT ND ND VI IL PA PA KY KY MD IL IL PA NC NC NC SC SC VA IN OH OH FL TX TX AL PA TX PA NE NE NE NE MI OR LA SC SC FL ID MS TN HI HI TN TN TN LA LA LA OK IN TX WI MS MI TX MN MN MN TN NC NC NC LA UT Fmt 4701 New CBSA No. 12060 12260 13140 13220 13220 13740 13900 13900 13980 14010 14100 14100 14540 14540 15680 16060 16060 16540 16740 16740 16740 16740 16740 16820 17140 18140 18140 18880 23104 23104 19300 20700 21340 23900 24260 24260 24260 24260 24340 24420 25220 25940 25940 26140 26820 27140 27180 27980 27980 28940 28940 28940 29180 29180 29180 30020 31140 31180 31540 32820 33220 33260 33460 33460 33460 34980 35100 35100 35100 35380 36260 Sfmt 4700 CBSA Atlanta-Sandy Springs-Roswell, GA. Augusta-Richmond County, GA–SC. Beaumont-Port Arthur, TX. Beckley, WV. Beckley, WV. Billings, MT. Bismarck, ND. Bismarck, ND. Blacksburg-Christiansburg-Radford, VA. Bloomington, IL. Bloomsburg-Berwick, PA. Bloomsburg-Berwick, PA. Bowling Green, KY. Bowling Green, KY. California-Lexington Park, MD. Carbondale-Marion, IL. Carbondale-Marion, IL. Chambersburg-Waynesboro, PA. Charlotte-Concord-Gastonia, NC–SC. Charlotte-Concord-Gastonia, NC–SC. Charlotte-Concord-Gastonia, NC–SC. Charlotte-Concord-Gastonia, NC–SC. Charlotte-Concord-Gastonia, NC–SC. Charlottesville, VA. Cincinnati, OH–KY–IN. Columbus, OH. Columbus, OH. Crestview-Fort Walton Beach-Destin, FL. Dallas-Fort Worth-Arlington, TX. Dallas-Fort Worth-Arlington, TX. Daphne-Fairhope-Foley, AL. East Stroudsburg, PA. El Paso, TX. Gettysburg, PA. Grand Island, NE. Grand Island, NE. Grand Island, NE. Grand Island, NE. Grand Rapids-Wyoming, MI. Grants Pass, OR. Hammond, LA. Hilton Head Island-Bluffton-Beaufort, SC. Hilton Head Island-Bluffton-Beaufort, SC. Homosassa Springs, FL. Idaho Falls, ID. Jackson, MS. Jackson, TN. Kahului-Wailuku-Lahaina, HI. Kahului-Wailuku-Lahaina, HI. Knoxville, TN. Knoxville, TN. Knoxville, TN. Lafayette, LA. Lafayette, LA. Lafayette, LA. Lawton, OK. Louisville/Jefferson County, KY–IN. Lubbock, TX. Madison, WI. Memphis, TN–MS–AR. Midland, MI. Midland, TX. Minneapolis-St. Paul-Bloomington, MN–WI. Minneapolis-St. Paul-Bloomington, MN–WI. Minneapolis-St. Paul-Bloomington, MN–WI. Nashville-Davidson—Murfreesboro—Franklin, TN. New Bern, NC. New Bern, NC. New Bern, NC. New Orleans-Metairie, LA. Ogden-Clearfield, UT. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49955 COUNTIES THAT WILL LOSE RURAL STATUS AND BECOME URBAN—Continued County State Gulf County ................................................................................. Custer County ............................................................................. Fillmore County .......................................................................... Yates County .............................................................................. Sussex County ........................................................................... Worcester County ....................................................................... Highlands County ....................................................................... Webster Parish ........................................................................... Cochise County .......................................................................... Plymouth County ........................................................................ Union County .............................................................................. Pend Oreille County ................................................................... Stevens County .......................................................................... Augusta County .......................................................................... Staunton City .............................................................................. Waynesboro City ........................................................................ Little River County ...................................................................... Sumter County ............................................................................ Pickens County ........................................................................... Gates County .............................................................................. Falls County ................................................................................ Columbia County ........................................................................ Walla Walla County .................................................................... Peach County ............................................................................. Pulaski County ............................................................................ Culpeper County ......................................................................... Rappahannock County ............................................................... Jefferson County ........................................................................ Kingman County ......................................................................... Davidson County ........................................................................ Windham County ........................................................................ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV d. Urban Counties That Moved to a Different Urban CBSA Under the New OMB Delineations As we stated in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28058 through 28060), in addition to rural counties becoming urban and urban counties becoming rural, several urban counties would shift from one urban CBSA to another urban CBSA under our proposal to adopt the new OMB delineations. In certain cases, adopting the new OMB delineations would involve a change only in CBSA name or number, while the CBSA continues to encompass the same constituent counties. For example, CBSA 29140 (Lafayette, IN) would experience both a change to its number and its name, and become CBSA 29200 (Lafayette-West Lafayette, IN), while all of its three constituent counties would remain the same. For the proposed rule, we identified 19 counties that would remain in a CBSA that experienced a change in name or number under the new delineations, but would retain the same constituent counties. In the proposed rule, we included a table listing those 19 counties. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059), we did not discuss further in this section the above VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 FL SD MN NY DE MD FL LA AZ IA SC WA WA VA VA VA AR FL AL NC TX WA WA GA GA VA VA NY KS NC CT New CBSA No. 37460 39660 40340 40380 41540 41540 42700 43340 43420 43580 43900 44060 44060 44420 44420 44420 45500 45540 46220 47260 47380 47460 47460 47580 47580 47894 47894 48060 48620 49180 49340 CBSA Panama City, FL. Rapid City, SD. Rochester, MN. Rochester, NY. Salisbury, MD–DE. Salisbury, MD–DE. Sebring, FL. Shreveport-Bossier City, LA. Sierra Vista-Douglas, AZ. Sioux City, IA–NE–SD. Spartanburg, SC. Spokane-Spokane Valley, WA. Spokane-Spokane Valley, WA. Staunton-Waynesboro, VA. Staunton-Waynesboro, VA. Staunton-Waynesboro, VA. Texarkana, TX–AR. The Villages, FL. Tuscaloosa, AL. Virginia Beach-Norfolk-Newport News, VA–NC. Waco, TX. Walla Walla, WA. Walla Walla, WA. Warner Robins, GA. Warner Robins, GA. Washington-Arlington-Alexandria, DC–VA–MD–WV. Washington-Arlington-Alexandria, DC–VA–MD–WV. Watertown-Fort Drum, NY. Wichita, KS. Winston-Salem, NC. Worcester, MA–CT. proposed changes because they are inconsequential changes with respect to the IPPS wage index. However, we did discuss that, in other cases, which if we adopted the new OMB delineations, counties would shift between existing and new CBSAs, changing the constituent makeup of the CBSAs. In one type of change, an entire CBSA would be subsumed by another CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single county (Flagler, FL) CBSA. Flagler County would become a part of CBSA 19660 (DeltonaDaytona Beach-Ormond Beach, FL) under the new OMB delineations. In another type of change, some CBSAs have counties that would split off to become part of or to form entirely new labor market areas. For example, CBSA 37964 (Philadelphia Metropolitan Division) currently is comprised of five Pennsylvania counties (Bucks, Chester, Delaware, Montgomery, and Philadelphia). We stated that if we adopted the new OMB delineations, Montgomery, Bucks, and Chester counties would split off and form the new CBSA 33874 (Montgomery CountyBucks County-Chester County, PA Metropolitan Division), while Delaware and Philadelphia counties would remain in CBSA 37964. PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 Finally, in some cases, a CBSA would lose counties to another existing CBSA if we adopted the new OMB delineations. For example, Lincoln County and Putnam County, WV would move from CBSA 16620 (Charleston, WV) to CBSA 26580 (HuntingtonAshland, WV–KY–OH). CBSA 16620 still would exist in the new labor market delineations with fewer constituent counties. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059 through 28060), we included a listing of the urban counties that would move from one urban CBSA to another urban CBSA if we adopted the new OMB delineations. If hospitals located in these counties move from one CBSA to another under the new OMB delineations, there may be impacts, both negative and positive, upon their specific wage index values. We referred readers to section III.B.2.e. of the preamble of the proposed rule for a discussion of our proposals to moderate the impact of our proposed adoption of the new OMB delineations. Comment: Commenters were supportive of the proposal to adopt the new OMB delineations, including the proposed reassignments of counties E:\FR\FM\22AUR2.SGM 22AUR2 49956 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations from one urban area to another urban area. Response: We appreciate the commenters’ support. As discussed above, we are finalizing our proposal to adopt the new OMB delineations. After consideration of the public comments we received, we also are finalizing our proposed reassignment of counties from one urban area to another urban area for purposes of the wage index based on these new OMB delineations. The following chart identifies the 19 counties that remain in a CBSA that experienced a change in name or number under this policy, but will retain the same constituent counties for purposes of the FY 2015 wage index. COUNTIES THAT WILL REMAIN IN CBSA THAT CHANGED NUMBER Prior CBSA No. 14484 14484 14484 47644 47644 47644 47644 47644 26180 29140 29140 29140 42044 42060 44600 44600 44600 13644 13644 New CBSA No. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. 14454 14454 14454 47664 47664 47664 47664 47664 46520 29200 29200 29200 11244 42200 48260 48260 48260 43524 43524 The following chart lists the urban counties that will move from one urban CBSA to another urban CBSA under our County State Norfolk County ............................................................................................... Plymouth County ........................................................................................... Suffolk County ............................................................................................... Lapeer County ............................................................................................... Livingston County .......................................................................................... Macomb County ............................................................................................. Oakland County ............................................................................................. St. Clair County ............................................................................................. Honolulu County ............................................................................................ Benton County ............................................................................................... Carroll County ................................................................................................ Tippecanoe County ........................................................................................ Orange County .............................................................................................. Santa Barbara County ................................................................................... Jefferson County ............................................................................................ Brooke County ............................................................................................... Hancock County ............................................................................................ Frederick County ........................................................................................... Montgomery County ...................................................................................... MA MA MA MI MI MI MI MI HI IN IN IN CA CA OH WV WV MD MD adoption of the new OMB delineations for purposes of the FY 2015 wage index. COUNTIES THAT WILL CHANGE TO ANOTHER CBSA tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Prior CBSA New CBSA 11300 11340 14060 37764 16620 16620 16974 16974 21940 21940 21940 26100 31140 34100 35644 35644 20764 20764 20764 35644 20764 35644 35644 35644 35644 35644 35644 35644 35644 37380 37700 37964 37964 37964 ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 26900 24860 14010 15764 26580 26580 20994 20994 41980 41980 41980 24340 21060 28940 35614 35614 35614 35614 35614 35614 35084 35614 35614 35614 20524 35614 35614 35614 35614 19660 25060 33874 33874 33874 PO 00000 County State Madison County ............................................................................................. Anderson County ........................................................................................... McLean County .............................................................................................. Essex County ................................................................................................. Lincoln County ............................................................................................... Putnam County .............................................................................................. DeKalb County ............................................................................................... Kane County .................................................................................................. Ceiba Municipio ............................................................................................. Fajardo Municipio .......................................................................................... Luquillo Municipio .......................................................................................... Ottawa County ............................................................................................... Meade County ............................................................................................... Grainger County ............................................................................................ Bergen County ............................................................................................... Hudson County .............................................................................................. Middlesex County .......................................................................................... Monmouth County ......................................................................................... Ocean County ................................................................................................ Passaic County .............................................................................................. Somerset County ........................................................................................... Bronx County ................................................................................................. Kings County ................................................................................................. New York County ........................................................................................... Putnam County .............................................................................................. Queens County .............................................................................................. Richmond County .......................................................................................... Rockland County ........................................................................................... Westchester County ...................................................................................... Flagler County ............................................................................................... Jackson County ............................................................................................. Bucks County ................................................................................................. Chester County .............................................................................................. Montgomery County ...................................................................................... Frm 00104 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 IN SC IL MA WV WV IL IL PR PR PR MI KY TN NJ NJ NJ NJ NJ NJ NJ NY NY NY NY NY NY NY NY FL MS PA PA PA Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49957 COUNTIES THAT WILL CHANGE TO ANOTHER CBSA—Continued Prior CBSA 39100 39100 41884 41980 41980 41980 41980 48900 49500 49500 49500 49500 New CBSA ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. ................................................. 20524 35614 42034 11640 11640 11640 11640 34820 38660 38660 38660 38660 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV e. Transition Period (1) Background In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060), we stated that, overall, we believe implementing the new OMB labor market area delineations would result in wage index values being more representative of the actual costs of labor in a given area. However, we recognized that some hospitals would experience decreases in wage index values as a result of the implementation of the new labor market area delineations. We also realize that some hospitals would have higher wage index values due to the implementation of the new labor market area delineations. We explained that, in the past, we have provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. For example, when implementing the new OMB definitions after the 2000 Census in the FY 2005 IPPS final rule (69 FR 49032 through 49034) for FY 2005, we evaluated several options to ease the transition to the new CBSA system. As discussed in that FY 2005 IPPS final rule, we determined that the transition to the current wage index system would have the largest negative impacts upon hospitals that were originally considered urban, but would be considered rural under the new labor market area definitions. To alleviate the decreased payments associated with having a rural wage index, in calculating the area wage index, in the FY 2005 IPPS final rule, we allowed urban hospitals that became rural under new definitions to maintain their assignment to the labor market area where they were located for FY 2004. This adjustment was granted for a period of 3 fiscal years. In the FY 2005 IPPS final rule, for all hospitals that experienced negative payment impacts due to adoption of new labor market area definitions (for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 County Dutchess County ........................................................................................... Orange County .............................................................................................. Marin County ................................................................................................. Arecibo Municipio .......................................................................................... Camuy Municipio ........................................................................................... Hatillo Municipio ............................................................................................. Quebradillas Municipio .................................................................................. Brunswick County .......................................................................................... ´ Guanica Municipio ......................................................................................... Guayanilla Municipio ...................................................................................... ˜ Penuelas Municipio ........................................................................................ Yauco Municipio ............................................................................................ example, they were moved to an urban CBSA with a lower wage index value than their previous rural or urban labor market area), we implemented a 1-year blended adjustment. We calculated wage indexes for all hospitals using both old and new labor market definitions. Hospitals received 50 percent of their wage index based on the new OMB delineations, and 50 percent of their wage index based on their current labor market area. This adjustment only applied to hospitals that would have experienced a drop in wage index values due to a change in labor market area definitions. Hospitals that benefitted from the labor market area transition received their new wage index at the time the new labor market area definitions became effective. We continue to have the same concerns expressed in the FY 2005 IPPS final rulemaking. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060 through 28064), we proposed a similar transition methodology to mitigate any negative financial impacts experienced by hospitals due to our proposal to implement the new OMB labor market area delineations for FY 2015. (2) Transition for Hospitals in Urban Areas That Would Become Rural In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060 through 28061), for hospitals that are currently located in an urban county that would become rural under the new OMB delineations, and would have no form of wage index reclassification or redesignation in place for FY 2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the Act, redesignations under section 1886(d)(8)(B) of the Act, or rural reclassifications under section 1886(d)(8)(E) of the Act), we proposed a policy to assign them the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (with the rural PO 00000 State Frm 00105 Fmt 4701 Sfmt 4700 NY NY CA PR PR PR PR NC PR PR PR PR and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). As stated in the FY 2005 IPPS proposed rule (69 FR 28252), we have in the past provided transitions when adopting changes that have significant payment implications, particularly large negative impacts. We believe it is appropriate to apply a 3-year transition period for hospitals located in urban counties that would become rural under the new OMB delineations, given the potentially significant payment impacts for these hospitals. This is consistent with the transition policy adopted in FY 2005 (69 FR 49032 through 49034). We continue to believe, as we stated in the FY 2005 IPPS final rule (69 FR 49033), that the longer transition period is appropriate because, as a group, we expect these hospitals would experience a steeper and more abrupt reduction in their wage index due to the labor market revisions compared to other hospitals. Assigning these hospitals the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index) would be the most similar to the actual payment wage index that these hospitals received in FY 2014, thereby minimizing the negative impact of adopting the new OMB delineations for these hospitals. Accordingly, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we proposed to assign these hospitals the area wage index value of the urban CBSA in which they were geographically located in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). For example, if urban CBSA 12345 consisted of three counties in FY 2014, and, under the new OMB E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49958 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations delineations, one of those counties, County X, would no longer be part of CBSA 12345 and would become rural for FY 2015, we proposed that hospitals in County X would be assigned the FY 2015 wage index of CBSA 12345, computed using the remaining two counties, with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index. We believe that assigning the wage index of the hospitals’ current area is the simplest and most effective method for mitigating negative payment impacts due to the proposed adoption of the new OMB delineations. We have identified relatively few hospitals that are located in urban counties that would become rural, and fewer yet that do not have a reclassification or redesignation in effect for FY 2015. Because we believe that these urban to rural transitions would be the most likely to cause significant negative payment impacts, we believe that these hospitals should be granted a longer transition period than hospitals that may be switching between urban labor market areas, which as discussed later, we proposed to apply a 1-year blended wage index. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), we noted that there are situations where a hospital cannot be assigned the wage index value of the CBSA to which it geographically belonged in FY 2014 because that CBSA would be split and no longer exist and some or all of the constituent counties would be added to another urban labor market area under the new OMB delineations. If the hospital cannot be assigned the wage index value of the CBSA to which it is geographically located in FY 2014 because that CBSA would be split apart and no longer exist, and some or all of its constituent counties would be added to another urban labor market area under the new OMB delineations, we proposed that hospitals located in such counties that would become rural under the new OMB delineations would be assigned the wage index of the FY 2015 urban labor market area that contains the urban county in their FY 2014 CBSA to which they are closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) for a period of 3 fiscal years. We believe this approach of assigning the wage index of the FY 2015 urban labor market area that contains the urban county in their FY 2014 CBSA to which they are closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) would most closely VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 approximate the hospitals’ FY 2014 actual payment wage index, thereby minimizing the negative effects of the proposed change in the OMB delineations. For example, George County, MS and Jackson County, MS, together, in FY 2014, comprise the urban CBSA 37700 (Pascagoula, MS). Under the new OMB delineations, George County would be considered rural and Jackson County, MS would become part of the urban labor market area of Gulfport-Biloxi-Pascagoula, MS (CBSA 25060). In this instance, we proposed that hospitals in George County, MS would be assigned the FY 2015 wage index for CBSA 25060 (Gulfport-Biloxi-Pascagoula, MS), with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied. Furthermore, we proposed that any hospital that is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations, but also has a reclassification or redesignation in effect for FY 2015 (from a pre-existing reclassification or redesignation granted prior to FY 2015), would not be eligible for the 3-year transition wage index. This is because if the hospital is reclassified or redesignated in some manner, it would instead receive a wage index that reflects its own choice to obtain its reclassified or redesignated status. Accordingly, if a hospital is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations and such hospital sought and was granted reclassification or redesignation for FY 2015 or such hospital seeks and is granted any reclassification or redesignation for FY 2016 or FY 2017, we proposed that the hospital would permanently lose its 3-year transitional assigned wage index status, and would not be eligible to reinstate it. For example, if a hospital that is currently urban but would become rural under the new OMB delineations received a 3-year transition wage index in FY 2015 based on the wage index of the urban CBSA to which it was geographically located in FY 2014 and then by its own choice, reclassifies to obtain a different area wage index in FY 2016, the hospital would not be eligible to reinstate the transition wage index, even if it opts to cancel its reclassification for FY 2017. We proposed the transition adjustment to assist hospitals if they experience a negative payment impact specifically due to the proposed adoption of the new OMB delineations in FY 2015. If a hospital chooses in a future fiscal year to forego this transition adjustment by PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 obtaining some form of reclassification or redesignation, we do not believe reinstatement of this transition adjustment would be appropriate. The purpose of the adjustment is to assist hospitals that may be negatively impacted by the new OMB delineations in transitioning to a wage index based on these delineations. By obtaining a reclassification or redesignation, we believe that the hospital has made the determination that the transition adjustment is not necessary because it has other viable options for mitigating the impact of the transition to the new OMB delineations. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), with respect to the wage index computation, we proposed to follow our existing policy regarding the inclusion of a hospital’s wage index data in the CBSA in which it is geographically located (we refer readers to Step 6 of the method for computing the unadjusted wage index in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592)). Accordingly, beginning with FY 2015, we proposed that the wage data of all hospitals receiving this type of 3-year transition adjustment would be included in the statewide rural area in which they are geographically located under the new OMB labor market area delineations. After the 3-year transition period, beginning in FY 2018, we proposed that these formerly urban hospitals discussed above would receive their statewide rural wage index, absent any reclassification or redesignation. In addition, we proposed that the hospitals receiving this 3-year transition because they are in counties that were urban under the current CBSA definitions, but would be rural under the new OMB delineations, would not be considered urban hospitals. Rather, they would maintain their status as rural hospitals for other payment considerations. This is because our proposal to apply a 3-year transitional wage index for these newly rural hospitals only applies for the purpose of calculating the wage index under our proposal to adopt the new CBSA delineations. We did not propose transitions for other IPPS payment policies that may be impacted by the proposed adoption of the new CBSA delineations. However, we will continue to apply the existing regulations at § 412.102 with respect to determining DSH payments in the first year after a hospital loses urban status (we refer readers to section II.B.2.e.(7) of the preambles of the proposed rule and this final rule). Comment: Commenters were supportive of CMS’ proposals to provide E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations a 3-year transition adjustment for hospitals that are shifting from urban to rural areas. Commenters appreciated CMS’ attempt to mitigate the negative effects of the application of the new OMB labor market delineations. Some commenters questioned why hospitals that switch from urban to rural could benefit from a longer 3-year transition adjustment, while other hospitals that would also be negatively affected by the transition could only benefit from a single year of a blended transition adjustment. They suggested a similar 3year transition adjustment for all hospital experiencing a negative impact, including hospitals that are moving from urban to urban, or are not moving at all, but are being impacted by other hospitals moving in or out of the labor market area. Response: We appreciate the commenters’ support for our proposals. We address comments pertaining to the difference between the 3-year urban to rural transition adjustment and the 1year 50/50 blended wage index transition adjustment, as well as the requested 3-year transition period for all hospitals experiencing a negative impact in section III.B.2.e.(4) of the preamble of this final rule. After consideration of the public comments we received, we are finalizing our proposals without modification. We will provide hospitals that are changing from an urban to a rural labor market area a 3-year wage index adjustment. Specifically, for hospitals that are currently located in an urban county that became rural under the new OMB delineations, and have no form of wage index reclassification or redesignation in place for FY 2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the Act, redesignations under section 1886(d)(8)(B) of the Act, or rural reclassifications under section 1886(d)(8)(E) of the Act), we will assign them the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). If the hospital cannot be assigned the wage index value of the CBSA to which it is geographically located in FY 2014 because that CBSA is split apart and no longer exists, and some or all of its constituent counties are added to another urban labor market area under the new OMB delineations, hospitals located in such counties that became rural under the new OMB delineations will be assigned the wage index of the FY 2015 urban labor market area that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 contains the urban county in their FY 2014 CBSA to which they are closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) for a period of 3 fiscal years. Any hospital that is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations, but also has a reclassification or redesignation in effect for FY 2015 (from a preexisting reclassification or redesignation granted prior to FY 2015), will not be eligible for the 3-year transition wage index. Accordingly, if a hospital is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations and such hospital sought and was granted reclassification or redesignation for FY 2015 or such hospital seeks and is granted any reclassification or redesignation for FY 2016 or FY 2017, the hospital will permanently lose its 3year transitional assigned wage index status, and will not be eligible to reinstate it. With respect to the wage index computation, we will follow our existing policy regarding the inclusion of a hospital’s wage index data in the CBSA in which it is geographically located (we refer readers to Step 6 of the method for computing the unadjusted wage index in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592)). Beginning with FY 2015, the wage data of all hospitals receiving this type of 3-year transition adjustment will be included in the statewide rural area in which they are geographically located under the new OMB delineations. After the 3-year transition period, beginning in FY 2018, these formerly urban hospitals discussed above will receive their statewide rural wage index, absent any reclassification or redesignation. In addition, the hospitals receiving this 3year transition because they are in counties that are urban under the current CBSA definitions, but become rural under the new OMB delineations, will not be considered urban hospitals. Rather, they will maintain their status as rural hospitals for other payment considerations. (3) Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) of the Act Where the Urban Area Became Rural Under the New OMB Delineations As discussed in section II.H.3. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061 through 28062) and this final rule, there are some hospitals that are currently geographically located in rural areas but are deemed to be urban under section 1886(d)(8)(B) of the Act. For FY 2015, PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 49959 some of these hospitals currently redesignated under section 1886(d)(8)(B) of the Act would no longer be eligible for deemed urban status under the new OMB delineations, as discussed in detail in section III.H.3. of the preamble of this final rule. Similar to the policy implemented in the FY 2005 IPPS final rule (69 FR 49059), and consistent with the policy we proposed for other hospitals in counties that were urban and would become rural under the new OMB delineations, we proposed to apply the 3-year transition to these hospitals currently redesignated to urban areas under section 1886(d)(8)(B) of the Act that would no longer be deemed urban under the new OMB delineations and would revert to being rural. That is, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we proposed to assign these hospitals the FY 2015 area wage index value of hospitals reclassified to the urban CBSA (that is, the attaching wage index) to which they were redesignated in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). If the hospital cannot be assigned the reclassified wage index value of the CBSA to which it was redesignated in FY 2014 because that CBSA would split apart and no longer exist, and some or all of its constituent counties would be added to another urban labor market area under the new OMB delineations, we proposed that such hospitals would be assigned the wage index of the hospitals reclassified to the FY 2015 urban labor market area that contains the urban county in their FY 2014 redesignated CBSA to which they are closest for a period of 3 fiscal years. We proposed to assign these hospitals the area wage index of hospitals reclassified to a CBSA because hospitals deemed urban under section 1886(d)(8)(B) of the Act are treated as reclassified under current policy, under which such hospitals receive an area wage index that includes wage data of all hospitals reclassified to the area. We did not receive any specific public comment addressing these proposals. In general, commenters were supportive of CMS’ proposal to implement the new OMB labor market delineations, including the policy to mitigate the negative effects of the transition to a new labor market area. We are finalizing our proposal to provide a 3-year adjustment to hospitals that were deemed urban under 1886(d)(8)(B) of the Act under the current labor market delineations, but are considered rural under the new delineations. We will E:\FR\FM\22AUR2.SGM 22AUR2 49960 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV apply the 3-year transition to these hospitals currently redesignated to urban areas under section 1886(d)(8)(B) of the Act that are no longer be deemed urban under the new OMB delineations and will revert to being rural. That is, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we will assign these hospitals the FY 2015 area wage index value of hospitals reclassified to the urban CBSA (that is, the attaching wage index) to which they were redesignated in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). If the hospital cannot be assigned the reclassified wage index value of the CBSA to which it was redesignated in FY 2014 because that CBSA was split apart and no longer exists, and some or all of its constituent counties were added to another urban labor market area under the new OMB delineations, such hospitals will be assigned the wage index of the hospitals reclassified to the FY 2015 urban labor market area that contains the urban county in their FY 2014 redesignated CBSA to which they are closest for a period of 3 fiscal years. We will assign these hospitals the area wage index of hospitals reclassified to a CBSA because hospitals deemed urban under section 1886(d)(8)(B) of the Act are treated as reclassified under current policy, under which such hospitals receive an area wage index that includes wage data of all hospitals reclassified to the area. Beginning in FY 2015, affected hospitals will be assigned the reclassified wage index of an urban area (as described above) for a period of up to 3 years. This wage index assignment will be forfeited if the hospital obtains any form of wage index reclassification or redesignation. (4) Transition for Hospitals That Will Experience a Decrease in Wage Index Under the New OMB Delineations While we believe that instituting the latest OMB labor market area delineations would create a more accurate wage index system, we also recognize that implementing the new OMB delineations may cause some short-term instability in hospital payments. Therefore, in addition to the 3-year transition adjustment for hospitals being transitioned from urban to rural status as discussed above, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28062), we proposed a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applicable effects of reclassification and redesignation) exclusively due to the proposed implementation of the new OMB delineations. Similar to the policy adopted in the FY 2005 IPPS final rule (69 FR 49033), we proposed that a postreclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floor applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We proposed to compare these two wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we proposed that a blended wage index would be computed, consisting of 50 percent of each of the two wage indexes added together. We proposed that this blended wage index would be the hospital’s wage index for FY 2015. We stated our belief that a 1-year, 50/50 blend would mitigate the short-term instability and negative payment impacts due to the proposed implementation of the new OMB delineations, providing hospitals with a transition period during which they may adjust to their new geographic CBSA or may assess any reclassification options that would be available to them starting in FY 2016. We proposed a longer 3-year transition adjustment for hospitals losing urban status because there are significantly fewer affected urban-to-rural hospitals, and we believe the negative impacts to a hospital shifting from urban to rural status would typically be greater than other types of transitions. We believe that a transition period longer than 1 year to address other impacts of the proposed adoption of new OMB delineations would reduce the accuracy of the overall labor market area wage index system because far more hospitals would be affected. In addition, for FY 2015, for hospitals that would receive the proposed 3-year transition, it is possible that receiving the FY 2015 wage index (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) of the CBSA where the hospital is geographically located for FY 2014 might still be less than the FY 2015 wage index that the hospital would have received in the absence of the adoption of the new OMB delineations (particularly in States where the rural floor is historically very high). Therefore, such a hospital may PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 additionally benefit from application of the 50/50 blended wage indexes. Accordingly, we proposed to include the assignment of the 3-year transitional wage index in our calculation of the FY 2015 portion of the 50/50 blended wage index for that hospital. After FY 2015, such a hospital may revert to the second year of the 3-year transition. For example, if Hospital X (formerly part of CBSA 12345, now rural) is assigned CBSA 12345’s FY 2015 wage index value of 1.0000 as part of the 3-year transition, but that FY 2015 wage index value would have been 1.1000 under the previous OMB delineations, that hospital would receive a 50/50 blended wage index of 1.0500 for FY 2015. In FY 2016 and FY 2017, Hospital X would still be eligible to receive the remaining 2 years of the 3-year transition wage index of CBSA 12345 (that is, in FY 2016, Hospital X would receive the FY 2016 wage index of CBSA 12345 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied)), and in FY 2017, Hospital X would receive the FY 2017 wage index of CBSA 12345 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). Comment: Commenters were generally supportive of CMS’ efforts to mitigate the negative impacts from the transition to the new OMB delineations. A number of commenters requested that CMS expand the 1-year 50/50 blended wage index adjustment for a longer period of time. One commenter suggested the adjustment be phased in over multiple years, with a first year adjustment equal to the hospital’s wage index under the current CBSA definitions. Several of these commenters stated that because hospitals cannot obtain an MGCRB reclassification under the new OMB delineations until FY 2016, the adjustment for FY 2015 should negate any negative impacts from the transition to the new OMB delineations. These commenters explained that the MGCRB timetable would not allow them to benefit from newly available reclassification opportunities until at least 1 year following the implementation of new OMB delineations. Other commenters questioned why hospitals that switch from urban to rural could benefit from a longer 3-year transition adjustment, while other hospitals that also would be negatively affected by the transition could only benefit from a single year of a blended transition adjustment, and requested a 3-year transition period for all hospitals experiencing a negative impact. They suggested a similar 3-year E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations transition adjustment for affected hospitals experiencing a negative impact, including the hospitals that are moving from urban to urban, or are not moving at all, but are being impacted by other hospitals moving in or out of the labor market area. Response: We appreciate the commenters’ support. We explored multiple alternatives to the proposed 1year 50/50 blended wage index adjustment. While we acknowledge that some providers will see negative impacts based upon the adoption of the new OMB delineations, we also point out that some providers will experience increases in their wage index values from the new OMB delineations. It is CMS’ longstanding policy to provide temporary adjustments to mitigate negative impacts from the adoption of new policies or procedures. However, these adjustments must be made in a budget-neutral manner, and all wage index values would be reduced to provide for any such transition benefit. We continue to believe that, in general, rural labor markets tend to have lower area wage index values than nearby urban areas. We proposed a longer 3-year transition adjustment for hospitals losing urban status because there are significantly fewer affected urban-to-rural hospitals, and we believe the negative impacts on a hospital shifting from urban to rural status would typically be greater than other types of transitions. We believe that a transition period longer than 1 year to address other impacts of the proposed adoption of new OMB delineations would reduce the accuracy of the overall labor market area wage index system because far more hospitals would be affected. We identified nine hospitals that could be negatively affected by their transition from urban to rural status under the new OMB delineations. Based on our experience regarding the impact of the policy established in FY 2005, we believe it is necessary to provide up to a 3-year transition adjustment for these hospitals to prevent the potential for drastic reductions in wage index values. The relatively small number of affected providers causes little concern for potential budget neutrality adjustment distortions in overall wage index values. However, significantly more providers will be negatively affected by other impacts from adopting the new labor market area delineations. Moving away from a 1-year 50/50 blend to an adjustment value that more closely approximates the hospital’s previous labor market assignment, or providing for a longer transition period, would result in a significantly larger national VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 budget neutrality adjustment. We believe the implementation of the new labor market area delineations will create more accurate representations of a hospital’s labor market areas, and we do not believe it is appropriate to expand or extend the 50/50 blended wage index adjustment further than what was proposed, because doing so would only further delay what we believe are the more refined and accurate labor market areas, based on the recent 2010 Census. Because the wage index is a relative measure of the value of labor in prescribed labor market areas, we believe it is important to implement the new delineations with as minimal a transition as is reasonable. Hospitals currently must wait more than a year for an MGCRB reclassification application to become effective. We do not believe the implementation of new OMB delineations requires any modification to this policy. We believe the 1-year 50/ 50 blended wage index adjustment provides an adequate safeguard against significant hospital payment reductions, and provides hospitals time to assess their reclassification options for future fiscal years. Comment: One group of commenters suggested CMS made an error in calculating the Connecticut rural wage index value under the old FY 2014 OMB definitions. Commenters claimed that CMS incorrectly assigned a hospital as being reclassified under section 1886(d)(8)(B) of the Act (that is, a ‘‘Lugar’’ hospital) when calculating the wage index under the old delineations. This hospital is located in a county that became urban under the new OMB delineations. Commenters claimed that the hospital opted to waive its ‘‘Lugar’’ status effective for FYs 2013, 2014, and FY 2015 in order to receive its outmigration adjustment. However, when CMS calculated the FY 2014 rural wage index for the purpose of applying the proposed transition blend, CMS calculated the rural wage index with this hospital being reclassified. By including this hospital as reclassified to an urban area, the commenters claimed that the wage index based on the ‘‘old’’ labor market area definitions, and therefore, the proposed FY 2015 payment wage index was significantly lower than it would be if this provider was properly identified as rural under the old definitions. Response: In prior fiscal years, the Connecticut rural wage index was set by a single hospital. While there were multiple hospitals located in rural areas in the State, all but one obtained or was granted some form of reclassification to another area. The wage data of rural PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 49961 hospitals that reclassify elsewhere may only be included in their State’s rural wage index if doing so would increase the wage index value (section 1886(d)(8)(C)(ii) of the Act). Because including the reclassified rural Connecticut hospitals would have lowered the State’s rural area wage index value, the wage index was instead based on that single hospital’s data. That hospital was designated urban under section 1886(d)(8)(B) of the Act but waived this status to receive an outmigration adjustment. As discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), a hospital may submit a request to waive its ‘‘Lugar’’ status for a period of 3 years. By doing so, we would no longer consider the hospital to be reclassified and would always use that hospital’s data in the calculation the State’s rural wage index. (We note that while we agree that the hospital waived its reclassification status for FY 2014 by accepting the out-migration adjustment, we disagree that the hospital in question waived its reclassified status for FY 2015. According to our records, the hospital sent a letter to CMS dated July 15, 2011, requesting to accept the outmigration adjustment and waive its Lugar redesignation for FYs 2012, 2013, and 2014.) When calculating the wage index based on the ‘‘old’’ labor market area definitions, CMS considered this hospital as being reclassified under section 1886(d)(8)(B) of the Act. Because all the rural Connecticut hospitals were now considered reclassified, the wage index was based upon their combined data because the baseline rural wage index did not include any hospitals. The result of including all reclassified hospitals was a rural wage index value that was significantly lower than in previous years. Considering that several hospitals in Connecticut benefited from the State’s rural floor, this reduction in the rural wage index affected multiple hospitals in the State. After further consideration of the commenters’ concerns, we agree with the commenters that this hospital should be treated as rural for the portion of the 1-year blended wage index under the FY 2014 delineations because this hospital had waived it Lugar status by accepting the out-migration adjustment in FY 2014. Therefore, we are revising this hospital’s wage index and the wage index of the hospitals affected by this change for FY 2015, as reflected in Tables 2–2, 4A–2 and 4B–2, 4C–2, and 4D–2. After consideration of the public comments we received, we are finalizing the transition policy as proposed. We will apply a 1-year E:\FR\FM\22AUR2.SGM 22AUR2 49962 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations blended wage index for all hospitals that would experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively due to the proposed implementation of the new OMB delineations. In FY 2015, a postreclassified wage index with the rural and imputed floor applied will be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floor applied will be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We will compare these two wage indexes. If the FY 2015 wage index with FY 2015 CBSAs is lower than the FY 2015 wage index with FY 2014 CBSAs, a blended wage index will be computed, consisting of 50 percent of each of the two wage indexes added together. This blended wage index will be the hospital’s wage index for FY 2015. For FY 2015, for hospitals that would receive the proposed 3-year transition, it is possible that receiving the FY 2015 wage index (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied) of the CBSA where the hospital is geographically located for FY 2014 might still be less than the FY 2015 wage index that the hospital would have received in the absence of the adoption of the new OMB delineations (particularly in States where the rural floor is historically very high). In this situation, we will include the assignment of the 3-year transitional wage index in our calculation of the FY 2015 portion of the 50/50 blended wage index for that hospital. After FY 2015, such a hospital may revert to the second year of the 3-year transition. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (5) Impact of Adoption of New OMB Labor Market Area Delineations As we did for the proposed rule (79 FR 28062 through 28063), for this final rule, to illustrate how the adoption of the new OMB labor market area delineations will impact hospitals’ FY 2015 wage indexes, we compared the final FY 2015 occupational mix adjusted post-reclassified wage indexes with rural floor budget neutrality applied under the FY 2014 CBSAs and under the FY 2015 CBSAs using the new OMB delineations. (This analysis does not include the effects of the out-migration adjustment, the frontier floor, the 3-year hold harmless transition wage indexes, or the 1-year transition blended wage indexes). As a result of applying the new OMB delineations to the wage data, the wage index values for 2,409 urban hospitals (85.6 percent) and 412 (65.2 percent) rural hospitals will increase. The wage index values of 2,372 (84.3 percent) urban hospitals will increase by less than 5 percent, and the wage index values of 14 (0.5 percent) urban hospitals will increase by at least 5 percent but less than 10 percent. The wage index values of 23 (0.8 percent) urban hospitals will increase by greater than or equal to 10 percent. The wage index values of 383 (60.6 percent) rural hospitals will increase by less than 5 percent, 18 rural hospitals (2.8 percent) will increase by at least 5 percent but less than 10 percent, and 11 rural hospitals (1.7 percent) will increase by greater than or equal to 10 percent. However, the wage index values for 397 urban hospitals (14.1 percent) and 220 (34.8 percent) rural hospitals will decrease. The wage index values of 341 (12.1 percent) urban hospitals will decrease by less than 5 percent, 50 urban hospitals (1.8 percent) will decrease by at least 5 percent but less than 10 percent, and 6 urban hospitals (0.2 percent) will decrease by greater than or equal to 10 percent. The wage index values of 191 (30.2 percent) rural hospitals will decrease by less than 5 percent, 28 rural hospitals (4.4 percent) will decrease by 5 percent and less than 10 percent, and 1 rural hospital (0.2 percent) will decrease by greater than or equal to 10 percent. The wage index values of 8 (0.3 percent) urban hospitals and zero rural hospitals will remain unchanged by the adoption of the new OMB delineations. The largest positive impacts are for 8 hospitals in 5 States (Texas, Michigan, Minnesota, Louisiana, and Alabama) that will be moving from a rural to an urban area under the new OMB delineations (ranging from a 17.23 percent increase in Texas to a 24.02 percent increase in wage index in Number of post-reclassified rural hospitals based on FY 2014 CBSA Percent change in FY 2015 wage index Decrease greater than or equal to 10.0 .......................................................................... Decrease greater than or equal to 5.0 but less than 10.0 .............................................. Decrease greater than or equal to 2.0 but less than 5.0 ................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00110 Alabama), and for 14 hospitals that will be moving from one urban CBSA (FY 2014 CBSA 20764, Edison-New Brunswick, NJ) to new urban CBSA 35614 (New York-Jersey City-White Plains, NY–NJ) under the new OMB delineations, representing a 15.13 percent increase in wage index. The largest negative impacts will be for 5 hospitals in 4 States (New York, Alabama, Idaho, and North Carolina) that will be moving from an urban to a rural area under the new OMB delineations (ranging from a 12.18 percent decrease in North Carolina to a 27.06 percent decrease in wage index in New York). One hospital in Delaware is moving from a rural to an urban area under the new OMB delineations and will experience an 11.38 percent decrease in wage index. Another hospital in Texas is moving from one urban area to another urban area under the new OMB delineations and will experience a 10.19 percent decrease in wage index. These results illustrate that hospitals that move from rural CBSAs to urban CBSAs under the new OMB delineations generally will benefit significantly, while hospitals that move from urban to rural CBSAs generally will have negative impacts. For all hospitals combined, the wage index values of 2,821 hospitals (81.9 percent) overall will increase, and 617 hospitals (17.9 percent) overall will decrease, indicating that most hospitals will be positively affected by the adoption of the new OMB delineations. Furthermore, the magnitude of the changes will be relatively small overall, with only 151 hospitals (4.4 percent) experiencing either an increase or decrease of at least 5 percent. The following table shows the impact of the adoption of the new OMB delineations on hospitals’ FY 2015 wage indexes, comparing the FY 2015 occupational mix adjusted postreclassified wage indexes with rural floor budget neutrality applied under the FY 2014 CBSAs and the FY 2015 CBSAs using the new OMB delineations. (This analysis does not include the effects of the out-migration adjustment, the frontier floor, the 3-year hold harmless transition wage indexes, or the 1-year transition blended wage indexes.) Fmt 4701 Sfmt 4700 Number of post-reclassified urban hospitals based on FY 2014 CBSA Total number of hospitals 1 28 33 6 50 88 7 78 121 E:\FR\FM\22AUR2.SGM 22AUR2 49963 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Number of post-reclassified rural hospitals based on FY 2014 CBSA Number of post-reclassified urban hospitals based on FY 2014 CBSA Total number of hospitals Decrease greater than 0.0 but less than 2.0 .................................................................. No change ....................................................................................................................... Increase greater than 0.0 but less than 2.0 .................................................................... Increase greater than or equal to 2.0 but less than 5.0 ................................................. Increase greater than or equal to 5.0 but less than 10.0 ............................................... Increase greater than or equal to 10.0 ............................................................................ 158 0 376 7 18 11 253 8 2,331 41 14 23 411 8 2,707 48 32 34 Total .......................................................................................................................... 632 2,814 3,446 Percent change in FY 2015 wage index We did not receive any public comments on the analysis in the proposed rule showing the effects of adopting the new CBSA delineations. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (6) Budget Neutrality In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063), for FY 2015, we proposed to apply both the 3year transition and 50/50 blended wage index adjustments in a budget neutral manner. We proposed to make an adjustment to the standardized amount to ensure that the total payments, including the effect of the transition provisions, would equal what payments would have been if we would not be providing for any transitional wage indexes under the new OMB delineations. We did not receive any public comments specific to our proposal to implement the 3-year transition and the 50/50 blended wage index adjustments in a budget neutral manner. We are finalizing the policy as proposed. For a complete discussion on this budget neutrality adjustment for FY 2015, we refer readers to section II.A.4.b. of the Addendum to this final rule. We note that, consistent with past practice (69 FR 49034), we are not adopting the new OMB delineations themselves in a budget neutral manner. We do not believe that the revision to the labor market areas in and of itself constitutes an ‘‘adjustment or update’’ to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act. (7) Determining Disproportionate Share Hospital (DSH) Payments Under the New OMB Delineations As noted in the FY 2005 IPPS final rule (69 FR 49033), the provisions of § 412.102 of the regulations continue to apply with respect to determining DSH payments for hospitals affected by our adoption of the new OMB delineations. Specifically, in the first year after a hospital loses urban status, the hospital would receive an additional payment that equals two-thirds of the difference VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital would receive an additional payment that equals onethird of the difference between the urban DSH payments applicable to the hospital before its redesignation from urban to rural and the rural DSH payments applicable to the hospital subsequent to its redesignation from urban to rural. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063 through 28064), we proposed to make changes to the regulations to delete § 412.64(b)(1)(ii)(D). In this provision, we currently define a ‘‘hospital reclassified as rural’’ as a hospital located in a county that, in FY 2004, was urban but was redesignated as rural after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003. Because the term ‘‘hospital reclassified as rural’’ is not used in § 412.64, but is used in § 412.102, we proposed to delete § 412.64(b)(1)(ii)(D) and revise the language at § 412.102 to address the circumstances set forth in § 412.64(b)(1)(ii)(D). The regulation at § 412.102, which addresses special treatment of hospitals located in areas that are changing from urban to rural as a result of a geographic redesignation, is the only location that currently references a ‘‘hospital reclassified as rural’’, as defined at § 412.64(b)(1)(ii)(D). To avoid confusion with urban hospitals that choose to reclassify as rural under § 412.103, we proposed to revise the regulation text at § 412.102 so that it no longer refers to the defined term ‘‘hospital reclassified as rural,’’ and instead specifically states the circumstances in which § 412.102 applies. In addition, we proposed to modify the regulation text so that it would apply to all transitions from PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 urban to rural status that occur as a result of any future adoption of new or revised OMB standards for delineating statistical areas adopted by CMS. Specifically, we proposed to revise the regulations at § 412.102 to state that an urban hospital that was part of an MSA, but was redesignated as rural as a result of the most recent OMB standards for delineating statistical areas adopted by CMS, may receive an adjustment to its rural Federal payment amount for operating costs for 2 successive fiscal years as provided in paragraphs (a) and (b) of the section. We did not receive any public comments regarding either of these proposals. We are finalizing the changes to § 412.102 and § 412.64(b)(1)(ii)(D) as proposed, effective for FY 2015. C. Worksheet S–3 Wage Data for the FY 2015 Wage Index The FY 2015 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2011 (the FY 2014 wage indexes were based on data from cost reporting periods beginning during FY 2010). 1. Included Categories of Costs The FY 2015 wage index includes the following categories of data associated with costs paid under the IPPS (as well as outpatient costs): • Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty); • Home office costs and hours; • Certain contract labor costs and hours (which includes direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315 through 47318)); and • Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS E:\FR\FM\22AUR2.SGM 22AUR2 49964 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations final rule (76 FR 51586 through 51590)) and other deferred compensation costs. 2. Excluded Categories of Costs Consistent with the wage index methodology for FY 2014, the wage index for FY 2015 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as skilled nursing facility (SNF) services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The FY 2015 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index, for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398). tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 3. Use of Wage Index Data by Suppliers and Providers Other Than Acute Care Hospitals Under the IPPS Data collected for the IPPS wage index also are currently used to calculate wage indexes applicable to suppliers and other providers, such as SNFs, home health agencies (HHAs), ambulatory surgical centers (ASCs), and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indexes of any supplier or provider except IPPS providers and LTCHs. Such comments should be made in response to separate proposed rules for those suppliers and providers. D. Verification of Worksheet S–3 Wage Data The wage data for the FY 2015 wage index were obtained from Worksheet S– 3, Parts II and III of the Medicare cost report for cost reporting periods beginning on or after October 1, 2010, and before October 1, 2011. For wage index purposes, we refer to cost reports during this period as the ‘‘FY 2011 cost report,’’ the ‘‘FY 2011 wage data,’’ or the ‘‘FY 2011 data.’’ Instructions for completing the wage index sections of Worksheet S–3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15–2), Chapter 40, Sections 4005.2 through 4005.4 for Form CMS–2552–10. The data file used to construct the FY 2015 wage index includes FY 2011 data submitted to us as of June 25, 2014. As in past years, we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 performed an extensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our MACs to revise or verify data elements that result in specific edit failures. For the proposed FY 2015 wage index, we stated that we identified and excluded 50 providers with aberrant data that should not be included in the wage index, although we stated that if data elements are corrected, we intended to include data from those providers in the final FY 2015 wage index (79 FR 28064). We have since determined that we had only removed 49, not 50, providers with aberrant data from the proposed wage index. We have received corrected data from 19 providers and data from an additional provider, and therefore, we are including the data for these 20 providers in the final FY 2015 wage index. However, since issuance of the proposed rule, we have determined that the data from 4 other providers (not included in the original 49 providers) were aberrant and should not be included in the final FY 2015 wage index. Therefore, in total, we are excluding the data of 34 providers from the final FY 2015 wage index. In constructing the FY 2015 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2011, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area’s current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed rule, we removed 6 hospitals that converted to CAH status on or after February 14, 2013, the cut-off date for CAH exclusion from the FY 2014 wage index, and through and including February 13, 2014, the cut-off date for CAH exclusion from the FY 2015 wage index. After removing hospitals with aberrant data and hospitals that converted to CAH status, the final FY 2015 wage index is calculated based on 3,416 hospitals. For the final FY 2015 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located in the same manner that we allotted such hospitals’ PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 data in the FY 2014 wage index (78 FR 50587). Table 2 containing the final FY 2015 wage index associated with this final rule (available via the Internet on the CMS Web site) includes separate wage data for the campuses of 6 multicampus hospitals. Comment: Commenters representing hospitals located in CBSA 46140 disagreed with the removal of the wage data of one hospital in that CBSA from the FY 2015 wage index. They argued that CMS’s removal of the hospital’s data is arbitrary and capricious, based only on the fact that the hospital’s average hourly wage is higher than those of the other hospitals in the CBSA. The commenters noted that the hospital’s data were included in the wage index in previous years, and CMS has provided ‘‘no rational explanation for its inconsistent treatment now.’’ The commenters further stated that ‘‘if CMS were to adopt a policy of excluding the hospital with the highest wage data from each CBSA, fairness would require that CMS also exclude the hospital with the lowest wage data from each CBSA.’’ The commenters stated that if CMS is employing a ‘‘bright-line cut off,’’ CMS must publish such ‘‘bright-line tests.’’ Response: Section 1886(d)(3)(E) of the Act requires the Secretary to adjust the proportion of hospitals’ costs attributable to wages and wage-related costs for area differences reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. We also refer readers to section 1886(d)(9)(C)(iv)(I) of the Act. Since the origin of the IPPS, the wage index has been subject to its own annual review process, first by the MACs, and then by CMS. Hospitals are aware that both the MACs (via instructions issued by CMS) and CMS evaluate the accuracy and reasonableness of hospitals’ wage index data. Each year, in every IPPS proposed rule, we discuss the process wherein CMS asks the MACs to ‘‘revise or verify data elements that result in specific edit failures’’ (most recently, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28064)). We state that, in constructing the wage index, we include the wage data for facilities that were IPPS hospitals in the relevant cost reporting year (that is, FY 2011 for the FY 2015 wage index), and that we include ‘‘those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations areas during the relevant past period and to ensure that the current wage index represents the labor market area’s current wages as compared to the national average of wages’’ (emphasis added; 79 FR 28064). CMS has historically exercised its discretion in developing a wage index that reflects a relative measure of the value of the labor provided to a typical hospital in a particular labor market area. We applied these same procedures, as discussed below, to the hospital at issue, and we disagree with the commenters that we have arbitrarily and capriciously removed the wage data of the cited hospital from the FY 2015 wage index. In the instance of the particular hospital to which the commenters refer, while the hospital’s wage data was properly documented, it did not merely have the highest average hourly wage in the CBSA; its average hourly wage was extremely and unusually high, significantly higher than the next highest average hourly wage in that CBSA and in the surrounding areas. We do not believe that the average hourly wage of this particular hospital accurately reflects the economic conditions in its labor market area during the FY 2011 cost reporting period, and, therefore, its inclusion in the wage index would not ensure that the FY 2015 wage index represents the labor market area’s current wages as compared to the national average of wages. Accordingly, we have exercised our discretion to remove this hospital’s wage data from the February 20, 2014 PUF, and from the May 2, 2014 PUF as well. Similarly, we have exercised our discretion by removing from the wage index (in FY 2015 and in prior years) the data of hospitals with average hourly wages that are unusually and uncharacteristically low for their respective CBSAs because we believe that the wage data of those hospitals also do not accurately reflect the economic conditions in their labor market area. We included the hospital’s data in the wage index in previous years because the hospital’s average hourly wage was lower and more reasonable relative to its labor market area in the prior years and, thus, we did not remove the hospital’s wage data from the prior years’ wage index. Questions have been raised recently regarding the reporting of contract housekeeping and dietary services on Worksheet S–3, Part II, lines 33 and 35 of the Medicare cost report. CMS finalized its proposal to begin collecting contract labor costs and hours for housekeeping, and dietary (along with management services and the overhead VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 services of administrative and general) in the FY 2003 IPPS final rule (67 FR 50022 through 50023). At that time, we stated, ‘‘We continue to consider whether to expand our contract labor definition to include more types of contract services in the wage index. In particular, we have examined whether to include the costs for acquired dietary and housekeeping services, as many hospitals now provide these services through contracts. Costs for these services tend to be below the average wages for all hospital employees. Therefore, excluding the costs and hours for these services if they are provided under contract, while including them if the services are provided directly by the hospital, creates an incentive for hospitals to contract for these services in order to increase their average hourly wage for wage index purposes’’ (67 FR 50022). In the FY 2003 IPPS proposed rule, we explained that we selected the three overhead services of administrative and general, housekeeping, and dietary because they are provided at all hospitals, either directly or through contracts, and together they comprise about 60 percent of a hospital’s overhead hours (67 FR 31433). In the FY 2003 IPPS final rule, we stated that we ‘‘will monitor the hospital industry for information regarding the hospitals’ ability to provide the data. Further, we will work with hospitals and intermediaries [MACs] to develop acceptable methods for tracking the costs and hours. Finally, before including these additional costs in the wage index, we will provide a detailed analysis of the impact of including these additional costs in the wage index values in the Federal Register and provide for public comment. Our final decision on whether to include contract indirect patient care labor costs in our calculation of the wage index will depend on the outcome of our analyses and public comments’’ (67 FR 50023). Subsequent to the issuance of the FY 2003 IPPS final rule, we revised Worksheet S–3, Part II of the Medicare cost report (CMS Form 2552–96) to add four lines for the reporting of contract labor salaries, wages, and hours. The lines added for contract housekeeping and dietary services were lines 26.01 and 27.01, respectively. (Line 9.03 for contract management and line 22.01 for contract administrative and general (A&G) services were also added at that time). These lines were effective with cost reporting periods beginning on or after October 1, 2003 (that is, FY 2004). Because the cost report data used for the wage index are on a 4-year lag, data PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 49965 from these new contract labor lines would first be available for the FY 2008 wage index. In the FY 2008 rulemaking process, we provided an analysis of the effect on the inclusion in the wage index of the wages and hours related to the new contract labor lines. At that time, 56 hospitals (1.6 percent) failed edits for contract housekeeping line 26.01; and 99 hospitals (2.8 percent) failed edits for contract dietary line 27.01 (72 FR 24680 and 24782). We also noted that ‘‘many of these edit failures are for wage data that are not to be included in the wage index and will be excluded through the wage index calculation. . . . In addition, some of the aberrant data will be resolved by the final rule through the correction process’’ (72 FR 24680 and 24782). The small percentage of hospitals that failed edits for these contract labor lines indicates that the vast majority of hospitals completing these contract labor lines were able to obtain and report reasonable salaries, wages, and hours associated with contract housekeeping and dietary services. In the FY 2008 IPPS final rule, we stated that we believe that ‘‘the impact of this policy is generally very minor, and we do not believe the additional complexity of a transition wage index is warranted for an impact this small. Further, we continue to believe it is prudent policy to include in the wage index the costs for these contract indirect patient care services’’ (72 FR 47316). Therefore, we adopted the policy to include the new contract labor lines in the wage index, beginning with the FY 2008 wage index. The questions that have recently come to our attention involve hospitals that consistently do not provide documentable salaries, wages, and hours for their contracted housekeeping and/or dietary services. (On the Medicare cost report (CMS Form 2552– 10), contract housekeeping is on Worksheet S–3, Part II, line 33 and contract dietary is on line 35). When this situation occurs, CMS has instructed the MACs to use reasonable estimates, such as regional average hourly rates, as a substitute for actual wages and hours, and to report the estimates on the hospital’s Worksheet S–3, Part II, line 33 or line 35, respectively. Our policy has been to use reasonable estimates for these housekeeping and dietary lines, rather than report zeroes for wages and hours, because, as discussed above and as stated in the FY 2003 IPPS final rule, ‘‘{c}osts for these services tend to be below the average wages for all hospital employees. Therefore, excluding the costs and hours for these services if they E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49966 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations are provided under contract, while including them if the services are provided directly by the hospital, creates an incentive for hospitals to contract for these services in order to increase their average hourly wage for wage index purposes’’ (57 FR 50022). We understand that the reason many hospitals provide for failing to report such contract wages and hours is that their contracts do not clearly specify this information, often because they use a single vendor to provide several different contract labor services. We believe that allowing hospitals to routinely use contracts that do not clearly break out the salaries, wages, and hours associated with these services as a reason for not being able to report proper salaries, wages, and hours for these cost report lines undermines the purpose of instituting these lines in the first place. Furthermore, because every hospital must provide housekeeping and dietary services, and because the wage index is a relative measure of the value of the labor provided to a hospital in a particular labor market area, to report zeroes for salaries, wages, and hours for housekeeping and dietary services is not only unrealistic (in that every hospital provides for these services), but also misrepresents the labor costs in that area and undermines our policy. Consequently, CMS has instructed the MACs not to zero out these line items when a hospital cannot document the housekeeping or dietary salaries, wages, and hours, but instead to use a reasonable estimation of these wages and hours. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28065 through 28066) rule, we reiterated our requirement that all hospitals must document salaries, wages, and hours for the purpose of reporting this information on Worksheet S–3, Part II, lines 32, 33, 34, and/or 35 (for either directly employed housekeeping and dietary employees on lines 32 and 34, and contract labor on lines 33 and 35). It is not acceptable for a hospital to request that the MACs zero out these line items if the hospital’s contract does not specifically break out the actual wages and hours. As indicated above, and stated in the FY 2008 IPPS proposed rule (72 FR 24680 and 24782), a small percentage of hospitals failed edits associated with the contract housekeeping and dietary lines, showing that the vast majority of hospitals reporting data on these lines were able to obtain and report reasonable salaries, wages, and hours associated with contract housekeeping and dietary services. We encourage VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospitals to ensure that their contracts clearly specify the salaries, wages, and hours related to all of their contract labor. Because these line items have been included in the cost report since FY 2004, we believe that hospitals have had adequate notice and time to structure their contracts so that the wages and hours of contract employees can be determined and included in the cost reports. We expect hospitals to provide accurate data on their cost reports. We understand that there may be rare situations where a hospital would not have documentable salaries, wages, and hours for contract housekeeping and dietary services. In these situations, we believe that it is appropriate and necessary to use reasonable estimates for these numbers in order to determinate the best, most realistic, wage index that we can. As discussed previously, housekeeping and dietary services are unique in that the costs for housekeeping and dietary services tend to be below the average wages for all hospital employees. Thus, an incentive is created for hospitals to avoid reporting these contract labor salaries, wages, and hours on the cost report in order to increase their average hourly wage for wage index purposes. To deter hospitals from not reporting this information and to ensure that the wage index more accurately reflects the labor costs in an area, we believe that it is both necessary and appropriate for the MACs to estimate such salaries, wages, and hours in the rare instance where a hospital cannot provide such information. Therefore, in the absence of documentable wages and hours for contract housekeeping and dietary services, MACs would continue to use reasonable estimates for these services. Examples of reasonable estimates are regional average hourly rates, including an average of the wages and hours for dietary and housekeeping services of other hospitals in the same CBSA as the hospital in question. Hospitals also may conduct time studies to determine hours worked. If, for whatever reason, regional averages or time studies cannot be used, MACs may use data from the Bureau of Labor Statistics to obtain average wages and hours for housekeeping and dietary services. Commenters may also suggest alternatives for imputing reasonable estimates for possible consideration by CMS. In all cases, MACs must determine that the data used are reasonable. Comment: One commenter encouraged CMS to instruct the MACs to be consistent across their entire jurisdiction in how the MACs estimate wages and hours for contract dietary PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 and housekeeping services, in the instances where there is a lack of documentable wages and hours for these services. Another commenter noted that CMS stated that commenters may suggest alternatives for imputing reasonable estimates for possible consideration by CMS. This commenter asked that CMS consider eliminating entirely all wages and hours associated with dietary and housekeeping services, both for hospital employees and contract labor, based on the belief that these services represent an ‘‘immaterial’’ 3.27 percent of total Worksheet S–3, Part II, line 1 wages, and their removal from the wage index would remove a time-consuming burden for both providers and MACs. The commenter asserted that if all wages and hours associated with dietary and housekeeping services were eliminated from the wage index, the ‘‘comparison among hospitals would remain meaningful and would remove any disparity among hospitals related to the issue.’’ Response: We agree with the first commenter that it is important for CMS’ policies and instructions to be implemented uniformly by the MACs across all jurisdictions. We provide updated and uniform instructions to the MACs each year prior to the start of the annual wage index desk review process, and also communicate with the MACs through various media throughout each annual wage index cycle, including instructions on how to estimate wages and hours for contract dietary and housekeeping services in the absence of documentable wages and hours for these categories. We do not agree with the second commenter’s request that CMS eliminate entirely all wages and hours associated with dietary and housekeeping services, both for hospital employees and contract labor. The IPPS wage index is a relative measure of the value of all types of labor provided to a typical hospital in a particular labor market area, not just the labor with high average hourly wages. We believe it would be inappropriate to agree to selectively include, or exclude, certain categories of labor from the wage index because doing so would result in a less accurate measure of labor costs and would undermine the relativity of the wage index as whole. We believe that hospitals have had adequate notice and time to structure their contracts so that the wages and hours of contract employees can be determined and included in the cost reports. We expect hospitals to provide accurate data on their cost reports, and the accuracy of the wages and hours of contract labor E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations will continue to be reviewed by the MACs as part of the annual desk review process. As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28065 through 28066), to deter hospitals from not reporting this information and to ensure that the wage index more accurately reflects the labor costs in an area, we believe that it is both necessary and appropriate for MACs to estimate such salaries, wages, and hours in the rare instance where a hospital cannot provide such information for its dietary and housekeeping services under contract. We will continue to instruct the MACs to use reasonable estimates for these services, in the absence of documentable wages and hours for contract housekeeping and dietary services. E. Method for Computing the FY 2015 Unadjusted Wage Index The method used to compute the FY 2015 wage index without an occupational mix adjustment follows the same methodology that we used to compute the FY 2012, FY 2013, and FY 2014 final wage indexes without an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366 through 53367, and 78 FR 50587 through 50588, respectively). As discussed in the FY 2012 final rule, in ‘‘Step 5,’’ for each hospital, we adjust the total salaries plus wagerelated costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2010, through April 15, 2012, for private industry hospital workers from the BLS’ Compensation and Working Conditions. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we did not propose any changes to the usage for FY 2015 (79 FR 28066). The factors used to adjust the hospital’s data were based on the midpoint of the cost reporting period, as indicated in the following table. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MIDPOINT OF COST REPORTING PERIOD MIDPOINT OF COST REPORTING PERIOD—Continued After Before Adjustment factor 05/14/2011 06/14/2011 07/14/2011 08/14/2011 09/14/2011 10/14/2011 11/14/2011 12/14/2011 01/14/2012 02/14/2012 03/14/2012 06/15/2011 07/15/2011 08/15/2011 09/15/2011 10/15/2011 11/15/2011 12/15/2011 01/15/2012 02/15/2012 03/15/2012 04/15/2012 1.01219 1.01084 1.00948 1.00811 1.00674 1.00538 1.00403 1.00269 1.00134 1.00000 0.99866 For example, the midpoint of a cost reporting period beginning January 1, 2011, and ending December 31, 2011, is June 30, 2011. An adjustment factor of 1.01084 would be applied to the wages of a hospital with such a cost reporting period. Using the data as described above and in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50587 through 50588), the FY 2015 national average hourly wage (unadjusted for occupational mix) is $39.2971. The FY 2015 Puerto Rico overall average hourly wage (unadjusted for occupational mix) is $16.9893. F. Occupational Mix Adjustment to the FY 2015 Wage Index As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals’ employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor. After Before Adjustment factor 1. Development of Data for the FY 2015 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey 10/14/2010 11/14/2010 12/14/2010 01/14/2011 02/14/2011 03/14/2011 04/14/2011 11/15/2010 12/15/2010 01/15/2011 02/15/2011 03/15/2011 04/15/2011 05/15/2011 1.02230 1.02078 1.01929 1.01782 1.01637 1.01494 1.01355 As provided for under section 1886(d)(3)(E) of the Act, we collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 49967 As discussed in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50588), the occupational mix adjustment to the FY 2014 wage index was based on data collected on the 2010 Medicare Wage Index Occupational Mix Survey (Form CMS–10079 (2010)). For the FY 2015 wage index, we proposed to use the occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2015. We did not receive any public comments on this proposal; therefore, we are finalizing our policy to use the occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2015. We are including data for 3,183 hospitals that also have wage data included in the FY 2015 wage index. 2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index As stated earlier, section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We used occupational mix data collected on the 2010 survey to compute the occupational mix adjustment for FY 2013, FY 2014, and the FY 2015 wage index associated with this final rule. Therefore, a new measurement of occupational mix is required for FY 2016. On December 7, 2012, we published in the Federal Register a notice soliciting comments on the proposed 2013 Medicare Wage Index Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 survey, which will be applied to the FY 2016 wage index, includes the same data elements and definitions as the 2010 survey and provides for the collection of hospital-specific wages and hours data for nursing employees for calendar year 2013 (that is, payroll periods ending between January 1, 2013 and December 31, 2013). The comment period for the notice ended on February 5, 2013. After considering the public comments that we received on the December 2012 notice, we made a few minor editorial changes and published the 2013 survey in the Federal Register on February 28, 2013 (78 FR 13679). This survey was approved by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/WAGEINDEX-OCCUPATIONAL-MIX-SURVEY 2013.pdf. The 2013 Occupational Mix Survey Hospital Reporting Form CMS–10079 E:\FR\FM\22AUR2.SGM 22AUR2 49968 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV for the Wage Index Beginning FY 2016 (in excel format) is available on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/Medicare-WageIndex-Occupational-MixSurvey2013.html?DLPage=1&DLSort=1& DLSortDir=descending. Hospitals were required to submit their completed 2013 surveys to their MACs by July 1, 2014. The preliminary, unaudited 2013 survey data was posted on the CMS Web site afterward, on July 11, 2014. The FY 2012 Worksheet S–3 wage data for the FY 2016 wage index review and correction process was posted on the CMS Web site in May 2014. Both the preliminary FY 2016 wage data and occupational mix survey data can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatient PPS/Wage-Index-Files-Items/FY-2016Wage-Index-Home-Page.html?DLPage= 1&DLSort=1&DLSortDir=descending. 3. Calculation of the Occupational Mix Adjustment for FY 2015 For FY 2015, we proposed to calculate the occupational mix adjustment factor using the same methodology that we used for the FY 2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77 FR 53367 through 53368, and 78 FR 50588 through 50589, respectively). As a result of applying this methodology, the proposed FY 2015 occupational mix adjusted national average hourly wage (based on the proposed new OMB labor market area delineations) was $39.1177. The proposed FY 2015 occupational mix adjusted Puerto Rico-specific average hourly wage (based on the proposed new OMB labor market area delineations) was $17.0526. Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2015 wage index. For the proposed FY 2015 wage index, because we are using the Worksheet S–3, Parts II and III wage data of 3,400 hospitals, and we are using the occupational mix surveys of 3,165 hospitals for which we also have Worksheet S–3 wage data, that represents a ‘‘response’’ rate of 93.1 percent (3,165/3,400). In the proposed FY 2015 wage index established in the FY 2015 IPPS/LTCH PPS proposed rule, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 23943 and 75 FR 50167, respectively), we stated that, in order to gain a better understanding of why some hospitals are not submitting the occupational mix data, we will require hospitals that do not submit occupational mix data to provide an explanation for not complying. This requirement was effective beginning with the 2010 occupational mix survey. We instructed MACs to continue gathering this information as part of the FY 2014 and FY 2015 wage index desk review process. We stated that we would review these data for future analysis and consideration of potential penalties for noncompliant hospitals. Comment: One commenter stated that all hospitals should be obligated to submit the occupational mix survey because failure to complete the survey jeopardizes the accuracy of the wage index. The commenter added that a penalty should be instituted for nonsubmitters. The commenter also stated that pending CMS’ analysis of the Commuting Based Wage Index and the Institute of Medicine’s study on geographic variation in hospital wage costs, CMS should eliminate the occupational mix survey and the significant reporting burden it creates. Response: We appreciate the commenter’s concern for the accuracy of the wage index, and we have continually exhorted all hospitals to complete and submit the occupational mix surveys. We did not propose a particular penalty for hospitals that do not submit the CY 2013 occupational mix survey, but we are continuing to consider for future rulemaking various options for ensuring full compliance. Examples include applying a hospital’s occupational mix survey data from a previous survey period to the current wage index of a given fiscal year; including the occupational mix survey as part of the cost report, and if not completed, the cost report would be rejected by the MAC; or application of a State-specific minimum or reduced occupational mix adjustment. Regarding the commenter’s request that CMS should eliminate the survey due to the burden it creates, section 1886(d)(3)(E) of the Act requires us to measure the earnings and paid hours of employment by occupational category. As long as the requirement to apply an occupational mix adjustment to the wage index remains in place in the statute, there PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 may be some amount of administrative burden involved in reporting that data. After consideration of the public comments we received, for FY 2015, we are finalizing our proposal to calculate the occupational mix adjustment factor using the same methodology that we used for the FY 2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77 FR 53367 through 53368, and 78 FR 50588 through 50589, respectively). As a result of applying this methodology, the FY 2015 occupational mix adjusted national average hourly wage (based on the new OMB labor market area delineations) is $39.2591. The FY 2015 occupational mix adjusted Puerto Rico-specific average hourly wage (based on the new OMB labor market area delineations) is $17.0410. For the FY 2015 wage index, because we are using the Worksheet S– 3, Parts II and III wage data of 3,416 hospitals, and we are using the occupational mix surveys of 3,183 hospitals for which we also have Worksheet S–3 wage data, that represents a ‘‘response’’ rate of 93.2 percent (3,183/3,416). G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2015 Occupational Mix Adjusted Wage Index 1. Analysis of the Occupational Mix Adjustment and the Occupational Mix Adjusted Wage Index As discussed in section III.F. of the preamble of this final rule, for FY 2015, we apply the occupational mix adjustment to 100 percent of the FY 2015 wage index. We calculated the occupational mix adjustment using data from the 2010 occupational mix survey data, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586). Using the occupational mix survey data and applying the occupational mix adjustment to 100 percent of the FY 2015 wage index results in a national average hourly wage (based on the new OMB labor market area delineations) of $39.2591 and a Puerto-Rico specific average hourly wage of $17.0410. After excluding data of hospitals that either submitted aberrant data that failed critical edits, or that do not have FY 2011 Worksheet S–3, Parts II and III, cost report data for use in calculating the FY 2015 wage index, we calculated the FY 2015 wage index using the occupational mix survey data from 3,183 hospitals. For the FY 2015 wage index, because we are using the Worksheet S–3, Parts II and III wage data of 3,416 hospitals, and we are using the occupational mix survey data of E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 3,183 hospitals for which we also have Worksheet S–3 wage data, those data represent a ‘‘response’’ rate of 93.2 percent (3,183/3,416). The FY 2015 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows: Average hourly wage National RN .......................... National LPN and Surgical Technician ......................... National Nurse Aide, Orderly, and Attendant .................... National Medical Assistant ... National Nurse Category ...... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Occupational mix nursing subcategory 37.420970136 21.78229118 15.31107725 17.251053917 31.769556957 The national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $31.769556957. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0. Based on the 2010 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the nurse category is 43.46 percent, and the national percentage of hospital employees in the all other occupations category is 56.54 percent. At the CBSA level, using the new OMB delineations for FY 2015, the percentage of hospital employees in the nurse category ranged from a low of 21.88 percent in one CBSA to a high of 62.04 percent in another CBSA. We compared the FY 2015 occupational mix adjusted wage indexes for each CBSA to the unadjusted wage indexes for each CBSA. We used the FY 2015 new OMB delineations for this analysis. As a result of applying the occupational mix adjustment to the wage data, the wage index values for 219 (53.8 percent) urban areas and 29 (61.7 percent) rural areas increased. One hundred and nineteen (29.2 percent) urban areas will increase by 1 percent but less than 5 percent, and 4 (1.0 percent) urban areas will increase by 5 percent or more. Fourteen (29.8 percent) rural areas will increase by 1 percent but less than 5 percent, and no rural areas will increase by 5 percent or more. However, the wage index values for 186 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (45.7 percent) urban areas and 18 (38.3 percent) rural areas decreased. Seventy nine (19.4 percent) urban areas will decrease by 1 percent but less than 5 percent, and 1 (0.2 percent) urban area will decrease by 5 percent or more. Seven (14.9 percent) rural areas will decrease by 1 percent and less than 5 percent, and no rural areas will decrease by 5 percent or more. The largest positive impacts will be 6.58 percent for an urban area and 3.36 percent for a rural area. The largest negative impacts will be 5.32 percent for an urban area and 1.73 percent for a rural area. Two urban areas’ wage indexes, but no rural area wage indexes, will remain unchanged by application of the occupational mix adjustment. These results indicate that a larger percentage of rural areas (61.7 percent) will benefit from the occupational mix adjustment than will urban areas (53.8 percent). However, approximately one-third (38.3 percent) of rural CBSAs will still experience a decrease in their wage indexes as a result of the occupational mix adjustment. 2. Application of the Rural, Imputed, and Frontier Floors a. Rural Floor Section 4410(a) of Public Law 105–33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the ‘‘rural floor.’’ Section 3141 of Public Law 111–148 also requires that a national budget neutrality adjustment be applied in implementing the rural floor. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28068), based on the proposed FY 2015 wage index associated with the proposed rule and based on the proposed implementation of the new OMB delineations discussed in section III.B. of the preamble of the proposed rule, we estimated that 441 hospitals would receive an increase in their FY 2015 proposed wage index due to the application of the rural floor. Based on the final FY 2015 wage index associated with this final rule and available on the CMS Web site and based on the implementation of the new OMB delineations, 422 hospitals are receiving an increase in their FY 2015 wage index due to application of the rural floor. We received some public comments concerning the application of the rural floor. We respond to these public comments in Appendix A of this final rule. PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 49969 b. Imputed Floor for FY 2015 In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the ‘‘imputed floor’’ policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have argued that they are disadvantaged by the absence of rural hospitals to set a wage index floor for those States. Since its initial implementation, we have extended the imputed floor policy four times, the last of which was adopted in the FY 2014 IPPS/LTCH PPS final rule and is set to expire on September 30, 2014. (We refer readers to further discussion of the imputed floor in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50589 through 50590) and to our regulations at 42 CFR 412.64(h)(4).) Currently, there are two all-urban States, New Jersey and Rhode Island, that have a range of wage indexes assigned to hospitals in these States, including through reclassification or redesignation (we refer readers to discussions of geographic reclassifications and redesignations in section III.H. of the preamble of the proposed rule and this final rule). However, as we explain below, the method as of FY 2012 for computing the imputed floor (the original methodology) benefitted only New Jersey, and not Rhode Island. In computing the imputed floor for an all-urban State under the original methodology, we calculated the ratio of the lowest-to-highest CBSA wage index for each all-urban State as well as the average of the ratios of lowest-to-highest CBSA wage indexes of those all-urban States. We then compared the State’s own ratio to the average ratio for allurban States and whichever is higher is multiplied by the highest CBSA wage index value in the State—the product of which established the imputed floor for the State. Under the current OMB labor market area delineations that we used for the FY 2014 wage index, Rhode Island has only one CBSA (ProvidenceNew Bedford-Fall River, RI–MA) and New Jersey has 10 CBSAs. Therefore, under the original methodology, Rhode Island’s own ratio equaled 1.0, and its imputed floor was equal to its original CBSA wage index value. However, because the average ratio of New Jersey and Rhode Island was higher than New Jersey’s own ratio, this methodology provided a benefit for New Jersey, but not for Rhode Island. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we retained the imputed floor calculated under the original methodology as discussed above, and established an alternative methodology for computing E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49970 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the imputed floor wage index to address the concern that the original imputed floor methodology guaranteed a benefit for one all-urban State with multiple wage indexes (New Jersey) but could not benefit the other all-urban State (Rhode Island). The alternative methodology for calculating the imputed floor was established using data from the application of the rural floor policy for FY 2013. Under the alternative methodology, we first determined the average percentage difference between the post-reclassified, pre-floor area wage index and the post-reclassified, rural floor wage index (without rural floor budget neutrality applied) for all CBSAs receiving the rural floor. (Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which is available on the CMS Web site) included the CBSAs receiving a State’s rural floor wage index.) The lowest post-reclassified wage index assigned to a hospital in an all-urban State having a range of such values then is increased by this factor, the result of which establishes the State’s alternative imputed floor. We amended § 412.64(h)(4) of the regulations to add new paragraphs to incorporate the finalized alternative methodology, and to make reference and date changes. In summary, for the FY 2013 wage index, we did not make any changes to the original imputed floor methodology at § 412.64(h)(4) and, therefore, made no changes to the New Jersey imputed floor computation for FY 2013. Instead, for FY 2013, we adopted a second, alternative methodology for use in cases where an all-urban State has a range of wage indexes assigned to its hospitals, but the State cannot benefit from the methodology in existing § 412.64(h)(4). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 50590), we extended the imputed floor policy (both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2014, while we continued to explore potential wage index reforms. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28068 through 28069), for FY 2015, we proposed to continue the extension of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015, as we continue to explore potential wage index reforms. As discussed in section III.B. of the preamble of the proposed rule, we proposed to adopt the new OMB labor market area delineations beginning in FY 2015. Under OMB’s new labor market area delineations based on Census 2010 data, Delaware would VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 become an all-urban State, along with New Jersey and Rhode Island. Under the new OMB delineations, Delaware would have three CBSAs, New Jersey would have seven CBSAs, and Rhode Island would continue to have only one CBSA (Providence-Warwick, RI–MA). We referred readers to a detailed discussion of our proposal to adopt the new OMB labor market area delineations in section III.B. of the preamble of the proposed rule. We proposed to revise the regulations at § 412.64(h)(4) and (h)(4)(vi) to reflect the proposed 1-year extension of the imputed floor. We invited public comments on our proposal regarding the 1-year extension of the imputed floor. Comment: Several commenters supported the CMS proposal to extend the imputed floor for 1 year, stating that it establishes an approach to remedy the competitive disadvantage suffered by all-urban States in the absence of an imputed wage index floor; and that the imputed wage index floor policy creates a climate of symmetry, equity and consistency in the Medicare reimbursement process. One commenter suggested that the industry have an opportunity to provide input to CMS prior to finalizing any decisions regarding the imputed floor policy. The commenter also suggested that if CMS decides to finalize a policy that would result in the expiration of the imputed floor, CMS afford hospitals a multiyear phase-out in order to offset their lost revenue. One commenter stated that CMS should reconsider the extension of the imputed floor policy, and questioned what statutory authority CMS has to extend the imputed floor policy and declare new States eligible. Another commenter objected to the proposal and stated that it does not support the policy behind the imputed floor. The commenter recommended that CMS not finalize the proposal to extend the imputed floor, and stated it agreed with the rationale that CMS previously provided in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25878 through 25879) for not proposing to extend the imputed floor policy, and urged CMS to let the policy expire. Response: We appreciate the commenters’ support for our proposal to extend the imputed floor for 1 year and are finalizing this proposal. In response to the commenters who objected to the proposed policy and made other recommendations, we will give further consideration to those comments as we continue to explore potential wage index reforms. As we have done every year since the proposal of the imputed floor, we provide and will continue to PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 provide the industry with the opportunity to provide input on our proposals prior to finalizing any decisions regarding the imputed floor policy. We will take the commenters’ recommendation to afford hospitals a multiyear phase-out into consideration should we propose not to extend the imputed floor policy in future years. In response to the commenter who questioned what statutory authority CMS has to extend the imputed floor policy and declare new States eligible, as we stated in the FY 2005 IPPS final rule (69 FR 49110), we note that the Secretary has broad authority under section 1886(d)(3)(E) of the Act to ‘‘adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates . . . for area differences in hospital wage levels by a factor (established by the Secretary) . . .’’ Therefore, we believe that we do have the discretion to adopt a policy that would adjust area wage indexes in the stated manner. We adopted the imputed floor policy and subsequently extended it through notice-andcomment rulemaking to address concerns from hospitals in all-urban states. Under the new OMB delineations discussed in section III.B. of the preamble of this final rule, Delaware becomes an all-urban State and, therefore, is subject to an imputed floor as well. After consideration of the public comments we received, we are finalizing our proposal without modification to extend the imputed floor policy under both the original methodology and the alternative methodology for an additional year, through September 30, 2015, while we continue to explore potential wage index reform. We also are adopting as final the proposed revisions to § 412.64(h)(4) and (h)(4)(vi) to reflect the 1-year extension of the imputed floor. The wage index and impact tables associated with this FY 2015 IPPS/ LTCH PPS final rule that are available on the CMS Web site reflect the continued application of the imputed floor policy at § 412.64(h)(4) and a national budget neutrality adjustment for the imputed floor for FY 2015. There are 15 providers in New Jersey, and no providers in Delaware that will receive an increase in their FY 2015 wage index due to the continued application of the imputed floor policy under the original methodology. The wage index and impact tables for this FY 2015 final rule also reflect the application of the alternative methodology for computing E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the imputed floor, which will benefit four hospitals in Rhode Island. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV c. State Frontier Floor Section 10324 of Public Law 111–148 requires that hospitals in frontier States cannot be assigned a wage index of less than 1.0000 (we refer readers to regulations at 42 CFR 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50160 through 50161)). Based on the implementation of the new OMB delineations discussed in section III.B. of the preamble of this final rule, 46 hospitals will receive the frontier floor value of 1.0000 for their FY 2015 wage index in this final rule. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming. Although Nevada also is defined as a frontier State, its FY 2015 rural floor value of 1.1373 is greater than 1.0000, and therefore, no Nevada hospitals will receive a frontier floor value for their FY 2015 wage index. We did not propose any changes to the frontier floor policy for FY 2015, and we did not receive any public comments on the issue. The areas affected by the rural, imputed, and frontier floor policies for the FY 2015 wage index are identified in Table 4D associated with this final rule, which is available via the Internet on the CMS Web site. 3. FY 2015 Wage Index Tables The wage index values for FY 2015 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act), included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site, include the occupational mix adjustment, geographic reclassification or redesignation as discussed in section III.H. of the preamble of this final rule, and the application of the rural, imputed, and frontier State floors as discussed in section III.G.2. of the preamble of this final rule. We note that because we are adopting the new OMB labor market area delineations for FY 2015, these tables have additional tabulations to account for wage index calculations computed under the previous and the new OMB delineations. Tables 3A and 3B, available on the CMS Web site, list the 3-year average hourly wage for each labor market area before the redesignation or reclassification of hospitals based on FYs 2009, 2010, and 2011 cost reporting periods. Table 3A lists these data for urban areas, and Table 3B lists these data for rural areas. In addition, Table VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2, which is available on the CMS Web site, includes the adjusted average hourly wage for each hospital from the FY 2009 and FY 2010 cost reporting periods, as well as the FY 2011 period used to calculate the FY 2015 wage index. The 3-year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described in Step 5 in section III.G. of the preamble of this final rule) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3year period is calculated based on the data available during that period. The average hourly wages in Tables 2, 3A, and 3B, which are available on the CMS Web site, include the occupational mix adjustment. The wage index values in Tables 4A, 4B, 4C, and 4D also include the national rural floor budget neutrality adjustment (which includes the imputed floor). The wage index values in Table 2 also include the outmigration adjustment for eligible hospitals. As stated above, because we are adopting the new OMB labor market area delineations for FY 2015, these tables have additional tabulations to account for wage index calculations computed under the current labor market area definitions and the new OMB labor market area delineations. In addition, for certain applicable hospitals, the wage index values included in Table 2 are computed to reflect the transitional wage index or the 50/50 blended wage index discussed in detail in section III.B.2.e. of the preamble of this final rule. H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General Policies and Effects of Reclassification and Redesignation Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (generally by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 49971 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations that we proposed for FY 2015, and the policies for the effects of hospitals’ reclassifications and redesignations on the wage index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under 42 CFR 412.103. Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of 42 CFR 412.103. While our general policies on geographic reclassification, redesignations under section 1886(d)(8)(B) of the Act, and urban hospitals reclassifying to rural under 42 CFR 412.103 will remain unchanged for FY 2015, we note that, due to our adoption of the new OMB labor market area delineations for FY 2015, there are numerous unique classification considerations for FY 2015 that are discussed in more detail in section III.H. of the preamble of this final rule. For a discussion of the new CBSA changes based on the new OMB labor market area delineations and our implementation of those changes, we refer readers to sections III.B. and VI.C. of the preamble of this final rule. Comment: One commenter stated that because the new OMB labor market area delineations will be effective October 1, 2014, for FY 2015, hospitals should have been given an opportunity to apply for reclassification to these new labor market areas a year ago. The commenter suggested that CMS provide a one-time expedited MGCRB application and approval process to be effective October 1, 2014. Similarly, another commenter stated that a hospital would not have had an adequate opportunity to assess reclassification options for FY 2015 because CMS did not publish 3-year average hourly wage data based on the new OMB labor market area delineations with the FY 2014 IPPS/ LTCH PPS final rule. The commenter therefore suggested that either the effective date of the implementation of the new OMB labor market areas delineations be postponed until FY 2016, or a new period be opened to allow hospitals to reclassify for FY 2015. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49972 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We do not agree with these comments. We did not propose to adopt the new OMB labor market area delineations in the FY 2014 IPPS/LTCH PPS proposed rule and, therefore, did not finalize the new OMB delineations in the FY 2014 IPPS/LTCH PPS final rule. Instead, we notified hospitals of our intention to propose changes to the wage index based on the new OMB delineations in the FY 2015 IPPS/LTCH proposed and final rules (78 FR 27552 through 27553; 78 FR 50586). Therefore, hospitals could not apply for reclassification on the basis of the new OMB labor market area delineations a year ago because they had not yet been implemented. Because we had not implemented the new OMB delineations, we were unable to release data, including average hourly wage data, based on these new delineations last year. Section 1886(d)(10)(C) of the Act mandates that hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (generally by September 1), and the MGCRB must issue its decision within 180 days after the first day of the 13month period preceding the fiscal year for which a hospital has filed its application. Therefore, we believe we have balanced our obligation to implement the reclassification decisions of the MGCRB with our responsibility to implement the most accurate labor market areas through the new OMB delineations in as uniform a manner as possible. However, we recognized that the new OMB delineations could affect reclassification decisions. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28073), we stated that hospitals that wished to be reassigned to an alternate CBSA (other than the CBSA to which their reclassification would be reassigned in this proposed rule) for which they meet the applicable proximity criteria could request reassignment within 45 days from the publication of the proposed rule. We also stated that if, for whatever reason, a hospital still finds itself assigned to a labor market area that would provide a wage index for FY 2015 that is lower than the wage index the hospital would have received under the FY 2014 CBSA delineations, we proposed a 50/50 blended wage index adjustment in FY 2015 for all hospitals that would experience a decrease in their FY 2015 wage index value due to the implementation of the new OMB delineations and are finalizing this transition adjustment in this rule. This transitional adjustment will mitigate VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 negative payment impacts for FY 2015, while providing hospitals additional time to fully assess any additional reclassification options available to them under the new OMB delineations for FY 2016. Therefore, we do not believe it is necessary to implement a one-time expedited MGCRB application and approval process, postpone the effective date of the implementation of the new OMB delineations until FY 2016, or open a new period to allow hospitals to reclassify for FY 2015. Comment: A few commenters stated that, in cases where a countywide (group) reclassification had been previously approved by the MGCRB, a new hospital is not able to obtain the same reclassified wage index until the first year that individual hospital’s wage index data match one of the 3 years’ data used by the MGCRB and a new 3year countywide reclassification is requested by the county’s hospitals (which can be a 4-year delay). The commenters stated that the hospital will have a wage index lower than the hospitals with which it competes for skilled labor. The commenter suggested that CMS change its policy to allow for a timelier competitive wage index for new hospitals. Two commenters suggested that the proximity rule for countywide reclassifications for hospitals in an urban county be modified to permit adjacent county reclassifications, regardless of whether they are in the same CSA or CBSA, or at a minimum, create an exception that would allow this in the event that half of the hospitals in the county are seeking to reclassify. Another commenter suggested that a county be permitted to apply for designation as a ‘‘core county’’ if its 3year average hourly wage is at least 108 percent of the 3-year average hourly wage of its CBSA, excluding the core county. The commenter also suggested that other counties within the same CBSA that are either adjacent to or within the same city as the core county, and whose 3-year average hourly wage is at least 85 percent of the core county’s average hourly wage, be permitted to join the core county to form a ‘‘core area’’ if the resulting wage index is beneficial to all hospitals in the core area. Response: We thank the commenters for their comments. We already have established criteria and processes for MGCRB reclassification, which are specified in 42 CFR 412.230 et. seq, and we did not propose any changes to these provisions for FY 2015. Consequently, we are not making any changes to address the commenter’s concerns at PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 this time. We refer the commenters to these regulations for complete details on wage index reclassifications. 2. FY 2015 MGCRB Reclassifications a. FY 2015 Reclassification Requirements and Approvals Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280. At the time this final rule was constructed, the MGCRB had completed its review of FY 2015 reclassification requests. Based on such reviews, there were 309 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2015 that did not withdraw or terminate their reclassifications within 45 days of the publication of the proposed rule. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2015, hospitals reclassified beginning during FY 2013 or FY 2014 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications for the remainder of their 3-year period. There were 155 hospitals approved for wage index reclassifications in FY 2013 that continue for FY 2015, and 270 hospitals approved for wage index reclassifications in FY 2014 that continue for FY 2015. Of all the hospitals approved for reclassification for FY 2013, FY 2014, and FY 2015, based upon the review at the time of this final rule, 734 hospitals are in a reclassification status for FY 2015. Under the regulations at 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of a proposed rule. For information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations, and clarifications regarding reinstating reclassifications and ‘‘fallback’’ reclassifications, were included in the FY 2008 IPPS final rule (72 FR 47333). Changes to the wage index that result from withdrawals of requests for reclassification, terminations, wage E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations index corrections, appeals, and the Administrator’s review process for FY 2015 are incorporated into the wage index values published in this FY 2015 IPPS/LTCH PPS final rule. These changes affect not only the wage index value for specific geographic areas, but also the wage index value redesignated/ reclassified hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated/reclassified hospitals. Further, the wage index value for the area from which the hospitals are redesignated/reclassified may be affected. Comment: One commenter stated that CMS’ policy that hospitals must request to withdraw or terminate MGCRB reclassifications within 45 days of the proposed rule is problematic because a hospital could terminate a reclassification based on information in the proposed rule, and with the publication of the final rule, discover that its original reclassified status was more desirable. The commenter stated that hospitals cannot make informed decisions concerning their reclassification status based on values in a proposed rule that are likely to change and, therefore, recommended that CMS revise its existing policy to permit hospitals to withdraw or terminate their reclassification status within 45 days of the publication of the final rule. Similarly, another commenter stated that the requirement for withdrawal of an existing reclassification is unnecessary and unfair because it requires that a hospital give up the certain benefit of the existing reclassification for the uncertain benefit of a proposal. The commenter stated that it is possible that CMS could modify the reclassification rules, and suggested that hospitals be allowed 30 days after the publication of the final rule to withdraw their reclassification requests or to reverse a withdrawal that was made based on the proposed rule in situations where data corrections could result in the hospital no longer benefiting by the alternative they selected. Response: We did not make any proposals to change any of the reclassification processes or criteria for FY 2015. Any changes to the reclassification processes or criteria would first need to be proposed in a separate rulemaking. Consequently, we are not making any changes to address the commenters’ concerns at this time. We maintain that information provided in the proposed rule constitutes the best available data to assist hospitals in making reclassification decisions. The VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 values published in the final rule represent the final wage index values reflective of reclassification decisions. b. Effects of Implementation of New OMB Labor Market Area Delineations on Reclassified Hospitals In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070 through 28074), we indicated that because hospitals that have been reclassified beginning in FY 2013, 2014, or 2015 were reclassified based on the current labor market delineations, if we adopted the new OMB labor market area delineations beginning in FY 2015, the areas to which they have been reclassified, or the areas where they are located, may change. Under the new OMB delineations, we stated that many existing CBSAs would be reconfigured. We encouraged hospitals with current reclassifications to verify area wage indexes on Tables 4A–2 and 4B–2 associated with the proposed rule (which are available via the Internet on the CMS Web site), and confirm that the areas to which they have been reclassified for FY 2015 would continue to provide a higher wage index than their geographic area wage index. We stated that hospitals may withdraw their FY 2015 reclassifications by contacting the MGCRB within 45 days from the publication of the proposed rule. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070), we stated that, in some cases, adopting the new OMB delineations would result in counties splitting apart from CBSAs to form new CBSAs, or counties shifting from one CBSA designation to another CBSA. Reclassifications granted under section 1886(d)(10) of the Act are effective for 3 fiscal years so that a hospital or county group of hospitals would be assigned a wage index based upon the wage data of hospitals in a nearby labor market area for a 3-year period. If CBSAs are split apart, or if counties shift from one CBSA to another under the new OMB delineations, it raises the question of how to continue a hospital’s reclassification for the remainder of its 3-year reclassification period, if that area to which the hospital reclassified no longer exists, in whole or in part. We dealt with this question in FY 2005 as well when CMS adopted the current OMB labor market area definitions. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28071), we indicated that, consistent with the policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054 through 49056), if a CBSA would be reconfigured due to the new OMB delineations and it would not be possible for the reclassification to PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 49973 continue seamlessly to the reconfigured CBSA, we believe it is appropriate for us to determine the best alternative location to reassign current reclassifications for the remaining 3 years. Therefore, to maintain the integrity of a hospital’s 3-year reclassification period, we proposed a policy to assure that current geographic reclassifications (applications approved for FY 2013, FY 2014, or FY 2015) that would be affected by CBSAs that are split apart or counties that shift to another CBSA under the new OMB delineations, would ultimately be assigned to a CBSA under the new OMB delineations that contains at least one county from the reclassified CBSA under the current FY 2014 OMB definitions, and would be generally consistent with rules that govern geographic reclassification. That is, consistent with the policy finalized in FY 2005 (69 FR 49054 and 49055), we proposed a general policy that affected reclassified hospitals would be assigned to a CBSA that (1) would contain the most proximate county that is located outside of the hospital’s proposed FY 2015 geographic labor market area, and (2) is part of the original FY 2014 CBSA to which the hospital is reclassified. We stated our belief that by assigning reclassifications to the CBSA that contains the nearest eligible county (as described above) satisfies the statutory requirement at section 1886(d)(10)(v) of the Act by maintaining reclassification status for a period of 3 fiscal years, while generally respecting the longstanding principle of geographic proximity in the labor market reclassification process. The hospitals that we proposed to reassign to a different CBSA based on our proposed policy above were listed in a special Table 9A–2 for the proposed rule, which is available via the Internet on the CMS Web site. In addition, we proposed to allow a hospital, or county group of hospitals, to request reassignment to another CBSA that would contain a county that is part of the current FY 2014 CBSA to which they are reclassified, if the hospital or county group of hospitals can demonstrate compliance with applicable reclassification proximity rules, as described later in this section. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28071), we stated that we recognize that this proposed reclassification reassignment described for hospitals that are reclassified to CBSAs that would split apart or to counties that would shift to another CBSA under the new OMB delineations may result in the reassignment of the E:\FR\FM\22AUR2.SGM 22AUR2 49974 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV hospital for the remainder of its 3-year reclassification period to a CBSA having a lower wage index than the wage index that would have been assigned for the reclassified hospital in the absence of the proposed adoption of the new OMB delineations. Therefore, as discussed in section III.B.2.e.(4) of the preamble of the proposed rule, we proposed (and are finalizing in this final rule) that all hospitals that would experience a decrease in their FY 2015 wage index value due to the proposed implementation of the new OMB delineations would receive a 50/50 blended wage index adjustment in FY 2015. For FY 2015, we proposed to calculate a wage index value based on the current FY 2014 OMB definitions, and a wage index value based upon the proposed new OMB delineations (including reclassification assignments discussed in this section). If the wage index under the proposed new OMB delineations would be lower than the wage index calculated with the current (FY 2014) OMB definitions, we proposed that the hospital would be assigned a blended wage index (50 percent of the current; 50 percent of the proposed). We stated our belief that this proposed transitional adjustment would mitigate negative payment impacts for FY 2015, and would afford hospitals additional time to fully assess any additional reclassification options available to them under the new OMB delineations. We are including the following descriptions of specific situations where we have determined that reassignment of reclassification areas is appropriate. (1) Reclassifications to CBSAs That Are Subsumed by Other CBSAs For the proposed rule (79 FR 28070), we identified 66 counties that are currently located in CBSAs that would be subsumed by another CBSA under the new OMB labor market area delineations. As a result, hospitals reclassifying to those CBSAs would now find that their reclassifications are to a CBSA that no longer exists. For these hospitals, we proposed to reassign reclassifications to the newly configured CBSA to which all of the original constituent counties in the FY 2014 CBSA are transferred. For example, CBSA 11300 (Anderson, IN) would no longer exist under the proposed FY 2015 delineations. The only constituent county in CBSA 11300, Madison County, IN, would be moving to CBSA 26900 (Indianapolis-Carmel-Anderson, IN). Because the original Anderson, IN labor market area no longer exists, we proposed to reassign reclassifications from the original Anderson, IN labor VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 market area to a newly configured CBSA where the original constituent county or counties are transferred, which is Indianapolis-Carmel-Anderson, IN. For hospitals reclassified to a CBSA that would be subsumed by another CBSA, we included a table in the proposed rule that reflected the hospitals’ current reclassified CBSA, and the CBSA to which we proposed to assign them for FY 2015 (79 FR 28071). We did not receive any public comments regarding this proposal to reassign hospitals reclassified to CBSAs that were subsumed by another CBSA. Therefore, we are finalizing this provision as proposed. For any hospital that is reclassified to a CBSA that no longer exists, and all of the CBSA’s constituent counties moved to another CBSA under the new OMB delineations, we assigned that hospital’s reclassification to the subsuming CBSA to which all of the original constituent counties in the FY 2014 CBSA are transferred. The following table lists 63 hospitals that are currently located in CBSAs that will be subsumed by another CBSA under the new OMB labor market area delineations and reflects the hospitals’ current reclassified CBSA and the CBSA to which we are assigning them for FY 2015. We note that three hospitals have terminated their reclassification since publication of the proposed rule and have been omitted. HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS RECLASSIFIED TO A CBSA THAT IS SUBSUMED BY ANOTHER CBSA CMS Certification Number (CCN) Current reclassified CBSA New CBSA 050022 050054 050102 050243 050292 050329 050390 050423 050534 050573 050684 050686 050701 050765 050770 140067 150089 220001 220002 220008 220011 220019 220020 220049 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 42044 14060 11300 14484 14484 14484 14484 14484 14484 14484 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 11244 14010 26900 14454 14454 14454 14454 14454 14454 14454 PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS RECLASSIFIED TO A CBSA THAT IS SUBSUMED BY ANOTHER CBSA— Continued CMS Certification Number (CCN) Current reclassified CBSA New CBSA 220058 220062 220063 220070 220073 220074 220082 220084 220090 220095 220098 220101 220105 220163 220171 220175 220176 230002 230020 230024 230053 230089 230104 230142 230146 230165 230176 230244 230270 230273 230297 390151 410001 410004 410005 410007 410010 410011 410012 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 14484 47644 47644 47644 47644 47644 47644 47644 47644 47644 47644 47644 47644 47644 47644 13644 14484 14484 14484 14484 14484 14484 14484 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 14454 47664 47664 47664 47664 47664 47664 47664 47664 47664 47664 47664 47664 47664 47664 43524 14454 14454 14454 14454 14454 14454 14454 (2) Reclassification to CBSAs Where the CBSA Number or Name Changed or to CBSAs Containing Counties That Moved to Another CBSA For the proposed rule (79 FR 28072), we identified six CBSAs with current reclassifications that would maintain the same constituent counties, but the CBSA number or name would change if we adopted the new OMB delineations. For example, CBSA 29140 (Lafayette, IN) currently contains three counties (Benton, Carroll, and Tippecanoe Counties). The CBSA name and number for these counties would change to CBSA 29200 (Lafayette-West Lafayette, IN) under the new OMB delineations. Because the constituent counties in these CBSAs would not change under the new delineations, we would consider these CBSAs to be unchanged, and we did not propose any E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations reassignment for hospitals reclassified to those labor market areas. In the proposed rule, we identified eight CBSAs with current reclassifications that have one or more counties that would split off and move to a new CBSA or to a different existing CBSA under the new OMB delineations. These CBSAs are shown in the following table. Current FY 2014 CBSA 16620 16974 20764 31140 35644 ... ... ... ... ... 37964 ... 39100 ... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 48900 ... Current FY 2014 CBSA name Charleston, WV. Chicago-Joliet-Naperville, IL. Edison-New Brunswick, NJ. Louisville/Jefferson County, KY–IN. New York-White Plains-Wayne, NY–NJ. Philadelphia, PA. Poughkeepsie-Newburgh-Middletown, NY. Wilmington, NC. In the proposed rule, we determined that 69 hospitals had current reclassifications to one of these CBSAs. Similar to the methodology finalized in the FY 2005 IPPS final rule (69 FR 49054 through 49055), we proposed to follow the general policy discussed in section III.H.2.b. of the preamble of the proposed rule. Specifically, we proposed that affected reclassified hospitals would be assigned to a CBSA (under the new OMB delineations) that would contain the most proximate county that is (1) located outside of the hospital’s proposed FY 2015 geographic labor market area; and (2) is included in the current CBSA to which they are reclassified. For each of the 69 hospitals, we conducted a mapping analysis and determined driving distances from their geographic location to the borders of each county that is in the reclassified CBSA under the FY 2014 delineations and is also included in a CBSA under the new OMB delineations, excluding any counties that would be located in the hospital’s proposed FY 2015 geographic labor market area. Following the general reassignment principle that we proposed, we proposed to reassign those reclassified hospitals to the CBSA which contains the geographically closest county. For example, there are hospitals that currently are reclassified to CBSA 39100 (PoughkeepsieNewburgh-Middletown, NY) under the FY 2014 delineations, which is comprised of Dutchess County and Orange County, NY. Under the new OMB delineations, Dutchess County would become part of new CBSA 20524 (Dutchess County-Putnam County, NY), while Orange County would join CBSA VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 35614 (New York-Jersey City-White Plains, NY–NJ Metropolitan Division). Therefore, we mapped the distances from one reclassified hospital to the border of Dutchess County and Orange County, NY (the two counties that were part of CBSA 39100 under the FY 2014 delineations). Our analysis showed that the hospital is 2.2 miles from Dutchess County, and 25.9 miles from Orange County. Therefore, we proposed to reassign this hospital’s reclassification from the FY 2014 CBSA 39100 to the new CBSA 20524. For the proposed rule, we also identified affected county group reclassifications. For these reclassifications, we proposed that we would follow our proposed policy discussed above, except that, for county group reclassifications, we proposed to reassign hospitals in a county group reclassification to the CBSA under the new OMB delineations to which the majority of hospitals in the group reclassification are geographically closest. Because hospitals in a county group applied as a group, we believe the reassignment should also be applied to the whole group. For example, the hospitals of Fairfield County, CT are reclassified as a group to CBSA 35644 under the FY 2014 delineations. Under the new OMB delineations, CBSA 35644 would no longer exist and would be split into the following two new CBSAs: 20524 (Dutchess County-Putnam County, NY) and 35614 (New YorkJersey City-White Plains, NY–NJ). Of the six hospitals in the group reclassification, all but one would be closer to an eligible county (Westchester, NY) in CBSA 35614 than to an eligible county (Putnam, NY) in CBSA 20524. Because these hospitals in Fairfield, CT applied as a group, we believe the reassignment should also be applied to the whole group. Therefore, we proposed to assign the hospitals in this group reclassification to CBSA 35614, the reconfigured CBSA to which the majority of the hospitals in the group reclassification are geographically closest. To summarize, of the 69 hospitals identified in the proposed rule as reclassified to 1 of the 8 CBSAs in the preceding table that have counties that would split off and move to a new CBSA or a different existing CBSA under the new OMB delineations, there are 27 hospitals that would maintain the same reclassified CBSA number under our proposals. Another 28 hospitals would be reassigned to a reconfigured CBSA that would contain a similar number of counties from their current reclassified CBSA. For the remaining 14 reclassified hospitals, we proposed to PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 49975 assign them to a CBSA (under the new OMB delineations) that would have a different CBSA number from the labor market area to which they are currently reclassified (under the current FY 2014 delineations). This is because if the original CBSA to which the hospitals are reclassified is losing counties to another urban CBSA, it may be that the original reclassification determination would not be reflective of the new delineations. In addition, because proximity to a CBSA is a requirement of reclassifications approved under section 1886(d)(10) of the Act, we stated our belief that it is appropriate to propose to reassign reclassification status to an urban CBSA that contains the county (from the hospital’s current CBSA reclassification) that is closest to the hospital. We stated our belief that this would more accurately reflect the geographic labor market area of the reclassified hospital. Consistent with refinements implemented in the FY 2005 IPPS final rule (69 FR 49055), we proposed to allow hospitals that reclassified under section 1886(d)(10) of the Act to one of the eight CBSAs that split (that is, current FY 2014 CBSAs 16620, 16974, 20764, 31140, 35644, 37964, 39100, 48900) to be reclassified to any CBSA containing a county from their original reclassification labor market area, provided that the hospital demonstrates that it meets the applicable proximity requirements under 42 CFR 412.230(b) and (c) (for individual hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42 CFR 412.234(a)(2) and (a)(3) (for an urban group) to that CBSA. We stated that hospitals that wished to be reassigned to an alternate CBSA (other than the CBSA to which their reclassification would be reassigned in this proposed rule) for which they meet the applicable proximity criteria could request reassignment within 45 days from the publication of the proposed rule. Hospitals had to send a request to WageIndex@cms.hhs.gov and provide documentation certifying that they meet the requisite proximity criteria for reassignment to an alternate CBSA, as described above. We stated our belief that this option of allowing hospitals to submit a request to CMS would provide hospitals with greater flexibility with respect to their reclassification reassignment, while ensuring that the proximity requirements are met. We believe that where the proximity requirements are met, the reclassified wage index would be consistent with the labor market area to which the hospitals were originally approved for reclassification. Under this proposed E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49976 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations policy, a hospital could request to be assigned a reclassification to any CBSA that contains any county from the CBSA to which it is currently reclassified. However, to be reassigned to an area that is not the most proximate to the hospital (or the majority of hospitals in a county group), we believe it is necessary that the hospital demonstrates that it complies with the applicable proximity criteria. If a hospital cannot demonstrate proximity to an alternate CBSA, the hospital would not be considered for reclassification to that labor market area, and reassignment would remain with the closest eligible (new) CBSA. In the proposed rule (79 FR 28073), we included a table showing proposed hospital reclassification assignments for hospitals reclassified to CBSAs from which counties would be split off and moved to a different CBSA under the new OMB delineations. The table showed the current reclassified CBSA and the CBSA to which CMS proposed reassignment. We proposed that hospitals that disagreed with our determination of the most proximate county had to provide an alternative method for determining proximity to CMS within 45 days from the publication of the proposed rule. We stated that changes to a hospital’s CBSA assignment on the basis of a hospital’s disagreement with our determination of closest county, or on the basis of being granted a reassignment due to meeting applicable proximity criteria to an eligible CBSA would be announced in this FY 2015 IPPS/LTCH PPS final rule. Comment: Commenters were generally supportive of our proposal to adopt the new OMB delineations. Commenters did not specifically address the proposed assignment of reclassification status for hospitals that are reclassified to labor market areas where the CBSA number or name changed or to CBSAs containing counties that moved to another CBSA. Response: We thank the commenters for their support of our proposal to implement the new OMB delineations for the hospital wage index. After consideration of the public comments we received, we are finalizing the reassignment methodology as proposed. Hospitals that were reclassified to a CBSA that had one or more counties that split off and moved to another CBSA under the new OMB delineations are reclassified to a CBSA that will contain the most proximate county that (1) is located outside of the hospital’s FY 2015 geographic labor market area; and (2) is included in the current CBSA to which they are reclassified. Group VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reclassifications are assigned to the CBSA under the new OMB delineations to which the majority of hospitals in that group reclassification are geographically closest and that (1) is located outside of the hospital’s FY 2015 geographic labor market area; and (2) is included in the current CBSA to which they are reclassified. We also allowed hospitals that reclassified under section 1886(d)(10) of the Act to one of the eight CBSAs that split (that is, current FY 2014 CBSAs 16620, 16974, 20764, 31140, 35644, 37964, 39100, 48900) to be reclassified to any CBSA containing a county from their original reclassification labor market area, provided that the hospital demonstrates that it meets the applicable proximity requirements under 42 CFR 412.230(b) and (c) (for individual hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42 CFR 412.234(a)(2) and (a)(3) (for an urban group) to that CBSA. Hospitals that wished to be reassigned to an alternate CBSA (other than the CBSA to which their reclassification would be reassigned in this proposed rule) for which they meet the applicable proximity criteria needed to request reassignment within 45 days from the publication of the proposed rule. We received one request in the WageIndex@ cms.hhs.gov mailbox to request reassignment to another eligible labor market area. A rural hospital in North Carolina was originally reclassified to CBSA 48900 (Wilmington, NC). This CBSA had more than one county that was split off and moved to another CBSA under the new OMB delineations. Thus, under our proposed policy (which we are finalizing in this final rule), we reclassified this hospital to a CBSA that contained the most proximate county that is located outside of the hospital’s FY 2015 geographic labor market area and is included in the current CBSA to which it is reclassified. Of all the former constituent counties of CBSA 48900, the hospital is geographically closest to Brunswick County, NC, which is outside of the hospital’s FY 2015 geographic labor market area and is included in the current CBSA to which the hospital is reclassified. However, under the new OMB delineations, Brunswick County is moved from CBSA 48900 to CBSA 34820 (Myrtle BeachConway-North Myrtle Beach, SC–NC). Therefore, we assigned this hospital’s reclassification to CBSA 34820 in the proposed rule. The hospital provided adequate evidence to demonstrate that it is located within 35-miles from Pender County, NC, which remains part of CBSA 48900. Because the proximity PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 criteria limit for MGCRB reclassification of an individual rural hospital is 35 miles (§ 412.230(b)(1)), we are approving the hospital’s request for reassignment back to CBSA 48900. The change is reflected in the proceeding table. The following table shows hospital reclassification assignments for hospitals reclassified to CBSAs from which counties were split off and moved to a different CBSA under the new OMB delineations. The following table shows the current reclassified CBSA and the CBSA to which CMS is making reassignments. We note that 23 hospitals terminated their reclassification status since the proposed rule was published and have been omitted. HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS THAT ARE RECLASSIFIED TO CBSAS FROM WHICH COUNTIES ARE SPLIT OFF AND MOVED TO A DIFFERENT CBSA CMS Certification Number (CCN) Current reclassified CBSA FY 2015 reassigned CBSA 140012 140110 140155 140161 140186 150002 150004 150008 150034 150090 150125 150126 150165 150166 180012 180048 310002 310009 310014 310015 310017 310031 310050 310054 310076 310083 310096 310119 330027 330106 330167 330181 330182 330198 330224 330225 330259 330331 330332 330372 340042 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 31140 31140 35644 35644 37964 35644 35644 20764 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 35644 39100 35644 35644 35644 35644 35644 48900 20994 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 16974 31140 31140 35614 35614 37964 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 35614 20524 35614 35614 35614 35614 35614 48900 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations HOSPITAL RECLASSIFICATION REASSIGNMENTS FOR HOSPITALS THAT ARE RECLASSIFIED TO CBSAS FROM WHICH COUNTIES ARE SPLIT OFF AND MOVED TO A DIFFERENT CBSA—Continued CMS Certification Number (CCN) Current reclassified CBSA FY 2015 reassigned CBSA 340068 390044 390096 390316 420085 48900 37964 37964 37964 48900 48900 33874 33874 33874 48900 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Table 9A–2 for this final rule (which is available via the Internet on the CMS Web site) reflects all reassignments of hospital reclassifications for FY 2015. (3) Reclassifications to CBSAs That Contain Hospital’s Geographic County In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074), we identified 14 reclassified hospitals that would be geographically located in their reclassified labor market area under the new OMB delineations. For example, hospital 34–0015 is located in Rowan County, NC. Rowan County is currently a Micropolitan Statistical Area in NC, and treated as rural. The hospital is reclassified to CBSA 16740 (CharlotteConcord-Rock Hill, NC–SC). Under the new OMB delineations, CBSA 16740 (Charlotte-Concord-Gastonia, NC–SC) would include Rowan County. Therefore, the current reclassification would become redundant. CBSA 16740 did not lose any counties to another labor market area; therefore, assignment to another alternate CBSA would not be an option under our proposed methodology. Because, by definition, a hospital would not be ‘‘reclassified’’ to its own geographic labor market area, and maintaining that ‘‘reclassified’’ status to its own geographic labor market area would serve no beneficial purpose for a hospital, we expected that all such affected hospitals would wish to terminate their reclassification status. Therefore, we assumed, for purposes of the proposed rule, that the affected hospitals would be terminating their reclassification status for the remaining years of their 3-year reclassification period, and for FY 2015, we proposed to assign them the wage index of the CBSA in which they are geographically located. We stated that affected hospitals should inform CMS if they wish to retain their current reclassification by sending notice to CMS within 45 days from the publication of the proposed rule. If an affected hospital did not inform us that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 they wished to retain their current reclassification, we assumed that the hospital had elected to terminate the reclassification. For purposes of the proposed rule, we presented tables under the presumption that all 14 hospitals would opt to cancel their reclassification status. We proposed to assign these hospitals the wage index value of their home area from Table 4A– 2 for the proposed rule (which is available via the Internet on the CMS Web site), and not include them as reclassified hospitals in Table 9A–2 for the proposed rule (which is available via the Internet on the CMS Web site). We did not receive any public comments on this proposal, nor did any hospital contact CMS through the WageIndex@cms.hhs.gov mailbox. Therefore, we are finalizing the proposal without any modifications. The following hospitals’ reclassifications are terminated, and they are assigned the wage index of the CBSA to which they are geographically located under the new OMB delineations. HOSPITALS RECLASSIFIED TO HOME LABOR MARKET AREA CMS Certification Number (CCN) Current geographic CBSA Reclassified geographic CBSA 340015 340129 340144 420036 450596 420027 150088 150113 190003 440073 460017 460039 190144 490019 34 34 34 42 45 11340 11300 11300 19 44 46 46 19 49 16740 16740 16740 16740 23104 24860 26900 26900 29180 34980 36260 36260 43340 47894 c. Applications for Reclassifications for FY 2016 Applications for FY 2016 reclassifications are due to the MGCRB by September 2, 2014 (the first working day of September 2014). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). As discussed in section III.B. of the preamble of this final rule, we are adopting the new OMB labor market area delineations announced on February 28, 2013. Therefore, hospitals should apply for reclassifications based on the new OMB delineations we are using for FY 2015. Applications and other information about MGCRB reclassifications may be obtained via the Internet on the CMS Web site at: PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 49977 https://www.cms.gov/Regulations-andGuidance/Review-Boards/MGCRB/ index.html, or by calling the MGCRB at (410) 786–1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244– 2670.3. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074, 28075, and 28304), we proposed changes to the regulations at § 412.232(b)(2) and § 412.234(a)(3)(iv) to include reference to the most recent OMB standards for delineating statistical areas (using the most recent Census Bureau data and estimates) that were adopted by CMS. For rural groups, the group of hospitals must demonstrate that the county in which the hospitals are located meets the standards for redesignation to an MSA as an ‘‘outlying county.’’ For urban groups, hospitals located in counties that are in the same combined statistical area or CBSA as the urban area to which they seek redesignation qualify as meeting the proximity requirements for reclassification to the urban area to which they seek redesignation. We did not propose any changes to the reclassification policy, but included language in the regulations to reflect use of the most recent OMB standards for delineating statistical areas (using the most recent Census Bureau data and estimates) that are adopted by CMS in consideration of group reclassification applications submitted for review in FY 2015 (that is submitted by September 2, 2014 (this date was erroneously stated in the proposed rule as September 30, 2014), reviewed by the MGCRB in FY 2015, to be effective in FY 2016) and future years. We did not receive any public comments on our proposed changes to the regulations at § 412.232(b)(2) and § 412.234(a)(3)(iv) to include a reference to the most recent OMB standards for delineating statistical areas (using the most recent Census Bureau data and estimates) that are adopted by CMS. Therefore, we are adopting as final the proposed changes to § 412.232(b)(2) and § 412.234(a)(3)(iv). 3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act Section 1886(d)(8)(B)(i) of the Act requires the Secretary to ‘‘treat a hospital located in a rural county adjacent to one or more urban areas as being located in the urban metropolitan statistical area to which the greatest number of workers in the county commute’’ if certain adjacency and commuting criteria are met. The criteria utilize standards for designating Metropolitan Statistical Areas published in the Federal Register by the Director E:\FR\FM\22AUR2.SGM 22AUR2 49978 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of the Office of Management and Budget (OMB) based on the most recently available decennial population data. Effective beginning FY 2005, we used OMB’s CBSA standards based on the 2000 Census and the 2000 Census data to identify counties in which hospitals qualify under section 1886(d)(8)(B) of the Act to receive the wage index of the urban area. Hospitals located in these counties have been known as ‘‘Lugar’’ hospitals and the counties themselves are often referred to as ‘‘Lugar’’ counties. As discussed in section III.B. of the preamble to the proposed rule, we proposed to implement OMB’s revised labor market area delineations based on the Census 2010 data for purposes of determining applicable wage indexes for acute care hospitals beginning in FY 2015. As we have done in the past, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28075 through 28078), we also proposed to use the new OMB delineations to identify rural counties that would qualify as ‘‘Lugar’’ under section 1886(d)(8)(B) of the Act and, therefore, would be redesignated to urban areas for FY 2015. We proposed to revise the regulations at § 412.64(b)(3)(i) to reflect the most recent OMB standards for delineating statistical areas adopted by CMS. In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that, by applying the new OMB delineations, the number of qualifying counties would increase from 98 in FY 2014 to 127 in FY 2015, as reflected in a chart published in the proposed rule. Since publication of the proposed rule, we have discovered a mistake where we inadvertently did not account for Davidson County, NC (which was a Lugar county in FY 2014 but is in a rural county no longer qualifying to be Lugar under the new OMB delineations, as discussed in section III.H.3.c. of the preamble of this final rule). Therefore, the number of qualifying counties increases from 99 in FY 2014 to 127 in FY 2015, and we are correcting this oversight in the preamble of this final rule. After evaluating and analyzing the 2010 Census commuting data, we proposed that, effective for discharges on or after October 1, 2014, in accordance with section 1886(d)(8)(B) of the Act, hospitals located in the rural counties listed in the first column of the table in the proposed rule would be designated as part of the urban area listed in the second column based on the criteria discussed above. Comment: One commenter suggested that Lugar hospitals be considered rural for all Medicare IPPS purposes other than receiving the urban wage index. Response: Lugar status is a deemed status, and there are only two provisions under the Medicare statute that would allow a Lugar hospital to be treated as a rural provider: (1) if the hospital is eligible for an out-migration adjustment under section 1886(d)(13) of the Act; or (2) if the hospital applies for an urban to rural reclassification under section 1886(d)(8)(E) of the Act. In either case, the hospital would be treated as rural for all IPPS purposes, which includes the wage index. We did not receive any other specific comments with regard to our proposal to use the new OMB delineations to identify rural counties that would qualify as ‘‘Lugar’’ under section 1886(d)(8)(B) of the Act. Therefore, we are finalizing the policy as proposed. We also are finalizing our proposed revision of the regulations at § 412.64(b)(3)(i) to reflect the most recent OMB standards for delineating statistical areas adopted by CMS. In addition, since publication of the proposed rule we discovered that, in the FY 2015 IPPS/LTCH proposed rule, for five of the Lugar counties, we had erroneously printed the names and codes of the entire Metropolitan Statistical Areas rather than the Metropolitan Division names and codes. Because we recognize Metropolitan Divisions as CBSAs, we should have printed the division names and codes for the following counties: Starke County, IN; Fannin County, TX; Hill County, TX; Van Zandt County, TX; and Island County, WA. The table below contains the corrected listing of the rural counties designated as urban under section 1886(d)(8)(B) of the Act. We note that this error was made only in the chart; that is, the wage index tables and data associated the FY 2015 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS Web site) properly captured the Metropolitan Divisions for hospitals in these five counties. We are finalizing that, effective for discharges on or after October 1, 2014, in accordance with section 1886(d)(8)(B) of the Act, hospitals located in the rural counties listed in the first column of the chart below will be designated as part of the urban area listed in the second column based on the finalized criteria discussed above. We note that rural counties that no longer meet the qualifying criteria to be Lugar are discussed in section III.H.3.c. of the preamble of this final rule. RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT [Based on new OMB delineations and census 2010 data] Rural county Lugar designated CBSA NEW tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV County name State Chambers County ............................... Cherokee County ................................ Cleburne County ................................. Macon County ..................................... Talladega County ................................ Denali Borough ................................... Hot Spring County .............................. Litchfield County ................................. Bradford County .................................. Levy County ........................................ Washington County ............................. Chattooga County ............................... Jackson County .................................. Lumpkin County .................................. Polk County ......................................... Talbot County ...................................... Oneida County .................................... Christian County ................................. Iroquois County ................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 AL AL AL AL AL AK AR CT FL FL FL GA GA GA GA GA ID IL IL Jkt 232001 CBSA CBSA name 12220 40660 11500 12220 11500 21820 26300 35300 27260 23540 37460 40660 12060 12060 40660 17980 36260 44100 28100 Auburn-Opelika, AL ......................................................................................... Rome, GA ........................................................................................................ Anniston-Oxford-Jacksonville, AL .................................................................... Auburn-Opelika, AL ......................................................................................... Anniston-Oxford-Jacksonville, AL .................................................................... Fairbanks, AK .................................................................................................. Hot Springs, AR ............................................................................................... New Haven-Milford, CT ................................................................................... Jacksonville, FL ............................................................................................... Gainesville, FL ................................................................................................. Panama City, FL .............................................................................................. Rome, GA ........................................................................................................ Atlanta-Sandy Springs-Roswell, GA ................................................................ Atlanta-Sandy Springs-Roswell, GA ................................................................ Rome, GA ........................................................................................................ Columbus, GA-AL ............................................................................................ Ogden-Clearfield, UT ....................................................................................... Springfield, IL ................................................................................................... Kankakee, IL .................................................................................................... PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 New. New. New. New. New. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49979 RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT— Continued [Based on new OMB delineations and census 2010 data] Rural county Lugar designated CBSA NEW tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV County name State Logan County ...................................... Mason County ..................................... Ogle County ........................................ Union County ...................................... Clinton County .................................... Greene County .................................... Henry County ...................................... Marshall County .................................. Parke County ...................................... Spencer County .................................. Starke County ..................................... Tipton County ...................................... Warren County .................................... Boone County ..................................... Buchanan County ............................... Cedar County ...................................... Delaware County ................................ Iowa County ........................................ Jasper County ..................................... Franklin County ................................... Nelson County .................................... Assumption Parish .............................. Jefferson Davis Parish ........................ St. Landry Parish ................................ Oxford County ..................................... Caroline County .................................. Franklin County ................................... Allegan County .................................... Ionia County ........................................ Lenawee County ................................. New.aygo County ................................ Shiawassee County ............................ Tuscola County ................................... Goodhue County ................................. Meeker County .................................... Rice County ........................................ Pearl River County .............................. Stone County ...................................... Dade County ....................................... Otoe County ........................................ Douglas County .................................. Lyon County ........................................ Los Alamos County ............................. Cayuga County ................................... Cortland County .................................. Genesee County ................................. Greene County .................................... Lewis County ...................................... Montgomery County ............................ Schuyler County .................................. Seneca County ................................... Camden County .................................. Caswell County ................................... Granville County ................................. Greene County .................................... Harnett County .................................... Polk County ......................................... Wilson County ..................................... Traill County ........................................ Ashtabula County ................................ Champaign County ............................. Columbiana County ............................ Harrison County .................................. Preble County ..................................... Clinton County .................................... Fulton County ...................................... Greene County .................................... Lawrence County ................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 IL IL IL IL IN IN IN IN IN IN IN IN IN IA IA IA IA IA IA KS KY LA LA LA ME MD MA MI MI MI MI MI MI MN MN MN MS MS MO NE NV NV NM NY NY NY NY NY NY NY NY NC NC NC NC NC NC NC ND OH OH OH OH OH PA PA PA PA Jkt 232001 CBSA CBSA name 44100 37900 40420 16060 29200 14020 26900 43780 45460 21780 23844 26900 29200 11180 47940 26980 20220 26980 19780 28140 31140 12940 29340 29180 30340 12580 44140 24340 24340 11460 24340 29620 40980 33460 33460 33460 25060 25060 44180 30700 16180 16180 42140 45060 27060 40380 10580 48060 10580 27060 40380 47260 15500 20500 24780 39580 43900 40580 24220 17460 44220 49660 48260 19380 48700 25180 38300 38300 Springfield, IL ................................................................................................... Peoria, IL ......................................................................................................... Rockford, IL ..................................................................................................... Carbondale-Marion, IL ..................................................................................... Lafayette-West Lafayette, IN ........................................................................... Bloomington, IN ............................................................................................... Indianapolis-Carmel-Anderson, IN .................................................................. South Bend-Mishawaka, IN-MI ........................................................................ Terre Haute, IN ................................................................................................ Evansville, IN-KY ............................................................................................. Gary, IN ........................................................................................................... Indianapolis-Carmel-Anderson, IN .................................................................. Lafayette-West Lafayette, IN ........................................................................... Ames, IA .......................................................................................................... Waterloo-Cedar Falls, IA ................................................................................. Iowa City, IA .................................................................................................... Dubuque, IA ..................................................................................................... Iowa City, IA .................................................................................................... Des Moines-West Des Moines, IA .................................................................. Kansas City, MO-KS ....................................................................................... Louisville/Jefferson County, KY-IN .................................................................. Baton Rouge, LA ............................................................................................. Lake Charles, LA ............................................................................................. Lafayette, LA ................................................................................................... Lewiston-Auburn, ME ...................................................................................... Baltimore-Columbia-Towson, MD .................................................................... Springfield, MA ................................................................................................ Grand Rapids-Wyoming, MI ............................................................................ Grand Rapids-Wyoming, MI ............................................................................ Ann Arbor, MI .................................................................................................. Grand Rapids-Wyoming, MI ............................................................................ Lansing-East Lansing, MI ................................................................................ Saginaw, MI ..................................................................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Minneapolis-St. Paul-Bloomington, MN-WI ..................................................... Gulfport-Biloxi-Pascagoula, MS ....................................................................... Gulfport-Biloxi-Pascagoula, MS ....................................................................... Springfield, MO ................................................................................................ Lincoln, NE ...................................................................................................... Carson City, NV ............................................................................................... Carson City, NV ............................................................................................... Santa Fe, NM .................................................................................................. Syracuse, NY ................................................................................................... Ithaca, NY ........................................................................................................ Rochester, NY ................................................................................................. Albany-Schenectady-Troy, NY ........................................................................ Watertown-Fort Drum, NY ............................................................................... Albany-Schenectady-Troy, NY ........................................................................ Ithaca, NY ........................................................................................................ Rochester, NY ................................................................................................. Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Burlington, NC ................................................................................................. Durham-Chapel Hill, NC .................................................................................. Greenville, NC ................................................................................................. Raleigh, NC ..................................................................................................... Spartanburg, SC .............................................................................................. Rocky Mount, NC ............................................................................................ Grand Forks, ND-MN ...................................................................................... Cleveland-Elyria, OH ....................................................................................... Springfield, OH ................................................................................................ Youngstown-Warren-Boardman, OH-PA ......................................................... Weirton-Steubenville, WV-OH ......................................................................... Dayton, OH ...................................................................................................... Williamsport, PA .............................................................................................. Hagerstown-Martinsburg, MD-WV ................................................................... Pittsburgh, PA .................................................................................................. Pittsburgh, PA .................................................................................................. PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. 49980 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT— Continued [Based on new OMB delineations and census 2010 data] Rural county Lugar designated CBSA NEW County name State Schuylkill County ................................. Susquehanna County ......................... Adjuntas Municipio .............................. Coamo Municipio ................................ ´ Las Marıas Municipio .......................... Maricao Municipio ............................... Salinas Municipio ................................ Clarendon County ............................... Colleton County .................................. Lee County .......................................... Marion County ..................................... New berry County ............................... Meigs County ...................................... Blanco County ..................................... Bosque County ................................... Calhoun County .................................. Fannin County ..................................... Grimes County .................................... Harrison County .................................. Henderson County .............................. Hill County ........................................... Milam County ...................................... Van Zandt County ............................... Willacy County .................................... King and Queen County ..................... Louisa County ..................................... Madison County .................................. Orange County .................................... Page County ....................................... Shenandoah County ........................... Southampton County .......................... Surry County ....................................... Island County ...................................... Mason County ..................................... Jackson County .................................. Morgan County ................................... Roane County ..................................... Green Lake County ............................. Jefferson County ................................. Walworth County ................................. PA PA PR PR PR PR PR SC SC SC SC SC TN TX TX TX TX TX TX TX TX TX TX TX VA VA VA VA VA VA VA VA WA WA WV WV WV WI WI WI tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. New Lugar Areas for FY 2015 In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we stated that of the 127 qualifying counties identified as Lugar counties based on the new OMB delineations, 58 counties would be newly designated as Lugar for FY 2015 if we finalize our proposed adoption of the new OMB delineations. Hospitals in these counties, with at least 25 percent of their workers commuting to a higher wage area, effective October 1, 2014, would be deemed to be located in the CBSA to which the highest number of their workers commute (which is identified in the column titled ‘‘Lugar Designated CBSA’’ in the table above). Hospitals in these counties would receive the reclassified urban wage index of the corresponding Lugar Designated CBSA, unless they choose to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 CBSA CBSA name 39740 13780 38660 41980 32420 32420 25020 44940 16700 44940 22500 17900 17420 12420 47380 47020 19124 17780 30980 46340 23104 12420 19124 15180 40060 40060 16820 47900 25500 49020 47260 47260 42644 36500 16620 25180 16620 22540 33340 33340 Reading, PA .................................................................................................... Binghamton, NY .............................................................................................. Ponce, PR ....................................................................................................... San Juan-Carolina-Caguas, PR ...................................................................... ¨ Mayaguez, PR ................................................................................................. ¨ Mayaguez, PR ................................................................................................. Guayama, PR .................................................................................................. Sumter, SC ...................................................................................................... Charleston-North Charleston, SC .................................................................... Sumter, SC ...................................................................................................... Florence, SC .................................................................................................... Columbia, SC .................................................................................................. Cleveland, TN .................................................................................................. Austin-Round Rock, TX ................................................................................... Waco, TX ......................................................................................................... Victoria, TX ...................................................................................................... Dallas-Plano-Irving, TX .................................................................................... College Station-Bryan, TX ............................................................................... Longview, TX ................................................................................................... Tyler, TX .......................................................................................................... Fort Worth-Arlington, TX ................................................................................. Austin-Round Rock, TX ................................................................................... Dallas-Plano-Irving, TX .................................................................................... Brownsville-Harlingen, TX ............................................................................... Richmond, VA .................................................................................................. Richmond, VA .................................................................................................. Charlottesville, VA ........................................................................................... Washington-Arlington-Alexandria, DC-VA-MD-WV ......................................... Harrisonburg, VA ............................................................................................. Winchester, VA-WV ......................................................................................... Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Virginia Beach-Norfolk-Newport News, VA-NC ............................................... Seattle-Bellevue-Everett, WA .......................................................................... Olympia-Tumwater, WA .................................................................................. Charleston, WV ............................................................................................... Hagerstown-Martinsburg, MD-WV ................................................................... Charleston, WV ............................................................................................... Fond du Lac, WI .............................................................................................. Milwaukee-Waukesha-West Allis, WI .............................................................. Milwaukee-Waukesha-West Allis, WI .............................................................. waive their Lugar status, as discussed later in this section. In the proposed rule (79 FR 28077), we stated that some areas that are currently urban counties would be geographically rural if we adopted the new OMB delineations and would meet the requirements for redesignation as Lugar areas. As described in section III.B.2.e.(2) of the preamble of the proposed rule, we proposed a 3-year hold harmless transitional wage index adjustment for hospitals located in urban counties that become rural under the new OMB delineations. Because Lugar status is a form of redesignation, hospitals that currently are located in urban counties that would become rural under the new OMB delineations and are also considered Lugar areas under the new OMB delineations would not be eligible for the 3-year transition wage PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. New. index adjustment unless they chose to waive Lugar status for FY 2015 (as discussed later in this section) and sought no other form of wage index reclassification. As discussed above, we did not receive any public comments with regard to our proposal to use the new OMB delineations to identify rural counties that would qualify as ‘‘Lugar’’ under section 1886(d)(8)(B) of the Act, and we are finalizing the policy as proposed. We refer readers to the summary of public comments and our responses regarding the proposed transition policies for the wage index as a result of adoption of the OMB delineations for FY 2015 in section III.B.2.e. of the preamble of this final rule. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we stated that by using Table 4C associated with the proposed rule (which is available via the Internet on the CMS Web site), affected hospitals could compare the reclassified wage index for the labor market area into which they would be reclassified by the MGCRB to the reclassified wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act. We stated that hospitals may withdraw from an MGCRB reclassification within 45 days of the publication of the FY 2015 proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51598 through 51599) for the procedural rules and requirements for a hospital that is redesignated under section 1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB, as well as our policy of measuring the urban area, exclusive of the Lugar County, for purposes of meeting proximity requirements.) We treat New England deemed counties in a manner consistent with how we treat Lugar counties. (We refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47337 through 47338) for a discussion of this policy.) Since publication of the proposed rule, we discovered that there are four hospitals in rural counties that are newly deemed Lugar areas for FY 2015 that also have MGCRB reclassifications to the same CBSAs to which they are redesignated as Lugar. Lugar hospitals are treated like reclassified hospitals for purposes of determining their applicable wage index and receive the reclassified wage index for the urban area to which they have been redesignated. Because the Lugar redesignated CBSA is now the same as the MGCRB reclassified CBSA, the MGCRB reclassification becomes redundant. We note that hospitals with Lugar redesignations and hospitals with MGCRB reclassifications receive the wage index for hospitals that are reclassified as provided in Table 4C–2 associated with this final rule (which is available via the Internet on the CMS Web site). Table 9A–2 associated with this final rule (which is available via the Internet on the CMS Web site) reflects the reclassified and redesignated hospitals. Hospitals that are redesignated as Lugar are indicated as such when the ‘‘Lugar’’ column is populated. Although we did indicate in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077) that hospitals redesignated as Lugar that also had an MGCRB reclassification may compare the reclassified wage index for the labor market area into which they would be reclassified by the MGCRB to the reclassified wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act, and 49981 terminate or withdraw from an MGCRB reclassification within 45 days of the publication of the proposed rule, we acknowledge that we did not highlight these four hospitals that also are Lugar that would have redundant reclassifications. We also note that these hospitals did not send requests to the MGCRB to terminate their reclassifications. Because the new Lugar status would deem these hospitals redesignated to the same area to which they have an approved MGCRB reclassification, the reclassified wage index would be the same for these four hospitals in either scenario. We realize that, for this reason, the hospitals may not have seen a need to withdraw the MGCRB reclassification. Because we did not state in the proposed rule that we would expect that these affected hospitals would be terminating the remaining years of their 3-year reclassification period, for FY 2015 we are not updating the Lugar column on Table 9A–2 for this final rule. However, we have indicated in a footnote that, under the new OMB delineations, these providers are now redesignated as Lugar to the same area to which they have an existing MGCRB reclassification that they did not terminate. We emphasize that the effect on the wage index of these four hospitals is immaterial because hospitals redesignated as Lugar as well as hospitals with approved MGCRB reclassifications both receive the reclassified wage index for the urban area to which they have been redesignated or reclassified. HOSPITALS REDESIGNATED AS LUGAR TO AN AREA WHERE THEY HAVE AN APPROVED MGCRB RECLASSIFICATION FOR FY 2015 CMS Certification No. (CCN) 150076 190017 390016 420030 ....................... ....................... ....................... ....................... Rural county name Marshall County, IN ................................................................................................. St. Landry Parish, LA .............................................................................................. Lawrence County, PA .............................................................................................. Colleton County, SC ................................................................................................ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as Lugar In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077 through 28078), we discussed that if we adopted the new OMB delineations, 29 rural counties would no longer meet the qualifying criteria to be redesignated as Lugar effective October 1, 2014, either because they would be geographically located in an urban area, or they would fail to meet the 25 percent cumulative out-migration threshold with application of the new 2010 Census VerDate Mar<15>2010 Lugar CBSA 18:25 Aug 21, 2014 Jkt 232001 commuting data. Since the publication of the proposed rule, we have discovered a mistake where we inadvertently did not account for Davidson County, NC. Therefore, the number of rural counties that will no longer meet the qualifying criteria to be redesignated as Lugar effective October 1, 2014, as indicated above, is 30 as opposed to 29. We are correcting this oversight in the preamble of this final rule. Counties that were deemed urban under section 1886(d)(8)(B) of the Act in PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 43780 29180 38300 16700 MGCRB reclassification CBSA 43780 29180 38300 16700 FY 2014, but would be geographically located in an urban area under the new OMB delineations for FY 2015 are: Windham County, CT Flagler County, FL Walton County, FL Morgan County, GA Peach County, GA De Witt County, IL Allen County, KY St. James Parrish, LA Montcalm County, MI Fillmore County, MN Davidson County, NC Lincoln County, NC E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49982 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Cotton County, OK Linn County, OR Adams County, PA Monroe County, PA Falls County, TX Buckingham County, VA Floyd County, VA Green County, WI Counties that would fail to meet the 25-percent threshold in FY 2015 are: Banks County, GA Hendry County, FL Bingham County, ID Oceana County, MI Columbia County, NY Sullivan County, NY Wyoming County, NY Oconee County, SC Middlesex County, VA Wahkiakum County, WA In section III.B.2.e.(2) of the preamble of the proposed rule, to help ease dramatic negative impacts in payment for hospitals designated as urban under the current FY 2014 OMB delineations, but would be classified as rural under the new OMB delineations, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we proposed to assign these hospitals the FY 2015 area wage index value of the urban CBSA to which they geographically belonged in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). (For purposes of the wage index computation, the wage data of these hospitals would remain assigned to the statewide rural area in which they are located.) Similarly, we proposed that the same 3-year transition apply to hospitals located in those counties that would lose their deemed urban designation under section 1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB delineations. Because these hospitals would, in fact, lose their designated urban status, we proposed to extend the 3-year hold harmless transitional wage index adjustment to these hospitals located in counties formerly designated as urban under section 1886(d)(8)(B) of the Act. That is, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we proposed to assign these hospitals the FY 2015 area wage index value of the urban CBSA to which they were designated as urban in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). We proposed to use the wage data from these hospitals as part of computing the rural wage index. In addition, during VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 this 3-year transition period, these hospitals would be eligible to apply for reclassification by the MGCRB. As discussed in section III.B.2.e.(3) of the preamble of the proposed rule, we proposed that if a hospital is currently located in an urban county that would become rural for FY 2015 under the new OMB delineations, and such hospital seeks and is granted any reclassification or redesignation during FYs 2015, 2016, or 2017, the hospital would permanently lose its 3-year transitional assigned wage index, and would not be able to reinstate it. Similarly, we proposed that this policy also apply to hospitals located in those counties that would lose their deemed urban designation under section 1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB delineations. In FY 2018, we proposed that these hospitals would receive their statewide rural wage index. As indicated earlier, we did not receive any public comments with regard to our proposal to use the new OMB delineations to identify rural counties that would qualify as ‘‘Lugar’’ under section 1886(d)(8)(B) of the Act. Therefore, we are finalizing the policy and designations as proposed. As discussed previously, for FYs 2015, 2016, and 2017, assuming no other form of wage index reclassification or redesignation is granted, we are assigning hospitals that are in urban counties that will become rural under the new OMB delineations to the FY 2015 area wage index value of the urban CBSA to which they geographically belonged in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). (For purposes of the wage index computation, the wage data of these hospitals will remain assigned to the statewide rural area in which they are located.) Similarly, the same 3-year transition will apply to hospitals located in those counties that will lose their deemed urban designation under section 1886(d)(8)(B) of the Act and will become rural under the new OMB delineations. We will use the wage data from these hospitals as part of computing the rural wage index. In FY 2018, these hospitals will receive their statewide rural wage index. Furthermore, if any such hospital seeks and is granted any reclassification or redesignation during FYs 2015, 2016, or 2017, the hospital will permanently lose its 3-year transitional assigned wage index and will not be able to reinstate it. We refer readers to summaries of public comments and our responses PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 regarding proposed transition policies for the wage index in section III.B.2.e. of the preamble of this final rule. 4. Waiving Lugar Redesignation for the Out-Migration Adjustment In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the DSH payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. (We refer readers to a discussion of DSH payment adjustment under section IV.F. of the preamble of this final rule.) In addition, we adopted a minor procedural change in that rule that would allow a Lugar hospital that qualifies for and accepts the outmigration adjustment (through written notification to CMS within 45 days from the publication of the proposed rule) to waive its urban status for the full 3-year period for which its out-migration adjustment is effective. By doing so, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the out-migration adjustment. Therefore, under the procedural change, a Lugar hospital that requests to waive its urban status in order to receive the rural wage index in addition to the out-migration adjustment would be deemed to have accepted the out-migration adjustment and agrees to be treated as rural for the duration of its 3-year eligibility period, unless, prior to its second or third year of eligibility, the hospital explicitly notifies CMS in writing, within the required period (generally 45 days from the publication of the proposed rule), that it instead elects to return to its deemed urban status and no longer wishes to accept the out-migration adjustment. If the hospital does notify CMS that it is electing to return to its deemed urban status, it would again be treated as urban for all IPPS payment purposes. We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51599 through 51600) for a detailed discussion of the policy and process for waiving Lugar status for the out-migration adjustment. Comment: One commenter sought clarification about whether a hospital can waive Lugar status in other E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV instances, such as to retain a special rural status such as CAH, SCH, or MDH, and not just when a hospital is eligible for the out-migration adjustment. Response: As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600, the statute provides two methods for a Lugar hospital to be treated as rural for Medicare payment purposes: (1) If the hospital is eligible for an out-migration adjustment under section 1886(d)(13) of the Act; or (2) if the hospital applies for an urban to rural reclassification under section 1886(d)(8)(E) of the Act. There are no other provisions under the Medicare statute that would allow a Lugar hospital to be treated as a rural provider. 5. Update of Application of Urban to Rural Reclassification Criteria Section 401(a) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106– 113), which amended section 1886(d)(8) of the Act by adding a new paragraph (E), directed the Secretary to treat any subsection (d) hospital located in an urban area as being located in the rural area of the State in which the hospital is located, providing that the hospital applied for reclassification in a manner determined by the Secretary and met certain criteria. As discussed in the FY 2001 interim final rule (65 FR 47029 through 47031), we codified in regulation at § 412.103 the application process and the qualifying criteria for any hospital seeking rural reclassification. In order to be approved for a rural reclassification, a hospital that is located in an urban area must meet one of the following four criteria under section 1886(d)(8)(E)(ii) of the Act (codified at § 412.103): (1) The hospital is located in a rural census tract of an MSA, as determined under the most recent version of the Goldsmith Modification, the Rural-Urban Commuting Area (RUCA) codes; (2) the hospital is located in an area designated by any law or regulation of such State as a rural area or is designated by such State as a rural hospital; (3) the hospital would qualify as a RRC or SCH if the hospital were located in an urban area; and (4) the hospital meets such other criteria as the Secretary may specify. On February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. These delineations are based on 2010 decennial Census data. Several VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 modifications of RUCA codes were necessary to take into account updated commuting data and revised OMB delineations. We refer readers to the U.S. Department of Agriculture’s Economic Research Service Web site for a detailed listing of updated RUCA codes found at: https:// www.ers.usda.gov/data-products/ruralurban-commuting-area-codes.aspx. The updated RUCA code definitions were introduced in late 2013. As discussed at § 412.103(f), the duration of an approved rural reclassification remains in effect without need for reapproval unless there is a change in the circumstances under which the classification was approved. If a hospital located in an urban area was approved for a rural reclassification under § 412.103(a)(1), that reclassification would no longer be valid if the hospital is no longer located within a rural census tract of an MSA defined as an RUCA. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28078), we encouraged all hospitals with active rural reclassifications under section 1886(d)(8)(E) of the Act to review their original reclassification application and determine whether the reclassification status would still apply. As discussed in section VI.C.2. of the preamble of the proposed rule, we proposed a 2-year grace period allowing affected CAHs additional time to seek a new rural reclassification without the threat of losing its CAH status. As discussed in section VI.C.2. of the preamble of the proposed rule, we did not propose a grace period for other types of hospitals to seek a new rural reclassification. We noted that rural reclassification status under § 412.103 is effective as of the filing date of the application. Therefore, if the change in RUCA codes invalidates any hospital’s rural reclassification status, we believe hospitals will have adequate time to apply for a new reclassification using an alternative qualification criterion specified at either § 412.103(a)(2) or § 412.103(a)(3). A rural referral center (RRC) or a sole community hospital (SCH) that continues to meet the appropriate qualification criteria would, in itself, qualify for a rural reclassification. If a complete application is received before October 1, 2014, and is approved by the CMS Regional Office, the hospital would experience no interruption in its rural status. Comment: Several commenters requested that additional provider types (SCHs and MDHs) be afforded the 2-year transition period of deemed rural status that was granted to CAHs. Commenters stated the critical role these hospitals PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 49983 serve in their communities, and cited the administrative burden that would be required to obtain rural status in order to maintain their provider type. Commenters asserted that hospitals that obtain an urban to rural reclassification are not entitled to receive an outmigration adjustment and would require additional time to assess their appropriate options. Response: We thank commenters for sharing their concerns. However, we do not believe that extending a 2-year transition period of deemed rural status is necessary for additional provider types. While it is true that there are potential payment consequences for a CAH, SCH, or MDH currently located in a rural area that becomes urban under the new OMB delineations, the payment consequences for CAHs are generally greater, because, unlike SCHs and MDHs, CAHs are entirely excluded from the IPPS and would face an end to payments based on 101 percent of their reasonable costs. In addition, given the different Conditions of Participation (CoPs) for CAHs, and that it would be generally more difficult for a CAH to have to meet the hospital CoPs instead of the CAH CoPs, only a CAH also faces the potential loss of its ability to continue to participate in the Medicare and Medicaid programs. Specifically, to avoid termination not only of its CAH status (and associated cost-based reimbursement), but of its Medicare agreement in its entirety, the CAH would have to convert back to a hospital, including demonstrating via a survey that it complies with the hospital CoPs, which are generally more stringent than those for CAHs. We believe that the combination of the generally greater payment consequences for CAHs relative to other provider types combined with the unique consequences for CAHs with respect to the CoPs make it appropriate for CAHs to be afforded a 2-year transition period in which to reclassify not afforded to other provider types. SCHs and MDHs that were located in rural areas that became urban under the new OMB delineations could have known of the upcoming change since February 2013 (when OMB published the new delineations); thus, these hospitals have had adequate time to assess options. SCHs and MDHs still can seek approval for rural reclassification for FY 2015 under § 412.103 if they meet the requirements of this section, provided that they apply before the beginning of FY 2015. This approval of rural status would be effective as of the date of the application. If any hospital’s wage index is negatively affected due to the adoption of the new OMB E:\FR\FM\22AUR2.SGM 22AUR2 49984 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV delineations, the hospital will receive a 50/50 blended wage index for FY 2015 (as discussed previously). With respect to the out-migration adjustment, commenters noted correctly that hospitals reclassified rural under section 412.103 are not eligible to receive an out-migration adjustment. Section 1886(d)(13)(G) of the Act specifies that a hospital is not eligible to receive an out-migration adjustment if it is granted any form of wage index reclassification, including urban to rural reclassification. We believe that a hospital that chooses to reclassify to a particular labor market area should not also receive an additional payment benefit to reflect commuting patterns within its home area. After consideration of the public comments we received, we are not implementing any additional changes to grant other provider types a transition period during which to reclassify as rural similar to that being adopted for CAHs. We refer readers to section VI.C.2. of the preamble of this final rule for a discussion of the CAH transition period policy. I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the ‘‘out-migration’’ adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index. When this provision was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau which was derived from a special tabulation of the 2000 Census journeyto-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the ‘‘long-form’’ survey, which the Census Bureau used at the time, and it contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was ‘‘short form’’ only; therefore, this information was not collected as part of the 2010 Census. The Census Bureau is working with CMS to provide an alternative dataset VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 based on the latest available data that is expected to meet our needs for developing a new out-migration adjustment. We believe we will have the necessary time to obtain, review and analyze the data in order to propose new out-migration adjustments based on new commuting patterns developed from the 2010 Census data beginning with FY 2016. Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. The data used for the FY 2014 out-migration adjustment are the most recent data that have been analyzed, and we believe that these data are appropriate to establish the qualifying counties. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28079 through 28080), we proposed that the FY 2015 out-migration adjustments continue to be based on the 2000 Census data. We also proposed that the FY 2015 out-migration adjustments continue to be based on the policies, procedures, and computation that were used for the FY 2014 out-migration adjustment. We did not receive any public comments with regard to the outmigration adjustment for FY 2015. Therefore, for FY 2015, we are finalizing our proposal that the FY 2015 outmigration adjustment continue to be based on the 2000 Census data used for the FY 2014 out-migration adjustment. We also are finalizing our proposal that the out-migration adjustment be based on the policies, procedures, and computation that were used for the FY 2014 out-migration adjustment. (We refer readers to a full discussion of the adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602)). Table 4J, which is available via the Internet on the CMS Web site, lists the out-migration adjustments for the FY 2015 wage index. Section 1886(d)(13)(F) of the Act states that ‘‘[a] wage index increase under this paragraph shall be effective for a period of 3 fiscal years, except that the Secretary shall establish procedures under which a subsection (d) hospital may elect to waive the application of such wage index increase.’’ Therefore, for FY 2015, because we are continuing to use the out-migration adjustment data used for FY 2014, consistent with the statute, we also proposed to allow hospitals that qualified in FY 2013 or FY 2014 to receive the out-migration adjustment based on the commuting data and the CBSA delineations used for FY 2014 to continue to receive the same PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 out-migration adjustment for the remainder of their 3-year qualification period. Similarly, if a hospital qualifies for and opts to receive the out-migration adjustment for the first time in FY 2015, we also proposed to allow that hospital to receive the out-migration adjustment based on the data used for FY 2014 for FYs 2015, 2016, and 2017. Accordingly, even if we propose to adopt new outmigration adjustment data for FY 2016, as we believe we will be able to do, hospitals that are already receiving an out-migration adjustment beginning with a fiscal year prior to FY 2016 would still receive their out-migration adjustment based on the data used for FY 2014 for the years that remain of their 3-year qualification period in FY 2016 and after. We did not receive any public comments with regard to our proposals. Therefore, we are finalizing our proposal that hospitals that qualified in FY 2013 or FY 2014 to receive the outmigration adjustment based on the commuting data and the CBSA delineations used for FY 2014 will continue to receive the same outmigration adjustment for the remainder of their 3-year qualification period. If a hospital qualifies for and opts to receive the out-migration adjustment for the first time in FY 2015, we will allow that hospital to receive the out-migration adjustment based on the data used for FY 2014 for FYs 2015, 2016, and 2017. We intend to address application of the FY 2016 out-migration adjustment in greater detail in the FY 2016 proposed rule. However, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28079), we solicited public comments on how to implement the new outmigration adjustment data for FY 2016, given the statutory requirement at section 1886(d)(13)(F) of the Act that an out-migration adjustment be effective for 3 fiscal years. We did not receive any public comments on how to implement the new out-migration adjustment data for FY 2016. As discussed in section III.B. of the preamble of this final rule, we are using OMB’s new labor market area delineations based on the 2010 Census data to identify counties qualifying as Lugar counties for FY 2015. In section III.H.3 of the preamble of this final rule, we discuss hospitals located in rural counties that are deemed to be urban under section 1886(d)(8)(B) of the Act. These rural counties are known as ‘‘Lugar’’ counties. Under the new OMB delineations, there are counties newly qualifying as Lugar as well as counties that were previously Lugar counties that will no longer meet the criteria to be redesignated as Lugar. As discussed in E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations section III.H.4. of the preamble of this final rule, if a Lugar hospital qualifies for and accepts the out-migration adjustment, it must waive its deemed urban status and can do so for the 3-year period for which the out-migration adjustment is effective. Therefore, hospitals located in counties newly designated as Lugar due to the new OMB delineations will have the choice to either maintain their Lugar status or waive it in order to receive the outmigration adjustment in FY 2015 based on the out-migration adjustment data used for FY 2014. On the other hand, there are hospitals in counties deemed to be Lugar under the current OMB delineations that waived their Lugar status for the outmigration adjustment, but are not Lugar under the new OMB delineations. These hospitals will continue to receive the out-migration adjustment for the 3-year eligibility period through FY 2015 or FY 2016. However, these hospitals that are located in urban counties under the new OMB delineations, and wish to continue to maintain their rural status effective October 1, 2014, must do so by reclassifying from urban to rural under § 412.103. Section 1886(d)(13)(G) of the Act states that a hospital cannot simultaneously receive the outmigration adjustment and be subject to a reclassification under section 1886(d)(8) or 1886(d)(10) of the Act. Therefore, if such hospital is not located in a geographically rural area under the new OMB delineations, and reclassifies under § 412.103 of the regulations in order to be treated as rural for IPPS purposes, the hospital is ineligible to receive an out-migration adjustment, even if the 3-year eligibility period has not expired. As discussed in section III.B.5. of the preamble of this final rule, we are finalizing our proposal to apply a 1-year blended wage index for any provider that experiences a decrease in wage index value due to the implementation of the new OMB labor market area delineations. This policy creates a wage index that is 50 percent of the wage index derived using the current FY 2014 OMB delineations, and 50 percent of the wage index based on the new OMB delineations. As discussed in section III.B.2.e.(4) of the preamble of this final rule, as we proposed, we are applying this blended wage index value to any affected hospital in a budget neutral manner. However, we proposed that hospitals receiving the out-migration adjustment would have it added to the result of the 50/50 blended wage index, after budget neutrality is applied. We established the blended wage index transition adjustment specifically to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 address any negative impact that may be caused by the adoption of the new OMB delineations in FY 2015. To specifically identify and address any such negative payment impact, we proposed to apply the out-migration adjustment independent of the blended wage index and other wage index adjustments (for example, the rural floor) and related budget neutrality adjustments. This is consistent with our current policy to apply the out-migration adjustment after all other wage index adjustments and related budget neutrality adjustments have been applied. Therefore, we believe the out-migration adjustment would be properly applied as a supplemental addition to a hospital’s final wage index value, similar to our treatment of hospitals receiving the frontier State floor value of 1.00, as described under 42 CFR 412.64(m), that also qualify for an out-migration adjustment and would receive that adjustment. One group of commenters suggested CMS made an error in calculating the rural wage index for Connecticut under the old OMB delineations (as discussed in section III.B.2.e.(4) of the preamble of this final rule) for the purpose of applying the proposed transition blend. We respond to this comment in section III.B.2.e.(4) of the preamble of this final rule, and we refer readers to this section for further discussion. After consideration of the public comments we received, we are finalizing our proposal without modification that we will add the outmigration adjustment for hospitals receiving such adjustment to the result of the 50/50 blended wage index, after budget neutrality is applied. Therefore, we will apply the out-migration adjustment independent of the blended wage index and other wage index adjustments (for example, the rural floor) and related budget neutrality adjustments. J. Process for Requests for Wage Index Data Corrections The preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the proposed FY 2015 wage index were made available on September 13, 2013, through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Wage-Index-FilesItems/FY-2015-Wage-Index-HomePage.html. In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional public use file on our Web site that reflects the actual data that are PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 49985 used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and the scheduling of the Hospital Open Door forums at the CMS Web site at: https://www.cms.gov/ Outreach-and-Education/Outreach/ OpenDoorForums/. In a memorandum dated September 16, 2013, we instructed all MACs to inform the IPPS hospitals they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed below). We also instructed the MACs to advise hospitals that these data were also made available directly through their representative hospital organizations. If a hospital wished to request a change to its data as shown in the September 13, 2013 wage and occupational mix data files, the hospital was to submit corrections along with complete, detailed supporting documentation to its MAC by November 21, 2013. Hospitals were notified of this deadline and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the Internet, through the September 16, 2013 memorandum referenced above. In the September 16, 2013 memorandum, we also specified that a hospital requesting revisions to its occupational mix survey data was to copy its record(s) from the CY 2010 occupational mix preliminary files posted to the CMS Web site in September, highlight the revised cells on its spreadsheet, and submit its spreadsheet(s) and complete documentation to its MAC no later than November 21, 2013. The MACs notified the hospitals by early-February 2014 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals’ late-November revision requests. The MACs also submitted the revised data to CMS by late January 2014. CMS published the proposed wage index public use files that included hospitals’ revised wage index data on February 20, 2014. Hospitals had until March 3, 2014, to submit requests to the MACs for reconsideration of adjustments made by the MACs as a result of the desk review, and to correct errors due to CMS’ or the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49986 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations MAC’s mishandling of the wage index data. Hospitals also were required to submit sufficient documentation to support their requests. After reviewing requested changes submitted by hospitals, MACs were required to transmit to CMS any additional revisions resulting from the hospitals’ reconsideration requests by April 9, 2014. The deadline for a hospital to request CMS intervention in cases where the hospital disagreed with the MAC’s policy interpretations was April 16, 2014. We note that, beginning with the FY 2015 wage index, in accordance with the FY 2015 wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/FY2015WI-Timeline.pdf, the April appeals had to be sent via mail and email. We refer readers to the wage index timeline for complete details. Hospitals were given the opportunity to examine Table 2, which was listed in section VI. of the Addendum to the proposed rule and available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Wage-Index-FilesItems/FY-2015-Wage-Index-HomePage.html. Table 2 contained each hospital’s proposed adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2011 data used to construct the proposed FY 2015 wage index. We noted that the proposed hospital average hourly wages shown in Table 2 only reflected changes made to a hospital’s data that were transmitted to CMS by February 26, 2014. The final wage index data public use files were posted on May 2, 2014 on the Internet at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY-2015-Wage-IndexHome-Page.html. The May 2014 public use files are made available solely for the limited purpose of identifying any potential errors made by CMS or the MAC in the entry of the final wage index data that resulted from the correction process described above (revisions submitted to CMS by the MACs by April 9, 2014). After the release of the May 2014 wage index data files, changes to the wage and occupational mix data could only be made in those very limited situations involving an error by the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the MAC nor CMS VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 will approve the following types of requests: • Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by the MACs on or before April 9, 2014. • Requests for correction of errors that were not, but could have been, identified during the hospital’s review of the February 20, 2014 wage index public use files. • Requests to revisit factual determinations or policy interpretations made by the MAC or CMS during the wage index data correction process. If, after reviewing the May 2014 final public use files, a hospital believed that its wage or occupational mix data were incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital was given the opportunity to notify both its MAC and CMS regarding why the hospital believes an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital was required to send its request to CMS and to the MAC no later than June 2, 2014. Similar to the April appeals, beginning with the FY 2015 wage index, in accordance with the FY 2015 wage index timeline posted on the CMS Web site at https://www.cms. gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ Downloads/FY2015-WI-Timeline.pdf, the June appeals were required to be sent via mail and email to CMS and the MACs. We refer readers to the wage index timeline for complete details. (We refer readers to section II.K. of the preamble to this final rule where we are making revisions to the wage index timetable.) Verified corrections to the wage index data received timely by CMS and the MACs (that is, by June 2, 2014) were incorporated into the final wage index in this FY 2015 IPPS/LTCH PPS final rule, which will be effective October 1, 2014. We created the processes described above to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2015 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the MAC’s decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the PRRB, the failure of CMS to make a requested data revision. We refer PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections. Again, we believe the wage index data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC’s attention. Moreover, because hospitals had access to the final wage index data by early May 2014, they had the opportunity to detect any data entry or tabulation errors made by the MAC or CMS before the development and publication of the final FY 2015 wage index by August 2014, and the implementation of the FY 2015 wage index on October 1, 2014. Given these processes, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after June 2, 2014, we retain the right to make midyear changes to the wage index under very limited circumstances. Specifically, in accordance with 42 CFR 412.64(k)(1) of our existing regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) the MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, ‘‘before the beginning of the fiscal year’’ means by the June deadline for making corrections to the wage data for the following fiscal year’s wage index (for example, June 2, 2014, for the FY 2015 wage index). This provision is not available to a hospital seeking to revise another hospital’s data that may be affecting the requesting hospital’s wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made. In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) the MAC or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the MAC and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the June 2, 2014 deadline for the FY 2015 wage index); and (3) CMS agreed before October 1 that the MAC or CMS made an error in tabulating the hospital’s wage index data and the wage index should be corrected. In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the June 2, 2014 deadline for the FY 2015 wage index), and CMS acknowledges that the error in the hospital’s wage index data was caused by CMS’ or the MAC’s mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital’s data. In addition, the provision cannot be used to correct prior years’ wage index data; and it can only be used for the current Federal fiscal year. In situations where our policies would allow midyear corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index. We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital’s payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital’s wage index data revision request. K. Notice of Change to Wage Index Development Timetable As explained in section III.J. of the preamble of this final rule, the preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the proposed FY 2015 wage index were made available on September 13, 2013, through the Internet on the CMS Web site. The posting of these preliminary files initiates what is virtually a year-long VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 cycle for developing the wage index associated with the following IPPS fiscal year. This lengthy, almost year-long cycle is unique to the development of the IPPS wage index, and occurs independently from the development of the IPPS proposed and final rules, which typically are published in the spring and summer each year. In addition, the wage index, which is based on hospitals’ wage data reported on Worksheets S–3, Parts II and III of Form CMS–2552–10 of the Medicare cost report and occupational mix data, is the only portion of the IPPS that historically has been subject to its own annual review process, first by the MACs, and then by CMS, followed by distinct opportunities for hospitals to appeal decisions made by the MACs or CMS. This process is separate and independent from the standard cost report settlement and appeals processes established under the regulations at 42 CFR 405.1800 through 405.1889. Although this unique wage index development timetable has been in place since the early days of the IPPS, the current timetable is rooted in changes adopted in the FY 1998 IPPS final rule with comment period (62 FR 45990 through 45993). However, with numerous legislative and regulatory changes made to the IPPS since FY 1998, the demands on hospitals, MACs, and CMS have increased substantially. As a result, it has become increasingly challenging for wage index stakeholders to manage the wage index timetable with competing priorities. For the FY 2015 wage index, CMS made slight changes to the wage index development timetable, by posting the preliminary public use file (PUF) in September 2013 rather than in October 2013, which, in turn, moved back the deadline for hospitals to request revisions to the data displayed in that preliminary PUF to November 2013, instead of December 2013. In addition, the date for the MACs to complete desk reviews on that data was similarly moved to a slightly earlier deadline in early CY 2014. The FY 2015 Wage Index Development Timetable, which is posted on the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/Downloads/FY2015WI-Timeline.pdf, shows that hospitals have a little more than 2 months to request revisions to their data displayed in the September 13, 2013 preliminary PUF, until the commencement of the desk review process by the MACs on November 21, 2013. The MACs also have a little more than 2 months to complete the desk reviews and submit revised cost report data to CMS by PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 49987 January 29, 2014. Less than a month later, on February 20, 2014, the revised FY 2015 wage index and occupational mix PUFs were posted on the CMS Web site. Ensuring the accuracy of the February PUF is extremely important and beneficial to hospitals because, as the timetable shows, it is the basis for hospitals to appeal data that are incorrect, with March 3, 2014 being the last date that hospitals can request revisions to errors in the February 20, 2014 PUF. Therefore, we want to take steps to improve the accuracy of the February PUF, most importantly by proposing changes to the wage index timetables for future IPPS fiscal years that are much more significant and fundamental than the slight revisions to the timetable implemented for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28082), we stated that we believe that the changes we proposed in that proposed rule would not only improve the accuracy of the February PUF, but also would reduce the number of hospital appeals based on the February PUF. For example, as specified below, instead of the current timetable which only provides CMS with less than a month to review the MACs’ desk reviews and prepare the February PUF, we proposed approximately 3 months between the date that the MACs’ desk reviews would end and the date that CMS would post the subsequent PUF. To allow hospitals and MACs adequate time to prepare for the changes to the wage index development timetable, we proposed to make significant changes beginning with the FY 2017 wage index cycle. We listed the proposed changes for FY 2017 in a table in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28082) shown below side by side with the existing timetable so that commenters could read the proposed changes in the context of the existing timetable. Under the proposed changes for FY 2017, although we did not provide exact dates for the FY 2017 wage index timetable, we noted that, with every change listed, we intend to provide hospitals and MACs with the same or somewhat more time than under the current timetable to complete reviews and request revisions. We stated that the proposed revisions would not reduce the amount of time that either hospitals or MACs have to review wage data. Therefore, the proposed changes would not result in additional work on the part of the hospitals or MACs; in fact, in shifting the various dates, we expect that more time would be provided to hospitals, MACs, and CMS E:\FR\FM\22AUR2.SGM 22AUR2 49988 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations to ensure an even more accurate wage index. Deadlines Posting of Preliminary PUF on CMS Web site ............................................................. Deadline for Hospitals to Request Revisions to Preliminary PUF ................................ Deadline for MACs to Complete Desk Reviews ........................................................... Posting of February PUF on CMS Web site ................................................................. Deadline Following Posting of February PUF for Hospitals to Request Revisions ...... Completion of Appeals by MACs and Transmission of Final Wage Data to CMS ....... Deadline for Hospitals to Appeal in April ...................................................................... Posting of Final Rule PUF ............................................................................................. Deadline for Hospitals to Appeal in June ...................................................................... Expected Issuance of IPPS final rule ............................................................................ September 13, 2013 .......... November 21, 2013 ........... January 29, 2014 ............... February 20, 2014 .............. March 3, 2014 .................... April 9, 2014 ....................... April 16, 2014 ..................... May 2, 2014 ....................... June 2, 2014 ...................... August 1, 2014 ................... Proposed FY 2017 timetable FY 2015 timetable With regard to the FY 2016 wage index cycle, we believe it can serve as a transition to the more significant changes we proposed for the FY 2017 wage index cycle. We believe that there are steps we can take to improve the accuracy of the February 2016 PUF by building in more time to the FY 2016 wage index review process as well. Specifically, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083), we stated that we were notifying hospitals of changes to the deadlines only in the beginning of the FY 2016 wage index timetable, as a transition to the more significant proposed changes for the entire FY 2017 wage index timetable. That is, for FY 2016, we were only changing the following four dates: The posting of the preliminary wage index PUF; the posting of the CY 2013 occupational mix survey data preliminary PUF; the deadline for hospitals to request revisions to the wage data and occupational mix data preliminary PUFs; and the deadline for MACs to complete the desk reviews. We stated that we were not changing the remainder of the FY 2016 timetable at this time. We stated that we expect that making these changes for the FY 2016 timetable will improve the accuracy of Mid-May 2015. Early August 2015. Mid-October 2015. Late January 2016. Mid-February 2016. Mid- to Late March 2016. Early April 2016. Late April 2016. Late May 2016. August 1, 2016. the February 2016 PUF, and also mitigate the number of hospital appeals based on the February 2016 PUF. In addition, we believe these changes will help hospitals, MACs, and CMS adjust to the more significant timeline changes proposed for FY 2017. We listed only the changes for FY 2016 in the table shown below side by side with the existing FY 2015 timetable so that commenters could read the FY 2016 changes in the context of the existing timetable. We stated that we were not listing dates that would remain unchanged for FY 2016. FY 2015 timetable Adjusted FY 2016 timetable Posting of Preliminary Wage Data PUF on CMS Web site ............................................................ Posting of Preliminary CY 2013 Occupational Mix Data PUF on CMS Web site .......................... Deadline for Hospitals to Request Revisions to Preliminary PUF .................................................. Deadline for MACs to Complete Desk Reviews ............................................................................. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Deadlines September 13, 2013 .. September 13, 2013 November 21, 2013 ... January 29, 2014 ...... Late May 2014 Early to Mid-July 2014 Early October 2014 Mid-December 2014 Typically, the preliminary PUF initiating the start of an IPPS wage index fiscal year contains one spreadsheet with the Worksheet S–3 wage data for the applicable fiscal year on one tab, and another tab with the preliminary occupational mix data for that fiscal year. For the FY 2016 wage index, new occupational mix survey data will be available for use, based on the CY 2013 occupational mix survey. Hospitals were required to submit their CY 2013 occupational mix surveys to their MACs no later than July 1, 2014. Therefore, we did not have the preliminary CY 2013 occupational mix survey data in time to post it simultaneously in late May 2014 with the preliminary FY 2016 wage data. Accordingly, as the table above indicates, we posted the preliminary FY 2016 wage data by itself first in late May 2014, followed by a separate posting of the preliminary CY 2013 occupational mix survey data when the data became available, in mid-July 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We invited public comments on our proposals set forth above to make revisions to the wage index timetables for FY 2017. Comment: Numerous commenters were supportive of the general concept of changing the wage index timeline, and that the overall accuracy of the wage index could be improved by altering the timing of the process. Commenters generally agreed with CMS’ adjusted FY 2016 timetable, which specified that the preliminary PUF would be posted in May 2014, and hospitals would request revisions to the preliminary PUF by early October, 2014. Commenters believed the extra time between the posting of the preliminary PUF and the desk review program would allow hospitals more time to ‘‘scrub’’ their data. However, commenters also asked that CMS work with its MACs to ensure that the MACs also are meeting their respective deadlines, as some hospitals have PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 noticed that their MACs missed deadlines to submit revisions to CMS. With respect to the adjustments to the FY 2017 timetable, the commenters believed that an early August 2015 deadline for hospitals to request revisions to the May 2015 preliminary PUFs was too ambitious because it would not provide sufficient time for hospitals to review their data, particularly when key personnel may be on vacation during the summer months. The commenters added that an August deadline would leave less time to compare the preliminary wage index information to the prior year’s wage index data, given that the prior year’s data are not even finalized and available to the public before August 1. Some commenters recommended an early October deadline, while others stated that an early September, midSeptember, or a late September deadline would be feasible. One commenter believed that a December deadline would be best for hospitals with June 30 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations fiscal year ends, while another commenter stated that a late September or early October deadline would be acceptable for such hospitals. One commenter stated that the proposed FY 2017 deadline does not provide enough time for hospitals to incorporate their pension data into the desk review process because the Internal Revenue Service (IRS) Form 5500 (used as the basis for reporting pension contributions for defined benefit plans) is due 7 months after the end of the plan year (July 31), with possible extensions through mid-September. The commenter recommended that CMS either move the proposed deadline to October, or allow hospitals to submit their revisions for pension data during the MAC desk review process. Response: We appreciate the commenters’ general support for our proposed revisions to the wage index timetable. We listed general timeframes in the FY 2016 timetable but will communicate the exact dates for the FY 2016 timetable to hospitals through their MACs after issuance of this FY 2015 final rule. Regarding the FY 2017 Wage Index Timetable, we understand the commenters’ concerns that an August deadline for hospitals to submit revisions to their preliminary wage data may be too challenging to meet. However, while almost all of the commenters believed that an August deadline was too ambitious, there was no consensus from the commenters regarding when the deadline should be, with recommendations ranging from early September to December. We also partially agree with the commenter who raised the point that hospitals may not be able to provide their pension data until October, as further discussed below. In addition, we noted that commenters requested that CMS work with the MACs to ensure that the MACs are meeting their respective deadlines. We understand that the MACs have also faced pressure to accurately complete desk reviews and submit to CMS the appropriate revisions on behalf of hospitals in a timely fashion. The longer the time that hospitals have to submit revisions to their preliminary wage data, the less time the MACs have to conduct their desk reviews. Therefore, we believe that it is important to accommodate both the hospitals’ and MACs’ need for more time to adequately review the wage and occupational mix data. Because the earliest deadline that commenters stated would be feasible is early September, we are finalizing a date within the first week of September 2015 (rather than early August) as the deadline for hospitals to request revisions to their FY 2017 preliminary wage and occupational mix data. A deadline in early September would be manageable for hospitals, yet also provide the MACs with the most amount of time possible to complete 49989 their desk reviews. In addition to a general deadline of early September, we are providing a limited exception for submission of a certain hospital’s pension data. Specifically, we are only providing an extension for hospitals that have a fiscal year begin date on or after August 15 of a year to submit their pension data by mid-October because hospitals with fiscal year begin dates prior to August 15 would have already made their 3-year pension contributions by the end of September. We believe that the majority of hospitals, which do have fiscal year begin dates prior to August 15 of a year, would be able to submit their pension data, along with the remainder of their wage index documentation, to their MACs by the beginning of September each year. In this final rule, we are changing our wage index timetable for FY 2016 and after so that hospitals with fiscal years that begin on or after August 15 may submit their pension data to their MACs by mid-October. However, in future rulemaking, we may consider revisions to the 3-year average pension policy, which would allow all hospitals to submit their pension data at the same time. For FY 2017, the MACs would work on the desk reviews until midNovember 2015 (instead of mid October, as proposed). Following are the revised FY 2016 and FY 2017 Wage Index Timetables that we are finalizing: FY 2016 WAGE INDEX TIMETABLE Deadlines FY 2015 timetable Adjusted FY 2016 timetable Posting of Preliminary Wage Data PUF on CMS Web site ............................................................ Posting of Preliminary CY 2013 Occupational Mix Data PUF on CMS Web site .......................... Deadline for Hospitals to Request Revisions to Preliminary PUF .................................................. Deadline for Hospitals with FYBs on or after August 15 to Submit Pension Data to MACs .......... Deadline for MACs to Complete Desk Reviews ............................................................................. September 13, 2013 .. September 13, 2013 November 21, 2013 ... November 21, 2013 .. January 29, 2014 ...... May 23, 2014. July 11, 2014. Early October 2014. Mid October 2014. Mid-December 2014. Deadlines FY 2015 timetable FY 2017 timetable Posting of Preliminary PUF on CMS Web site ............................................................................... Deadline for Hospitals to Request Revisions to Preliminary PUF .................................................. September 13, 2013 .. November 21, 2013 ... Deadline for Hospitals with FYBs on or after August 15 to Submit Pension Data to MACs .......... Deadline for MACs to Complete Desk Reviews ............................................................................. Posting of February PUF on CMS Web site ................................................................................... Deadline Following Posting of February PUF for Hospitals to Request Revisions ........................ Completion of Appeals by MACs and Transmission of Final Wage Data to CMS ......................... November 21, 2013 .. January 29, 2014 ...... February 20, 2014 ..... March 3, 2014 ........... April 9, 2014 .............. Deadline for Hospitals to Appeal in April ........................................................................................ Posting of Final Rule PUF ............................................................................................................... Deadline for Hospitals to Appeal in June ........................................................................................ Expected Issuance of IPPS final rule .............................................................................................. April 16, 2014 ............ May 2, 2014 .............. June 2, 2014 ............. August 1, 2014 .......... Mid-May 2015. First week of September 2015. Mid-October 2015. Mid-November 2015. Late January 2016 Mid-February 2016. Mid- to Late March 2016. Early April 2016. Late April 2016. Late May 2016. August 1, 2016. Comment: Commenters asked that CMS instruct MACs to notify State notifying State hospital associations about hospitals that do not respond to tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV FY 2017 WAGE INDEX TIMETABLE VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospital associations of aberrant data, in addition to the current practice of PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 49990 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV requests for data. In addition, commenters recommended that CMS provide more instructions to MACs and hospitals regarding how to correct errors and the timeframe for correcting errors. They believed that this action is necessary because the notification to hospital associations would be after the deadline for hospitals to request data adjustments. Another commenter suggested that accuracy and consistency in wage index verification would be improved if CMS would assign a single MAC to review all wage index data. Response: We will take these comments into consideration as we develop the details of the Wage Index Timetables and the desk review instructions that we provide to the MACs. L. Labor-Related Share for the FY 2015 Wage Index Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wagerelated costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related: ‘‘The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. . . .’’ We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index. Section 403 of Public Law 108–173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this ‘‘would result in lower payments to a hospital than would otherwise be made.’’ However, this provision of Public Law 108–173 did not change the legal requirement that the Secretary estimate ‘‘from time to time’’ the proportion of hospitals’ costs that are ‘‘attributable to wages and wage-related costs.’’ Thus, hospitals receive payment based on either a 62percent labor-related share, or the laborrelated share estimated from time to time by the Secretary, depending on which labor-related share resulted in a higher payment. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 50607), we rebased and revised the hospital market basket. We established a FY 2010-based VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 IPPS hospital market basket to replace the FY 2006-based IPPS hospital market basket, effective October 1, 2013. In that final rule, we presented our analysis and conclusions regarding the frequency and methodology for updating the laborrelated share for FY 2014. Using the FY 2010-based IPPS market basket, we finalized a labor-related share for FY 2014 of 69.6 percent. In addition, we implemented this revised and rebased labor-related share in a budget neutral manner. However, consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0000 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0000. The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083), for FY 2015, we did not propose to not make any further changes to the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other labor-related services. Therefore, for FY 2015, we proposed to continue to use a labor-related share of 69.6 percent for discharges occurring on or after October 1, 2014. Tables 1A and 1B, which were published in section VI. of the Addendum to the FY 2015 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site, reflected this proposed labor-related share. For FY 2015, for all IPPS hospitals whose wage indexes are less than or equal to 1.0000, we proposed to apply the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals whose wage indexes are greater than 1.0000, for FY 2015, we proposed to apply the wage index to a proposed labor-related share of 69.6 percent of the national standardized amount. We note that, for Puerto Rico hospitals, the national labor-related share is 62 percent because the national wage index for all Puerto Rico hospitals is less than 1.0000. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through 50603), we also rebased and revised the laborrelated share for the Puerto Rico-specific standardized amounts using FY 2010 as a base year. We finalized a labor-related share for the Puerto Rico-specific standardized amounts for FY 2014 of 63.2 percent. In the FY 2015 IPPS/LTCH PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 PPS proposed rule (79 FR 28084), for FY 2015, we did not propose to make any further changes to the Puerto Rico specific average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other labor-related services. For FY 2015, we proposed to continue to use a laborrelated share for the Puerto Rico-specific standardized amounts of 63.2 percent for discharges occurring on or after October 1, 2014. Puerto Rico hospitals are paid based on 75 percent of the national standardized amounts and 25 percent of the Puerto Rico-specific standardized amounts. For FY 2015, we proposed that the labor-related share of a hospital’s Puerto Rico-specific rate would be either the Puerto Rico-specific labor-related share of 63.2 percent or 62 percent, depending on which results in higher payments to the hospital. If the hospital has a Puerto Rico-specific wage index greater than 1.000 for FY 2015, we proposed to set the hospital’s rates using a labor-related share of 63.2 percent for the 25 percent portion of the hospital’s payment determined by the Puerto Rico standardized amounts because this amount would result in higher payments. Conversely, a hospital with a Puerto Rico-specific wage index of less than or equal to 1.000 for FY 2015 would be paid using the Puerto Ricospecific labor-related share of 62 percent of the Puerto Rico-specific rates because the lower labor-related share would result in higher payments. The proposed Puerto Rico labor-related share of 63.2 percent for FY 2015 is reflected in Table 1C, which was published in section VI. of the Addendum to the FY 2015 IPPS/ LTCH PPS proposed rule and available via the Internet on the CMS Web site. Comment: One commenter believed that CMS has provided incentives for hospitals to reduce costs through a declining wage index. The commenter stated that CMS has not kept pace by adjusting the labor-related share of 62 percent for hospitals with a wage index below 1.0000. The commenter noted that current law requires a labor-related share of 62 percent for hospitals with a wage index less than or equal to 1.0000. However, the commenter requested that, despite current law, in consideration of its comments, CMS lower the laborrelated share from 62 percent to 42 percent for hospitals with a wage index below 1.0000. One commenter recommended that CMS compute an alternative labor and nonlabor-related share percentage under the national standardized amount for hospitals in Puerto Rico. The E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations commenter explained that the current labor-related share percentage of 62 percent under the national standardized amounts meets the statutory definition in section 1886(d)(3)(E) of the Act, resulting in lower payments for providers in Puerto Rico. Therefore, the commenter believed that CMS should calculate an alternative national laborrelated share percentage for hospitals in Puerto Rico that is lower than 62 percent. Response: As mentioned by the commenter, current law requires that the labor-related share be set at 62 percent for hospitals with a wage index less than or equal to 1.0000. Specifically, as discussed above, section 403 of Public Law 108–173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this ‘‘would result in lower payments to a hospital than would otherwise be made.’’ Therefore, we are unable to change the labor-related share of 62 percent. In addition, the commenters did not provide any empirical data to demonstrate why a lower labor-related share percentage is justified. Therefore, we are unable to verify the commenters’ statement. After consideration of public comments received, we are finalizing our proposals without modification. For FY 2015, we are continuing to use a labor-related share of 69.6 percent for discharges occurring on or after October 1, 2014. Tables 1A and 1B, which are published in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site, reflect this labor-related share. For FY 2015, for all IPPS hospitals whose wage indexes are less than or equal to 1.0000, we are applying the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals whose wage indexes are greater than 1.0000, for FY 2015, we are applying the wage index to a labor-related share of 69.6 percent of the national standardized amount. For Puerto Rico hospitals, the national labor-related share is 62 percent because the national wage index for all Puerto Rico hospitals is less than 1.0000. For FY 2015, we also are continuing to use a labor-related share for the Puerto Rico-specific standardized amounts of 63.2 percent for discharges occurring on or after October 1, 2014. Puerto Rico hospitals are paid based on 75 percent of the national standardized amounts and 25 percent of the Puerto Rico-specific standardized amounts. For FY 2015, the labor-related share of a hospital’s Puerto Rico-specific rate will be either the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Puerto Rico-specific labor-related share of 63.2 percent or 62 percent, depending on which results in higher payments to the hospital. If the hospital has a Puerto Rico-specific wage index greater than 1.000 for FY 2015, we will set the hospital’s rates using a labor-related share of 63.2 percent for the 25-percent portion of the hospital’s payment determined by the Puerto Rico standardized amounts because this amount will result in higher payments. The Puerto Rico labor-related share of 63.2 percent for FY 2015 is reflected in Table 1C, which is published in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site. IV. Other Decisions and Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs A. Changes to MS–DRGs Subject to the Postacute Care Transfer Policy (§ 412.4) 1. Background Existing regulations at § 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines acute care transfers, and § 412.4(c) defines postacute care transfers. Our policy, set forth in § 412.4(f), provides that when a patient is transferred and his or her length of stay is less than the geometric mean length of stay for the MS–DRG to which the case is assigned, the transferring hospital is generally paid based on a graduated per diem rate for each day of stay, not to exceed the full MS–DRG payment that would have been made if the patient had been discharged without being transferred. The per diem rate paid to a transferring hospital is calculated by dividing the full DRG payment by the geometric mean length of stay for the MS–DRG. Based on an analysis that showed that the first day of hospitalization is the most expensive (60 FR 45804), our policy generally provides for payment that is twice the per diem amount for the first day, with each subsequent day paid at the per diem amount up to the full MS–DRG payment (§ 412.4(f)(1)). Transfer cases are also eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 412.80(b), is equal to the fixed-loss outlier threshold for nontransfer cases (adjusted for geographic variations in costs), divided by the geometric mean length of stay for the MS–DRG, and multiplied by the length of stay for the case, plus one day. We established the criteria set forth in § 412.4(d) for determining which DRGs PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 49991 qualify for postacute care transfer payments in the FY 2006 IPPS final rule (70 FR 47419 through 47420). The determination of whether a DRG is subject to the postacute care transfer policy was initially based on the Medicare Version 23.0 GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is revised, we use the current version of the Medicare GROUPER and the most recent complete year of MedPAR data to determine if the DRG is subject to the postacute care transfer policy. Specifically, if the MS– DRG’s total number of discharges to postacute care equals or exceeds the 55th percentile for all MS–DRGs and the proportion of short-stay discharges to postacute care to total discharges in the MS–DRG exceeds the 55th percentile for all MS–DRGs, CMS will apply the postacute care transfer policy to that MS–DRG and to any other MS–DRG that shares the same base MS–DRG. In the preamble to the FY 2006 IPPS final rule (70 FR 47419), we stated that ‘‘we will not revise the list of DRGs subject to the postacute care transfer policy annually unless we are making a change to a specific DRG.’’ To account for MS–DRGs subject to the postacute care transfer policy that exhibit exceptionally higher shares of costs very early in the hospital stay, § 412.4(f) also includes a special payment methodology. For these MS– DRGs, hospitals receive 50 percent of the full MS–DRG payment, plus the single per diem payment, for the first day of the stay, as well as a per diem payment for subsequent days (up to the full MS–DRG payment (§ 412.4(f)(6)). For an MS–DRG to qualify for the special payment methodology, the geometric mean length of stay must be greater than 4 days, and the average charges of 1-day discharge cases in the MS–DRG must be at least 50 percent of the average charges for all cases within the MS–DRG. MS–DRGs that are part of an MS–DRG group will qualify under the DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies (§ 412.4(f)(6)). 2. Changes to the Postacute Care Transfer MS–DRGs In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28084 through 28086), we discussed that, based on our annual review of MS–DRGs, we had identified a number of MS–DRGs that should be included on the list of MS– DRGs subject to the postacute care transfer policy. In response to public comments and based on our analysis of E:\FR\FM\22AUR2.SGM 22AUR2 49992 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations FY 2013 MedPAR claims data, we proposed to make several changes to MS–DRGs to better capture certain severity of illness levels, to be effective for FY 2015. Specifically, we proposed to modify the assignment of endovascular cardiac valve replacements currently assigned to MS– DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/ MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/ MCC) to MS–DRGs 266 and 267 (Endovascular Cardiac Valve Replacement with and without MCC, respectively) to better reflect the differences in patients receiving endovascular cardiac valve replacements from patients who undergo an open chest cardiac valve replacement. We also proposed to further refine back and neck procedures currently assigned to MS–DRGs 490 and 491 (Back & Neck Procedure Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator and without CC/MCC or Disc Device/ Neurostimulator, respectively) into additional severity levels, now identified as MS–DRGs 518, 519, and 520 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/ Neurostimulator, with CC, and without MCC/CC, respectively). Finally, we proposed to remove the severity levels for reverse shoulder replacements, merging MS–DRGs 483 and 484 (Major Joint & Limb Reattachment Procedure of Upper Extremity with CC/MCC and without CC/MCC, respectively) into MS–DRG 483 (Major Joint/Limb Reattachment Procedure of Upper Extremities). A discussion of these proposed changes can be found in section II.G.4.c., II.G.5.c. and II.G.5.a., respectively, of the preamble of the proposed rule. In light of these proposed changes to the MS–DRGs according to the regulations under § 412.4(c), we evaluated these proposed FY 2015 MS– DRGs against the general postacute care transfer policy criteria using the FY 2013 MedPAR data. If an MS–DRG qualified for the postacute care transfer policy, we also evaluated that MS–DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6). We continue believe it is appropriate to reassess MS–DRGs when proposing reassignment of diagnostic codes that would result in material changes to an MS–DRG. As a result of our review, we found that MS–DRGs 216 through 221 would require no revisions in postacute care transfer or special payment policy status. However, we proposed to update the list of MS– DRGs that are subject to the postacute care transfer policy to include the proposed new MS–DRGs 266, 267, 518, 519, and 520. (These MS–DRGs are reflected in Table 5, which is listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site, and also are listed in the charts at the end of this section.) In addition, based on our evaluation of the proposed FY 2015 MS–DRGs using the FY 2013 Med PAR data, we determined that proposed revised MS– DRG 483 would no longer meet the postacute care transfer criteria. Therefore, we proposed that it be removed from the list of MS–DRGs subject to the postacute care transfer policy, effective FY 2015. We refer readers to the asterisk (*) bolded text in the following table for which criterion was not met in our analysis for each MS–DRG removed from the postacute care transfer policy list. LIST OF MS–DRGS THAT WOULD CHANGE POSTACUTE CARE TRANSFER POLICY STATUS IN FY 2015 MS–DRG MS–DRG title 266 .................... Endovascular Cardiac Valve Replacement with MCC. Endovascular Cardiac Valve Replacement w/o MCC. Major Joint/Limb Reattachment Procedure of Upper Extremities. Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/ Neurostimulator. Back & Neck Procedure Except Spinal Fusion with CC. Back & Neck Procedure Except Spinal Fusion without CC/MCC). 267 .................... 483 .................... 518 .................... 519 .................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 520 .................... Postacute care transfers (55th percentile: 1,471) Short-stay postacute care transfers Percent of short-stay postacute care transfers to all cases (55th percentile: 7.9060%) 4,086 2,851 1,030 25.21 YES. 4,476 2,800 835 18.66 YES. 41,372 17,289 2,271 * 5.49 NO. 3,844 2,136 412 10.72 YES. 15,238 7,405 1,126 * 7.39 YES.** 31,792 7,859 0 * 0.00 YES.** Total cases Postacute transfer policy status * Indicates a current postacute care transfer policy criterion that the MS–DRG did not meet. ** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS–DRGs that share the same base MS–DRG will all qualify under the postacute care transfer policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. Finally, we determined that MS– DRGs 266, 267, 518, 519, and 520 also would meet the criteria for the special VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 payment methodology. Therefore, we proposed that they would be subject to PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 the MS–DRG special payment methodology, effective FY 2015. E:\FR\FM\22AUR2.SGM 22AUR2 49993 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations LIST OF MS–DRGS THAT CHANGED DRG SPECIAL PAYMENT POLICY STATUS IN FY 2015 Geometric mean length of stay MS–DRG MS–DRG title 266 .................... 267 .................... 518 .................... Endovascular Cardiac Valve Replacement with MCC ... Endovascular Cardiac Valve Replacement without MCC Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator. Back & Neck Procedure Except Spinal Fusion with CC Back & Neck Procedure Except Spinal Fusion without CC/MCC). 519 .................... 520 .................... 50% of average charges for all cases within MS–DRG Average charges of 1-day discharges Special pay policy status 8.3643 5.0271 4.2882 $42,081 128,013 68,515 $126,326 95,141 43,514 YES.* YES. YES. 3.0507 1.7315 0 0 0 0 YES.* YES.* *As described in the policy at 42 CFR 412.4(d)(6)(iv), MS–DRGs that share the same base MS–DRG will all qualify under the DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. We did not receive any public comments regarding our proposals to change the postacute care transfer and the special payment policy status for the identified MS–DRGs. Therefore, we are adopting the proposed changes as final for FY 2015. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV B. Changes in the Inpatient Hospital Update for FY 2015 (§ 412.64(d)) 1. FY 2015 Inpatient Hospital Update In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient operating costs by a factor called the ‘‘applicable percentage increase.’’ In FY 2014, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we set the applicable percentage increase under the IPPS by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.3 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2014 adjustment of 0.3 percentage point may result in the applicable percentage increase being less than zero. For FY 2015, there are three statutory changes to the applicable percentage increase compared to FY 2014. First, under section 1886(b)(3)(B)(viii) of the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Act, beginning with FY 2015, the reduction in the applicable percentage increase for hospitals that fail to submit quality information under rules established by the Secretary is onequarter of the applicable percentage increase (prior to the application of statutory adjustments under sections 1886(b)(3)(B)(ix), 1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act) or onequarter of the applicable market basket update. For FY 2014, the reduction to the applicable percentage increase for hospitals that failed to submit quality information under rules established by the Secretary was 2.0 percentage points. Second, beginning with FY 2015, section 1886(b)(3)(B)(ix) of the Act requires that any hospital that is not a meaningful electronic health record (EHR) user (as defined in section 1886(n)(3) of the Act and not subject to an exception under section 1886(b)(3)(B)(ix) of the Act)) will have ‘‘three-quarters’’ of the applicable percentage increase (prior to the application of statutory adjustments under sections 1886(b)(3)(B)(viii), 1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act), or three-quarters of the applicable market basket update, reduced by 331⁄3 percent. The reduction to three-quarters of the applicable percentage increase for those hospitals that are not meaningful EHR users increases to 662⁄3 percent for FY 2016, and, for FY 2017 and subsequent fiscal years, to 100 percent. Third, for FY 2015, section 1886(b)(3)(B)(xii) of the Act applies an additional reduction of 0.2 percentage point compared to 0.3 percentage point for FY 2014. To summarize, for FY 2015, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a 331⁄3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.2 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. As noted previously, sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2015 adjustment of 0.2 percentage point may result in the applicable percentage increase being less than zero. We note that, in compliance with section 404 of the MMA, in the FY 2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS operating and capital market baskets with the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28086), we proposed to continue to use the FY 2010-based IPPS operating and capital market baskets for FY 2015. We also proposed to continue to use a laborrelated share that is reflective of the FY 2010 base year. For FY 2015, we E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49994 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations proposed to continue using the laborrelated share of 69.6 percent, which is based on the FY 2010-based IPPS market basket. We did not receive any public comments on this proposal and, therefore, for FY 2015, we will continue to use the FY 2010-based IPPS operating and capital market baskets and the labor-related share of 69.6 percent. Based on the most recent data available for the FY 2015 proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087) to base the proposed FY 2015 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Insight, Inc.’s (IGI’s) first quarter 2014 forecast of the FY 2010-based IPPS market basket rateof-increase with historical data through fourth quarter 2013, which was estimated to be 2.7 percent. We proposed that if more recent data became subsequently available (for example, a more recent estimate of the market basket and the MFP adjustment), we would use such data, if appropriate, to determine the FY 2015 market basket update and MFP adjustment in the final rule. Based on updated data for this FY 2015 IPPS/LTCH PPS final rule, that is, the IGI’s second quarter 2014 forecast of the FY 2010-based IPPS market basket rate-of-increase with historical data through first quarter 2014, we estimate that the FY 2015 market basket update used to determine the applicable percentage increase for the IPPS is 2.9 percent. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. For FY 2015, we did not propose to make any change in our methodology for calculating and applying the MFP adjustment. For FY 2015, we proposed a MFP adjustment of ¥0.4 percentage point. Similar to the market basket adjustment, for the proposed rule, we used the most recent data available to compute the MFP adjustment. Based on updated data for this final rule, we computed an MFP adjustment is 0.5 percentage point for FY 2015. Comment: One commenter stated that the FY 2015 update factor is understated, as the productivity adjustment should be 0.4 (as projected in the proposed rule), not 0.5. The commenter stated that, as a result, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 instead of a 1.2 percent update factor, the projection should use a 1.3 percent update factor. Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), the proposed productivity adjustment for FY 2015 was 0.4 percent. Furthermore, we proposed to make a 1.3 percent update to the national standardized amount (79 FR 28355), which reflects a proposed 2.7 percent market basket update, the proposed reduction of 0.4 percentage point for the multifactor productivity adjustment, the 0.2 percentage point reduction in accordance with the Affordable Care Act and the proposed FY 2015 documentation and coding recoupment adjustment of ¥0.8 percent on the national standardized amount as part of the recoupment required by section 631 of the ATRA. As stated in the proposed rule, we proposed to use more recently available data to determine the final market basket and multifactor productivity adjustment. We did not receive any public comments on this proposal. Therefore, for this final rule, we are finalizing a market basket update of 2.9 percent and an MFP adjustment of 0.5 percent based on more recently available data. For FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), we discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087) that there are four possible applicable percentage increases that can be applied to the standardized amount. As noted above, we proposed that if more recent data became subsequently available (for example, a more recent estimate of the market basket and the MFP adjustment), we would use such data, if appropriate, to determine the FY 2015 market basket update and MFP adjustment in the final rule. We did not receive any public comments on the four applicable percentage increases and our finalizing our proposal. Based on the more recent data described earlier, we have determined final applicable percentage increases to the standardized amount for FY 2015, as specified below. PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 • For a hospital that submits quality data and is a meaningful EHR user, we are finalizing an applicable percentage increase to the FY 2015 operating standardized amount of 2.2 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.9 percent less an adjustment of 0.5 percentage point for economy-wide productivity (that is, the MFP adjustment) and less 0.2 percentage point). • For a hospital that submits quality data and is not a meaningful EHR user, we are finalizing an applicable percentage increase to the operating standardized amount of 1.475 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.9 percent, less an adjustment of 0.725 percentage point (the market basket rateof-increase of 2.9 percent × 0.75)/3) for failure to be a meaningful EHR user, less an adjustment of 0.5 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). • For a hospital that does not submit quality data and is a meaningful EHR user, we are finalizing an applicable percentage increase to the operating standardized amount of 1.475 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.9 percent, less an adjustment of 0.725 percentage point (the market basket rateof-increase of 2.9 percent/4) for failure to submit quality data, less an adjustment of 0.5 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). • For a hospital that does not submit quality data and is not a meaningful EHR user, we are finalizing an applicable percentage increase to the operating standardized amount of 0.75 percent (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.9 percent, less an adjustment of 0.725 percentage point (the market basket rateof-increase of 2.9 percent/4) for failure to submit quality data, less an adjustment of 0.725 percentage point (the market basket rate-of-increase of 2.9 percent × 0.75)/3) for failure to be a meaningful EHR user, less an adjustment of 0.5 percentage point for the MFP adjustment, and less an additional adjustment of 0.2 percentage point). Below we provide a table summarizing the four final applicable percentage increases. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 49995 FINAL FY 2015 APPLICABLE PERCENTAGE INCREASES FOR THE IPPS Hospital submitted quality data and is a meaningful EHR user FY 2015 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Market Basket Rate-of-Increase ................................................................ Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act. Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act. MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .................... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ............. Final Applicable Percentage Increase Applied to Standardized Amount .. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), we proposed to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law for the FY 2015 update. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we proposed to add a new paragraph (vi) to § 412.64(d)(1) to reflect the applicable percentage increase to the FY 2015 operating standardized amount as the percentage increase in the market basket index, subject to a reduction of onefourth of the applicable percentage increase (prior to the application of other statutory adjustments) if the hospital fails to submit quality information (under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act) and a 331⁄3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments) for a hospital that is not a meaningful EHR user in accordance with section 1886(b)(3)(B)(ix) of the Act, less an MFP adjustment and less an additional reduction of 0.2 percentage point. In addition, we proposed to make technical changes to §§ 412.64(d)(1), (d)(1)(i) through (d)(1)(v), (d)(2)(i), (d)(2)(ii), and (d)(3) introductory text to reflect the order in which CMS applies the statutory adjustments to the applicable percentage increase under section 1886(b)(3)(B) of the Act. As mentioned above, consistent with section 1886(b)(3)(B) of the Act, CMS sets the applicable percentage increase under the IPPS by applying the following adjustments in the following sequence. Specifically, we set the applicable percentage increase under the IPPS equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas subject to a reduction for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Hospital submitted quality data and is NOT a meaningful EHR user Frm 00143 Fmt 4701 Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.9 2.9 2.9 2.9 0.0 0.0 ¥0.725 ¥0.725 ¥0.725 ¥0.5 ¥0.2 1.475 0.0 ¥0.5 ¥0.2 1.475 ¥0.725 ¥0.5 ¥0.2 0.75 0.0 ¥0.5 ¥0.2 2.2 beginning in FY 2015, a reduction for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act; and then subject to an adjustment based on changes in economy-wide productivity (the MFP adjustment), and an additional reduction as required by section 1886(b)(3)(B)(xii) of the Act. The existing regulation text at § 412.64(d)(2) and (d)(3) describes the reductions for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act as reductions to ‘‘the applicable percentage change specified in paragraph (d)(1) of this section.’’ Section 412.64(d)(1) describes the applicable percentage change for the applicable fiscal year as the percentage increase in the market basket index less the MFP adjustment and less the additional reduction required by section 1886(b)(3)(B)(xii) of the Act. This text suggests that CMS applies the reduction for hospitals that fail to submit quality information and, beginning in FY 2015, the reduction for hospitals not considered to be meaningful EHR users, after it applies the MFP adjustment and the additional reduction under section 1886(b)(3)(B)(xii) of the Act. Therefore, we proposed to revise the regulations in § 412.64(d) to reflect the order in which CMS applies the adjustments to the applicable percentage increase under section 1886(b)(3)(B) of the Act. We note that we also proposed clarifying amendments to the regulatory text for prior fiscal years under §§ 412.64(d)(1)(i) through (d)(1)(v) to reflect the determination of the applicable percentage change for those prior years as well as other technical changes for readability. We did not receive any public comments on our proposed changes to PO 00000 Hospital did NOT submit quality data and is a meaningful EHR user Sfmt 4700 the regulations at §§ 412.64(d)(1), (d)(1)(i) through (d)(1)(v), (d)(2)(i), (d)(2)(ii), and (d)(3) introductory text and therefore are finalizing these proposed changes without modification. Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs is also subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28088), for FY 2015, we proposed the following updates to the hospital-specific rates applicable to SCHs and MDHs: An update of 2.1 percent for a hospital that submits quality data and is a meaningful EHR user; an update of 1.425 percent for a hospital that fails to submit quality data and is a meaningful EHR user; an update of 1.425 percent for a hospital that submits quality data and is not a meaningful EHR user; an update of 0.75 percent for a hospital that fails to submit quality data and is not a meaningful EHR user. (As noted below, under current law, the MDH program is effective for discharges occurring on or before March 31, 2015.) For FY 2015, the existing regulations in §§ 412.73(c)(16), 412.75(d), 412.77(e), 412.78(e), and 412.79(d) contain provisions that set the update factor for SCHs and MDHs equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, we did not propose to make any further changes to these five regulatory provisions to reflect the FY 2015 update factor for the hospitalspecific rates of SCHs and MDHs. As mentioned above, for the proposed rule, we used IGI’s first quarter 2014 forecast of the FY 2010-based IPPS market E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 49996 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations basket update with historical data through fourth quarter 2013. Similarly, we used IGI’s first quarter 2014 forecast of the MFP adjustment. For the final rule, we proposed to use the most recent data available. We did not receive any public comments on these proposals and therefore our finalizing them as proposed to set the update for SCHs and MDHs in this final rule using the most recent data available. As discussed above, based on the more recent data for IGI’s second quarter 2014 forecast of the FY 2010-based IPPS market basket update with historical data through first quarter 2014, we estimate that the FY 2015 market basket update used to determine the update factor for this final rule for the hospitalspecific rates of SCHs and MDHs is 2.9 percent. Similarly, for this final rule, we used IGI’s second quarter 2014 forecast of the MFP adjustment, which is estimated at 0.5 percentage point for FY 2015. Accordingly, we are finalizing the following updates to the hospitalspecific rates applicable to SCHs and MDHs: An update of 2.2 percent for a hospital that submits quality data and is a meaningful EHR user; an update of 1.475 percent for a hospital that fails to submit quality data and is a meaningful EHR user; an update of 1.475 percent for a hospital that submits quality data and is not a meaningful EHR user; an update of 0.75 percent for a hospital that fails to submit quality data and is not a meaningful EHR user. We note that, as discussed in section IV.G. of the preamble of this final rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014, Public Law 113–93, enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April l, 2015). Prior to the enactment of Public Law 113–67, the MDH program was to be in effect through the end of FY 2013 only. The MDH program expires for discharges beginning on April 1, 2015 under current law. Accordingly, the update of the hospital-specific rates for FY 2015 for MDHs will apply in determining payments for FY 2015 discharges occurring before April 1, 2015. 2. FY 2015 Puerto Rico Hospital Update Puerto Rico hospitals are paid a blended rate for their inpatient operating costs based on 75 percent of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 1886(d)(9)(C)(i) of the Act is the basis for determining the applicable percentage increase applied to the Puerto Rico-specific standardized amount. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act, which states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for fiscal year 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28088), we proposed an applicable percentage increase to the Puerto Rico-specific operating standardized amount of 2.1 percent for FY 2015. We also proposed, for the final rule, to use the most recent data available to determine the FY 2015 applicable percentage increase. We note that the provisions of section 1886(b)(3)(B)(viii) of the Act, which specify the adjustments to the applicable percentage increase for ‘‘subsection (d)’’ hospitals that do not submit quality data under the rules established by the Secretary, and the provisions of section 1886(b)(3)(B)(ix) of the Act, which specify the adjustments to the applicable percentage increase for ‘‘subsection (d)’’ hospitals that are not meaningful EHR users, are not applicable to hospitals located in Puerto Rico. We did not receive any public comments concerning our proposal. Therefore, using the most recent data available, we are finalizing an applicable percentage increase to the Puerto Rico-specific operating amount of 2.2 percent for FY 2015. As we noted above, for the proposed rule, we used the first quarter 2014 forecast of the FY 2010-based IPPS market basket update with historical data through fourth quarter 2013. For this final rule, we used the most recent data available, PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 which is IGI’s second quarter 2014 forecast of the FY 2010-based IPPS market basket update with historical data through first quarter 2014. Similarly, for the proposed rule, we used IGI’s first quarter 2014 forecast of the MFP adjustment. For this final rule, we used the most recent data available, which was IGI’s second quarter 2014 forecast of the MFP adjustment. For FY 2015, the existing regulations in § 412.211(c) set the update factor for Puerto Rico-specific standardized amount equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, we are not making any further changes to this regulatory provision to reflect the FY 2015 update factor for the Puerto Rico-specific standardized amount. Comment: One commenter indicated that the nonlabor costs in Puerto Rico are closer or equal to those in the United States. It is unclear what the commenter was requesting. Based on our interpretation of the comment, it appears that the commenter may be requesting that CMS make equal the nonlabor payment amount of the Puerto Rico-specific standardized amount to the nonlabor payment amount of the national standardized amount. Response: The commenter did not provide any empirical data to demonstrate how the nonlabor costs in Puerto Rico are equal to those in the United States. Therefore, we are unable to verify the commenter’s statement. In addition, we did not propose to make any updates to the national or Puerto Rico-specific standardized amounts aside from applying the statutory updates as discussed earlier. We will continue to work with Puerto Rico and other stakeholders to ensure we are using appropriate data for ratesettting. C. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as a rural referral center (RRC). RRCs receive some special treatment under both the DSH payment adjustment and the criteria for geographic reclassification. Section 402 of Public Law 108–173 raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs are also not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital’s average E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area where the hospital is located. Section 4202(b) of Public Law 105–33 states, in part, ‘‘[a]ny hospital classified as an RRC by the Secretary . . . for fiscal year 1991 shall be classified as such an RRC for fiscal year 1998 and each subsequent year.’’ In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), CMS reinstated RRC status for all hospitals that lost the status due to triennial review or MGCRB reclassification. However, CMS did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of ‘‘urban’’ and ‘‘rural’’ specified in Subpart D of 42 CFR Part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum CMI and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to § 412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register (53 FR 38513).) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if— • The hospital’s CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and • The hospital’s number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.) 1. Case-Mix Index (CMI) Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year’s annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The national median CMI value for FY 2015 is based on the CMI values of all urban hospitals nationwide, and the regional median CMI values for FY 2015 are based on the CMI values of all urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in § 413.75). These values are based on discharges occurring during FY 2013 (October 1, 2012 through September 30, 2013), and include bills posted to CMS’ records through March 2014. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28089), we proposed that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2014, they must have a CMI value for FY 2013 that is at least— • 1.5730; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2015 IPPS/LTCH PPS proposed rule at 79 FR 28089.) The final CMI values for FY 2015 are based on the latest available data (FY 2013 bills received through March 2014). In addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2014, they must have a CMI value for FY 2013 that is at least— • 1.5723; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. The final CMI values by region are set forth in the following table: Case-mix index value Region tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1. 2. 3. 4. 5. 6. 7. 8. 9. New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................ Middle Atlantic (PA, NJ, NY) ........................................................................................................................................................... South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ............................................................................................................... East North Central (IL, IN, MI, OH, WI) .......................................................................................................................................... East South Central (AL, KY, MS, TN) ............................................................................................................................................. West North Central (IA, KS, MN, MO, NE, ND, SD) ...................................................................................................................... West South Central (AR, LA, OK, TX) ............................................................................................................................................ Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ............................................................................................................................... Pacific (AK, CA, HI, OR, WA) ......................................................................................................................................................... A hospital seeking to qualify as an RRC should obtain its hospital-specific CMI value (not transfer-adjusted) from its fiscal intermediary or MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS–DRG-based payment. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2. Discharges Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges in each year’s annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. In the FY 2015 IPPS/LTCH PPS proposed PO 00000 Frm 00145 Fmt 4701 49997 Sfmt 4700 1.3587 1.4318 1.4807 1.4938 1.4107 1.5459 1.6039 1.6586 1.5658 rule (79 FR 28090), we proposed to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2012 (that is October 1, 2011 through September 30, 2012), which are the latest cost report data available at the time the proposed rule was developed. We proposed that, in addition to meeting other criteria, a hospital, if it is E:\FR\FM\22AUR2.SGM 22AUR2 49998 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2014, must have, as the number of discharges for its cost reporting period that began during FY 2012, at least— • 5,000 (3,000 for an osteopathic hospital); or • The median number of discharges for urban hospitals in the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2015 IPPS/LTCH PPS proposed rule at 79 FR 28090.) Based on the latest discharge data available at this time (that is, based on FY 2012 cost report data), the final median number of discharges for urban hospitals by census region are set forth in the following table: Number of discharges Region 1. 2. 3. 4. 5. 6. 7. 8. 9. New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................ Middle Atlantic (PA, NJ, NY) ........................................................................................................................................................... South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ............................................................................................................... East North Central (IL, IN, MI, OH, WI) .......................................................................................................................................... East South Central (AL, KY, MS, TN) ............................................................................................................................................. West North Central (IA, KS, MN, MO, NE, ND, SD) ...................................................................................................................... West South Central (AR, LA, OK, TX) ............................................................................................................................................ Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ............................................................................................................................... Pacific (AK, CA, HI, OR, WA) ......................................................................................................................................................... We reiterate that, if an osteopathic hospital is to qualify for RRC status for cost reporting periods beginning on or after October 1, 2014, the hospital would be required to have at least 3,000 discharges for its cost reporting period that began during FY 2012. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV D. Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital that is paid under IPPS beginning in FY 2005. Sections 3125 and 10314 of the Affordable Care Act provided for a temporary change in the low-volume hospital payment policy for FYs 2011 and 2012. Section 605 of the American Taxpayer Relief Act of 2012 (ATRA) extended, for FY 2013, the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act. Prior to the enactment of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) on December 26, 2013, and section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93) on April l, 2014, for FY 2014 (and subsequent years), the low-volume hospital qualifying criteria and payment adjustment returned to the statutory requirements under section 1886(d)(12) of the Act that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. (For additional information on the expiration of the temporary changes in the low-volume hospital payment policy for FYs 2011 through 2013 provided for by the Affordable Care Act and the ATRA, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610 through 50613).) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Section 1105 of the Pathway for SGR Reform Act extended, for the first 6 months of FY 2014 (that is, through March 31, 2014), the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act and extended through FY 2013 by the ATRA. We addressed the extension of the temporary changes to the lowvolume hospital payment policy through March 31, 2014 under the Pathway for SGR Reform Act in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022 through 15025) (hereafter referred to as the ‘‘March 2014 IFC’’). In that March 2014 IFC, we also amended the regulations at 42 CFR 412.101 to reflect the extension of the temporary changes to the qualifying criteria and the payment adjustment for low-volume hospitals through March 31, 2014. (In section IV.P. of the preamble of this final rule, we are responding to the public comments we received on the March 2014 IFC and are stating our finalized policy for the extension of the temporary changes to the low-volume hospital payment policy through March 31, 2014, under the Pathway for SGR Reform Act.) 2. Provisions of the Protecting Access to Medicare Act of 2014 Section 105 of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113–93) extends, for an additional year (that is, through March 31, 2015), the temporary changes in the lowvolume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act and extended through FY 2013 by the ATRA and the first half of FY 2014 by the Pathway for PO 00000 Frm 00146 Fmt 4701 Sfmt 4700 7,635 10,841 10,642 8,530 7,975 7,925 4,960 8,525 8,504 SGR Reform Act. We addressed the extension of the temporary changes to the low-volume hospital payment policy for the second half of FY 2014 (that is, from April 1, 2014 through September 30, 2014) under the PAMA in a notice that appeared in the Federal Register on June 17, 2014 (79 FR 34444). However, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28090), we proposed to make conforming changes to the existing regulations text at § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through the first half of FY 2015 (that is, through March 31, 2015) in accordance with section 105 of the PAMA. Specifically, we proposed to revise paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of § 412.101. Under these proposed changes to § 412.101, beginning with FY 2015 discharges occurring on or after April 1, 2015, consistent with section 1886(d)(12) of the Act, as amended, the low-volume hospital qualifying criteria and payment adjustment methodology would revert to that which was in effect prior to the amendments made by the Affordable Care Act and subsequent legislation (that is, the low-volume hospital payment adjustment policy in effect for FYs 2005 through 2010). We did not receive any public comments on our proposed conforming changes to the existing regulations text at § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through the first half of FY 2015 (that is, through March 31, 2015) in accordance with section 105 of the PAMA. Therefore, in this final rule, we are adopting our proposed revisions to E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of § 412.101 as final without modification. We note that these revisions supersede the conforming changes to these same regulatory provisions made in the March 2014 IFC to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through March 31, 2014, under the Pathway for SGR Reform Act, as discussed in section IV.P. of the preamble of this final rule. The public comments we received on our proposals related to the low-volume hospital payment policy for FY 2015 and our responses are presented in section IV.D.3. of the preamble of this final rule. 3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015 As discussed above, under section 1886(d)(12) of the Act, as amended, the temporary changes in the low-volume hospital payment policy originally provided by the Affordable Care Act and extended through subsequent legislation, are effective for FY 2015 discharges occurring before April 1, 2015. To implement the extension of the temporary change in the low-volume hospital payment policy through the first half of FY 2015 (that is, for discharges occurring through March 31, 2015) provided for by the PAMA, in accordance with proposed § 412.101(b)(2)(ii) and consistent with our historical approach, we proposed to update the discharge data source used to identify qualifying low-volume hospitals and calculate the payment adjustment (percentage increase) for FY 2015 discharges occurring before April 1, 2015. Under existing § 412.101(b)(2)(ii), for the applicable fiscal years, a hospital’s Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the low-volume payment adjustment in the current year. The applicable low-volume percentage increase, as originally provided for by the Affordable Care Act, is determined using a continuous linear sliding scale equation that results in a low-volume hospital payment adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to a zero percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges. For FY 2015 discharges occurring before April 1, 2015, consistent with our historical policy, we proposed that qualifying low-volume hospitals and their payment adjustment would be VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 determined using the most recently available Medicare discharge data from the FY 2013 MedPAR file, as these data are the most recent data available. Table 14 listed in the Addendum of the proposed rule (which is available only through the Internet on the CMS Web site at https://www.cms.hhs.gov/Acute InpatientPPS/01_overview.asp) lists the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the December 2013 update of the FY 2013 MedPAR file and their proposed low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible). We noted that the list of hospitals with fewer than 1,600 Medicare discharges in Table 14 did not reflect whether or not the hospital meets the mileage criterion. Eligibility for the low-volume hospital payment adjustment for the first 6 months of FY 2015 would also be dependent upon meeting the mileage criterion specified at proposed § 412.101(b)(2)(ii); that is, the hospital is located more than 15 road miles from any other IPPS hospital. In addition, we indicated that if more recent Medicare discharge data become available, we intended to use updated data to determine the list of ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the March 2014 update of the FY 2013 MedPAR file and their potential low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible) in Table 14 of the final rule. We did not receive any public comments on our proposal that qualifying low-volume hospitals and their payment adjustment for FY 2015 discharges occurring before April 1, 2015 would be determined using the most recently available Medicare discharge data from the FY 2013 MedPAR file, as these data are the most recent data available. Therefore, in this final rule, as we proposed, we are establishing that qualifying low-volume hospitals (that is, the list of ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges) and their potential low-volume payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible) will be based on Medicare discharge data from the March 2014 update of the FY 2013 MedPAR file. Table 14 listed in the Addendum of this final rule (which is available only through the Internet on the CMS Web site at https://www.cms.hhs.gov/Acute InpatientPPS/01_overview.asp) lists the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the March 2014 update of the FY 2013 MedPAR file and their low-volume PO 00000 Frm 00147 Fmt 4701 Sfmt 4700 49999 payment adjustment for FY 2015 discharges occurring before April 1, 2015 (if eligible). We note that the list of hospitals with fewer than 1,600 Medicare discharges in Table 14 does not reflect whether or not the hospital meets the mileage criterion. Eligibility for the low-volume hospital payment adjustment for FY 2015 discharges occurring before April 1, 2015, is also dependent upon meeting (in the case of a hospital that did not qualify for the low-volume hospital payment adjustment in FY 2014) or continuing to meet (in the case of a hospital that did qualify for the low-volume hospital payment adjustment in FY 2014) the mileage criterion specified at revised § 412.101(b)(2)(ii) (that is, the hospital is located more than 15 road miles from any other subsection (d) hospital). In accordance with section 1886(d)(12) of the Act, as amended, beginning with FY 2015 discharges occurring on or after April 1, 2015, the low-volume hospital definition and payment adjustment methodology will revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and subsequent legislation (including the PAMA). Therefore, as we stated in the proposed rule, consistent with section 1886(d)(12) of the Act, as amended, effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Consistent with our existing policy for FYs 2005 through 2010, we stated that, effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, qualifying hospitals would receive the low-volume hospital payment adjustment of an additional 25 percent for discharges occurring during the fiscal year (or portion of the fiscal year). Also consistent with our existing policy for FYs 2005 through 2010, for FY 2015 discharges occurring on or after April 1, 2015 (and subsequent years), we stated that the discharge determination for the low-volume hospital payment adjustment would be made based on the hospital’s number of total discharges, that is, Medicare and non-Medicare discharges based on the hospital’s most recently submitted cost report. We use cost report data to determine if a hospital meets the discharge criterion because these data are the best available E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50000 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations data source that includes information on both Medicare and non-Medicare discharges. In addition to a discharge criterion, eligibility for the low-volume hospital payment adjustment also depends on the hospital meeting a mileage criterion. As specified at § 412.101(b)(2)(i), to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2015 discharges occurring on or after April 1, 2015 (and subsequent years), a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. Comment: A few commenters expressed concern about the financial impact of the expiration of the temporary changes in the low-volume hospital adjustment originally provided for by the Affordable Care Act. Some of these commenters requested that CMS permanently adopt the temporary changes in the low-volume hospital adjustment, while other commenters urged CMS to support legislative efforts to permanently extend these provisions beyond the current March 31, 2015 statutory expiration date. (These comments are similar to comments we received previously, prior to the statutory extensions of the temporary changes in the low-volume hospital adjustment for FYs 2013 and 2014 provided by subsequent legislation.) Response: While we appreciate the commenters’ concerns about the change to the low-volume hospital policy that will occur for discharges occurring on or after April 1, 2015 under current law, we are unable to extend the temporary changes to the low-volume hospital adjustment originally provided for by the Affordable Care Act beyond the current March 31, 2015 statutory expiration date. As discussed in response to similar comment in both the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408 through 53409) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50612 through 50613), to implement the original low-volume hospital payment adjustment provision, and as mandated by statute, we developed an empirically justified adjustment based on the relationship between costs and total discharges of hospitals. (For more information on this analysis, we refer readers to the FY 2005 IPPS final rule (69 FR 49101 through 49102).) Under current law, the low-volume hospital definition and payment adjustment methodology will revert back to the policy established under statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and subsequent legislation (include the PAMA) beginning with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 discharges occurring on after April 1, 2015. Therefore, consistent with section 1886(d)(12) of the Act, as amended, under the conforming changes to § 412.101(b)(2), effective for FY 2015 discharges occurring on or after April 1, 2015, and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Consistent with our existing policy for FYs 2005 through 2010, effective for FY 2015 discharges occurring on or after April 1, 2015, and subsequent years, qualifying hospitals will receive the low-volume hospital payment adjustment of an additional 25 percent for discharges occurring during the fiscal year (or portion of the fiscal year). The discharge determination for the low-volume hospital payment adjustment will be made based on the hospital’s number of total discharges, that is, Medicare and non-Medicare discharges, as specified at § 412.101(b)(2)(i). The hospital’s most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the lowvolume hospital payment adjustment in the current fiscal year. We use cost report data to determine if a hospital meets the discharge criterion because these data are the best available data source that includes information on both Medicare and non-Medicare discharges. In addition to a discharge criterion, eligibility for the low-volume hospital payment adjustment also depends on the hospital meeting a mileage criterion. As specified at § 412.101(b)(2)(i), to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2015 discharges occurring on or after April 1, 2015 (and subsequent years), a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28091 through 28092), for FY 2015, we proposed a process for requesting and obtaining the low-volume hospital payment adjustment that was consistent with our previously established procedure. We proposed that in order to receive a lowvolume hospital payment adjustment under § 412.101, a hospital must notify and provide documentation to its MAC that it meets the discharge and distance requirements under proposed § 412.101(b)(2)(ii) for FY 2015 discharges occurring before April 1, PO 00000 Frm 00148 Fmt 4701 Sfmt 4700 2015, and under proposed § 412.101(b)(2)(i) for FY 2015 discharges occurring on or after April 1, 2015, if also applicable. Specifically, for FY 2015, we proposed that a hospital must make a written request for low-volume hospital status that is received by its MAC no later than September 1, 2014, in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges occurring on or after October 1, 2014, and through March 31, 2015, or through September 30, 2015, for hospitals that also meet the low-volume hospital payment adjustment qualifying criteria for discharges occurring during the second half of FY 2015. Under this proposal, a hospital that qualified for the low-volume payment adjustment in FY 2014 may continue to receive a lowvolume payment adjustment for FY 2015 discharges occurring before April 1, 2015, without reapplying if it continues to meet the Medicare discharge criterion established for FY 2015 and the distance criterion. However, the hospital must send written verification that is received by its MAC no later than September 1, 2014, stating that it continues to be more than 15 miles from any other ‘‘subsection (d)’’ hospital. We also proposed that if a hospital’s written request for low-volume hospital status for FY 2015 is received after September 1, 2014, and if the MAC determines that the hospital meets the criteria to qualify as a low-volume hospital, the MAC would apply the applicable low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges, effective prospectively within 30 days of the date of its low-volume hospital status determination. Comment: One commenter requested that CMS not impose a notification requirement for hospitals that qualified for the low-volume hospital payment adjustment in FY 2014. The commenter stated that eliminating this verification would reduce the administrative burden for those hospitals and their MACs. Response: We appreciate the commenter’s suggestion to reduce the administrative burden for hospitals and MACs by not having a notification requirement under the FY 2015 lowvolume hospital policy for hospitals that qualified for the low-volume hospital payment adjustment in FY 2014. However, as we explained in the proposed rule, under our proposal a hospital that qualified for the lowvolume payment adjustment in FY 2014 does not need to reapply for FY 2015 if it continues to meet the applicable discharge and distance criteria (that is, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations such a hospital would not have to resubmit a low-volume hospital request with supporting documentation to demonstrate that it meets the mileage criterion). Rather, such a hospital would only be required to send written verification that it continues to meet the distance criterion that is received by the MAC by the proposed notification deadline. This written verification could be a brief letter to the MAC stating that the hospital continues to meet the lowvolume hospital distance criterion as documented in a prior low-volume hospital status request. We proposed this abridged notification requirement for hospitals that qualified for the lowvolume payment adjustment in FY 2014 because we believe compliance with the statutory low-volume hospital criteria should be monitored while recognizing that it is not necessary to have such hospitals resubmit a low-volume hospital request with the necessary documentation. In addition, if we were to consider no longer requiring verification for hospitals that qualified for the low-volume hospital payment adjustment in the prior year, we may also want to develop alternative policies for monitoring compliance with the statutory low-volume hospital qualifying criteria. Therefore, we are not adopting the commenter’s suggestion regarding hospitals that qualified for the low-volume hospital payment adjustment in FY 2014. However, should the temporary changes to the low-volume hospital adjustment be extended beyond March 31, 2015, by subsequent legislation, we may consider modifying the verification process in conjunction with developing an alternative compliance policy. In this final rule, we are adopting our policy as proposed without modification. Therefore, in order to receive a low-volume hospital payment adjustment under § 412.101, a hospital must notify and provide documentation to its MAC that it meets the discharge and distance requirements under revised § 412.101(b)(2)(ii) for FY 2015 discharges occurring before April 1, 2015, and under revised § 412.101(b)(2)(i) for FY 2015 discharges occurring on or after April 1, 2015, if also applicable. The MAC will determine, based on the most recent data available, if the hospital qualifies as a low-volume hospital, so that the hospital would know in advance whether or not it will receive a payment adjustment. The MAC and CMS may review available data, in addition to the data the hospital submits with its request for low-volume hospital status, in order to determine whether or not the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospital meets the qualifying criteria. Consistent with our previously established procedure, for FY 2015, a hospital must make a written request for low-volume hospital status that is received by its MAC no later than September 1, 2014, in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges occurring on or after October 1, 2014, and through March 31, 2015, under revised § 412.101(b)(2)(ii) or through September 30, 2015, for hospitals that also qualify under revised § 412.101(b)(2)(i). A hospital that qualified for the lowvolume payment adjustment in FY 2014 may continue to receive a low-volume payment adjustment for FY 2015 discharges occurring before April l, 2015, without reapplying if it continues to meet the Medicare discharge criterion established for FY 2015 (shown in Table 14 of this final rule, which is available via the Internet on the CMS Web site) and the distance criterion. However, the hospital must send written verification that is received by its MAC no later than September 1, 2014, that it continues to be more than 15 miles from any other ‘‘subsection (d)’’ hospital. This written verification could be a brief letter to the MAC stating that the hospital continues to meet the low-volume hospital distance criterion as documented in a prior low-volume hospital status request. If a hospital’s written request for lowvolume hospital status for FY 2015 is received after September 1, 2014, and if the MAC determines that the hospital meets the criteria to qualify as a lowvolume hospital under revised § 412.101(b)(2)(ii), the MAC will apply the applicable low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges, effective prospectively within 30 days of the date of its lowvolume hospital status determination through discharges occurring on or before March 31, 2015. If the hospital also qualifies under revised § 412.101(b)(2)(i), the MAC will apply the 25-percent low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 discharges occurring on or after April 1, 2015. If a hospital’s written request for low-volume hospital status for FY 2015 is received on a later date such that the prospective effective date would be on or after April 1, 2015, and the hospital qualifies under revised § 412.101(b)(2)(i), the MAC will apply the 25-percent low-volume hospital payment adjustment to determine the payment for the hospital’s FY 2015 PO 00000 Frm 00149 Fmt 4701 Sfmt 4700 50001 discharges occurring from the prospective effective date through September 30, 2015. (For additional details on our established process for the low-volume hospital payment adjustment, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).) E. Indirect Medical Education (IME) Payment Adjustment (§ 412.105) 1. IME Adjustment Factor for FY 2015 Under the IPPS, an additional payment amount is made to hospitals with residents in an approved graduate medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The payment amount is determined by use of a statutorily specified adjustment factor. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at § 412.105. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of the IME adjustment and IME adjustment factor. Section 1886(d)(5)(B) of the Act states that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. Accordingly, for discharges occurring during FY 2015, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2015 IME adjustment will result in an increase in IPPS payment of 5.5 percent for every approximately 10 percent increase in the hospital’s resident to bed ratio. Comment: One commenter stated it has a longstanding commitment to graduate medical education, the practice of academic medicine, and successful training of surgical residents. The commenter expressed appreciation of Federal support of IME payments. The commenter stated these payments are an important part of ensuring a strong general surgery workforce, which is currently experiencing a growing shortage. Response: We acknowledge the commenter’s support. We note that the IME formula multiplier is set by Congress. We are specifying in this final rule that the IME formula multiplier for FY 2015 is set at 1.35. 2. IME Medicare Part C Add-On Payments to Sole Community Hospitals (SCHs) That Are Paid According to Their Hospital-Specific Rates and Change in Methodology in Determining Payment to SCHs Section 1886(d)(11) of the Act provides for an additional payment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50002 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations amount to a subsection (d) teaching hospital that has an approved medical residency training program for each applicable discharge of any individual who is enrolled under Medicare Managed Care under Part C. The amount of such payment is specified in section 1886(d)(11)(C) of the Act and ‘‘shall be equal to the applicable percentage (as defined in subsection (h)(3)(D)(ii)) of the estimated average per discharge amount that would otherwise have been paid under paragraph (5)(B) if the individuals had not been enrolled as described in subparagraph (B).’’ Under section 1886(d)(5)(D) of the Act, sole community hospitals (SCHs) are paid based on their hospital-specific rate from specified base years or the IPPS Federal rate, whichever yields the greatest aggregate payment for the hospital’s cost reporting period. Payments based on the Federal rate are based on the IPPS standardized amount and include all applicable IPPS add-on payments, such as outliers, DSH, and IME, while payments based on the hospital-specific rate include no add-on payments. Under CMS’ current payment system, both the IME add-on payment for Medicare Part A patient discharges under section 1886(d)(5)(B) of the Act and the IME add-on payment for Medicare Part C patient discharges under section 1886(d)(11) of the Act are included as part of the Federal rate payment, whereas neither of these addon payments are included as part of the hospital-specific rate payment. We note that SCHs that are paid based on their hospital-specific rate do not receive a separate IME add-on payment for Medicare Part A patient discharges because, generally, the hospital-specific rate already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients. In the case of Medicare Part C patients, there is no component of the hospital-specific rate that already accounts for the additional costs that SCHs incur for their Medicare Part C patients, and there is currently no payment mechanism for SCHs paid based on their hospital-specific rate to receive the IME add-on payment for Medicare Part C patients. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28092), for the reasons specified below, effective for discharges occurring in cost reporting periods beginning on or after October 1, 2014, we proposed: (1) To provide all SCHs that are subsection (d) teaching hospitals IME add-on payments for applicable discharges of Medicare Part C patients in accordance with section 1886(d)(11) of the Act, regardless of whether the SCH is paid based on the Federal rate or its hospital-specific rate; VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 and (2) that, for purposes of the comparison of payments based on the Federal rate (hereinafter also referred to as the ‘‘Federal rate payment’’) and payments based on the hospital-specific rate (hereinafter also referred to as the ‘‘hospital-specific rate payment’’) under section 1886(d)(5)(D) of the Act, IME payments under section 1886(d)(11) of the Act for Medicare Part C patients will no longer be included as part of the Federal rate payment. After the higher of the Federal rate payment amount or the hospital-specific rate payment amount is determined, any IME add-on payments under section 1886(d)(11) of the Act for Medicare Part C patient discharges would be added to that payment for purposes of determining the hospital’s total payment amount. As noted above, under section 1886(d)(5)(D) of the Act, SCHs are paid based on their hospital-specific rate or the Federal rate, whichever yields the higher payment for the hospital’s cost reporting period. For each cost reporting period, the MAC determines which of the payment options will yield the higher aggregate payment. Interim payments are automatically made on a claim-by-claim basis at the higher rate using the best data available at the time the MAC makes the payment determination for each discharge. However, it may not be possible for the MAC to determine in advance precisely which of the rates will yield the higher aggregate payment by year’s end. In many cases, it is not possible to forecast outlier payments or the final amount of the DSH payment adjustment or the IME adjustment until cost report settlement. As noted above, these adjustment amounts are included only as part of the payments based on the Federal rate but not payments based on the hospitalspecific rate. The MAC makes a final adjustment at cost report settlement after it determines precisely which of the two payment rates would yield the higher aggregate payment to the hospital for its cost reporting period. This payment methodology makes SCHs unique because SCH payments can change on a yearly basis from payments based on the hospital-specific rate to payments based on the Federal rate, or vice versa. As we stated earlier, section 1886(d)(11) of the Act provides for an additional payment for each applicable discharge of any subsection (d) teaching hospital for treating Medicare Part C patients. Section 1886(d)(11)(C) of the Act specifies that the amount of the payment ‘‘shall be equal to the applicable percentage (as defined in subsection (h)(3)(D)(ii)) of the estimated average per discharge amount that PO 00000 Frm 00150 Fmt 4701 Sfmt 4700 would otherwise have been paid under paragraph (5)(B) if the individuals had not been enrolled as described in subparagraph (B)’’ (emphasis added). Because an SCH that is paid based on its hospital-specific rate does not receive any IME add-on payment for Medicare Part A patients as provided under section 1886(d)(5)(B) of the Act, CMS has interpreted section 1886(d)(11)(C) of the Act to mean that an SCH that is paid based on its hospital-specific rate also is not entitled to receive payment for discharges of Medicare Part C patients under section 1886(d)(11) of the Act. After further consideration of the language at section 1886(d)(11) of the Act, we believe that the statute would allow an SCH that is paid based on its hospital-specific rate to receive IME add-on payments for its Medicare Part C patient discharges. Section 1886(d)(11)(A) of the Act provides for an additional payment amount for each applicable discharge of a Medicare Part C patient of a subsection (d) hospital that has an approved medical residency training program. Section 1886(d)(11)(C) of the Act sets forth the amount of this additional payment, by reference to the amount that would otherwise have been paid under section 1886(d)(5)(B) of the Act. We believe that section 1886(d)(11)(C) of the Act can be interpreted as simply establishing the methodology for calculating the amount of the add-on payment, without limiting the applicability of the add-on payment to those SCHs that are paid based on the Federal rate. As noted earlier, currently, in making the comparison of SCH payments under the Federal rate and the hospitalspecific rate under section 1886(d)(5)(D) of the Act, the aggregate Federal rate payments are based on the IPPS standardized amount and include IME add-on payments for both Medicare Part A and Medicare Part C patient discharges. Payments based on the hospital-specific rate do not include the Medicare Part A IME add-on payment under section 1886(d)(5)(B) of the Act, under the rationale that, generally, the hospital-specific rate already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients. Payments based on the hospital-specific rate do not include the IME add-on payment for Medicare Part C patient discharges under section 1886(d)(11) of the Act. As a result, under the current methodology, if an SCH that is a teaching hospital is paid based on its hospital-specific rate, it receives no IPPS payment that reflects or accounts for the additional costs that a teaching E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital incurs for its Medicare Part C patients. In conjunction with our proposal to provide IME add-on payments under section 1886(d)(11) of the Act to SCHs, regardless of whether the SCH is paid based on the Federal rate or its hospitalspecific rate, we also believe that, for purposes of the comparison of payments based on the Federal rate and the hospital-specific rate, it would be appropriate for IME add-on payments under section 1886(d)(11) of the Act to no longer be included as part of the Federal rate payment. Therefore, we proposed to no longer include these payments in the comparison in order to more accurately reflect comparable payments for Medicare Part A patient discharges. In addition, because the IME add-on payment for Medicare Part C patient discharges for a given provider would be the same, regardless of whether it is paid based on the Federal rate or its hospital-specific rate, there would be no need to include the IME add-on payment for Medicare Part C patient discharges in the comparison. This is because the Part C IME adjustment is always multiplied by the Federal rate that is used under section 1886(d)(5)(B) of the Act, regardless of whether the hospital-specific rate is higher, in accordance with section 1886(d)(11) of the Act, which states that the IME Part C add-on amount ‘‘shall be equal to the applicable percentage . . . of the estimated average per discharge amount that would otherwise have been paid under paragraph (5)(B).’’ We invited public comments on both of these proposals and any alternatives that we should consider. Comment: Several commenters supported CMS’ proposal to make IME add-on payments for Medicare Part C discharges to SCHs paid based on the hospital-specific rate. Some of these commenters also supported the proposal to change the methodology in determining whether an SCH is paid based on the Federal rate or the hospital-specific rate by excluding the IME add-on amount for Medicare Part C discharges from the comparison. Although commenters supported the proposal to make IME add-on payments for Medicare Part C discharges to SCHs that are paid based on the hospitalspecific rate, several commenters objected to the proposal to make a corresponding change to the methodology for determining whether an SCH is paid based on the Federal rate or the hospital-specific rate by excluding the IME add-on amount for Medicare Part C discharges from the comparison. The commenters claimed that this change would have the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 unintended consequence of precluding hospitals from receiving DSH and uncompensated care payments, which would disadvantage a subset of SCHs that receive payment based on the hospital-specific rate. They recommended making no changes to the comparison. Response: We appreciate the commenters’ support of our proposal to make IME add-on payments for Medicare Part C discharges to SCHs that are paid based on the hospital-specific rate. While we agree that a provider that receives payment based on the hospitalspecific rate would not be eligible for DSH or uncompensated care payments, we do not agree that exclusion of the IME add-on payment for Medicare Part C discharges from the comparison of the Federal rate payments to the hospitalspecific rate payments would disadvantage a given hospital. Our proposal does not preclude a provider from receiving payment based on the Federal rate (which includes DSH and uncompensated care payments as applicable), if the Federal rate payment is higher than the hospital-specific rate payment. However, it is true that a provider that receives payment based on the hospital-specific rate would not be eligible for DSH or uncompensated care payments. As we stated in the proposed rule, we believe that the proposed methodology more accurately reflects the comparable payments for Medicare Part A discharges for SCHs. Generally the hospital-specific rate payment already reflects the additional costs that a teaching hospital incurs for its Medicare Part A patients. However, because the costs associated with Medicare Part C patient discharges are not reflected in the hospital-specific rate, we believe that excluding these amounts from the Federal rate payment provides for a more accurate comparison of payments for Medicare Part A discharges. The commenters did not provide any explanation in support of maintaining our current methodology of comparing the Federal rate payment with the IME add-on amount for Medicare Part C discharges to the hospital-specific rate payment. Moreover, these commenters did not include any explanation of how our proposal to exclude the IME add-on payments for Medicare Part C discharges from both sides of the comparison would specifically disadvantage a given provider by precluding it from receiving DSH and uncompensated care payments. For these reasons, we are not adopting the commenters’ suggestion to maintain the current comparison methodology. PO 00000 Frm 00151 Fmt 4701 Sfmt 4700 50003 Comment: One commenter urged CMS to extend the same payment IME add-on for Part C patients to MDHs because they also are paid the higher of the Federal rate payment or ‘‘the blended rate incorporating a hospitalspecific rate.’’ Response: Unlike SCHs, an MDH receives the higher of the Federal rate or the Federal rate payment plus 75 percent of the amount by which the Federal rate payment is exceeded by its hospital-specific rate payments (that is, payment based on the highest of its hospital-specific rates based on costs in one of its base years). Because payment, whether in whole or in part to an MDH, is always based on the Federal rate, an MDH that is a teaching hospital receives IME add-on payments for Medicare Part A patient discharges under section 1886(d)(5)(B) of the Act, and, therefore, under our historical interpretation of section 1886(d)(11)(C) of the Act, is entitled to receive IME add-on payments for Medicare Part C patient discharges. Consequently, there is no need to ‘‘extend’’ this payment add-on to MDHs that are teaching hospitals because they are already receiving IME add-on payments for Medicare Part C discharges. We also note that, as explained elsewhere, the Federal rate payment used in the MDH payment methodology is the same Federal rate payment that is used in the SCH payment methodology (79 FR 28096). This means that, under the proposed change to the comparison methodology to exclude IME add-on payments for Medicare Part C discharges from the Federal rate payment, the Federal rate payment used for the purpose of the MDH payment methodology, that is, to calculate the 75 percent of the amount by which the Federal rate payment is exceeded by the highest of its hospitalspecific rate payments based on costs in one of the MDH’s base years, would likewise exclude the IME add-on payment for Medicare Part C discharges. After determining the higher of the Federal rate payment or the Federal rate payment plus 75 percent of the amount by which the Federal rate payment is exceeded by the hospital-specific rate payment, any add-on payments under section 1886(d)(11) of the Act for Medicare Part C patient discharges will be added to that payment for purposes of determining the hospital’s total payment amount. Comment: One commenter addressed the general payment methodology for SCHs and the limited number of specified years upon which the hospital-specific rate is based. The commenter stated that the proposal to make additional IME Part C add-on E:\FR\FM\22AUR2.SGM 22AUR2 50004 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payments to SCHs does not cover IME costs for SCHs that did not have a teaching program during or prior to FY 2006. The commenter suggested allowing rural hospitals to rebase their hospital-specific rate in the fiscal year following the start of a new residency program. Response: We consider this comment to be outside of the scope of the proposals described above. We also note that the fiscal years upon which the hospital-specific rates are based are specified in the statute. CMS does not have authority to authorize a rebasing of hospital-specific rates absent additional legislation. After consideration of the public comments we received, we are adopting our proposals without modification. In summary, effective with discharges occurring in cost reporting periods beginning on or after October 1, 2014, our final policies are: (1) To provide all SCHs that are subsection (d) teaching hospitals IME add-on payments for Medicare Part C patient discharges in accordance with section 1886(d)(11) of the Act; and (2) for purposes of the comparison of payments based on the Federal rate and the hospital-specific rate for SCHs under section 1886(d)(5)(D) of the Act, IME add-on payments under section 1886(d)(11) of the Act for Medicare Part C patient discharges will no longer be included in the aggregate payment based on the Federal rate. After the higher of the Federal rate payment or the hospitalspecific rate payment under section 1886(d)(5)(D) of the Act is determined, the Part C IME adjustment factor is multiplied by the Federal rate to determine the add-on payment amount under section 1886(d)(11) of the Act, and then any IME add-on payments under section 1886(d)(11) of the Act are added to the payment amount under section 1886(d)(5)(D) of the Act for purposes of determining the hospital’s total payment amount. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 3. Other Policy Changes Affecting IME In section IV.K. of the preamble of this final rule, we present other policy changes relating to GME payments, which may also apply to IME payments. We refer readers to that section of the preamble of this proposed rule where we present these policies. F. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that serve a significantly disproportionate number of low-income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the ‘‘Pickle method.’’ The second method for qualifying for the DSH payment adjustment, which is the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital’s geographic designation, the number of beds in the hospital, and the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: The ‘‘Medicare fraction’’ and the ‘‘Medicaid fraction.’’ The Medicare fraction (also known as the ‘‘SSI fraction’’ or ‘‘SSI ratio’’) is computed by dividing the number of the hospital’s inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital’s total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital’s number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days in the same period. Because the DSH payment adjustment is part of the IPPS, the DSH statutory references (under section 1886(d)(5)(F) of the Act) to ‘‘days’’ apply only to hospital acute care inpatient days. Regulations located at § 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b). 2. Impact on Medicare DSH Payment Adjustment of Implementation of New OMB Labor Market Delineations As discussed in section III.B. of the preamble of this final rule, in the FY PO 00000 Frm 00152 Fmt 4701 Sfmt 4700 2015 IPPS/LTCH PPS proposed rule, we proposed to implement the new OMB labor market area delineations (which are based on 2010 Decennial Census data) for the FY 2015 wage index. We stated that this proposal also would have an impact on the calculation of Medicare DSH payments to certain hospitals. Hospitals that are designated as rural with less than 500 beds and that are not rural referral centers (RRCs) are subject to a maximum DSH payment adjustment of 12 percent. Accordingly, hospitals with less than 500 beds that are currently in urban counties that would become rural if we adopt the new OMB delineations, and that do not become RRCs, would be subject to a maximum DSH payment adjustment of 12 percent. (We note that urban hospitals are only subject to a maximum DSH payment adjustment of 12 percent if they have less than 100 beds.) Under existing regulations at 42 CFR 412.102, a hospital located in an area that is reclassified from urban to rural, as defined in the regulations, may receive an adjustment to its rural Federal payment amount for operating costs for two successive fiscal years. Specifically, the regulations state that, in the first year after a hospital loses urban status, the hospital will receive an additional payment that equals twothirds of the difference between the urban standardized amount and disproportionate share payments as applicable to the hospital before its redesignation from urban to rural and the rural standardized amount and disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital will receive an additional payment that equals one-third of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its redesignation from urban to rural and the rural standardized amount and disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. We note that we no longer make a distinction between the urban standardized amount and the rural standardized amount. Rather, hospitals receive the same standardized amount regardless of their geographic designation. Accordingly, we proposed to revise the regulation at § 412.102 to remove references to the urban and rural standardized amounts. We did not receive any public comments on this proposal and we are E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations adopting the revisions to the regulation at § 412.102 to remove references to the urban and rural standardized amounts. The provisions of § 412.102 will continue to apply with respect to the calculation of the DSH payments to hospitals that are currently located in urban counties that will become rural under our adoption of the new OMB delineations as described in section III.B.2. of the preamble to this final rule. Specifically, the regulations state that, in the first year after a hospital loses urban status, the hospital will receive an additional payment that equals twothirds of the difference between disproportionate share payments as applicable to the hospital before its redesignation from urban to rural and the disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. In the second year after a hospital loses urban status, the hospital will receive an additional payment that equals one-third of the difference between the disproportionate share payments applicable to the hospital before its redesignation from urban to rural and the disproportionate share payments otherwise applicable to the hospital subsequent to its redesignation from urban to rural. For the purposes of ratesetting, calculating budget neutrality, and modeling payment impacts for this final rule, any hospital that was previously urban but will change to rural status in FY 2015 as a result of the adoption of the new OMB labor market area delineations will have its DSH payments modeled such that the payment equals the amount of the rural disproportionate share payments plus two-thirds of the difference between the urban disproportionate share payments and the rural disproportionate share payments. 3. Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (§ 412.106) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. General Discussion Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111–152), added a new section 1886(r) to the Act that modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. For purposes of this proposed rule, we refer to these provisions collectively as section 3133 of the Affordable Care Act. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicare DSH adjustment payments are calculated under a statutory formula that considers the hospital’s Medicare utilization attributable to beneficiaries who also receive Supplemental Security Income (SSI) benefits and the hospital’s Medicaid utilization. Beginning with discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments. This provision applies equally to hospitals that qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act. The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year are based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year. As provided by section 3133 of the Affordable Care Act, section 1886(r) of the Act requires that, for FY 2014 and each subsequent fiscal year, a ‘‘subsection (d) hospital’’ that would otherwise receive a ‘‘disproportionate share hospital payment . . . made under subsection (d)(5)(F)’’ receives two separately calculated payments. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such a subsection (d) hospital (including a Pickle hospital) 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for disproportionate share hospital payments, which represents ‘‘the empirically justified amount for such payment, as determined by the Medicare Payment Advisory Commission in its March 2007 Report to the Congress.’’ We refer to this payment as the ‘‘empirically justified Medicare DSH payment.’’ In addition to this payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay to ‘‘such subsection (d) hospital an additional amount equal to the product of’’ three factors. The first factor is the difference between ‘‘the aggregate amount of PO 00000 Frm 00153 Fmt 4701 Sfmt 4700 50005 payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply’’ and ‘‘the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1)’’ for each fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act. The second factor is, for FYs 2014 through 2017, 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, determined by comparing the percent of such individuals who are uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment), minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FYs 2015 through 2017. For FYs 2014 through 2017, the baseline for the estimate of the change in uninsurance is fixed by the most recent estimate of the Congressional Budget Office before the final vote on the Health Care and Education Reconciliation Act of 2010, which is contained in a March 20, 2010 letter from the Director of the Congressional Budget Office to the Speaker of the House. (A link to this letter is included in section IV.F.3.d.(2) of the preamble of this final rule.) For FY 2018 and subsequent years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals ‘‘who are uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary’’ of CMS, and the percent of individuals ‘‘who are uninsured in the most recent period for which data is available (as so estimated and certified), minus 0.2 percentage points for FYs 2018 and 2019.’’ Therefore, for FY 2018 and subsequent years, the statute provides some greater flexibility in the choice of the data sources to be used for the estimate of the change in the percent of uninsured individuals. The third factor is a percent that, for each subsection (d) hospital, ‘‘represents the quotient of . . . the amount of uncompensated care for such hospital for a period selected by the Secretary (as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50006 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations estimated by the Secretary, based on appropriate data . . .),’’ including the use of alternative data ‘‘where the Secretary determines that alternative data is available which is a better proxy for the costs of subsection (d) hospitals for . . . treating the uninsured,’’ and ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection.’’ Therefore, this third factor represents a hospital’s uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in that fiscal year, expressed as a percent. For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment determined by these factors as the ‘‘uncompensated care payment.’’ Section 1886(r) of the Act applies to FY 2014 and each subsequent fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647) and the FY 2014 IPPS interim final rule with comment period (78 FR 61191 through 61197), we set forth our policies for implementing the required changes to the DSH payment methodology made by section 3133 of the Affordable Care Act for FY 2014. In those rules, we noted that, because section 1886(r) of the Act modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR Part 412, Subpart M, which were established through the exercise of the Secretary’s discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act. Finally, section 1886(r)(3) of the Act provides that there shall be ‘‘no administrative or judicial review under section 1869, section 1878, or otherwise’’ of ‘‘any estimate of the Secretary for purposes of determining the factors described in paragraph (2),’’ or of ‘‘any period selected by the Secretary’’ for the purpose of determining those factors. Therefore, there is no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or the periods selected in order to develop such estimates. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 b. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments As indicated earlier, the payment methodology under section 3133 of the Affordable Care Act applies to ‘‘subsection (d) hospitals’’ that would otherwise receive a ‘‘disproportionate share hospital payment . . . made under subsection (d)(5)(F).’’ Therefore, eligibility for empirically justified Medicare DSH payments is unchanged under section 3133 of the Affordable Care Act. Consistent with the law, hospitals must receive empirically justified Medicare DSH payments in a fiscal year to receive an additional Medicare uncompensated care payment for that year. Specifically, section 1886(r)(2) of the Act states that ‘‘[i]n addition to the payment made to a subsection (d) hospital under paragraph (1) . . . the Secretary shall pay to such subsection (d) hospital an additional amount . . .’’ (emphasis supplied). Because paragraph (1) refers to empirically justified Medicare DSH payments, the additional payment under section 1886(r)(2) of the Act therefore, is limited to hospitals that receive empirically justified Medicare DSH payments in accordance with section 1886(r)(1) of the Act for the applicable fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2014 IPPS interim final rule with comment period (78 FR 61193), we provided that hospitals that are not eligible to receive empirically justified Medicare DSH payments in a fiscal year will not receive uncompensated care payments for that year. We also specified that we would make a determination concerning eligibility for interim uncompensated care payments based on each hospital’s estimated DSH status for the applicable fiscal year (using the most recent data that are available). We indicated that our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH status on the cost report for that payment year. In the FY 2014 IPPS/LTCH PPS final rule, we also considered whether several specific classes of hospitals are included within the scope of section 1886(r) of the Act. As we specified in that final rule (78 FR 50623), subsection (d) Puerto Rico hospitals that are eligible for DSH payments also are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology. Comment: Several commenters representing the hospital community of PO 00000 Frm 00154 Fmt 4701 Sfmt 4700 Puerto Rico stated that the DSH payment methodology has historically disadvantaged hospitals in Puerto Rico because U.S. citizens residing in Puerto Rico are not entitled to SSI benefits. Because the formula prior to the enactment section 3133 of the Affordable Care Act relied so heavily on SSI and because SSI is statutorily excluded for citizens residing on Puerto Rico, these commenters asserted that DSH payments to Puerto Rico hospitals were disproportionately depressed in comparison to payments to hospitals in the 50 States. The commenters acknowledged that the new DSH payment formula implemented in FY 2014 represents an improvement because it significantly reduces the value of SSI enrollment in calculating DSH payments. However, the commenters also contended that the continued reliance under the new formula upon SSI enrollment means that payments remain unintentionally and unfairly lowered for hospitals in Puerto Rico. In particular, the commenters noted that one of the three factors in determining the uncompensated care payment is intended to account for a hospital’s specific portion of uncompensated care as a percent of uncompensated care by all hospitals. They stated that although CMS has adopted a policy of measuring uncompensated care as the sum of insured low-income Medicaid patient days and SSI days, the use SSI days in determining uncompensated care is not required by statute. Rather, they noted that the statute (section1886(r)(2)(C) of the Act) states only that the Secretary determine uncompensated care ‘‘as estimated by the Secretary, based on appropriate data.’’ Therefore, the commenters pointed out that CMS has the discretion to consider other data in place of SSI days to determine uncompensated care. The commenters maintained that the Secretary is obligated to identify a substitute data source for Puerto Rico because section 1886(d)(9)(D) requires the Secretary to ensure that Medicare DSH payments made to Puerto Rico hospitals are made ‘‘in the same manner and to the extent as they apply’’ to PPS hospitals in the United States. The commenters believed that the revised DSH formula fails to make payments to Puerto Rico hospitals ‘‘in the same manner’’ because it factors in and is based upon an indicator that is not even available in Puerto Rico. Therefore, the commenters believed that DSH payments are applied in a disproportionately reduced manner to Puerto Rico hospitals based upon the inclusion of SSI data. The commenters E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations believed that this outcome is illogical because the main purpose of the DSH payment is to compensate hospitals for the higher costs of treating low-income Medicare patients. Response: As we discussed in the proposed rule, we believe that SSI data combined with Medicaid data are the best data currently available for estimating hospitals’ uncompensated care burdens. Accordingly, we proposed to use both SSI and Medicaid data in our estimates of uncompensated care for all hospitals. We employ the same payment methodology for hospitals in Puerto Rico and the 50 States, and therefore, consistent with section 1886(d)(9)(D) of the Act, Medicare DSH payments are made to subsection (d) Puerto Rico hospitals ‘‘in the same manner and to the extent as they apply’’ elsewhere. Accordingly, we do not agree with the commenters that the statute requires us to develop an alternative methodology for making uncompensated care payments to hospitals in Puerto Rico. Nevertheless, we will consider the issues posed by the commenters for future rulemaking. We would also point out that hospitals in Puerto Rico experienced a significant increase in Medicare DSH payments under the new uncompensated care provision. For example, the impact statement in the FY 2014 IPPS/LTCH PPS final rule (78 FR 51009) showed that Puerto Rico hospitals were expected to experience a 41.3 percent increase in payments from the implementation of the new Medicare DSH payment methodology under section 3133 of the Affordable Care Act. In addition, in the FY 2014 IPPS/ LTCH PPS final rule, we considered whether Maryland hospitals that were paid under section 1814(b)(3) of the Act would be eligible to receive uncompensated care payments. We explained that, under section 1814(b) of the Act, hospitals in the State of Maryland were subject to a waiver from the Medicare payment methodologies under which they would otherwise be paid. Because Maryland waiver hospitals were not paid under the IPPS (section 1886(d) of the Act), in the FY 2014 IPPS/LTCH PPS final rule, we determined that Maryland hospitals that operated under a waiver under section 1814(b)(3) of the Act were not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1886(r) of the Act (78 FR 50623). As stated in section IV.H. of the preamble of this final rule, effective January 1, 2014, the State of Maryland elected to no longer have Medicare pay Maryland hospitals in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 accordance with section 1814(b)(3) of the Act and entered into an agreement with CMS that Maryland hospitals will be paid under the Maryland All-Payer Model. However, under the Maryland All-Payer Model, Maryland hospitals still are not paid under the IPPS. Therefore, they remain ineligible to receive empirically justified Medicare DSH payments or the uncompensated care payments under section 1886(r) of the Act. SCHs are paid based on their hospitalspecific rate from certain specified base years or the IPPS Federal rate, whichever yields the greater aggregate payment for the hospital’s cost reporting period. If an SCH is paid under its hospital-specific rate, it is not eligible for Medicare DSH payments. In order to implement the provisions of section 1886(r) of the Act, in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50624), we specified that we will continue to determine interim payments for SCHs based on what we estimate and project their DSH status to be prior to the beginning of the Federal fiscal year (based on the best available data at that time), subject to settlement through the cost report. We also specified that SCHs that receive interim empirically justified Medicare DSH payments in a fiscal year would receive interim uncompensated care payments for that fiscal year on a per discharge basis, subject as well to settlement through the cost report. Final eligibility determinations will be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments will be adjusted accordingly. Therefore, we follow the same processes of interim and final payments for SCHs that we follow for eligible IPPS DSH hospitals generally. Comment: One commenter stated that the uncompensated care payment amount should be excluded from the payment under the Federal rate when being compared to payments under the hospital-specific rate in order to determine which payment rate an SCH receives. The commenter stated that the hospital-specific rate does not include the cost of care for indigent patients and, therefore, the uncompensated care payment amount should not be part of the comparison of the Federal payment and the hospital-specific payment. The commenter also stated that the uncompensated care payment should be given to a qualifying SCH, regardless of whether the SCH is paid under the hospital-specific rate or the Federal rate. Response: We addressed a similar comment in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50624) where we PO 00000 Frm 00155 Fmt 4701 Sfmt 4700 50007 stated that we did not agree that an SCH that is paid under the hospital-specific rate should also receive an uncompensated care payment. We found that section 1886(r)(2) of the Act specifies that the uncompensated care payment amount is made in addition to the empirically justified Medicare DSH payment under section 1886(r)(1) of the Act. Therefore, in order to receive an uncompensated care payment, a hospital must receive an empirically justified Medicare DSH payment and if an SCH is paid under the hospitalspecific rate, it does not receive an empirically justified Medicare DSH payment. Furthermore, for the reasons that we discussed in the FY 2014 IPPS/ LTCH PPS final rule, we believe it is appropriate to include the uncompensated care payment amount in the payment under the Federal rate for purposes of making the comparison to the hospital-specific payment rate. MDHs are paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospitalspecific rate from certain specified base years (76 FR 51684). The IPPS Federal rate used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology. Uncompensated care payments to MDHs were not explicitly addressed in the FY 2014 IPPS/LTCH PPS final rule because, at the time of the publication of the final rule, the MDH program was set to expire at the end of FY 2013. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, the MDH program was extended from October 1, 2013, to March 31, 2014, under the Pathway for SGR Reform Act (Pub. L. 113–67) and was further extended an additional year from April 1, 2014, to March 31, 2015, by the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93). Because MDHs are paid under the IPPS Federal rate and, therefore, are eligible to receive Medicare DSH payments if their disproportionate patient percentage is at least 15 percent, we apply the same process to determine eligibility for Medicare DSH and the uncompensated care payment as we do for all other IPPS hospitals. That is, we make a determination concerning eligibility for interim uncompensated care payments based on each hospital’s estimated DSH status for the applicable fiscal year (using the most recent data that are available) and our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50008 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations status on the cost report for that payment year. In addition, as we do for all IPPS hospitals, we would calculate a numerator for Factor 3 for all MDHs, regardless of whether they are projected to be eligible for DSH during the fiscal year, but the denominator for Factor 3 would be based on the uncompensated care data from the hospitals that we have projected to be eligible for DSH during the fiscal year. Furthermore, in the FY 2014 IPPS interim final rule with comment period (79 FR 15027), which addressed MDH payments for the first 6 months of FY 2014, we established a policy of including a pro rata share of the uncompensated care payment amount for that period as part of the Federal rate payment in the comparison of payments under the hospital-specific rate and the Federal rate. Consistent with that policy, for MDH payments for the first 6 months of FY 2015, a pro rata share of the uncompensated care payment amount for that period will be included as part of the Federal rate payment in the comparison of payments under the hospital-specific rate and the Federal rate. That is, in making this comparison at cost report settlement, we will include the pro rata share of the uncompensated care payment amount that reflects the period of time the hospital was paid under the MDH program for its discharges occurring on or after October 1, 2014, and before April 1, 2015. Consistent with the policy for hospitals with Medicare cost reporting periods that span more than 1 Federal fiscal year, this pro rata share will be determined based on the proportion of the applicable Federal fiscal year that is included in that cost reporting period (78 FR 61192 through 61194). As noted previously, section 106 of Public Law 113–93 provides for an extension of the MDH program through March 31, 2015, only. Therefore, beginning April 1, 2015, all hospitals that previously qualified for MDH status will no longer have MDH status under current law. IPPS hospitals that have elected to participate in the Bundled Payments for Care Improvement initiative receive a payment that links multiple services furnished to a patient during an episode of care. We have stated in previous rulemaking that those hospitals continue to be paid under the IPPS (77 FR 53342). Hospitals that elect to participate in the initiative can still receive DSH payments while participating in the initiative, if they otherwise meet the requirements for receiving such payments. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50625), we specified that we will apply VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the new DSH payment methodology to the hospitals participating in this initiative, so that eligible hospitals will receive empirically justified Medicare DSH payments and uncompensated care payments. Section 410A of the Medicare Modernization Act established the Rural Community Hospital Demonstration Program. After the initial 5-year period, the demonstration was extended for an additional 5-year period by sections 3123 and 10313 of the Affordable Care Act. There are 23 hospitals currently participating in the demonstration. Under the payment methodology provided in section 410A, participating hospitals receive payment for Medicare inpatient services on the basis of a cost methodology. Specifically, for discharges occurring in the hospitals’ first cost reporting period of the initial 5-year demonstration or the first cost reporting period of the 5-year extension, the hospitals participating in the demonstration receive payments for the reasonable cost of providing such services. For discharges occurring in subsequent cost reporting periods during the applicable 5-year period, hospitals receive the lesser of the current year’s reasonable cost-based amount, or the previous year’s amount updated by the percentage increase in the IPPS market basket (the target amount). The instructions (Change Request 5020 (April 14, 2006) and Change Request 7505 (July 22, 2011)) for the demonstration require that the MAC not pay Medicare DSH payments in addition to the amount received under the reasonable cost-based payment methodology. Because hospitals participating in the demonstration do not receive DSH payments, we determined in the FY 2014 IPPS/LTCH PPS final rule that these hospitals also are excluded from receiving empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology (78 FR 50625). c. Empirically Justified Medicare DSH Payments As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the DSH payment that would otherwise be made under subsection (d)(5)(F) to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did PO 00000 Frm 00156 Fmt 4701 Sfmt 4700 not believe that it is necessary to develop any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision simply by revising the claims payment methodologies to adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the final rule that can be found on the CMS Web site at: https:// www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/2014Transmittals-Items/R5P240.html. d. Uncompensated Care Payments As we have discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the new uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to the rate of uninsurance in 2013, and each eligible hospital’s estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. Below we review the data sources and methodologies for computing each of these factors, our final policies for FY 2014, and our proposed and final policies for FY 2015. (1) Calculation of Factor 1 for FY 2015 Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that it is a factor ‘‘equal to the difference between (i) the aggregate amount of payments that would be made to subsection (d) hospitals under subsection (d)(5)(F) if this subsection did not apply for such fiscal year (as estimated by the Secretary); and (ii) the aggregate amount of payments that are made to subsection (d) hospitals under paragraph (1) for such fiscal year (as so estimated).’’ Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payment that would have been made under section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for such fiscal year. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be ‘‘estimated by the Secretary.’’ Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in a fiscal year, as prescribed under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount. Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for the fiscal year. In order to determine Factor 1 in the uncompensated care payment formula, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule with comment period (78 FR 61194), we adopted a policy under which we develop final estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments to hospitals under section 1886(r)(1) of the Act prior to each fiscal year to which the new provision applies. These estimates are not revised or updated after we know the final Medicare DSH payments for the fiscal year. Specifically, in order to determine the two elements of Factor 1 (Medicare DSH payments prior to the application of section 1886(r)(1) of the Act, and empirically justified Medicare DSH payments after application of section 1886(r)(1) of the Act), we use the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by CMS’ Office of the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Actuary. The Office of the Actuary projects Medicare DSH payments on a biannual basis, typically in February of each year (based on data from December of the previous year) as part of the President’s Budget, and in July (based on data from June) as part of the Midsession Review. The estimates are based on the most recently filed Medicare hospital cost report with Medicare DSH payment information, cost report data provided by Indian Health Service (IHS) hospitals to CMS, and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File. Therefore, for the Office of the Actuary’s February 2014 estimate, the data were based on the December 2013 update of the Medicare Hospital Cost Report Information System (HCRIS), cost report data provided by IHS hospitals to CMS as of December 2013 and the FY 2014 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2014 IPPS/LTCH PPS final rule. For the July 2014 estimate, the data are based on the March 2014 update of the HCRIS data, cost report data provided by IHS hospitals to CMS as of March 2014, and the FY 2015 IPPS Proposed Rule Impact File, published in conjunction with the FY 2015 IPPS/ LTCH PPS proposed rule (and which is available via the Internet on the CMS Web site). For purposes of the proposed rule, we used the February 2014 Medicare DSH estimates to calculate Factor 1 and to model the proposed impact of this provision. For this final rule, we use the July 2014 Medicare DSH estimates to determine Factor 1 and to model the impact of this provision. In addition, because SCHs paid under their hospital-specific payment rate are excluded from the application of section 1886(r) of the Act, we also exclude SCHs that are projected to be paid under their hospital-specific rate from our Medicare DSH estimates. Similarly, because Maryland hospitals participating in the Maryland All-Payer Model and hospitals participating in the Rural Community Hospital Demonstration do not receive DSH payments, we also exclude these hospitals from our Medicare DSH estimates. Using the data sources discussed above, the Office of the Actuary uses the most recently submitted Medicare cost report data to identify current Medicare DSH payments, cost report data provided by IHS hospitals to CMS, and the most recent DSH payment adjustments provided in the IPPS Impact File, and applies inflation PO 00000 Frm 00157 Fmt 4701 Sfmt 4700 50009 updates and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The February 2014 Office of the Actuary estimate for Medicare DSH payments for FY 2015, without regard to the application of section 1886(r)(1) of the Act, was $14.205 billion. This estimate excludes Maryland hospitals participating in the Maryland All-Payer Model, SCHs paid under their hospital-specific payment rate, and hospitals participating in the Rural Community Hospital Demonstration as discussed above. Therefore, based on this estimate, the estimate for empirically justified Medicare DSH payments for FY 2015, with the application of section 1886(r)(1) of the Act, was $14.205 billion (25 percent of the total amount estimated). Under § 412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the Office of the Actuary. Therefore, for the purpose of modeling Factor 1, we proposed that Factor 1 for FY 2015 would be $10.654 billion ($14.205 billion minus $3.551 billion). We invited public comment on our proposed calculation of Factor 1 for FY 2015. Comment: A number of commenters supported CMS’ methodology for determining Factor 1 and/or the proposed Factor 1 for FY 2015. However, other commenters complained that CMS did not provide enough information in the proposed rule regarding the methodologies, calculations, and data sources used to develop this and other estimates to provide a sufficient basis for comment. With regard to the estimate of Factor 1 in particular, these commenters contend: • The estimated DSH payments do not account for the impact of Allina v. Sebelius, by excluding Medicare Advantage days from the SSI ratio and including dual-eligible Medicare Advantage days in the Medicaid fraction, thus understating Factor 1 DSH estimate. • The 2012 estimated DSH payments of $11.720 billion figure is understated because the 2012 ‘‘update’’ factor (provided for in the FY 2015 IPPS Proposed Rule DSH Supplemental Data File that displays the Office of the Actuary’s assumptions in determining the Medicare DSH estimate) is understated. Specifically, a 1.1 percent increase in light of the Cape Cod litigation result was not applied. As a result, instead of a ¥0.1 percent update factor, the projection should use a +1.0 percent update factor. Therefore the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50010 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2012 estimated DSH amount should be $11.732 billion. • The estimate of DSH payments for FY 2015 of $14.205 billion is understated because the 2015 update factor is understated. Specifically, the productivity adjustment should be 0.4 percent (as projected in the FY 2015 IPPS/LTCH PPS proposed rule), not 0.5 percent. As a result, instead of a 1.2 percent update factor, the projection should use a 1.3 percent update factor. Therefore, including the 2012 correction and the cumulative impact, the 2015 estimated DSH amount should be $14.234 billion. • The summary analysis of the DSH estimate includes an adjustment factor for discharges. However, CMS has not provided the detail supporting the discharge factor used. In addition, the footnote to the discharge column states that all inpatient hospitals were used, not just IPPS hospitals. Because the purpose of the projection is to estimate the amount of DSH that will go to a subset of all inpatient hospitals, it would seem appropriate that factors that drive the estimate likewise would include only the hospitals projected to share in the payments. • The DSH estimate is subject to 100 percent of any documentation and coding adjustments due to MS–DRGs. The FY 2015 IPPS/LTCH PPS proposed rule refers to a recoupment adjustment of ‘‘$11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017.’’ CMS should model the impact of such adjustments to the DSH and uncompensated care payments before subjecting the DSH estimate to dramatic adjustments. • The ‘‘Other’’ column from the Factor 1 source file is supposed to contain the DSH payment impact factor: The ‘‘Other’’ column includes impact of only IPPS discharges and impact of DSH payments increasing or decreasing at a different rate than other IPPS payments. This single input should at least reflect the changes in DSH payments, which will be significantly impacted by the effects of Medicaid/CHIP expansion. According to the February 2014 CBO report, an additional 12 million people are projected to enroll in Medicaid/ CHIP during 2014 and 2015. That represents a 35-percent increase in Medicaid/CHIP population. Yet, the latest FY 2014 and 2015 ‘‘Other’’ factor only applied a 3.28 percent and a 2.92 percent increase, respectively. Even the pre-Affordable Care Act FY 2012 and 2013 ‘‘Other’’ factor reflected 4.45 percent and 1.56 percent increases, and that was prior to widespread Medicaid expansion. In the light of these and other concerns about data sources and methods, the commenters insisted that CMS adopt a process of reconciling the initial estimates of Factor 1 with actual data for the payment year in conjunction with the final settlement of hospital cost reports. Response: Below we present the Office of the Actuary’s updated estimate of Factor 1. In order to satisfy the commenters’ request for additional information, we also provide additional information regarding the data sources, assumptions, and methods employed by the actuaries. We acknowledge that commenters have requested that we establish a reconciliation procedure for Factor 1. However, we continue to believe that applying our best estimates prospectively would be most conducive to administrative efficiency, finality, and predictability in payments (78 FR 50628). As we noted in the FY 2014 IPPS/LTCH PPS final rule, we do not know the aggregate Medicare DSH payment amount that would be paid for each Federal fiscal year until the time of cost report settlements, which occur several years after the end of the fiscal year. Furthermore, because the statute provides that Factor 1 shall be determined based on estimates of the aggregate amount of DSH payments that would be made in the absence of section 1886(r) of the Act and the aggregate amount of empirically justified DSH payments that are made under section 1886(r)(1) of the Act, we do not agree with commenters that we should establish such a reconciliation process at this time. However, we note the following about the Office of the Actuary’s estimates. Factor 1 is an estimate of the expected DSH payments under the previous DSH payment methodology under section 1886(d)(5)(F) of the Act. We believe it is reasonable that an estimate should represent a 50-percent chance of being too high and a 50-percent chance being too low in comparison to actual experience. In reviewing, the Office of the Actuary’s prior estimates for DSH payments compared to actual experience, from FY 2005 to FY 2015, the original estimates have been higher than actual experience for 7 of the 11 years, and lower than actual experience in only 4 years. This result is reasonably consistent with the expectation that an estimate has a 50-percent chance of being too high and a 50-percent chance of being too low. As indicated above, using the data sources discussed above, the Office of the Actuary uses the most recently submitted Medicare cost report data to identify current Medicare DSH payments, cost report data provided by IHS hospitals to CMS, and the most recent DSH payment adjustments provided in the IPPS Impact File, and applies inflation updates and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The July 2014 Medicare DSH estimate for FY 2015, without regard to the application of section 1886(r)(1) of the Act, is $13,383,462,195.71. This estimate excludes Maryland hospitals participating in the Maryland All-Payer Model, SCHs paid under their hospitalspecific payment rate, and hospitals participating in the Rural Community Hospital Demonstration as discussed above. Therefore, based on this estimate, the estimate for empirically justified Medicare DSH payments for FY 2015, with the application of section 1886(r)(1) of the Act, is $3,345,865,548.93 (25 percent of the total amount estimated). Under § 412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the Office of the Actuary. Therefore, in this final rule, we are providing that Factor 1 for FY 2015 is $10,037,596,646.78 ($13,383,462,195.71 minus $3,345,865,548.93). Below we provide additional detail regarding the development of this estimate in response to the commenters. The Office of the Actuary’s estimates begins with a baseline of $11.499 billion in Medicare DSH expenditures for FY 2011. The following table shows the factors applied to update this baseline through the current estimate for FY 2015: INCREASES FROM 2011 FY Update 2012 ......................................................... 2013 ......................................................... 2014 ......................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 0.999 1.028 1.009 PO 00000 Frm 00158 Discharge Case-mix 0.9701 0.9799 0.9855 Fmt 4701 Sfmt 4700 1.007 1.014 1.005 Other Total 1.0447 1.0132 1.0355 E:\FR\FM\22AUR2.SGM 22AUR2 1.019537 1.034923 1.034818 DSH 11724 12133 12556 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50011 INCREASES FROM 2011—Continued FY Update 2015 ......................................................... Discharge 1.014 In this table, the discharge column shows the increase in the number of Medicare inpatient hospital discharges. The figures for FYs 2012 and 2013 are based on Medicare claims data which have been adjusted by a completion factor. The discharge figure for FY 2014 is based on preliminary data for 2014. The discharge figure for FY 2015 is an assumption based on recent trends recovering back to the long-term trend and assumptions related to how many beneficiaries will be enrolled in Medicare Advantage (MA) plans. The case-mix column shows the increase in case-mix for IPPS hospitals. The case- Case-mix 1.0116 Other 1.005 mix figures for FYs 2012 and 2013 are based on actual data adjusted by a completion factor. The FY 2014 and FY 2015 increases are based on the recommendation of the 2010–2011 Medicare Technical Review Panel. The ‘‘other’’ column shows the increase in other factors which contribute to the Medicare DSH estimates. These factors include the difference between the total inpatient hospital discharges and the IPPS discharges, various adjustments to the payment rates which have been included over the years but are not reflected in the other columns (such as the increase in rates for the Cape Cod Total 1.034 1.065942 Medicaid enrollment pre-ACA (in millions) .............................................................................................................. Medicaid enrollment post-ACA (in millions) ............................................................................................................ Under 65 pre-ACA enrollment (in millions) ............................................................................................................. Under 65 post-ACA enrollment (in millions) ............................................................................................................ Increase in Medicare DSH ...................................................................................................................................... increase due to the Medicaid expansion by FY 2015. This estimate is lower than the commenters may have expected due to the assumption that the expansion population is healthier than the rest of the Medicaid population and will utilize fewer hospital services. This FY tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 2012 2013 2014 2015 Market basket ............................................................................... ............................................................................... ............................................................................... ............................................................................... In this table, all numbers are based on mid-session review of FY 2015 Budget projections. With regard to the assumed update factor for FY 2012, the commenters are correct that the update to the Federal standardized amount due to the Cape Cod litigation should be reflected in our DSH estimate. However, we have included it in the DSH estimate and the 1.1 percent increase is reflected in the ‘‘other ‘‘column. We consider it not to be part of the update and that is consistent with our treatment of the 0.2 percent reduction to the rate in FY 2014 for the 2-midnight policy finalized in the FY 2014 IPPS/LTCH PPS final rule, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Affordable Care Act payment reductions 3 2.6 2.5 2.9 PO 00000 Frm 00159 Fmt 4701 Sfmt 4700 56.0 64.7 50.6 59.3 4.9% FY 2015 55.9 69.8 50.4 64.3 3.4% factor in the estimate is included in the ‘‘other’’ column of the breakdown. The next table below shows the factors that are included in the ‘‘update’’ column of the above table: Productivity 0.1 0.1 0.3 0.2 which is also included in the ‘‘other’’ column. We agree with the commenters that the update for FY 2015 should include the productivity adjustment finalized for FY 2015 in our FY 2015 Medicare DSH estimates. Accordingly, we have revised our FY 2015 Medicare DSH estimates to reflect this final productivity adjustment. We also agree with the commenters that the DSH estimates are only affected by IPPS discharges. However, the discharge figures reflect all inpatient hospitals, and we adjust the Medicare DSH estimates to take into account the difference between the increase in 13383 litigation and the reduction in rates for the 2-midnight policy). In addition, this column includes a factor for the Medicaid expansion due to the Affordable Care Act. However, the increase due to the Medicaid expansion is not as large as commenters contended due to the actuarial assumption that the new enrollees are healthier than the average Medicaid recipient and, therefore, use fewer hospital services. We have included the impact of the Medicaid expansion in the FY 2015 DSH estimate and note that it was also included in the FY 2014 DSH estimate. Our estimates are as follows: FY 2014 As can be seen in the table above, there is assumed to be a 4.9 percent increase in Medicare DSH due to the Medicaid expansion in FY 2014, and an additional 3.4 percent increase in Medicare DSH in FY 2015. This results in approximately an 8.5 percent DSH Documentation and coding 1 0.7 0.5 0.5 ¥2 1 ¥0.8 ¥0.8 Total ¥0.1 2.8 0.9 1.4 discharges for all inpatient hospitals and the IPPS hospital discharge increase in the ‘‘other’’ column. If the ‘‘discharge’’ column was limited to IPPS hospitals, the ‘‘discharge’’ column would be lower and the ‘‘other’’ column would be higher, and the increase reflected in the ‘‘total’’ column would be the same. The commenters also are correct that the documentation and coding numbers for future years could be more than a 0.8 percent reduction to comply with the $11 billion requirement, but those figures have not yet been determined. The reason for the higher possibility is E:\FR\FM\22AUR2.SGM 22AUR2 50012 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV that the number of discharges has decreased significantly. Lastly, we do not believe that the decision in Allina v. Sebelius is relevant to our estimate of Factor 1 for FY 2015. The decision in Allina did not address the FY 2014 IPPS/LTCH PPS final rule (78 FR 50614 through 50620) in which we readopted the policy of counting Medicare Advantage days in the SSI ratio for FY 2014 and all subsequent fiscal years. Accordingly, consistent with that policy, our estimate of Factor 1 for FY 2015 appropriately accounts for Medicare Advantage days by including them in the SSI ratio. (2) Calculation of Factor 2 for FY 2015 Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Specifically, section 1886(r)(2)(B)(i) of the Act provides: ‘‘For each of fiscal years 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals (I) who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment); and (II) who are uninsured in the most recent period for which data is available (as so calculated), minus 0.1 percentage points for fiscal year 2014 and minus 0.2 percentage points for each of fiscal years 2015, 2016, and 2017.’’ Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the percent of individuals under 65 without insurance in 2013 must be the percent of such individuals ‘‘who are uninsured in 2013, the last year before coverage expansion under the Patient Protection and Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment).’’ The Health Care and Education Reconciliation Act (Pub. L. 111–152) was enacted on March 30, 2010. It was passed in the House of Representatives on March 21, 2010, and by the Senate on March 25, 2010. Because the House of Representatives was the first House to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 vote on the Health Care and Education Reconciliation Act of 2010 on March 21, 2010, we have determined that the most recent estimate available from the Director of the Congressional Budget Office ‘‘before a vote in either House on the Health Care and Education Reconciliation Act of 2010 . . .’’ (emphasis added) appeared in a March 20, 2010 letter from the director of the CBO to the Speaker of the House. Therefore, we believe that only the estimates in this March 20, 2010 letter meet the statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we refer readers to the Web site at: https:// www.cbo.gov/sites/default/files/ cbofiles/ftpdocs/113xx/doc11379/ amendreconprop.pdf.) In its March 20, 2010 letter to the Speaker of the House of Representatives, the CBO provided two estimates of the ‘‘post-policy uninsured population.’’ The first estimate is of the ‘‘Insured Share of the Nonelderly Population Including All Residents’’ (82 percent) and the second estimate is of the ‘‘Insured Share of the Nonelderly Population Excluding Unauthorized Immigrants’’ (83 percent). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate that includes all residents, including unauthorized immigrants. We stated that we believe this estimate is most consistent with the statute which requires us to measure ‘‘the percent of individuals under the age of 65 who are uninsured,’’ and provides no exclusions except for individuals over the age of 65. In addition, we stated that we believe that this estimate more fully reflects the levels of uninsurance in the United States that influence uncompensated care for hospitals than the estimate that reflects only legal residents. The March 20, 2010 CBO letter reports these figures as the estimated percentage of individuals with insurance. However, because section 1886(r)(2)(B)(i) of the Act requires that we compare the percent of individuals who are uninsured in the applicable year with the percent of individuals who were uninsured in 2013, in the FY 2014 IPPS/LTCH PPS final rule, we used the CBO insurance rate figure and subtracted that amount from 100 percent (that is the total population without regard to insurance status) to estimate the 2013 baseline percent of individuals without insurance. Therefore, for FYs 2014 through 2017, our estimate of the uninsurance percentage for 2013 is 18 percent. Section 1886(r)(2)(B)(i) of the Act requires that we compare the baseline PO 00000 Frm 00160 Fmt 4701 Sfmt 4700 uninsurance rate to the percent of such individuals ‘‘who are uninsured in the most recent period for which data is available (as so calculated).’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634), we used the same data source, CBO estimates, to calculate this percent of individuals without insurance. In response to public comments, we also agreed that we should normalize the CBO estimates, which are based on the calendar year, for the Federal fiscal years for which each calculation of Factor 2 is made (78 FR 50633). Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we employed the most recently available estimate, specifically CBO’s May 2013 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at: https://www.cbo.gov/sites/default/ files/cbofiles/attachments/44190_Effects AffordableCareActHealthInsurance Coverage_2.pdf) as amended by CBO’s July 2013 estimates of changes in estimates of the effects of insurance coverage provisions in the Affordable Care Act issued in conjunction with a memo regarding ‘‘Analysis of the Administration’s Announced Delay of Certain Requirements Under the Affordable Care Act,’’ which are available at: https://www.cbo.gov/sites/ default/files/cbofiles/attachments/ 44465-ACA.pdf. The CBO’s May 2013 estimate of the rate of insurance for CY 2013 was 80 percent, and for CY 2014 was 84 percent. Therefore, the calculation of Factor 2 for FY 2014, employing a weighted average of the CBO projections for CY 2013 and CY 2014, was as follows: • CY 2013 rate of insurance coverage (May 2013 CBO estimate): 80 percent. • CY 2014 rate of insurance coverage (May 2013 CBO estimate, updated with July 2013 CBO estimate): 84 percent. • FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent * .75) = 83 percent. • Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent. • Percent of individuals without insurance for FY 2014 (weighted average): 17 percent. 1 ¥ [(0.17 ¥ 0.18)/0.18]| = 1 ¥ 0.056 = 0.944 (94.4 percent). 0.944 (94.4 percent) ¥ 0.001 (0.1 percentage points) = 0.943 (94.3 percent). 0.943 = Factor 2 Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we adopted 0.943 as the final determination of Factor 2 for FY 2014. In conjunction with this determination, we also determined in the FY 2014 IPPS/LTCH PPS final rule E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations and later revised in the FY 2014 IPPS interim final rule with comment period (78 FR 61195) that the amount available for uncompensated care payments for FY 2014 would be approximately $9.046 billion (0.943 times our Factor 1 estimate of $9.593 billion). For the FY 2015 proposed rule, we used CBO’s February 2014 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at https://www.cbo.gov/ publication/43900?utm_source=feed blitz&utm_medium=FeedBlitzEmail& utm_content=812526&utm_ campaign=0). The CBO’s February 2014 estimate of individuals under the age of 65 with insurance in CY 2014 was 84 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2014 at the time of the FY 2015 IPPS/LTCH PPS proposed rule was 16 percent (that is, 100 percent minus 84 percent.) Similarly, the CBO’s February 2014 estimate of individuals under the age of 65 with insurance in CY 2015 was 86 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2015 available at the time of the FY 2015 IPPS/LTCH PPS proposed rule was 14 percent (that is, 100 percent minus 86 percent.) The calculation of the proposed Factor 2 for FY 2015, employing a weighted average of the CBO projections for CY 2014 and CY 2015, was as follows: • CY 2014 rate of insurance coverage (February 2014 CBO estimate): 84 percent. • CY 2015 rate of insurance coverage (February 2014 CBO estimate): 86 percent. • FY 2015 rate of insurance coverage: (84 percent * .25) + (86 percent * .75) = 85.5 percent. • Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent. • Percent of individuals without insurance for FY 2015 (weighted average): 14.5 percent. 1 ¥ [(0.145 ¥ 0.18)/0.18] = 1 ¥ 0.19444 = 0.80556 (80.556 percent) 0.80556 (80.556 percent) ¥ 0.002 (0.2 percentage points for FY 2015 under section 1886(r)(2)(B)(i) of the Act) = 0.8036 (80.36 percent) 0.8036 = Factor 2 Therefore, we proposed that Factor 2 for FY 2015 would be 0.8036. We indicated that our proposal for Factor 2 was subject to change if more recent CBO estimates of the insurance rate became available at the time of the preparation of the final rule. We invited public comments on our proposed calculation of Factor 2 for FY 2015. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 50013 Comment: A number of commenters supported the use of the CBO estimates for determining Factor 2. However, other commenters objected to CMS’ proposed calculation of Factor 2. Some commenters found that the calculation of Factor 2 appeared arbitrary. For example, some of the commenters complained that a 2-percent decrease in the percentage of uninsured does not seem reasonable based on current economic conditions. Other commenters asserted that, in their views, the Affordable Care Act was not implemented until January 1, 2014, so that such a large decrease in uninsured is very speculative and without historical data. Commenters requested additional information on how the CBO calculates its insurance estimates, including the assumptions in its estimates. Commenters also requested reconciliation of the Factor 2 estimates with actual data at the time of cost report settlements. While these commenters understood that estimates must be used for interim payments, they believed that more accurate numbers based on actual experience should be available for purposes of determining final payments at the time of cost report settlement. Response: We note that, in the FY 2014 IPPS/LTCH PPS final rule, we finalized a policy to employ the most recent CBO estimates of the rates of uninsurance in the calculation of Factor 2 for FY 2014 and subsequent years, and did not adopt any policy for reconciling those estimates. In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50632), we stated that we believe that employing actual data as the basis for reconciling the projections employed to determine Factor 2 would impose an unacceptable delay in the final determination of uncompensated care payments. Actual data on the rates of insurance and uninsurance would not become available until several years after the payment year, and the initial data for the year would continue to be adjusted for several years after that as further data become available. In its April 2014 report,22 the CBO and the Joint Committee on Taxation (JCT) estimated that the Affordable Care Act would result in insurance coverage for 12 million more nonelderly individuals in FY 2014 than in the absence of the Affordable Care Act. The coverage projections included the changes arising from participation in the health insurance exchanges, Medicaid and CHIP enrollment, and changes in employer-sponsored, nongroup and other insurance coverage. Included in the uninsured population are undocumented immigrants who are not eligible for Medicaid and exchange coverage and low-income residents of States not participating in the Medicaid expansion. In addition, other individuals will choose to remain uninsured, despite being eligible for Medicaid or having access through an employer, the exchange, or from an insurer. The CBO and JCT estimate of the increase in insurance coverage represents the number of people who are expected to be insured this year under current law minus the number who would have been insured this year in the absence of the Affordable Care Act. More people are expected to obtain insurance through the exchanges over time due to subsidies and penalties for noncoverage. CBO and JCT expected more people to obtain insurance through Medicaid and CHIP because of increased eligibility due to the Medicaid expansion and more enrollments among those who were previously eligible for Medicaid or CHIP but would not have enrolled in the absence of the Affordable Care Act. Overall, the net coverage effect is a large decrease in the uninsured population. Because not all States have expanded their Medicaid programs, the CBO and JCT revised their estimates for changes in the insured population due to Medicaid expansion. The table below presents the updated estimates of the change in insurance coverage under Medicaid and CHIP under the Affordable Care Act. The CBO and JCT revised their estimates to indicate a decrease in the number of insured individuals in CYs 2014 and 2015. In addition, CBO and JCT did not rely on State predictions about the Medicaid expansion under the Affordable Care Act.23 Instead, they projected the approximate shares of the affected population residing in States that will fall into different broad categories. The broad categories range from States that did not expand their Medicaid program to States that choose Medicaid expansion. Due to the uncertainty of States’ actions, estimates by the CBO and JCT reflected an assessment of the different outcome probabilities and the middle of the distribution of all possible 22 Congressional Budget Office. Updated Estimates of the Insurance Coverage Provisions of the Affordable Care Act, April 2014 (April 2014). https://www.cbo.gov/sites/default/files/cbofiles/ attachments/45231-ACA_Estimates _OneColumn.pdf. 23 Congressional Budget Office. Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision (July 2012). https://www.cbo.gov/sites/ default/files/cbofiles/attachments/43472-07-242012-CoverageEstimates.pdf. PO 00000 Frm 00161 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50014 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations outcomes. For instance, the CBO’s and JCT’s estimates considered multiple factors that are associated with a State’s choice on whether to expand Medicaid eligibility: Overall budgetary situation; current thresholds for Medicaid eligibility; the amounts that States and local governments spend to provide health care to the uninsured or to pay providers for uncompensated care; the number of people likely to enroll in the program after expansion; the Federal contributions toward the cost of their care, and other factors. ESTIMATES OF THE INCREASE IN INSURANCE COVERAGE DUE TO MEDICAID AND CHIP UNDER THE AFFORDABLE CARE ACT * Last updated date 2013 2014 July 2012 .................. February 2013 .......... May 2013 ................. February 2014 .......... April 2014 ................. 1 1 1 ................ ................ 2015 7 8 9 8 7 2016 9 11 12 12 11 2017 10 11 12 12 12 2018 10 11 12 12 12 2019 11 11 12 12 13 2020 11 11 12 12 13 2021 11 12 13 13 13 2022 11 12 13 13 13 11 12 13 13 13 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Source: CBO reports on effects of the Affordable Care Act on health insurance coverage (July 2012–April 2014) https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf. * Millions of nonelderly people, by calendar year. In their April 2014 report, CBO and JCT estimated that an average of 6 million people will be covered by insurance obtained through the exchanges by the end of CY 2014. The estimate was determined at the national level instead of at the level of individual States. Although CBO and JCT did not account for the variations of success in obtaining health insurance through the exchanges by State, they did account for the possibility of individuals moving in and out of insurance coverage over time due to changes in employment, family circumstances, and other factors. The CBO and JCT estimates therefore do take into account some uncertainties and risks under the Affordable Care Act, including the probabilities of different outcomes of Medicaid expansions and changes in insurance coverage status over time. For the FY 2015 final rule, we use the CBO’s April 2014 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at https://www.cbo.gov/sites/ default/files/cbofiles/attachments/ 43900-2014-04-ACAtables2.pdf). The CBO’s April 2014 estimate of individuals under the age of 65 with insurance in CY 2014 is 84 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2014 is 16 percent (that is, 100 percent minus 84 percent.) Similarly, the CBO’s April 2014 estimate of individuals under the age of 65 with insurance in CY 2015 is 87 percent. Therefore, the CBO’s most recent estimate of the rate of uninsurance in CY 2015 available for this final rule is 13 percent (that is, 100 percent minus 87 percent.) The calculation of the final Factor 2 for FY 2015, employing a weighted average of the CBO projections for CY 2014 and CY 2015, is as follows: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • CY 2014 rate of insurance coverage (April 2014 CBO estimate): 84 percent. • CY 2015 rate of insurance coverage (April 2014 CBO estimate): 87 percent. • FY 2015 rate of insurance coverage: (84 percent * .25) + (87 percent * .75) = 86.25 percent. • Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent. • Percent of individuals without insurance for FY 2015 (weighted average): 13.75 percent. 1 ¥ |((0.1375 ¥ 0.18)/0.18)| = 1 ¥ 0.2361 = .7639 (76.39 percent) 0.7639 (76.39 percent) ¥ .002 (0.2 percentage points for FY 2015 under section 1886(r)(2)(B)(i) of the Act) = 0.7619 or 76.19 percent 0.7619 = Factor 2 Therefore, the final Factor 2 for FY 2015 is 76.19 percent. The FY 2015 Final Uncompensated Care Amount is: $10,037,596,646.78 × 0.7619 = $7,647,644,885.18. FY 2015 Final Uncompensated Care Total Available—$7,647,644,885.18. (3) Calculation of Factor 3 for FY 2015 Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is ‘‘equal to the percent, for each subsection (d) hospital, that represents the quotient of (i) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data is available which is a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (ii) the aggregate amount of uncompensated care for all subsection PO 00000 Frm 00162 Fmt 4701 Sfmt 4700 (d) hospitals that receive a payment under this subsection for such period (as so estimated, based on such data).’’ Therefore, Factor 3 is a hospitalspecific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary to determine: (1) The definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period ‘‘based on appropriate data.’’ In addition, we note that the statute permits the Secretary to use alternative data ‘‘in the case where the Secretary determines that alternative data is available,’’ which is a better proxy for the costs of subsection (d) hospitals for treating uninsured individuals. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations In the course of considering how to determine Factor 3 during the rulemaking process for FY 2014, we considered defining the amount uncompensated care for a hospital as the uncompensated care costs of each hospital and considered potential data sources for those costs. For purposes of selecting an appropriate data source for this possible definition of uncompensated care costs, we reviewed the literature and available data sources and determined that Worksheet S–10 of the Medicare cost report could potentially provide the most complete data for Medicare hospitals. (We refer readers to the report ‘‘Improvements to Medicare Disproportionate Share (DSH) Payments’’ for a full discussion and evaluation of the available data sources. The report is available on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/dsh.html.) However, we noted that Worksheet S–10 is a relatively new data source that has been used for specific payment purposes only in relatively restricted ways (for example, to provide a source of charity care charges in the computation of EHR incentive payments (75 FR 44456)). We also noted that some stakeholders have expressed concern that hospitals have not had enough time to learn how to submit accurate and consistent data through this reporting mechanism. Other stakeholders have maintained that some instructions for Worksheet S–10 still require clarification in order to ensure standardized and consistent reporting by hospitals. At the same time, we noted that Worksheet S–10 is the only national data source that includes data for all Medicare hospitals and is designed to elicit data on uncompensated care costs. We discussed the possible use of data reported on Worksheet S–10 to determine uncompensated care costs in more detail in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27586). Because of concerns regarding variations in the data reported on Worksheet S–10 of the Medicare cost report and the completeness of these data, we did not propose to use data from the Worksheet S–10 to determine the amount of uncompensated care. However, we stated our belief that Worksheet S–10 of the Medicare cost report would otherwise be an appropriate data source to determine uncompensated care costs. In particular, we noted that Worksheet S–10 was developed specifically to collect information on uncompensated care costs in response to interest by MedPAC and other stakeholders regarding the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 topic (for example, MedPAC’s March 2007 Report to Congress) and that it is not unreasonable to expect information on the cost report to be used for payment purposes. Furthermore, hospitals attest to the accuracy and completeness of the information reported in the cost report at the time of submission. We indicated that we expect reporting on Worksheet S–10 to improve over time, particularly in the area of charity care which is already being used and audited for payment determinations related to the EHR Incentive Program, and that we will continue to monitor these data. Accordingly, we stated that we may proceed with a proposal to use data on the Worksheet S–10 to determine uncompensated care costs in the future, once hospitals are submitting accurate and consistent data through this reporting mechanism. As a result of our concerns regarding the data reported on Worksheet S–10 of the Medicare cost report, we believed it was appropriate to consider the use of alternative data, at least in FY 2014, the first year that this provision is in effect, and possibly for additional years until hospitals have adequate experience reporting all of the data elements on Worksheet S–10. We noted that this approach is consistent with input we received from some stakeholders in response to the CMS National Provider Call in January 2013, who stated their belief that existing FY 2010 and FY 2011 data from the Worksheet S–10 should not be used for implementation of section 1886(r) of the Act and who requested the opportunity to resubmit the data once more specific instructions were issued by CMS. Accordingly, we examined alternative data sources that could be used to allow time for hospitals to gain experience with and to improve the accuracy of their reporting on Worksheet S–10 of the Medicare cost report. We stated in the FY 2014 IPPS/ LTCH PPS final rule that we believe that data on utilization for insured lowincome patients can be a reasonable proxy for the treatment costs of uninsured patients. Moreover, due to the concerns regarding the accuracy and consistency of the data reported on the Worksheet S–10, we also determined that these alternative data, which are currently reported on the Medicare cost report, would be a better proxy for the amount of uncompensated care provided by hospitals. Accordingly, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we adopted the policy of employing the utilization of insured low-income patients defined as inpatient days of Medicaid patients plus PO 00000 Frm 00163 Fmt 4701 Sfmt 4700 50015 inpatient days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively, to determine Factor 3. We also indicated that we remained convinced that the Worksheet S–10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3 once hospitals are submitting more accurate and consistent data through this reporting mechanism. In the interim, we indicated that we would take steps such as revising and clarifying cost report instructions, as appropriate. We stated that it is our intention to propose introducing the use of the Worksheet S–10 data for purposes of determining Factor 3 within a reasonable amount of time. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have continued to evaluate and assess the comments we have received from stakeholders about Worksheet S–10 as well as to evaluate what changes might need to be made to the instructions to make the data hospitals submit more accurate and consistent across hospitals. Although we have not yet developed revisions to the Worksheet S–10 instructions at this time, we remain committed to making improvements to Worksheet S–10. For that reason, we believe it would be premature to propose the use of Worksheet S–10 data for purposes of determining Factor 3 for FY 2015. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28101), we proposed to continue to employ the utilization of insured lowincome patients defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients, as defined in § 412.106(b)(4) and § 412.106(b)(2)(i), respectively, to determine Factor 3 for FY 2015. Accordingly, we proposed to revise the regulations at 42 CFR 412.106(g)(1)(iii)(C) to state that, for FY 2015, CMS will base its estimates of the amount of hospital uncompensated care on the most recent available data on utilization for Medicaid and Medicare SSI patients, as determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of that section of the regulations. We invited public comments on this proposal and indicated that we will continue to work with the hospital community and others to develop the appropriate clarifications and revisions to Worksheet S–10 of the Medicare cost report for reporting uncompensated care data. In particular, we invited public comments on what would be a reasonable timeline for adopting Worksheet S–10 of the Medicare cost E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50016 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations report as the data source for determining Factor 3. As we did for the FY 2014 IPPS/LTCH PPS proposed rule, for the FY 2015 IPPS/LTCH PPS proposed rule, we published on the CMS Web site a table listing Factor 3 for all hospitals that we estimate would receive empirically justified Medicare DSH payments in a fiscal year (that is, hospitals that we project would receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) and subsection (d) Puerto Rico hospitals that have the potential of receiving a DSH payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. Hospitals had 60 days from the date of public display of the FY 2015 IPPS/LTCH PPS proposed rule to review these tables and notify CMS in writing of a change in a hospital’s subsection (d) hospital status, such as if a hospital has closed or converted to a CAH. Comment: Most commenters agreed that the Worksheet S–10 data are not yet sufficiently consistent and reliable to be employed for purposes of determining each hospital’s share of uncompensated care payments. The commenters therefore supported the proposal to continue employing SSI days and Medicaid days for this purpose in FY 2015. Some of these commenters did express support for eventually employing the Worksheet S–10 data for this purpose, once cost reporting instructions have been appropriately revised and the hospital community has been adequately instructed to render those data sufficiently consistent and reliable. Some commenters also requested a more specific timetable for adopting the Worksheet S–10 data. However, MedPAC and a few other commenters supported the use of the Worksheet S–10 data for FY 2015. MedPAC expressed disagreement with CMS’ statement that the data on utilization for insured low-income patients can serve as a reasonable proxy for the treatment costs of uninsured patients. MedPAC specifically cited its 2007 analysis of data from the GAO and data from the American Hospital Association (AHA), which suggests that Medicaid days and low-income Medicare days are not a good proxy for uncompensated care costs. Given its prior findings that the Medicaid and SSI shares were poor predictors of uncompensated care costs, MedPAC argued that there is a need to transition to new measures. MedPAC therefore supported Worksheet S–10 in the Medicare cost report as an appropriate VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 measure of uncompensated care that could begin to replace the reliance on Medicaid and SSI shares. Specifically, it recommended employing charity care for the uninsured, which is reported on the Worksheet S–10 (line 23, column 1) as a reasonable proxy for the costs of treating the uninsured. In response to concerns about whether the quality of the data reported on Worksheet S–10 is adequate for use in distributing uncompensated care payments, MedPAC argued that it is already better than using Medicaid and SSI days as a proxy for uncompensated care costs, and that the data on Worksheet S–10 will improve over time as they are actually used in making payments. MedPAC also expressed its view that the Worksheet S–10 data currently available should only establish an interim allocation of uncompensated care payments; the final allocation of payments to each hospital should be determined based on the Worksheet S– 10 data available at year-end settlement. To prevent financial shocks to hospitals, some commenters suggested that CMS could transition to use of the Worksheet S–10 data over 3 years. Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule, we believe that data on utilization for insured low-income patients can be a reasonable proxy for the treatment costs of uninsured patients. Moreover, due to the concerns that continue to be expressed by a large majority of commenters regarding the accuracy and consistency of the data reported on the Worksheet S–10, we continue to believe that these alternative data on utilization for insured low-income patients, which are currently reported on the Medicare cost report, remain a better proxy for the amount of uncompensated care provided by hospitals. Accordingly, in this final rule, we are finalizing for FY 2015 the policy that we originally adopted in the FY 2014 IPPS/LTCH PPS final rule, of employing the utilization of insured low-income patients defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively, to determine Factor 3. However, we also remain convinced that Worksheet S–10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3 once hospitals are submitting more accurate and consistent data through this reporting mechanism. In the interim, we will continue to take steps to revise and clarify cost report instructions, as appropriate. We also are PO 00000 Frm 00164 Fmt 4701 Sfmt 4700 undertaking benchmarking analyses to compare available Worksheet S–10 data to other data sources on uncompensated care, such as on uncompensated care costs reported to the IRS on Form 990 by not-for-profit hospitals. Because the data submitted through Form 990 are audited and come from an external source, they represent a suitable standard of comparison. It remains our intention to propose introducing the use of the Worksheet S–10 data for purposes of determining Factor 3 within a reasonable amount of time. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we considered public comments which recommended that we use the wage index to adjust insured low-income days in determining Factor 3 in order to account for the differences in ‘‘purchasing power’’ in different regions of the country. With respect to these public comments, we agreed that there may be regional variation in uncompensated care costs due to regional variations in the costs of care generally. However, we stated that we did not believe that there was sufficient basis for believing that the wage index reflects the variations in uncompensated care costs well enough to adopt it as the basis for adjusting Factor 3. The wage index reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. In computing the wage index, we derive an average hourly wage for each labor market area (total wage costs divided by total hours for all hospitals in the geographic area) and a national average hourly wage (total wage costs divided by total hours for all hospitals surveyed in the nation). A labor market area’s wage index value is the ratio of the area’s average hourly wage to the national average hourly wage. We note that, for FY 2014, 69.6 percent of the standardized amount is considered to be the labor-related share and, therefore, adjusted by the wage index. However, in addition to the labor-related share of the standardized amount being adjusted by the wage index, the entire standardized amount is also adjusted for the relative weight of the MS–DRG for each individual patient. In other words, the wage index only adjusts for a portion of the variation in costs, and does not address variations in resource use and patient severity. Therefore, we stated that we did not believe that there was sufficient basis for believing that adjusting lowincome patient days by the wage index would better reflect variations in uncompensated care costs. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations continued to consider whether to propose employing the wage index to adjust insured low-income days in determining Factor 3. After this consideration, we continue to believe that a wage index adjustment to insured low-income days is not an appropriate measure to account for variations in the costs of uncompensated care among hospitals. The intensity of such care, and therefore the costs, may vary by hospital, but we still lack convincing evidence that the wage index data are an accurate measure of that intensity. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to adopt such an adjustment to lowincome days for purposes of calculating Factor 3 in FY 2015. Comment: Several commenters agreed that applying the wage index to Factor 3 is not an appropriate measure of variations in uncompensated care costs. One commenter stated that CMS should apply a wage and case-mix adjustment to the Medicaid and SSI days using the hospital area wage index and hospitalspecific case mix index. The commenter believed that this information is readily available, well-understood, and is appropriate for measuring cost variation among hospitals. Response: We appreciate the comments and continue to believe it is not appropriate to adopt a wage index adjustment to low-income days to calculate Factor 3 for FY 2015. Although wage index information is readily available, for the reasons discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we continue to believe that is it not an accurate measure of the intensity of uncompensated care costs and would not serve as an appropriate basis for making adjustments to Factor 3. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we also considered public comments that requested that we include insured low-income days from exempt units (specifically, inpatient rehabilitation units paid under the IRF PPS and inpatient psychiatric units paid under the IPF PPS) of the hospital in the computation of Factor 3, in order to better capture the treatment costs of the uninsured by the hospital. In response to those public comments, we stated our belief that there may be some merit to including insured low-income days from exempt units of the hospital in order to better capture the full costs of the treatment of the uninsured by the hospital insofar as those data may be publicly available, subject to audit, and used for payment purposes. We also indicated that we believed it would be prudent to consider the degree to which these data meet these conditions before VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 adopting this recommendation. Therefore, we stated that we would consider including this recommendation among our proposals in future rulemaking. Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have conducted an analysis of the impact of adopting this recommendation. That analysis has indicated that the inclusion of Medicaid and Medicare-SSI days for exempt inpatient units does not significantly change the distribution of uncompensated care payments to hospitals, with the exception of a few hospitals with high utilization associated with those exempt units that would see increases in their uncompensated care payments. Furthermore, Medicaid and SSI days for inpatient rehabilitation units have been audited and are used for payment purposes under the IRF PPS; specifically, these data are used to calculate the low-income payment (LIP) adjustment under the IRF PPS. However, the data for inpatient psychiatric units are not generally audited and have not been used previously for payment purposes. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to include those days in the calculation of a hospital’s share of uncompensated care payments for FY 2015. As we indicated earlier, we believe it would be appropriate to include such data in the calculation of uncompensated care payments only insofar as those data may be publicly available, subject to audit, and used for payment purposes. The use of data for inpatient psychiatric units would fail the second and third conditions. At the same time, we do not believe that including only inpatient rehabilitation unit days without inpatient psychiatric unit days would improve the accuracy of the uncompensated care payment calculation. We also observe, as we have previously noted, that the statutory references under section 1886(d)(5)(F) of the Act to ‘‘days’’ apply only to hospital acute care inpatient days. Section 412.106(a)(1)(ii) of the regulations therefore provides that, for purposes of DSH payments, ‘‘the number of patient days in the hospital includes only those days attributable to units or wards of the hospital providing acute care services generally payable under the prospective payment system and excludes’’ other days. In the absence of compelling reasons to do otherwise, we believe it is preferable to maintain consistency with this longstanding precedent in the context of this temporary method for determining uncompensated care PO 00000 Frm 00165 Fmt 4701 Sfmt 4700 50017 payments. However, we invited public comments on this issue. Comment: Several commenters supported the proposal to not include Medicaid and SSI days from excluded units in the calculation. One commenter believed it would be inconsistent to distribute uncompensated care payments based on non-IPPS days and unfair to providers that do not have exempt units. Some commenters supported including Medicaid and SSI days from excluded units in our calculation of Factor 3. One commenter stated that the inclusion of days for psychiatric and rehabilitation units that are exempt from IPPS would improve the accuracy of these data, as IPPS days and exempt unit days combined would function as a proxy for total hospital uncompensated care services. Response: We thank the commenters for their feedback and continue to believe that we should finalize our proposal to calculate Factor 3 based on a DSH hospital’s share of their Medicaid and SSI days associated with their acute care units. We believe that it would be inappropriate to include Medicaid and SSI days from psychiatric units, as those days are not audited for payment purposes, and we do not believe that including only inpatient rehabilitation unit days without inpatient psychiatric unit days would improve the accuracy of the uncompensated care payment calculation. The statute also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as ‘‘the amount of uncompensated care for such hospital for a period selected by the Secretary. . . .’’ (emphasis added). Section 1886(r)(2)(C)(ii) of the Act defines the denominator as ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period’’ (emphasis added). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that process, we also determined the time period from which to calculate the numerator and denominator of the Factor 3 quotient in a way that would be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50018 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospitals that we estimate will qualify for Medicare DSH payments using the most recently available historical data and for those hospitals that we do not estimate will qualify for Medicare DSH payments but that may ultimately qualify for Medicare DSH payments at the time of cost report settlement. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), therefore, we adopted the policy to calculate the numerator and the denominator of Factor 3 for hospitals based on the most recently available full year of Medicare cost report data (including the most recently available data that may be used to update the SSI ratios) with respect to a Federal fiscal year. In other words, we use data from the most recently available full year cost report for the Medicaid days and the most recently available SSI ratios (that is, latest available SSI ratios before the beginning of the Federal fiscal year) for the Medicare SSI days. We noted that these data are publicly available, subject to audit, and used for payment purposes. While we recognized that older data also meet these criteria, we often use the most recently available data for payment determinations. The data used are located in the HCRIS database for most hospitals, but the data for IHS hospitals are not included in that database. Accordingly, in the FY 2014 IPPS interim final rule with comment period (78 FR 61195), we revised our policy to also include cost report data submitted to CMS by IHS hospitals in order allow their Medicaid days to be used to calculate Factor 3. Therefore, for FY 2014, we used data from the most recently available full year cost report for the Medicaid days and the most recently available SSI ratios, which meant data from the 2010/ 2011 cost reports (that is, cost reports that have cost reporting periods that begin in either FY 2010 or FY 2011) for the Medicaid days taken from the March 2013 update of the HCRIS database, 2011 cost report data submitted to CMS by IHS hospitals by March 2013, and the FY 2011 SSI ratios for the Medicare SSI days to estimate Factor 3 for FY 2014. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28102), for FY 2015, we again proposed to use data from the most recently available full year cost report for the Medicaid days (that is, we proposed to use the 2012 cost report, unless that cost report is unavailable or reflects less than a full 12-month year; in the event the 2012 cost report is for less than 12 months, we proposed to use the cost report from 2012 or 2011 that is closest to being a full 12-month cost report), cost report data submitted to CMS by IHS hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 and the most recently available SSI ratios. For purposes of the proposed rule, we used data from the 2011/2012 Medicare cost reports (that is, from cost reports that have cost reporting periods that begin in either FY 2011 or FY 2012) taken from the December 2013 update of the HCRIS database for the Medicaid days and the FY 2011 SSI ratios for the Medicare SSI days. Consistent with our FY 2014 IPPS interim final rule with comment period (78 FR 61195), for FY 2015, we also used supplemental cost report data provided by IHS hospitals to CMS as of December 2013 in order to calculate the proposed Factor 3. We indicated that, for the FY 2015 IPPS/ LTCH PPS final rule, we intended to use the March 2014 update of the HCRIS database for the 2011/2012 Medicare cost reports, cost report data submitted to CMS by IHS hospitals as of March 2014, and the most recently available SSI ratios (FY 2012 SSI ratios and, if not available, the FY 2011 SSI ratios) to calculate Factor 3. We stated that we believed the March update to the Medicare cost reports would be the most recently available data to calculate Factor 3 at the time of publication of the FY 2015 IPPS final rule. We also indicated that this proposal is consistent with CMS’ historical policy to use the best available data when setting the payment rates and factors in both the proposed and final rules. Furthermore, we noted that this approach is consistent with our approach in other areas of IPPS, where we historically use the March update of cost report data and MedPAR claims data to calculate IPPS relative weights, budget neutrality factors, the outlier threshold, and the standardized amount for the IPPS final rule. If we were to wait for a later update of the cost report data to become available, this would cause delay of the publication of the IPPS final rule. Comment: Several commenters questioned the data used to calculate the hospitals’ Factor 3. Several commenters stated that their Medicaid days were understated. Furthermore, commenters stated that they submitted their updated cost report to be included in the March 2014 update of the Medicare cost report data but the contractor had not yet uploaded the information in the HCRIS database. In addition, some commenters indicated that they had updated Medicaid days and had submitted their cost report to their contractors after the March 2014 update of the Medicare hospital cost report data and wanted their updated data included. Some commenters requested use of the June update of cost report data to obtain Medicaid days to PO 00000 Frm 00166 Fmt 4701 Sfmt 4700 calculate Factor 3. Some commenters sought clarification of why some hospitals have their Medicaid days based on Worksheet S–2 and some hospitals have their Medicaid days based on Worksheet S–3. Some commenters stated that their Medicaid days were based on a 6-month cost report and they should be based on a 12month cost report either by combining cost reports or annualizing the data. Some commenters questioned their DSH eligibility, stating that their hospitals had been listed as not being eligible for DSH for FY 2015, when they had previously received DSH on their cost report. Other commenters submitted corrections because their hospitals had been identified as SCHs, but were actually operating as MDHs. Finally, several commenters requested additional time after the publication of the final rule to review the data used to calculate Factor 3 and submit corrections. Response: We are finalizing our proposal to use the most recently available full year cost report for the Medicaid days (that is, our proposal to use the 2012 cost report, unless that cost report is unavailable or reflects less than a full 12-month year; in the event the 2012 cost report is for less than 12 months, we will use the cost report from 2012 or 2011 that is closest to being a full 12-month cost report) and the most recently available SSI ratios. For this FY 2015 final rule, we are using the March 2014 update of the hospital cost report data in the HCRIS database and cost report data submitted to CMS by IHS hospitals as of March 2014 to obtain the Medicaid days to calculate Factor 3. In addition, we are using the FY 2012 SSI ratios published on the CMS Web site to calculate Factor 3 (https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/dsh.html). We note that we are unable to use a later update of the cost report data, like the June update, and still calculate the final Factor 3 in time for publication of the IPPS final rule. Any delay in the publication of the final rule would prevent changes and updates to payments under the IPPS from taking effect on October 1, the first day of the fiscal year. We are not able to accept supplemental data for hospitals, as we are not able to validate the information included in that supplemental data. We note that hospitals have ample time after the close of their fiscal year to submit the data that are used in this calculation. Specifically, Chapter I, section 104 of the Provider Reimbursement Manual, Part 2, generally allows a hospital 5 months after the close of its cost reporting E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations period to file its cost report. In addition, CMS allows hospitals to request amendments of their cost report submissions before CMS issues a Notice of Program Reimbursement. In response to the commenters that indicated they had submitted their updated cost reports, but that the MAC had not yet uploaded the information, we note that MACs follow guidelines to upload revised cost report information. In accordance with Medicare Financial Management Manual, Chapter 8, Section 10.4—Submission of Cost Report Data to CMS, the MACs are required to submit an extract of the following Medicare cost reports to CMS in accordance with the HCRIS specifications within 210 days of the cost reporting period ending date or 60 days after receipt of the cost report, whichever is later. With respect to the comments requesting clarification on whether Worksheet S–2 or Worksheet S–3 is used to obtain Medicaid days, we addressed this concern in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642) and reiterate that we use the Medicaid days reported on Worksheet S–2 of the Medicare Hospital Cost Report version 2552–10 for hospitals projected to receive Medicare DSH because the Medicaid days reported on Worksheet S–2 are used in the computation of the Medicaid fraction for Medicare DSH payments. Therefore, because they are used for payment of Medicare DSH, we believe that these data are more reliable than data not used for payment purposes. Hospitals that were not eligible to receive Medicare DSH payments on that cost report were unable to report Medicaid days on Worksheet S–2, but could report their Medicaid days on Worksheet S–3. Therefore, for hospitals that we project to not be eligible for Medicare DSH payments, we are using the Medicaid days reported on Worksheet S–3 to calculate their Factor 3. A transmittal has been issued to allow for hospitals that are not receiving DSH to report their Medicaid days on Worksheet S–2, and we hope to rely only on the data reported on that Worksheet S–2 in the future, if we continue to use this data on low-income insured days in the future. With regard to the comments from hospitals that found that their Factor 3 was calculated using a cost report that was less than 12 months, we are finalizing our proposal to use the 2012 cost report, unless that cost report is unavailable or reflects less than a full 12-month year. In the event the 2012 cost report is for less than 12 months, we would use the cost report from 2012 or 2011 that is closest to being a full 12month cost report. In the case where a VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 less than 12-month cost report was used to calculate a hospital’s Factor 3, this would indicate that both the 2012 and 2011 cost reports were less than 12 months. In such a case, we would use the longer of the two cost reports to calculate a hospital’s Factor 3. We did not make a proposal to annualize or combine cost reports to calculate Factor 3. We note that section 1886(r)(2)(c) of the Act specifies that Factor 3 is equal to the percent that represents ‘‘the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data . . .’’ divided by ‘‘the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under this subsection for such period (as so estimated . . .’’ In implementing this provision, as we did through rulemaking in FY 2014, we believe it is appropriate to first select the period—in this case, the period for which we have the most recently available data—and then to select the data from a cost report that aligns best with that period. However, we acknowledge that the situations presented by commenters, where a hospital remains in operation in both Federal fiscal years for which we analyze cost report data but submits cost reports for both Federal fiscal years that reflect substantially less than a full year of data, pose unique challenges in the context of estimating Factor 3. As a result, this is an issue that we intend to consider further and may address in future rulemaking. With regards to the comments from hospitals stating that their DSH eligibility is inaccurate, we note that we used the FY 2012 SSI ratios and the Medicaid fraction listed in the March 2014 update of the Provider Specific File in order to identify which hospitals are projected to receive DSH for FY 2015, and thus are eligible to receive uncompensated care payments and interim uncompensated care payments for FY 2015. We did not use historical cost report data to make this determination. We believe that the FY 2012 SSI ratios and the Medicaid fraction in the March 2014 update of Provider Specific File are the most recently available information regarding whether a hospital is currently being paid Medicare DSH on an interim basis, and therefore, we believe they are an appropriate data source to make our determination of which hospitals are projected to receive DSH for FY 2015, and thus are eligible to receive uncompensated care payments, as presented in Table 18. As we have stated previously, final determination of PO 00000 Frm 00167 Fmt 4701 Sfmt 4700 50019 DSH eligibility and uncompensated care payments are made at cost report settlement. In making our DSH projections for FY 2015, we also identify which hospitals are SCHs that we estimate will be paid the hospital-specific rate and not the Federal rate and, therefore, will not receive a Medicare DSH payment and will be ineligible to receive the uncompensated care payment. In the FY 2015 IPPS/LTCH PPS proposed rule, we inadvertently identified several MDHs as SCHs in our projections and have updated our list of SCHs for the final rule accordingly. Finally, we accept the recommendation of many commenters to provide the public with an additional 30 days subsequent to the publication of the final rule in order to review and submit comments limited to whether any hospitals should be added to the list of hospitals eligible to receive interim empirically justified DSH payments and uncompensated care payments or if any hospitals should be removed from the list based on changes in their subsection(d) status, as we did in the FY 2014 IPPS/LTCH PPS final rule. Commenters can submit their comments to our inbox at Section3133DSH@cms. hhs.gov. After receiving and reviewing comments, if we make any changes to the list, we will post on the Web site a revised table showing the final Factor 3 for each hospital prior to October 1, 2014. This timetable will give MACs sufficient time in order to enter the final data into the provider specific file and make timely payments for discharges occurring on or after October 1, 2014. Comment: Several commenters asked whether the Medicaid days used to calculate Factor 3 can be reconciled based on audit by the Medicare contractor and whether any recouped uncompensated care payments would be redistributed to the providers receiving an uncompensated care payment at cost report settlement. Response: As we discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50645), at this time, we do not intend to reconcile Factor 3 because we believe the statute provides the authority to make uncompensated care payments on the basis of estimates of Factors 1, 2, and 3 and that it is preferable to do so in order to avoid unacceptable delays in the final determination of uncompensated care payments. Comment: One commenter objected to the proposal to calculate Factor 3 based on a hospital’s share of total Medicaid days and Medicare SSI days as a proxy for measuring a hospital’s share of uncompensated care. The commenter believed that this proxy does not E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50020 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations appropriately target hospitals with the highest burden of uncompensated care costs and instead rewards hospitals in states where Medicaid has expanded. Response: For the reasons discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we continue to believe that our methodology to calculate Factor 3 based on a hospital’s share of Medicaid days and SSI days does not inappropriately reward States that expand Medicaid coverage. Furthermore, as discussed above and in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50639), we believe that using the low-income insured days as a proxy for uncompensated care costs provides a reasonable basis to determine Factor 3 on a temporary basis as we work to improve Worksheet S–10 to accurately and consistently capture uncompensated care costs. Comment: Several commenters requested that hospitals have the opportunity to request to have the SSI days recalculated on the basis of their cost reporting period, not Federal fiscal year, as part of their Factor 3 calculation. Response: We do not believe that this would improve our estimates for Factor 3. For the DSH calculation, CMS generally issues SSI ratios based on a Federal fiscal year to be used to determine a hospital’s Medicare DSH payments at cost report settlement. For the purpose of the Medicare DSH payment, a provider may request a realignment under § 412.106(b)(3) such that its SSI ratio is recalculated based on the hospital’s specific cost-reporting period. The choice to request a realignment and the timing of this choice may vary. Therefore, a hospital’s decision whether to have its SSI ratio calculated on the basis of its cost reporting period may not have been made at the time we determine Factor 3 for a specific Federal fiscal year. Furthermore, we do not believe that allowing hospitals the option of having their SSI days calculated on the basis of their cost reporting period would improve our estimates of Factor 3. Therefore, to preserve consistency and administrative efficiency, we continue to believe it is appropriate to use SSI ratios based on the Federal fiscal year. Comment: Several commenters asked how the decision in Allina v. Sebelius would affect the calculation of Factor 3. Commenters stated that the SSI days should exclude MA days, and MA dualeligible days should be included as Medicaid days in the calculation of Factor 3 for FY 2015 and that CMS should reconcile the FY 2014 Factor 3 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 estimates based on the decision in Allina v. Sebelius. Response: Similar to what we stated earlier in this final rule, we do not believe the Allina decision has any bearing on our estimate of Factor 3 for either FY 2014 or FY 2015. The decision in Allina did not address our decision to readopt the policy of counting Medicare Advantage days in the SSI ratio for FY 2014 and subsequent fiscal years. Nor did the decision address the issue of how patient days should be counted for purposes of estimating uncompensated care. Moreover, section 1886(r)(2)(C) of the Act provides discretion for the Secretary to determine how to estimate uncompensated care costs, and for FY 2015, we are finalizing our proposal to continue to apply the methodology adopted in the FY 2014 IPPS/LTCH PPS final rule to define uncompensated care based on the proxy of utilization by low-income insured patients. Specifically, Factor 3 will be based on a hospital’s share of total Medicaid days and SSI days. Consistent with the policy that we finalized in the FY 2014 IPPS/LTCH PPS final rule regarding the counting of SSI days, we believe that, for purposes of determining uncompensated care payments, SSI days should include both MA and FFS SSI days. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642), we discussed several specific issues concerning the use of cost report data to determine Factor 3. One issue concerned the process and data to be employed in determining Factor 3 in the case of hospital mergers. Specifically, two hospitals that merged in 2011 with one surviving provider number requested that we account for the merger by including data from both hospitals’ cost reports immediately prior to the merger in the calculation of the Factor 3 amount. In that final rule, we had calculated Factor 3 using only the surviving hospital’s cost report data and SSI ratio data. In the final rule (78 FR 50602), we responded to the public comment that Factor 3 would be calculated based on the low-income insured patient days (that is, Medicaid days and SSI days) under the surviving CCN, based on the most recent available data for that CCN (for FY 2014, from the cost report for 2011 or 2010). We noted that this was consistent with the treatment of other IPPS payment factors, where data used to calculate a hospital’s Medicare DSH payment adjustment, CCRs for outlier payments, and wage index values are tied to a hospital’s CCN. Data associated with a CCN that is no longer in use are not used to determine those IPPS hospital payments under the surviving CCN. PO 00000 Frm 00168 Fmt 4701 Sfmt 4700 Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we have received additional input from hospitals that have undergone mergers that suggest using only the surviving CCN produces an estimate of the surviving hospital’s uncompensated care burden that is lower than warranted. For FY 2015, for example, Factor 3 of the uncompensated care payment calculation would be determined using 2011/2012 cost reports. As a result, for any mergers occurring between FY 2011 and FY 2015, Factor 3 of the uncompensated care payment for FY 2015 would reflect only the data of the hospital with the surviving CCN, not the combination of the data from the two hospitals that merged. We believe that revising our methodology to incorporate data from both of the hospitals that merged could improve our estimate of the uncompensated care burden of the merged hospital. Accordingly, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28103 through 28104), we proposed to revise our methodology for determining Factor 3 to incorporate data from both merged hospitals until data for the merged hospitals become available under the surviving CCN. In addition, because the data systems used to calculate Factor 3 do not identify hospitals that have merged, we also proposed to establish a process to identify hospitals that have merged after the period of the historical data that are being used to calculate Factor 3, up to a point in time during ratesetting for that Federal fiscal year. Under this approach, we would combine the data for the merged hospitals to calculate Factor 3 of the uncompensated care payment. Specifically, we proposed that we would identify the hospitals that merged after the period from which data are being used to calculate Factor 3 (for FY 2015, 2012 and 2011) but before the publication of each year’s final rule. For purposes of the proposal, we defined a merger to be an acquisition where the Medicare provider agreement of one hospital is subsumed into the provider agreement of the surviving provider. We would not consider an acquisition where the new owner voluntarily terminates the Medicare provider agreement of the hospital it purchased by rejecting assignment of the previous owner’s provider agreement to be a merger. We believe it is appropriate to combine data to calculate Factor 3 for a merged hospital where the Medicare provider agreement of one hospital is subsumed into the provider agreement of the surviving provider because, in this type of acquisition as described in the September 6, 2013 Survey & E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Certification Memorandum S&C: 13–60– ALL (https://www.cms.gov/Medicare/ Provider-Enrollment-and-Certification/ SurveyCertificationGenInfo/Downloads/ Survey-and-Cert-Letter-13-60.pdf), the buyer is subject to all applicable statutes and regulations and to the terms and conditions under which the assigned agreement was originally issued. These include, but are not limited to, Medicare requirements to adjust payments to account for prior overpayments and underpayments, even if they relate to a pre-acquisition period (successor liability), and to adjust payments to collect civil monetary penalties. Therefore, we believe it is appropriate to also retain the data of the subsumed hospital to calculate the uncompensated care payment for the merged hospital. Conversely, by rejecting assignment of the Medicare provider agreement of the subsumed hospital, the surviving provider has voluntarily terminated the Medicare provider agreement and is precluded from having successor liability for Medicare overpayments or underpayments that would have otherwise been made to the subsumed provider. Furthermore, when the surviving hospital rejects automatic assignment of the existing provider agreement, but wishes to participate in the Medicare program, the merged hospital is considered an initial applicant to the Medicare program. In an instance in which the surviving provider has rejected assignment of the Medicare provider agreement of the subsumed provider, it would not seem appropriate to use data from the subsumed provider for purposes of Medicare payment, including for the calculation of a hospital’s uncompensated care payment. For FY 2015, we proposed to identify mergers by querying the Medicare contractors. We believe it is appropriate to obtain merger information from the Medicare contractors, as a copy of each final sales agreement/transaction indicating the effective date of the acquisition is generally submitted to the Medicare contractors once an acquisition is finalized. For the purpose of the proposed rule, we requested that the Medicare contractors provide us with a list of mergers that occurred between October 1, 2010 (the first day of FY 2011, which is the earliest date that would be included in any 2011 cost report data that are used to calculate a hospital’s Factor 3) through January 2014 (when we started preparing for the FY 2015 IPPS/LTCH PPS proposed rule). On the basis of this information, we would then combine the data elements of any hospitals that had VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 merged to calculate the uncompensated care payment for the merged hospital. Specifically, we proposed to combine the Medicaid days from the most recently available full year cost reports and the SSI days from the most recently available SSI ratios tied to the two CCNs prior to the merger to calculate the merged hospital’s Factor 3. For FY 2015, we proposed to combine the Medicaid days from either the 2011 or 2012 cost reports and would use the most recently available SSI ratios available at the time the final rule is developed. In order to confirm these mergers and the accuracy of the data used to determine each merged hospital’s uncompensated care payment, we proposed to publish a table on the CMS Web site, in conjunction with the issuance of the proposed and final rules for a fiscal year, containing a list of the mergers that we are aware of and the computed uncompensated care payment for each merged hospital. A copy of this table was published on the CMS Web site in conjunction with the issuance of the FY 2015 proposed rule. The affected hospitals had the opportunity to comment during the public comment period on the accuracy of this information. We proposed to treat hospitals that merge after the development of the final rule similar to new hospitals. For these newly merged hospitals, we would not have data currently available to calculate a Factor 3 amount that accounts for the merged hospital’s uncompensated care burden. In addition, we would not have data to determine if the newly merged hospital is eligible for Medicare DSH payment and, therefore, eligible for uncompensated care payments for the applicable fiscal year because the only data we would have to make this determination are those for the surviving CCN. Accordingly, we proposed to treat newly merged hospitals in a similar manner as new hospitals, such that the newly merged hospital’s final uncompensated care payment would be determined at cost report settlement where the numerator of the newly merged hospital’s Factor 3 would be based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year. We proposed that the interim uncompensated care payments for the newly merged hospitals would be based on only the data of the surviving hospital’s CCN at the time of the preparation of the final rule for the applicable fiscal year. In other words, for newly merged hospitals, eligibility to receive interim uncompensated care payments and the amount of any PO 00000 Frm 00169 Fmt 4701 Sfmt 4700 50021 interim uncompensated care payments would be based on the Medicaid days from either the 2011 or 2012 cost reports and the most recently available SSI ratios available at the time the final rule is developed for only the surviving CCN. However, at cost report settlement, we would determine the newly merged hospital’s final uncompensated care payments based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year. That is, we would revise the numerator of Factor 3 for the newly merged hospital to reflect the Medicaid and SSI days reported on the cost report for the applicable fiscal year. We invited public comment on our proposed change to the treatment of hospital mergers in the calculation of a hospital’s uncompensated care payment. Comment: Commenters uniformly supported the proposal to establish a process to identify the hospitals that have merged so CMS can calculate the merged hospital’s share of the total uncompensated care amount available using the low-income patient days from all hospitals that existed prior to the merger. Several commenters identified additional hospitals that had undergone a merger that were not included on the list of mergers identified in the FY 2015 IPPS/LTCH PPS proposed rule. A number of commenters requested that the public have additional time after the publication of the final rule to review and submit corrections to CMS’ list of identified mergers. One commenter asked CMS to clarify that, under the proposal, CMS would recalculate the hospital’s uncompensated care payments by combining the Medicaid days and SSI days published with the final rule from the applicable ‘‘data year’’ for the surviving CCN, as well as for any acquired CCNs that were retired through the merger process. Response: We appreciate the commenters’ support and are finalizing our proposal as proposed. We have updated our list of mergers based on information submitted by the Medicare contractor as of June 2014. In addition, we have reviewed the commenters’ submissions of mergers not previously identified in the proposed rule and have updated our list accordingly. In response to the request from one commenter, for the hospitals that we have listed as undergoing a merger, we are confirming that we would recalculate the hospital’s uncompensated care payments by combining the Medicaid days and SSI days published with the final rule from the applicable ‘‘data year’’ for the surviving CCN, as well as for any acquired CCNs that were retired through E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50022 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the merger process. For example, to calculate the FY 2015 Factor 3 using the FY 2012 SSI ratio and the full year cost report from 2012 or 2011, we would combine the FY 2012 SSI days and Medicaid days from the 2012 or 2011 cost report from the surviving and retiring providers. We would not update the merged hospital’s Factor 3 after that. For a newly merged hospital, defined for the purpose of this policy as a hospital that we do not identify as undergoing a merger until after the public comment period and additional review period after the final rule or that undergoes a merger during the fiscal year, the final Factor 3 would be recalculated based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year since the Factor 3 that we are publishing in this final rule would not reflect the merger. For example, for a newly merged hospital that merged in FY 2015, the numerator of its Factor 3 would be recalculated based on the FY 2015 SSI days and the Medicaid days reported on its 2015 cost report. Finally, in response to the comments seeking additional review of CMS’ list of identified mergers, we are providing an additional 30 days after the publication of this final rule for hospitals to review and submit comments on the accuracy of the list of mergers that we have identified in this final rule. Comments can be submitted to our inbox at Section 3133DSH@cms.hhs.gov and any changes to Factor 3 will be posted on the CMS Web site prior to October 1, 2014. Comment: One commenter expressed concern about the process of requesting that MACs provide information to CMS on mergers/acquisitions. The commenter noted that the MACs may not have the most up-to-date information on mergers to provide to CMS because documentation of the merger, such as tie-in or tie-out notices, can be delayed in getting to a contractor. Response: We appreciate the commenters’ concerns. We believe that we have implemented several safeguards in the event that a merger is not identified by the MACs, including allowing opportunity for comment on the accuracy of the mergers that we have identified during the comment period for the proposed rule and after the publication of the final rule. In addition, as described earlier, for any newly merged hospital or for a hospital that we do not identify as having undergone a merger, we will recalculate the merged hospital’s Factor 3 at the end of the applicable fiscal year based on the Medicaid days and SSI days reported on the cost report used for the applicable fiscal year since the Factor 3 published VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in the final rule would not reflect the merger. Comment: MedPAC and one other commenter expressed concern about our policy of distributing the uncompensated care payments as a perdischarge add-on. They believed this policy is problematic because the perdischarge add-on varies widely from hospital to hospital. The variability of the add-on payments in turn distorts the MS–DRG prices and creates problematic incentives for ACOs and MA plans. Therefore, MedPAC and the other commenter believed that it would be better to provide a common interim addon payment for all DSH hospitals in a county. Any underpayments or overpayments to an individual hospital could be corrected at year-end settlement or on an interim basis during the year (as is already necessary under the current system). One commenter also suggested applying a growth factor based on CBO projections to CMS’ historical discharge data to calculate the interim per-discharge uncompensated care payments to mitigate overpayments and stabilize cash flow. Another commenter opposed MedPAC’s recommendation and supported CMS’ current methodology to calculate interim uncompensated care payments, stating that MedPAC’s recommendation could cause cash-flow problems for providers. Response: We consider these comments to be outside the scope of the proposed rule, as we did not propose any revision in our method of making interim payments for uncompensated care. However, we would like to make two preliminary reactions to this recommendation. The first observation is that we have received very few comments from the hospital industry indicating that the problem cited by these two commenters actually exists. We would expect that, if hospitals were truly disadvantaged in the manner cited by these commenters by our methodology for making interim payment uncompensated care payments, we would have received many more comments to that effect. The second preliminary reaction is that adopting the recommendation may pose, for some hospitals, serious problems that may conceivably exceed the problem that the recommendation is designed to solve. For example, reducing the interim uncompensated care payments of high DSH hospitals to a county-wide average payment may cause serious cash flow problems during the period before the interim payments can be adjusted or settled. Similarly, low DSH hospitals may receive significantly higher interim payments PO 00000 Frm 00170 Fmt 4701 Sfmt 4700 than would be warranted by their actual uncompensated care data. As a result, these hospitals would have to take financial management steps to ensure that they are capable of making significant repayments when interim payments are adjusted or settled. Comment: Commenters suggested that CMS implement a stop-loss and stopgain policy to limit the amount by which a hospital’s DSH payment could change in a single year. Response: As we previously stated in a response to a similar comment in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622), we do not believe that the statute provides authority for adopting a stop-loss and stop-gain policy designed to limit changes in DSH payments. Comment: Commenters expressed concern that there shall be no administrative or judicial review of the uncompensated care factors. Response: Section 1886(r)(3) of the Act provides that there will be no administrative or judicial review under section 1869 of the Act, section 1878 of the Act, or otherwise of any of the following: • Any estimate of the Secretary for purposes of determining the factors described in paragraph (2) of section 1886(r) of the Act. • Any period selected by the Secretary for such purposes. The regulation at § 412.106(g)(2), which was finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50643), is consistent with these statutory limitations on review. G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) and Sole Community Hospitals (SCHs) (§ 412.92) 1. Background for MDH Program Section 1886(d)(5)(G) of the Act provides special payment protections, under the IPPS, to a Medicaredependent, small rural hospital (MDH). (For additional information on the MDH program and the payment methodology, we refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684).) As we discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51683 through 51684), section 3124 of the Affordable Care Act extended the expiration of the MDH program from the end of FY 2011 (that is, for discharges occurring before October 1, 2011) to the end of FY 2012 (that is, for discharges occurring before October 1, 2012). Under prior law, as specified in section 5003(a) of Public Law 109–171 (DRA 2005), the MDH program was to be in effect through the end of FY 2011 only. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Since the extension of the MDH program through FY 2012 provided by section 3124 of the Affordable Care Act, the MDH program has been further extended multiple times. First, section 606 of the ATRA (Pub. L. 112–240) extended the MDH program through FY 2013 (that is, for discharges occurring before October 1, 2013). Second, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) extended the MDH program through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). In the interim final rule with comment period (IFC) that appeared in the Federal Register on March 18, 2014 (the ‘‘March 2014 IFC’’) (79 FR 15025 through 15027), we discussed the expiration of the MDH program on March 31, 2014. (In section IV.P. of the preamble of this final rule, we are responding to any public comments we received on the March 2014 IFC and are stating our finalized policy for the extension of the MDH program for the first half of FY 2014, through March 31, 2014, under the Pathway for SGR Reform Act of 2013.) In the March 2014 IFC, we explained how providers may be affected by the 6-month extension of the MDH program under the Pathway for SGR Reform Act of 2013 and described the steps to reapply for MDH status for FY 2014, as applicable. Generally, a provider that was classified as an MDH as of September 30, 2013, was reinstated as an MDH effective October 1, 2013, with no need to reapply for MDH classification. However, if the MDH had classified as an SCH or cancelled its rural classification under § 412.103(g) effective on or after October 1, 2013, the effective date of MDH status may not be retroactive to October 1, 2013. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649) and the March 2014 IFC (79 FR 15025 through 15027), we made conforming changes to the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the extensions of the MDH program provided for by the ATRA and Pathway for SGR Reform Act of 2013, respectively. Lastly, under current law, section 106 of the PAMA (Pub. L. 113–93) provides for a 1-year extension of the MDH program effective from April 1, 2014 through March 31, 2015. Specifically, section 106 of the PAMA amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking ‘‘April 1, 2014’’ and inserting ‘‘April 1, 2015’’. Section 106 of the PAMA also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. We addressed the extension of the MDH program for the second half of FY VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2014 (that is, from April 1, 2014 through September 30, 2014) under the PAMA in a notice that appeared in the Federal Register on June 17, 2014 (79 FR 34446 through 344449). For additional information on the extensions of the MDH program after FY 2012, we refer readers to the following: the FY 2013 IPPS/LTCH PPS final rule that appeared in the Federal Register on August 31, 2012 (77 FR 53404 through 53405 and 53413 through 53414); the FY 2013 IPPS notice that appeared in the Federal Register on March 7, 2013 (78 FR 14689); the FY 2014 IPPS/LTCH PPS final rule that appeared in the Federal Register on August 19, 2013 (78 FR 50647 through 50649); the FY 2014 interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (the ‘‘March 2014 IFC’’) (79 FR 15025 through 15027); and the FY 2014 notice that appeared in the Federal Register on June 17, 2014 (79 FR 34446 through 34449). 2. PAMA Provisions for FY 2015 for MDHs Prior to the enactment of the PAMA, under section 1106 of the Pathway for SGR Reform Act of 2013, the MDH program authorized by section 1886(d)(5)(G) of the Act was set to expire midway through FY 2014. Section 106 of the PAMA amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year extension of the MDH program, effective from April 1, 2014 through March 31, 2015. Section 106 of the PAMA also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28104), we proposed to make conforming changes to the regulations at §§ 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program for the first 6 months of FY 2015 made by section 106 of the PAMA. We did not receive any public comments on our proposed conforming changes to the existing regulations text at §§ 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program through the first half of FY 2015 (that is, through March 31, 2015) in accordance with section 106 of the PAMA. Therefore, in this final rule, we are adopting our proposed revisions to the regulations at §§ 412.108(a)(1) and (c)(2)(iii) as final without modification. We note that these regulatory provisions supersede the conforming changes to §§ 412.108(a)(1) and (c)(2)(iii) made in the March 2014 IFC to reflect the extension of the MDH program through March 31, 2014, under the Pathway for PO 00000 Frm 00171 Fmt 4701 Sfmt 4700 50023 SGR Reform Act, as discussed in section IV.P. of the preamble of this final rule. 3. Expiration of the MDH Program Because section 106 of the PAMA extends the MDH program through the first half of FY 2015 only, beginning April 1, 2015, the MDH program will no longer be in effect. Because the MDH program is not authorized by statute beyond March 31, 2015, beginning April 1, 2015, all hospitals that previously qualified for MDH status will no longer have MDH status. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we revised our SCH policies to allow MDHs to apply for SCH status and be paid as such under certain conditions, following expiration of the MDH program at the end of FY 2012. We codified these changes in the regulations at § 412.92(b)(2)(i) and § 412.92(b)(2)(v). For additional information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We note that those same conditions apply to MDHs that intend to apply for SCH status with the expiration of the MDH program on March 31, 2015. Specifically, the existing regulations at § 412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval of SCH status that is the day following the expiration date of the MDH program. In accordance with these regulations, in order for an MDH to receive SCH status effective April 1, 2015, it must apply for SCH status at least 30 days before the end of the MDH program; that is, the MDH must apply for SCH status by March 1, 2015. The MDH also must request that, if approved as an SCH, the SCH status be effective with the expiration of the MDH program provision; that is, the MDH must request that the SCH status, if approved, be effective April 1, 2015, immediately after its MDH status expires with the expiration of the MDH program on March 31, 2015. We note that an MDH that applies for SCH status in anticipation of the expiration of the MDH program would not qualify for the April 1, 2015 effective date upon approval if it does not apply by the March 1, 2015 deadline. The provider would instead be subject to the usual effective date for SCH classification, that is, 30 days after the date of CMS’ written notification of approval as specified at § 412.92(b)(2)(i). Although we made no proposals related to the expiration of the MDH program, we received the following comments. Comment: A few commenters expressed concern about the financial E:\FR\FM\22AUR2.SGM 22AUR2 50024 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations impact of the expiration of the MDH program. Some of these commenters urged CMS to continue the MDH program permanently, while other commenters urged CMS to support legislative efforts to extend these provisions beyond the current March 31, 2015 statutory expiration date. Some commenters urged CMS to work with Congress to extend the MDH provision because these hospitals are vitally needed in serving elderly persons with health care needs. Other commenters stated that the MDH program provides needed funding for hospitals with Medicare as their predominant payor. The commenters stated that many of these hospitals provide primarily outpatient services, and the low Medicare OPPS rates, which pay less than cost, threaten the financial viability of these hospitals without the added funding that Medicare dependent status provides. In order to maintain access to care for Medicare beneficiaries and others in many rural communities, the commenters urge CMS to continue the MDH program permanently. Response: While we appreciate the commenters’ concerns about the expiration of the MDH program, CMS does not have the authority under current law to extend the MDH program beyond the March 31, 2015 statutory expiration date. These comments are similar to comments we received previously, prior to the statutory extensions of the MDH program for FYs 2013 and 2014 provided by subsequent legislation, and discussed in both the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413 through 53414) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649. Therefore, under current law, beginning April 1, 2015, all hospitals that previously qualified for MDH status will no longer have MDH status. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 4. Effect on MDHs of Adoption of New OMB Delineations We received some comments regarding the effect of the implementation of the new OMB delineations (discussed in section III.H.5. of the preamble of this final rule) on MDHs, including requests for a transition period for MDHs to adapt to the changes that would result from the new OMB delineations; in particular, changes from rural to urban status. We refer readers to section III.H.5. (Update of Application of Urban to Rural Classification Criteria) of the preamble of this final rule for our summary of public comments received and our responses to those comments. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 5. Effect on SCHs of Adoption of New OMB Delineations and 2-Year Transition for CAHs Section 1886(d)(5)(D)(iii) of the Act defines a sole community hospital (SCH) generally as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of inpatient hospital services reasonably available to Medicare beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria that a hospital must meet to be classified as a SCH. For more information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (74 FR 43894 through 43897). In connection with the implementation of the new OMB delineations for urban and rural areas, as discussed in section III.H.5. of the preamble of this final rule, we received public comments requesting a transition period for SCHs affected by implementation of the new OMB delineations, similar to the 2-year transition period for affected CAHs, as discussed in section VI.D.2. of the preamble of this final rule, during which the CAH must reclassify as rural in order to retain its CAH status after the 2-year transition period ends. We refer readers to section III.H.5. of the preamble of this final rule for the discussion of and responses to those public comments. We also were asked to clarify the status of a CAH during the 2-year transition period and its effect on SCHs. Comment: One commenter requested that CMS clarify that a hospital’s SCH status would not be affected by a CAH that is now located in an urban area as a result of a new OMB delineation while that CAH is in its 2-year transition period to reclassify as rural. Response: We are clarifying that during an affected CAH’s 2-year transition period, the facility will continue to be considered a CAH and, therefore, would not fall under the definition of ‘‘like hospital’’ at § 412.92(c)(2). Therefore, an affected CAH will not impact the status of an SCH during that CAH’s 2-year transition period. For purposes of determining whether an SCH is located near a CAH affected by the most recent change in OMB delineations implemented in this final rule effective October 1, 2014, we plan to post on the CMS Web site, a list of the affected CAHs. We refer readers to section VI.D.2. of the preamble of this PO 00000 Frm 00172 Fmt 4701 Sfmt 4700 final rule for a discussion related to the CAH 2-year transition period. H. Hospital Readmissions Reduction Program: Changes for FY 2015 Through FY 2017 (§§ 412.150 Through 412.154) 1. Statutory Basis for the Hospital Readmissions Reduction Program Section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act, added a new section 1886(q) to the Act. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program,’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those applicable hospitals may be reduced to account for certain excess readmissions. Section 1886(q)(1) of the Act sets forth the methodology by which payments to ‘‘applicable hospitals’’ will be adjusted to account for excess readmissions. In accordance with section 1886(q)(1) of the Act, payments for discharges from an ‘‘applicable hospital’’ will be an amount equal to the product of the ‘‘base operating DRG payment amount’’ and the adjustment factor for the hospital for the fiscal year. That is, ‘‘base operating DRG payments’’ are reduced by a hospital-specific adjustment factor that accounts for the hospital’s excess readmissions. Section 1886(q)(2) of the Act defines the base operating DRG payment amount as ‘‘the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (o) [the Hospital VBP Program]) for a discharge if this subsection did not apply; reduced by . . . any portion of such payment amount that is attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d).’’ Paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments, IME payments, DSH adjustment payments, and add-on payments for low-volume hospitals, respectively. Furthermore, section 1886(q)(2)(B) of the Act specifies special rules for defining ‘‘the payment amount that would otherwise be made under subsection (d)’’ for certain hospitals, including policies for SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374), we finalized policies to implement the statutory provisions related to the definition of ‘‘base operating DRG payment amount’’ with respect to those hospitals. Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges. . . .’’ Section 1886(q)(3)(C) of the Act establishes the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. Section 1886(q)(4) of the Act defines the terms ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio . . . for such hospital for such applicable period minus 1.’’ The ‘‘excess readmissions ratio’’ is a hospital-specific ratio based on each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmissions ratio as the ratio of actual-over-expected readmissions; specifically, the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. Section 1886(q)(5) of the Act provides definitions of ‘‘applicable condition,’’ ‘‘expansion of applicable conditions,’’ ‘‘applicable hospital,’’ ‘‘applicable period,’’ and ‘‘readmission.’’ The term ‘‘applicable condition’’ (which is addressed in detail in section IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through 51666)) is defined as a ‘‘condition or procedure selected by the Secretary among conditions and procedures for which: (i) Readmissions . . . represent conditions or procedures that are high volume or high expenditures . . . and (ii) measures of such readmissions . . . have been endorsed by the entity with a contract under section 1890(a) [of the Act] . . . and such endorsed measures have exclusions for readmissions that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ Section 1886(q)(5)(B) of the Act also requires the Secretary, beginning in FY 2015, ‘‘to the extent practicable, [to] expand the applicable conditions beyond the 3 conditions for which measures have been endorsed . . . to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and procedures as determined appropriate by the Secretary.’’ Section 1886(q)(5)(C) of the Act defines ‘‘applicable hospital,’’ that is, a hospital subject to the Hospital Readmissions Reduction Program, as a ‘‘subsection (d) hospital or a hospital that is paid under section 1814(b)(3) [of the Act], as the case may be.’’ The term ‘‘applicable period,’’ as defined under section 1886(q)(5)(D) of the Act, ‘‘means, with respect to a fiscal year, such period as the Secretary shall specify.’’ As explained in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671), the ‘‘applicable period’’ is the period during which data are collected in order to calculate various ratios and payment adjustments under the Hospital Readmissions Reduction Program. Section 1886(q)(6) of the Act sets forth the public reporting requirements for hospital-specific readmission rates. Section 1886(q)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(q) of the Act. Finally, section 1886(q)(8) of the Act requires the Secretary to collect data on readmission rates for all hospital inpatients (not just Medicare patients) for a broad range of both subsection (d) and non-subsection(d) hospitals, in order to calculate the hospital—specific readmission rates for all such hospital inpatients and to publicly report these ‘‘all-patient’’ readmission rates. 2. Regulatory Background The payment adjustment factor set forth in section 1886(q) of the Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676), we addressed the issues of the selection of readmission measures and the calculation of the excess readmissions ratio, which will be used, in part, to calculate the readmissions adjustment factor. Specifically, in that final rule, we finalized policies that relate to the portions of section 1886(q) of the Act that address the selection of and measures for the applicable conditions, PO 00000 Frm 00173 Fmt 4701 Sfmt 4700 50025 the definitions of ‘‘readmission’’ and ‘‘applicable period,’’ and the methodology for calculating the excess readmissions ratio. We also established policies with respect to measures for readmission for the applicable conditions and our methodology for calculating the excess readmissions ratio. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401), we finalized policies that relate to the portions of section 1886(q) of the Act that address the calculation of the hospital readmission payment adjustment factor and the process by which hospitals can review and correct their data. Specifically, in that final rule, we addressed the base operating DRG payment amount, aggregate payments for excess readmissions and aggregate payments for all discharges, the adjustment factor, applicable hospital, limitations on review, and reporting of hospital-specific information, including the process for hospitals to review readmission information and submit corrections. We also established a new Subpart I under 42 CFR Part 412 (§§ 412.150 through 412.154) to codify rules for implementing the Hospital Readmissions Reduction Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 50676), we finalized our policies that relate to refinement of the readmissions measures and related methodology for the current applicable conditions, expansion of the ‘‘applicable conditions’’ beginning for FY 2015, and clarification of the process for reporting hospital—specific information, including the opportunity to review and submit corrections. We also established policies related to the calculation of the adjustment factor for FY 2014. 3. Overview of Policies for the FY 2015 Hospital Readmissions Reduction Program In this final rule, we are— • Making refinements to the readmissions measures and related methodology for FY 2015 and subsequent years (section IV.H.4. of the preamble of this final rule); • Expanding the scope of ‘‘applicable conditions’’ for FY 2017 to include coronary artery bypass graft (CABG) (section IV.H.6. of the preamble of this final rule); • Discussing the maintenance of technical specifications for quality measures (section IV.H.7. of the preamble of this final rule); • Describing a waiver from the Hospital Readmissions Reduction Program for hospitals formerly paid E:\FR\FM\22AUR2.SGM 22AUR2 50026 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV under section 1814(b)(3) of the Act (§ 412.154(d)) (section IV.H.8. of the preamble of this final rule); • Specifying the adjustment factor floor for FY 2015 (section IV.H.9. of the preamble of this final rule); • Specifying the applicable period for FY 2015 (section IV.H.10. of the preamble of this final rule); • Making changes to the calculation of the aggregate payments for excess readmissions to include two additional readmissions measures (chronic obstructive pulmonary disease (COPD) and THA/TKA)) (section IV.H.11. of the preamble of this final rule); and • Discussing whether to establish an exceptions process to address hospitals with extraordinary circumstances (section IV.H.12. of the preamble of this final rule). 4. Refinement of the Readmission Measures and Related Methodology for FY 2015 and Subsequent Years Payment Determinations We note that, during the comment period following the proposed rule, we received comments that were not related to our specific proposals and considered out of scope for the Hospital Readmissions Reduction Program in the FY 2015 IPPS/LTCH PPS proposed rule. Some of the out-of-scope comments were related to a wide range of aspects of the Hospital Readmissions Reduction Program and its readmission measures. For example, there were recommendations for statutory changes to the program payment structure and previously finalized program definitions, changes to the program goals, frequency of assessing and reporting performance on measures, and changes to the 30-day window of measuring readmissions. Notably, there were many comments on risk adjustment for socioeconomic status (SES) at the patient- and hospital-level. While we appreciate the commenters’ feedback, these topics are out of scope of this rule, and we will not be specifically addressing them, with the exception of risk-adjustment for SES. Among the out-of-scope topics, we are addressing the risk-adjustment for SES because of the volume of comments and the importance of this topic for outcome measures in payment programs. All other out-of-scope topics not specifically addressed in this rule will be taken into consideration when developing policies and program requirements for future years. Comment: Many of the commenters on CMS quality programs and those specifically commenting on the Hospital Readmissions Reduction Program expressed concern that these programs VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 do not risk-adjust for SES. Many commenters expressed concern that the lack of risk adjustment for SES leads to the unintended consequences of unfair payment adjustments which: (1) Disproportionately penalize hospitals serving high proportions of low-SES patients; (2) penalize hospitals for patient characteristics outside of their control; and (3) decrease financial resources of the hospitals most likely to serve low-SES patients which would lead to lower quality of care for these patients. Many commenters outlined specific SES characteristics that are not adjusted for in the current readmission measures, including Medicare dualeligible status, life circumstances, access to health care post-discharge, literacy, education level, community factors, language, income, poverty level, living conditions and support in the home (that is, post-discharge support structure), complex medical histories, and having chronic conditions. One commenter noted that claims data cannot be used to identify SES, making it difficult for the commenter to support the Hospital Readmissions Reduction Program, which uses claimsbased measures. Other commenters believed that risk adjustment for SES ‘‘levels the playing field’’ among all hospitals while still illuminating disparities. Response: We appreciate the commenters’ concerns and note that these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654; 50673 through 50674). As described in prior rulemaking, we do not currently riskadjust for SES in the Hospital Readmissions Reduction Program. However, we do risk-adjust for comorbidities (that is, correlated illnesses) and other factors to ensure that hospitals are not penalized for serving populations that are sicker or have higher incidences of chronic disease. We are aware that there are differing opinions regarding this approach. We appreciate the commenters’ suggestions on the importance of addressing SES in the Hospital Readmissions Reduction Program. We have continued to consider and evaluate stakeholder concerns regarding the influence of patient SES status on readmission rates. Comment: One commenter noted that the purpose of the Hospital Readmissions Reduction Program is to transform the Medicare payment and delivery system. Other commenters supported this belief and urged CMS not to adjust the readmission measures for SES. PO 00000 Frm 00174 Fmt 4701 Sfmt 4700 Response: We appreciate the feedback and support not to adjust the readmissions measures for SES. Comment: Some commenters urged that CMS not risk-adjust the readmission measures with SES until it is proven that the program is biased against low-SES hospitals. These commenters noted that the Hospital Readmissions Reduction Program is designed to provide incentives for changes that also enhance the quality of health care and that the same care protocols that work with a different population of patients who are not lowSES may also work with low-SES patients. Response: We appreciate support of the Hospital Readmissions Reduction Program’s goal to encourage improved health care through this program. Like the commenters, we continue to believe that the same care protocols and processes that are successful in caring for nonlow-SES patient populations may also be successful in caring for lowSES patient populations. Comment: Many commenters provided recommendations on how to risk-adjust for SES and specifically recommended adopting the recommendations of the draft report issued by NQF’s Expert Panel on RiskAdjustment for Sociodemographic Factors (Draft Report available at: https://www.qualityforum.org/Risk_ Adjustment_SES.aspx). A few commenters supported risk adjustment for SES as recently proposed in two bills in the 113th Congress (S. 2501, ‘‘The Hospital Readmissions Program Accuracy and Accountability Act,’’ and H.R.4188, the ‘‘Establishing Beneficiary Equity in the Hospital Readmission Program Act’’). Both bills attempt to address the potential disproportionate impact of payment penalties on hospitals that serve high proportions of low-SES patients. Response: We appreciate these comments and the importance of the role that SES plays in the care of patients. We are aware that there are differing opinions regarding our current approach in risk-adjusting measures in the Hospital Readmissions Reduction Program for SES. We note that the readmission measures aim to reveal differences related to the quality of care provided. We believe that quality of care received by patients of lower SES contributes at least in part to the observed association between SES status and the readmissions rate. We continue to have concerns about holding hospitals to different standards for the outcomes of their patients of low SES— we do not want to mask potential disparities or minimize incentives to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations improve the outcomes of disadvantaged populations. We routinely monitor the impact of SES on hospitals’ results. To date, we have found that hospitals that care for large proportions of patients of low SES are capable of performing well on our measures (we refer readers to the 2013 Medicare Hospital Quality Chart Book on pages 46 through 53 at: https://www. cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook2013.pdf). Previous analyses presented at the NQF during endorsement proceedings of the Hospital-Wide AllCause Unplanned Readmission Measure (available at: https://www.qualityforum. org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=70813) also show that adding SES to the risk-adjustment has a negligible impact on hospitals’ risk-standardized rates. The risk adjustment for clinical factors likely captures much of the variation due to SES, therefore resulting in an attenuation of the impact of SES factors on hospitals’ results. We continue to monitor related activities at NQF, such as the July 23, 2014 decision by the NQF Board in which the Board approved a trial period to test the impact of sociodemographic factor risk adjustment of performance measures (available at: https://www. qualityforum.org/Press_Release/2014/ NQF_Board_Approves_Trial_Risk_ Adjustment.aspx), and in Congress. As we stated in the past, we are committed to working with the NQF and other stakeholder communities to continuously refine our measures and to address the concerns associated with SES and risk adjustment. We believe that continued collaboration with the stakeholder communities will enable us to identify feasible ways to appropriately address any unintended consequences for providers serving high proportions of low-SES patients. Comment: Many commenters provided recommendations on how to risk-adjust for SES and specifically referenced MedPAC’s recommendation to use ‘‘peer group stratification,’’ that is, stratifying hospitals by the hospital’s proportion of low-SES patients, as a method to correlate readmission rates and penalties with patient income. These commenters also recognized that this new method would require legislative changes because the current payment adjustment formula used to compute the readmission penalty is set in law. Response: We appreciate the suggestion for risk-adjustment by ‘‘peer group stratification’’ as a method to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 address SES. We will take MedPAC’s recommendations into consideration for the Hospital Readmissions Reduction Program, but also note that MedPAC recognizes that statutory changes would be required for us to adopt this recommendation because the current payment adjustment formula used to compute the readmission penalty is established by statute. Comment: A few commenters supported the use of an unplanned hospital-wide readmission measure (some of these commenters specifically asked CMS to consider adding the Hospital-Wide All-Cause Readmission Measure (NQF #1789)) as this type of measure would capture a global perspective on hospital performance and urged CMS to consider these measures instead of CABG. Response: We thank the commenters for this input and will continue to take the recommendation into consideration, as we stated previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50658). We developed the HospitalWide All-Cause Readmission Measure (NQF #1789) (HWR measure) that has been implemented in the Hospital IQR Program. The HWR measure estimates the hospital-level, risk-standardized rate of all-cause, unplanned readmission within 30 days of hospital discharge with any eligible condition. The measure reports a single composite riskstandardized readmission rate (RSRR), derived from the volume-weighted results of five different models, one for each of the following specialty cohorts (groups of related discharge condition categories or procedure categories): surgery/gynecology; general medicine; cardiorespiratory; cardiovascular; and neurology. While we appreciate the commenters’ recommendations to consider this measure for the Hospital Readmissions Reduction Program, we believe that section 1886(q)(5)(A) of the Act (defining ‘‘applicable condition’’) prohibits us from adopting the many categories of diagnoses and procedures comprising the HWR measure as a single ‘‘condition.’’ Based on the limitations of the current statutory provisions for the Hospital Readmissions Reduction Program, we have not implemented the HWR measure in the Hospital Readmissions Reduction Program. Comment: One commenter opposed the addition of the 30-day Ischemic stroke readmission measure in the Hospital Readmissions Reduction Program because it is not risk-adjusted using the National Institutes Stroke Severity Scale. PO 00000 Frm 00175 Fmt 4701 Sfmt 4700 50027 Response: We thank the commenter for this feedback and note that we did not propose this measure for the Hospital Readmissions Reduction Program. We note that, in the FY 2014 IPPS/LTCH PPS final rule, we discussed this issue with respect to the Hospital IQR Program (79 FR 50801). At that time we stated that we appreciated the concerns of the stakeholders on this issue. We also stated that not only are we committed to working with the stakeholder communities and to continuously refine our measures, which for the stroke outcome measures includes risk-adjusted patient severity, but also committed to working with the stroke communities and other stakeholders to seek feasible ways to incorporate additional severity adjustment as suggested. Finally, we highlighted that stroke is the fifth leading cause of adult mortality in the United States, and therefore we believe it would be a disservice to patients to delay inclusion of these current stroke outcome measures in quality reporting and quality improvement initiatives. We are committed to making these measures better and working with stakeholders to do so, and will take these comments into consideration. Comment: A few commenters noted that heart failure readmission rates are inversely related to heart failure mortality rates. Response: We appreciate the commenters’ concerns and note that this issue was addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50650). Comment: A few commenters recommended that the Hospital Readmissions Reduction Program be improved by excluding admissions that are part of the natural disease or treatment progression, in order to fairly assess hospitals and avoid unintended consequences for patients and their families. One commenter specifically highlighted readmissions due to ongoing care for patients suffering traumatic injury and requiring staged operative therapies should also be excluded. Response: We appreciate these suggestions and agree that admissions that are part of planned management to address disease progression should not be counted in the outcome. We identify and do not count in the measure results and the readmission outcomes those admissions that are planned readmissions for ongoing care management. For example, ongoing treatments such as maintenance chemotherapy for cancer or cardiac device placement for cardiovascular disease patients are excluded from the E:\FR\FM\22AUR2.SGM 22AUR2 50028 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV calculation of the measure result for readmission rates. Comment: Many commenters requested that CMS be more transparent and collaborative in its approach to all measures in the Hospital Readmissions Reduction Program. Response: We appreciate this feedback regarding our proposed changes to the planned readmission algorithm and the proposed refinements to the measure cohort in the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day RiskStandardized Readmission Measure. We strive to collaborate with stakeholders, as well as be transparent about the direction of the Hospital Readmissions Reduction Program and the measures proposed for the program. We previously discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657 through 50658) that we use multiple methods to communicate with stakeholders; for example, through press releases, open door forums, as well as through the Federal rulemaking process. We also post all measure methodology documents online for broad public access at our Web site (https://www.cms. gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html). In addition, during measure development, we seek public comments on various stages of development, and also have the measures undergo the NQF’s endorsement processes and measure maintenance reviews. We also adhere to the Affordable Care Act’s provision that requires all measures that will be proposed in future rulemaking be reviewed by NQF’s MAP as part of the pre-rulemaking process. All of these processes are open to the public for comment. While we believe all of these processes help to inform the public of our plans for and decisions regarding the Hospital Readmissions Reduction Program, we will strive to collaborate with all of our stakeholders to identify more effective ways of communicating our plans and decisions. a. Refinement of Planned Readmission Algorithm for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through 50655), we finalized for 2014 and subsequent years’ payment determinations the use of the CMS Planned Readmission Algorithm VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Version 2.1 in the AMI, HF, PN, COPD, and THA/TKA readmission measures. The algorithm identifies readmissions that are planned and occur within 30 days of discharge from the hospital. A complete description of the CMS Planned Readmission Algorithm Version 2.1, which includes lists of planned diagnoses and procedures, can be found on our Web site (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). NQF has endorsed the use of the algorithm for these measures. Last year’s stakeholder comments supported the incorporation of the CMS Planned Readmission Algorithm Version 2.1 and suggested that we update it on a regular basis. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50652), we agreed to continually review the CMS Planned Readmission Algorithm and make updates as needed. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28106 through 28108) we proposed to use a revised version, the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, COPD, and THA/TKA readmission measures for FY 2015 and subsequent payment determinations. We also proposed to use this algorithm for the CABG readmission measure proposed for inclusion in the Hospital Readmissions Reduction Program starting in FY 2017. Version 3.0 incorporates improvements that were made based on a validation study of the algorithm. Researchers reviewed 634 patients’ charts at 7 hospitals, classified readmission as planned or unplanned based on the chart review, and compared the results to the claimsbased algorithm’s classification of the readmissions. The findings suggested the algorithm was working well but could be refined. Specifically, the study suggested the need to make small changes to the tables of procedures and conditions used in the algorithm to classify readmission as planned or unplanned. The algorithm uses the Agency for Healthcare Research and Quality’s (AHRQ’s) Clinical Classification Software (CCS) to group thousands of procedure and diagnosis codes into fewer categories of related procedures or diagnoses. The algorithm then uses four tables of procedures and diagnoses categories and a flow diagram to classify tables as planned or unplanned. For all measures, the first table lists procedures that, if present in a readmission, classify the readmission as planned. The second table identifies primary discharge diagnoses that always PO 00000 Frm 00176 Fmt 4701 Sfmt 4700 classify readmissions as planned. Because almost all planned admissions are for procedures or surgeries, a third table identifies procedures for which patients are typically admitted; if any of these procedures are coded in the readmission, we classify a readmission as planned as long as that readmission does not have an acute (unplanned) primary discharge diagnosis. The fourth table lists the acute (unplanned) primary discharge diagnoses that disqualify readmissions that include one or more of the potentially planned procedure in the third table as planned. These tables are structured the same across all measures but the specific procedure and conditions they contain vary slightly for certain measures based on clinical considerations for each cohort. The final proposed tables for each measure can be found on our Web site under the Measure Methodology reports (available at: https://www.cms. gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html). Version 3.0 modifies two of these tables by removing or adding procedures or conditions to improve the accuracy of the algorithm. First, a validation study revealed that the algorithm could be improved by removing two procedure CCS categories from the third table, the potentially planned procedure table: CCS 211— Therapeutic Radiation and CCS 224— Cancer Chemotherapy. Typically, patients do not require admission for scheduled Therapeutic Radiation treatments (CCS 211). The study found that readmissions that were classified as planned because they included Therapeutic Radiation were largely unplanned. The algorithm was also more accurate when CCS 224—Cancer Chemotherapy was removed from the potentially planned procedure table. The second table of the algorithm classifies all readmissions with a principal diagnosis of Maintenance Chemotherapy as planned. Most patients who receive cancer chemotherapy have both a code for Cancer Chemotherapy (CCS 224) and a principal discharge diagnosis of Maintenance Chemotherapy (CCS 45). In the validation study, the readmissions for patients who received Cancer Chemotherapy (CCS 224) but who did not have a principal diagnosis of Maintenance Chemotherapy were largely unplanned; therefore, removing CCS 224 from the potentially planned procedure table improved the algorithm’s accuracy. Therefore, Version 3.0 removes CCS 211 and CCS 224 from the list of potentially planned E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations procedures to improve the accuracy of the algorithm. As noted above, the algorithm uses a table of acute principal discharge diagnoses to help identify unplanned readmissions. Readmissions that have a principal diagnosis listed in the table are classified as unplanned, regardless of whether they include a procedure in the potentially planned procedure table. The validation study identified one diagnosis CCS that should be added to the table of acute diagnoses to more accurately identify truly unplanned admissions as unplanned: Hypertension with Complications (CCS 99). Hypertension with Complications is a diagnosis that is rarely associated with planned readmissions. In addition, the validation study identified a subset of ICD–9–CM diagnosis codes within two CCS diagnosis categories that should be added to the acute diagnosis table to improve the algorithm. CCS 149, Pancreatic Disorders, includes the code for acute pancreatitis; clinically, there is no situation in which a patient with this acute condition would be admitted for a planned procedure. Therefore, Version 3.0 adds the ICD–9–CM code for acute pancreatitis, 577.0, to the acute primary diagnosis table to better identify unplanned readmissions. Finally, CCS 149, Biliary Tract Disease, is a mix of acute and nonacute diagnoses. Adding the subset of ICD–9–CM codes within this CCS group that are for acute diagnoses to the list of acute conditions improves the accuracy of the algorithm for these acute conditions while still ensuring that readmissions for planned procedures, like cholecystectomies, are counted accurately as planned. For more detailed information on how the algorithm is structured and the use of tables to identify planned procedures and diagnoses, we refer readers to discussion of the CMS Planned Readmission Algorithm Version 2.1 in our reports (available at: https://www. cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html). As noted above, readers can find the specific Version 3.0 tables for each measure in the measure updates and specifications reports at the above link. We invited public comment on these proposals. Comment: Several commenters specifically supported all of the proposed modifications to the planned readmissions algorithm. Some commenters supported the use of the algorithm in general and others specifically supported the inclusion of the algorithm in the Hospital-Level 30- VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Day Readmission Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease. Response: We appreciate the support for the inclusion of the planned readmission algorithm in the Hospital Readmissions Reductions Program measures. Comment: Several commenters support the periodic update to the Hospital Readmissions Reduction Program’s planned readmission algorithm to ensure its lists of inclusions and exclusions are accurate. Response: We appreciate the comment and, as discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28106), we have revised the planned readmission algorithm based on a validation study conducted at 7 hospitals. During the revision of the algorithm, we also collaborated with technical and medical experts. Comment: Several commenters commended CMS for including the planned readmission algorithm updates in the FY 2015 IPPS/LTCH PPS proposed rule updates specifically related to the proposed exclusions. They also suggested CMS exclude unrelated readmissions. Response: We appreciate the commenters’ support and the support to remove the two procedure Clinical Classification Software (CCS) categories of Therapeutic Radiation (CCS 211) and Cancer Chemotherapy (CCS 224) as we strive to be transparent with the stakeholders. We note that we addressed the concern for exclusion of unrelated readmissions in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50654). We indicated last year that unrelated readmissions are addressed through the planned readmission algorithm and, in coordination with medical experts, we expanded the list of conditions considered planned. Generally, planned readmissions are not a signal of quality of care. Therefore, we have worked with experts in the medical community, as well as other stakeholders, to carefully identify procedures and treatments that should be considered ‘‘planned’’ and, therefore, not counted as readmissions. Comment: Several commenters were concerned with the exclusion of two cancer related Clinical Classification Software (CCS) groups. Some commenters were specifically concerned that removal of Clinical Classification Software (CCS) groups CCS 211—Therapeutic Radiation and CCS 224—Cancer Chemotherapy from the potentially planned procedure table of the planned readmission algorithm will have the unintended consequences of discouraging needed cancer care. These commenters requested that CMS PO 00000 Frm 00177 Fmt 4701 Sfmt 4700 50029 therefore initiate an ad hoc review of this change. One commenter was unconvinced that the validation study findings for Maintenance Chemotherapy holds true for all hospitals and therefore hospitals that deliver a large amount of cancer services could be affected by this change. Response: We note that removal of CCS 211 would be appropriate because patients are not typically admitted for therapeutic radiation, and admissions with this treatment were noted in general to be unplanned. In addition, we removed CCS 224 because the validation study showed admissions for individuals who receive cancer chemotherapy but do not have a principal diagnosis of maintenance chemotherapy are typically unplanned admissions. All admissions for patients with a principal diagnosis of Maintenance Chemotherapy (that is, CCS 45) will continue to be considered planned and will not be counted in the measure outcome. Therefore, we expect removal of CCS 211 and CCS 224 to improve the accuracy of the planned readmission algorithm and do not anticipate it will have the unintended consequence of discouraging needed cancer care. We appreciate the concern that the validation study findings may not apply to all hospitals and will consider further evaluation of this concern. Comment: One commenter noted that he/she was aware of the methodologies that separate preventable versus nonpreventable readmissions while measures in the Hospital Readmissions Reduction Program continue to penalize hospitals for circumstances outside of their control. The commenter asserted that ‘‘well researched and documented methodologies’’ exist to separate potentially preventable versus nonpreventable readmissions. Response: We note that it is difficult, and can be subjective, to categorize a readmission as preventable or unpreventable. The difficulty, and risk for being subjective, occurs because a readmission cannot be determined as being preventable or unpreventable based on the reason or diagnoses for the admission alone. For this reason, we have not chosen to categorize readmissions as preventable or unpreventable, but rather planned or unplanned. The planned readmission algorithm identifies those diagnoses codes, identified by medical experts in multiple specialties, as those frequently and most likely to be associated with planned reasons for a readmission. By categorizing readmissions as planned, we are trying to remove the subjective E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50030 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations nature of deeming readmissions as preventable or unpreventable. Finally, we are not aware of any publicly known NQF-approved methodology for identifying preventable versus unpreventable readmissions. The goal of the Hospital Readmissions Reduction Program is to lower the risk of all types of admissions through the most appropriate care and care transitions. We believe this goal can best be achieved through measuring and reporting a risk-standardized metric of excess readmissions that reflects how well hospitals are doing in decreasing unplanned readmissions relative to hospitals with similar patients. Comment: One commenter believed that CMS’ measures would benefit from refinement, including exclusion of planned readmissions and unrelated readmissions. Other commenters were disappointed that CMS did not propose a process for excluding readmissions unrelated to the initial reason for admission in calculating the measures, which they characterize as being mandated by the Affordable Care Act. Several commenters continued to urge CMS to exclude from the Hospital Readmissions Reduction Program admissions unrelated to the prior hospital stay, including, for example, admissions for chemotherapy, trauma, burns, end-stage renal disease, maternity, and substance abuse, because, the commenters stated, by their nature, they are not preventable readmissions. Response: We note that we have been responsive to stakeholder suggestions to not include planned readmissions in the calculations, as discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50654), and as evidenced by multiple versions of the planned readmission algorithm since 2012. As with other aspects of any measure, we continue to review and revise the area of unrelated readmissions through our refinement of the planned readmissions algorithm. Regarding other types of unrelated readmissions, we currently do not seek to differentiate between related and unrelated readmissions because readmissions not directly related to the index condition may still be a result of the care received during the index hospitalization. For example, a patient hospitalized for COPD who develops a hospital associated infection may ultimately be readmitted for sepsis. It would be inappropriate to treat this readmission as unrelated to the care the patient received during the index hospitalization. Furthermore, the range of potentially avoidable readmissions also includes those not directly related to the initial VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospitalization, such as those resulting from poor communication at discharge or inadequate follow-up. Therefore, we believe that creating a comprehensive list of potential complications related to the index hospitalization would be arbitrary, incomplete, and, ultimately, extremely difficult to implement. However, in coordination with medical experts, we created a planned readmission algorithm to determine which conditions and therefore, readmissions, that are generally considered planned. Generally, planned readmissions are not indicative of an inferior quality of care, therefore are not counted as readmissions. Regarding the suggestion to remove ‘‘extreme circumstances [such as] chemotherapy, trauma, burns, end stage renal disease, maternity, and substance abuse because, by their nature, they are not preventable readmissions,’’ we addressed this comment in the FY 2013 IPPS/LTCH PPS final rule. In that rule and the current rulemaking, the commenters requested that circumstances like those listed in the above comment be excluded from the index hospitalizations. In FY 2013 IPPS/ LTCH PPS final rule, (77 FR 53377), we stated that ‘‘we appreciate the concern expressed by some commenters that patients of these ‘extreme circumstances’ clinically could be sicker and more likely to be readmitted. The measures address clinical differences in hospitals’ case-mix through risk adjustment rather than through excluding patients from the measure as suggested by the commenter. The goal in developing outcomes measures is to create a clinically cohesive cohort that includes as many patients as possible admitted with the given condition. Greatly expanding our list of exclusions would result in a measure that was less useful and meaningful because it would reflect the care of fewer patients. In addition, we believe that, by excluding patients with significant comorbidities, the measure would not assess of the quality of care for those patients. To fairly profile hospitals’ performance, it is critical to place hospitals on a level playing field and account for their differences in the patients that present for care. This is accomplished through adequate risk-adjustment for patients’ clinical presentation rather than exclusion of patients.’’ Comment: One commenter urged CMS to work with the physician and hospital communities to identify other planned readmissions that should be excluded. Response: We will continue to involve all stakeholders in the process of measure development and measure PO 00000 Frm 00178 Fmt 4701 Sfmt 4700 maintenance. We also collaborate with various medical specialty societies and associations whenever feasible and appropriate to ensure that their input and feedback are considered in real-time during measure development and maintenance, which also include input from expert panels, and public comment periods. We will consider the comment in future revisions to the algorithm. Comment: Many commenters believe that CMS should have had the proposed Planned Readmission Algorithm Version 3.0 changes reviewed by NQF before finalizing and using in the readmission measures. One commenter believed the changes to be substantive and did not support adopting changes for measures to incorporate the Planned Readmission Algorithm Version 3.0 until the revised measures have been recommended by the MAP. One commenter stated that the size of the validation study for the Planned Readmission Algorithm Version 3.0 was limited, and making recommendations based on this information, without external review from NQF, could create unintended consequences. Response: We note that the NQF has reviewed the Planned Readmission Algorithm Version 3.0 multiple times over the past 6 to 8 months as it was submitted for review as part of the NQF’s annual measure maintenance review for re-endorsement of the Hospital-Level 30-Day Readmission Following Admission for Heart Failure, Pneumonia, Chronic Obstruction Pulmonary Disease, and Total Hip Arthroplasty/Total Knee Arthroplasty measures. As of July 2014, all of these measures are still under review by NQF. NQF also reviewed the Planned Readmission Algorithm Version 3.0 with the Coronary Artery Bypass Surgery readmission measure during its endorsement proceedings of this measure, which led to the measure being recommended for endorsement. We will consider the comment in future revisions to the algorithm. Comment: Several commenters requested that CMS clarify what is a ‘‘related’’ readmission or a ‘‘planned’’ readmission, while others noted the measures fail to distinguish between a planned and unplanned readmission. Other commenters expressed appreciation for the proposed exclusions for certain readmissions, but requested exclusion of unrelated readmissions. Response: We note that the issue of excluding unrelated readmissions from the Hospital Readmissions Reduction Program was addressed in FY 2014 IPPS/LTCH PPS final rule (78 FR 50654 through 50655). Regarding clarification E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of what is a planned readmission, we refer readers to the technical reports for each measure that define specifically how planned readmissions are defined for the measure. The technical reports can be found in the planned readmission algorithm at the following Web site: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/MeasureMethodology.html. Finally, we continue to review and revise our algorithm for planned readmissions to improve its accuracy. Comment: One commenter emphasized the need to continuously improve and evaluate the accuracy of a signal provided by a specific readmission measure. Response: We thank the commenter for this feedback. We believe that unplanned readmissions, in general, are a signal of the quality of care that hospitals provide to their patients. The commenter is concerned with the accuracy of the readmission measures; we note that these measures have been NQF-endorsed and widely vetted by technical experts during measure development and annual measure maintenance. We will continue to monitor and update the measures to ensure their accuracy. Comment: Some commenters recommended that CMS create a system to monitor unintended consequences related to planned readmissions and implement an audit function that will accurately account for true planned readmissions. Response: We note that we have been concerned about the unintended consequence of hospitals’ increased use of observation stays and emergency department visits to avoid counting a patient as having been readmitted, and we are tracking these incidences in the Medicare Hospital Quality Chartbook available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/Downloads/-MedicareHospital-Quality-Chartbook-2013.pdf. Regarding the recommendation to create an audit function that will accurately account for ‘‘true planned readmissions,’’ we understand this to mean that the commenter is concerned about the validity of the planned readmission algorithm. We note that, during development and maintenance of the planned readmission algorithm, there have been several iterations of the algorithm as a result of review by medical experts and other stakeholders like the NQF. We believe that the constant review and update of the algorithm by medical experts and other VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 stakeholders provide a planned readmissions algorithm that accurately identifies truly planned readmissions. After consideration of the public comments we received, we are finalizing our proposal to update the planned readmission algorithm. We believe the updated Planned Readmission Algorithm Version 3.0 continues to fulfill statutory requirements to remove planned readmissions, as well as addresses stakeholder recommendations to continually refine and adjust the algorithm. b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/ TKA) 30-Day Readmission Measure Cohort In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28107), for FY 2015 and subsequent years, we proposed to refine the measure cohort for the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-Standardized Readmission Measure. Currently, the THA/TKA Readmission Measure adopted for the Hospital Readmissions Reduction Program is intended to only include patients who have an elective THA or TKA. Therefore, this measure excludes patients who have a principal discharge diagnosis of femur, hip, or pelvic fracture on their index admission because hip replacement for hip fracture is not an elective procedure. However, after hospitals reviewed their hospitalspecific THA/TKA Readmission Measure data during the national dry run conducted during September and October 2012, we learned that hospitals code hip fractures that occur during the same admission as a THA as either a principal or secondary diagnosis. According to feedback received from hospitals participating in the dry run, the measure methodology failed to identify and therefore appropriately exclude a small number of patients (that is, 0.42 percent of patients in 2009–2010 data) with hip fracture who had nonelective total hip arthroplasty. To ensure that all such hip fracture patients are excluded from the measure, we proposed to refine the measure to exclude patients with hip fracture coded as either principal or secondary diagnosis during the index admission. We believe this refinement is responsive to comments from hospitals and will allow us to accurately exclude patients who were initially admitted for a hip fracture and then underwent total hip arthroplasty, making their procedure nonelective. PO 00000 Frm 00179 Fmt 4701 Sfmt 4700 50031 Comment: Several commenters supported the refinements to the Total Hip Arthroplasty and Total Knee Arthroplasty 30-day readmission cohort. Response: We appreciate support of these refinements to this measure cohort. Comment: Several commenters acknowledged that the change to the THA/TKA measure is likely appropriate, but recommended that CMS submit the proposal to NQF in an ad hoc review of updates to the planned readmission algorithm and this measure cohort, before finalizing this proposal. Response: We appreciate this feedback, especially acknowledgement that the change to the THA/TKA measure is likely to be appropriate. We appreciate the suggestion for an ad hoc NQF review of this change to the THA/ TKA measure cohort. We also understand the importance of seeking broad stakeholder review during routine measure maintenance and note that this measure was submitted to NQF for annual maintenance review in June 2014. We note that the proposed changes to the cohort were the result of feedback from hospitals that had participated in the dry run of this measure and noted that the prior measure methodology failed to identify, and therefore appropriately exclude, a small number of patients (that, is 0.42 percent of patients in the 2009–2010 data) with hip fracture who had nonelective total hip arthroplasty. The recommendations resulting from the hospitals participating in the dry run were also reviewed by a group of medical experts working with our measure developer. Notwithstanding this expert medical opinion, we realize that broader stakeholder review is necessary as we continue to strive for transparency with management of the Hospital Readmissions Reduction Program. We will work towards improving and broadening stakeholder review of measure updates; we will take this recommendation under consideration. Comment: One commenter encouraged CMS to continue to work with appropriate clinicians and stakeholder groups (for example, the American Association of Hip and Knee Surgeons and the American Academy of Orthopaedic Surgeons) to identify planned readmissions that may occur within 30 days of discharge from the hospital that are unrelated to the quality of care received during the initial admission. Response: We continually work towards improving and broadening stakeholder review of measure updates. E:\FR\FM\22AUR2.SGM 22AUR2 50032 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: One commenter encouraged CMS to work with the YaleNew Haven Hospital Health Services Corporation, Center for Outcomes Research and Evaluation (YNHHSC/ CORE) to determine the most appropriate method for excluding or risk-adjusting for cases that involve conversion of previous hip surgery to total hip arthroplasty (represented by CPT code 27132). Response: We note that the commenter’s concerns focused on having us revise our Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) AllCause Unplanned 30-Day RiskStandardized Readmission Measure to exclude additional specific groups of patients with prior hip surgeries that place them at a significantly increased risk of complications, including revision procedures and those requiring removal of implanted devices from the femur (ICD–9–CM codes 78.65). We will continue to work closely with the YNHHSC/CORE to determine the most appropriate method for exclusions or risk-adjustment for these cases 24 for this measure. After consideration of the public comments we received, we are finalizing our proposal to the refinements to the THA/TKA readmission measure cohort. c. Anticipated Effect of Proposed Refinements on Measures The proposed refinement of the CMS Planned Readmission Algorithm Version 2.1 to Version 3.0 would have had the following effects on the measures based on our analyses of discharges between July 2009 and June 2012, if these changes had been applied for FY 2014. We note that these statistics are for illustrative purposes only, and we did not propose to revise the measure calculations for the FY 2014 payment determination. Rather, we proposed to apply these changes to the readmission measures for the FY 2015 payment determination and subsequent years. Among hospitals that were subject to the Hospital Readmissions Reduction Program in FY 2014 (Table IV.H.1), the number of eligible discharges based on the July 2009 through June 2012 data were 494,121 discharges for AMI; 1,165,606 discharges for HF; 954,033 discharges for PN; 926,433 discharges for COPD; and 858,266 discharges for hip/knee (as shown in Table IV.H.1. below). The proposed 30-day readmission rate (excluding the planned readmissions) would remain constant for AMI and COPD; increase by 0.1 percentage points for HF and PN; and increase by 0.4 percentage points for hip/knee. The new national readmission (unplanned) rate for each condition would have been 17.9 percent for AMI; 23.0 percent for HF; 17.7 percent for PN; 21.1 percent for COPD; and 5.27 percent for hip/knee. The number of readmissions considered planned (and, therefore, not counted as a readmission) would decrease by 319 for AMI; 1,313 for HF; 866 for PN, 547 for COPD; and 298 for hip/knee. The proposed modification of the hip/ knee measure cohort would have had the following effects on the measure: The measure cohort would have been reduced by 0.37 percent; the crude readmission rate would have been reduced by 0.02 absolute percentage points; and the mean RSRR would have been reduced by 0.03 absolute percentage points. TABLE IV.H.1.—COMPARISON OF PLANNED READMISSION ALGORITHMS V 2.1 AND 3.0 FOR AMI/HF/PN/COPD/THA/TKA READMISSION MEASURES [Based on 2009–2012 discharges from 3025 hospitals] AMI HF V 3.0 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Number of Discharges .......... Number of Unplanned Readmissions ..... Readmission Rate ............... Number of Planned Readmissions ..... Planned Readmission Rate .. % of Readmissions that are Planned .......... V 2.1 V 3.0 494,121 494,121 1,165,606 88,567 88,248 17.9% PN V 2.1 COPD THA/TKA V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 1,165,606 954,033 954,033 926,433 926,433 858,266 858,266 268,072 266,759 169,213 168,347 195,595 195,048 45,205 44,907 17.9% 23.0% 22.9% 17.7% 17.6% 21.1% 21.1% 5.27% 5.23% 11,577 11,896 15,293 16,606 5,867 6,733 5,858 6,405 2,283 2,581 2.3% 2.4% 1.3% 1.4% 0.6% 0.7% 0.6% 0.7% 0.3% 0.3% 11.6% 11.9% 5.4% 5.9% 3.4% 3.8% 2.9% 3.2% 4.8% 5.4% 5. No Expansion of the Applicable Conditions for FY 2016 In FY 2014 IPPS/LTCH PPS final rule, we finalized for FY 2015 two new condition specific readmission measures: (1) Hospital-level 30-day allcause risk-standardized readmission rate following elective total hip arthroplasty (THA) and total knee arthroplasty (TKA) (NQF #1551); and (2) Hospital-level 30-day all-cause risk- standardized readmission rate following chronic obstructive pulmonary disease (COPD) (NQF #1891). This brought the total number of finalized applicable conditions to five over the past 2 years of implementation. We also noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657) that commenters requested that we delay adding other conditionspecific measures. In view of these requests and our belief that it is reasonable to allow more time for hospitals to become familiar with these five applicable conditions before adding other applicable conditions in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28108), we did not propose any new applicable conditions for FY 2016. Comment: Several commenters encouraged CMS to strengthen the Hospital Readmissions Reduction Program through the inclusion of new 24 Suter L.G., Parzynski C.S., Searfoss R., Dorsey K.B., Grady J.N., Keenan M., Okai M., Nwosu M., Ngo C., Lin Z., Bhat K.R., Krumholz H.M., Bernheim S.M. 2014 Procedure-Specific Readmission Measures Updates and Specifications Report: Report prepared for the Centers for Medicare & Medicaid Services. 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00180 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measures for FY 2016 and FY 2017 so that momentum of recent successes in the reduction of readmission rates is not lost. Other commenters not only supported CMS’ decision not to expand measures in FY 2016 for the Hospital Readmissions Program, but also recommended that CMS delay expanding the program in FY 2017. Response: We agree that it is important for the nation’s hospitals to continue to be successful in the reduction of readmission rates and to utilize this momentum to implement other condition specific readmission measures. However, we noticed over the past 2 years a persistent dichotomy in stakeholder recommendations where some recommended expansion of the program with new measures each fiscal year and others recommended not expanding the program in FY 2016 and FY 2017. In response to last year’s proposed rule (78 FR 50657), stakeholders requested that they be given time to become familiar with the measures and the program. For this reason, we did not propose expanding the program in FY 2016. However, we proposed to expand the program in FY 2017 with the Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure. We will continue to review condition-specific readmission rate performance gaps in conjunction with our Quality Improvement Strategy (available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Quality InitiativesGenInfo/CMS-QualityStrategy.html) and the availability of robust risk-adjusted readmission measures. As we indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657), we will continue to ensure that hospitals are aware of future proposed program expansion through press releases, open door forums, as well as through the Federal rulemaking process. We also continue to strive to ensure our measure selection process for the Hospital Readmissions Reduction Program is transparent and allows the public several opportunities to comment on measures being selected for the Hospital Readmissions Reduction Program. Comment: Several commenters suggested expanding the Hospital Readmissions Reduction Program by adding the Society of Thoracic Surgeons’ (STS) Risk-Adjusted Coronary Artery Bypass Graft (CABG) Readmission Rate measure (NQF #2514) in conjunction with CMS’ Hospital 30DayDay, All-Cause, Unplanned, RiskStandardized Readmission Rate (RSRR) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515). These commenters believed that having the STS registry-based measure in addition to CMS’ claims-based measure would help providers and patients fully understand CABG care. Others commenters not only recommended including the Hospital 30-Day Risk— Standardized Readmission Rates following Percutaneous Coronary Intervention (PCI) measure (NQF #0695), believing it would drive improvements in quality and patient outcomes while simultaneously realizing significant cost savings for Medicare, but also implementing the Hospital 30-Day Risk-Standardized Readmission Rates following Percutaneous Coronary Intervention (PCI) measure (NQF #0695) no later than FY 2017. Response: We note that both the STS and the CMS Coronary Artery Bypass Graft (CABG) Readmission measures (NQF # 2514 and 2515 respectively) were both recommended for endorsement by NQF in May 2014, and a final decision on the endorsement status will be forthcoming in the third quarter of 2014. We note that both measures are fully harmonized, despite using different data sources. The STS’ Risk-Adjusted Coronary Artery Bypass Graft (CABG) Readmission Rate measure (NQF #2514) uses the STS National Database, while CMS’ Hospital 30DayDay, All-Cause, Unplanned, RiskStandardized Readmission Rate (RSRR) following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515) uses administrative claims. We believe having two measures that are fully harmonized using two different data sources provides the greatest flexibility for stakeholders to identify which measure best fits their current capabilities for data collection and submission. We also note that we believe the use of the administrative claims-based measure would be less burdensome for participating hospitals in the Hospital Readmissions Reduction Program. Regarding the recommendation to expand the program in FY 2017 with the Hospital 30-Day Risk-Standardized Readmission Rates following Percutaneous Coronary Intervention (PCI) measure (NQF #0695), we note that this issue was addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657). We stated that the addition of measures for the other vascular and PCI conditions are not feasible for two reasons: (1) Inpatient admissions for PCI and other vascular conditions appear to be decreasing; and (2) the hospitals are increasingly performing procedures PO 00000 Frm 00181 Fmt 4701 Sfmt 4700 50033 relating to these conditions in outpatient departments. For these reasons, addition of these measures in the Hospital Readmissions Reduction Program is not practical. After consideration of the public comments we received, we are finalizing our proposal not to expand the applicable conditions in the Hospital Readmissions Reduction Program in FY 2016. 6. Expansion of the Applicable Conditions for FY 2017 To Include the Patients Readmitted Following Coronary Artery Bypass Graft (CABG) Surgery Measure a. Background Under section 1886(q)(5)(B) of the Act, ‘‘[b]eginning with FY 2015, the Secretary shall, to the extent practicable, expand the applicable conditions beyond the 3 conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) . . . to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission [MedPAC] in its report to Congress in June 2007, and to other conditions and procedures as determined appropriate by the Secretary.’’ The four conditions and procedures recommended by MedPAC are: (1) Coronary artery bypass graft (CABG) surgery; (2) chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI); and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act directs the Secretary, in selecting an ‘‘applicable condition,’’ to choose from among readmissions ‘‘that represent conditions or procedures that are high volume or high expenditures under this title (or other criteria specified by the Secretary).’’ In accordance with section 1886(q)(5)(A) of the Act, effective for the calculation of the readmissions payment adjustment factors in FY 2017, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28108 through 28111), we proposed to expand the scope of applicable conditions and procedures to include patients readmitted following CABG surgery. This proposal is consistent with the prior FY 2014 IPPS/LTCH PPS final rule (78 FR 50657) where we indicated our intent to explore quality measures that address CABG readmission rates. We describe this measure in detail below. We proposed the inclusion of the condition of CABG readmissions to the Hospital Readmissions Reduction Program based on MedPAC’s recommendations. For this condition, we developed a Hospital-Level 30-Day E:\FR\FM\22AUR2.SGM 22AUR2 50034 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure. The National Quality Forum (NQF) Measure Applications Partnership (MAP) Hospital workgroup conditionally supported this measure for use in the Hospital Readmissions Reduction Program. The condition for support is based on attainment of NQF endorsement. On February 5, 2014, we submitted the Hospital-Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure to NQF for endorsement. The rationale for expanding the applicable conditions and the measures used to estimate the excess readmissions ratio is described in detail below. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV b. Overview of the CABG Readmissions Measure: Hospital-Level, 30-Day, AllCause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery Among the seven conditions MedPAC identified in its 2007 Report to Congress as having the highest potentially preventable readmission rate, CABG had the highest rate of readmissions within 15 days following discharge (13.5 percent) and second highest average Medicare payment per readmission ($8,136).25 The annual cost to Medicare for potentially preventable CABG readmissions was estimated at $151 million.26 Evidence also shows variation in readmissions rates for patients with CABG surgery, supporting the finding that opportunities exist for improving care. The median, 30-day, riskstandardized readmission rate among Medicare fee-for-service patients aged 65 or older hospitalized for CABG in 2009 was 17.2 percent, and ranged from 13.9 percent to 22.1 percent across 1,160 hospitals.27 Although data documenting readmission reductions in CABG are limited, there are data that support CABG readmission as an important quality metric.28 Studying readmission rates after CABG surgery in New York, Hannan, et al. found: (1) Wide variation 25 Medicare Payment Advisory Committee. Report to the Congress: Promoting Greater Efficiency in Medicare, 2007. 26 Ibid. 27 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 28 Rumsfield J, Allen L. Reducing Readmission Rates: Does Coronary Artery Bypass Graft Surgery Provide Clarity? JACC Cardiovasc Interv. May 2011;4(5):2. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in readmission rates; (2) the most common cause of readmission after CABG is complication related to the surgery; and (3) that hospital-level variables such as use of cardiac rehabilitation and length of stay influenced readmission rates.29 The authors also noted that readmission rates were not closely correlated to mortality rates and thus measuring readmission rates likely offers a complementary metric intended to assess a different domain of quality. Mortality measures are more likely to encourage improvements in clinical quality, including rapid triage, effective safety practices, and early intervention and coordination in the hospital. Readmission measures place an increased emphasis on aspects of quality related to effective transitions to the outpatient setting, clear communication with patients and caregivers, and collaboration across communities and providers. Together, these data suggest that reducing readmission rates following CABG surgery is an important target for quality improvement. In addition, inclusion of this measure in the Hospital Readmissions Reduction Program aligns with CMS’ Quality Strategy objectives to promote successful transitions of care for patients from the acute care setting to the outpatient setting, and to reduce short-term readmission rates. In its final recommendations for rulemaking, the MAP conditionally supported the inclusion of the proposed CABG measure pending NQF endorsement and implementation. In order to address this concern, we submitted the CABG readmission measure to NQF for endorsement on February 5, 2014. We believe the proposed HospitalLevel, 30-Day, All-Cause, Unplanned Readmission Measure Following CABG Surgery measure warrants inclusion in the Hospital Readmissions Reduction Program for FY 2017 because it meets the criteria in section 1886(q)(5)(A) of the Act, as a high cost, high volume condition that was recognized by MedPAC Report to Congress in 2007 as a specific medical condition to focus on for improving readmission rates. As with other readmission measures, this measure also excludes such unrelated readmissions as planned readmissions and transfers to other hospitals. For these reasons, we believe this measure is appropriate for the Hospital Readmissions Reduction Program. 29 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. PO 00000 Frm 00182 Fmt 4701 Sfmt 4700 We invited public comments on this proposal. Comment: Many commenters supported the use of the Hospital-Level, 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery (NQF #2515) measure unconditionally, while other commenters only supported the use of the measure if it was endorsed by the NQF. Some commenters supported the measure because it will add more conditions and procedures to the Hospital Readmissions Reduction Program. Other commenters supported the measure but encouraged CMS to implement the measure in FY 2016 instead FY 2017 because the measure will be NQF-endorsed by FY 2016 and the MAP conditionally recommended the measure upon endorsement. Response: We appreciate the commenters’ support for the inclusion of the Hospital-Level, 30-DayDay AllCause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery measure (NQF #2515) in the Hospital Readmissions Reduction Program. We also appreciate the recommendation to expand the program by another condition-specific measure a year earlier than proposed. We note that, in last year’s final rule, we stated we would allow the stakeholders time to become familiar with the current finalized measures, and for this reason, we proposed to implement the measure in FY 2017 rather than FY 2016. Finally, on May 5–6, 2014, both the STS Risk-Adjusted Coronary Artery Bypass Graft (CABG) Readmission Rate measure (NQF #2514) and the CMS Hospital 30-DayDay, All-Cause, Unplanned, Risk Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515) were recommended for endorsement by the NQF (Draft Report for Commenting at: https://www.qualityforum.org/Project Materials.aspx?projectID=73619). Comment: Many commenters did not support the use of the CMS Hospital 30DayDay, All-Cause, Unplanned, Risk Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515) for the Hospital Readmissions Reduction Program. Some of the reasons commenters gave for not supporting the CABG readmission measure (NQF #2515) included: • Not being given enough time to establish their quality improvement program before having to incorporate additional medical conditions into its program. These commenters indicated that expansion of the Hospital Readmissions Reduction Program E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations through additional conditions (that is, readmission measures) and penalties while these hospital programs are being established will place additional strain on hospitals before they are given a chance to succeed in reducing their readmission rates; • Not being given time to become familiar with the CABG readmission measure (NQF #2515) through the Hospital IQR Program; • CMS not addressing Hospital Readmissions Reduction Program policies related to a lack of riskadjustment for SES and excessive payment penalties for a single readmission; • Belief that there is the potential negative consequence of unfairly targeting hospitals that do perform CABG surgical procedures, when CABG is not a universally performed procedure; and • Belief that there is the potential negative unintended consequence of reducing access for high-risk, older patients to CABG procedures due to their increased potential for complications and readmissions. This commenter asked that CMS monitor CABG utilization in high-risk, older patients to ensure these patients are offered medically indicated care. Finally, one commenter did not support the CABG readmission measure (NQF #2515) until concerns over the limitations of the readmissions exclusions, risk adjustment, and access to information on hospital performance on the readmission measures were resolved. Response: We acknowledge that there is a balance between allowing time for stakeholders to initiate and establish programs to improve readmission rates and expanding the Hospital Readmissions Reduction Program to narrow the performance gaps noted throughout the nation with various medical conditions. We take into account many factors when we decide how and when to expand the readmission measure set, and believe that addition of the CABG readmission measure (NQF #2515) for FY 2017 is reasonable, especially considering that we had signaled in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27597) that we were considering how to expand the Hospital Readmissions Reduction Program based on the recommendations in MedPAC’s June 2007 report (available at: https://www.medpac.gov/documents/ jun07_entirereport.pdf) which included CABG surgical procedures. We understand that hospitals prefer time to become familiar with new measures and, for this reason, we had posted the CABG readmission measure (NQF VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 #2515) measure methodology reports in April 2014 the CMS Web site (https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html), as well as alerted the public of these reports documents in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28109). We also have intermittently performed dry runs for certain measures and may consider plans to have a dry run for the CABG readmission measure (NQF #2515) in order to allow hospitals and other stakeholders to become more familiar with the measure. We also provide the opportunity for hospitals to review and correct their readmissions data relating to these measures prior to its release to the public on the Hospital Compare Web site. We anticipate the review and correction period to be in late July 2014. Because we have instituted a sequential pattern of implementing a readmission measure in the Hospital IQR Program before implementing it in the Hospital Readmission Reduction Program, we believe that stakeholders have sufficient time to become familiar with this measure because it will not be implemented until FY 2017. We also note suggestions we received from some commenters that we take advantage of the readmissions’ improvement momentum, as evidenced by nationwide reductions in the rate of hospital readmissions, by expanding the Hospital Readmission Reduction Program measure set beginning in FY 2016 instead of FY 2017. We will continue to take into consideration comments regarding expansion of the Hospital Readmission Reduction Program during future deliberations on when to expand the readmission measure set. Regarding the concern for a lack of SES risk-adjustment SES in the CABG readmission measure (NQF #2515), we refer readers to section IV.H.4 of this preamble of this final rule for our discussion of SES. We note the commenter’s views that CMS imposes excessive payment penalties for a single readmission. We recognize that not all hospitals perform CABG procedures. However, we also note that in the January 2009– September 2011 Medicare FFS data, there were over 150,000 CABG procedures eligible for inclusion in this measure, and that there was a broad range of hospital-level risk-standardized readmission rates after CABG surgical procedures among hospitals ranges from PO 00000 Frm 00183 Fmt 4701 Sfmt 4700 50035 12.0 percent to 23.1 percent.30 We also note in MedPAC’s June 2007 report (available at: https://www.medpac.gov/ documents/jun07_entirereport.pdf) that CABG has the highest potentially preventable readmission rate within 15 days following discharge (13.5 percent) and the second highest average Medicare payment per readmission ($8,136). For these reasons, and because of the physical and emotional burden of readmissions on patients themselves, we seek to ensure readmission rates following these common, costly, and preventable procedures are adequately monitored and hospitals are provided with performance data to allow quality improvement. Finally, regarding the concern for a potential negative unintended consequence of reducing access for high-risk, older patients to CABG procedures due to such patients’ increased potential for complications and readmissions, we note that the readmission measures take into account the care of older patients in the riskadjustment model in order not to create disincentives to care for older patients. We also note that the goal of the readmissions measures is not to have readmission rates of zero, but rather to evaluate hospitals relative to hospitals with similar patients for excess readmissions. We will consider ways to monitor for this unintended consequence as well. Comment: Many commenters stated that the CMS Hospital 30-DayDay, AllCause, Unplanned, Risk Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515) is unreliable due to a small number of CABG surgeries performed during the measurement period. One commenter suggested that hospitals may be unfairly penalized because of variation in readmission rates that results from a small number of cases during the measurement period. Response: We appreciate the commenters’ feedback, and note that reliability is related to sample size. We do not agree that the CABG readmission measure is unreliable. We note that the same statistical approach to reliability for the CMS Hospital 30-Day, All-Cause, Unplanned, Risk Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2515) is used and established for all other CMS NQF30 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50036 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations approved, hospital risk-adjusted outcome measures, including the mortality and readmissions measures. We adopted a risk adjustment modeling methodology for our outcome measures that takes into account sample size. We note that this issue was raised and responded to in part in the FY 2013 and FY 2014 IPPS/LTCH PPS final rules (77 FR 53379 and 78 FR 50659, respectively) in our discussion of the readmission measures for the Hospital Readmissions Reduction Program. In the former rule, we stated that ‘‘[w]e determined the 25-case threshold for public reporting based on a reliability statistic that is calculated from the intercluster correlation, a parameter of the model [we refer readers to pages 14 through 17 of the document ‘‘PulmonaryAdditionalComment.pdf’’ which can be retrieved at: https:// www.google.com/url?sa=t&rct=j&q=& esrc=s&source=web&cd=1&ved=0CB0Q FjAA&url=https%3A% 2F%2Fwww.qualityforum.org%2FWork Area%2Flinkit.aspx%3FLink Identifier%3Did%26ItemID%3D 71385&ei=CRDYU4D6BYPhsASm4o DACA&usg=AFQjCNEvsLpiX23smKp BINVSv-91IAsXGA&sig2=UMJeMe 1LdVq3lP69ks-1Hg&bvm=bv.71778758, d.cWc&cad=rja]. We are maintaining the minimum 25-case threshold that we adopted through rulemaking last year.’’ We acknowledge that smaller hospitals typically have less certain estimates because they have fewer cases for use in assessing quality. Our approach to modeling addresses the concern that small hospitals will be penalized due to random variation, and this challenge is inherent in outcome measurements. However, one advantage of the statistical model used for the CMS outcome measures is that it allows for the inclusion of small hospitals while characterizing the certainty of their estimates. The hierarchical logistic regression model that we use to calculate the risk-standardized outcome measures allows the inclusion of hospitals with relatively few observations, but takes into account the uncertainty associated with sample size in estimating their risk-standardized outcome rates. The model takes into account the uncertainty in the estimate of outcome rates for low-volume hospitals by assuming that each hospital is a typically performing hospital. It weighs that assumption along with the outcomes for the particular hospital in calculating the outcome rate. Therefore, the estimated outcome rates for smaller hospitals will likely be closer to the national rate because the limited number of eligible cases in the hospital VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 indicated little about that hospital’s true outcome rate. c. Methodology for the CABG Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery The proposed CABG readmission measure assesses hospitals’ 30-day, allcause risk-standardized rate of unplanned readmission following admission for a CABG procedure. In general, the measure uses the same approach to risk-adjustment and hierarchical logistic modeling (HLM) methodology that is specified for the AMI, HF, PN, COPD, and THA/TKA readmission measures that we previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case-mix), the number of patients it treats, and the quality of care it provides. The HLM methodology is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and, therefore, the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. The measure methodology defines hospital case-mix based on the clinical diagnoses provided in the hospitals’ claims for the hospitals’ patient inpatient and outpatient visits for the 12 months prior to the hospitalization for CABG, as well as those present in the claims for care at admission. However, the methodology specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. Comment: One commenter supported the minimum case size and believed that hospitals that are included in this measure will far exceed the minimum case volume, which will result in better measurement of a predicted readmission rate. Response: We appreciate the commenter’s support. Comment: One commenter believed that, for the CABG measure, there should be areas for accountability on both the index and discharge hospitals. For example, if the discharge hospital does not perform accurate medication reconciliation, an error resulting in PO 00000 Frm 00184 Fmt 4701 Sfmt 4700 readmission should not reasonably be attributed to the index hospital. Response: We acknowledge that, unlike our other readmission measures in the Hospital Readmissions Reduction Program, the CABG readmission measure (NQF #2515) attributes the readmission outcome to the hospital that performed the initial CABG procedure, even if that hospital was not responsible for discharging the patient home or to a postacute setting for care. We took this approach for CABG readmission measure (NQF #2515) because, unlike for medical conditions, transfer to another acute care facility following CABG surgery is most likely due to a complication of the initial CABG procedure or the peri-operative care the patient received.31 Therefore, the care provided by the hospital performing the CABG procedure likely dominates readmission risk, even among transferred patients. We believe that the transferring hospital has control over the hospital to which they transfer their CABG patients and will be encouraged by this measure to work closely with the institutions they transfer patients to, to provide optimal continuity of care for their patients. We note that this approach is supported by the high proportion of CABG readmissions for diagnoses such as heart failure, pleural effusion, and pneumonia and is endorsed by clinical experts from the Society of Thoracic Surgeons and the nationally convened Technical Expert Panel members who helped develop this measure.32 We discuss the measure methodology below. (1) Data Sources The proposed CABG readmission measure is based on data derived from administrative claims. It uses Medicare administrative data from hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG procedure. (2) Definition of Outcome The proposed CABG readmission measure defines 30-day, all-cause readmission as an unplanned subsequent inpatient admission to any applicable acute care facility for any cause within 30 days of the date of discharge from the index 31 Hannan EL, Racz MJ, Walford G, Ryan TJ, Isom OW, Bennett E, Jones RH. Predictors of Readmission for Complications of Coronary Artery Bypass Graft Surgery. JAMA. 2003;290:773–780. 32 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV hospitalization. A number of studies demonstrate that improvements in care at the time of discharge can reduce 30day readmission rates.33 34 Thirty days is a meaningful timeframe for hospitals because readmissions are more likely attributable to care received within the index hospitalization and during the transition to the outpatient setting. The proposed CABG readmission measure assesses all-cause unplanned readmissions (excluding planned readmissions) rather than readmissions for CABG only. We include all unplanned readmissions for several reasons. First, from the patient perspective, a readmission for any reason is likely to be an undesirable outcome of care, even though not all readmissions are preventable. Second, limiting the measure to CABG-related readmissions may focus quality improvement efforts too narrowly rather than encouraging broader initiatives aimed at improving the overall care within the hospital and care transitions from the hospital setting. Moreover, it is often hard to exclude quality issues and accountability for a readmission based on the documented cause of readmission. For example, a patient who underwent a CABG surgery and developed a hospital associated infection might ultimately be readmitted for sepsis. It would be inappropriate to consider such a readmission to be unrelated to the care the patient received for their CABG surgery. Finally, while the measure does not presume that each readmission is preventable, quality improvement interventions generally have shown reductions in all types of readmissions. The proposed measure does not count planned readmissions as readmissions. Planned readmissions are identified in claims data using the CMS Planned Readmission Algorithm Version 3.0 that detects planned readmissions that may occur within 30 days of discharge from the hospital. Version 2.1 of the algorithm was finalized for use in the Hospital Readmissions Reduction Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through 50655). We have since updated the algorithm to Version 3.0 as part of yearly measure maintenance. The proposed CABG readmission measure uses the planned 33 Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency Department Visit and Readmission in Patients Hospitalized for Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct. 2010;170:1664– 1670. 34 Nelson EA, Maruish ME, Axler JL.: Effects of Discharge Planning and Compliance with Outpatient Appointments on Readmission Rates. Psychiatr Serv. July 1 2000;51(7):885–889. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 readmission algorithm, tailored for CABG patients. We adapted the algorithm for this group of patients with input from cardiothoracic surgeons and other experts, narrowing the types of readmissions considered planned because planned readmissions following CABG are less common and less varied than among patients discharged from the hospital following a medical admission. More detailed information on how the proposed CABG readmission measure incorporates the CMS Planned Readmission Algorithm Version 3.0 can be found in the 2012 CABG Readmission Measure Methodology Report on the CMS Web site (available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/MeasureMethodology.html). For the proposed CABG readmission measure, unplanned readmissions that fall within the 30-day post-discharge timeframe from the index admission would not be counted as readmissions for the index admission if they were preceded by a planned readmission. (3) Cohort of Patients In order to include a clinically coherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and noncardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures; that is, CABG procedures performed without concomitant high-risk cardiac and noncardiac procedures.35 Limiting the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes. Therefore, the proposed measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort suitable for a riskadjusted outcome measure. For detailed information on the cohort definition, we refer readers to the 2012 CABG Readmission Measure Methodology Report on the CMS Web site (available 35 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. PO 00000 Frm 00185 Fmt 4701 Sfmt 4700 50037 at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). Comment: One commenter supported focusing on isolated CABG cases for the measure because it reflects a much more cohesive clinical population. Response: We appreciate the commenter’s support. (4) Inclusion and Exclusion Criteria The proposed CABG readmission measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare FFS enrollment to allow for adequate data for risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who are discharged against medical advice (excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); (2) admissions for patients who die during the initial hospitalization (these patients are not eligible for readmission); (3) admissions for patients with subsequent qualifying CABG procedures during the measurement period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery; therefore, we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort); and (4) admissions for patients without at least 30 days post-discharge enrollment in Medicare FFS (excluded because the 30day readmission outcome cannot be assessed in this group). Comment: One commenter did not support the CABG measure because it does not exclude readmissions unrelated to the initial reason for admission. Response: We addressed a similar comment in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50654). We continue to review and revise the area of unrelated readmissions through our expansion of planned readmissions. Regarding other types of unrelated readmissions, we currently do not seek to differentiate between related and unrelated readmissions because readmissions not directly related to the index condition may still be a result of the care received during the index hospitalization. For example, a patient hospitalized for CABG who develops a hospital associated infection may ultimately be readmitted for sepsis. It would be inappropriate to treat this readmission as unrelated to the care the E:\FR\FM\22AUR2.SGM 22AUR2 50038 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV patient received during the index hospitalization. Furthermore, the range of potentially avoidable readmissions also includes those not directly related to the initial hospitalization, such as those resulting from poor communication at discharge or inadequate follow-up. Therefore, we believe that creating a comprehensive list of potential complications related to the index hospitalization would be arbitrary, incomplete, and, ultimately, extremely difficult to implement. However, in coordination with medical experts, we created a planned readmission algorithm to determine conditions considered planned. Generally, planned readmissions are not a signal of quality of care. Therefore, we have worked with experts in the medical community, as well as other stakeholders, to carefully identify procedures and treatments that should be considered ‘‘planned’’ and, therefore, not counted as readmissions. (5) Transferred Patients and Attribution of Readmission Outcome Among medical conditions, such as AMI, heart failure, and pneumonia, transfers between acute care facilities can occur for a variety of different reasons and it is likely that the discharging hospital has the most influence over a patient’s risk of readmission and therefore the readmission outcome is appropriately assigned to the hospital that discharges the patient. For that reason, the currently publicly reported AMI, HF, and PN readmission measures attribute the readmission outcome to the hospital discharging the patient, even if that is not the hospital that initially admitted the patient. In contrast, following CABG surgery, transfer to another acute care facility after CABG is most likely due to a complication of the CABG procedure or the peri-operative care the patient received. Therefore, the care provided by the hospital performing the CABG procedure likely dominates readmission risk, even among transferred patients. This viewpoint is supported by the high proportion of CABG readmissions for diagnoses such as heart failure, pleural effusion, and pneumonia and endorsed by the clinical experts on YNHHSC/ CORE, and the STS CABG readmission measure development working groups and our TEP. Therefore, for this measure, the readmission outcome is attributed to the hospital performing the first (‘‘index’’) CABG, even if this is not the discharging hospital. For example, a patient may be admitted to hospital A for a CABG that qualifies the patient for inclusion in the measure and is then VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 transferred to hospital B. The initial admission to hospital A and the admission to hospital B are considered one acute episode of care, made up of two inpatient admissions. The measure identifies transferred patients as those who are admitted to an acute care hospital on the same day or following day of discharge from an eligible admission. Comment: One commenter supported attributing the readmission following a CABG procedure to the hospital performing the first CABG procedure. Response: We appreciate the commenter’s support. (6) Risk-Adjustment The proposed CABG readmission measure adjusts for differences across hospitals in the level of risk their patients have for readmission relative to patients cared for by other hospitals. The measure uses administrative claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. We refer readers to section IV.H.4 of the preamble of this final rule for further discussion of risk-adjustment for socioeconomic factors. Comment: One commenter was concerned with the CABG readmission measure’s predictive ability, but the commenter did not provide additional details of its concern. Response: We believe the commenter’s primary concern is with the c-statistic of the measure, and would like to clarify the important difference between predictive models intended for patient-level risk-stratification versus models used to profile hospital performance. First, in a patient-level predictive model, the objective is to predict patient outcomes and the riskadjustment variables as a means to best predict these outcomes. As an example, a patient who has a serious complication of care may be at higher risk of mortality and readmission, and therefore complications might be useful to include in a model used for patientlevel prediction. Second, and in contrast, the role of risk-adjustment in hospital profiling models is to level the playing field for hospitals in measures that assess hospitals on their relative performance—that is, on how well a hospital is doing compared to other hospitals with similar patients. The riskadjustment variables should only include those that are inherent to the patient and are present at the start of the time period. Although risk-adjusting for complications of care could increase the statistical power of a profiling model, it PO 00000 Frm 00186 Fmt 4701 Sfmt 4700 would not make sense to risk-adjust for complications because it could lead hospitals with high rates of complications to appear to be performing better than hospitals that admitted similar patients even though the quality of care is worse. We note that, in addition to this clarification, the CABG readmission measure (NQF #2515) risk model has been validated using registry data from the STS’ Adult Cardiac Surgery Database and produced nearly identical c-statistics in a matched set of patients with correlation coefficients between 0.92 and 0.96, depending upon the statistic used.36 Comment: One commenter encouraged CMS to ensure measures risk-adjust for comorbidities and preexisting conditions for vascular patients as these are major determinants of patient outcomes. Response: We agree with the commenter that vascular comorbidities and preexisting conditions for vascular patients are important determinants of CABG patient outcomes. The CABG readmission measure adjusts for a range of preexisting comorbidities, including vascular and circulatory conditions, stroke and cerebrovascular disease, and other cardiac disorders such as congestive heart failure and arrhythmias, as well as comorbidities that place patients at risk for these conditions, such as diabetes and endstage renal disease.37 (7) Calculating the Excess Readmissions Ratio The proposed CABG readmission measure uses the same methodology and statistical modeling approach as the other Hospital Readmissions Reduction Program measures. We published a detailed description of how the readmission measures estimate the excess readmissions ratio in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381). In summary, we proposed to adopt the Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure in the Hospital Readmissions Reduction Program beginning in FY 2017. 36 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 37 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV We note that the set of hospitals for which this measure is calculated for the Hospital Readmissions Reduction Program differs from the set of hospitals used in calculations for the Hospital IQR Program. The Hospital Readmissions Reduction Program includes only subsection (d) hospitals as defined in 1886(d)(1)(B) of the Act, while the Hospital IQR Program calculations include non-IPPS hospitals such as CAHs, cancer hospitals, and hospitals located in the Territories of the United States. However, we believe that the CABG readmissions measure is appropriate for use in both programs. After consideration of the public comments we received, we are finalizing our proposal to adopt the Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Measure Following CABG Surgery measure for inclusion in the Hospital Readmissions Reduction Program for FY 2017. 7. Maintenance of Technical Specifications for Quality Measures Technical specification of the readmission measures are provided at our Web site in the Measure Methodology Reports (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). Additional resources about the Hospital Readmissions Reduction Program and measure technical specifications and methodology are on the QualityNet Web site on the Resources Web page (available at: https://www.qualitynet. org/dcs/ContentServer?c=Page&page name=QnetPublic%2FPage%2FQnet Tier3&cid=1228772412995). Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF endorsed. As part of its regular maintenance process for NQF-endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. We note that NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates required by the NQF into the measure specifications we have adopted for the Hospital Readmissions Program so that these measures remain up-to-date. The NQF regularly maintains its endorsed measures through annual and triennial reviews, which may result in the NQF requiring updates to the measures. We note that, for this calendar year, the AMI readmission measure is undergoing the NQF maintenance endorsement process. For the Hospital Readmissions Reduction Program, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28111), we proposed to follow the finalized processes outlined for addressing changes to adopted measures in the Hospital IQR Program ‘‘Maintenance of Technical Specifications for Quality Measures’’ section found in section IX.A.1.b. of the preamble of the proposed rule. We believe this proposal adequately balances our need to incorporate NQF updates to NQF-endorsed Hospital Readmissions Reduction Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We invited public comment on this proposal. Comment: One commenter commended the proposal to follow the finalized processes outlined for addressing changes to adopted measures in the Hospital IQR Program ‘‘Maintenance of Technical Specifications for Quality Measures’’ section found in section IX.A.1.b. of the preamble of the proposed rule (79 FR 28218). The commenter noted that this policy of handling substantive and nonsubstantive changes to measures that arise through measure maintenance processes allows CMS two mechanisms to address measure updates: (1) The use of future proposed rules and review periods for substantive changes; (2) subregulatory processes for nonsubstantive changes which also preserves CMS’ autonomy and flexibility to rapidly implement nonsubstantive updates to measures. No commenters opposed or recommended changes to the proposal. Response: We appreciate the commenter’s support. Comment: One commenter indicated that any changes to a measure developed for adults but now include those <18 years of age should not be considered nonsubstantive. PO 00000 Frm 00187 Fmt 4701 Sfmt 4700 50039 Response: We appreciate this comment and note that this concern was addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50776). After consideration of the public comments we received, we are finalizing the proposed maintenance of technical specifications for quality measures for the Hospital Readmissions Reduction Program. 8. Waiver From the Hospital Readmissions Reduction Program for Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (§ 412.152 and § 412.154(d)) The definition of ‘‘applicable hospital’’ under section 1886(q)(5)(C) of the Act also includes hospitals paid under section 1814(b)(3) of the Act. Section 1886(q)(2)(B)(ii) of the Act, however, allows the Secretary to exempt such hospitals from the Hospital Readmissions Reduction Program, provided that the State submit an annual report to the Secretary describing how a similar program to reduce hospital readmissions in that State achieves or surpasses the measured results in terms of health outcomes and cost savings established by Congress for the program as applied to ‘‘subsection (d) hospitals.’’ The State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dualeligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. As part of this agreement, Medicare will no longer pay Maryland hospitals in accordance with section 1814(b)(3) of the Act. Therefore, section 1886(q)(2)(B)(ii) of the Act is no longer applicable to Maryland hospitals. The effect of Maryland hospitals no longer being paid under 1814(b)(3) of the Act is that they are not entitled to be exempted from the Hospital Readmissions Reduction Program under section 1886(q)(2)(B)(ii) of the Act but, for the model, would be included in the Hospital Readmissions Reduction Program. In other words, the exemption E:\FR\FM\22AUR2.SGM 22AUR2 50040 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV from the Hospital Readmissions Reduction Program under section 1814(b)(3) of the Act no longer applies. However Maryland hospitals will not be participating in the Hospital Readmissions Reduction Program because section 1886(q) of the Act and its implementing regulations have been waived for purposes of the model, under the terms of the agreement. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28111 through 28112), we proposed to make conforming changes to the implementing regulations to reflect this change. Under § 412.152, we proposed to delete from the definition of an ‘‘applicable hospital’’ the following language: ‘‘or a hospital in Maryland that is paid under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the hospital inpatient prospective payment system.’’ Under § 412.154, we proposed to delete § 412.154(d) in its entirety. We invited public comment on these proposals. Comment: Several commenters supported CMS’ proposal to continue to exempt Maryland hospitals, now being paid under the Maryland All-Payer Model, from the Hospital Readmissions Reduction Program and the proposed conforming changes to the Hospital Readmissions Reduction Program regulations. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing the changes to the Hospital Readmissions Reduction Program regulations as proposed without modification. Specifically, we are finalizing our proposal to make conforming changes to our regulations at § 412.152 and § 412.154(d) to reflect that Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act. 9. Floor Adjustment Factor for FY 2015 (§ 412.154(c)(2)) Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. Specifically, it states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the aggregate payments for all discharges . . . .’’ The calculation of this ratio is codified at § 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act specifies the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. We codified the floor adjustment factor at § 412.154(c)(2) of the regulations (77 FR 53386). Consistent with 1886(q)(3) of the Act, codified at § 412.154(c)(2), the adjustment factor is either the greater of the ratio or, for FY 2015 and subsequent fiscal years, a floor adjustment factor of 0.97. Under our established policy, the ratio is rounded to the fourth decimal place. In other words, for FY 2015 and subsequent fiscal years, a hospital subject to the Hospital Readmissions Reduction Program will have an adjustment factor that is between 1.0 (no reduction) and 0.9700 (greatest possible reduction). Comment: One commenter expressed concern that the maximum reduction has been raised from 2 percent to 3 percent and that, in conjunction with adding two new measures to the program, this change will only increase harm to safety net hospitals. Response: We recognize the commenter’s concern regarding the magnitude of the maximum payment reduction for FY 2015 provided under the statute. Section 1886(q)(3) of the Act requires that, effective for discharges occurring in FY 2015 and beyond, the maximum readmissions payment adjustment factor or the floor adjustment factor to be 0.97 or a 3 percent reduction, applied to a hospital’s base operating DRG payment amount. We note that we estimate that only 39 hospitals will be subject to the maximum reduction for FY 2015. After consideration of the public comments we received, we are finalizing our proposal that the floor adjustment factor be 0.97 for FY 2015, consistent with section 1886(q)(3) of the Act, as codified at § 412.154(c)(2). 10. Applicable Period for FY 2015 Under section 1886(q)(5)(D) of the Act, the Secretary has the authority to specify the applicable period with respect to a fiscal year under the Hospital Readmissions Reduction Program. We finalized our policy to use 3 years of claims data to calculate the readmission measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition of ‘‘applicable period’’ in the regulations at 42 CFR 412.152 as the 3year period from which data are VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00188 Fmt 4701 Sfmt 4700 collected in order to calculate excess readmissions ratios and adjustments for the fiscal year, which includes aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment. Consistent with the definition at § 412.152, we established that the applicable period for FY 2014 under the Hospital Readmissions Reduction Program is the 3-year period from July 1, 2009, to June 30, 2012. That is, we determined the excess readmissions ratios and calculate the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2014 using data from the 3-year time period of July 1, 2009 to June 30, 2012, as this was the most recent available 3-year period of data upon which to base these calculations (78 FR 50669). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28112), for FY 2015, consistent with the definition at § 412.152, we proposed an ‘‘applicable period’’ for the Hospital Readmissions Reduction Program to be the 3-year period from July 1, 2010 to June 30, 2013. In other words, we proposed that the excess readmissions ratios and the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2015 would be calculated based on data from the 3-year time period of July 1, 2010 to June 30, 2013. We invited public comment on these proposals. Comment: Several commenters requested that CMS make real-time reporting of readmission rates accessible to hospitals, while other commenters suggested that CMS monitor reported data for correlation and trends to identify if hospitals are making unacceptable trade-offs by reducing readmissions at the expense of increasing post discharge mortality. Response: We note that these requests are considered out of scope for the Hospital Readmissions Reduction Program in the FY 2015 IPPS/LTCH PPS proposed rule and will take these requests under consideration during future rulemaking. Comment: Several commenters requested that CMS revise the applicable time period to only include the most recent year. One commenter believed that it is unfair to penalize hospitals for performance from 2 or 3 years ago, especially if they have improved in the most recent year. Response: We note that we addressed this concern in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380), and that E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV we use a 3-year period of index admissions to increase the number of cases per hospital used for measure calculation, which improves the precision of each hospital’s readmission estimate. Although this approach utilizes older data, it also identifies more variation in hospital performance and still allows for improvement from one year of reporting to the next. After consideration of the public comments we received, we are finalizing as proposed the applicable period of the 3-year time period of July 1, 2010 to June 30, 2013 to calculate the excess readmission ratios and the readmission payment adjustment factors for FY 2015. 11. Inclusion of THA/TKA and COPD Readmissions Measures To Calculate Aggregate Payments for Excess Readmissions Beginning in FY 2015 Under the Hospital Readmissions Reduction Program the ‘‘base operating DRG payment amount’’ defined at § 412.152 is used both to determine the readmission adjustment factor that accounts for excess readmissions under section 1886(q)(3) of the Act and to determine which payment amounts will be adjusted to account for excess readmissions under section 1886(q) of the Act. Consistent with section 1886(q)(2) of the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53383), under the regulations at § 412.152, we define the ‘‘base operating DRG payment amount’’ and specify that it does not include adjustments or addon payments for IME, DSH, outliers and low-volume hospitals as required by section 1886(q)(2) of the Act. Furthermore, consistent with section 1886(q)(2)(B)(i) of the Act, for SCHs and for MDHs for FY 2013, the definition of ‘‘base operating DRG payment amount’’ at § 412.152 excludes the difference between the hospital’s applicable hospital-specific payment rate and the Federal payment rate. For FY 2015 and subsequent years, for purposes of calculating the payment adjustment factors and applying the payment methodology, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28112 through 282117), we proposed that the base operating DRG payment amount for MDHs includes the difference between the hospital-specific payment rate and the Federal payment rate (as applicable). Section 1886(q)(3)(B) of the Act specifies the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions . . . and (ii) the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 aggregate payments for all discharges. . . .’’ The definition of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges,’’ as well as a methodology for calculating the numerator of the ratio (aggregate payments for excess readmissions) and the denominator of the ratio (aggregate payments for all discharges) are codified at § 412.154(c)(2) of the regulations (77 FR 53387). Section 1886(q)(4) of the Act sets forth the definitions of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘for a hospital for an applicable period, the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio . . . for such hospital for such applicable period minus 1.’’ We codified this definition of ‘‘aggregate payments for excess readmissions’’ under the regulations at § 412.152 as the product, for each applicable condition, of: (1) The base operating DRG payment amount for the hospital for the applicable period for such condition; (2) the number of admissions for such condition for the hospital for the applicable period; and (3) the excess readmissions ratio for the hospital for the applicable period minus 1 (77 FR 53675). The excess readmissions ratio is a hospital-specific ratio calculated for each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the excess readmissions ratio as the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable hospital for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. The methodology for the calculation of the excess readmissions ratio was finalized in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51673). ‘‘Aggregate payments for excess readmissions’’ is the numerator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program (as described in further detail later in this section). The term ‘‘aggregate payments for all discharges’’ is defined at section 1886(q)(4)(B) of the Act as ‘‘for a hospital for an applicable period, the sum of the base operating DRG payment PO 00000 Frm 00189 Fmt 4701 Sfmt 4700 50041 amounts for all discharges for all conditions from such hospital for such applicable period.’’ ‘‘Aggregate payments for all discharges’’ is the denominator of the ratio used to calculate the adjustment factor under the Hospital Readmissions Reduction Program. We codified this definition of ‘‘aggregate payments for all discharges’’ under the regulations at § 412.152 (77 FR 53387). We finalized the inclusion of two additional applicable conditions, COPD and THA/TKA, to the Hospital Readmissions Reduction Program beginning for FY 2015 in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657 through 50664). In section IV.H.11. of the preamble of the proposed rule, we discussed the proposed methodology to include these two additional measures in the calculation of the readmissions payment adjustment for FY 2015. Specifically, we proposed how the addition of COPD and THA/TKA applicable conditions would be included in the calculation of the aggregate payments for excess readmissions, which is the numerator of the readmissions payment adjustment. We note that this proposal does not alter our established methodology for calculating aggregate payments for all discharges, that is, the denominator of the ratio (77 FR 53387). As discussed above, when calculating the numerator (aggregate payments for excess readmissions), we determine the base operating DRG payments for the applicable period. ‘‘Aggregate payments for excess readmissions’’ (the numerator) is defined as ‘‘the sum, for applicable conditions . . . of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the excess readmissions ratio . . . for such hospital for such applicable period minus 1.’’ When determining the base operating DRG payment amount for an individual hospital for such applicable period for such condition, we use Medicare inpatient claims from the MedPAR file with discharge dates that are within the same applicable period to calculate the excess readmissions ratio. We use MedPAR claims data as our data source for determining aggregate payments for excess readmissions and aggregate payments for all discharges, as this data source is consistent with the claims data source used in IPPS rulemaking to determine IPPS rates. For FY 2015, we proposed to use MedPAR claims with discharge dates E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50042 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations that are on or after July 1, 2010, and no later than June 30, 2013. Under our established methodology we use the update of the MedPAR file for each Federal fiscal year, which is updated 6 months after the end of each Federal fiscal year within the applicable period, as our data source (that is, the March updates of the respective Federal fiscal year MedPAR files) for the final rules. The FY 2010 through FY 2013 MedPAR data files can be purchased from CMS. Use of these files allows the public to verify the readmissions adjustment factors. Interested individuals may order these files through the CMS Web site at: https:// www.cms.hhs.gov/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)–Hospital (National). This Web page describes the files and provides directions and further detailed instructions for how to order the data sets. Persons placing an order must send the following: A Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check for $3,655 to: • If using the U.S. Postal Service: Centers for Medicare and Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520. • If using express mail: Centers for Medicare and Medicaid Services, OFM/ Division of Accounting–RDDC, Mailstop C#07–11, 7500 Security Boulevard, Baltimore, MD 21244–1850. In the proposed rule, we proposed to determine aggregate payments for excess readmissions and aggregate payments for all discharges using data from MedPAR claims with discharge dates that are on or after July 1, 2010, and no later than June 30, 2013. However, we note that, for the purpose of modeling the proposed FY 2015 readmissions payment adjustment factors for the proposed rule, we used excess readmissions ratios for applicable hospitals from the FY 2014 Hospital Readmissions Reduction Program applicable period. For the final rule, applicable hospitals will have had the opportunity to review and correct data from the proposed FY 2015 applicable period of July 1, 2010 to June 30, 2013, before they are made public under our policy regarding the reporting of hospital-specific information, which is discussed later in this section. In the proposed rule, for FY 2015, we proposed to use MedPAR data from July 1, 2010 through June 30, 2013. Specifically, in the proposed rule, we used the March 2011 update of the FY 2010 MedPAR file to identify claims within FY 2010 with discharges dates VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that are on or after July 1, 2010, the March 2012 update of the FY 2011 MedPAR file to identify claims within FY 2011, the March 2013 update of the FY 2012 MedPAR file to identify claims within FY 2012, and the December 2013 update of the FY 2013 MedPAR file to identify claims within FY 2013 with discharge dates no later than June 30, 2013. For the final rule, we proposed to use the same MedPAR files as listed above for claims within FY 2010, FY 2011 and FY 2012. For claims within FY 2013, we proposed to use in the final rule the March 2014 update of the FY 2013 MedPAR file. In order to identify the admissions for each condition, including the two additional conditions THA/TKA and COPD, to calculate the aggregate payments for excess readmissions for an individual hospital, for FY 2015, we proposed to identify each applicable condition using the ICD–9–CM codes used to identify applicable conditions to calculate the excess readmissions ratios. Under our existing policy, we identify eligible hospitalizations and readmissions of Medicare patients discharged from an applicable hospital having a principal diagnosis for the measured condition in an applicable period (76 FR 51669). The discharge diagnoses for each applicable condition are based on a list of specific ICD–9–CM codes for that condition. These codes are posted on the QualityNet Web site at: https://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures > Readmission Measures > Measure Methodology. In order to identify the applicable conditions to calculate the aggregate payments for excess readmissions, for FY 2015, we proposed to identify the claim as an applicable condition consistent with the methodology to identify conditions to calculate the excess readmissions ratio. In other words, the applicable conditions of AMI, HF and PN are identified for the calculation of aggregate payments for excess readmissions if the ICD–9–CM code for that condition is listed as the principal diagnosis on the claim. In order to identify claims with the applicable condition of THA/TKA, we proposed that any claim that has the procedure codes for THA/TKA listed in any diagnosis/procedure field of the claim would be included in the calculation of aggregate payments for readmissions, consistent with the methodology to calculate the excess readmissions ratio for THA/TKA. In order to identify claims with the applicable condition of COPD, we proposed to identify claims that either have the ICD–9–CM code for that PO 00000 Frm 00190 Fmt 4701 Sfmt 4700 condition is listed as the principal diagnosis on the claim or has a principal diagnosis of some respiratory failure along with secondary diagnosis of COPD. Under our established methodology for calculating aggregate payments for readmissions, admissions that are not considered index admissions for the purpose of the readmissions measures are excluded from the calculation of the excess readmissions ratio, and therefore also are not considered admissions for the purposes of determining a hospital’s aggregate payments for excess readmissions (78 FR 50670 through 50876). With the addition of THA/TKA and COPD as applicable conditions beginning in FY 2015, we proposed to modify our current methodology to identify the admissions included in the calculation of ‘‘aggregate payments for excess readmissions’’ for THA/TKA and COPD in the same manner as the original applicable conditions (AMI, HF and PN). That is, THA/TKA and COPD admissions that would not considered index admissions in the readmissions measures also would not considered admissions for the purposes of calculation a hospital’s aggregate payments for excess readmissions. In the proposed rule, for FY 2015, we proposed to continue to apply the same exclusions to the claims in the MedPAR file as we applied for FY 2014 (78 FR 50670 through 50673), and we proposed to apply those exclusions for the two additional applicable conditions, THA/ TKA and COPD. For FY 2015, in order to have the same types of admissions to calculate aggregate payments for excess readmissions as is used to calculate the excess readmissions ratio, we proposed to identify admissions for all five applicable conditions, AMI, HF, PN, THA/TKA and COPD, for the purposes of calculating aggregate payments for excess readmissions as follows: • We would exclude admissions that are identified as an applicable condition if the patient died in the hospital, as identified by the discharge status code on the MedPAR claim. • We would exclude admissions identified as an applicable condition for which the patient was transferred to another provider that provides acute care hospital services (that is, a CAH or an IPPS hospital), as identified through examination of contiguous stays in MedPAR at other hospitals. • We would exclude admissions identified as an applicable condition for patients who are under the age of 65, as identified by linking the claim information to the information provided in the Medicare Enrollment Database. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations • For conditions identified as AMI, we would exclude claims that are same day discharges, as identified by the admission date and discharge date on the MedPAR claim. • We would exclude admissions for patients who did not have Medicare Parts A and B FFS enrollment in the 12 months prior to the index admission, based on the information provided in the Medicare Enrollment Database. • We would exclude admissions for patients without at least 30 days postdischarge enrollment in Medicare Parts A and B fee-for-service, based on the information provided in the Medicare Enrollment Database. • We would exclude all multiple admissions within 30 days of a prior index admission’s discharge date, as identified in the MedPAR file, consistent with how multiple admissions within 30 days of an index admission are excluded from the calculation of the excess readmissions ratio. These exclusions are consistent with our current methodology, which was established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50671). In addition to the exclusions described above for all five applicable conditions, for FY 2015, we proposed the following steps to identify admissions specifically for THA/TKA for the purposes of calculating aggregate payments for excess readmissions: • We proposed to exclude admissions for THA/TKA for all transfer cases regardless of whether the discharge was a transfer to another hospital or from another hospital, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We proposed to exclude admissions for THA/TKA for cases where the discharge includes a femur, hip, or pelvic fracture coded in the principal or secondary diagnosis fields, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We proposed to exclude admissions for THA/TKA for cases where the discharge includes a mechanical complication coded in the principal diagnosis field, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We proposed to exclude admissions for THA/TKA for cases where the discharge includes a malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, or bone/bone marrow or a disseminated malignant neoplasm coded in the principal diagnosis field, consistent with the calculation of the excess readmissions ratio for THA/TKA. • We proposed to exclude admissions for THA/TKA for cases where the discharge includes more than two hip/ knee procedures. • We proposed to exclude admissions for THA/TKA for cases that meet either any of the following conditions or following procedures concurrent with THA/TKA: Revision procedures; partial hip arthroplasty (PHA) procedures; resurfacing procedures; and removal of implanted devices/prostheses. Furthermore, we proposed to only identify Medicare FFS claims that meet the criteria (that is, claims paid for under Medicare Part C (Medicare Advantage) would not be included in this calculation), consistent with the methodology to calculate excess readmissions ratios based solely on admissions and readmissions for Medicare FFS patients. Therefore, consistent with our established methodology, for FY 2015, we would exclude admissions for patients enrolled in Medicare Advantage as identified in the Medicare Enrollment Database. This proposal is consistent with how admissions for Medicare Advantage patients are identified in the calculation of the excess readmissions ratios under our established methodology. The tables below list the ICD–9–CM codes we proposed to use to identify each applicable condition to calculate the aggregate payments for excess readmissions under this proposal for FY 2015. The tables include the ICD–9–CM codes we proposed to use to identify the two conditions, THA/TKA and COPD, added to the Hospital Readmissions Reduction Program beginning for FY 2015. These ICD–9–CM codes also would be used to identify the applicable conditions to calculate the excess readmissions ratios, consistent with our established policy (76 FR 51673 through 51676). ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV ICD–9–CM Code 480.0 ............................. 480.1 ............................. 480.2 ............................. 480.3 ............................. 480.8 ............................. 480.9 ............................. 481 ................................ 482.0 ............................. 482.1 ............................. 482.2 ............................. 482.30 ........................... 482.31 ........................... 482.32 ........................... 482.39 ........................... 482.40 ........................... 482.41 ........................... 482.42 ........................... 482.49 ........................... 482.81 ........................... 482.82 ........................... 482.83 ........................... 482.84 ........................... 482.89 ........................... 482.9 ............................. 483.0 ............................. 483.1 ............................. 483.8 ............................. 485 ................................ VerDate Mar<15>2010 Description of code Pneumonia due to adenovirus. Pneumonia due to respiratory syncytial virus. Pneumonia due to parainfluenza virus. Pneumonia due to SARS-associated coronavirus. Viral pneumonia: pneumonia due to other virus not elsewhere classified. Viral pneumonia unspecified. Pneumococcal pneumonia [streptococcus pneumoniae pneumonia]. Pneumonia due to klebsiella pneumoniae. Pneumonia due to pseudomonas. Pneumonia due to hemophilus influenzae [h. influenzae]. Pneumonia due to streptococcus unspecified. Pneumonia due to streptococcus group a. Pneumonia due to streptococcus group b. Pneumonia due to other streptococcus. Pneumonia due to staphylococcus unspecified. Pneumonia due to staphylococcus aureus. Methicillin Resistant Pneumonia due to Staphylococcus Aureus. Other staphylococcus pneumonia. Pneumonia due to anaerobes. Pneumonia due to escherichia coli [e.coli]. Pneumonia due to other gram-negative bacteria. Pneumonia due to legionnaires’ disease. Pneumonia due to other specified bacteria. Bacterial pneumonia unspecified. Pneumonia due to mycoplasma pneumoniae. Pneumonia due to chlamydia. Pneumonia due to other specified organism. Bronchopneumonia organism unspecified. 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00191 Fmt 4701 Sfmt 4700 50043 E:\FR\FM\22AUR2.SGM 22AUR2 50044 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES—Continued ICD–9–CM Code 486 ................................ 487.0 ............................. 488.11 ........................... Description of code Pneumonia organism unspecified. Influenza with pneumonia. Influenza due to identified novel H1N1 influenza virus with pneumonia. ICD–9–CM CODES TO IDENTIFY HEART FAILURE (HF) CASES ICD–9–CM Code 402.01 402.11 402.91 404.01 ........................... ........................... ........................... ........................... 404.03 ........................... 404.11 ........................... 404.13 ........................... 404.91 ........................... 404.93 ........................... 428.xx ........................... Code description Hypertensive heart disease, malignant, with heart failure. Hypertensive heart disease, benign, with heart failure. Hypertensive heart disease, unspecified, with heart failure. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I through stage IV, or unspecified failure and chronic kidney disease stage V or end stage renal disease. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease heart failure and with chronic kidney disease stage I through stage IV, or unspecified. Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or end stage renal disease. Heart Failure. ICD–9–CM CODES TO IDENTIFY ACUTE MYOCARDIAL INFARCTION (AMI) CASES ICD–9–CM code 410.00 410.01 410.10 410.11 410.20 410.21 410.30 410.31 410.40 410.41 410.50 410.51 410.60 410.61 410.70 410.71 410.80 410.81 410.90 410.91 ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... ........................... Description of Code AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI (anterolateral wall)—episode of care unspecified. (anterolateral wall)—initial episode of care. (other anterior wall)—episode of care unspecified. (other anterior wall)—initial episode of care. (inferolateral wall)—episode of care unspecified. (inferolateral wall)—initial episode of care. (inferoposterior wall)—episode of care unspecified. (inferoposterior wall)—initial episode of care. (other inferior wall)—episode of care unspecified. (other inferior wall)—initial episode of care. (other lateral wall)—episode of care unspecified. (other lateral wall)—initial episode of care. (true posterior wall)—episode of care unspecified. (true posterior wall)—initial episode of care. (subendocardial)—episode of care unspecified. (subendocardial)—initial episode of care. (other specified site)—episode of care unspecified. (other specified site)—initial episode of care. (unspecified site)—episode of care unspecified. (unspecified site)—initial episode of care. ICD–9–CM CODES TO IDENTIFY CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD) CASES Description of code 491.21 ........................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV ICD–9–CM Code Obstructive chronic bronchitis; With (acute) exacerbation; acute exacerbation of COPD, decompensated COPD, decompensated COPD with exacerbation. Obstructive chronic bronchitis; with acute bronchitis. Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis. Unspecified chronic bronchitis. Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar, centrilobular, obstructive, panacinar, panlobular, unilateral, vesicular. MacLeod’s syndrome; Swyer-James syndrome; unilateral hyperlucent lung. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, unspecified. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with status asthmaticus. Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with (acute) exacerbation. Chronic: nonspecific lung disease, obstructive lung disease, obstructive pulmonary disease (COPD) NOS. NOTE: This code is not to be used with any code from categories 491–493. Other diseases of lung; acute respiratory failure; respiratory failure NOS. 491.22 ........................... 491.8 ............................. 491.9 ............................. 492.8 ............................. 493.20 ........................... 493.21 ........................... 493.22 ........................... 496 ................................ 518.81* ......................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00192 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50045 ICD–9–CM CODES TO IDENTIFY CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD) CASES—Continued ICD–9–CM Code Description of code 518.82* ......................... 518.84* ......................... 799.1* ........................... Other diseases of lung; acute respiratory failure; other pulmonary insufficiency, acute respiratory distress. Other diseases of lung; acute respiratory failure; acute and chronic respiratory failure. Other ill-defined and unknown causes of morbidity and mortality; respiratory arrest, cardiorespiratory failure. *Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22) ICD–9–CM CODES TO IDENTIFY TOTAL HIP ARTHROPLASTY/TOTAL KNEE ARTHROPLATY (THA/TKA) CASES ICD–9–CM code Description of code 81.51 ................ 81.54 ................ Total hip arthroplasty. Total knee arthroplasty. For FY 2015, we proposed to calculate aggregate payments for excess readmissions, using MedPAR claims from July 1, 2010 to June 30, 2013, to identify applicable conditions based on the same ICD–9–CM codes used to identify the conditions for the readmissions measures, and to apply the proposed exclusions for the types of admissions discussed above. To calculate aggregate payments for excess readmissions, we proposed to calculate the base operating DRG payment amounts for all claims in the 3-year applicable period for each applicable condition (AMI, HF, PN, COPD and THA/TKA) based on the claims we have identified as described above. Once we have calculated the base operating DRG amounts for all the claims for the five applicable conditions, we proposed to sum the base operating DRG payments amounts by each condition, resulting in five summed amounts, one amount for each of the five applicable conditions. We proposed to then multiply the amount for each condition by the respective excess readmissions ratio minus 1 when that excess readmissions ratio is greater than 1, which indicates that a hospital has performed, with respect to readmissions for that applicable condition, worse than the average hospital with similar patients. Each product in this computation represents the payments for excess readmissions for that condition. We proposed to then sum the resulting products which represent a hospital’s proposed ‘‘aggregate payments for excess readmissions’’ (the numerator of the ratio). Because this calculation is performed separately for each of the five conditions, a hospital’s excess readmissions ratio must be less than or equal to 1 on each measure to aggregate payments for excess readmissions (and thus a payment reduction under the Hospital Readmissions Reduction Program). We note that we did not propose any changes to our existing methodology to calculate ‘‘aggregate payments for all discharges’’ (the denominator of the ratio). We proposed the following methodology for FY 2015 as displayed in the chart below. FORMULAS TO CALCULATE THE READMISSIONS ADJUSTMENT FACTOR Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI × (Excess Readmissions Ratio for AMI–1)] + [sum of base operating DRG payments for HF × (Excess Readmissions Ratio for HF–1)] + [sum of base operating DRG payments for PN × (Excess Readmissions Ratio for PN–1)] + [sum of base operating DRG payments for COPD) × (Excess Readmissions Ratio for COPD–1)] + [sum of base operating DRG payments for THA/TKA × (Excess Readmissions Ratio for THA/TKA–1)]. *Note, if a hospital’s excess readmissions ratio for a condition is less than/equal to 1, then there are no aggregate payments for excess readmissions for that condition included in this calculation. Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments for all discharges). Proposed Readmissions Adjustment Factor for FY 2015 is the higher of the ratio or 0.9700. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV *Based on claims data from July 1, 2010 to June 30, 2013 for FY 2015. We invited public comment on these proposals. Comment: Several commenters supported the inclusion of the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day RiskStandardized Readmission and the Hospital-level 30-day Readmission Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease measures. Others commenters supported the modified exclusions for both of these measures, as well as the payment adjustment factor and calculation of aggregate payments. Response: We thank the commenters for support of the exclusions, payment adjustment factor, and calculation of aggregate payments for the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 All-Cause Unplanned 30-Day RiskStandardized Readmission and the Hospital-Level 30-day Readmission Following Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary Disease measures, and the support to expand the Hospital Readmissions Reduction Program with this measures. Comment: On CMS’ proposed methodology to identify THA/TKA admissions to include in the calculation of Aggregate Payments for Excess Readmissions, one commenter recommended that CMSCMS expand the list of exclusions to specifically exclude conversion of previous hip surgery to total hip arthroplasty (represented by CPT code 27132). The commenter noted that, while the current granularity of the ICD–9–CM coding framework may complicate isolating PO 00000 Frm 00193 Fmt 4701 Sfmt 4700 these cases, the commenter believed that the previous surgery of the hip is a specific risk factor for complications (for example, infection, fracture), and therefore these cases should be identified for purposes of the readmission measure. Response: As discussed earlier in this final rule, in order to calculate aggregate payments for excess readmissions, consistent with our existing policy, we proposed to identify each applicable condition using the ICD–9–CM codes used to identify applicable conditions to calculate the excess readmissions ratios. We do not believe it would be appropriate to apply an exclusion to the set of admissions used to calculate the aggregate payments that is not applied in the measure cohort definition that is calculation of the excess readmission ratio. The current measure for THA/ E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50046 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations TKA excludes specific groups of patients with prior hip surgeries that place them at a significantly increased risk of complications, including revision procedures and those requiring removal of implanted devices from the femur (ICD–9–CM codes 78.65). We are currently exploring the specificity of ICD–9–CM versus CPT codes for prior hip surgery to assess whether the measure cohort definition could be further refined by including CPT codes. If we determine that any changes to the measure cohort may be appropriate, we would propose such changes through future rulemaking. Comment: Several commenters recommended changes to the methodology to calculate the readmission payment adjustment factors. Several commenters stated that the proposed calculation of the readmission payment adjustment factor creates excessive payment reductions. Commenters noted that the calculation of the readmissions payment adjustment factors is flawed because the excess readmission ratio should be applied to the number of a hospital’s readmissions, not admissions, in order to determine the hospital’s excess payments for readmissions. Furthermore, these commenters asserted that CMS has the authority through rulemaking to apply the excess readmission ratio to a hospital’s readmissions to determine a hospital’s excess payments for readmissions, which they believed would be consistent with Congressional intent. Commenters noted that CMS’ estimated savings exceed the Congressional Budget Office (CBO) score for the provision, which commenters believed demonstrates that CMS’ literal reading of the statute is not consistent with Congressional intent. Commenters also suggested that CMS could determine the magnitude of the readmission reduction using the 25th percentile of hospital performance on the readmission measures rather than assuming average hospital performance, which is the assumption of the current methodology used to determine the number of expected readmissions. Response: We received a similar comment in response to the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 53393) and to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 50673). We continue to believe that the statute is prescriptive with respect to the calculation of ‘‘aggregate payments for excess readmissions’’ where the statute specifies that the ‘‘aggregate payments for excess readmissions’’ is the sum for each condition of the product of ‘‘the operating DRG payment amount for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 such hospital for such applicable period for such condition’’ and ‘‘the number of admissions for such condition’’ and ‘‘the excess readmission ratio’’ minus one. We believe that section 1886(q)(4)(A) of the Act requires us to include all admissions for a condition in the calculation of ‘‘aggregate payments for excess readmissions.’’ We do not believe we have the discretionary authority to implement an alternative methodology under the existing the statute. We continue to believe that we are implementing the provision as required by law. Comment: Several commenters stated that the Hospital Readmissions Reduction Program does not account for improvement in readmission rates. One commenter asserted that there is no incentive for improvement under the Hospital Readmissions Reduction Program as there is in the Hospital VBP Program and stated that penalties under this program are due to issues out of the control of the hospital. One commenter suggested that the penalty should equal the cost of excess readmissions over a fixed target level of readmissions, as opposed to a hospital being measured against the national average. Response: We appreciate the comments on various ways to change the calculations of the readmissions payment adjustment factors and readmissions measures to account for improvement in readmission rates or provide incentives for readmissions, as opposed to penalties. We received similar comments in responses in previous rulemaking (77 FR 53394 and 78 FR 50673). The Hospital Readmissions Reduction Program under section 1886(q) of the Act is structured to compare a hospital’s performance for certain conditions compared to the average hospital. If a hospital can improve over time and those improvements result in a performance on readmissions for the applicable conditions that is better than the average hospital, the hospital has the potential to reduce its penalty or not be subject to a penalty at all. As we have stated in previous rules, the statute does not provide us with the authority to reward hospitals for improvement, which is allowed under section 1886 (p) of the Act for the Hospital VBP Program. Comment: MedPAC provided several recommendations to change the Hospital Readmissions Reduction Program related to the calculation of the readmissions payment adjustment factor, which MedPAC acknowledged would require statutory changes. Specifically, MedPAC stated that the readmission penalty formula is flawed because aggregate penalties remain PO 00000 Frm 00194 Fmt 4701 Sfmt 4700 constant even as national readmission rates decline. In addition, MedPAC pointed out that the condition-specific penalty per excess readmission is higher for conditions with low readmission rates, which becomes more important with the inclusion of elective total hip and total knee arthroplasty (relatively low readmission rate conditions) to the Hospital Readmissions Reduction Program. Lastly, MedPAC believed the readmissions multiplier should be removed from the formula and replaced with a penalty that roughly equals the cost of excess readmissions over a fixed target level of readmissions. Given a fixed target, under this approach penalties would decline if hospitals’ collective performance improves. Response: We appreciate the comments and suggestions made by MedPAC. We note that these comments are similar to comments submitted year for the FY 2014 IPPS/LTCH PPS final rule (78 FR 50674), and we agree that to implement these recommendations would require statutory changes. Comment: Several commenters requested that CMS clarify whether admissions denied by the CMS Recovery Audit Contractor (RACs) are excluded from either the numerator or the denominator in the calculation of the excess readmission ratios or in the calculation of the readmissions payment adjustment factors. Commenters believed that by including admissions denied by the CMS RACs, a hospital would be penalized twice for the same admission—once by the RAC denial and a second time by having the admission included in the readmission payment penalty. Response: As we explained in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50675), we use MedPAR claims data as our data source to calculate readmissions payment adjustment factors, specifically the excess payments for readmissions and payment for all discharges. In this final rule, for FY 2015, we are finalizing a policy to use MedPAR data for discharges from July 1, 2010 through June 30, 2013, consistent with our historical practice. We also are finalizing the policy to use the March 2011 update of the FY 2010 MedPAR file, the March 2012 update of the FY 2011 MedPAR, the March 2013 update of the FY 2012 MedPAR file and the March 2014 update of the FY 2013 MedPAR file to identify the discharges occurring from July 1, 2010 through June 30, 2013. In addition, the Standard Analytic File is the data source used to calculate the excess readmission ratios. We use the June 2011 update of the 2010 SAF file, the June 2012 update of the 2011 file, the June 2012 update of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the 2012 file, and the September 2013 update of the 2013 file. RACs have up to 3 years to review claims to determine whether a claim was inappropriately billed as inpatient when it should have been an outpatient claim. If a claim is denied as an inpatient stay, the claim is adjusted through the standard Medicare claims processing systems, going through the CWF, SAF and MedPAR. However, given the timing of the RAC audits and the updates of the SAF and MedPAR files used to calculate the readmissions measures and readmissions payment adjustment factors, it is not certain that all denied claims will be reflected in our claims files at the time of our calculations. However, we continue to believe that using these updates of the MedPAR and SAF files is consistent with IPPS ratesetting and allows for transparency for the public to obtain this dataset for replication. Furthermore, inpatient stays that are denied payment under Medicare Part A typically remain classified as inpatient stays, and can be billed to Medicare Part B as an Medicare Part B inpatient stay. These inpatient stays that are denied payment under Medicare Part A will typically continue to count as a qualifying inpatient stay for other payment purposes such as qualifying for SNF benefits and Medicare DSH patient days. Therefore, we continue to believe that it is appropriate to include these admissions in the Hospital Readmissions Reduction Program. Comment: One commenter opposed the proposal that the base operating DRG payment amount for MDHs include the difference between the hospitalspecific rate payment and the Federal rate payment in FY 2015, noting that, for teaching MDHs, the hospital-specific rate add-on payment is inclusive of costs associated with teaching and that the inclusion of such payment would violate the Affordable Care Act. This commenter requested that CMS maintain the current definition of ‘‘base operating DRG payment amount,’’ which excludes this additional hospitalspecific payment rate amount. Response: We disagree with the commenter. The ‘‘base operating DRG payment amount’’ is generally defined as the wage-adjusted DRG operating payment plus any applicable new technology add-on payments (§ 412.152 and § 412.160). For years prior to FY 2014, the statutory provisions related to the definition of ‘‘base operating DRG payment amount’’ under section 1886(q)(2)(B)(i) of the Act excluded the difference between an MDH’s applicable hospital-specific payment rate and the Federal payment rate (referred to as the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospital-specific add-on) from the definition of the base operating DRG payment amount. (MDHs are paid based on the Federal rate or, if higher, the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospitalspecific rate from certain specified base years.) However, section 1886(q)(2)(B)(i) of the Act states that the exclusion of the hospital-specific add-on from the base operating DRG payment amount is only effective for MDHs with respect to discharges occurring during FYs 2012 and 2013. Furthermore, section 1886(q)(2)(B)(ii) of the Act requires that the definition of base operating DRG payment amount exclude payments made under section 1886(d)(5)(B) of the Act (IME payments). While a portion of the hospital-specific rate is related to teaching services provided by teaching MDHs, we do not consider that amount to be a payment under section 1886(d)(5)(B) of the Act. We otherwise do not have authority to exclude the difference between the hospital-specific payment rate for MDHs from the definition of base operating DRG payment amount for discharges. Therefore, in accordance with the statute, beginning in FY 2014, the definition of ‘‘base operating DRG payment amount’’ includes the difference between an MDH’s applicable hospital-specific rate payment and Federal rate payment (that is, the hospital-specific add-on). As a result, in the calculation of the readmissions payment adjustment factor, which is a ratio of a hospital’s ‘‘aggregate payments for excess readmissions’’ and a hospitals ‘‘aggregate payments for all discharges’’, the base operating DRG payment amounts used in this calculation for MDHs also includes the hospitalspecific add-on, if applicable. Furthermore, the statute specifies that the readmissions payment adjustment factor is applied to the base operating DRG payment amount for each Medicare FFS discharge in a Federal fiscal year. Therefore, we are adopting our proposal as final, and for FY 2015, the readmissions payment adjustment factor will be applied to the base operating DRG payment amount, including the hospital-specific add on for MDHs as applicable. This is consistent with the policy established for the treatment of MDHs under the Hospital Readmissions Reduction Program and the Hospital VBP Program for FY 2014 in the notice that appeared in the Federal Register on June 17, 2014 (79 FR 34448 through 34449) that implemented the extension of the MDH program through September 30, 2015, as provided by the PAMA. In that notice, we explained that this PO 00000 Frm 00195 Fmt 4701 Sfmt 4700 50047 change in the determination of base operating DRG for MDHs consistent is with the section 1886(q)(2)(B)(i) of the Act, and affects both the calculation of the readmission payment adjustment factor and the payments reduced by the readmission payment adjustment factor for MDHs that receive the hospitalspecific add-on payment. As noted previously, MDHs are paid the higher of the Federal rate payment or Federal rate payment plus the hospital-specific add-on payment on a per claim basis. At cost report settlement, the MAC determines which of the payment options yields a higher aggregate payment for an MDH, and also determines the final hospital-specific add-on payment (if applicable) for that MDH for each cost reporting period. Because a final payment determination for an MDH’s cost reporting period is not done until cost report settlement, if an MDH ultimately receives the hospital-specific add-on (that is, its final payment is determined to be the Federal rate payment plus 75 percent of the amount by which the Federal rate payment is exceeded by the updated hospital-specific rate payment), then additional adjustments under the Hospital Readmissions Reduction Program will be made during cost report settlement and not on the claim. If at cost report settlement an MDH ultimately does not receive a hospitalspecific add-on for the cost reporting period (that is, its final payment is determined to be the Federal rate payment only), then no additional adjustment (if otherwise applicable) under the Hospital Readmissions Reduction Program will be made. Comment: Some commenters supported the proposed series of changes to calculate the aggregate payments for excess readmissions for FY 2015 including the two additional conditions of COPD and TKA/THA. Specifically, some commenters supported CMS’ exclusions of admissions to calculate aggregate payments for excess readmissions, most of which conformed to the calculation exclusions of the individual measures. Commenters supported CMS’ proposals where index admissions that are not considered readmissions for the purpose of the readmissions measures and are excluded from the calculation of the excess readmission ratio, would also be excluded from the admissions used to determine a hospital’s aggregate payments for excess readmissions, such as exclusions for admissions for patients who did not have Medicare Part A and B for 12 months prior to the admission or 3030 days after the admission, as identified by linking MedPAR claims E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50048 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations files to the Medicare Enrollment Database (EDB). Some commenters supported CMS’ proposal to use of MedPAR data to calculate the readmissions payment adjustment factors. Response: We thank the commenters for their support of our proposed methodology to calculate the readmission payment adjustment factors with the inclusion of two additional readmissions measures of THA/TKA and COPD, and we are finalizing the policies as proposed. The MedPAR data we are finalizing to use to calculate the readmissions payment adjustment factors for FY 2015 is specified above. We note that we stated in the proposed rule (79 FR 28113) that, for the final rule, applicable hospitals will have had the opportunity to review and correct data from the proposed FY 2015 applicable period of July 1, 2010 to June 30, 2013 before they are made public under our policy regarding the reporting of hospital-specific information. In previous years, the review and correction period occurred prior to the publication of the final rule, and we published the final excess readmission ratios and readmission payment adjustment factors on the CMS IPPS Web site and the final readmission payment adjustment factors in Table 15 in conjunction with the issuance of the final rule. Since the publication of the proposed rule, we experienced unexpected delays in the production of the excess readmission ratios, which has resulted in a later than expected start to the 30-day review and corrections period. For the data from the FY 2015 applicable period, the review and corrections period will still be ongoing through August 19, 2014, which extends beyond the issuance of this FY 2015 IPPS/LTCH PPS final rule. As a result, in Table 15A listed in the Addendum of this final rule (which is available only via the Internet on the CMS Web site), we are providing proxy FY 2015 readmission payment adjustment factors, and are posting the corresponding proxy excess readmission ratios, which are based on the FY 2015 application period of July 1, 2010 to June 30, 2013, on the CMS IPPS Web site. After the completion of the review and corrections process, we will publish the final FY 2015 readmissions payment adjustment factors in Table 15B that will be effective for determining payments for discharges occurring on or after October 1, 2014, and the corresponding final excess readmission ratios on the CMS IPPS Web site. We expect the final FY 2015 readmissions payment adjustment factors in Table 15B and the corresponding final excess VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 readmission ratios to be posted on the CMS IPPS Web site prior to October 1, 2014. After consideration of the public comments we received, we are finalizing without modification our proposals pertaining to the inclusion of THA/TKA and COPD readmissions measures to calculate aggregate payments for excess readmissions beginning in FY 2015. 12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676), we indicated that commenters had requested a potential waiver or exemption process for hospitals located in areas that experience disasters or other extraordinary circumstances, even though we had not proposed an extraordinary circumstance exceptions/ exemptions (ECE) policy for the Hospital Readmissions Reduction Program. We noted that there are several policy and operational considerations in developing a disaster exemption process for the Hospital Readmissions Reduction Program. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117) we welcomed public comment on whether an exemption process should be implemented, and the policy and operational considerations for a potential Hospital Readmissions Reduction Program ECE policy. Comment: A few commenters supported the creation of an extraordinary circumstance exemption process. The commenters recommended that an extraordinary circumstance exemption process should be allowed for hospitals that experience a natural disaster and should also be applied to the payment year in which the date of the disaster occurs because the Hospital Readmissions Reduction Program uses 2 years of performance data that also overlaps with subsequent payment years. Two commenters specifically indicated that the extraordinary circumstance exemption process should be similar to the existing Hospital VBP Program exceptions process. Finally, a commenter suggested establishing a 90day period, beginning with the date of the disaster, for hospitals to submit a request for an exemption from the Hospital Readmissions Reduction Program for a specific fiscal year. No commenters made other recommendations on how to operationalize an extraordinary circumstance exemption policy and supporting processes. PO 00000 Frm 00196 Fmt 4701 Sfmt 4700 Response: We appreciate the input from the commenters. We will take into consideration these recommendations as we consider whether an exemption process for the Hospital Readmissions Reduction Program should be implemented. I. Hospital Value-Based Purchasing (VBP) Program 1. Statutory Background Section 1886(o) of the Act, as added by section 3001(a)(1) of the Affordable Care Act, requires the Secretary to establish a hospital value-based purchasing program (the Hospital Value-Based Purchasing (VBP) Program) under which value-based incentive payments are made in a fiscal year to hospitals that meet performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. Section 1886(o)(1)(B) of the Act states that the Hospital VBP Program applies to payments for hospital discharges occurring on or after October 1, 2012. In accordance with section 1886(o)(6)(A) of the Act, we are required to make valuebased incentive payments under the Hospital VBP Program to hospitals that meet or exceed performance standards for a performance period for a fiscal year. As further required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each hospital’s value-based payment percentage on the hospital’s Total Performance Score (TPS) for a specified performance period. In accordance with section 1886(o)(7) of the Act, the total amount available for value-based incentive payments for a fiscal year will be equal to the total amount of the payment reductions for all participating hospitals for such fiscal year, as estimated by the Secretary. For FY 2014, the available funding pool was equal to 1.25 percent of the base-operating DRG payments to all participating hospitals, as estimated by the Secretary. The size of the applicable percentage has increased to 1.50 percent for FY 2015 and will increase to 1.75 percent for FY 2016, and to 2.0 percent for FY 2017 and successive fiscal years. Section 1886(o)(1)(C) of the Act generally defines the term ‘‘hospital’’ for purposes of the Hospital VBP Program as a subsection (d) hospital (as that term is defined in section 1886(d)(1)(B) of the Act), but excludes from the definition of the term ‘‘hospital,’’ with respect to a fiscal year: (1) A hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program) for such fiscal E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations year; (2) a hospital for which, during the performance period for the fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients; and (3) a hospital for which there are not a minimum number (as determined by the Secretary) of measures that apply to the hospital for the performance period for the fiscal year involved, or for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year. 2. Overview of Previous Hospital VBP Program Rulemaking We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), FY 2012 IPPS/ LTCH PPS final rule (76 FR 51653 through 51660), CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547), FY 2013 IPPS/ LTCH PPS final rule (77 FR 53567 through 53614), FY 2014 IPPS/LTCH PPS final rule (78 FR 50676 through 50707), and CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121) for further descriptions of our policies for the Hospital VBP Program. We have also codified certain requirements for the Hospital VBP Program at Title 42, Sections 412.160 through 412.167 of our regulations. 3. FY 2015 Payment Details tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Payment Adjustments Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce the base operating DRG payment amount for a hospital for each discharge in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) of the Act, the sum total of these reductions in a fiscal year must equal the total amount available for value-based incentive payments for all eligible hospitals for the fiscal year, as estimated by the Secretary. We finalized details on how we would implement these provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573) and refer readers to that rule for further details. Under section 1886(o)(7)(C)(iii) of the Act, the applicable percent for the FY 2015 Hospital VBP Program is 1.50 percent. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117 through 28118), using the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), we estimated that the total amount available for value-based incentive payments for FY 2015 was $1.4 billion, based on the December 2013 update of the FY 2013 MedPAR file. We stated VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that we intended to update this estimate for the FY 2015 IPPS/LTCH PPS final rule, using the March 2014 update of the FY 2013 MedPAR file. Based on the March 2014 update of the FY 2013 MedPAR file, we continue to estimate that the amount available for valuebased incentive payments for FY 2015 is $1.4 billion. As finalized in the FY 2013 IPPS/ LTCH PPS final rule, we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its TPS. We will then calculate a valuebased incentive payment adjustment factor that will be applied to the base operating DRG payment amount for each discharge occurring in FY 2015, on a per-claim basis. We noted in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117–28118) that we were publishing proxy value-based incentive payment adjustment factors in Table 16 of that proposed rule (which is available via the Internet on the CMS Web site). The proxy factors are based on the TPSs from the FY 2014 Hospital VBP Program. These FY 2014 performance scores are the most recently available performance scores that hospitals have been given the opportunity to review and correct. The slope of the linear exchange function used to calculate those proxy value-based incentive payment adjustment factors was 2.0952951561. This slope, along with the estimated amount available for value-based incentive payments, was also published in Table 16. We stated that we intended to update this table as Table 16A in this final rule (which will be available via the Internet on the CMS Web site) to reflect changes based on the March 2014 update to the FY 2013 MedPAR file. We also stated that we intended to update the slope of the linear exchange function used to calculate those updated proxy valuebased incentive payment adjustment factors. The slope of the linear exchange function used to calculate those updated proxy value-based incentive payment adjustment factors is 2.0950773214. The updated proxy value-based incentive payment adjustment factors for FY 2015 continue to be based on historic FY 2014 Program TPSs because hospitals will not have been given the opportunity to review and correct their actual TPSs for the FY 2015 Hospital VBP Program until after this FY 2015 IPPS/LTCH PPS final rule is published. After hospitals have been given an opportunity to review and correct their actual TPSs for FY 2015, we will add Table 16B (which will be available via the Internet on the CMS Web site) to PO 00000 Frm 00197 Fmt 4701 Sfmt 4700 50049 display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2015 Hospital VBP Program. We expect that Table 16B will be posted on the CMS Web site in October 2014. We received a number of public comments on our stated intention to update Table 16 as Table 16A for the final rule: Comment: Commenters found Table 16 misleading and urged CMS to adopt a change in the process that would allow for a more meaningful release of information in the proposed rule on Hospital VBP performance. Specifically, commenters stated that Table 16 is not useful to hospitals that attempt to assess their performance in comparison to others when CMS has added or removed new measures and changed the domain weights. As a result, commenters urged CMS to calculate proxy factors using the updated measures and domain weights finalized in last year’s rule for FY 2015 so that hospitals are not forced to rely on data provided to them from other entities, such as State hospital associations that provide updated information to their members. Response: While we understand commenters’ concerns with comparing Hospital VBP performance information across program years, we make these calculations using the most recentlyavailable performance data that hospitals have had the opportunity to review, which at the time of the IPPS/ LTCH PPS rule’s publication does not include the scoring data for the next fiscal year. We do not believe it would be useful to publish proxy factors using domain weights finalized for the next fiscal year without the corresponding performance scoring data from the same program year because that action would mix policies between fiscal years, which is why we have adopted the practice of calculating proxy factors from the previous year. We believe that these calculations represent the most accurate data available at the time of the final rule’s publication and appropriately reflect policies for a single program year. b. Base Operating DRG Payment Amount Definition for MedicareDependent, Small Rural Hospitals (MDHs) Section 106 of Public Law 113–93, the Protecting Access to Medicare Act of 2014 (PAMA), extended the MDH program through March 31, 2015. We note that that the special treatment for MDHs under section 1886(o)(7)(D)(ii)(I) of the Act, with regard to definition of base operating DRG payment amount, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50050 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations does not apply to discharges occurring after FY 2013. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28118), for FY 2015 and subsequent years, for purposes of calculating the payment adjustment factors and applying the payment methodology, we proposed that the base operating DRG payment amount for MDHs will include the difference between the hospital-specific payment rate and the Federal payment rate (as applicable). We also proposed to revise the definition of ‘‘base operating DRG payment amount’’ in section 412.160 paragraph (2) of our regulations to reflect this change. We welcomed comments on this proposal. Comment: One commenter opposed CMS’ proposal to revise the definition of base operating DRG payment amount for MDHs to include the difference between the hospital-specific payment rate addon payment amount and the Federal payment rate, noting that for teaching MDHs, the hospital-specific rate add-on payment amount is inclusive of costs associated with teaching and that the inclusion of such payment would violate the Affordable Care Act. This commenter requested that CMS maintain the current definition of base operating DRG payment amount, which excludes this additional hospitalspecific payment rate amount. Response: We disagree with this comment. Section 1886(o)(7)(D)(i)(II) of the Act requires that the definition of base operating DRG payment amount exclude payments made under section 1886(d)(5)(B) of the Act. While a portion of the hospital-specific rate is related to teaching services provided by teaching MDHs, we do not consider that amount to be a payment under section 1885(d)(5)(B) of the Act. We do not believe that we have authority to exclude the difference between the hospital-specific payment rate and the Federal payment rate for MDHs from the definition of base operating DRG payment amount for discharges after FY 2013. We did not receive any public comments on the corresponding proposed regulatory revision at 42 CFR 412.160. After consideration of the public comments we received, we are finalizing our policy, as proposed, to revise the definition of ‘‘base operating DRG payment amount’’ for MDH to include the difference between the hospital-specific payment rate and the Federal payment rate (as applicable). We also are finalizing the revision to the definition of ‘‘base operating DRG payment amount’’ in section 412.160, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 paragraph (2), of our regulations, as proposed. We also received a number of general comments on the Hospital VBP Program: Comment: Commenters asked that CMS to clarify why CMS did not address FY 2018 Hospital VBP Program requirements in the proposed rule. Response: We adopted certain FY 2018 policies related to claims-based measures that require a long performance period in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694 and 50698 through 50699). For the same reason, we are adopting certain policies related to FY 2019 and FY 2020 measures in this final rule. We intend to propose additional FY 2018 policies, including additional measures, performance periods, performance standards, and other policies in future rulemaking. Comment: One commenter expressed concern about the instability and changing requirements of the Hospital VBP Program. The commenter was especially concerned that 60 percent of the measures are calculated based on coding that could result in inaccurate measure rates. The commenter suggested that there be some sort of validation for hospitals performing well to assure that coding practices are being met. Response: As discussed in the Hospital Inpatient VBP Program final rule (76 FR 26537 through 26538), we have finalized a policy under which we will use the validation process that we use for the Hospital IQR Program to ensure that Hospital VBP data are accurate. As we described in that final rule, we view the Hospital IQR Program’s validation processes as sufficient to ensure that Hospital VBP Program data are accurate, and we intend to continue working with stakeholders to develop additional validation processes as necessary to ensure data accuracy for the Hospital VBP Program. Comment: One commenter urged CMS to put measures in place prior to affecting Medicare payments. The commenter suggested the best way to improve patient care is to ‘‘put into practice’’ a measure and track it over time. According to the commenter, if there is no improvement in the results, the measure could then be included in the Hospital VBP Program. Response: We interpret the comment as suggesting that we adopt measures for reporting purposes prior to adopting them under the Hospital VBP Program. We note that we can only select measures for the Hospital VBP Program that have been specified under the PO 00000 Frm 00198 Fmt 4701 Sfmt 4700 Hospital IQR Program and publicly reported on the Hospital Compare Web site. However, we appreciate the suggestion that we track measures over time before adopting them for the Hospital VBP Program to ensure that these measures will serve the goals of the program, and we will take the suggestion into consideration as we develop future policies. Comment: Commenters strongly supported CMS’ removal of process measures that use chart-abstracted data and supported the use of outcomes measures. Response: We thank the commenters for their support. Comment: One commenter urged CMS to return a hospital’s ‘‘carve-out’’ if the hospital is deemed ineligible for the Hospital VBP Program as a result of the policy by which CMS requires that hospitals submit a minimum number of cases and measures across domains in order to receive a Total Performance Score. Response: Hospitals that are excluded from the Hospital VBP Program for a fiscal year for any reason do not have the applicable percentage withheld from their base operating DRG payment amounts. Comment: Several commenters stated that they do not believe 2 percent of the amount of Medicare hospital payments is significant enough to drive valuebased change in the system. A few commenters suggested that CMS consider alternative ways to align Medicare payments with the policies developed in the Hospital VBP Program to promote more change. Response: The statute ultimately caps the Hospital VBP Program’s funding at 2 percent of base-operating DRG payment amounts, and we view this amount as substantial enough to provide significant incentives to hospitals to improve the quality of care they provide to Medicare beneficiaries. Comment: Several commenters supported CMS’ efforts to align the Hospital VBP Program with existing hospital and physician quality reporting initiatives, including the Physician Value-Based Modifier (VM) Program. One commenter stated that the programs should encourage consistent quality throughout the continuum of care. However, one commenter cautioned CMS in its goal of increasing alignment between the Hospital VBP and physician quality reporting initiatives because, despite generally supporting alignment between Medicare reporting requirements to decrease the administrative burden on providers, the commenter expressed concern that the Medicare Spending per Beneficiary E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (MSPB) measure is inappropriate for inclusion in the physician quality reporting programs. Response: We will consider possible policies aimed at aligning our quality programs across different care settings in future rulemaking. We disagree, however, that the MSPB measure is generally inappropriate for inclusion in physician quality reporting programs. We view measures of efficiency like MSPB as critical components of quality measurement and pay-for-performance programs. Comment: One commenter suggested that CMS adopt more specific achievement thresholds and benchmarks to draw comparisons between hospitals of similar size, with similar access to technology, specialized staff, and patient populations. Response: We do not believe that these types of specific adjustments to Hospital VBP Program performance standards are feasible at this time. To implement this change, we would need to incorporate detailed adjustment methodologies in each of the measures that we have adopted for the Hospital VBP Program. We do not believe we have sufficient data on the various comparison points that the commenter suggests to create separate Hospital VBP Program performance standards for different types of hospitals at this time. Moreover, the Hospital VBP Program’s scoring methodology, based on several years’ research and policy development, is designed to provide incentives to hospitals based on national performance metrics. As discussed further below, we continue to believe that the scoring methodology appropriately holds hospitals accountable based on established and well-understood metrics. However, we may consider 50051 adjustments of the type the commenter suggests in the future as more data becomes available for analyses. 4. Measures for the FY 2017 Hospital VBP Program a. Measures Previously Adopted In the FY 2013 IPPS/LTCH PPS final rule, we finalized our proposal to readopt measures from the prior program year for each successive program year, unless proposed and finalized otherwise (for example, because one or more of the measures is ‘‘topped-out’’ or for other policy reasons). We stated our belief that this policy would facilitate measure adoption for the Hospital VBP Program for future years, as well as align the Hospital VBP Program with the Hospital IQR Program (77 FR 53592). The FY 2016 Hospital VBP Program includes the following measures: FINALIZED MEASURES FOR THE FY 2016 HOSPITAL VBP PROGRAM Clinical process of care domain AMI–7a .................. IMM–2 ................... PN–6 ..................... SCIP–Inf–2 ............ SCIP–Inf–3 ............ SCIP–Inf–9 ............ SCIP–Card–2 ........ SCIP–VTE–2 ......... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization. Initial Antibiotic Selection for CAP in Immunocompetent Patient. Prophylactic Antibiotic Selection for Surgical Patients. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. Urinary Catheter Removed on Postoperative Day 1 or Postoperative Day 2. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery. Patient experience of care domain HCAHPS ............... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. Outcomes Domain CAUTI ................... CLABSI ................. MORT–30–AMI ..... MORT–30–HF ....... MORT–30–PN ....... PSI–90 .................. SSI ........................ Catheter-Associated Urinary Tract Infection. Central Line-Associated Blood Stream Infection. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Complication/patient safety for selected indicators (composite). Surgical Site Infection: • Colon • Abdominal Hysterectomy Efficiency domain tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MSPB–1 ................ Medicare Spending per Beneficiary. We received a number of comments on measures that we have previously adopted for the Hospital VBP Program. Comment: Several commenters urged CMS to consider updating and researching the HCAHPS Survey as a whole because the measure has been used for over a decade and the technology and tools have changed in this period of time. Several commenters stated that less expensive survey administration modes should be VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 available to minimize survey costs for participating hospitals. One commenter noted that the methods for delivering the survey are outdated given today’s Internet-based society. Response: While the HCAHPS Survey has been in use for nearly a decade, we continually review the survey and, when warranted, make changes to improve its content, implementation and data submission processes, and public reporting of its results. For PO 00000 Frm 00199 Fmt 4701 Sfmt 4700 instance, in recent years we added five new survey items, including the Care Transition Measure, made the patientmix adjustment for ‘language spoken at home’ more granular to account for differences among speakers of major languages, investigated the suitability of new modes of survey administration, and made survey results and analytical tools available to the public via downloadable databases on CMS Web sites. We continually examine and E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50052 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations refine HCAHPS protocols for survey implementation, oversight, and public reporting to maintain the integrity of the survey and increase the usefulness and accessibility of its results. We will continue to asses, analyze and improve the HCAHPS Survey to increase its value to consumers and hospitals. With regard to comments urging us to update the HCAHPS tool, we note that the HCAHPS Survey was purposely designed to accommodate, to the degree possible, the variety of patient survey methodologies hospitals employed prior to the introduction of HCAHPS. Thus, the HCAHPS Survey was made available in four modes of survey administration (mail only; telephone only; mail with telephone follow-up; and Active Interactive Voice Response modes). Hospitals are given the option to either self-administer the survey or engage an approved survey vendor, of which several dozen are listed on the official HCAHPS On-Line Web site, www.HCAHPSonline.org. In addition, hospitals are permitted to add their own supplemental items to the survey. We are sensitive to the costs of survey administration, especially as patient experience surveys become a standard element of quality improvement and public reporting programs for other types of healthcare providers. In 2008, we conducted a large-scale mode experiment to test the suitability of a Web-based mode of the HCAHPS Survey and concluded that a number of factors, including unavailability of email addresses for a substantial portion of the hospital patient population and low response rates, preclude the adoption of a Web-based mode at this time. We will continue to monitor and periodically evaluate the suitability of alternative, electronic survey modes. We are continuing to look at this issue. In particular, we are tracking access to the Internet among the elderly and minority populations since currently access to the Internet is lower for these critical populations that participate in our surveys.38 Comment: Several commenters expressed concerns about the sufficiency of the risk adjustment of the HCAHPS composite measures. One commenter pointed out that research shows that high-acuity patients score their patient experience at a lower level, systematically disadvantaging hospitals that take on complex and sicker patients, and suggested that CMS incorporate additional adjustments to account for patients’ illness severity. One commenter urged CMS to further research broad improvements to the HCAHPS survey delivery and adjustment methodologies. A few commenters suggested that CMS exclude HCAHPS scores from the Hospital VBP Program until riskadjustments are updated and its validity has been determined. Response: Research on health care providers indicates that a number of quality measures differ on a regional basis, which is indicative of true differences that should not be obscured by data adjustment. CMS and the HCAHPS Project Team are familiar with the studies commenter cited. We also are aware of a number of studies published in peer-reviewed journals that have found that patient experience of care, as measured by the HCAHPS Survey, is strongly and positively related to clinical process measures, outcomes, readmissions, and mortality. For brief reviews of these findings, we refer readers to: ‘‘The Patient Experience and Health Outcomes’’ 39 and ‘‘What does the patient know about quality?’’ 40 With respect to the articles cited by the commenter, we note that other researchers have cited flaws in the approach, data and methodology employed in the Fenton, et al., study, which did not directly examine the HCAHPS Survey. The study by Lyu, et al. is premised upon the misunderstanding that we use patient experience as the sole criterion for measuring and assessing hospital quality. In addition, their findings, based on examination of 31 hospitals, may insufficiently represent the over 3,000 hospitals that participate in the Hospital VBP Program and the approximately 4,000 hospitals that participate in the Hospital IQR Program. In addition, a recent national study found a significant positive relationship between patient experience of care and surgical quality, which suggests that incentives to improve surgical patient experience and surgical quality are aligned.41 Comment: One commenter suggested that CMS separate the Cleanliness & Quietness dimension on the HCAHPS 38 ‘‘A Randomized Experiment Investigating the Suitability of Speech-Enabled IVR and Web Modes for Publicly Reported Surveys of Patients’ Experience of Hospital Care.’’ M.N. Elliott, J.A. Brown, W.G. Lehrman, M.K. Beckett, K. Hambarsoomian, L.A. Giordano and E. Goldstein. Medical Care Research and Review. 70: 165–184. 2013. 39 Matthew Manary, William Boulding, Richard Staelin, and Seth Glickman. New England Journal of Medicine, 368 (3): 201–203. 2013. 40 Karen Luxford. International Journal for Quality in Health Care. 24 (5): 439–440. 2012. 41 Tsai, et al. ‘‘Patient Satisfaction and Quality of Surgical Care in US Hospitals.’’ Annals of Surgery, 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00200 Fmt 4701 Sfmt 4700 Survey, stating that it would be more helpful for consumers to know which element is driving hospitals’ performance and improvement in those areas. Response: ‘‘Hospital Environment’’ is one of eight equally-weighted dimensions in the Patient Experience of Care Domain of the Hospital VBP Program. The Hospital Environment dimension is itself composed of two equally-weighted measures from the HCAHPS Survey: Percent of patients who responded ‘‘Always’’ to the hospital cleanliness item, and percent of patients who responded ‘‘Always’’ to the hospital quietness item. Therefore, the Hospital Environment dimension assigns 5 points to each of the environment measures. The Hospital Environment dimension is given the same weight in Hospital VBP Program as other key HCAHPS measures, such as Communication with Nurses, and Discharge Information (‘‘A Step-by-Step Guide to Calculating the Patient Experience of Care Domain Score in the Hospital Value-Based Purchasing FY 2013 Actual Percentage Payment Summary Report,’’ available on HCAHPS On-Line Web site at: https:// www.hcahpsonline.org/Hospital VBP.aspx.) While the two environment measures have been combined in the Hospital VBP Program, consumers can see how hospitals perform on cleanliness and quietness separately by examining the measure scores posted on the Hospital Compare Web site. Comment: One commenter urged CMS to reevaluate the validity of questions used on the HCAHPS Survey related to pain management, including whether the survey appropriately reflects patient satisfaction and whether or not it may encourage inappropriate treatment. The commenter expressed concern about the abuse of opioid pain relievers in hospital settings. The commenter explained that the HCAHPS Survey principally focuses on effective use of pharmacotherapy, which may be consistent with the patient’s wishes but is not always in his or her best interest. Response: The Pain Management domain is derived from three items on the HCAHPS Survey. It is important to note that the HCAHPS Survey is designed to capture and report patient experience of care at the hospital level, not at the level of physician, and that only adult inpatients are eligible for the HCAHPS Survey (emergency room patients would be eligible for the survey only if they were subsequently admitted as inpatients). The HCAHPS sampling protocol does not support reliable measurement of performance at the physician level. Any use of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations HCAHPS Survey to evaluate individual physicians is inconsistent with our guidance. We understand and share the commenter’s concerns about the rising level of abuse of opioid pain relievers in the United States. The HCAHPS Survey includes three questions about pain control to measure and publicly report patient experience with this common, yet critical, aspect of hospitalization; and neither the patient nor the physician(s) is identified in survey data submitted to CMS. Pain control is an important part of patient care in a hospital and should be evaluated at the hospital level. There are non-opioid options for pain control that many hospitals use. All items on the HCAHPS Survey have been carefully constructed and tested, both in the field and in focus groups of patients and caregivers.42 The statistical reliability of the Pain Management domain was 0.80 in 2013. We share the commenter’s commitment to reducing abuse of opioids and will reach out to hospitals and physicians to help them more fully understand the capacities and limits of the HCAHPS Survey in this regard and will pursue further research on the wording of the pain management items in the HCAHPS Survey. Comment: One commenter proposed replacing the MSPB measure with the NQF-endorsed Relative Resource Use (RRU) measure, or a measure designed to track health care resource use by providers, health plans, or other units for individuals having one of five chronic diseases (COPD, cardiovascular disease, diabetes, asthma, and hypertension). Response: We disagree that the MSPB should be replaced with an RRU measure. We note that the MSPB measure is also NQF-endorsed. Inclusion of an overall measure of cost is an essential complement to the condition-specific measures included in the clinical process of care and outcomes domains. Relying on condition-specific measures alone, such as RRU measures, would disregard differences in overall cost. The MSPB measure is reported as a ratio of the payment-standardized, risk-adjusted MSPB amount for each hospital divided by the weighted median MSPB amount across all hospitals. As discussed in section IV.I.6.b. of the preamble of this final rule (Possible Future Efficiency and Cost Reduction Domain Measure Topics), we are considering expansion of the Efficiency and Cost Control 42 Sofaer, et al., Health Services Research, 40: 6, 2018–2036. 2005. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 domain to include six condition-specific Medicare payment measures (three medical and three surgical conditionspecific episodes) in addition to the MSPB measure and would do so through public notice and comment rulemaking. Comment: Several commenters recommended that CMS refine its policies on risk-adjustment in the MSPB and other measures to include socioeconomic status because a patient’s socioeconomic status affects clinical outcomes. Commenters explained that comorbidities, socioeconomic status, and sociodemographic factors are major determinants of outcomes, and penalizing physicians and hospitals for readmissions of the most chronically ill patients without proper risk adjustment could provide unintended negative consequences. Commenters stated that, without a risk-adjustment factor, hospitals treating these patients become subject to penalizations for readmissions not related to the care provided as well as penalizations for extending an inpatient stay in order to better optimize the patient’s health status. Further, commenters suggested that hospitals that serve a disproportionate share of these patients could conceivably do the most to improve their health status but are disproportionately penalized without a risk adjustment. One commenter suggested that CMS examine NQF’s Risk Adjustment for Socioeconomic Status or Other Sociodemographic Factors Draft Report for determining the appropriate risk adjustment methodology for the Hospital VBP Program. (Draft Report available at: https://www.qualityforum. org/Risk_Adjustment_SES.aspx.) Another commenter strongly supported the recommendations contained in the draft report and urged CMS to accordingly modify its risk-adjustment methodology to include such factors. Response: We appreciate these comments and the importance of the role that SES plays in the care of patients. With regard to the MSPB measure’s risk adjustment specifically, we note that the MSPB measure was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51619 through 51627). In that rule, we addressed concerns about risk adjustment. We are aware that there are differing opinions regarding our current approach in riskadjusting measures in the Hospital Readmissions Reduction Program for SES. We note that the readmission measures aim to reveal differences related to the quality of care provided. We believe that quality of care received PO 00000 Frm 00201 Fmt 4701 Sfmt 4700 50053 by patients of lower SES contributes at least in part to the observed association between SES status and the readmissions rate. We continue to have concerns about holding hospitals to different standards for the outcomes of their patients of low SES—we do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations. We routinely monitor the impact of SES on hospitals’ results. To date, we have found that hospitals that care for large proportions of patients of low SES are capable of performing well on our measures (see the 2013 Medicare Hospital Quality Chart Book on pages 46 through 53 at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/Downloads/-MedicareHospital-Quality-Chartbook-2013.pdf). Previous analyses presented at the NQF during endorsement proceedings of the Hospital-Wide All-Cause Unplanned Readmission Measure (available at: https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID= 70813) also show that adding SES to the risk-adjustment has a negligible impact on hospitals’ risk-standardized rates. The risk adjustment for clinical factors likely captures much of the variation due to SES, therefore resulting in an attenuation of the impact of SES factors on hospitals’ results. We continue to monitor related activities at NQF, such as the July 23, 2014 decision by the NQF Board in which the Board approved a trial period to test the impact of sociodemographic factor risk adjustment of performance measures (available at: https://www. qualityforum.org/Press_Release/2014/ NQF_Board_Approves_Trial_Risk_ Adjustment.aspx), and in Congress. As we stated in the past, we are committed to working with the NQF and other stakeholder communities to continuously refine our measures and to address the concerns associated with SES and risk adjustment. We believe that continued collaboration with the stakeholder communities will enable us to identify feasible ways to appropriately address any unintended consequences for providers serving high proportions of low-SES patients. Comment: Some commenters expressed concern about the influence of factors that are outside the hospital’s control on the MSPB measure and the lack of associated quality or outcome measures. One of these commenters stated that any measures focusing exclusively on cost such as the MSPB measure create incentives to reduce services in ways that adversely affect patient outcomes and that such cost E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50054 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measures also create disincentives to adopt new technologies. One commenter expressed concern that the measure does not track the frequency of hospitalization, noting that a community that reduces avoidable hospitalizations may experience higher per-hospitalization costs, even if overall costs go down. Response: Regarding the commenters’ concern with the degree of the hospital’s control over the MSPB measure, we continue to disagree that care furnished to beneficiaries after they are discharged from an acute care hospital is outside of the hospital’s control. As we stated in the FY 2012 IPPS/LTCH PPS final rule, we believe that hospitals that provide quality inpatient care, conduct appropriate discharge planning, and work with providers and suppliers on appropriate follow-up care can achieve efficiencies and perform well on the measure (76 FR 51621). Regarding the comment that the MSPB measure does not account for quality, we continue to agree that it is beneficial to view a cost measure in light of other quality measures. We do not believe that a including measure of cost, independent of quality in the Hospital VBP Program, would result in a reduction of needed services or in a disincentive to develop new technologies, because as we stated in the FY 2012 IPPS/LTCH PPS final rule, for purposes of the Hospital VBP Program, we will weight and combine the Efficiency and Cost Control domain with the other domain scores, in order to calculate each hospital’s TPS, ensuring that that MSPB and any other Efficiency and Cost Control Domain measures we adopt make up only a portion of the TPS and that the remainder is based on hospitals’ performance on the other quality measures (76 FR 51622). As we stated in the FY 2013 IPPS/LTCH PPS final rule, section 1886(o)(2)(B)(ii) of the Act expressly requires the inclusion of ‘‘measures of Medicare spending per beneficiary’’ in the Hospital VBP Program. We do not believe that the MSPB measure itself should assess both cost and quality. We believe that a inclusion of a distinct measure of cost, independent of quality, as part of the Hospital VBP Program enables us to identify hospitals involved in the provision of high quality care at a lower cost to Medicare (77 FR 53586). With regard to tracking the frequency of hospital admissions, we do not believe that the measure would adversely affect communities involved in minimizing hospitalizations because the risk adjustment takes into account the severity of illness of hospitalized VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 beneficiaries so that hospitals admitting more complex patients would have their Medicare spending compared to the expected spending for similarly complex patients. Comment: One commenter recommended that CMS delay any further implementation of the MSPB measure until after the Physician VM Program is implemented, stating that hospitals should not be expected to bear the consequences of physicians’ decisions. Response: We agree that alignment of incentives across programs is important. In the CY 2014 Physician Fee Schedule final rule (78 FR 74774 through 74780), we finalized the inclusion of the MSPB amount in the cost composite portion of the physician value-based modifier (VM), beginning with the 2016 VM. We do not believe that it would be appropriate to suspend the further use of the MSPB measure until after the VM is implemented. We continue to believe, as we stated in the FY 2012 IPPS/LTCH PPS final rule, that the MSPB measure is an important step in encouraging hospitals to redesign and coordinate care with other providers and suppliers of care, and that its timely implementation is critical to incentivizing hospitals to provide the highest-quality, most efficient care possible to Medicare beneficiaries (76 FR 51657). Comment: One commenter expressed concern that the MSPB measure overlaps conceptually with the Hospital Readmissions Reduction Program, as hospitals are already being penalized for excessive readmissions under that program. The commenter urged CMS to reevaluate the MSPB measures so that CMS does not place disproportionate domain weighting on spending outside of hospitals’ control. Response: We disagree that the MSPB measure inappropriately overlaps with measures used in the Hospital Readmissions Reduction Program. As we stated in the FY 2012 IPPS/LTCH PPS final rule, the MSPB measure is not a measure of readmission rates, but rather it is a measure of total Medicare spending per beneficiary, relative to a hospital stay. A Medicare spending per beneficiary measure is required by the section 1886(o)(2)(B)(ii) of the Act to be included in the Hospital VBP Program, and therefore, in the Hospital IQR Program. We also continue to believe that the Medicare payments made for readmissions must be attributable to the index hospital stay, in order to: fully capture Medicare spending relative to a hospital stay; encourage the provision of comprehensive inpatient care, discharge planning, and follow-up; and strengthen PO 00000 Frm 00202 Fmt 4701 Sfmt 4700 incentives to reduce readmissions (76 FR 51621). We further disagree, as we stated earlier, that the MSPB measure represents services that are outside of the hospital’s control. As we stated above, and in the FY 2012 IPPS/LTCH PPS final rule, we believe that hospitals that provide quality inpatient care, conduct appropriate discharge planning, and work with providers and suppliers on appropriate follow-up care can achieve efficiencies and perform well on the measure (76 FR 51621). We thank commenters for this feedback. b. Changes Affecting ‘‘Topped-Out’’ Measures (1) Removal of Six ‘‘Topped-Out’’ Measures For the FY 2017 Hospital VBP Program measure set, we evaluated whether any measures that we previously adopted are now ‘‘toppedout’’ by focusing on two criteria: (1) national measure data showing statistically indistinguishable performance levels at the 75th and 90th percentiles; and (2) national measure data showing a truncated coefficient of variation (TCV) less than 0.10. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497) for further discussion of these current ‘‘topped-out’’ criteria and to our proposal below to modify the second criterion. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119), based on our evaluation of the most recently available data, we stated our belief that PN–6, SCIP–Card–2, SCIP–Inf–2, SCIP– Inf–3, SCIP–Inf–9, and SCIP–VTE–2 are all now ‘‘topped-out.’’ Therefore, we proposed to remove these six measures from the FY 2017 Hospital VBP measure set because measuring hospital performance on these measures will have no meaningful effect on a hospital’s TPS. We believe that removing these ‘‘topped-out’’ measures will continue to ensure that we make valid statistical comparisons through our finalized scoring methodology and will reduce the reporting burden on participating hospitals. We welcomed public comments on this proposal. Comment: Many commenters supported CMS’ proposal to remove ‘‘topped-out’’ measures, expressing appreciation for our efforts to streamline the program. Response: We thank the commenters for their support. Comment: One commenter suggested that CMS flag additional measures that E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations are approaching ‘‘topped-out’’ status in future rulemaking. Response: We thank the commenter for this suggestion and will take it into consideration in future rulemaking. Comment: Commenters urged caution with CMS’ proposed removal of ‘‘topped-out’’ measures, stating that several are only recently ‘‘topped-out.’’ Commenters also suggested that CMS consider adding more measures to the Hospital VBP Program to make up for the proposed removal of ‘‘topped-out’’ measures and to ensure that no single measure has a disproportionate impact on hospital performance in more than one program. Response: We will consider new measures as they become eligible for inclusion in the Hospital VBP Program. Comment: One commenter suggested that identified ‘‘topped-out’’ measures remain available in other reporting programs because the commenter believes that reporting these six specific measures has contributed to recent increases and emphasis on improved healthcare quality in hospitals, with a significant impact on local improvement efforts. Response: While we appreciate commenter’s observation that quality reporting has contributed to improved healthcare quality in hospitals, we believe that topped-out measures should be assessed to supplement a clinicallybased assessment of the measure’s impact on a clinical topic or domain. Comment: Commenters supported the removal of the ‘‘topped-out’’ measures but expressed confusion at why the measures will not be removed sooner than 2017. Response: We evaluate the Clinical Care—Process Domain measures for ‘‘topped-out’’ status on an annual basis in order to propose changes, if necessary, during the rulemaking process, and we do not believe it would be helpful to participating hospitals to remove measures that have been previously adopted for the Program in previous rulemakings. We note that, for example, we are currently in the middle of the Clinical Process of Care domain’s performance period for the FY 2016 Hospital VBP Program, which was adopted as CY 2014. We do not believe it would be helpful to hospitals to attempt to retire a measure in the middle of their performance period, barring substantial extenuating circumstances. We believe removing these measures for the FY 2017 Hospital VBP Program, adopted with a CY 2015 performance period, is most feasible. Comment: Some commenters suggested that CMS retire measures when their evidentiary basis has VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 changed, when the collection and measurement costs exceed their utility, or when measures have been demonstrated to have minimal impact on health outcomes and status. Response: We thank the commenters for their suggestions, and may consider additional ‘‘topped-out’’ criteria in future rulemaking. After consideration of the public comments we received, we are finalizing our proposal to remove PN–6, SCIP–Card–2, SCIP–Inf–2, SCIP–Inf–3, SCIP–Inf–9, and SCIP–VTE–2 from the FY 2017 measure set due to their being ‘‘topped-out.’’ (2) Change to Truncated Coefficient of Variation Criterion to Determine Whether a Measure is ‘‘Topped-Out’’ As stated above, we have adopted two criteria for determining the ‘‘toppedout’’ status of Hospital VBP Program measures: • Statistically indistinguishable performance at the 75th and 90th percentiles; and • Truncated coefficient of variation < 0.10. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119), we proposed to modify the second criterion to the following: • Truncated coefficient of variation ≤ 0.10. The coefficient of variation (CV) is a common statistic that expresses the standard deviation as a percentage of the sample mean in a way that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad distribution of individual hospital scores, with large and presumably meaningful differences between hospitals in relative performance. A small CV would indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not useful to draw distinctions among individual hospitals’ measure performance. By proposing to change the truncated CV from ‘‘less than’’ to ‘‘less than or equal to’’ 0.10 under our ‘‘topped-out’’ test, we will better be able to distinguish measures with significant variation in performance among hospitals and more accurately determine what measures are ‘‘topped-out’’ for purposes of the Program. We welcomed public comments on this proposal. Comment: Commenters agreed with the methodology regarding calculations to determine whether a measure is topped-out, and agreed with the proposal to alter the threshold from PO 00000 Frm 00203 Fmt 4701 Sfmt 4700 50055 ‘‘less than 0.10’’ to ‘‘less than or equal to 0.10.’’ Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing our modification to the truncated coefficient of variation criterion for determining whether a measure is ‘‘topped-out’’ as proposed. c. New Measures for the FY 2017 Hospital VBP Program We considered if we should adopt additional measures for the FY 2017 Hospital VBP Program. We considered which measures are eligible for adoption based on the statutory requirements, including specification under the Hospital IQR Program and posting dates on the Hospital Compare Web site, and our priorities for quality improvement as outlined in the National Quality Strategy (NQS) (available for download at: https://www. cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/Quality InitiativesGenInfo/Downloads/CMSQuality-Strategy.pdf). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119 through 28121) we stated that we believe that the following three proposed measures meet the statutory requirements for inclusion in the FY 2017 Hospital VBP Program. We also believe that these measures represent important components of quality improvement in the acute inpatient hospital setting. We received a number of general comments on quality measures for the Hospital VBP Program: Comment: Many commenters supported CMS’ proposals to adopt MRSA, C. difficile Infection, and PC–01 for the FY 2017 Program. These commenters believed that the measures are appropriate for the Program and will have been publicly posted on Hospital Compare in accordance with the Hospital VBP Program’s statute. Response: We agree and thank the commenters. Comment: Commenters supported CMS’ proposal to readopt the IMM–2 measure for FY 2017 and suggested that CMS consider adopting additional immunization measures in the future. Response: As with other suggested measure topics, we will consider new measures as they become available to us under the statutory requirements for the Hospital VBP Program. Comment: A few commenters recommended that the Hospital VBP Program should include a mix of measures, including measures that would test adherence to evidence-based medical interventions. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50056 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We agree, and we have attempted to introduce a variety of quality measure types into the Hospital VBP Program, including measures of processes, outcomes, and efficiency. Comment: One commenter believed that all measures in the Hospital IQR, HAC Reduction, and Hospital VBP Programs should be NQF-endorsed before their adoption by CMS, because NQF-endorsement ensures that the measures have been evaluated by a panel of experts in quality measurement. The commenter therefore supported the removal of measures that have lost NQF-endorsement. Response: We note that the Hospital VBP Program relies on data submitted under the Hospital IQR Program, and the Hospital IQR Program’s statute enables us to select measures that have not been endorsed by NQF, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Our statistical and clinical assessment of the measures chosen for adoption in the Hospital VBP Program supports our belief that the measures are sufficiently valid and reliable. Each measure has been used in the Hospital IQR Program for at least one year, and we believe each measure we adopt will improve patient outcomes. Comment: Commenters suggested that CMS consider exploring measures related to sepsis mortality as an alternative to current proposals. Commenters recommended that CMS prioritize the development of quality measures that promote nutrition screening and assessment of nutrition interventions. Additional commenters recommended that CMS consider measures of advance care planning, malnutrition care, measures related to diabetes, atrial fibrillation, COPD, and oncology, additional process measures, immunization measures, and a measure of all-cause readmission. Other commenters suggested that CMS consider PSI–4: Death among surgical inpatients with serious treatable complications, COPD 30-day mortality, and AMI Payment per Episode for the Hospital VBP Program. Additional commenters suggested that CMS consider adopting STK–1 (venous thromboembolism (VTE) prophylaxis); STK–2 (discharged on antithrombotic therapy); and STK–4 (percentage of eligible patients receiving thrombolytic therapy within 0–3 hours of symptom onset). One commenter specifically noted that the STK–4 measure in the Hospital VBP Program as it is especified and has not been deemed ‘‘topped-out.’’ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We will consider new measures for the Hospital VBP Program as they become eligible for inclusion in the measure set. We note, however, that section 1886(o)(2)(A) of the Act specifically excludes measures of readmissions from the Hospital VBP Program. Comment: One commenter urged CMS to expand the Surgical Site Infection list within the Outcomes domain to include Major Joint Replacement Surgeries and Spine procedures so that surgical specialty hospitals are able to participate in future Hospital VBP Programs. Otherwise, the commenter believed, hospitals that qualify for the Hospital VBP Program, and whose excellent performance records bolster the overall quality and efficacy of the program, may be excluded because the SSI list does not include these common procedures which make up the majority of the procedures they perform. Response: We thank the commenter for this suggestion. We are continuously evaluating the program and working to identify new, potentially suitable measures to fill measure gaps. We appreciate the commenter’s input for measure selection and will take this feedback into consideration in future rulemaking. We note that CDC maintains ongoing collaborations with a number of professional surgical organizations and is currently in the process of developing additional SSI metrics for higher volume surgical procedures. Once these measures are finalized, we may consider them for future inclusion in our quality reporting and pay for performance programs. Comment: Many commenters expressed concern that measures in both the Hospital VBP and HAC Reduction Programs overlap. Commenters pointed to a wide variety of concerns, including: Multiple competing benchmarks, various penalty calculation methodologies, wasting precious resources, and the potential for confusion among hospitals and beneficiaries. Many commenters noted that using measures in both HAC Reduction and the Hospital VBP Programs potentially penalizes participating hospitals twice, or could result in instances where hospitals perform well in one program and are penalized in the other. Another commenter stated that the overlap inappropriately magnifies the impact and importance of the measures. Some commenters were concerned that the overlap between measures in the HAC Reduction and Hospital VBP Programs may create a defeatist attitude among certain hospitals that are PO 00000 Frm 00204 Fmt 4701 Sfmt 4700 disproportionately affected, such as safety net hospitals. Commenters noted that such duplication between quality programs could draw needed dollars away from the very organizations that need to be focusing in this area. Response: We acknowledge that there is some overlap in quality measures between the Hospital VBP Program and the HAC Reduction Program. While we are aware that commenters object to the possibility of scoring hospitals on certain measures under both programs, we note that these measures cover topics of critical importance to quality improvement in the inpatient hospital setting, and to patient safety. We selected these quality measures because we believe that HAC measures comprise some of the most critical patient safety areas therefore justifying the use measures in more than one program. The MRSA Bacteremia and C. difficile Infection measures that we have proposed to adopt track infections that could cause significant health risks to Medicare patients, and we believe it is appropriate to provide incentives for hospitals to avoid them under more than one program. We further stress that the HAC Reduction Program and the Hospital VBP Program are separate programs with different purposes and policy goals. For example, the HAC Reduction Program is a program that reduces payments to hospitals for excess HACs to increase patient safety in hospitals. On the other hand, the Hospital VBP Program is an incentive program that redistributes a portion of the Medicare payments made to hospitals based on their performance on various measures. Therefore, although the measures exist in more than one program, the measures are used and calculated for very distinct purposes. Accordingly, as stated above, we believe that the critical importance of these measures to patient safety warrants their inclusion in both programs. We will, in the future, monitor the HAC Reduction and Hospital VBP Programs and analyze the impact of our measures selection, including any unintended consequences with having a measure in more than one program, and will revise the measure set in one or both programs if needed. Comment: Many commenters stated that CMS’ proposed measures for FY 2017, despite appearing to have the potential to be positive additions to the program, have not been publicly reported on the Hospital Compare Web site for 1 year as required by the Act. Response: Section 1886(o)(2)(C)(i) of the Act requires that measures must have been ‘‘included on the Hospital Compare Internet Web site for at least 1 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations year prior to the beginning of the performance period.’’ As commenters noted, we first reported these measures’ data in December 2013, and have proposed an FY 2017 performance period for these measures of CY 2015, which complies with the statutory requirement in section 1886(o)(2)(C)(i) of the Act. Accordingly, we believe that the three proposed measures meet the statutory requirements for inclusion in the FY 2017 Hospital VBP Program. We also believe that these measures represent important components of quality improvement in the acute inpatient hospital setting. However, to the extent that there remains any question regarding our interpretation of section 1886(o)(2)(C)(i) of the Act, we are finalizing that the effective date of the new FY 2017 measures, PC–01, MRSA Bacteremia, and C. difficile Infection, will be January 1, 2015, consistent with the beginning of the performance period for those measures. Comment: One commenter believed that the AMI–7a measure is inappropriate for the Hospital VBP Program because it does not apply to most hospitals due to a low volume of cases. Response: While we understand that many hospitals do not provide services that would be measured by the AMI–7a measure, the finalized Hospital VBP Program scoring methodology does not penalize hospitals that do not have sufficient cases for that measure, or any measures that we have adopted. Even if the measure will only apply to a small number of hospitals, we believe that this measure accomplishes the goals of the Hospital VBP Program and will improve patient outcomes in the hospitals where the measure will apply. We will consider proposing removal of this measure in future policy making. Comment: Commenters expressed continued concern about the three 30day mortality measures that we have adopted and placed into the Clinical Care—Outcomes domain. Commenters stated that the measures do not meaningfully reflect hospital performance because they do not meet the lower limit of moderate reliability identified by CMS’ analytical contractor in a 2012 report. Commenters expressed their appreciation for our adoption of longer performance periods for these measures, but noted that even at 24 months, the measures’ reliability is significantly less than we require for chart-abstracted measures. Commenters suggested that we consider a plan to improve or replace the mortality measures and consider reducing the domain weighting allocated to the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Clinical Care—Outcomes domain in the meantime. Response: As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53591) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50693), we believe that the mortality measures capture important quality data for purposes of the Hospital VBP Program. We believe that the three 30-day mortality measures are sufficiently reliable for inclusion in the Hospital VBP Program, particularly in light of our finalized policies to set a 25 case minimum and to extend the performance period’s duration for these measures over successive years to reach 36 months. Comment: One commenter requested that CMS change the mortality measures’ populations to ensure that the same patient is not counted under more than one measure. The commenter explained that its mortality measure scores had been adversely affected by a patient that had been counted under both pneumonia and AMI mortality. Response: If a patient was hospitalized for AMI and Pneumonia on a different date and died within 30 days from the first hospitalization in the three-year time frame we used to calculate the mortality measures, the patient could be included in both AMI and Pneumonia mortality measures. However, cohorts of mortality are determined by the principle diagnosis on the index hospitalization claims (that is, the denominator is defined as discharges/admissions not patients). There is only one principal diagnosis on each claim, therefore it is not likely that a specific patient’s claim or admission would be in both AMI and Pneumonia measures. (1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF #1716) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF #1716) is a risk-adjusted outcome measure monitoring hospital onset of MRSA Bacteremia bloodstream infection events using the standardized infection ratio (MRSA Bacteremia SIR) among all inpatients in the facility. The MRSA Bacteremia SIR is reported via the Center for Disease Control and Prevention’s (CDC) National Healthcare Safety Network (NHSN). We adopted this measure beginning with the FY 2015 payment determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630). Initial measure data were posted on Hospital Compare in December 2013. We remain concerned about the persistent public health threat presented by MRSA Bacteremia infections. According to a 2013 study available at PO 00000 Frm 00205 Fmt 4701 Sfmt 4700 50057 the National Institute of Health’s Web site, MRSA Bacteremia ‘‘results in longer hospitalization, increased expenses, and poorer patient prognosis’’ and ‘‘has been swiftly increasing worldwide over the past several decades.’’ 43 As we noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630), invasive MRSA Bacteremia infections may cause about 18,000 deaths during a hospital stay a year.44 The Measure Application Partnership (MAP) supported the direction of the MRSA Bacteremia measure for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id& ItemID=72746. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set, the measure should be applied following public reporting on Hospital Compare, and the most recent version of the NQF-endorsed measure should be applied. We believe that this measure is eligible for the Hospital VBP Program based on the MAP recommendation, our adoption of the most recent NQFendorsed version under the Hospital IQR Program, and our posting of measure data on Hospital Compare. Based on the continued danger that MRSA Bacteremia infections present to patients and to public health, we further believe that this measure is appropriate for the Hospital VBP Program. Therefore, we proposed to adopt the MRSA Bacteremia measure for the FY 2017 Hospital VBP Program, and we proposed to place the measure into the Safety domain. We invited public comment on this proposal. Comment: Commenters supported CMS’ proposal to adopt MRSA Bacteremia and C. difficile infection measures for the FY 2017 Program, stating that the measures will provide incentives for hospitals to employ appropriate infection control and prevention and antimicrobial stewardship programs. (CMS discusses C. difficile infection in more detail in the next section). Another commenter noted that the measure is a first step towards encouraging hospitals to focus 43 Tatokoro et al. BMC Urology 2013, 13:35. Available at https://www.ncbi.nlm.nih.gov/pmc/ articles/PMC3720197/pdf/1471-2490-13-35.pdf 44 Catherine Liu, Arnold Bayer, et al., Clinical practice Guidelines for the treatment of MethicillinResistant Staphylococcus aureus Infections in Adult and Children. Infectious Disease Society of America 2011; 52:e18. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50058 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations on prevention and appropriate treatment of these infections. One commenter noted that quality measures implemented in the U.K. had a positive effect on C. difficile infections and treatments and that appropriate treatment of C. difficile infections have important implications for patient outcomes, society, and the reduction of healthcare expenditures. Another commenter noted that MRSA Bacteremia and C. difficile infections are both largely preventable diseases. Another commenter expressed specific support for CMS’ proposal to adopt the C. difficile Infection measure, stating that stoma care management is necessary at all clinical stages to avoid life threatening and costly infections. Response: We thank the commenters for their support. Comment: One commenter urged CMS to delay use of the MRSA Bacteremia and C. difficile measures until FY 2018 because, while the measures are NQF-endorsed, the MAP did not fully support them for the Hospital VBP Program. The commenter stated that the MAP voted to ‘‘support direction’’ and noted that the measure should be publicly reported for a sufficient amount of time prior to being added to the Hospital VBP Program. Response: We disagree. We view the MRSA Bacteremia and C. difficile Infection measures as important quality measures to be added to the Safety domain because they track infections that present significant danger to patients. We believe that tracking hospitals on these measures—and providing incentives for better performance—will result in reduced harm to patients, better health care quality, and an improved health care system. Comment: One commenter urged caution with the C. difficile infection and MRSA Bacteremia measures, and argued that they must track to hospital onset-infections. Commenters suggested that many infections emerge in the community, meaning hospitals are not at fault for the origination of the infection. One commenter noted that infections caused by MRSA Bacteremia vary widely geographically, and there has been a rise in the frequency of community-associated MRSA Bacteremia skin/soft tissue infections, many of which are likely best treated with direct interventions at the site of infection and do not require antibiotics. The commenter believed that as the proportion of community-associated strains become predominant, hospitals will have less ability to have any appreciable impact on their frequency. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 A few commenters requested that the MRSA Bacteremia and C. difficile Infection measures control for known regional variation in the infection rates so that hospitals that care for high-risk populations are not inadvertently targeted or encouraged to limit access to care by such high-risk patients. Some commenters suggested that a better way to track MRSA Bacteremia and C. difficile infections is to include measures that focus on best practices and guidelines for patients who contract MRSA Bacteremia or C. difficile infections. One commenter also asked CMS to consider that C. difficile infections are higher in surgical patients, rather than non-surgical patients, and are particularly high in gastrointestinal surgery patients. Therefore, the commenter believed that hospitals that perform a greater number of colorectal procedures will have higher rates of C. difficile infections in their patients, even if they are perfectly compliant with all the applicable guidelines and practices. Response: The MRSA and C. difficile measures differentiate between community-acquired and hospital-onset events based on a patient’s date of admission and date(s) of specimen collection, and includes an adjustment for many risk factors specifically facility size, medical teaching hospital affiliation, prevalence of communityonset infection, and for CDI test type. Therefore, we do not believe the measures need to be revised to account for these factors because the current approach already addresses many of the commenters’ concerns. However, we will collaborate with CDC to evaluate whether there is a need to consider additional risk adjustment factors, such as occurrence of gastrointestinal surgeries, suggested by the commenters for future policy development. While we are willing to consider other risk factors, the additional adjustment gained must be weighed against the extra burden added to collected more required data elements. The issue of the same measures being included in multiple programs is addressed further below. After consideration of the public comments we received, we are finalizing our proposal to adopt the MRSA Bacteremia measure for the FY 2017 Hospital VBP Program. (2) Clostridium difficile (C. difficile) Infection (NQF #1717) C. difficile Infection (NQF #1717) is a risk-adjusted outcome measure monitoring hospital onset of C. difficile Infection events using the standardized PO 00000 Frm 00206 Fmt 4701 Sfmt 4700 infection ratio (C. difficile SIR) among all inpatients in the facility. The C. difficile SIR is reported via CDC’s NHSN. We adopted this measure beginning with the FY 2015 payment determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 51631). Initial measure data were posted on Hospital Compare in December 2013. As with MRSA Bacteremia infections, we are concerned about the seriousness of C. difficile infections. According to a 2012 study, ‘‘infection with Clostridium difficile is associated with poor outcomes for patients. Previous work has determined that, regardless of baseline risk of death, for every 10 patients that acquire C. difficile in the hospital, 1 patient will die. Clostridium difficile is also associated with increased health care costs. One of the primary mechanisms by which C. difficile increases costs is by increasing the length of time patients spend in hospital.’’ 45 As we stated in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51630 through 51631), C. difficile infections have become more frequent, more severe, and more difficult to treat in recent years. Each year, tens of thousands of people in the United States get sick from C. difficile, including some otherwise healthy people who are not hospitalized or taking antibiotics. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set, the measure should be applied following public reporting on Hospital Compare, and that the most recent version of the NQF-endorsed measure should be applied. We believe that this measure is eligible for the Hospital VBP Program based on the MAP recommendation, our adoption of the most recent NQFendorsed version under the Hospital IQR Program, and our posting of measure data on Hospital Compare, as well as the continued danger that C. difficile infections present to patients and the public health. Therefore, we proposed to adopt the C. difficile SIR measure for the FY 2017 Hospital VBP Program, and we proposed to place the measure into the Safety domain. We invited public comment on this proposal. Comment: One commenter urged CMS to delay use of the C. difficile Infection measure until FY 2018 45 Forster et al. ‘‘The effect of hospital-acquired infection with Clostridium difficile on length of stay in hospital.’’ Canadian Medical Association Journal, January 10, 2012. Available at https:// www.ncbi.nlm.nih.gov/pmc/articles/PMC3255231/ pdf/1840037.pdf. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations because C. difficile infections have diverse sources and are not associated with symptomatic cases for which infection control interventions are primarily targeted. Further, the commenter had concerns about current lab identification definitions used for public reporting because (1) asymptomatic cases with positive lab identification events are included, (2) recurrences are counted as new cases if tested again after two weeks, and (3) patients may be asymptomatically colonized prior to admission and develop the disease, resulting in attribution of a healthcare associated infection, regardless of any hospital’s infection prevention strategies. Finally, the commenter noted that there is no standard strategy for testing patients for C. difficile infections. Response: The CDC Web site includes posted information for appropriate clinical practice, testing, and identification of C. difficile infections at: https://www.cdc.gov/HAI/organisms/ cdiff/Cdiff_clinicians.html. These practices are strongly suggested when tracking C. difficile cases for reporting to NHSN, and include guidance to only perform the test for C. difficile and its toxins on diarrheal (unformed) stool from symptomatic patients, unless ileus due to C. difficile is suspected, and to avoid testing stool from asymptomatic patients, for routine identification of asymptomatic carriers, or as a test of cure. Following this guidance as a standard of practice will avoid reporting of asymptomatic, colonized patients, who are not to be reported per NHSN protocol. Recurrent cases are counted separately from incident cases and are not included in the hospital-onset, incident C. difficile metric reported to CMS. Per published research and the NHSN protocol, a recurrent C. difficile LabID Event is defined as a specimen obtained >2 weeks (>= 2 weeks is a duplicate and not reported) and ≤8 weeks after the most recent CDI LabID Event for that patient. Incident cases are defined and counted as specimens obtained >8 weeks after the most recent CDI LabID Event for that patient (McDonald LC, et al. Infect Control Hosp Epidemiol 2007; 28:140–145). Comment: One commenter cautioned that the C. difficile Infection measure may result in discouraging healthcare professionals from screening for or attempting to diagnose mild cases of CDI because the measure focuses on rates of infection rather than screening. The commenter suggested that CMS consider rewarding hospitals for limiting prolonged periods of multiple antibiotic use among patients, for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 optimizing antimicrobial therapy, and for instituting CDI prevention programs. Response: We will consider this feedback; however we do not think that this measure will discourage healthcare professionals from testing for C. difficile when clinically indicated, particularly given the potential for serious harm that C. difficile infections present to patients. Though healthcare professionals may have incentives to avoid diagnostic testing, they also have incentives to treat with confirmation of the diagnosis, in part because of the danger of overprescribing antibiotics and its associated complications for patients. We will consider the commenter’s suggestions in the future. After consideration of the public comments we received, we are finalizing our proposal to adopt the C. difficile infection measure for the FY 2017 Hospital VBP Program. (3) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) is a chart-abstracted measure that we adopted beginning with the FY 2015 payment determination for the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53530). Initial measure data were posted on Hospital Compare in December 2013. Although this is a chart-abstracted measure, we finalized our policy in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53529) that this measure would be collected in aggregated numerator, denominator, and exclusion counts per hospital via a Web-based tool, instead of collecting patient-level data from hospitals. As we described in the FY 2013 IPPS/ LTCH PPS final rule referenced above, the Strong Start Initiative (https://www. innovation.cms.gov/initiatives/strongstart/) was launched to help reduce early elective births. At launch, the HHS Secretary stated that more than half a million infants are born prematurely in America each year. Fortunately, the early elective birth rate has steadily decreased. In 2012, the number of early elective births had decreased to approximately 456,000 or 11.55 percent of the total number of births.46 Early elective births may require additional medical attention and early intervention services. Research indicates that elective deliveries before 39 weeks increase the 46 Martin, JA, Hamilton, BE, Osterman, MJK, Curtin, SC, Mathews, TJ. (2013). Births: Final data for 2012. Natl Vital Stat Rpt. 62(9). Retrieved from https://www.cdc.gov/nchs/data/nvsr/nvsr62/nvsr62_ 09.pdf. PO 00000 Frm 00207 Fmt 4701 Sfmt 4700 50059 risk of significant complications for mother and baby, as well as long-term health problems.47 48 49 50 Early elective births are a public health problem that has significant consequences for families well into a child’s life. As a public campaign to reduce early elective births, the Strong Start Initiative’s objective is to test ways to reverse this trend by helping provide expectant mothers with the care they need for a healthy delivery and a healthy baby, and by focusing on reducing early elective deliveries, which can lead to a variety of health problems for mothers and infants. The Strong Start Initiative cuts across many agencies within HHS and involves external organizations including the March of Dimes and the American College of Obstetricians and Gynecologists (ACOG). We believe that a reduction in the number of nonmedically indicated elective deliveries at ≥37 to <39 weeks gestation will result in a substantial decrease in neonatal morbidity and mortality, as well as a significant savings in health care costs. In addition, the rate of cesarean sections should decrease with fewer elective inductions, resulting in decreased length of stay and health care costs. The MAP supported adoption of the PC–01 Elective Delivery measure for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS found at https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id&Item ID=72746. The MAP noted that the measure addresses an NQS priority not adequately addressed in the program measure set. We proposed to adopt this measure for the Hospital VBP Program and we proposed to place the measure into the Clinical Care—Process domain because we believe this measure furthers the NQS’s three-part aim of better healthcare for individuals, better health for populations, and lower costs of healthcare. In addition, although the 47 Glantz, J. (Apr. 2005). Elective induction vs. spontaneous labor associations and outcomes. J Reprod Med. 50(4):235–40. 48 Vardo, J., Thornburg, L., Glantz J., (2011). Maternal and neonatal morbidity among nulliparous women undergoing elective induction of labor. J. report med. 56(1–2): 25–30. 49 Tita, A., Landon, M., Spong, C., Lai, Y., Leveno, K., Varner, M., et al. (2009). Timing of elective repeat cesarean delivery at term and neonatal outcomes. [Electronic Version]. NEJM. 360:2, 111– 120. 50 Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., & Meyers, J. (2009). Neonatal and maternal outcomes associated with elective delivery. [Electronic Version]. Am J Obstet Gynecol. 200:156.e1–156.e4. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50060 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PC–01 Elective Delivery measure captures data from all applicable patients, we also believe that the measure is specifically relevant to the nearly 2 million Medicare beneficiaries who are aged 44 and under, most of whom are dual eligible beneficiaries, who have the potential to be impacted by early elective births. In 2011, Medicare paid for roughly 14,000 births. We welcomed public comment on this proposal. Comment: Many commenters supported CMS’ proposal to include the PC–01 measure in the Hospital VBP Program, noting that many hospitals continue to have rates of early elective delivery in excess of 15 percent despite the American College of Obstetricians and Gynecologists recommendations that no elective delivery be performed before the gestational age of 39 weeks without a medical indication. One commenter believed that this measure will reduce costs and also have the potential to greatly improve newborn outcomes of care. Response: We thank the commenters for their support. Comment: Several commenters expressed opposition to the PC–01 measure for the FY 2017 Hospital VBP Program because the measure is Webbased, and there has not been any chart validation for accuracy and consistency of data collection across hospitals. Some commenters specifically opposed using any data that are not validated under the Hospital VBP Program, stating that PC– 01 should therefore not be finalized for the program based on data accuracy concerns. Commenters stated that, while hospitals are working diligently to collect accurate data for this measure, it is possible that hospitals collecting the most accurate data will have the lowest scores. Commenters stated that the benchmark of 0 percent is not realistic considering that justifications for Elective Delivery are based off of ICD– 9–CM codes and The Joint Commission (TJC) has stated that not all the justifications for an elective delivery are included on the ICD–9–CM Justification Table. Further, commenters noted that TJC has stated that the purpose of this measure is to enable hospitals to establish a baseline for their performance, which in turn serves as a determinant of whether improvement efforts are effective over time. One commenter suggested that CMS wait to adopt this type of measure until the electronic clinical quality measure version is available. One commenter did not support the recommendation to add the PC–01 measure to the Clinical Care—Process domain because the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 measure algorithm exclusions are applied prior to denominator selection. The commenter stated that these exclusions make the quarterly denominators very low, even for a large facility, and that, therefore, the measure does not truly assess the quality of care provided. Response: We disagree with the concept that this measure may be inherently invalid because not all justifications for an elective delivery are included in the ICD–9–CM Justification Table, or invalid because of the volume of exclusions. All NQF-endorsed measures must meet strict reliability and validity criteria to gain endorsement. PC–01 is NQF-endorsed therefore the measure as defined is clinically valid. Regarding the accuracy of the submitted data, hospitals are required to acknowledge the accuracy of the data submitted through the Hospital IQR Program’s Data Accuracy and Completeness Acknowledgment statement on an annual basis. To validate the accuracy of submitted data, we employ logic checks as we do for other measures. For example, the number of cases entered in the numerator cannot be greater than the number of cases entered in the denominator. As explained in section IX.A.11 of this preamble, because the PC–01 data are collected in aggregate instead of for individual patients, we cannot use the same mechanism to assess reliability of PC–01 as we use for chart-abstracted clinical process of care measures reported at the patient level. The approach for other clinical process of care measures involves sampling, whereas the analogous approach for aggregate data would involve collecting all data from a hospital. We believe that the benefits of validating aggregate data in this way are outweighed by the burden to hospitals in submitting potentially hundreds of records to validate one measure, and also believe that this approach would be costprohibitive for CMS. However, we are exploring different options to assess the general validity of PC–01 data more robustly. For the reasons outlined in the proposed rule, we continue to believe this measure is appropriate for the Hospital VBP Program. We have adopted the e-CQM version of this measure under our voluntary electronic reporting option for the Hospital IQR Program. Comment: Some commenters opposed CMS’ proposed adoption of the PC–01 measure, stating that CMS should first determine that there is sufficient room for making additional substantive PO 00000 Frm 00208 Fmt 4701 Sfmt 4700 improvements that would result in better patient care. Response: The NQF notes that preterm births are a rapidly escalating public health problem, and that early elective delivery contributes to this problem.51 As stated above, many commenters have noted that many hospitals continue to have rates of early elective delivery in excess of 15 percent despite the American College of Obstetricians and Gynecologists recommendations that no elective delivery be performed before the gestational age of 39 weeks without a medical indication. Therefore, we believe that hospitals have the opportunity to improve upon a detrimental practice that was until very recently rapidly expanding.52 Comment: Commenters expressed concerns about CMS’ proposal to adopt the PC–01 measure, noting that many hospitals do not provide perinatal care services and stating that the volume of Medicare births is not high enough to justify this measure’s placement into the Hospital VBP Program. Commenters suggested that CMS remove PC–01 from the proposed measure set. Response: We continue to believe this measure is appropriate for the Hospital VBP Program, as we described in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28120). The measure is NQFendorsed and was supported for the Hospital VBP Program by the MAP, and addresses an NQS priority not adequately addressed in the Program’s measure set to date. In addition, as we noted, nearly 2 million Medicare beneficiaries are aged 44 and under, and in 2011, Medicare paid for roughly 14,000 births. After consideration of the public comments we received, we are finalizing our proposal to adopt the PC– 01 measure for the FY 2017 Hospital VBP Program. d. Adoption of the Current Central LineAssociated Bloodstream Infection (CLABSI) Measure (NQF #0139) for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50682 and 50686), we adopted the CLABSI measure for the FY 2016 Hospital VBP Program. We stated our belief that adopting the current CLABSI measure is consistent with the MAP’s recommendation in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under 51 https://www.qualityforum.org/WorkArea/link it.aspx?LinkIdentifier=id&ItemID=72746. 52 Osterman MJK, Martin JA. Changes in cesarean delivery rates by gestational age: United States, 1996–2011. NCHS data brief, no 124. Hyattsville, MD: National Center for Health Statistics. 2013. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Consideration by HHS found at https:// www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&Item ID=72746, to use the standardized infection ratio version of the measure until the reliability-adjusted CLABSI measure is NQF-endorsed. We have stated our intent to consider adopting the reliability-adjusted CLABSI measure in future rulemaking. The reliability-adjusted standardized infection ratio (SIR) is an outcome measure that summarizes the healthcare-associated infection experience by type of infection (for example, central-line associated bloodstream infection, surgical site infection) for individual hospitals. The reliability-adjusted measure enables more meaningful statistical differentiation between hospitals by accounting for differences in patient case-mix, exposures to medical devices or procedures (for example, central line days, surgical procedure volume), and unmeasured factors that are not reflected in the unadjusted SIR and that cause variation in outcomes between hospitals. Accounting for these sources of variability enables better measure discrimination between hospitals and leads to more reliable quality measurements. However, in the absence of NQF endorsement of the reliability-adjusted CLABSI measure or any additional MAP recommendations, and unless and until the Hospital IQR Program adopts the reliability adjustments, we believe we may only consider the current version of the CLABSI measure for adoption under the Hospital VBP Program. We continue to believe that the CLABSI measure encourages hospitals to minimize infection events that present significant health risks to patients. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28120 through 28121), we proposed to adopt the current version of the CLABSI measure for the FY 2017 Hospital VBP Program and subsequent years. If a reliability-adjusted version of the measure becomes available to us in the future, we will consider adopting it. We welcomed public comment on this proposal. Comment: Commenters requested that CMS clarify whether the CLABSI and CAUTI measures will include non-ICU locations. Commenters also requested that CMS clarify whether hospitals that report CLABSI and CAUTI to NHSN as Mixed Acuity Units instead of ICUs will receive SIRs for the Hospital VBP Program, or if the measures will not be applicable for hospitals that do not report for ICUs. Response: For the CLABSI and CAUTI measures, we will score hospitals using VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 adult, pediatric, and neonatal ICU data only for the FY 2017 and FY 2018 Hospital VBP Programs, because the baseline periods for FY 2017 and FY 2018 are CY 2013 and 2014 respectively. These baseline periods are prior to the Hospital IQR Program requirement that hospitals report data on selected nonICU locations (78 FR 50787). Therefore, we will have no data on non-ICU locations to use for performance or improvement benchmarks for these program years. Beginning with the FY 2019 Program, we intend to publicly report the CLABSI and CAUTI SIR data reported to the Hospital IQR Program on selected nonICU locations (that is, adult or pediatric medical ward, surgical ward, and medical/surgical ward). We will consider inclusion of these locations in the Hospital VBP Program as soon as applicable reliable baseline data are available. Mixed acuity units do not meet NHSN definitions for the six select non-ICU locations, and therefore are not required to be reported for Hospital IQR Program purposes, so we will not use data from those units for the Hospital VBP Program for any of the baseline or performance periods. We refer readers to the NHSN Helpdesk Mailbox (nhsn@ cdc.gov) with any specific questions about correctly defining and mapping patient care locations into NHSN. Comment: One commenter supported the continued inclusion of the existing risk-adjusted, rate-based ICU-only NHSN CLABSI measure in the FY 2017 Hospital VBP Program. The commenter also urged CMS to calculate the CLABSI measure using the ICU-only specifications until the facility-wide measure is available for both the baseline and performance periods of the Hospital VBP Program. The commenter was unaware of how CMS will deal with the CLABSI measure once it transitions to a facility-wide measure and expressed concern that CMS might dispense with the improvement score when the baseline and performance periods do not match. The commenter noted that the CDC has sufficiently granular data to continue reporting ICUonly results to CMS despite the collection moving to facility wide. Response: We agree that improvement scores are an important part of the Hospital VBP Program. We refer readers to our response to the previous commenter, in which we explain our intention to follow the commenter’s suggestion, and provide the timelines for transitioning from the ICU-only measure to the broader measure of CLABSI in ICU and select non-ICU locations. PO 00000 Frm 00209 Fmt 4701 Sfmt 4700 50061 Comment: One commenter urged CMS to rapidly incorporate a reliabilityadjusted Standardized Infection Ration (SIR) calculation for the CLABSI measure because it provides a more robust calculation to identify differences among hospital rates. Response: We continue to believe that the CLABSI measure encourages hospitals to minimize infection events that present significant health risks to patients. However, in the absence of NQF-endorsement of the reliabilityadjusted measure and any additional MAP recommendations, and unless we decide to adopt the reliability adjustments in the Hospital IQR Program, we believe we may only consider the current version of the CLABSI measure for adoption under the Hospital VBP Program. If a reliabilityadjusted version of the measure becomes available to us in the future, we will consider adopting it. Comment: One commenter stated that CMS should not finalize the CLABSI measure and should wait until the reliability-adjusted version of the measure is endorsed by NQF. The commenter explained that many hospitals are having difficulty reporting the current measure, resulting in deviations in accuracy that may create profound differences in hospital performance. Response: We will consider adopting the new version of the measure if it is endorsed by NQF. However, reliability adjustment is a methodology designed to address hospitals with small numerators and denominators. The methodology is not designed to assist hospitals in reporting CLABSI data accurately. To assist hospitals in accurately reporting CLABSI, CMS and CDC have been working collaboratively to clarify NHSN protocol specifications and to educate hospitals on these protocols. Comment: One commenter was pleased with CMS’ proposal to adopt the CLABSI measure, stating that it measures important safety outcomes for consumers and purchasers. Response: We agree and thank the commenter. After consideration of the public comments we received, we are finalizing our proposal to adopt the current CLABSI measure for the FY 2017 Hospital VBP Program. e. Summary of Previously Adopted and New Measures for the FY 2017 Hospital VBP Program The following table outlines the measures for the FY 2017 Hospital VBP Program, including those that we are readopting and those measures we are E:\FR\FM\22AUR2.SGM 22AUR2 50062 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations adopting for the first time. As discussed further below, this table also includes the FY 2017 domains into which we are placing the readopted measures, as well as the domains into which we are placing the newly adopted measures. PREVIOUSLY ADOPTED AND NEW MEASURES FOR THE FY 2017 HOSPITAL VBP PROGRAM Measure Description Domain CAUTI * ............................ CLABSI ** ......................... C. difficile *** .................... MRSA *** .......................... PSI–90 * ........................... SSI * ................................. MORT–30–AMI * .............. Catheter-Associated Urinary Tract Infection (NQF #0138) ...................................................... Central Line-Associated Blood Stream Infection (NQF #0139) ................................................ Clostridium difficile Infection (NQF #1717) ............................................................................... Methicillin-Resistant Staphylococcus aureus Bacteremia (NQF #1716) .................................. Complication/patient safety for selected indicators (composite) (NQF #0531) ........................ Surgical Site Infection: (NQF #0753) ........................................................................................ • Colon • Abdominal Hysterectomy Acute Myocardial Infarction (AMI) 30-day mortality rate (NQF #0230) .................................... MORT–30–HF * ................ Heart Failure (HF) 30-day mortality rate (NQF #0229) ............................................................ MORT–30–PN * ............... Pneumonia (PN) 30-day mortality rate (NQF #0468) ............................................................... AMI–7a * ........................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival (NQF #0164) ................ IMM–2 * ............................ Influenza Immunization (NQF #1659) ....................................................................................... PC–01 *** ......................... Elective Delivery Prior to 39 Completed Weeks Gestation (NQF #0469) ................................ MSPB–1 * ......................... Medicare Spending per Beneficiary (NQF #2158) ................................................................... HCAHPS * ........................ Hospital Consumer Assessment of Healthcare Providers and Systems Survey (NQF #0166) Safety. Safety. Safety. Safety. Safety. Safety. Clinical Care—Outcomes. Clinical Care—Outcomes. Clinical Care—Outcomes. Clinical Care—Process. Clinical Care—Process. Clinical Care—Process. Efficiency and Cost Reduction. Patient and Caregiver Centered Experience of Care/Care Coordination. * Measures readopted for the FY 2017 Hospital VBP Program. ** Measure adopted for the FY 2017 Hospital VBP Program that were not previously subject to automatic readoption. *** Measures newly adopted for the FY 2017 Hospital VBP Program in this final rule. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 5. Additional Measures for the FY 2019 Hospital VBP Program a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) (NQF #1550) is an outcome measure that we adopted beginning with the FY 2015 payment determination under the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53516 through 53518). The measure assesses complications occurring after THA and TKA surgery from the date of the index admission to 90 days post date of the index admission. The outcome is one or more of the following complications: Acute myocardial infarction, pneumonia, or sepsis/septicemia within 7 days of admission; surgical site bleeding, pulmonary embolism or death within 30 days of admission; or mechanical complications, periprosthetic joint infection or wound infection within 90 days of admission. We posted THA/ TKA measure data on the Hospital Compare Web site in December 2013. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We refer readers to the FY 2013 IPPS/ LTCH PPS final rule and to the THA/ TKA complication methodology report (https://qualitynet.org/dcs/Blob Server?blobkey=id&blobnocache=true &blobwhere=1228890067881&blob header=multipart%2Foctet-stream&blob headername1=Content-Disposition &blobheadervalue1=attachment%3B filename%3DTHK_CmpMsrUpdtSpecs_ 080113.pdf&blobcol=urldata&blob table=MungoBlobs) for additional details on the THA/TKA measure. We continue to believe that measuring and reporting risk-standardized complication rates will inform health care providers about opportunities to improve care, strengthen incentives for quality improvement, and promote improvements in the quality of care received by patients and in the outcomes they experience. We believe that THA/TKA is an important measure of clinical outcomes, and, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28121 through 28122), we proposed to adopt it for the FY 2019 Hospital VBP Program and subsequent years. The MAP supported the adoption of the measure for inclusion in the Hospital VBP Program in its MAP PreRulemaking Report: 2013 Recommendations on Measures Under PO 00000 Frm 00210 Fmt 4701 Sfmt 4700 Consideration by HHS found at https:// www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id& ItemID=72746, noting it addresses a high-volume elective procedure with variation in performance. We proposed to adopt this measure for FY 2019 now based on the length of the measure’s reporting period and the time necessary to complete scoring calculations. Because it is an outcome measure, we proposed to place it in the Clinical Care—Outcomes domain. We welcomed public comments on this proposal. Comment: Several commenters supported CMS’ proposal to adopt THA/ TKA for the FY 2019 Program, stating that the measure will further drive hospitals to boost their care quality initiatives focused on this procedure. Some commenters urged CMS to consider adopting it as early as FY 2018. Response: We believe that the time periods necessary to collect sufficiently reliable performance data on this measure preclude us from adopting the measure sooner than FY 2019. Comment: Several commenters opposed adoption of the THA/TKA measure, stating that it has not met the one-year public reporting requirement outlined in the Hospital VBP Program statute. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: As described above with respect to measures proposed for FY 2017, section 1886(o)(2)(C)(i) of the Act requires that measures must have been ‘‘included on the Hospital Compare Internet for at least 1 year prior to the beginning of the performance period.’’ As commenters noted, we reported these measures’ data in December 2013, and have proposed an FY 2017 performance period for these measures of CY 2015, which complies with the statutory requirement in section 1886(o)(2)(C)(i) of the Act. We believe that this measure meets the statutory requirements for inclusion in the FY 2019 Hospital VBP Program. We also believe that this measure represents an important component of quality improvement in the acute inpatient hospital setting. However, to the extent that there remains any question regarding our interpretation of section 1886(o)(2)(C)(i) of the Act, we are finalizing that the effective date of the THA/TKA measure will be July 1, 2015, consistent with the beginning of the performance period for that measure. Comment: One commenter supported the addition of the THA/TKA quality measure because it is MAP-approved and will further drive hospitals to boost their quality of care initiatives around these high-volume procedures that reduce pain and increase mobility for hundreds of thousands of Medicare beneficiaries each year. The commenter noted that this measure is particularly important because it captures multiple complications and adverse events at various post-operative time intervals and would give hospitals a common benchmark around which to organize their quality improvement efforts. Response: We agree and thank the commenter for its support. Comment: One commenter expressed concern about the accuracy of the administrative data sets that are the basis for the THA/TKA measure, stating that the coding data have been known to underreport significant comorbidities that may therefore skew quality measurement. Response: We believe that the administrative claims data used for the Hip/Knee Complication measure is sufficiently accurate for purposes of Hospital VBP Program inclusion. We have validated the AMI, HF, and pneumonia mortality measures by building comparable models using medical record data for risk adjustment for heart failure patients (National Heart Failure data), AMI patients (Cooperative Cardiovascular Project data), and pneumonia patients (National Pneumonia Project dataset). When the medical record-based models were VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applied to the corresponding patient population, the hospital riskstandardized rates estimated using the claims-based risk adjustment models had a high level of agreement with the results based on the medical record model, thus supporting the use of the claims-based models for public reporting. Regarding the commenter’s concern about underreporting significant comorbidities, during measure development, we also conducted a medical record validation study of the THA/TKA complications measure. The goal of that study was to determine the overall agreement between arthroplasty patients identified as having a complication (or no complication) in the claims-based measure and those who had a complication (or no complication) also documented in the medical record. Overall measure agreement was 93 percent (598/644 patients) before any changes were made to the model specifications. After the measure specifications were changed based upon both the results of this validation study, the measure agreement between claims data and the medical record was 99 percent (635/644). Comment: Some commenters opposed the proposed adoption of the THA/TKA measure, stating that CMS should verify that the measure is properly riskadjusted across patient populations to ensure that hospitals are not deterred from performing these surgeries for older, high-risk beneficiaries. One commenter opposed the adoption of the THA/TKA measure because it uses the same hierarchical logical modeling methodology that is specified for the mortality measures included in the Hospital VBP Program, and the commenter continued to have concerns about the ability of this model to accurately distinguish between hospitals’ performance. The commenter suggested instead that the model should include an adjustment for socioeconomic status, which commenter believes is an important predictor of complication rates. The commenter believes the measure is insufficient for inclusion in payment policies, for these reasons. Another commenter expressed support for the proposed THA/TKA measure, conditioned on CMS’ adoption of a sociodemographic adjustment to the measure. Response: We refer readers to our earlier discussion of risk adjustment based on socioeconomic status with respect to the MSPB measure in section IV.I.4. of the preamble of this final rule, which also is relevant for this measure. As discussed in the previous section, we believe that the THA/TKA measure’s PO 00000 Frm 00211 Fmt 4701 Sfmt 4700 50063 risk adjustment methodology appropriately considers and adjusts for clinical factors. After consideration of the public comments we received, we are finalizing the THA/TKA measure for the FY 2019 Hospital VBP Program and subsequent years. b. PSI–90 Measure In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698), we declined to finalize the PSI–90 measure for the FY 2019 Hospital VBP Program in order to adopt a more recent baseline period than would have been possible at that time. However, we did not intend to signal that we would not adopt the PSI– 90 measure for FY 2019 and subsequent years. We continue to believe that adopting this Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicator (PSI) composite measure provides strong incentives for hospitals to ensure that patients are not harmed by the medical care they receive, which is a critical consideration in quality improvement. In order to clarify the measure’s status under the Hospital VBP Program and ensure that there is no confusion about our intent, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122), we proposed to readopt the PSI–90 measure for FY 2019 Hospital VBP Program and subsequent years. We welcomed public comments on this proposal. Comment: Several commenters supported CMS’ proposal to adopt the PSI–90 measure for the FY 2019 Program. One commenter noted that the measure captures important patient safety outcomes for consumers and purchasers. Response: We thank the commenters for their support. Comment: Several commenters suggested that CMS publish hospitals’ performance on both the full composite measure and its individual indicators. One commenter suggested that CMS consider separate patient safety indicators for the Hospital VBP Program rather than the composite. Response: With respect to commenters’ suggestions that we publish hospitals’ performance on individual indicators, we may consider doing so in the future. However, since we have adopted the composite measure for the Hospital VBP Program, we believe it is appropriate to publish hospitals’ performance on that measure, rather than its components, as a reflection of performance measured and scored under the Program. The composite measure is the basis for awarding achievement and E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50064 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations improvement points under the Hospital VBP Program, not its underlying indicators, and we believe it is appropriate to focus the Program’s public reporting on the measures that receive points under the Program. Comment: Some commenters urged CMS to remove the PSI–90 measure from the Hospital VBP, Hospital IQR, and HAC Reduction Programs immediately based on NQF’s recent report on patient safety measures. Several commenters noted that the NQF’s Patient Safety Standing Committee did not recommend the measure for endorsement during maintenance review. Commenters also noted that the PSI– 90 measure is undergoing maintenance review by the NQF. One commenter stated that AHRQ’s proposed changes to the measure to regain NQF’s endorsement may be significant and suggested that CMS consider whether it should continue to adopt the measure for the Hospital VBP, HAC Reduction, and Hospital IQR Programs. Response: We would like to clarify the status of the PSI–90 measure with regard to NQF endorsement. As part of the routine NQF measure maintenance process, the Patient Safety Committee expressed concerns about the weighting of the PSI–90 component measures and requested to see additional measure information related to re-weighting of PSI–90 with three additional components (PSI–9, PSI 10 and PSI–11 before deciding if it would recommend continued endorsement of the measure. AHRQ has submitted the requested data for the NQF Patient Safety Committee’s consideration. If, during the NQF review process, significant changes are made to the measure, we will evaluate those changes, including whether the measure remains appropriate for the Hospital VBP Program. Comment: Several commenters stated that the PSI–90 measure lacks robust risk-adjustment and tends to penalize hospitals with larger case volumes. Several commenters argued that the measure relies on inadequately validated claims data. Commenters stated that claims-based measures are not necessarily reliable for Hospital VBP Program purposes. Commenters argued that the measure’s basis in administrative claims data presents significant limitations and that using administrative claims data is a less accurate method of identifying patient severity than clinical data abstracted from medical records. Another commenter was opposed to further adoption of the PSI–90 measure for the Hospital VBP Program, stating VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that composite measures calculated using retrospective claims data create many problems for quality improvement activities, as the commenter believes claims-based data create inherent difficulties that are not present in nonclaims data. The commenter was also opposed to rebalancing the PSI–90 measure by adding new metrics or shifting weighting to better measures in the composite, and stated that nonclaims data should be considered for future composites when feasible. Response: Each of the PSI–90 composite component measures includes detailed risk-adjustment for clinical factors (for example, modified diagnostic related groupings, major diagnostic categories, comorbidities), age, and gender that influence the risk for experiencing a patient safety event during hospitalization. AHRQ’s Quality Indicator program continually updates and refines the indicators to capture the best possible quality indicators for the measure. We also note that there are previously conducted validation studies examining the relationship between billing or claims data and medical records. In addition, AHRQ has advised us that the NQF-convened a group of experts to determine what criteria should be used for evaluating the indicators in the PSI–90 measure. The Technical Expert Panel provided clear guidance on the relationship between the individual component indicators and the composite in the Composite Performance Measure Evaluation Guidance document (NQF, April 2013), available at https://www.quality forum.org/Publications/2013/04/ Composite_Performance_Measure_ Evaluation_Guidance.aspx. Specifically, individual component measures that are included in the composite performance measure: (1) Should be justified based on the clinical evidence; (2) do not need to be NQF endorsed; (3) generally should demonstrate a gap in performance; and (4) may not be sufficiently reliable independently, but contribute to the reliability of the composite performance measure. AHRQ convened a Composite Measure Workgroup of experts in the field to determine the best weighting strategy. The methodology of the PSI–90 measure is detailed in the original technical report by the AHRQ Composite: https://quality indicators.ahrq.gov/Downloads/ Modules/PSI/PSI_Composite_ Development.pdf. Several alternative approaches were discussed with the AHRQ Composite Measure Workgroup and the first NQF Composite Measure Steering Committee. Factor analysis was PO 00000 Frm 00212 Fmt 4701 Sfmt 4700 considered as one approach and was deemed to have no clear advantages over less complex, more intuitively clear weighting schemes. In brief, numerator weighting that is used in PSI–90 was preferred due to its greater simplicity and clarity. Comment: A few commenters strongly opposed the duplicative use of PSI–90 in both the Hospital VBP and HAC Reduction Programs. Response: As discussed further above, while we are aware that commenters object to the possibility of scoring hospitals on certain NHSN measures under both the Hospital VBP and HAC Reduction Programs, we note that these measures cover topics of critical importance to quality improvement in the inpatient hospital setting, and to patient safety. Comment: Some commenters opposed adoption of the PSI–90 composite measure, stating that its component indicators have serious flaws. Commenters stated that, for example, the PSI–15 indicator (accidental puncture or laceration), does not clearly define what constitutes an ‘‘accidental puncture.’’ Commenters also stated that PSI–12 (postoperative PE/DVT rate) relies on risk adjustment criteria that could lead to potential unintended consequences such as tagging every LE thrombophlebitis, whether or not they are clinically significant. One commenter stated that emergent cases and patients with a prior history of PE or DVT should also be excluded from that measure. Response: We continue to believe the PSI–90 measure is an important measure of patient safety, and therefore warrants inclusion in the Hospital VBP Program. PSI 15—accidental puncture and laceration and PSI 12— Perioperative Pulmonary Embolism or Deep Vein Thrombosis Rate are endorsed as valid and reliable measures (NQF 0345, NQF 0450, respectively). Expert panels have felt that these are scientifically sound measures. Comment: One commenter expressed concern about the reliability and reproducibility of the PSI–90 claimsbased composite measure because of generally poor agreement between these and NHSN-based surveillance criteria, with the exception of surgical site infection (SSI). The commenter encouraged AHRQ and other independent researchers to examine the value, validity, reliability, and reproducibility of PSI–90 by comparing it to epidemiologic measures within NHSN’s domain. The commenter recommended that CMS study how these measures correlate with SSI and NHSN-based surveillance criteria. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Response: We agree with the commenter that studying the correlation between PSI–90 and with SSI and NHSN-based surveillance criteria would provide additional insights into PSI–90 measure validity, and will consider this in the future. We note that we are finalizing a policy to access certain NHSN data reported to the Hospital IQR Program which would make it possible to conduct this type of alignment analysis between the PSI–90 measure and the NHSN measures. Comment: Commenters suggested that CMS consider removing the PSI–12 indicator from the PSI–90 composite for the FY 2015 Program until stakeholder concerns with the indicator’s validity have been resolved. Response: We do not believe the PSI– 12 indicator should be removed from the PSI–90 composite measure because it is designed to improve surveillance and awareness of post-operative deep vein thrombosis and pulmonary embolism. We believe that monitoring these conditions is important to protect patients from post-operative complications. Comment: A few commenters asked CMS not to finalize several proposed new measures for the FY 2019 Hospital VBP Program until they are NQFendorsed, recommended by the MAP, and hospitals have experience in reporting and understanding the measures. Response: We believe that we have complied with the Hospital VBP Program’s statutory requirements with respect to endorsement from NQF, MAP recommendations, and reporting through the Hospital IQR Program prior to adopting these measures under the Hospital VBP Program. Further, for the reasons we described in the proposed rule and in our responses to comments on that proposed rule, we continue to believe that the proposed measures represent improvements to the Hospital VBP Program’s measure set by expanding to new clinical topics and addressing public health concerns. After consideration of the public comments we received, we are finalizing our proposal to adopt the PSI– 90 composite measure for the FY 2019 Hospital VBP Program. 6. Possible Measure Topics for Future Program Years a. Care Transition Measure (CTM–3) Items for Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122), we stated that we are considering proposing to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 add the Care Transition Measure (CTM) from the HCAHPS Survey to the Patient and Caregiver Centered Experience of Care/Care Coordination (PEC/CC) domain of the FY 2018 Hospital VBP Program. We sought public comments on this topic. The CTM was added to the HCAHPS Survey of hospital inpatients in January 2013 (77 FR 53513 through 53516). Three items were added to the HCAHPS Survey to create the new Care Transition Measure composite. After collecting four quarters of data on these items (January 2013 through December 2013), we intend to publicly report CTM scores for the first time on our Hospital Compare Web site in October 2014. Once the CTM has been publicly reported on Hospital Compare for one year, in accordance with the statutory requirements of the Hospital VBP Program, we are considering proposing to adopt CTM as the ninth dimension of the HCAHPS survey in the PEC/CC domain for the FY 2018 Hospital VBP Program. We intend to propose that the PEC/CC domain in the FY 2018 Hospital VBP Program would have a baseline period of January 1, 2014 through December 31, 2014, and a performance period of January 1, 2016 through December 31, 2016. Currently, the PEC/CC domain is comprised of eight dimensions of the HCAHPS Survey. Scoring in this domain is based on two elements: The HCAHPS Base Score and HCAHPS Consistency Points Score. For additional information on the calculation of the PEC/CC domain score, we refer readers to ‘‘A Step-by-Step Guide to Calculating the Patient Experience of Care Domain Score in the Hospital Value-Based Purchasing FY 2013 Actual Percentage Payment Summary Report,’’ at: https:// www.hcahpsonline.org/HospitalVBP .aspx. We specifically sought public comments on how the new CTM dimension should be included in the scoring methodology that we have adopted for the PEC/CC domain. In accordance with the finalized Hospital VBP Program scoring methodology for other domains, we are considering the ‘‘normalization’’ approach, which would introduce only minor changes to the original scoring formula, as follows. For purposes of the HCAHPS Base Score, the new CTM dimensions would be calculated in the same manner as the eight existing HCAHPS dimensions. For each of the nine dimensions, Achievement Points (0–10 points) and Improvement Points (0–9 points) would be calculated, the larger of which would be summed across the nine dimensions to create a pre-normalized HCAHPS PO 00000 Frm 00213 Fmt 4701 Sfmt 4700 50065 Base Score (0–90 points, as compared to 0–80 points when only eight dimensions were included). The prenormalized HCAHPS Base Score would then be multiplied by 8/9 (0.88888) and rounded according to standard rules (values of 0.5 and higher are rounded up, values below 0.5 are rounded down) to create the normalized HCAHPS Base Score. Each of the nine dimensions would be of equal weight, so that, as before, the normalized HCAHPS Base Score would range from 0 to 80 points. HCAHPS Consistency Points would then be calculated in the same manner as before and would continue to range from 0 to 20 points. The Consistency Points Score would now consider scores across all nine of the PEC/CC domain dimensions, whereas before it considered only the eight dimensions that preceded the CTM measure. The final element of the scoring formula would be the sum of the HCAHPS Base Score and the HCAHPS Consistency Points Score and would range from 0 to 100 points, as before. We welcomed public comments on this approach to including the CTM–3 dimensions in the PEC/CC domain score. Comment: Many commenters supported incorporating the HCAHPS Care Transition Measure (CTM–3) into the PEC/CC domain, given the critical importance of the care transition for improving patient outcomes and reducing patient suffering. Other commenters strongly supported the addition and urged CMS to finalize it. Commenters also supported the proposed methodology for scoring and weighting the measure within the domain. One commenter noted that the measure develops a ninth dimension of the HCAHPS Survey in the PEC/CC domain for FY 2018. The commenter stated that this measure is a significant first step in addressing shared accountability and quality of care during transitions of care periods and discharges from the health-system setting. The commenter further agreed that the normalization approach should be used for this care transition measure and calculation of total performance score. One commenter commended CMS for considering adopting the CTM–3 items on the HCAHPS Survey, stating that effective management of care transitions is essential to ensuring proper patient recoveries while reducing readmissions and ensuring medication adherence. Another commenter supported our plan to include the CTM–3 items on the HCAHPS survey in the Hospital VBP Program in future years, noting that E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50066 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations providing incentivizes for hospitals to coordinate patient transitions will aid significantly in decreasing readmissions and potentially mortality among Medicare patients. Other commenters supported adoption of the CTM–3 items on the HCAHPS Survey under the Hospital IQR Program and offered to evaluate their inclusion under the Hospital VBP Program once the items have been publicly reported. Other commenters noted that their support because managing safe and effective transitions of care is a critical competency in the health care system. Response: We appreciate the comments in support of adding the Care Transition Measure to the Hospital VBP Program and the proposed methodology and weighting of this dimension in the PEC/CC domain. Comment: Several commenters did not support the addition of the threequestion care transition measure as a ninth dimension to the HCAHPS Hospital VBP Program scoring before evidence supporting its validity and materiality to the Hospital VBP Program was released. One commenter suggested that CMS exclude HCAHPS scores from the program or adjust provider scores to account for demographic factors that have been shown to impact survey results. One commenter requested additional analysis of the measure results after its first year of implementation. Response: Should we decide to formally propose the addition of the HCAHPS Care Transition Measure to the Patient Experience of Care domain of the Hospital VBP Program through the rulemaking process, we will release additional information about the validity, reliability and statistical properties of the CTM. In order to achieve the goal of fair comparisons across all hospitals that participate in HCAHPS, it is necessary to adjust for factors that are not directly related to hospital performance but do affect how patients answer HCAHPS survey items. The HCAHPS patient-mix adjustment is intended to eliminate any advantage or disadvantage in scores that might result from patient characteristics beyond a hospital’s control. We do not collect or adjust for patients’ socioeconomic status, however the HCAHPS patient-mix adjustment does include patients’ highest level of education, which can be related to socioeconomic status. (HCAHPS OnLine Web site, Mode and Patient-mix Adjustment: https://www.hcahp sonline.org/modeadjustment.aspx.) Comment: One commenter pointed to an analysis by the Cleveland Clinic that that shows that as patients’ severity of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 illness worsens, HCAHPS scores decline in a statistically significant manner. Further, the commenter notes that the same relationship was observed when the researchers examined the relationship between patients’ symptoms of depression and responses to HCAHPS—as symptoms of depression worsened, HCAHPS scores declined. The commenter believed this trend also may affect scores for other surveys in the CAHPS family. The commenter encouraged CMS to conduct an analysis that assesses the extent of the issue, and identifies potential mechanisms for enhancing how CAHPS scores are adjusted for patient factors. Response: Since its national implementation in 2006, the HCAHPS Survey has included an item that asks for patients’ assessment of their overall health. We use this information in a transparent manner in the standard patient-mix adjustment of HCAHPS scores, as explained on the official HCAHPS On-Line Web site, www.HCAHPSonline.org, in our research documents, in the patient-mix adjustment coefficients that are posted on this Web site, and in published research. Responding to comments about HCAHPS in previous IPPS/LTCH PPS rulemaking, we added an item to the HCAHPS Survey in January 2013 that asks patients to assess their overall mental or emotional health. We have analyzed the impact of this item and found that its inclusion in patient-mix adjustment does not explain more or improve the model in which the ‘overall health’ item also appears. Therefore we include only the ‘overall health’ item in the HCAHPS patient-mix adjustment, as this adequately adjusts for patient severity. With respect to a Cleveland Clinic analysis that is said to show a greater than expected impact of severity of illness on HCAHPS scores, we understand that this analysis does not examine associations between patient characteristics and HCAHPS scores after the standard HCAHPS patient-mix adjustment has been applied. The standard HCAHPS patient-mix adjustment would be expected to remove most or all of the association mentioned. We also understand that the Cleveland Clinic analysis is not based on national data. In addition, recent research found that using patients’ clinical characteristics in adjustment models had relatively little impact relative to survey questions about patients’ health and that adding such measures to the existing HCAHPS case- PO 00000 Frm 00214 Fmt 4701 Sfmt 4700 mix adjustment model would have very little effect.53 Comment: One commenter urged CMS to expedite the initiative to include additional patient-centered palliative care measures into the Hospital VBP Program because the HCAHPS Survey is currently the only measure of patient experience, which misses all who die in the hospital or who are too ill to fill out the survey. The commenter noted that these individuals are most vulnerable due to the severity of their illness and deserve to have their and their families’ experiences measured. Response: The survey methodology and question wording at this point cannot accommodate proxy respondents, so HCAHPS cannot measure the experience of care of those who died in the hospital. However, as about 6.6 percent of hospice patients in 2012 died in a hospital setting,54 the new Hospice Experience of Care Survey, which is specifically designed for proxy respondents, will be able to capture some information about the experience in the hospital setting. b. Possible Future Efficiency and Cost Reduction Domain Measure Topics In the interest of expanding the Efficiency and Cost Reduction domain to include a more robust measure set, including measures that supplement the MSPB measure with more condition and/or treatment specific episodes, as well as facilitating alignment with the Physician VM Program, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122 through 28224), we stated that we are considering proposing to add new episode-based payment measures to the Hospital VBP Program through future rulemaking. Expanding the Efficiency and Cost Reduction domain to include such measures would create incentives for coordination between hospitals and physicians to optimize the care they provide to Medicare beneficiaries and would increase alignment between the Hospital VBP and Physician VM Programs. Any future Hospital VBP Program measures would first be finalized for inclusion in the Hospital IQR Program and included on the Hospital Compare Web site for one year, as required by section 1886(o)(2)(C) of the Act. As we discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28123), the six episode-based standardized 53 Cleary, et al. Medical Care. 52: 619–625. 2014. Facts and Figures: Hospice Care in America, 2013 Edition. National Hospice and Palliative Care Organization. Available at https:// www.nhpco.org/sites/default/files/public/Statistics_ Research/2013_Facts_Figures.pdf. 54 NHPCO’s E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payment measures we are considering are similar in many ways to the NQFendorsed MSPB measure already included in the Efficiency domain and, like the MSPB measure, Medicare payments included in these episodebased measures would be standardized according to the CMS standardization methodology finalized for the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626). In the FY 2013 IPPS/LTCH PPS proposed rule (79 FR 28123 through 28124), we also discussed notable differences between these new measures under consideration and the MSPB measure. Most notably, we would only include Medicare payments for services that are clinically related to the health conditions treated during the hospital stay that triggered the episode. We stated that the aim of including these episode-based payment measures in the Hospital VBP Program would be to differentiate between hospitals that provide care efficiently (that is, high quality care at a lower cost to Medicare). We stated our belief that risk-adjusted standardized Medicare payments are an appropriate indicator of efficiency as they allow us to compare hospitals without regard to such factors as geography and teaching status. This comparison is particularly important with clinically coherent episodes because it distinguishes the degree to which practice pattern variation influences the cost of care. We believe that creating incentives for appropriately reducing practice pattern variation is an important part of our aims to lower the cost of care appropriately and create better coordinated care for Medicare beneficiaries. We noted another difference between the episode-based measures we are considering and the MSPB measure, which occurs when, during the 30 days following discharge from an index admission, a beneficiary is readmitted for a condition that is clinically related to the index admission and that also triggers an episode-based cost measure episode. We provided details of which admissions would begin a new episode and contribute to a preceding episode may be found at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/hospital-valuebased-purchasing/?redirect=/ hospital-value-based-purchasing. We stated that we are considering three medical and three surgical episodes for the potential inclusion in the initial expansion of the Efficiency domain. The medical episodes would address the following conditions: (1) Kidney/urinary tract infection; (2) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 cellulitis; and (3) gastrointestinal hemorrhage. A medical episode would be ‘triggered’ by an inpatient claim with a specified MS–DRG. The surgical episodes currently under consideration are (1) hip replacement/revision; (2) knee replacement/revision; and (3) lumbar spine fusion/refusion. A surgical episode would be triggered when an inpatient claim has one of the specified MS–DRGs and at least one of the procedure codes specified for that episode. We welcomed public comment on the three medical and three surgical conditions that we are considering as new episode-based measures for initial expansion of the Efficiency domain. Comment: A few commenters expressed support for one or more specific episodes, and some commenters suggested that CMS also consider adding additional measures to the domain in the future. One commenter supported the proposal to adopt a hip/ knee replacement/revision measure in the future efficiency domain, as the episode would encourage care coordination. Some of those commenters who supported one or more of these episodes also expressed concerns. Many commenters did not support inclusion of the episode-based standardized measures into the Hospital VBP Program. One commenter stated that the DRG triggers for urinary tract infection and cellulitis are often unrelated to an index inpatient admission. A few commenters also requested additional information on the measures CMS is considering. Response: We appreciate the commenter’s support of the hip and knee replacement/revision conditionspecific measures. Regarding the comment on the kidney/urinary tract infection and cellulitis episodes, we would like to clarify that these episode are only triggered by the presence of a specific MS–DRG on an inpatient claim. Thus, the episodes can only be initiated when the kidney/urinary tract infection or cellulitis is the primary reason for inpatient hospitalization. With regard to the request for additional information, we note that we provided detailed measure specifications at https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/hospital-valuebased-purchasing/?redirect=/ hospital-value-based-purchasing, and we reiterate that would implement any future measures for the Hospital VBP Program by first proposing and finalizing them for inclusion in the Hospital IQR Program, through notice and comment rulemaking. PO 00000 Frm 00215 Fmt 4701 Sfmt 4700 50067 We thank the commenters for the responses and we will consider them as we develop future measures for the Hospital VBP Program. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122 through 28123), we noted that there are a number of other types of episodes that could also meet the episode selection criteria we describe below, including those related to heart and lung (for example, heart failure and pneumonia). We stated that we are exploring data related to episodes for these types of conditions under the Physician VM Program. We welcomed comment regarding the applicability of episodebased measures for these or other conditions for future expansion of the Efficiency domain. Comment: One commenter applauded CMS’ consideration of conditionspecific episode-based cost measures, and suggested that CMS consider focusing on additional high-impact conditions such as heart failure, stroke, and diabetes. The commenter also suggested that CMS attempt to identify geographic areas and hospitals where volume may be unduly high. Another commenter stated that, in FY 2017, CMS will be reporting Cost per Episode for pneumonia and heart failure through the Hospital IQR Program and was unclear why CMS is using different medical episodes here. Another commenter recommended that CMS consider the development and inclusion of additional measures outside of therapeutic areas already represented in the Hospital VBP Program, including measuring relating to diabetes, atrial fibrillation, COPD, and oncology. Several commenters who supported the measures encouraged CMS to develop additional episodes although these commenters did not identify specific episode names. Response: We thank the commenters for the support of the six measures and the suggestions for additional high impact conditions and will consider their suggestions in the future. Regarding the comment that pneumonia and heart failure episodes were in the Hospital IQR Program but not among the six measures among the proposed conditions for potential inclusion in the Efficiency domain, the 6 measures were selected for common conditions with the five criteria discussed below. Other measures such as pneumonia and heart failure could be considered among the medical episodes for potential inclusion in the future. As stated earlier, we would first propose any future Hospital VBP Program measures for the Hospital IQR Program, through notice and comment rulemaking. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50068 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We thank the commenters for the responses and we will consider them as we develop future measures for the Hospital VBP Program. In selecting the six conditions around which we would develop episode measures for future expansion of the Efficiency domain, we considered the following five criteria: (1) The condition constitutes a significant share of Medicare payments for hospitalized patients during and surrounding the hospital stay; (2) the degree to which clinical experts consulted for this project agree that standardized Medicare payments for services provided during the episode can be linked to the care provided during the hospitalization; (3) episodes of care for the condition are comprised of a substantial proportion of payments for post-acute care, indicating episode payment differences are driven by utilization outside of the MS–DRG payment; (4) episodes of care for the condition reflect high variation in postdischarge payments, enabling differentiation between hospitals; and, (5) the medical condition is managed by general medicine physicians or hospitalists and the surgical conditions are managed by surgical subspecialists, enabling comparison between similar practitioner types within each episode measure. For analysis purposes, the five selection criteria were applied to 2012 Medicare acute inpatient hospital data in a hierarchical manner, to prioritize the inpatient conditions. After the selection criteria were applied, we narrowed the medical and surgical episodes to those episodes that are less complex, in order to allow CMS and hospitals to gain experience with this new measure type. Full details of the episode selection criteria are available on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/hospital-value-basedpurchasing/?redirect=/ hospital-value-based-purchasing. We welcomed public comments on the episode selection criteria we utilized. Comment: Some commenters expressed support for the criteria. One commenter asked who is responsible for defining the episodes of care for cost management purposes. Response: We thank the commenters for the support of the criteria. We have worked closely with clinicians and contractors experienced in health services research to develop the episode measure selection criteria and to define the episodes of care cost measures. We thank the commenters for the responses and we will consider them as VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 we develop future measures for the Hospital VBP Program. Complete episode specifications, including the MS–DRG and ICD–9–CM procedure codes used to identify each of the episodes, details of episode construction methodology, and information on the clinical expert reviewers for this project are available on the CMS Web site at: https://www. cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ hospital-value-based-purchasing/index. html?redirect=/hospital-value-basedpurchasing. We welcomed public comments on these specifications and the construction of the six episodebased payment measures that we are considering. Comment: A number of commenter expressed concern regarding the lack of assessment of quality within the 6 cost measures or association with existing quality measures, both among those who supported the measures and those who did not. One commenter did not support the addition of six episodebased payment measures to the Efficiency domain in addition to the MSPB measure until a sufficient number of appropriate clinical outcome or clinical process measures related to these therapeutic areas are included in the program and have demonstrated high provider performance, and noted that the inclusion of cost measures without relevant quality measures could have the unintended consequence of sacrificing quality of care for the sake of cost reduction. Response: As we take incremental steps towards providing all stakeholders with comprehensive metrics, we have selected condition-specific cost measures for common conditions with evidence of large variation in payments to encourage higher value care where there is the most opportunity for improvement, the greatest number of patients to benefit from improvements, and the largest sample size to ensure reliability. Regarding the comment that the measures under consideration do not account for quality, we continue to believe that it is beneficial to view a cost measure in light of other quality measures. As we stated in the FY 2012 IPPS/LTCH PPS final rule, for purposes of the Hospital VBP Program, we would weight and combine the Efficiency and Cost Control domain with the other domain scores, in order to calculate each hospital’s TPS. This ensures that any future spending measures would make up only a portion of the TPS and that the remainder would be based on hospitals’ performance on the other quality measures (76 FR 51622). We continue to believe that distant PO 00000 Frm 00216 Fmt 4701 Sfmt 4700 measures of cost, independent of quality, enable us to identify hospitals involved in the provision of high quality care at a lower cost to Medicare (77 FR 53586). Comment: Several commenters expressed concern about the potentially small number of episodes, which leads to more random variation. These commenters expressed concern about the reliability of the proposed condition-specific cost measures. One commenter noted that there would be fewer observations for each condition than there would be for an all-condition measure, such as the MSPB measure, and expressed concern that this would result in more random variation without providing clear additional information about the average costliness of the hospitals’ care. To ensure reliability, the commenter expressed the belief that it is important that the cost measures used should be as broadly based as possible. Another commenter expressed concern that CMS may not be able to reliably and validly calculate Hospital VBP improvement scores and recommended that CMS focus on achievement scores. This commenter suggested that condition-specific cost measures will split efficiency data into small pools of information that are more prone to random variation and inconclusive results. Response: As we take incremental steps towards providing all stakeholders with comprehensive metrics, we have selected for potential future inclusion in the Efficiency domain conditionspecific cost measures for common conditions with evidence of large variation in payments to encourage higher value care where there is the most opportunity for improvement, the greatest number of patients to benefit from improvements, and the largest sample size to ensure reliability. To further ensure reliability, inclusion of the condition-specific cost measures for individual hospitals would require a minimum number of cases, which would be based on statistical tests of reliability and would be proposed through future rulemaking. We also note that commenters have previously suggested that we narrow the MSPB measure to condition-specific measures, and we responded in the FY 2012 IPPS/LTCH PPS final rule that we would consider adding conditionspecific measures to the Efficiency domain through future rulemaking (76 FR 51623). As we stated in the FY 2015 IPPS/LTCH PPS proposed rule, we believe that these condition-specific, cost and-outcome-measure groupings would allow patients and payers to make more fully informed comparisons E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of hospitals’ performance. Including condition-specific cost measures would also provide hospitals with actionable feedback that would better assist them in targeting resources for improvements than would an overall cost-measure alone. Comment: A number of commenters expressed their concern that the episode measures, like the MSPB measure, include the cost of services that they perceived to be beyond hospitals’ control, including post-acute care and readmissions. Commenters also expressed their concern that including post-acute care may skew measure results, due to including greater effects of patient comorbidities. Some commenters suggested that the measures would be more appropriate for inclusion in the Shared Savings Program or after they are implemented in the Physician Value Modifier (VM). Some commenters also suggested that the measures account for site of service choices made by beneficiaries. Response: We disagree that Medicare payments for post-discharge services are beyond the influence of hospitals, and we believe that including post-acute care services in the episodes of care is important because it ensure that these high-cost services, often with alternative post-acute options with large variations in cost, are included in the overall condition-specific episode costs. Patient comorbidities that contribute to higher post-acute care costs are included in the risk adjustment models to address the concerns raised. We agree that it is important to align incentives across CMS payment incentive programs. While these measures have not been proposed for inclusion in the Shared Savings Program or the VBM at present, they have been included in the Supplemental Quality and Resource Use Reports distributed to groups of 100 or more EPs in the summer of 2014 and we intend to continue to include them in these reports, as they are disseminated to more groups of EPs, including solo practitioners, in the future. We would also consider proposing them for inclusion in the VM and MSSP programs through future rulemaking. As we stated in the stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51625), we do not believe that site of service adjustments are appropriate for spending measures, because such adjustments would undermine the ability of the measures to meaningfully capture differences in Medicare spending. However, we would consider the potential inclusion of site of service choice as we further examine the measure. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Comment: Some commenters suggested that CMS explore the Bundling Payments for Care Improvement (BPCI) initiative before these six potential measures are implemented. These commenters expressed concern that the measure specifications and episode construction rules were not aligned with the Bundled Payments for Care Improvement initiative, resulting in confusion among hospitals, and suggested that CMS consider this initiative before further pursuing these six episodes. Response: We considered the BPCI methodology when we developed the episode based payment measures we discuss in this rule. We believe the episodes included in the Hospital VBP Program should be more specific in their inclusion of clinically-related costs, because these measures would be publicly reported and used to evaluate hospitals and adjust their payments, based on performance for specific conditions. The BPCI approach (model 2) includes the inpatient hospital stay for the anchor MS–DRG and all related care covered under Medicare Part A and Part B within 30, 60, or 90 days following discharge from the acute care hospital. Unrelated services are not included in the BPCI episode. These excluded services can be found at https:// innovation.cms.gov/Files/x/BPCI2-4_ PartA-B_Exclusion.pdf. In contrast, the 6 condition-based episodes discussed in the proposed rule include all costs from the index admission and only clinicallyrelated costs from Part A and B services occurring immediately before and after the index admission. Service costs may only be included in the condition-based episodes if they meet certain cost thresholds and are billed with select procedures, services, and/or diagnoses. In other words, the BPCI approach is designed to pay for an episode of care, which includes all relevant services for a set period of time. The six conditionbased episodes proposed for potential future consideration are designed to support more targeted assessments of hospital performance by using the cost of major, clinically-related services in the post-discharge period as an indicator of a hospital’s success in delivering clinically-relevant, high quality, and appropriate services during the index hospital admission. Comment: Many commenters stated that the 6 condition-based episode measures under consideration did not risk adjust for sociodemographic factors and encouraged CMS to review its risk adjustment models. One commenter noted that lack of proper riskadjustment for sociodemographic status PO 00000 Frm 00217 Fmt 4701 Sfmt 4700 50069 could result in unintended negative consequences. Some commenters discussed the recent NQF draft report on the subject that suggested that measures take these factors into account. Response: We refer readers to our earlier discussion of risk adjustment based on socioeconomic status with respect to the MSPB measure which also is relevant for these measures. Comment: Many commenters stated that inclusion of the 6 measures would mean double counting the services that are already included in the MSPB measure, which is the only measure in the Efficiency domain. Some commenters suggested that if these measures are adopted for inclusion in the Efficiency domain, then they should replace, rather than supplement the MSPB. Response: We disagree that inclusion of additional condition-specific measures in the Efficiency and Cost Control domain would inappropriately double count payments for episodes attributed to hospitals. Unlike the MSPB measure, the condition-specific cost measures only include costs from services/procedures related to the condition. These condition-specific, cost-and-outcome-measure groupings would allow patients and payers to make more fully informed comparisons of hospitals’ performance. Including condition-specific cost measures would also provide hospitals with actionable feedback that will better equip them to implement targeted improvements than an overall costmeasure alone. Relying on conditionspecific measures alone would disregard differences in overall cost. The MSPB– 1 measure is reported as a ratio of payment-standardized, risk-adjusted MSPB amount for each hospital divided by the weighted median MSPB amount across all hospitals. These six clinical episode measures, if adopted in the future, are intended to supplement the information provided by the MSPB. We note that, as mentioned above, commenters have previously suggested that we narrow the MSPB measure to condition-specific measures, and we responded in the FY 2012 IPPS/LTCH PPS final rule that we would consider adding condition-specific measures to the Efficiency domain through future rulemaking (76 FR 51623). Comment: Several commenters noted that CMS should follow the MAP process and propose to include these measures in the Hospital IQR Program first, prior to inclusion in the Hospital VBP Program. Response: Any future Hospital VBP Program measures would first be E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50070 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations finalized for inclusion in the Hospital IQR Program and included on the Hospital Compare Web site for one year, as required by section 1886(o)(2)(C)(i) of the Act. Comment: Several commenters, including those who supported the measure, requested additional information on the six measures. One commenter expressed concern about the proposed cost measures and recommended that the public have additional opportunity to review and comment on this proposal before CMS moves ahead on a hip/knee surgical episode under the Hospital VBP Program. Response: The six episode cost measures have been designed specifically for the Medicare program using transparent methodology that is described in materials that are publicly available on the CMS hospital valuebased purchasing Web site: https://www. cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ hospital-value-based-purchasing/ index.html. There will be additional opportunity to review and comment on this proposal before we would move ahead on any of the six episodes under consideration. Comment: One commenter stated that readmissions for a condition clinically related to the index admission should not start a new index admission because it would be holding hospitals accountable twice for the care provided. Response: The methodology of the condition-specific cost measures assigns separate significance to a readmission that is grouped to a related previous hospitalization and a second triggered episode for the same condition. These admissions would not necessarily be attributed to the same hospitals, and assigning one as a readmission to the previous hospitalization and also allowing it to begin a second episode provides an opportunity for both managing hospitals to be evaluated. We will consider the suggestion that readmissions not trigger new episodes, but we believe that it may be appropriate to begin a new episode in these cases, because Medicare payments made for the care provided during these subsequent hospitalizations represents a significant cost that would otherwise not be captured. We also note that the measures could be calculated similarly to the MSPB measure, where the total cost per episode could be divided by the number of episodes, so that the amount would represent an average of the episode costs for multiple admissions. Comment: One commenter suggested that CMS focus on the development of a multi-dimensional patient-reported VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 composite measure of maternity care in the near-term, which could be collected six weeks after birth to measure outcomes and identify common newonset morbidities during a post-partum visit. Another commenter recommended the adaption of the generic Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey to measure the experience of care of childbearing women and newborns. Response: Patients admitted for maternity care are eligible for the HCAHPS Survey and comprise a significant portion of patients who report their experience of care. We are considering whether to extend the HCAHPS Survey to encompass the pediatric population; currently the HCAHPS Survey is oriented toward patients 18 years of age and older. We thank the commenters for the responses and we will consider them as we develop future measures for the Hospital VBP Program. 7. Previously Adopted and Newly Finalized Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program a. Background Section 1886(o)(4) of the Act requires the Secretary to establish a performance period for the Hospital VBP Program for a fiscal year that begins and ends prior to the beginning of such fiscal year. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689 through 50692) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75020 through 75021) for the performance periods and baseline periods for the Clinical Care—Process, Patient Experience of Care, Clinical Care—Outcomes, and Efficiency and Cost Reduction domains for the FY 2016 Hospital VBP Program. As discussed further below, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted new NQS-based quality domains for FY 2017, and in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124 through 28125), we proposed to adopt performance and baseline periods using those new domains for the FY 2017 Hospital VBP Program. b. Previously Adopted Baseline and Performance Periods for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694 and 50698 through 50699), because of the time needed to process measure data for the three 30-day mortality measures (Clinical Care—Outcomes domain) and the PSI–90 measure (also referred to in PO 00000 Frm 00218 Fmt 4701 Sfmt 4700 previous rulemaking as the AHRQ patient safety PSI–90 composite measure) (Safety domain), and in consideration of our policy goal to collect enough data to generate the most reliable scores possible, we adopted performance periods and performance standards for the 30-day mortality measures for FY 2017, FY 2018, and FY 2019, and for the PSI–90 measure for FY 2017 and FY 2018. c. Clinical Care—Process Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month performance period for the FY 2016 Clinical Care—Process domain measures of CY 2014 (January 1, 2014 through December 31, 2014). We also adopted a corresponding 12-month baseline period of CY 2012 (January 1, 2012, through December 31, 2012), for purposes of calculating improvement points and performance standards. Based on our review of FY 2013 and FY 2014 Hospital VBP performance period denominator data, we continue to believe that a 12-month performance period provides us with reliable and sufficient data for scoring Clinical Care—Process domain measures under the Hospital VBP Program. These data are available for public review on our Hospital Compare Web site. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124), we proposed to adopt a 12-month performance period for FY 2017 Clinical Care—Process domain measures (including the proposed PC–01 measure) of CY 2015 (January 1, 2015, through December 31, 2015). We also proposed to adopt a corresponding 12month baseline period of CY 2013 (January 1, 2013, through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invited public comment on these proposals. Comment: Many commenters supported CMS’ proposed baseline and performance periods for FY 2017 measures in the Safety, Clinical Care— Process, and Efficiency and Cost Reduction domains. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing the FY 2017 Clinical Care— Process performance and baseline periods as proposed. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations d. PEC/CC Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689), we adopted a 12month performance period for FY 2016 Patient Experience of Care domain measures of CY 2014, or January 1, 2014 through December 31, 2014, for the FY 2016 Hospital VBP Program. We also adopted a corresponding 12-month baseline period of CY 2012 (January 1, 2012 through December 31, 2012), for purposes of calculating improvement points and calculating performance standards. We continue to believe that a 12-month performance period provides us sufficient HCAHPS data on which to score hospital performance, which is an important goal both for CMS and for stakeholders. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124), we proposed to adopt a 12-month performance period for the FY 2017 PEC/CC domain of CY 2015 (January 1, 2015 through December 31, 2015). We also proposed to adopt a corresponding 12-month baseline period of CY 2013 (January 1, 2013 through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invited public comment on these proposals. However, we did not receive specific comments on the PEC/CC domain’s performance period for FY 2017. Accordingly, we are finalizing the FY 2017 performance and baseline periods for the PEC/CC domain as proposed. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV e. Performance Period and Baseline Period for NHSN Measures in the Safety Domain for the FY 2017 Hospital VBP Program In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75121), for the three NHSN HAI measures that we have adopted for the FY 2016 Hospital VBP Program (Catheter-Associated Urinary Tract Infection (CAUTI), CLABSI, and Surgical Site Infection (SSI)), we adopted an FY 2016 performance period of CY 2014 (January 1, 2014 through December 31, 2014), with a corresponding baseline period of CY 2012 (January 1, 2012 through December 31, 2012) for purposes of calculating improvement points and calculating performance standards. We continue to believe that a 12month performance period provides us with sufficient data on which to score hospital performance on NHSN measures in the Safety domain. We also noted that 12-month performance and baseline periods are consistent with the reporting periods used for these measures under the Hospital IQR Program (78 FR 50689). Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124) for the FY 2017 NHSN measures in the Safety domain (including the proposed CLABSI, C. difficile Infection and MRSA Bacteremia measures), we proposed to adopt a performance period of CY 2015 (January 1, 2015 through December 31, 2015), and a corresponding baseline period of CY 2013 (January 1, 2013 through December 31, 2013) for purposes of calculating improvement points and calculating performance standards. We invited public comment on these proposals. Comment: One commenter supported the performance and baseline periods for the FY 2017 NHSN measures in the Safety domain but recommended collaboration with NHSN on limitations of SIR analysis, especially for smaller size facilities or those with lower volumes of use of devices such as central lines, urinary catheters, and surgical procedures. The commenter also expressed concern that an SIR may not calculate even for a 12-month block of time for some hospitals. Response: We intend to continue working with CDC to ensure that reliable SIRs are calculated for participating hospitals. After consideration of the public comment we received, we are finalizing the FY 2017 performance period and baseline periods for the NHSN measures in the Safety domain as proposed. f. Efficiency and Cost Reduction Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month 50071 performance period for the MSPB measure for the FY 2016 Hospital VBP Program of CY 2014 (January 1, 2014, through December 31, 2014), with a corresponding baseline period of CY 2012 (January 1, 2012, through December 31, 2012). This performance and baseline period enable us to collect sufficient measure data, while allowing time to calculate and incorporate MSPB measure data into the Hospital VBP Program scores in a timely manner. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124 through 28125), we proposed to adopt a 12month performance period for the FY 2017 Efficiency and Cost Reduction domain of CY 2015 (January 1, 2015 through December 31, 2015), with a corresponding baseline period of CY 2013 (January 1, 2013 through December 31, 2013). We noted that this proposed performance and baseline period aligns with the performance and baseline periods for Clinical Care—Process, PEC/ CC, and certain Safety measures under the new domain structure. We invited public comments on these proposals. Comment: Commenters supported CMS’ proposed baseline and performance periods for FY 2017 measures in the Safety, Clinical Care— Process, and Efficiency and Cost Reduction domains. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing the FY 2017 performance and baseline periods for the Efficiency and Cost Reduction domain as proposed. g. Summary of Previously Adopted and Newly Finalized Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program The table below summarizes the newly finalized baseline and performance periods for the FY 2017 Hospital VBP Program (with previously adopted baseline and performance periods for the mortality and AHRQ PSI composite (PSI–90) measures noted). PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE AND BASELINE PERIODS FOR THE FY 2017 HOSPITAL VBP PROGRAM Domain Baseline period Safety: • PSI–90* .................................................... • NHSN (CAUTI, CLABSI, SSI, C. difficile Infection, MRSA Bacteremia). Clinical Care—Outcomes: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Performance period • October 1, 2010–June 30, 2012* ................. • January 1, 2013–December 31, 2013 ......... ...................................................................... PO 00000 Frm 00219 Fmt 4701 Sfmt 4700 • October 1, 2013–June 30, 2015.* • January 1, 2015–December 31, 2015. E:\FR\FM\22AUR2.SGM 22AUR2 50072 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE AND BASELINE PERIODS FOR THE FY 2017 HOSPITAL VBP PROGRAM—Continued Domain Baseline period Performance period • Mortality* (MORT–30–AMI, MORT–30– HF, MORT–30–PN). Clinical Care—Process • (AMI–7a, IMM–2, PC–01) ........................ Efficiency and Cost Reduction (MSPB–1) ......... Patient and Caregiver-Centered Experience of Care/Care Coordination (HCAHPS). • October 1, 2010–June 30, 2012* ................. • October 1, 2013–June 30, 2015.* January 1, 2013–December 31, 2013 ............. January 1, 2013–December 31, 2013 ............. January 1, 2013–December 31, 2013 ............. January 1, 2015–December 31, 2015. January 1, 2015–December 31, 2015. January 1, 2015–December 31, 2015. * Previously adopted performance and baseline periods. We note that we intend to propose additional baseline and performance periods for the FY 2018 Hospital VBP Program in future rulemaking. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 8. Previously Adopted and Newly Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program a. Previously Adopted and Newly Finalized Performance Period and Baseline Period for the FY 2019 Hospital VBP Program for Clinical Care—Outcome Domain Measures As described above, we have previously adopted the FY 2019 performance and baseline periods for the three 30-day mortality measures that we have adopted for the former Outcome domain and that we have since placed into the Clinical Care— Outcomes domain under the new domain structure. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28121 through 28122), we proposed to adopt the THA/ TKA measure for the FY 2019 Hospital VBP Program and to place that measure in the Clinical Care—Outcomes domain. THA/TKA is reported to the Hospital IQR Program for 36-month time periods. However, we do not believe that we can feasibly adopt a 36-month performance period for this measure and adopt it for the FY 2019 Hospital VBP Program. Based on the time needed to complete measure calculations and performance scoring, we believe that we must conclude the performance period for this measure by June 30, 2017. We believe that a 30-month performance period will result in sufficiently reliable quality measure data for purposes of Hospital VBP Program scoring, and our analysis of historic data supported our belief that comparisons between a 36month baseline period and a 30-month performance period will not result in significant differences in measure scores. Further, adopting this proposed performance period would enable us to include the measure in the FY 2019 Hospital VBP Program, which would ensure that hospitals continue focusing VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 on measures of outcomes under the Hospital VBP Program and that we continue transitioning the Hospital VBP Program from its initial focus on process measures to outcome measures. We note that we have proposed below to adopt a 36-month performance period for the THA/TKA measure for the FY 2020 Hospital VBP Program. We have examined the correlation between hospitals’ performance on the THA/ TKA measure for 30-month and 36month periods, and we believe that the 30-month period meets our standard for moderate reliability of quality measure data during the specified time period. However, as with the 30-day mortality and PSI–90 measures, we are attempting to align performance periods under the Hospital VBP Program with reporting periods under the Hospital IQR Program, while introducing measures covering important clinical topics into the Hospital VBP Program as quickly as possible. We believe that our proposal for a 30-month performance period for this measure for the FY 2019 Hospital VBP Program allows us to bring the measure into the program in FY 2019 and to accomplish that alignment beginning with the FY 2020 Hospital VBP Program. Therefore, we proposed to adopt an FY 2019 performance period of January 1, 2015 through June 30, 2017 for the THA/TKA measure. Further, we proposed to adopt an FY 2019 baseline period for this measure of July 1, 2010 to June 30, 2013 for purposes of calculating performance standards and awarding improvement points. We welcomed public comments on these proposals. We did not receive any specific public comments on these proposals and are finalizing the FY 2019 performance and baseline periods for the THA/TKA measure as proposed. PO 00000 Frm 00220 Fmt 4701 Sfmt 4700 b. Performance Period and Baseline Period for the PSI–90 Safety Domain Measure for the FY 2019 Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694), we adopted performance periods and baseline periods for the PSI–90 measure for the FY 2017 and FY 2018 Hospital VBP Programs. We adopted this policy in light of the time needed to process measure data and our policy goal to collect enough data to generate the most reliable measure scores possible. We stated our belief that aligning the Hospital VBP Program performance periods with the Hospital IQR Program reporting period duration would allow hospitals to review Hospital Compare measure rates when they are updated and incorporate this information into their quality improvement efforts, rather than having to wait until the Hospital VBP Program provides its scoring reports to hospitals. We stated our further belief that aligning the Hospital IQR Program and the Hospital VBP Program in this manner will minimize the burden on participating hospitals by aligning the time periods during which they must monitor their performance on this measure. We did not finalize a baseline period and performance period for the AHRQ PSI–90 measure for FY 2019 in that final rule (78 FR 50692 through 50694). We stated that, by declining to finalize the measure’s FY 2019 performance and baseline periods in that final rule, we would be able to adopt a more recent baseline period than we initially proposed. We stated that we intended to propose baseline and performance periods for the AHRQ PSI measure for the FY 2019 Hospital VBP Program in future rulemaking. We continue to believe that we should adopt performance and baseline periods of 24 months for the PSI–90 measure. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28126) we proposed to adopt an FY 2019 performance period for the PSI–90 measure of July 1, 2015 through June 30, E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2017, with a corresponding 24-month baseline period of July 1, 2011 through June 30, 2013, for purposes of calculating performance standards and awarding improvement points. We welcomed public comments on these proposals. However, we did not receive any specific public comments on this proposal and are finalizing the FY 2019 performance and baseline periods for the PSI–90 measure as proposed. 50073 c. Summary of Previously Adopted and Newly Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program The following table summarizes previously adopted and proposed performance and baseline periods for the FY 2019 Hospital VBP Program: PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE AND BASELINE PERIODS FOR CERTAIN MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Domain Baseline period Safety: • PSI–90 ..................................................... Clinical Care—Outcomes: • Mortality* (MORT–30–AMI, MORT–30– HF, MORT–30–PN). • THA/TKA .................................................. Performance period • July 1, 2011–June 30, 2013 ......................... • July 1, 2015–June 30, 2017. • July 1, 2009–June 30, 2012* ....................... • July 1, 2014–June 30, 2017.* • July 1, 2010–June 30, 2013 ......................... • January 1, 2015–June 30, 2017. * Previously adopted performance and baseline periods. 9. Performance Period and Baseline Period for the Clinical Care—Outcomes Domain for the FY 2020 Hospital VBP Program As described above with respect to the mortality measures, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694), we adopted performance periods and baseline periods for the three 30-day mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs. We adopted this policy in light of the time needed to process measure data and to ensure that we collect enough measure data for reliable performance scoring, as described further above. We continue to believe that we should adopt 36-month performance and baseline periods for the mortality measures when possible to accommodate those durations. We believe that a similar rationale applies to the new THA/TKA measure that we proposed to adopt for the Clinical Care—Outcomes domain for the FY 2019 Hospital VBP Program, and which, under our policy of measure readoption, we generally would readopt for the FY 2020 Hospital VBP Program if finalized. As stated above, we have examined the correlation between hospitals’ performance on the THA/ TKA measure for 30-month and 36month periods, and we believe that the 30-month period meets our standard for moderate reliability of quality measure data during the specified time period. However, as with the 30-day mortality and PSI–90 measures, we are attempting to align performance periods under the Hospital VBP Program with reporting periods under the Hospital IQR Program, while introducing measures covering important clinical topics into the program as quickly as possible. We believe that our proposal for a 30-month performance period for this measure for FY 2019 allows us to accomplish that alignment beginning with the FY 2020 Program. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28126 through 28127) we proposed to adopt a 36-month performance period for the measures in the Clinical Care— Outcomes domain in the FY 2020 Hospital VBP Program (including the proposed THA/TKA measure for FY 2020, if that measure is adopted for the FY 2020 Hospital VBP Program) of July 1, 2015 through June 30, 2018, with a corresponding 36-month baseline period of July 1, 2010 through June 30, 2013, for purposes of calculating performance standards and awarding improvement points. We welcomed public comment on these proposals. We did not receive any specific public comments on this proposal and are finalizing the FY 2020 performance and baseline periods for the Clinical Care— Outcomes domain as proposed. The following table summarizes the finalized performance and baseline period for the Clinical Care—Outcomes domain for the FY 2020 Hospital VBP Program: PERFORMANCE AND BASELINE PERIOD FOR THE CLINICAL CARE—OUTCOMES DOMAIN FOR THE FY 2020 HOSPITAL VBP PROGRAM tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Domain Baseline period Clinical Care—Outcomes: • Mortality (MORT–30 AMI, MORT–30–HF, MORT-30– PN). • THA/TKA ..................................................................... 10. Performance Standards for the Hospital VBP Program a. Background Section 1886(o)(3)(A) of the Act requires the Secretary to establish performance standards for the measures VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • July 1, 2010–June 30, 2013 ............... • July 1, 2015–June 30, 2018. • July 1, 2010–June 30, 2013 ............... • July 1, 2015–June 30, 2018. selected under the Hospital VBP Program for a performance period for the applicable fiscal year. The performance standards must include levels of achievement and improvement, as required by section 1886(o)(3)(B) of PO 00000 Performance period Frm 00221 Fmt 4701 Sfmt 4700 the Act, and must be established and announced not later than 60 days before the beginning of the performance period for the fiscal year involved, as required by section 1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient E:\FR\FM\22AUR2.SGM 22AUR2 50074 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations VBP Program final rule (76 FR 26511 through 26513) for further discussion of achievement and improvement standards under the Hospital VBP Program. In addition, when establishing the performance standards, section 1886(o)(3)(D) of the Act requires the Secretary to consider appropriate factors, such as: (1) practical experience with the measures, including whether a significant proportion of hospitals failed to meet the performance standard during previous performance periods; (2) historical performance standards; (3) improvement rates; and (4) the opportunity for continued improvement. b. Performance Standards for the FY 2016 Hospital VBP Program In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through 53604), we adopted performance standards for FY 2015 and certain FY 2016 Hospital VBP Program measures. We also finalized our policy to update performance periods and performance standards for future Hospital VBP Program years via notice on the CMS Web site or another publicly available Web site. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our regulatory definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ at 42 CFR 412.160 and adopted performance standards for additional FY 2016 Hospital VBP Program measures. We also adopted an interpretation of ‘‘achievement threshold’’ and ‘‘benchmark’’ under section 412.160 to not include the numerical values that result when the performance standards are calculated. We further adopted a policy under which we may update a measure’s performance standards for a fiscal year once if we identify data issues, calculation errors, or other problems that would significantly affect the displayed performance standards. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50695 through 50698) for the complete set of FY 2016 performance standards. c. Previously Adopted Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698 through 50699), we adopted performance standards for the three 30-day mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs and for the PSI– 90 measure for the FY 2017 and FY 2018 Hospital VBP Programs. We refer readers to that final rule for those performance standards. d. Additional Performance Standards for the FY 2017 Hospital VBP Program In accordance with our finalized methodology for calculating performance standards (discussed more fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513)), in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28127 through 28128) we proposed to adopt the following additional performance standards for the FY 2017 Hospital VBP Program. We note that the numerical values for the performance standards displayed below represent estimates based on the most recently available data, and we intend to update the numerical values in the FY 2015 IPPS/ LTCH PPS final rule. We note further that the MSPB measure’s performance standards are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. We note further that the performance standards for the NHSN measures (CAUTI, SSI, and proposed CLABSI, MRSA Bacteremia, and C. difficile Infection), the PSI–90 measure, and the MSPB measure are calculated with lower values representing better performance, in contrast to other measures, on which higher values indicate better performance. As discussed further in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50684), the performance standards for SSI are computed separately for each measure stratum. We will award achievement and improvement points to each stratum separately and then compute a weighted average of the points awarded to each stratum by predicted infections. We note that we misstated PC–01 measure’s benchmark in the proposed rule and have corrected that error in the table below. PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES Measure ID Description Achievement threshold Benchmark Safety Measures CAUTI ................................ CLABSI .............................. C. difficile ........................... MRSA Bacteremia ............. PSI–90* .............................. SSI ..................................... Catheter-Associated Urinary Tract Infection Central Line-Associated Blood Stream Infection. Clostridium difficile Infection ........................ Methicillin-Resistant Staphylococcus aureus Bacteremia. Complication/patient safety for selected indicators (composite)*. Surgical Site Infection. • Colon .................................................... • Abdominal Hysterectomy ..................... 0.8371 ......................................... 0.4483 ......................................... 0.0000. 0.0000. 0.7927 ......................................... 0.8613 ......................................... 0.0000. 0.0000. *0.577321 .................................... *0.397051. • 0.7117 ...................................... • 0.7509 ...................................... • 0.0000. • 0.0000. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Clinical Care—Outcomes Measures MORT–30–AMI* ................. MORT–30–HF* .................. MORT–30–PN* .................. Acute Myocardial Infarction (AMI) 30-day mortality rate*. Heart Failure (HF) 30-day mortality rate* .... Pneumonia (PN) 30-day mortality rate* ...... *0.851458 .................................... *0.871669. *0.881794 .................................... *0.882986 .................................... *0.903985. *0.908124. Clinical Care—Process Measures AMI–7a ............................... IMM–2 ................................ VerDate Mar<15>2010 Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization ............................... 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00222 Fmt 4701 0.954545 ..................................... 1.000000. 0.995882 ..................................... 1.000000. Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50075 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES— Continued Measure ID Description Achievement threshold Benchmark PC–01 ................................ Elective Delivery Prior to 39 Completed Weeks Gestation. 0.031250 ..................................... 0.000000. Efficiency and Cost Reduction Measure MSPB–1 ............................. Medicare Spending per Beneficiary ............ Median Medicare Spending per Beneficiary ratio across all hospitals during the performance period. Mean of the lowest decile Medicare Spending per Beneficiary ratios across all hospitals during the performance period. *Previously adopted performance standards. PROPOSED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM PATIENT AND CAREGIVER-CENTERED EXPERIENCE OF CARE/CARE COORDINATION DOMAIN Communication with Nurses .................................................................................................. Communication with Doctors ................................................................................................. Responsiveness of Hospital Staff .......................................................................................... Pain Management .................................................................................................................. Communication about Medicines .......................................................................................... Hospital Cleanliness & Quietness ......................................................................................... Discharge Information ............................................................................................................ Overall Rating of Hospital ...................................................................................................... We note that we intend to propose additional performance standards for the FY 2018 Hospital VBP Program in future rulemaking. We welcomed public comments on these proposed performance standards. Achievement threshold (percent) Floor (percent) HCAHPS survey dimension We did not receive any specific public comments on the proposed performance standards. We are therefore finalizing the FY 2017 performance standards as outlined below. Set out below are the updated the numerical values for the performance 56.90 62.03 36.46 49.47 42.89 43.46 61.86 35.00 Benchmark (percent) 78.08 80.43 64.83 70.20 62.82 65.26 85.59 69.81 86.41 88.71 79.62 78.18 73.15 79.06 91.04 84.27 standards. As with the NHSN measures and the PSI–90 measure, we note that better performance on the PC–01 measure is represented by lower numerical values. PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES Measure ID Description Achievement threshold Benchmark Safety Measures CAUTI ................................ CLABSI .............................. C. difficile ........................... MRSA Bacteremia ............. PSI–90* .............................. SSI ..................................... Catheter-Associated Urinary Tract Infection Central Line-Associated Blood Stream Infection. Clostridium difficile Infection ........................ Methicillin-Resistant Staphylococcus aureus Bacteremia. Complication/patient safety for selected indicators (composite)*. Surgical Site Infection. • Colon .................................................... • Abdominal Hysterectomy ..................... 0.845 ........................................... 0.457 ........................................... 0.000. 0.000. 0.750 ........................................... 0.799 ........................................... 0.000. 0.000. *0.577321 .................................... *0.397051. • 0.751 ........................................ • 0.698 ........................................ • 0.000. • 0.000. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Clinical Care—Outcomes Measures MORT–30–AMI* ................. MORT–30–HF* .................. MORT–30–PN* .................. Acute Myocardial Infarction (AMI) 30-day mortality rate*. Heart Failure (HF) 30-day mortality rate* .... Pneumonia (PN) 30-day mortality rate* ...... *0.851458 .................................... *0.871669. *0.881794 .................................... *0.882986 .................................... *0.903985. *0.908124. Clinical Care—Process Measures AMI–7a ............................... IMM–2 ................................ VerDate Mar<15>2010 Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Influenza Immunization ............................... 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00223 Fmt 4701 0.954545 ..................................... 1.000000. 0.951607 ..................................... 0.997739. Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50076 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM: SAFETY, CLINICAL CARE—OUTCOMES, CLINICAL CARE—PROCESS, AND EFFICIENCY AND COST REDUCTION MEASURES—Continued Measure ID Description Achievement threshold Benchmark PC–01 ................................ Elective Delivery Prior to 39 Completed Weeks Gestation. 0.031250 ..................................... 0.000000. Efficiency and Cost Reduction Measure MSPB–1 ............................. Medicare Spending per Beneficiary ............ Median Medicare Spending per Beneficiary ratio across all hospitals during the performance period. Mean of the lowest decile Medicare Spending per Beneficiary ratios across all hospitals during the performance period. *Previously adopted performance standards. PERFORMANCE STANDARDS FOR THE FY 2017 HOSPITAL VBP PROGRAM PATIENT AND CAREGIVER-CENTERED EXPERIENCE OF CARE/CARE COORDINATION DOMAIN Communication with Nurses .................................................................................................. Communication with Doctors ................................................................................................. Responsiveness of Hospital Staff .......................................................................................... Pain Management .................................................................................................................. Communication about Medicines .......................................................................................... Hospital Cleanliness & Quietness ......................................................................................... Discharge Information ............................................................................................................ Overall Rating of Hospital ...................................................................................................... e. Performance Standards for the FY 2019 and FY 2020 Hospital VBP Programs As discussed further above, we have adopted certain Safety and Clinical Care—Outcomes domain measures for future program years in order to ensure that we can adopt performance periods Achievement threshold (percent) Floor (percent) HCAHPS survey dimension and baseline periods of sufficient length for performance scoring purposes. In the FY 2015 IPPS/LTCH PPS proposed rule, we also proposed to adopt the PSI–90 measure in the Safety domain and the THA/TKA measure in the Clinical Care—Outcomes domain for the FY 2019 Hospital VBP Program. We note that, as described above with respect to 58.14 63.58 37.29 49.53 41.42 44.32 64.09 35.99 Benchmark (percent) 78.19 80.51 65.05 70.28 62.88 65.30 85.91 70.02 86.61 88.80 80.01 78.33 73.36 79.39 91.23 84.60 the NHSN, PSI–90, and MSPB measures, better performance is represented by lower values for the THA/TKA measure. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28128 through 28129) we proposed to adopt the following performance standards for the FY 2019 Hospital VBP Program: PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR CERTAIN SAFETY AND CLINICAL CARE— OUTCOMES DOMAIN MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Safety Measures PSI–90 ............................... Complication/patient safety for selected indicators (composite) ........................ 0.840421 0.589716 *0.850671 *0.883472 *0.882334 0.032521 *0.873263 *0.908094 *0.907906 0.022895 Outcomes Measures tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MORT–30–AMI* ................. MORT–30–HF* ................... MORT–30–PN* .................. THA/TKA ............................ * Previously Acute Myocardial Infarction (AMI) 30-day mortality rate* ................................... Heart Failure (HF) 30-day mortality rate* ............................................................ Pneumonia (PN) 30-day mortality rate* .............................................................. Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). adopted performance standards. We welcomed public comments on these proposed performance standards. We did not receive any specific public comments on this proposal and are VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 finalizing the FY 2019 performance standards as outlined below. Set out below are the updated numerical values for the FY 2019 performance standards. We note that, as PO 00000 Frm 00224 Fmt 4701 Sfmt 4700 described above with respect to the NHSN, PSI–90, and MSPB measures, better performance is represented by lower values for the THA/TKA measure. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50077 PREVIOUSLY ADOPTED AND NEWLY FINALIZED PERFORMANCE STANDARDS FOR CERTAIN SAFETY AND CLINICAL CARE— OUTCOMES DOMAIN MEASURES FOR THE FY 2019 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Safety Measures PSI–90 ............................... Complication/patient safety for selected indicators (composite) ........................ 0.840335 0.589462 *80.850671 *80.883472 *80.882334 0.032229 *80.873263 *80.908094 *80.907906 0.023178 Outcomes Measures MORT–30–AMI* ................. MORT–30–HF* ................... MORT–30–PN* .................. THA/TKA ............................ * Previously Acute Myocardial Infarction (AMI) 30-day mortality rate* ................................... Heart Failure (HF) 30-day mortality rate* ............................................................ Pneumonia (PN) 30-day mortality rate* .............................................................. Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). adopted performance standards. We also proposed to adopt the following performance standards for the FY 2020 Hospital VBP Program: PROPOSED PERFORMANCE STANDARDS FOR CLINICAL CARE—OUTCOMES DOMAIN MEASURES FOR THE FY 2020 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Clinical Care—Outcomes Measures MORT–30–AMI .................. MORT–30–HF .................... MORT–30–PN .................... THA/TKA ............................ Acute Myocardial Infarction (AMI) 30-day mortality rate .................................... Heart Failure (HF) 30-day mortality rate ............................................................. Pneumonia (PN) 30-day mortality rate ............................................................... Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). We welcomed public comments on these proposed performance standards. We did not receive any specific public comments on this proposal and are finalizing the FY 2020 performance standards as outlined below. Set out below are the updated the numerical values for the FY 2020 performance standards. We note that, as 0.853511 0.881394 0.882281 0.032521 0.875840 0.905962 0.909460 0.022895 described above with respect to the NHSN, PSI–90, and MSPB measures, better performance is represented by lower values for the THA/TKA measure. PERFORMANCE STANDARDS FOR CLINICAL CARE—OUTCOMES DOMAIN MEASURES FOR THE FY 2020 HOSPITAL VBP PROGRAM Measure ID Achievement threshold Description Benchmark Clinical Care—Outcomes Measures MORT–30–AMI .................. MORT–30–HF .................... MORT–30–PN .................... THA/TKA ............................ Acute Myocardial Infarction (AMI) 30-day mortality rate .................................... Heart Failure (HF) 30-day mortality rate ............................................................. Pneumonia (PN) 30-day mortality rate ............................................................... Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA). tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV f. Technical Updates Policy for Performance Standards In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our regulatory definitions of ‘‘achievement threshold’’ and ‘‘benchmark’’ at 42 CFR 412.160 and adopted performance standards for additional FY 2016 Hospital VBP Program measures. We also adopted an interpretation of ‘‘achievement VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 threshold’’ and ‘‘benchmark’’ under section 412.160 to not include the numerical values that result when the performance standards are calculated. We further adopted a policy under which we may update a measure’s performance standards for a fiscal year once if we identify data issues, calculation errors, or other problems that would significantly change the displayed performance standards. PO 00000 Frm 00225 Fmt 4701 Sfmt 4700 0.853715 0.881090 0.882266 0.032229 0.875869 0.906068 0.909532 0.023178 Our historic practice has been to display Hospital VBP Program performance standards’ numerical values in rulemaking. We adopted this practice for the convenience of the public. Although we have typically expressed the performance standards for each Hospital VBP measure as a numerical value prior to the start of the performance period for that measure, we do not display numerical values for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50078 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations MSPB measure because the measure is constructed as a measure of costs attributable to patient care during a specified episode of care during the performance period itself (77 FR 53601). We have stated that with respect to the MSPB measure, we do not believe it is helpful for hospitals to be compared against performance standards constructed from baseline period data given the potential changes in market forces and utilization practices that occur over time. Further, during the long interval between the time we first display the performance standards for all measures but the MSPB measure and the time that we calculate the achievement and improvement scores for those measures based on actual hospital performance, one or more of those measures might have been technically updated in a way that inhibits our ability to ensure that we are making appropriate comparisons between the baseline and performance period. For example, the software used to calculate the PSI–90 measure is regularly updated to incorporate coding changes, refinements based on the consensus development process, and refinements to improve specificity and sensitivity. The statistical modeling we use to adjust measure calculations for PSI–90 and HCAHPS also needs to be periodically updated to incorporate coefficient factors that more properly account for patient mix (both measures) and the HCAHPS survey data collection mode (HCAHPS survey). These types of technical updates do not substantively affect the measure rate calculation methodology, but they do sometimes affect our ability to make appropriate comparisons between the baseline and performance period if, for example, the baseline performance standards are tabulated using one version of the software and hospital performance during subsequent performance periods is tabulated with another version. We believe that in order to make the most accurate comparison of hospital performance across time, we should use the most updated version of the measure that is available at the time we calculate that performance because the updated version will produce the most valid measure rates. Further, as part of its regular maintenance process for NQF-endorsed performance measures, NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. The NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures in order to maintain endorsement status. We believe that it is important to incorporate nonsubstantive updates required by the NQF, as well as nonsubstantive updates made to other measures, into the measure specifications we have adopted for the Hospital VBP Program so that these measures remain up-to-date and ensure that we make fair comparisons between the performance and baseline periods that we adopt under the program. We also recognize that some updates to measures are substantive in nature and might not be appropriate for adoption without further rulemaking. With respect to what constitutes substantive versus nonsubstantive changes to measures, we would make this determination on a case-by-case basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that nonsubstantive changes may include updates to measures based upon changes to guidelines upon which the measures are based. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28129 through 28130) we proposed to amend the definition of ‘‘performance standards’’ under section 412.160 to enable us to update performance standards’ numerical values to incorporate nonsubstantive technical updates that are made to Hospital VBP Program measures between the time that they are adopted for a particular program year and the time that we actually calculate hospital performance on those measures after the performance period for the program year has concluded. Further, we proposed to inform hospitals of these technical updates through postings on our Hospital VBP Program Web site, the QualityNet Web site, other educational outreach efforts, and/or the scoring reports that we provide for each program year. We noted that these proposals, if finalized, may have the effect of superseding the performance standards that we establish prior to the PO 00000 Frm 00226 Fmt 4701 Sfmt 4700 start of the performance period for the affected measures, but we believe them to be necessary to ensure that the performance standards in the Hospital VBP Program’s scoring calculations enable the fairest comparisons between performance measured during the baseline period and performance period. We would continue to use rulemaking to adopt substantive updates to the measures we have adopted for the Hospital VBP Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure or when a standard of performance assessed by a measure becomes more stringent (that is, changes in acceptable timing of medication, procedure/ process, or test administration). We also noted that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. We also proposed to include in our revised definition of ‘‘performance standards’’ under section 412.160 of our regulations the policy we adopted in the FY 2013 IPPS/LTCH PPS final rule to update the performance standards once if we identify data issues, calculation errors, or other problems that would significantly change the standards (78 FR 50695). We proposed to make this change so that our policies governing updates to the performance standards appear together. We welcomed public comments on these proposals. We also specifically sought public comments on what we should consider to be substantive changes in measures’ performance standards, including whether or not we should consider certain changes in performance standards as a result of technical or nonsubstantive updates to be substantive. Comment: Several commenters opposed CMS’ proposal to adopt technical updates for performance standards, stating that there is no reason we cannot use the public notice and technical corrections process to disseminate changes in performance standards to stakeholders. Some commenters stated that not all stakeholders have access to QualityNet to receive the updates that CMS proposed. One commenter noted that changing performance standards targets with more than annual frequency would undermine hospitals’ ability to implement performance improvement efforts. Commenters noted that the Hospital VBP Program is designed to hold hospitals accountable for their performance during a specified time period based on standards that are E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations published before that performance period begins. One commenter recommended that CMS apply changes in the risk adjustment system only when a new performance standard is published and then use those same updates when performance is measured for the performance period—if the changes are indeed ‘‘nonsubstantive,’’ as the proposed regulatory text would specify, delaying the application of such updates should not be detrimental to the Hospital VBP Program. The commenter expressed concern that changes could be made resulting both in different hospital performance and a different performance standard, which would eliminate the usefulness of the minimal amount of information currently available to hospitals on these measures. Response: We disagree with the recommendation to have all measure changes subject to notice-and-comment rulemaking. As previously noted in FY 2014 IPPS/LTCH PPS final rule (78 FR 50776), we believe that the maintenance of technical specifications for quality measure policy for the Hospital IQR Program also is applicable to the Hospital VBP Program. We believe this policy adequately balances our need to incorporate nonsubstantive NQF updates to NQF-endorsed measures in the most expeditious manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. These policies regarding what is considered substantive versus nonsubstantive apply to all measures in the Hospital IQR Program and the Hospital VBP Program, and we believe the same standard applies when determining what should be considered substantive changes to performance standards. We believe that it is of paramount importance that the performance standards that we adopt accurately reflect hospitals’ actual performance during the baseline period. We view our Technical Updates authority policy as a means to ensure that accuracy and to ensure that the program scores hospitals based on performance standards that reflect the actual provision of care in hospitals around the country. With respect to commenters’ concerns that we may update performance standards more than annually, we are aware that updates may have unintended consequences on hospitals’ quality improvement efforts. We do not VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 intend to make updates to performance standards except to improve the standards’ accuracy and to ensure that the numerical values that we display for hospitals accurately reflect hospitals’ performance during the baseline period, as applicable. In addition, with respect to commenters’ suggestion that delays to performance standards updates would not be detrimental to the Hospital VBP Program, we disagree. We believe that we must provide hospitals with as much accurate information as is possible so that they may develop and implement quality improvement policies. We do not believe it would be helpful to hospitals for us to delay publishing a technical update on the basis that the update will not significantly affect performance. We note further that we do not intend to limit any updates made to performance standards using this authority to QualityNet accountholders. We intend to publish any changes made under this policy on the public QualityNet Web site and through our Hospital VBP Program listserv entitled, ‘‘Hospital Inpatient Value-Based Purchasing (HVBP) and Improvement,’’ available under the notifications and discussions link on our home page. Comment: One commenter suggested that CMS should define in specific terms what should constitute a ‘‘substantive’’ versus a ‘‘nonsubstantive’’ update to the Hospital VBP Program performance standards before adopting the authority to make technical updates. The commenter further stated that CMS should be as transparent with stakeholders as possible about these changes, noting that midstream updates could have profound impacts on hospitals’ performance under Hospital VBP Program. Response: With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-bycase basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that nonsubstantive changes may include updates to NQF-endorsed measures based upon changes to guidelines upon which the measures are based. However, as commenters have requested, we intend to be as transparent as possible with stakeholders about any technical updates that we would adopt, including the rationale for any such updates and PO 00000 Frm 00227 Fmt 4701 Sfmt 4700 50079 their effects on finalized performance standards. We will continue to use rulemaking to adopt substantive updates made to measures we have adopted for the Hospital IQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent, for example, changes in acceptable timing of medication, procedure/process, or test administration. Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. These policies regarding what is considered substantive versus nonsubstantive would apply to all measures in the Hospital IQR Program. After consideration of the public comments we received, we are finalizing the technical updates policy for performance standards as proposed. We are also finalizing our proposed revisions to the definition of ‘‘performance standards’’ in section 412.160 of our regulations. g. Request for Public Comments on International Classification of Diseases, Tenth Revision, Clinical Modification/ Procedure Coding System (ICD–10–CM/ PCS) Transition Beginning October 1, 2015, when the ICD–10–CM/PCS codes become the required code set, we will collect nonelectronic health record-based quality measure data coded only in ICD–10– CM/PCS. Even though we expect that the endorsement status of the measures we have adopted for the Hospital VBP Program will remain the same, we are concerned that the transition to a new coding system might have unintended consequences on quality measure data denominators, statistical adjustment coefficients, and measure rates. We are concerned about the possible impacts on the Hospital VBP Program, and requested public comments on how we should accommodate the transition. Specifically, we requested comments on how, if at all, we should adjust performance scoring under the Hospital VBP Program to accommodate quality data coded under ICD–10–CM/PCS, or otherwise ensure fair and accurate comparisons under the Hospital VBP Program once the transition date has passed. For example, we could consider analyzing the effects of the ICD–10–CM/ PCS transition on hospitals’ measured performances and, if substantive E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50080 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations differences result, retrospectively adjust performance standards in order to ensure that they accurately reflect the underlying methodology. We could also consider performing similar adjustments to hospitals’ measure rates, measure scores, or TPSs once our analysis is completed. We also might consider scoring hospitals only on achievement if analysis indicates that we are unable to reliably and validly calculate improvement scores when comparing International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM) based baseline period data to ICD–10–CM/PCS based performance period data. However, while we intend to analyze the effects of the ICD–10– CM/PCS transition on hospitals’ performance, we do not have the necessary data for all hospitals at this time. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28130) we stated that we intended to take two steps to analyze ICD–10–CM/PCS potential impact before receiving ICD–10–CM/ PCS-based fall 2015 discharge data in May 2016. First, we stated that we will assess measure specifications to qualitatively assess impact to measure denominators after CMS releases ICD– 10–CM/PCS-based measure specifications in the future. Second, we stated that we intend to voluntarily solicit information from no more than 9 hospitals before October 1, 2015 to estimate the impact of ICD–10–CM/PCS on their Hospital VBP measure rates and denominator counts. We intend to use this information to inform both proposed and future Hospital VBP Program policy and measures. We welcomed public comments on this topic. Comment: One commenter supported CMS’ implementation of ICD–10–CM/ PCS on October 1, 2015 without any further delays. The commenter also warned that, while adoption is welcome and overdue, implementation of the new system must be carefully orchestrated to minimize the administrative burden on hospitals. The commenter noted their appreciation of CMS’ efforts to offer extensive educational opportunities for hospitals and noted that extensive end-to-end testing of both the electronic transaction and the adjudication of the claim by Medicare contractors and State Medicaid agencies will be needed to ensure a smooth transition from ICD–9– CM to ICD–10–CM/PCS. Response: We thank the commenter for its support. We would like to clarify that HHS has not yet finalized an ICD– 10 implementation date through rulemaking. We refer readers to the CMS VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Web page on ICD–10 (https:// cms.hhs.gov/Medicare/Coding/ICD10/ index.html) and the Federal Register for current information. Comment: A few commenters recommended that CMS work with more than nine hospitals, as well as other national hospital associations and stakeholders interested in volunteering to participate in the ICD–10–CM/PCS transition process, to gain a broader understanding of the coding transition and its impact on CMS’ quality reporting and pay-for-performance programs. Response: We believe an initial limited analysis will enable us to better understand the impact of the ICD–10– CM/PCS transition on hospitals’ performance. We intend to continue discussing this topic with stakeholders in the future. Comment: One commenter supported CMS’ suggested strategy for analyzing Hospital VBP Program performance scores to accommodate the ICD–10–CM/ PCS transition, but requested that CMS make any adjustment methodology public and continue to score hospitals on both achievement and improvement. Response: We intend to discuss publicly any adjustments that we would subsequently propose through rulemaking for the Hospital VBP Program. Comment: Many commenters urged CMS not to adopt achievement-only scoring as a result of the ICD–10–CM/ PCS transition, stating that improvement points are a balancing feature of the Hospital VBP Program that provide incentives for progress. Some commenters stated that the Hospital VBP Program statute requires that CMS score hospitals on both achievement and improvement, and suggested that CMS ‘‘waive’’ hospitals’ participation in the program until we have adequate data to provide both elements of performance scoring. Several commenters suggested that CMS remove measures from the program for a year if we cannot calculate reliable improvement scores. Other commenters requested that CMS allow sufficient time to analyze the impact of the ICD–10–CM/PCS transition and address any potential issues before penalizing hospitals in future Hospital VBP Program years. One commenter suggested holding hospitals harmless if CMS cannot accurately accept and calculate quality measures. Response: We thank the commenters for this feedback and will take it into consideration as we develop our policy on this issue. Comment: Several commenters expressed concern that transitioning the PO 00000 Frm 00228 Fmt 4701 Sfmt 4700 Hospital VBP Program to the ICD–10– CM/PCS system could significantly alter how measures are scored between the baseline and performance periods. The commenter opined that comparisons between the ICD–9–CM and ICD–10– CM/PCS systems would be unfair, and suggested that CMS score hospitals using ICD–9–CM data and an ICD–10– CM/PCS crosswalk. Commenters suggested that CMS run both the baseline data and the performance data using ICD–9–CM (using crosswalk software) and make the results of the testing publicly available. A few commenters urged CMS to formalize its ICD–10–CM/PCS testing plans to ensure that end-to-end testing begins no later than January 2015 and is made available to all hospitals. Response: We thank the commenters for this feedback and will take it into consideration as we develop our policy on this issue. Comment: One commenter recommended that CMS update its quality measures in order to best take advantage of the added granularity offered by ICD–10–CM/PCS. The commenter does not believe that it will be possible to accurately adjust performance standards retrospectively in order to correct the substantive differences in ICD–9–CM and ICD–10– CM/PCS quality data. The commenter suggested that evaluating quality measures solely on achievement would minimize the administrative costs associated with identifying the feasibility, validity, and reliability of comparing quality measures based on dissimilar code sets, and would also allow measure developers to freely update quality measures without the fear of distorting comparisons between baseline and performance period data coded in dissimilar formats. Commenters agreed that the ICD–10– CM/PCS transition may have an impact on quality measurement based on claims data, and encouraged CMS to analyze those effects rigorously once data are available. Response: We thank the commenters for this feedback and will take it into consideration as we develop our policy on this issue. We thank the commenters for these responses and we will consider them as we plan for the ICD–10–CM/PCS transition under the Hospital VBP Program. 11. FY 2017 Hospital VBP Program Scoring Methodology a. General Hospital VBP Program Scoring Methodology In the Hospital Inpatient VBP Program final rule (76 FR 26514), we adopted a E:\FR\FM\22AUR2.SGM 22AUR2 50081 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV methodology for scoring clinical process of care, patient experience of care, and outcome measures. As noted in that rule, this methodology outlines an approach that we believe is well understood by patient advocates, hospitals, and other stakeholders because it was developed during a lengthy process that involved extensive stakeholder input, and was based on a scoring methodology we presented in a report to Congress. We also noted in that final rule that we had conducted extensive additional research on a number of other important methodology issues to ensure a high level of confidence in the scoring methodology. In addition, we believe that, for reasons of simplicity, transparency, and consistency, it is important to score hospitals using the same general methodology each year, with appropriate modifications to accommodate new domains and measures. We finalized a similar scoring methodology for the MSPB measure in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 through 51656). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604 through 53605), for the FY 2015 Hospital VBP Program, we finalized our proposal to use these same general scoring methodologies to score hospital performance for the FY 2015 Hospital VBP Program. In that rule, we stated that we believe these scoring methodologies continue to appropriately capture hospital quality as reflected by the finalized quality measure sets. We also noted that readopting the finalized scoring methodology from prior program years represents the simplest and most consistent policy for hospitals and the public. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50699), we readopted the finalized general scoring methodology adopted for the FY 2015 Hospital VBP Program for the FY 2016 Hospital VBP Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted new quality domains based on the NQS for FY 2017 and subsequent years. We continue to agree with the reasoning for the scoring methodology outlined in the FY 2013 IPPS/LTCH PPS final rule and summarized above. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28130 through 28131) we proposed to adopt the general scoring methodology adopted for the FY 2016 Hospital VBP Program for the FY 2017 Hospital VBP Program, with appropriate modifications to accommodate the new quality domains that we have previously adopted. These proposed modifications to our scoring methodology are limited to reclassified quality domains, new placements for measures within those domains, and domain weighting. We discuss below a proposal to revise the finalized domain weighting for FY 2017. We welcomed public comment on this proposal. We also received a number of general comments on the Hospital VPB Program’s scoring methodology. Comment: Several commenters stated that CMS should consider phasing out improvement scoring for selected measures or the entire Hospital VBP Program that have been included in the Hospital VBP Program for several years in order to emphasize comparative performance on the measures. Several commenters agreed that phasing out improvement scoring after several years (one commenter suggested 3 years) would emphasize comparative performance on the measures. While some commenters noted that improvement at the outset of the program is very important to encouraging historically poorperforming hospitals to invest in improvement, those commenters believe that hospitals should be compared and paid on their achievements and not merely for improving on subpar performance after a period of time. Several other commenters, on the other hand, expressed strong support for pay-for-performance programs that assess multiple aspects of care and recognize hospitals for achievement versus national benchmarks and improvement versus baseline performance. Commenters stated that this incentive structure can provide greater inducement for hospitals to improve performance. Commenters believed this construct is foundational for hospitals to improve performance in a rational and predictable manner. Response: We thank the commenters for this feedback. We will take it under consideration as we develop Hospital VBP Program policies. Comment: One commenter recommended that CMS consider comparing ‘‘like’’ hospitals—such as those of similar sizes, teaching status, and case mix—under the Hospital VBP Program in order to avoid inadvertently providing scoring advantages or disadvantages to participating hospitals. Response: We do not believe the quality measures that we have adopted for the Hospital VBP Program incorporate the necessary data to disaggregate hospitals’ performance by size, teaching status, or case mix any further than they already do through risk adjustment. We do intend, however, to assess the feasibility of this suggestion through our program monitoring and evaluation efforts. After consideration of the public comments we received, we are finalizing our proposal to adopt the general scoring methodology adopted for the FY 2016 Hospital VBP Program for the FY 2017 Hospital VBP Program, with appropriate modifications to accommodate the new quality domains that we have previously adopted. These modifications to our scoring methodology are limited to reclassified quality domains, new placements for measures within those domains, and domain weighting. b. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals That Receive a Score on All Domains In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through 50704), we adopted our proposal to align the Hospital VBP Program’s quality measurement domains with the NQS’s quality priorities, with certain modifications. We adopted this realignment beginning with the FY 2017 Hospital VBP Program. We also adopted the following domains and domain weights for the FY 2017 Hospital VBP Program for hospitals that receive a score in all newly aligned domains. PREVIOUSLY ADOPTED DOMAINS AND DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS Domain Weight Safety ............................................................................................................................................................................................... Clinical Care .................................................................................................................................................................................... • Clinical Care—Outcomes ..................................................................................................................................................... • Clinical Care—Process ......................................................................................................................................................... Efficiency and Cost Reduction ........................................................................................................................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00229 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 15 35 • 25 • 10 25 percent. percent. percent. percent. percent. 50082 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PREVIOUSLY ADOPTED DOMAINS AND DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS—Continued Domain Weight Patient and Caregiver Centered Experience of Care/Care Coordination ....................................................................................... However, as discussed in more detail above, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119), we are finalizing our proposal to remove six ‘‘topped-out’’ measures from the FY 2017 Clinical Care—Process subdomain. This substantial reduction in the number of measures adopted for the Clinical Care—Process subdomain warrants reconsideration of the finalized domain weighting for FY 2017 that we adopted in the FY 2014 IPPS/LTCH PPS final rule. As described in more detail above, we are also finalizing our proposal to readopt the CLABSI measure and to adopt two new measures (MRSA Bacteremia and C. difficile Infection) for the Safety domain for FY 2017 Hospital VBP Program and subsequent years, which raises the total number of measures in this domain for FY 2017 to six. Because we proposed to make changes in the number of measures in only two domains (Safety and Clinical Care), we focused our proposed domain weighting 25 percent. changes in the proposed rule on these domains only. Because we continue to believe that hospitals should be provided strong incentives to perform well on measures of patient safety, in view of the new measures we proposed to add to that domain, we proposed to revise the previously finalized domain weighting for the FY 2017 Hospital VBP Program for hospitals receiving a score on all newly aligned domains as follows: PROPOSED REVISED DOMAIN WEIGHTS FOR THE FY 2017 HOSPITAL VBP PROGRAM FOR HOSPITALS RECEIVING A SCORE ON ALL NEWLY ALIGNED DOMAINS Domain Weight tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Safety ............................................................................................................................................................................................... Clinical Care .................................................................................................................................................................................... • Clinical Care—Outcomes ..................................................................................................................................................... • Clinical Care—Process ......................................................................................................................................................... Efficiency and Cost Reduction ........................................................................................................................................................ Patient and Caregiver Centered Experience of Care/Care Coordination ....................................................................................... We welcomed public comments on the proposed revised domain weights. Comment: Several commenters expressed broad support for CMS’ proposed revision to the domain weighting for FY 2017, agreeing that it appropriately shifts the program’s focus to the Safety domain and away from Clinical Care—Process domain. One commenter commended CMS’ efforts to move the delivery system towards value-driven paradigms that reward high quality and cost effective health care providers. A few commenters noted that the Safety domain is largely comprised of well-developed HAI outcome measures. One commenter noted that the domain weights largely align with the National Quality Strategy’s quality priorities and places an increased focus on patient safety. Some commenters specifically expressed support for maintaining the weight of the Efficiency and Cost Reduction domain at 25 percent. Response: We thank the commenters for their support. Comment: Several commenters wanted CMS to maintain the Clinical Care—Process domain weighting at 35 percent, and noted that measures of clinical processes continue to play an important role in improving the quality of care. One commenter suggested CMS VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 not reduce the weight for Clinical Care—Process measures to 5 percent because commenter believed that these measures play a vital role in quality improvement and should remain a significant component of the Hospital VBP Program. The commenter also noted that a hospital’s level of performance on Clinical Care—Process measures reflects a hospital’s overall discipline and commitment to quality improvement that extends beyond just the specific topics being measured. Other commenters suggested that the final rule should increase the weight for the Clinical Care—Process domain in order to ensure that the Hospital VBP Program’s focus is appropriately on improving patient outcomes. A few commenters noted that measuring clinical processes gives hospitals the data they need to improve performance and identify good process measures that are not burdensome to collect. One commenter stated that the Clinical Care—Outcomes and Safety domains already reflect higher priority than Clinical Care—Process domain measures. This commenter suggested that process measures may be used to identify gaps that may not be readily apparent from outcome measures. One commenter encouraged CMS to give the Clinical Care—Process measures the PO 00000 Frm 00230 Fmt 4701 Sfmt 4700 20 30 • 25 • 5 25 25 percent. percent. percent. percent. percent. percent. greatest weight because of the limitations of the measures in the other domains and because this domain provides hospitals with the most actionable information on quality performance. One commenter questioned the extent to which measures of clinical process are necessary given the low domain weighting allocated to the Clinical Care—Process domain. The commenter suggested that CMS consider phasing the measures out of the program entirely. Other commenters suggested additional measures that should be added to the Clinical Care—Process Domain, including one commenter who suggested the Medicare Service Utilization measure be added to the Efficiency and Cost Reduction domain. Response: Because we proposed to remove six ‘‘topped-out’’ measures from the FY 2017 Clinical Care—Process subdomain, the number of measures adopted for that subdomain will be significantly reduced. For that reason, we reconsidered the finalized domain weighting for FY 2017 that we adopted in the FY 2014 IPPS/LTCH PPS final rule. We continue to believe that hospitals should be provided strong incentives to perform well on measures of patient safety, and we believe the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations revised domain weighting appropriately reduces the relative weighting allocated to the Clinical Care—Process domain, in accordance with the substantially reduced number of measures adopted under that domain. As we have stated in prior rulemaking, we believe that the Hospital VBP Program should shift from its initial focus on measures of processes to measures of outcomes and efficiency, and we believe that the proposed domain weighting change appropriately continues that policy change. Comment: One commenter urged that CMS ensure that the IMM–2 measure is afforded sufficient weight in determining hospital value-based payments, such as by including this measure in the Safety domain. Response: We believe we have placed the IMM–2 measure appropriately within the Clinical Care—Process domain, as it is a chart-abstracted measure. We further believe that we have allocated sufficient domain weighting to the Clinical Care—Process domain, and respond to additional comments on the FY 2017 domain weighting in subsequent sections below. Comment: One commenter recommended that CMS decrease the weight of the consistency score in the HCAHPS survey to 10 percent and weight the HCAHPS measure total score with the new care transition measures at 90 percent. Alternatively, the commenter suggested that CMS revise the methodology of the consistency score to more accurately measure consistent performance and leave the weight of 20 percent in place. Instead of using the HCAHPS floor values as the minimum range for consistency, the commenter suggested that CMS use the 25th percentile value so that consistency points would only be rewarding hospitals maintaining a reasonable level of performance in each HCAHPS measure. Response: We continue to believe that the HCAHPS survey is an important and significant component of the Total Performance Score. We further believe that Consistency Points appropriately encourage hospitals to attempt to improve their scores on all dimensions of the HCAHPS survey, and are therefore appropriately allotted 20 points within the domain. While we may reexamine the HCAHPS survey’s scoring methodology if we adopt the CTM–3 items in the future, we do not believe that it is appropriate at this time to reduce the Consistency Points component of the PEC/CC domain to 10 percent. Comment: Many commenters urged CMS to revise the MSPB measure to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 include both quality and cost outcomes, which means achieving better outcomes at lower total health costs, rather than simply and crudely cutting costs. A few commenters stated that basing 25 percent of the TPS on a measure of cost comparison with no quality component will encourage hospitals to further cut costs beyond the incentives of the DRG system, with uncertain checks on corresponding quality impacts. Several commenters stated that because so much of the MSPB measure is outside of the hospital’s control, the domain should not be factor so heavily into the TPS. A few commenters urged CMS to consider removing the MSPB measure entirely or dropping the Efficiency and Cost Reduction domain’s weighting to 5 percent because the commenters suggested that measures aimed at improving efficiency should be grounded in current best evidence, should evaluate clinical outcomes concurrently with resource use, and should be interpretable based on outcomes achieved with resources expended. Another commenter recommended lowering the weight of the Efficiency domain when the new episode-based payment measures’ initial implementation begins to provide CMS and hospitals an opportunity to gain experience with these measures. The commenter noted that lowering the weight of the Efficiency domain provides a period of time for the development of more accurate or relevant Efficiency measures into the program. However, several commenters suggested that CMS increase weighting of the Efficiency and Cost Reduction domain. A few commenters suggested that CMS consider incrementally increasing the Efficiency and Cost Reduction domain’s weight to 50 percent as more efficiency measures are developed in the coming years. One commenter suggested that this change should occur in six years. Response: We believe we have appropriately balanced our desire to provide strong incentives for hospitals to consider the cost and the quality of the care that they provide to Medicare beneficiaries and to all patients by assigning the Efficiency and Cost Reduction domain to 25 percent of the Total Performance Score. We note that the MSPB measure is still relatively new to the Hospital VBP Program, and represents the incorporation of efficiency metrics for the first time in the program. We view that step as important, and we continue to believe it merits significant domain weighting in order to ensure that hospitals monitor PO 00000 Frm 00231 Fmt 4701 Sfmt 4700 50083 the costs of the care they provide to Medicare beneficiaries during the inpatient hospitalization and are involved in the coordination of beneficiaries’ care immediately prior to a hospitalization and post-discharge. However, we thank the commenters for their thoughts and intend to continue examining domain weighting and will consider revisiting this issue in the future. Comment: A few commenters wanted to decrease the PEC/CC weight. One commenter stated that anecdotal evidence shows significant variation in HCAHPS survey scores due to differences in acuity level and region. The commenter also noted that a recent study found that patient satisfaction was independent of hospital compliance with surgical processes and with hospitals’ safety culture. One commenter urged CMS to retain the PEC/CC domain’s weighting at 25 percent, stating that the patient’s experience is a critical component of quality health care. The commenter stated that, if CMS retains the Safety domain, CMS should not increase its allocated domain weighting, and should leave the Clinical Care—Process domain’s weighting at 10 percent. A few commenters suggested adding additional measures to the PEC/CC domain, in order to strengthen those domains. Response: We disagree with commenters that suggested that we consider lower weighting for the PEC/ CC domain. We continue to believe that the patient’s experience is an important component of high-quality health care, and we believe that allocating significant domain weighting to the PEC/CC domain reflects that priority appropriately. As described further above, we also believe that the Consistency Points are properly set at 20 points within the domain. We believe the PEC/CC domain’s weighting appropriately provides hospitals with strong incentives to improve their patients’ experience during acute care hospitalizations. Comment: A few commenters urged that CMS remove the Safety domain from the Hospital VBP Program and consider the HAC Reduction Program as its Safety domain, redistributing the weight to the other domains. In the alternative, one commenter suggested that CMS leave the Clinical Care— Process domain’s weighting at 10 percent. One commenter suggested that CMS increase the Safety or Clinical Care— Outcomes domain weights. Response: We consider measures of patient safety to be of critical E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50084 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations importance to the Hospital VBP Program, and we believe that their inclusion in the program with significant domain weighting appropriately provides hospitals with substantial incentives to protect their patients during acute care episodes. Comment: A few commenters suggested that CMS replace the Clinical Care—Outcome measures or develop a plan to improve the measures’ reliability. One commenter expressed concern that three mortality measures in the Clinical Care—Outcomes domain do not reliably assess hospital performance and could have negative unintended consequences for certain hospitals. One commenter urged CMS to modify the domain weights so that more emphasis is placed on achieving outcomes, providing quality clinical processes, and improving patient experience. Commenters expressed support for the goal of improving quality and cost outcomes within the system, which means achieving better outcomes at lower total health costs, rather than simply and crudely cutting costs. Response: We believe that we have taken appropriate steps to increase the reliability of the 30-day mortality measures that we have placed into the Clinical Care—Outcomes domain by extending the performance periods for those measures. We believe that the measures appropriately receive substantial domain weighting in order to ensure that hospitals focus quality improvement efforts on patients with these harmful conditions. In addition, we believe that, our future measure set should evolve to emphasizing outcomes, safety cost and efficiency, population health, and patient experience of care as noted in the HHS National Quality Strategy. We continue to evaluate measures that assess these critical components of the HHS National Quality Strategy, and as we add more measures in this area, we intend to increase the weight of this domain. We also believe that safety and the patient experience of care is important in assessing quality. As we note above, because we are adding two new measures to the Safety domain, we are increasing this domain’s weight by 5 percent, we believe that this increase appropriately balances the importance of patient safety while balancing the need for excellence in the remaining domains. Likewise, we believe that a 25 percent weight for the Patient and Caregiver Centered Experience of Care/ Care Coordination domain appropriately balances the need to address the patient experience with the importance of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 stressing quality clinical processes, outcomes, efficiency and safety. After consideration of the public comments we received, we are finalizing the revised domain weighting for the FY 2017 Hospital VBP Program as proposed. c. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals Receiving Scores on Fewer than Four Domains In prior program years, we finalized a policy that hospitals must have received domain scores on all finalized domains in order to receive a TPS. However, because the Hospital VBP Program has evolved from its initial two domains to an expanded measure set with additional domains, we considered whether it was appropriate to continue this policy. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606 through 53607), we finalized our proposal that, for the FY 2015 Hospital VBP Program and subsequent years, hospitals with sufficient data to receive at least two out of the four domain scores that existed for the FY 2015 Hospital VBP Program (that is, sufficient cases and measures to receive a domain score on at least two domains) will receive a TPS. We also finalized our proposal that, for hospitals with at least two domain scores, TPSs would be reweighted proportionately to the scored domains to ensure that the TPS is still scored out of a possible 100 points and that the relative weights for the scored domains remain equivalent to the weighting which occurs when there are scores in all four domains. We believe that this approach allows us to include relatively more hospitals in the Hospital VBP Program while continuing to focus on reliably scoring hospitals on their quality measure performance. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through 50702), we continued this approach for the FY 2016 Hospital VBP Program and subsequent fiscal years for purposes of eligibility for the program even though, based on the NQS, we adopted four NQS-based domains for the FY 2017 Hospital VBP Program (78 FR 50702 through 50704), which include the subdivided Clinical Care domain. In light of the four NQS-based domains we have adopted, we have reconsidered the appropriate minimum number of domains (that is, the number of domains on which hospitals must receive scores) in order to receive a TPS. We are concerned that requiring just two out of the four NQS-based domains in order to receive a TPS may be insufficient to ensure robust quality measurement under the Hospital VBP PO 00000 Frm 00232 Fmt 4701 Sfmt 4700 Program. Further, given the transition to NQS-based domains that we have adopted, we believe an additional independent analysis of appropriate minimum numbers of domains under the new domain structure is appropriate. We commissioned that analysis from our Reports & Analytics contractor for the Hospital VBP Program. The results of that analysis informed our proposal below, and we stated that we intended to post a summary of the reliability and minimum numbers analysis on the CMS Web site during the public comment period. We believe that requiring three out of the four NQS-based domains appropriately balances our desire to be as inclusive as possible with Hospital VBP Program requirements while ensuring that TPSs under the program are sufficiently reliable. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28132) we proposed to require that, for the FY 2017 Hospital VBP Program and subsequent years, hospitals must receive domain scores on at least three quality domains in order to receive a TPS. For purposes of the Clinical Care domain score, we proposed to consider either the Clinical Care—Process or Clinical Care—Outcomes subdomains as one domain in order to meet this proposed requirement. By adopting this policy, we believe we will continue to allow as many hospitals as possible may participate in the program while ensuring that reliable TPSs result. However, we would only reweight hospitals’ TPSs once and would therefore not reallocate the Clinical Care—Process and Clinical Care— Outcomes subdomains’ weighting within the Clinical Care domain if a hospital does not have sufficient data for one of the subdomains. For example, a hospital receiving domain scores on all domains except the Clinical Care— Process subdomain would not have the 5 percent weighting from the Clinical Care—Process subdomain reallocated entirely to the Clinical Care—Outcomes subdomain. Instead, the 5 percent weighting from the Clinical Care— Process subdomain would be proportionately reallocated across all domains. We welcomed public comments on this proposal. Comment: One commenter supported CMS’ proposal to require hospitals to have sufficient data on at least three domains in order to receive a Total Performance Score in FY 2017. Response: We thank the commenter for their support. Comment: One commenter expressed concern that CMS’ proposal would E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations result in lower participation rates in the program. The commenter recommended that CMS retain the minimum number of domain scores at two. Response: As described above, we are concerned that requiring just two domains to receive a Total Performance Score for FY 2017 may provide an insufficient basis in quality data for robust performance scoring. We believe that the proposed requirement appropriately balances our desire to include as many hospitals as possible in the Hospital VBP Program while ensuring that Total Performance Scores are based on reliable quality data. After consideration of the public comments we received, we are finalizing the requirement that hospitals have sufficient data on at least three of the four domains for the FY 2017 Program as proposed. We also are finalizing that hospitals with sufficient data on at least three of four domains for FY 2017 will have their Total Performance Scores proportionately reweighted, and for purposes of that reweighting, we will not reallocate the Clinical Care—Process and Clinical Care—Outcomes subdomains’ weighting within the Clinical Care domain if a hospital does not have sufficient data for one of the subdomains. 12. Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program’s Quality Domains tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Previously Adopted Minimum Numbers of Cases and FY 2016 Minimum Numbers of Cases In the Hospital Inpatient VBP Program final rule (76 FR 26527 through 26531), we adopted minimum numbers of at least 10 cases on at least 4 measures for hospitals to receive a Clinical Process of Care domain score. In the same final rule, we adopted a minimum number of 100 HCAHPS surveys for a hospital to receive a Patient Experience of Care domain score. In the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74532 through 74534), we adopted a minimum number of 10 cases for the mortality measures that we adopted for FY 2014. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a new minimum number of 25 cases for the mortality measures for FY 2015. In the same final rule, we adopted a minimum number of 25 cases for the MSPB measure (77 FR 53609 through 53610), a minimum of three cases for any underlying indicator for the PSI–90 measure based on AHRQ’s measure methodology (77 FR 53608 through 53609), and a minimum of one predicted infection for NHSN- VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 based surveillance measures based on CDC’s minimum case criteria (77 FR 53608 through 53609). However, we noted that we adopted these case minimums for FY 2015 only, although we intended to adopt them for FY 2015 and subsequent years. We continue to believe that the finalized minimum numbers of cases described above are appropriate and provide sufficiently reliable data for scoring purposes under the Hospital VBP Program. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28132), we proposed to adopt the specified case minimums for the FY 2016 Hospital VBP Program and subsequent years. We welcomed public comment on this proposal. We noted that we proposed below to specify minimum numbers of measures for the FY 2017 Hospital VBP Program and subsequent years based on the new domain structure. We did not receive any specific public comments on this proposal. Therefore, we are finalizing this policy as proposed. b. Minimum Number of Measures— Safety Domain As described in more detail above, we proposed to adopt six quality measures in the Safety domain for the FY 2017 Hospital VBP Program. Of these measures, five are NHSN-based surveillance measures and one is the PSI–90 measure. After consideration of these measures and of previous independent analyses of the necessary minimum number of measures adopted for the Outcomes domain, whose measures formed the basis for part of the new Safety domain, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133) we proposed to adopt a minimum number of three measures for the Safety domain for FY 2017 and subsequent years. We believe this proposal balances our desire to be as inclusive as possible with the Hospital VBP Program and the need for reliable quality measurement data on which to base TPSs. We also clarified that we will continue to score hospitals on NHSN measures if, as we discussed with respect to the CLABSI measure (77 FR 53608) and the SSI measure (78 FR 50684), the hospital has met CDC’s minimum case criteria of one predicted infection during the applicable period. We welcomed public comment on this proposal. We did not receive any specific public comments on this proposal, and therefore are finalizing this policy as proposed. PO 00000 Frm 00233 Fmt 4701 Sfmt 4700 50085 c. Minimum Number of Measures— Clinical Care Domain (1) Background In the FY 2014 IPPS/LTCH PPS final rule, we adopted a new domain structure for the FY 2017 Hospital VBP Program and subsequent years based on the NQS. In that final rule, we adopted a Clinical Care domain that was subdivided into the Clinical Care— Process and Clinical Care—Outcome subdomains. We adopted these subdomains in order to ensure that we place the appropriate domain weighting on measures of clinical processes and measures of clinical outcomes. We believe the same consideration is appropriate for determining minimum numbers of measures for each subdomain, and, based on prior independent analyses conducted of the appropriate minimum numbers for the Clinical Process of Care and Outcomes domains whose measures formed the basis for the new Clinical Care domain, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133), we proposed separate minimum numbers for each of these subdomains below. As described further above, we also attempted to balance our desire to be as inclusive as possible with the Hospital VBP Program and the need for reliable quality measurement data on which to base TPSs. (2) Clinical Care—Outcomes Subdomain In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707), we adopted a minimum number of two measures in the former Outcome domain. We stated our belief that this minimum number is appropriate for the expanded Outcome domain that formed the basis for the Clinical Care—Outcomes subdomain because adding measure scores beyond the minimum number of measures has the effect of enhancing the domain score’s reliability. As noted above, the Clinical Care— Outcomes subdomain now contains the three 30-day mortality measures, and based on previous independent analysis of the appropriate minimum number of measures for the Outcomes domain that formed the basis for the Clinical Care— Outcomes subdomain (available on our Web site at: https://cms.hhs.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/hospital-valuebased-purchasing/Downloads/HVBP_ Measure_Reliability-.pdf), we continue to believe that a minimum number of two measures within the subdomain appropriately balances scoring reliability with inclusiveness under the program. As noted above, we stated our intent to post a summary of the E:\FR\FM\22AUR2.SGM 22AUR2 50086 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations reliability and minimum numbers analysis on the CMS Web site during the public comment period. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 281333), we proposed to adopt a minimum number of two measures in the Clinical Care—Outcome subdomain for FY 2017 and subsequent years. We welcomed public comment on this proposal. We did not receive any specific public comments on this proposal, and therefore are finalizing this policy as proposed. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (3) Clinical Care—Process Subdomain We have reconsidered the finalized minimum number of measures given the significant reduction in Clinical Care— Process measures due to ‘‘topped-out’’ removals that we proposed in the proposed rule. We are concerned that requiring hospitals to report on all three proposed Clinical Care—Process measures for the FY 2017 Hospital VBP Program, or even requiring two out of three measures, could prevent a significant proportion of participating hospitals from receiving a Clinical Care—Process subdomain score. We are aware that relatively few hospitals report data for the AMI–7a measure, and the proposed PC–01 measure will only include hospitals that provide maternity services. In accordance with our preference for including as many hospitals as possible in the Hospital VBP Program while ensuring the reliability of the domain score, and based on a prior independent analysis that formed the basis for the Clinical Care—Process domain, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133) we proposed to require hospitals to report a minimum of one measure in the Clinical Care—Process domain for the FY 2017 Hospital VBP Program and subsequent years to receive a domain score. We welcomed public comment on this proposal. We did not receive any specific public comments on this proposal, and therefore are finalizing this policy as proposed. d. Minimum Number of Measures— Efficiency and Cost Reduction Domain Because the MSPB measure remains the only measure within the Efficiency and Cost Reduction domain for FY 2017, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133) we proposed to require that hospitals receive a MSPB measure score in order to receive an Efficiency and Cost Reduction domain score. If we adopt additional measures for this domain in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the future, we will consider if we should revisit this policy. We welcomed public comments on this proposal. We did not receive any specific public comments on this proposal, and therefore are finalizing this policy as proposed. e. Minimum Number of Measures— PEC/CC Domain As with the MSPB measure adopted for the Efficiency and Cost Reduction domain described further above, we have not adopted additional measures for the PEC/CC domain. Because the HCAHPS survey measure remains the only measure within the PEC/CC domain for FY 2017, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133), we proposed to require that hospitals receive an HCAHPS survey measure score in order to receive a PEC/ CC domain score. If we adopt additional measures for this domain in the future, we will consider if we should revisit this policy. We welcomed public comments on this proposal. We did not receive any specific public comments on this proposal, and therefore are finalizing this policy as proposed. 13. Applicability of the Hospital VBP Program to Maryland Hospitals Section 1886(o)(1)(C) of the Act specifies the hospitals for which the Hospital VBP Program applies. Specifically, the term ‘‘hospital’’ is defined under section 1886(o)(1)(C)(i) of the Act as a ‘‘subsection (d) hospital (as defined in section 1886(d)(1)(B) [of the Act]).’’ Section 1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to the definition of the term ‘‘hospital’’ with respect to a fiscal year. Section 1886(o)(1)(C)(iv) of the Act states that in the case of a hospital that is paid under section 1814(b)(3) of the Act, the Secretary may exempt the hospital from the Hospital VBP Program if the State submits an annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under the Hospital VBP Program. We have interpreted the reference to section 1814(b)(3) of the Act to mean those Maryland hospitals that were paid under section 1814(b)(3) of the Act and that, absent the ‘‘waiver’’ provided by section 1814(b)(3) of the Act, would have been paid under the IPPS. The State of Maryland entered into an agreement with CMS, effective January PO 00000 Frm 00234 Fmt 4701 Sfmt 4700 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dualeligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of Titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to hospitals paid under section 1814(b)(3) of the Act, including but not limited to section 1886(o)(1)(C)(iv) of the Act, which provides an exemption for hospitals paid under section 1814(b)(3) of the Act from the application of the Hospital VBP Program if the State which is paid under that section meets certain requirements. In order to implement the Maryland All-Payer Model, we have waived certain provisions of the Act, and the corresponding implementing regulations, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement. The effect of Maryland hospitals no longer being paid under section 1814(b)(3) of the Act is that they are not entitled to be exempted from the Hospital VBP Program under section 1886(o)(1)(C)(iv) of the Act and, but for the model, would be included in the Hospital VBP Program. In other words, although the exemption from the Hospital VBP Program no longer applies, Maryland hospitals will not be participating in the Hospital VBP Program because section 1886(o) of the Act and its implementing regulations have been waived for purposes of the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations model, subject to the terms of the agreement. Accordingly, in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28133 through 28134) we proposed to make conforming revisions to section 412.160, in the definition of ‘‘base-operating DRG payment amount’’ and to section 412.161, which describes the applicability of the Hospital VBP Program. We proposed to delete references in these regulations to hospitals paid under section 1814(b)(3) of the Act because, at this time, there are no hospitals paid under that section. We welcomed public comment on these proposals. After receiving no specific public comment on these proposals, we are finalizing our proposed regulation text changes to delete references in the regulation text to hospitals paid under section 1814(b)(3) of the Act because no hospitals are paid under that section. 14. Disaster/Extraordinary Circumstance Exception Under the Hospital VBP Program In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50704 through 50706), we adopted a disaster/extraordinary circumstance exception. We refer readers to that final rule for the policy’s details. We note that we are currently in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form, previously approved under OMB control number 0938–1171. J. Changes to the Hospital-Acquired Condition (HAC) Reduction Program 1. Background We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50708) for a general overview of the HAC Reduction Program. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 2. Statutory Basis for the HAC Reduction Program Section 3008 of the Affordable Care Act added section 1886(p) to the Act to provide an incentive for certain hospitals to reduce the incidence of HACs. Section 1886(p) of the Act requires the Secretary to make an adjustment to payments to ‘‘applicable hospitals’’ effective beginning on October 1, 2014 and for subsequent program years. Section 1886(p)(1) of the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ will be adjusted to account for HACs with respect to discharges occurring during FY 2015 or later. For hospitals with HAC scores in the worst VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 performing quartile relative to other applicable hospitals for a given fiscal year, the amount of Medicare payment is reduced to 99 percent of the amount of payment that would otherwise apply to discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection (d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average, of conditions acquired during the applicable period, as determined by the Secretary. Section 1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and apply a riskadjustment methodology in calculating HAC scores for each hospital. Sections 1886(p)(3) and (p)(4) of the Act define ‘‘hospital-acquired conditions’’ and ‘‘applicable period,’’ respectively. The term ‘‘hospitalacquired condition’’ means ‘‘a condition identified in subsection 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary.’’ The term ‘‘applicable period’’ means, with respect to a fiscal year, a period specified by the Secretary. Section 1886(p)(5) of the Act requires that, prior to FY 2015 and each subsequent fiscal year, the Secretary provides confidential reports to each applicable hospital with respect to the HAC Reduction Program scores for the applicable period, to give the hospitals an opportunity to review and correct the data. Section 1886(p)(6)(A) of the Act sets forth the reporting requirements by which the Secretary would make information available to the public regarding HACs for each applicable hospital. Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the HAC scores of the applicable hospital prior to such information being made public. Section 1886(p)(6)(C) of the Act requires that, once corrected, the HAC scores be posted on the Hospital Compare Web site on the Internet in an easily understandable format. Section 1886(p)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(p) of the Act. These determinations include: what qualifies as an applicable hospital; the PO 00000 Frm 00235 Fmt 4701 Sfmt 4700 50087 specifications of a HAC; the Secretary’s determination of the ‘‘applicable period’; the provision of confidential reports submitted to the applicable hospital; and the information publicly reported on the Hospital Compare Web site. 3. Implementation of the HAC Reduction Program for FY 2015 a. Overview In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729), we presented the general framework for implementation of the HAC Reduction Program for the FY 2015 implementation. We included the following provisions for the program: (a) The relevant definitions applicable to the program; (b) the payment adjustment under the program; (c) the measure selection and conditions for the program, including a risk-adjustment and scoring methodology; (d) performance scoring; (e) the process for making hospital-specific performance information available to the public, including the opportunity for a hospital to review the information and submit corrections; and (f) limitation of administrative and judicial review. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967), we established the rules governing the payment adjustment under the HAC Reduction Program at Subpart I of 42 CFR Part 412 (§§ 412.170 and 412.172). We also amended existing § 412.150 (the section that describes the basis and scope of Subpart I of Part 412, which contains the regulations governing adjustments to the base operating DRG payment amounts under the IPPS for inpatient operating costs) to incorporate the basis and scope of §§ 412.170 and 412.172 for the HAC Reduction Program. In accordance with the provisions of section 1886(p) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we included, under § 412.170, definitions for the terms ‘‘hospital-acquired condition,’’ ‘‘applicable hospital,’’ and ‘‘applicable time period’’ (78 FR 50967). In § 412.170, we defined ‘‘hospitalacquired condition’’ as a condition as described in section 1886(d)(4)(D)(iv) of the Act and any other condition determined appropriate by the Secretary that an individual acquires during a stay in an applicable hospital, as determined by the Secretary. We defined an ‘‘applicable hospital’’ as ‘‘a hospital described in section 1886(d)(1)(B) of the Act (including a hospital in Maryland that is paid under section 1814(b)(3) of the Act and that, absent the waiver specified by section 1814(b)(3) of the Act, would have been paid under the E:\FR\FM\22AUR2.SGM 22AUR2 50088 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital inpatient prospective payment system) as long as the hospital meets the criteria specified under § 412.172(e)’’ (78 FR 50967). We specified that this definition does not include hospitals and hospital units excluded from the IPPS, such as LTCHs, cancer hospitals, children’s hospitals, IRFs, IPFs, CAHs, and Puerto Rico hospitals. We defined the ‘‘applicable period’’ as, with respect to a fiscal year, the 2-year period (as specified by the Secretary) from which data are collected in order to calculate the Total HAC Score for the HAC Reduction Program. Comment: Commenters supported the HAC Reduction Program as a mechanism to identify hospitals that underperform in preventing wellidentified, measurable, and preventable adverse events. Response: We appreciate the commenters’ support. We are committed to reduce HACs, which are important markers of quality of care and whose reduction can positively impact patient outcomes and the cost of care. Comment: Several commenters suggested changing the terminology of ‘‘hospital-acquired conditions’’ to ‘‘hospital-acquired complications’’ to signal more clearly the intent of the program is to focus on complications that arise from inappropriate delivery of care. Response: The name of the HAC Reduction Program is specified in section 1886(d) of the Act. We believe that the name of the program reflects Congress’ intent in passing this provision of the Affordable Care Act. b. Payment Adjustment Under the HAC Reduction Program, Including Exemptions tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Basic Payment Adjustment Section 1886(p)(1) of the Act sets forth the requirements by which payments to ‘‘applicable hospitals’’ are to be adjusted for hospitals in the worst performing quartile relative to other applicable hospitals beginning on October 1, 2014. Section 1886(p)(1) of the Act specifies that the amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable. As specified in the statute, this payment adjustment is calculated and made after payment adjustments under sections 1886(o) and 1886(q) of the Act, the Hospital VBP Program and the Hospital Readmissions Reduction Program respectively, are calculated and made. (We note that the Hospital VBP Program is discussed in section IV.I. of the preamble of this final VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 rule and the Hospital Readmissions Reduction Program is discussed in section IV.H. of the preamble of this final rule.) Section 1886(p)(2)(A) of the Act defines ‘‘applicable hospitals’’ as subsection (d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria and specifies that the payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) of all subsection (d) hospitals, relative to the national average of hospitals that report conditions acquired during the applicable period, as determined by the Secretary. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967), we specified in § 412.172(b) of the regulations that, for applicable hospitals, beginning with discharges occurring during FY 2015, the amount of payment under § 412.172, or section 1814(b)(3) of the Act, as applicable, for such discharges shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under § 412.172, or section 1814(b)(3) of the Act. This amount of payment will be determined after the application of the payment adjustment under the Hospital Readmissions Reduction Program under § 412.154, and the adjustment made under the Hospital VBP Program under § 412.162, and section 1814(l)(4) of the Act but without regard to this section 1886(p) of the Act. Comment: Many commenters noted that the proposed 1-percent reduction in payment for the top quartile of lower performing hospitals will provide a stronger penalty than the current DRA HAC policy and has the potential to stimulate improvements in safety. The commenters supported CMS’ efforts to reduce HACs by paying less to hospitals for instances involving patients contracting HACs during a hospital stay. These commenters noted that quality payment adjustments continue to positively affect provider performance. Commenters further noted that several commercial health plans have implemented similar actions, processes, and guidelines to align their payment policies with CMS to adjust payment for reasonably preventable errors made by hospitals and health care facilities. Response: We appreciate the commenters’ support and agree that the HAC Reduction Program, along with the other CMS quality initiatives set forth under the Affordable Care Act (for example, the Hospital VBP and Hospital Readmissions Reduction Programs), will lead to improvements in patient care, safety and outcomes. PO 00000 Frm 00236 Fmt 4701 Sfmt 4700 Comment: Some commenters indicated that it was not clear in the FY 2015 IPPS/LTCH PPS proposed rule how the HAC Reduction Program payment adjustment would specifically be applied. The commenters stated that the HAC Reduction Program penalty appears to apply to all hospital payments (for example, outliers, DSH, uncompensated care, and IME) and they questioned why the policy should apply to IME and DSH payments that they asserted are not related to the underlying quality policy the provision enforces. These commenters urged CMS to use administrative authority under section 1886(d)(5)(I)(i) of the Act to limit the HAC penalty to the base operating DRG payment only, which they reported would be consistent with Congressional intent and with the Hospital VBP and Hospital Readmissions Reduction Programs. The commenters noted that by restricting the penalty to the base operating DRG payment it could ensure consistency across the programs and reduce any confusion because under the Hospital VBP and Hospital Readmissions Reduction Programs the payment adjustment applies to the base operating DRG payment, not the base DRG rate and the additional add-on payments of outliers, DSH, uncompensated care, and IME. Response: We did not propose to change the application of the payment adjustment that we finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50711). As we discussed in that rule, the statutory requirements for the HAC Reduction Program payment adjustment differ from those for the Hospital VBP and Hospital Readmissions Reduction Programs. In accordance with section 1886(q)(1) of the Act, the Hospital Readmissions Reduction Program adjustment is applied to the base operating DRG payment amount, which is defined at section 1886(q)(2) of the Act to exclude certain payments under subsection (d). Similarly, in accordance with sections 1886(o)(7)(A) and 1886(o)(7)(B) of the Act, the Hospital VBP Program applies adjustments to the base operating DRG payment amount, which is defined at section 1886(o)(7)(D) of the Act to exclude certain payments under subsection (d). For the HAC Reduction Program, no such statutory exclusion exists and section 1886(p)(1) of the Act states that the payment for applicable hospitals ‘‘shall be equal to 99 percent of the amount of payment that would otherwise apply.’’ Therefore, the HAC Reduction Program payment adjustment will be applied after the application of the other program adjustments E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV including add-on payments consisting of outliers, DSH, uncompensated care, and IME. As we have stated previously, our goal for the HAC Reduction Program is to heighten the awareness of HACs and reduce the number of incidences that occur through implementing the adjustments required by section 1886(p) of the Act. We believe that our efforts in using payment adjustments and our measurement authority will encourage hospitals to eliminate the incidence of HACs that could be reasonably prevented by applying evidence-based clinical guidelines. Given this goal, and the statutory language in 1886(p) of the Act, we do not believe this is an appropriate situation for us to exercise our authority under 1886(d)(5)(I)(i) of the Act. (2) Applicability to Maryland Hospitals Section 1886(p)(2)(c) of the Act specifies that the Secretary may exempt hospitals paid under 1814(b)(3) ‘‘from the application of this subsection if the State which is paid under such section submits an annual report to the Secretary describing how a similar program in the state for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established under this subsection.’’ Accordingly, a program established by the State of Maryland that could serve to exempt hospitals in the State from the HAC Reduction Program would focus on hospitals operating under the waiver provided by section 1814(b)(3) of the Act, that is, those hospitals that would otherwise have been paid by Medicare under the IPPS, absent this provision. As we stated in section IV.J.3.b of the preamble of this final rule, because hospitals paid under section 1814(b)(3) of the Act are subsection (d) hospitals, unless the Secretary exempts these hospitals from the application of payment adjustments under the HAC Reduction Program under the authority of section 1886(p)(2)(C) of the Act, they are considered to be ‘‘applicable hospitals’’ (subject to the payment adjustments in the HAC Reduction Program) under the HAC Reduction Program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967 through 50968), we established criteria for evaluation to determine whether Maryland would be exempted from the application of the payment adjustments under the HAC Reduction Program for a given fiscal year, under § 412.172(c). Pursuant to our rule, if the State submitted an annual report to the Secretary describing how a similar program to reduce hospital VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 acquired conditions in that State achieves or surpasses the measured results in terms of health outcomes and cost savings for the HAC Reduction Program as applied to hospitals described in section 1886(d)(1)(B) of the Act, the State would be exempt from the HAC Reduction Program. We specified in the regulations that ‘‘CMS will establish criteria for evaluation of Maryland’s annual report to the Secretary to determine whether Maryland will be exempted from the application of payment adjustments under this program for a given fiscal year.’’ We also specified that Maryland’s annual report to the Secretary and request for exemption from the HAC Reduction Program must be resubmitted and reconsidered annually. We provided that, for FY 2015, Maryland must submit a preliminary report to us by January 15, 2014 and a final report to us by June 1, 2014. We noted that our criteria to evaluate Maryland’s program is for FY 2015, the first year of the payment adjustment under the HAC Reduction Program, and that our evaluation criteria may change through notice and comment rulemaking as this program evolves. The State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS’ new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Social Security Act (‘‘Act’’), as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow states to ‘‘test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.’’ Section 1115A of the Act authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out Section 1115A with respect to testing models. Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare reimburse Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also stipulated that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under Section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to PO 00000 Frm 00237 Fmt 4701 Sfmt 4700 50089 those provisions of the Act and related implementing regulations that are specific to section 1814(b)(3) hospitals, including but not limited to section 1886(p)(2)(C) of the Act, which provides exemptions for hospitals paid under section 1814(b)(3) from the application of the HAC Reduction Program. However, in order to implement the Maryland All-Payer Model, CMS has waived certain provisions of the Act for Maryland hospitals, including section 1886(p), and the corresponding implementing regulations, as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement. In other words, although section 1886(p)(2)(C) of the Act no longer applies to Maryland hospitals, Maryland hospitals will not be participating in the HAC Reduction Program because section 1886(p) of the Act and its implementing regulations have been waived for purposes of the model, subject to the terms of the agreement. Consequently, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28135), we proposed that the Total HAC Scores for Maryland hospitals would not be included when identifying the top quartile of all hospitals with respect to their Total HAC Score during the applicable period. As a result of changes to the status of Maryland hospitals under 1814(b)(3) of the Act described above, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28136), we proposed conforming changes to these regulations and sought public comment on this proposal. Specifically, we proposed to remove the entire contents of paragraph (c) under § 412.172 and reserve the paragraph (c) designation. No commenters opposed our proposal to exclude the Total HAC Scores for Maryland hospitals when identifying the top quartile of all hospitals and no commenters opposed CMS’ proposed changes to the regulations regarding Maryland hospitals. Therefore, we are finalizing our proposal to exclude the Total HAC Scores for Maryland hospitals when identifying the top quartile of all hospitals and our proposed changes to the regulations regarding Maryland hospitals. c. Measure Selection and Conditions, Including Risk-Adjustment Scoring Methodology (1) General Selection of Measures We did not propose any new measures for the HAC Reduction Program in the FY 2015 IPPS/LTCH PPS proposed rule. Although we are not required under section 1886(p) of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50090 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Act to address specific measure scoring methodologies and domain weights regarding the HAC Reduction Program in notice-and-comment rulemaking, as required under the Hospital VBP program, we believe that it is important to set forth such scoring methodologies for each individual HAC measure, in order for the public to understand how the measures adopted in previous rulemaking relate to the performance methodology used to determine the applicable hospitals subject to the payment adjustment under the HAC Reduction Program. Below we set forth the specific measure scoring methodology and domain weights regarding the HAC Reduction Program for FY 2015 as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50712 through 50719). Comment: A few commenters thanked CMS for not adding any new measures to the HAC program for FY 2015 and FY 2016. One commenter encouraged CMS to fill measure gaps as soon as possible to ensure that this program provides the greatest possible value for quality improvement and consumer education. Several commenters suggested that CMS identify new measures for the HAC Reduction Program that would address a variety of quality and safety issues relevant to the broadest possible range of hospitals and affect a greater number of patients, as commenters asserted that this approach is more fair and would ensure hospitals are not penalized for the type of patients they treat. In addition, the commenters believed this approach would help improve the ability of the program to identify the real poor performers. One commenter recommended that these new measures should not be entirely claims-based. Commenters made additional recommendations for future new measures including PSI–4: Death rate among surgical inpatients with serious, treatable complications (NQF #0351), PSI–16: Transfusion reaction count (NQF #0349), surgical site infections (SSIs) following hip and knee arthroplasty and SSIs following highvolume procedures such as caesarean section surgery. One commenter recommended expanding the iatrogenic pneumothorax rate (PSI–6), which currently addresses iatrogenic pneumothorax with venous catheterization, to also include iatrogenic pneumothorax with paracentesis and thoracentesis. One commenter recommended that new measures of infection be developed that incorporate infection rates per thousand discharges in order to inform patients of their likelihood of acquiring an infection at a given hospital. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We did not propose new measures in this rulemaking as we intend to allow time for providers to gain experience with the finalized measures. We are continuously evaluating the program and working to identify new, potentially suitable measures to fill measure gaps. We appreciate the commenters’ input for measure selection and will take this feedback into consideration in future rulemaking. Comment: Many commenters suggested that all HAC Reduction Program measures should be NQFendorsed and, while recognizing it is not a requirement for the HAC Reduction Program, commenters also recommended that CMS use the formal pre-rulemaking process of the Measure Applications Partnership (MAP) for any measures being considered for the program. Response: While we note that section 1886(p)(3) of the Act does not require NQF endorsement for a measure to be considered for the HAC Reduction Program, we are aware of the value of the NQF endorsement and MAP processes in facilitating information exchange and agreement among stakeholders. We also note that all of the measures adopted for the HAC Reduction Program went through the pre-rulemaking process and were either recommended for inclusion by the MAP, or represent 1 of the 12 HACs that have been identified by the Secretary and which are referenced in section 1886(p) of the Act for the HAC Reduction Program. (2) Updates on AHRQ PSI–90, and CDC NHSN CLABSI and CAUTI Measures For FY 2015, we will keep the AHRQ PSI–90 composite measure (in Domain 1) that we adopted in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50717) because it is currently endorsed by NQF. However, we note that the AHRQ PSI–90 composite measure is currently undergoing NQF maintenance review. The PSI–90 composite measure consists of eight component indicators: PSI–3 Pressure ulcer rate; PSI–6 Iatrogenic pneumothorax rate; PSI–7 Central venous catheter-related blood stream infections rate; PSI–8 Postoperative hip fracture rate; PSI–12 Postoperative Pulmonary Embolism/Deep Vein Thrombosis rate; PSI–13 Postoperative sepsis rate; PSI–14 Wound dehiscence rate; and PSI–15 Accidental puncture & laceration rate. AHRQ is considering the addition of PSI–9 (Perioperative hemorrhage rate), PSI–10 (Perioperative physiologic metabolic derangement rate) and PSI–11 (Post-operative respiratory failure rate) or a combination of these PO 00000 Frm 00238 Fmt 4701 Sfmt 4700 three measures into the PSI–90 composite measure. We consider the inclusion of additional component measures in the PSI–90 composite measure to be a significant change to the PSI–90 composite measure that we finalized in the FY 2014 IPPS/LTCH PPS final rule. If the changes are significant, we will engage in noticeand-comment rulemaking prior to requiring reporting of this revised composite. Similarly, the CDC NHSN CatheterAssociated Urinary Tract Infection (CAUTI) and Central Line-Associated Blood Stream Infection (CLABSI) measures in Domain 2 that we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717) for FY 2015 also are currently undergoing NQF maintenance review. If there are significant changes to these measures, we will engage in notice-and-comment rulemaking prior to requiring reporting of the changes made to CDCs NHSN CLABSI and CAUTI measures. For FY 2015, we will keep CDC’s NHSN CAUTI and CLABSI measures in Domain 2 as they are currently endorsed. Comment: Several commenters supported CMS’ commitment to use the notice-and-comment rulemaking process for any HAC measure with significant changes made during the NQF review process. One commenter specifically recommended that the AHRQ PSI–90 measure and the CDC NHSN CLABSI and CAUTI measures currently undergoing NQF maintenance review only be included for FY 2016 and beyond contingent upon continued NQF endorsement and any updates recommended for continued endorsement. Response: We appreciate the commenters’ support of our rulemaking process. As for the comments regarding NQF endorsement of the measures, we refer readers to our response in section IV.J.3.c. of the preamble of this final rule. (3) Measure Selection In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the following measures for selection: (i) the AHRQ PSI–90 composite measure for Domain 1 and the CDC NHSN measures CAUTI and CLABSI for Domain 2 for FY 2015; (ii) addition of the CDC NHSN Surgical Site Infection (SSI) measure for FY 2016; and (iii) addition of the CDC NHSN Methicillin-Resistant Staphylococcus aureus (MRSA) Bactremia and C. difficile measures for FY 2017. Several of these measures are already part of the Hospital IQR E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Program and are reported on the Hospital Compare Web site. Comment: One commenter supported the implementation schedule of quality measures for the program, specifically stating that the AHRQ PSI–90 composite measure and the CDC NSHN CLABSI and CAUTI measures are sufficient starting points for the HAC Reduction Program. A few commenters also supported the addition of the CDC NHSN SSI, MRSA and C. difficile measures which they believed would address the increasing incidence of these infections in hospital settings. A few commenters supported the adoption of the NHSN SSI measure in Domain 2 for FY 2016. Response: We thank the commenters for the recognition of the significance of potential patient harms in hospitals as well as for their support of our proposals for the implementation of the HAC Reduction Program. We emphasize that patient safety is our primary objective for the HAC Reduction Program. Comment: A few commenters supported maintaining claims-based measures such as the PSI–90 composite measure in quality reporting programs because they are the least burdensome, least costly and most widely accessible and available reporting method. Response: We agree that claims-based measures have the advantages of being minimally burdensome to providers while providing data covering a large proportion of the Medicare population. We consider several factors when selecting measures for quality programs, including but not limited to measurement gap areas, opportunities for quality improvement, and feasibility and burden for implementation. Claimsbased measures, including AHRQ PSIs, are collected and widely accepted by States and other health care purchasers for payment purposes. In addition to the claims-based measure in the FY 2015 HAC Reduction Program, we also adopt chart-abstracted measures as appropriate. There are currently two chart-abstracted measures in the program and the number of chartabstracted measures will increase in subsequent years (three in FY2016 and five in FY 2017). We also are exploring options for new measures, including electronically specified measures, that could be incorporated into the HAC Reduction Program in future years. Comment: Many commenters believed that coding biases result in unacceptable levels of reliability and validity for the PSI–90 composite measure and thus the measure fails to accurately and meaningfully reflect hospital performance. A few commenters VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 expressed concerns that the PSI measures are not clinically validated against medical records. Response: We have previously addressed commenters’ specific concerns regarding validity and coding issues of PSI–90 composite measure, and we refer readers to our responses to these comments in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50715). We also note that there are validation studies examining the relationship between billing or claims data and medical records.55 Comment: Many commenters expressed a lack of confidence about the PSI–90 composite measure due to recent discussions at the NQF Patient Safety Standing Committee (‘‘Patient Safety Committee’’ or ‘‘Committee’’). Some commenters stated that the Patient Safety Committee did not recommend the measure for endorsement and other commenters noted that NQF Patient Safety Committee requested changes to the weighting of the individual components in the composite measure to better reflect their relative importance or preventability. One way the Committee suggested this reweighting could be achieved is through including three additional component measures (PSI–9—Perioperative Hemorrhage or Hematoma Rate, PSI–10—Postoperative Physiologic and Metabolic Derangement Rate and PSI–11—Postoperative Respiratory Failure Rate) in the composite. A few commenters expressed support for the potential inclusion of PSI–9, 10 and 11 in the PSI–90 composite measure. However, one commenter did not support the addition of any new components to the composite measure, while a few commenters opposed the inclusion of PSI–9 and PSI–10 in particular because they claimed that these components had a high false-positive rate due to lack of clarity on the coding criteria. In the event that the composite measure is not re-endorsed by NQF, some commenters recommended that 55 (1) Zrelak PA, Romano PS, Tancredi DJ, Geppert JJ, Utter GH. Validity of the AHRQ Patient Safety Indicator for Postoperative Physiologic and Metabolic Derangement based on a national sample of medical records. Medical Care 2013; 51(9):806– 11. (2) Utter GH, Zrelak PA, Baron R, Tancredi DJ, Sadeghi B, Geppert JJ, Romano PS. Detecting postoperative hemorrhage or hematoma from administrative data: The performance of the AHRQ Patient Safety Indicator. Surgery 2013; 154(5):1117– 25. (3) Borzecki AM, Cevasco M, Chen Q, Shin M, Itani KM, Rosen AK. How valid is the AHRQ Patient Safety Indicator ‘‘postoperative physiologic and metabolic derangement’’? J Am Coll Surg. 2011 Jun;212(6):968–976. (4) Borzecki AM, Kaafarani H, Cevasco M, Hickson K, Macdonald S, Shin M, Itani KM, Rosen AK. How valid is the AHRQ Patient Safety Indicator ‘‘postoperative hemorrhage or hematoma’’? J Am Coll Surg. 2011 Jun;212(6):946– 953. PO 00000 Frm 00239 Fmt 4701 Sfmt 4700 50091 CMS not consider using individual PSI– 90 component measures that may still be endorsed. They also recommended that additional testing for consistency between individual components and the composite scores be undertaken and the results released. Other commenters had concerns that several of the PSI–90 component measures are not NQFendorsed. Some commenters supported and understood that CMS may need to retain the PSI–90 composite measure, regardless of NQF endorsement status. Response: We would like to clarify the status of the PSI–90 measure with regard to NQF endorsement. As part of the routine NQF measure maintenance process, the Patient Safety Committee expressed concerns about the weighting of the PSI–90 component measures and requested to see additional measure information related to re-weighting of PSI–90 with three additional components (PSI–9, PSI 10 and PSI 11) before deciding if the measure would be recommended for continued endorsement. AHRQ has submitted the requested data for the NQF Patient Safety Committee’s consideration in making their decision regarding continued endorsement of the composite. As we stated earlier, if during the NQF review process, substantive changes are made to the measure, we will go through a noticeand-comment rulemaking process. Regarding the concern for the claimed high false-positive rate of some of the PSI–90 component measures, we conferred with AHRQ which noted that most of the studies that examine positive predictive values predate the use of Present on Admission (POA) coding that is now integral to the PSIs. Detailed reviews of these studies indicate that most of the false positives were due to events that were POA. POA coding for IPPS hospitals was required by CMS beginning October 1, 2007 with a payment penalty beginning October 1, 2008. Studies that use data prior to 2009 would not have captured POA information. Therefore, we believe that proper coding will address the commenters’ concerns. In addition, AHRQ noted that the NQF convened a group of 12 experts to determine what criteria should be used for evaluating composite performance measurement for NQF endorsement. The Technical Expert Panel provided clear guidance on the relationship between the individual component indicators and the composite in the Composite Performance Measure Evaluation Guidance document (NQF, April 2013). Specifically, individual component measures that are included in the composite performance measure: E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50092 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (1) should be justified based on the clinical evidence; (2) do not need to be NQF endorsed; (3) generally should demonstrate a gap in performance; and (4) may not be sufficiently reliable independently, but contribute to the reliability of the composite performance measure. AHRQ convened a Composite Measure Workgroup of experts in the field to determine the best weighting strategy. The methodology of the PSI–90 composite measure is detailed in the original technical report by the AHRQ Composite Measure Workgroup: https:// qualityindicators.ahrq.gov/Downloads/ Modules/PSI/PSI_Composite_ Development.pdf. Several alternative approaches were discussed with the AHRQ Composite Measure Workgroup and the first NQF Composite Measure Steering Committee. Factor analysis was considered as one approach and was deemed to have no clear advantages over less complex, more intuitively clear weighting schemes. In brief, numerator weighting that is used in the PSI–90 composite measure was preferred due to its greater simplicity and clarity. Comment: A few commenters stated that many of the AHRQ PSI–90 composite component measures are rare events and do not meet the high-volume requirement for the HAC Reduction Program. Response: We note that section 1886(d)(4) (D)(iv) of the Act defines a hospital-acquired condition for the HAC Reduction Program as one that is high cost, high volume or both or any other conditions determined appropriate by the Secretary. We believe the PSI–90 composite measure and its components meet the statutory requirement for inclusion in the program. Comment: Some commenters asserted that composite measures such as PSI–90 do not provide actionable information to hospitals. Response: We disagree and note that hospitals have access to their results on the individual PSI–90 component measures and how they compare to the national risk adjusted rate on their Hospital Specific Reports which are issued during the review and corrections period. In addition, the component measure scores are available to hospitals and the public on our Web site at: https://www.medicare.gov/. Therefore, hospitals can use the individual component measure results to identify specific areas for improvement efforts. Comment: Based on the belief that the PSI–90 composite measure has significant flaws as described above, many commenters recommended VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 identifying alternatives to the PSI–90 composite measure and phasing it out of the HAC Reduction Program as soon as possible. Some commenters suggested that the alternative measure(s) be derived from the NQF portfolio of safety measures. Response: In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27625 through 27626), we explained the rationale for including the PSI–90 composite measure in the HAC Reduction Program. We continue to believe the PSI–90 is an appropriate tool for calculation of HAC scores. Nonetheless, we will continue to explore options for new measures, including electronically specified measures that could be incorporated into the HAC Reduction Program to supplement or replace the PSI–90 composite measure. We also note that the PSI–90 is one of three measures included in the Program for FY 2015. The other two measures are chartabstracted and we are increasing the number of chart-abstracted measures in subsequent years of the program (three in FY 2016 and five in FY 2017). Comment: One commenter suggested revisions to four of the PSI–90 composite component measures. For PSI–6, the commenter recommended exclusion of high frequency outliers, such as iatrogenic pneumothorax in patients with a lack of intravenous access; acuity; and cases where iatrogenic pneumothorax is secondary to a life-saving procedure. The commenter also recommended that CMS not apply this measure if clinicians have used all available means of avoiding iatrogenic pneumothorax, such as ultrasound guidance. For PSI–7, the commenter recommended exclusions for trauma. For PSI–12, the commenter recommended clear definition of the inclusion criteria in order to avoid misclassification of providers and subsequent inappropriate penalties. For PSI–14, the commenter requested adding exclusions for trauma cases and patients in shock that require emergency procedures. Another commenter recommended that PSI–7 be removed from the HAC calculation because it is not as wellvalidated as the NSHN CLABSI measure, the transition from ICD–9 to ICD–10 coding which some hospitals have already undergone could compromise the validity of this component and that, as it currently exists, some vascular catheter infections might be double counted. Response: AHRQ’s Quality Indicator program continually updates and refines measures to provide the best possible quality indicators to the public. We PO 00000 Frm 00240 Fmt 4701 Sfmt 4700 conferred with AHRQ, which welcomed the commenters’ suggestions and will examine the feasibility of including these exclusions. All of the AHRQ quality indicators go through a rigorous testing process prior to changes being made to the indicators. It should be noted that NQF policy and guidance generally has favored risk adjustment approaches over exclusion of high-risk patients, when possible, to optimize the generalizability and value of quality measures. Suggestions regarding potential PSI measure revisions can be made directly to QIsupport@ ahrq.hhs.gov. With regard to the commenter’s specific suggestion for PSI–6— Iatrogenic Pneumothorax Rate, it is impossible to identify patients who lack peripheral intravenous access using ICD–9–CM coded data. However, given exclusions for trauma and respiratory disease, it is assumed that all patients who experienced this event had some type of procedure (such as central venous catheter placement or thoracentesis) that placed them at risk for iatrogenic (hospital-acquired) pneumothorax. For PSI–7—Central Venous Catheter-Related Blood Stream Infection Rate, ICD–10 implementation will take effect no sooner than October 1, 2015 and may be subject to additional delays. AHRQ will conduct extensive testing on the ICD–10 specified measures to ensure events are not double counted. For PSI–12—Perioperative Pulmonary Embolism or Deep Vein Thrombosis Rate, inclusion criteria are clearly defined and have been narrowed as a result of changes in ICD–9–CM codes and user feedback. For example, the numerator inclusion criteria no longer include upper extremity or thoracic venous thrombosis, due to concern about the uncertain preventability of these events among patients who require long-term use of central venous catheters. The numerator inclusion criteria also no longer include superficial venous thrombosis, due to concern about the uncertain preventability of these events. Comment: One commenter was concerned that several of the PSI composite component measures in the HAC Reduction Program—including PSI–6, PSI–12 and PSI–15—were finalized for removal from the Hospital IQR Program after FY 2014 in the FY 2013 IPPS/LTCH PPS final rule. The commenter contended that because these measures have been deemed unfit for use in a public reporting application, they are equally unsuitable for use in a payment penalty program. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53507 through 53509), to avoid duplication, we removed PSI–6, PSI–12 and PSI–15 from Hospital IQR Program as these individual measures are already included in the PSI–90 composite measure which is currently part of the Hospital IQR Program measure set. The measures were not deemed to be unfit, as characterized by the commenter. Comment: One commenter described its experience with the AHRQ Quality Indicator Software not allowing its organization to identify specific patient encounters included in the measure components and not always accurately reflecting POA. This commenter recommended that CMS ask AHRQ to update the software outputs to provide accurate case level patient information for patients in the numerator, to update the software to define which ICD code triggers the measure, to include simultaneous SAS and MonAHRQ releases and to include the PSI–90 outputs in the AHRQ process the same way as other measures. Response: AHRQ informed us that they are constantly improving the AHRQ QI software and welcomes this and other suggestions for improvements. The AHRQ QI software and the MonAHRQ software are under different timelines for release for a variety of external reasons. Additional suggestions for improvements can be made directly to QIsupport@ahrq.hhs.gov. Comment: One commenter recommended revisions to the CAUTI measure to minimize the potential for the possible unintended consequence of premature urinary catheter removal. The commenter’s recommended revisions included adding exclusions for bedridden elderly patients whose urine output cannot be monitored otherwise, those who have had complex pelvic surgery, and those with a history of urinary retention; and inclusion of a data capture point for catheter reinsertion to capture the rate of repeat instrumentation and infection risk for those with early catheter removal. Response: We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50716) for our discussion of the issue of potential unintended consequences of the CAUTI measure. In regard to the addition of a data capture point in the NHSN system, we conferred with CDC, which stated that they weigh each datum piece that is required for NHSN surveillance very carefully, considering the burden required to capture and collect the information and the benefits of the data collected. Individuals performing validation of CAUTI data have stated that locating insertion VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 documentation is very difficult, if not impossible in many cases. For this reason, NHSN does not require the documentation of the date of insertion of indwelling urinary catheters. The NHSN UTI data collection form and system do allow for voluntary collection of this information and NHSN encourages facilities to utilize these capabilities to inform their CAUTI prevention efforts as they deem necessary. However, it is not appropriate to require such documentation by all facilities. Comment: Several commenters contended that the MRSA and C. difficile measures do not adequately distinguish between communityacquired and hospital-acquired infections and suggested the measures not be included in the HAC Reduction Program for that reason. Another commenter had the same concern and supported the inclusion of the MRSA measure but not the C. difficile measure. A commenter noted that rates of C. difficile are generally higher in patient with surgical procedures (particularly with gastrointestinal surgical procedures) versus non-surgical patients and that there are known regional variations in MRSA and C. difficile infection rates. For these reasons, this commenter recommended that process measures focusing on best practices and guidelines for patients who contract MRSA or C. difficile as inpatients would be more appropriate than outcome measures tracking MRSA and C. difficile infection rates. A few commenters recommended that the C. difficile measure be included in the Hospital VBP program, and not in the HAC Reduction Program. Response: With respect to some commenters’ concerns about MRSA and C. difficile measures, we note that these measures do enable differentiation between community-acquired and health care-associated events based on date of admission and date(s) of specimen collection. Therefore, we do not believe the measures need to be revised. While we appreciate the recommendations for process measures, we note that process measures are not usually risk adjusted and current statute requires risk-adjustment for the HAC Reduction Program. The issue of the same measures being included in multiple programs is addressed below. Comment: Many commenters urged CMS to eliminate the overlap of measures between the Hospital VBP and HAC Reduction Programs. The commenters understood CMS’ desire to align the programs in order to draw more attention to these important patient safety issues and to spur quicker PO 00000 Frm 00241 Fmt 4701 Sfmt 4700 50093 and more meaningful change in patient care. However, the commenters believed that this approach creates multiple operational challenges, results in the potential for double payment penalties, and sends conflicting signals about the true state of hospital performance (a hospital could incur a penalty under the HAC Reduction Program but receive an incentive under the Hospital VBP Program). Commenters overwhelmingly recommended that the HAC Reduction Program measures should only be included in either the HAC Reduction Program or the Hospital VBP program but not in both programs. One commenter recommended that either the HAC Reduction Program or the Hospital VBP program be eliminated completely. Response: We acknowledge that there is overlap in measures between the Hospital VBP Program and the HAC Reduction Program and refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50716) for our discussion of the rationale for this overlap. As for elimination of these programs, they are statutory requirements and eliminating them is beyond the scope of the Secretary’s authority. Comment: Several commenters recommended that CMS consider a comprehensive strategy in which measures are placed into pay-forperformance programs using a staged approach: the Hospital IQR Program would be the basis for selection into the pay-for-performance programs; the Hospital VBP Program would be the next step and would include measures covering important safety issues but ones for which it is unclear if effective strategies exist to improve performance; and the HAC Reduction Program would be the final stop and would include measures that have generally good but not topped out performance with a limited performance gap to close and a set of highly effective, proven strategies that are widely implementable. Many commenters also suggested that measures should be publicly reported for at least one year before they are included in the HAC Reduction Program so that any unintended consequences of measurement and reporting can be addressed. Response: We appreciate the commenters’ feedback and will consider these suggestions in future rulemaking. (4) Measure Risk-Adjustment Methodology In the FY 2014 IPPS/LTCH PPS final rule, we established that we would use the existing measure-level riskadjustment that is already part of the risk-adjustment methodology for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50094 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations individual measures in Domains 1 and 2 in order to fulfill this requirement (78 FR 50719). We codified the use of this methodology under § 412.172(d) of the regulations. The AHRQ PSI–90 composite measure and the CDC NHSN measures selected for the program are risk-adjusted and reliability-adjusted. Links to the measure specification documents can be found in section IV.J.4. of the preamble of this final rule. Specifically, risk factors such as the patient’s age, gender, comorbidities, and complications will be considered in the calculation of the measure rates so that hospitals serving a large proportion of sicker patients are not unfairly penalized. We noted that the riskadjustment methodology for these measures meets current NQF endorsement criteria. We believe that such risk-adjustment is appropriate, pursuant to section 1886(p) of the Act. We will continue to examine the impact of the additional measures in the program, and propose refinements to the program if necessary. Should changes to the risk-adjustment models for the measures be adopted during NQF endorsement maintenance processes, we will propose adopting these changes as soon as possible through rulemaking. Comment: Many commenters had concerns about the PSI–90 riskadjustment methodology. Most commenters believed that inadequate risk-adjustment results in a disproportionate impact on teaching hospitals or hospitals that treat many sick and vulnerable patients, perform a high volume of emergency trauma and burn care, and perform a large number of surgical procedures. Another commenter expressed the opposite concern—that small hospitals might have artificially inflated HAC scores as a result of the risk-adjustment methodology algorithm, which gives hospitals with poor data reliability a low reliability weight therefore skewing their rates closer to the national mean. Response: Each of the PSI–90 composite measure component measures includes detailed riskadjustment for clinical factors (for example, modified diagnostic related groupings, major diagnostic categories, comorbidities), age, and gender that influence the risk for experiencing a patient safety event during hospitalization. The three risk factors mentioned explicitly above—trauma, burns, and surgical discharges—are accounted for in the PSI risk-adjustment models. For example, acknowledging that some hospitals do more transplants and trauma care than others, the models account for this heterogeneity of risk. AHRQ’s Quality Indicator program VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 continually updates and refines measures to provide the best possible quality indicators to the public. Comment: Several commenters expressed concerns that the HAC Reduction Program does not contain adequate adjustment for socioeconomic (SES) factors that influence HAC rates. Commenters recommended comparing providers to their peers, adjusting provider penalties based on SES of patients served, incorporating a provider’s annual improvement into performance calculations, and adopting new measures that better adjust for socioeconomic factors. One commenter specifically recommended complying with the recommendations of the NQF’s Expert Panel on Risk-Adjustment for Sociodemographic Factors (Draft Report available at: https://www.quality forum.org/Risk_Adjustment_SES.aspx). Response: We appreciate the commenters’ suggestions on the importance of addressing socioeconomic status in the HAC Reduction Program and have continued to consider and evaluate these stakeholder concerns. We also note that these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673 through 50674) and again in section IV.H.4. of the preamble of this final rule. While these discussions in section IV.H.4. of the preamble of this final rule are in response to comments regarding the Hospital Readmissions Reduction Program, we have received similar comments with respect to other quality reporting programs and our responses address considerations which also apply to the HAC Reduction Program. To the extent that these commenters were requesting that CMS mitigate the HAC Reduction Program payment adjustment despite a hospital being in the top quartile, section 1886(p) of the Act specifies that the amount of payment for such a hospital ‘‘shall be equal to 99 percent of the amount of payment that would otherwise apply’’ and we refer readers to the earlier discussion of the payment adjustment in section IV.J.3.b. of the preamble of this final rule. (5) Measure Calculations In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717 through 50719), we established that we will perform measure calculations for the AHRQ PSI– 90 composite measure under Domain 1 and the CDC NHSN measures under Domain 2. We stated that measure calculations for the AHRQ PSI–90 composite measure included using ICD– 9–CM diagnosis and/or procedure codes and, for the principal and secondary PO 00000 Frm 00242 Fmt 4701 Sfmt 4700 diagnoses, a present on admission (POA) indicator value associated with all diagnoses on the claim. As noted in section IV.J.3.b. of the preamble of this final rule, in order to implement the new Maryland All-Payer Model, Maryland elected to no longer have Medicare payment made to Maryland hospitals in accordance with section 1814(b)(3) of the Act, effective January 1, 2014. Although CMS has waived certain provisions of the Act for Maryland hospitals as set forth in the agreement between CMS and Maryland and subject to Maryland’s compliance with the terms of the agreement, CMS has not waived the POA indicator reporting requirement. In other words, the changes to the status of Maryland hospitals under section 1814(b)(3) of the Act as described above do not in any way change the POA indicator reporting requirement for Maryland hospitals. We also finalized that the same rules under the Hospital IQR Program be applied to determine how the AHRQ PSI–90 composite measure and CDC NHSN measures are applied and calculated. (6) Applicable Time Period In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we adopted a 2-year applicable period to collect data that would be used to calculate the Total HAC Score for FY 2015. For Domain 1 (AHRQ PSI–90 composite measure), we established a 2-year data period to calculate the measures based on recommendations from AHRQ, the measure developer, as we believed that the 24-month data period will provide hospitals and the general public the most current data available. The 24month data period also will allow time to complete the complex calculation process for these measures, to perform comprehensive quality assurance to enhance the accuracy of measure results, and to disseminate confidential reports on hospital-level results to individual hospitals. As such, for FY 2015, we will use the 24-month period from July 1, 2011 through June 30, 2013 as the applicable time period for the AHRQ PSI–90 composite measure. The claims for all Medicare FFS beneficiaries discharged during this period will be included in the calculation of measure results for FY 2015. This includes claims data from the 2011, 2012, and 2013 Inpatient Standard Analytic Files (SAFs). The CDC NHSN measures, CAUTI and CLABSI, are currently collected and calculated on a quarterly basis. However, for the purpose of the HAC Reduction Program, we will use 2 years of data to calculate the Domain 2 score. For FY 2015, we will use calendar years E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2012 and 2013 for the HAC Reduction Program. As noted above, we codified the definition of ‘‘applicable time period’’ in the FY 2014 IPPS/LTCH PPS final rule at § 412.170. Comment: One commenter supported use of the 2-year applicable time periods for the collection of Domain 1 and 2 measures for FY 2015. A few commenters suggested aligning the duration of performance periods for Hospital VBP and the HAC Reduction Programs, in particular suggesting using 1 year of data for the CDC NHSN measures. A few additional commenters had concerns that the data are retrospective and therefore do not provide actionable information. One commenter disagreed with the finalized 2-year data collection period for the CDC measures for CAUTI and CLABSI and requested that CMS reconsider quarterly collection and calculation of these measures for Domain 2. The commenter stated that quarterly data would be more useful for providers in addressing areas in which they would like to improve, and would also allow consumers and purchasers to have timely information regarding areas of care that are meaningful and important to them. Response: We refer readers to our response to the applicable time period comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717). We understand that hospitals might find quarterly data more useful and for that purpose, we refer stakeholders to Hospital Compare that includes quarterly updates of the measures included in the HAC Reduction Program. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV d. Criteria for Applicable Hospitals and Performance Scoring Policy The HAC Reduction Program does not contain specific statutory directives on scoring methods, as found with other programs. Therefore, our main concern when establishing scoring methods for the HAC Reduction Program was to align with existing scoring methodologies in similar hospital programs. Accordingly, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50721), we finalized a scoring methodology that aligns with the achievement scoring methodology currently used under the Hospital VBP Program (78 FR 27629). We believe aligning the scoring methodologies reduces confusion associated with multiple scoring methodologies. In addition, we note that alignment benefits the hospital stakeholders who have prior experience with the Hospital VBP Program. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629), we proposed to implement a methodology for assessing the top quartile of applicable hospitals for HACs based on performance standards, where we would score each hospital based on whether they fall in the top quartile for each applicable measure and where in the top quartile they fall. In addition, we proposed to calculate a Total HAC Score for each hospital by summing the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiplying each domain score by a proposed weight (Domain 1—AHRQ Patient Safety Indicators 50 percent, Domain 2—CDC NHSN Measures 50 percent), and adding together the weighted domain scores to determine the Total HAC Score. We reviewed the public input on the proposed 75th percentile benchmark. Several commenters requested that a change to the proposed minimum benchmark for scoring each measure be made. We agreed with these commenters, and in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50722), we modified our proposal and established that the scoring will begin at the minimum value for each measure rather than the 75th percentile. The methodology finalized in the FY 2014 IPPS/LTCH PPS final rule will assess the top quartile of applicable hospitals for HACs based on the Total HAC Score. The support for Domain 2 measures in general, coupled with multiple recommendations, and specifically those from MedPAC, to provide more weight to Domain 2 measures led us to conclude that such scoring changes were necessary. Therefore, we finalized a different weight for each Domain than originally proposed (78 FR 50721). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722), we further specified that we will calculate a Total HAC Score for each hospital by using the hospital’s performance score on each measure within a domain to determine a score for each domain, then multiply each domain score by the following weights: Domain 1—(AHRQ PSI–90 composite measure), 35 percent; and Domain 2— (CDC NHSN measures), 65 percent; and combine the weighted domain scores to determine the Total HAC Score (§ 412.172(e)(3)). We use each hospital’s Total HAC Score to determine the top quartile of subsection (d) hospitals (applicable hospitals) that are subject to the payment adjustment beginning with discharges on or after October 1, 2014. With respect to a subsection (d) hospital, we identify the top quartile of all hospitals that are subsection (d) PO 00000 Frm 00243 Fmt 4701 Sfmt 4700 50095 hospitals with respect to their rate of HACs during the applicable period (§ 412.172(e)(1)). We use a Total HAC Score to identify applicable hospitals and identify the 25 percent of hospitals with the highest Total HAC Scores as applicable hospitals (§ 412.172(e)(2)). We finalized the PSI–90 composite measure for Domain 1. Because hospitals may not have complete data for every AHRQ indicator in the composite measure for this Domain 1 measure, we finalized the same methodology used for the Hospital VBP Program to determine the minimum number of indicators with complete data to be included in the calculation of the Domain measure. In addition, we finalized the following rules to determine the number of AHRQ indicators to be included in the calculation for a hospital’s Domain 1 score. In this discussion, ‘‘complete data’’ refers to whether a hospital has enough eligible discharges to calculate a rate for a measure. Complete data for the AHRQ PSI–90 composite measure means the hospital has three or more eligible discharges for at least one component indicator. Specifically— If a hospital does not have ‘‘complete data’’ for the PSI–90 composite measure, we will not calculate a Domain 1 score for that hospital. If a hospital has ‘‘complete data’’ for at least one indicator for the AHRQ PSI– 90 composite measure, we will calculate a Domain 1 score. The calculation of the SIR for the CDC measures requires that the facility have a ≥ 1 predicted HAI event. The predicted number of events is calculated using the national HAI rate and the denominator counts (that is, number of device days, procedure days, or patient days depending on the HAI). In the event the SIR cannot be calculated for any domain 2 measures because the facility has < 1 predicted infection for each measure, Domain 1 scores exclusively will be used to calculate a HAC score. In other words, we will exclude from the overall HAC score calculation any measure for which an SIR cannot be calculated for the reason set out above. Because of the differences among the measures for the HAC Reduction Program and the distribution of measure results, simply adding up the measure results to calculate the domain or Total HAC Score will make the scores less meaningful to hospitals and the general public. As a result, as we indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50720 through 50725), points will be assigned to hospitals’ performance for each measure. This approach aligns with the Hospital VBP Program for measuring hospital E:\FR\FM\22AUR2.SGM 22AUR2 50096 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations achievement. In particular, the Hospital VBP Program assigns up to 10 points for each measure based on a hospital’s performance result for that measure for a given time period. We note that, for the HAC Reduction Program, unlike the Hospital VBP Program where a higher score means better performance, the more points a hospital receives on a measure corresponds with a poorer score performance. For the HAC Reduction Program, we finalized use of a slightly different methodology for scoring points, depending on the specific measure (Table C in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included below). Specifically— • For the AHRQ Patient Safety for Selected Condition (PSI–90) composite in Domain 1, point assignment will be based on a hospital’s score for the composite measure. • For the PSI–90 composite measure, 1 to 10 points will be assigned to the hospital. • For the CDC NHSN measures in Domain 2, point assignment for each measure will be based on the SIR for that measure. • For each SIR, 1 to 10 points will be assigned to the hospital for each measure (CAUTI and CLABSI for FY 2015). • The Domain 2 score will consist of the average of points assigned to the SIR (CAUTI and CLABSI for FY 2015). TABLE C—CALCULATION OF DOMAIN 1 AND 2 MEASURES FOR FY 2015 Individual measure score (points) Measure name Measure result Scenario Domain 1 AHRQ PSI–90 *** .......... Weighted average of rates of component indicators. Standard Infection Ratio (SIR) ..... Composite value ........................... 1–10. SIR ................................................ 1–10 (refer to Figure A). Domain 2 CDC NHSN CAUTI CLABSI. *** These measure rates are risk-adjusted and reliability-adjusted. CDC NHSN for the Hospital IQR Program. The CDC NHSN HAI measures capture adverse events that occurred within intensive care units (ICUs), including pediatric and neonatal units. For the Hospital IQR Program, hospitals that elected to participate in the reporting program (that is, have an active IQR pledge), but do not have an ICU, can apply for ICU waivers so that the hospitals will not be subject to the 2-percent payment reduction for nonsubmission of quality reporting data. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we noted in the second quarter of 2012, among the 3,321 IPPS hospitals with active IQR pledges FIGURE A—POINT ASSIGNMENT FOR for data submission, 377 (or 10.1 HOSPITAL A’S PSI–90 SCORE percent) applied and received an ICU waiver. At the same time, 2,939 If Hospital A’s PSI–90 hospitals (88.5 percent) of the IPPS Then assign this rate falls into this hospitals did not have an ICU waiver number of points percentile and submitted data for the CDC HAI 1st–10th .......................... 1 CLABSI measure, while 4 hospitals (0.1 11th–20th ........................ 2 percent) that had no ICU waiver failed 21st–30th ........................ 3 to submit data to the NHSN. For the 31st–40th ........................ 4 same quarter, of the 3,321 IPPS 41st–50th ........................ 5 hospitals with active IQR pledges, 2,935 51st–60th ........................ 6 (88.4 percent) that did not have an ICU 61st–70th ........................ 7 71st–80th ........................ 8 waiver submitted data for the CDC HAI 81st–90th ........................ 9 CAUTI measure, whereas 8 hospitals 91st–100th ...................... 10 (0.2 percent) did not submit data. Because data availability for the two For Domain 2, we will obtain measure CDC HAI measures impact the score for results that hospitals submitted to the Domain 2 and eventually the Total HAC tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV For all measures finalized for the HAC Reduction Program, we will use the following rules to determine the number of points assigned to a measure (78 FR 50723 through 50725). Based on the distribution for PSI–90 rates for all the hospitals, we will divide the results into percentiles in increments of 10 with the lowest percentile ranges meaning better performance. Hospitals with PSI–90 rates within the lowest tenth percentile will be given one point; those with PSI– 90 rates within the second lowest percentile range (between the 11th and 20th percentile) will be given 2 points, and so forth. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00244 Fmt 4701 Sfmt 4700 Score, we aim to encourage hospitals with an ICU that did not submit data to begin data submission, and to encourage hospitals that have already submitted data to continue data submission for all the CDC HAI measures. To this end, we finalized the following rules (Figure B in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50724), which is included below): • If a hospital has an ICU waiver for the CDC HAI measures, we will use only the Domain 1 score to calculate its Total HAC Score. • If a hospital does not have an ICU waiver for a CDC HAI measure: Æ If the hospital does not submit data for the CDC HAI measures, we will assign 10 points to that measure for that hospital. Æ If the hospital does submit data for at least one CDC NHSN measure: D If there are ‘‘complete data’’ (that is, enough adverse events to calculate the SIR) for at least one measure, we will use those data to calculate a Domain 2 score and use the hospital’s Domain 1 and Domain 2 scores to calculate the Total HAC Score. D If there are not enough adverse events to calculate the SIR for any of the measures, we will use only the hospital’s Domain 1 score to calculate its Total HAC Score. E:\FR\FM\22AUR2.SGM 22AUR2 Comment: Several commenters supported the use of a scoring methodology for the HAC Reduction Program that aligns with the achievement methodology of the Hospital VBP Program and agreed that this scoring alignment reduces confusion. Response: We appreciate the commenters’ support. Comment: A few commenters stated that CMS implemented as reasonable a scoring methodology as was permitted by statute. A few commenters expressed support for the creation of two domains of measures using measures that are risk adjusted at the patient, unit and hospital levels and expressed support for the weighted contributions of Domain 1 and Domain 2 measures to the Total HAC score. Another commenter found the scoring to be very complex and detailed, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 making it difficult for hospitals to replicate. Response: We acknowledge that the scoring methodology is complex. The scoring methodology was described in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50719 through 50725) and is clarified later in the preamble to this final rule. During the review and correction period that will occur prior to assessment of the HAC Reduction Program penalty or posting of the data on Hospital Compare, hospitals will be given access to their HAC Reduction Program measure scores, domain scores and total HAC score accompanied by a document that describes how the scores were calculated. Comment: One commenter questioned whether the HAC Reduction Program scores reflect meaningful differences in quality between hospitals. The commenter specifically stated that the PO 00000 Frm 00245 Fmt 4701 Sfmt 4700 50097 HAC scoring methodology makes distinctions between hospitals whose performance is not statistically different from one another which results in payment adjustments being levied on hospitals whose performance is not statistically different from the national benchmarks. The commenter also believed that there will be inconsistencies between results for the CMS programs using the same measures but different scoring methodologies. Response: We note that HAC Reduction Program does not have national benchmarks in the current scoring methodology. We also recognize the possibility for inconsistencies between our programs when measures like the AHRQ PSI–90 composite measure and the CDC NHSN HAI measures are used in multiple programs; we refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50728) E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.001</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50098 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV where we addressed this issue. We note that different CMS programs have different purposes and thus it is not unexpected that programs use different approaches to score hospitals’ performance. For example, the Hospital IQR Program, which publicly reports measure performance on Hospital Compare, is intended to provide consumers with the information needed to allow them to make informed decisions about hospital quality when seeking care. The HAC Reduction Program is intended to motivate hospitals to reduce the incidence of HACs. We will continue to monitor the HAC Reduction Program and take the commenter’s concerns under consideration as we strive to improve the program. Comment: A few commenters supported using the same method of determining if a hospital has enough data to calculate a PSI–90 score in both the Hospital VBP and HAC Reduction Programs and the same inclusion criteria for the CDC NHSN measures as is used in the Hospital IQR Program. Response: We appreciate the commenters’ support. This alignment was described in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50722). Comment: One commenter requested the posting of more HAC Reduction Program measure thresholds and benchmark data in advance as has been accomplished with the Hospital VBP Program. Response: We note that the HAC Reporting Program is not required by law to create measure thresholds and benchmarks, as is the Hospital VBP Program. By statute, the payment adjustments for the HAC Reporting Program are applied to hospitals with a Total HAC score in the 75th percentile. Based on the differing statutory approaches, we do not believe that the commenter’s requests are applicable to this program. (1) Clarification of Finalized Measure Result Scoring for FY 2015 and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we finalized for the HAC Reduction Program a scoring methodology that divides the measure results into percentiles in increments of 10 and assigns points (1 to 10) in accordance with the percentile into which the hospital’s measure result falls. Our preliminary analysis of the measures showed that multiple hospitals had the same measure results, and that in certain instances, the number of hospitals with the same measure results exceeded the number of hospitals for their appropriate VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 percentile. Consequently a few hospitals with the same measure results fall into the next higher percentile. In these instances, we will assign the same point for all hospitals with the same measure results, and that point will be based on the prior or the lowest appropriate percentile. For example, if, for the CAUTI measure, 13 percent of hospitals have an SIR of 0, we will assign a point of 1 to all 13 percent of hospitals, even though, arguably, 10 percent of them fall into the first percentile, and 3 percent of the 13 percent fall into the second percentile. Because each percentile range ideally represents 10 percent of hospitals, we will assign a point of 2 to the remaining 7 percent of hospitals in the second percentile because their SIR is larger than 0. We believe this is the most favorable method for scoring measure results for hospitals. We note that randomly assigning some hospitals with the same SIR a higher (for example, less favorable) score would be both arbitrary and capricious, which are prohibited by the Administrative Procedure Act. Comment: A few commenters applauded CMS for clarifying the process by which measure scores will be assigned in the case of hospitals with tied measure results spanning multiple deciles. Response: We appreciate the commenters’ support for the clarified process and believe it makes clear that we are applying the scoring criteria in a manner that is most equitable to hospitals. (2) Clarification of FY 2015 Finalized Narrative of Rules to Calculate the Total HAC Score In the FY 2014 IPPS/LTCH PPS final rule, we finalized a series of rules to determine how to calculate the Domain 2 score and ultimately the Total HAC Score when there were waivers for the collection of CDC NHSN HAI measures (78 FR 50723). We also illustrated and finalized these rules in Figure B of the final rule (78 FR 50724). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28141), we proposed to clarify that the narrative for Figure B should also include ‘‘other waivers’’ that waive hospitals from collecting CDC HAI measure data. The clarified rules that we proposed are as follows for the collection of CDC HAI measures: • If a hospital has an ICU waiver or other waiver for the CDC NHSN HAI measures, we will use only the Domain 1 score to calculate its Total HAC Score. • If a hospital does not have an ICU waiver or other waiver for the CDC HAI measures: PO 00000 Frm 00246 Fmt 4701 Sfmt 4700 Æ If the hospital does not submit data for the CDC HAI measures, we will assign 10 points to that measure for that hospital. Æ If the hospital does submit data for at least one CDC NHSN measure: ■ If there are ‘‘complete data’’ (that is, enough adverse events to calculate the SIR) for at least one measure, we will use those data to calculate a Domain 2 score and use the hospital’s Domain 1 and Domain 2 scores to calculate the Total HAC Score. ■ If there are not enough adverse events to calculate the SIR for any of the measures, we will use only the hospital’s Domain 1 score to calculate its Total HAC Score. As discussed earlier, if a hospital has enough data to calculate the PSI–90 composite measure score for Domain 1 and ‘‘complete data’’ for at least one measure in Domain 2, the scores of the two domains will contribute to the Total HAC Score at 35 percent for Domain 1 and 65 percent for Domain 2. However, if a hospital does not have enough data to calculate the PSI–90 composite measure score for Domain 1 but it has ‘‘complete data’’ for at least one measure in Domain 2, its Total HAC Score will depend entirely on its Domain 2 score. Similarly, if a hospital has ‘‘complete data’’ to calculate the PSI–90 composite measure score in Domain 1 but none of the measures in Domain 2, its Total HAC Score will be based entirely on its Domain 1 score. If the hospital does not have ‘‘complete data’’ to calculate the PSI–90 composite measure score for Domain 1 or any of the measures in Domain 2, we will not calculate a Total HAC Score for this hospital. Comment: A few commenters were concerned that a hospital without any Domain 2 measure scores would have their Total HAC score based entirely on Domain 1, which comprises claimsbased data. Because this situation could happen when a hospital does not have enough data to reliably calculate an SIR for the CDC NHSN HAI measures, one commenter recommended that CMS collaborate with CDC to determine if there are analytic approaches besides the SIR that would allow more hospitals to meet the minimum data criteria for reliable measure results for the CDC NHSN HAI measures. Response: We understand the commenters’ concern and point out that the intention of the scoring rules described above for calculating a Total HAC score is to make use of the available data for each hospital and encourage hospitals to report HAI data to CDC NHSN, even if they do not have enough data to reliably calculate an SIR for the CDC NHSN HAI measures in E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Domain 2. In section IV.J.3.c. of the preamble of this final rule, we address stakeholders concerns about using claims data in general and the PSI–90 measure in particular, for the HAC Reduction Program. We conferred with CDC, which indicated that they continuously evaluate the data reported to NHSN and consider the best measures for monitoring and comparative purposes. Currently the SIR is the best measure to allow for risk adjustment and production of a facility-level and/or CCN-level metric that can be used for comparison across similar facility types. This provides the opportunity to most accurately represent a facility’s success. If the data are insufficient (for example, too few device days) to produce the SIR, CDC indicated that any calculation produced from such low numbers would be imprecise. CDC continues to review the data and evaluate options for metric development, including situations where facilities have low denominator volume and/or few infections. After consideration of the public comments we received, we are finalizing the scoring clarifications for the HAC Reduction Program as proposed. e. Reporting Hospital-Specific Information, Including the Review and Correction of Information tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Confidential Reports to Applicable Hospitals Section 1886(p)(5) of the Act requires the Secretary to provide confidential reports to the applicable hospitals with respect to HACs. To meet the requirements under section 1886(p)(5) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we finalized the provision of confidential reports for the HAC Reduction Program to include information related to claims-based measure data for the PSI measures, the measure scores, the domain score for each domain, and the Total HAC Score (78 FR 50725). We noted that we use chart-abstracted measures in the HAC Reduction Program, and such information will be contained in the reports hospitals currently receive as part of the Hospital IQR Program and can be reviewed and corrected through the process specified for that program. We stated that we believe that this method would reduce the burden on hospitals, by alleviating the need to correct data present in two different programs. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (2) Availability of Information to the Public Section 1886(p)(6)(A) of the Act requires the Secretary to ‘‘make information available to the public regarding HAC rates of each subsection (d) hospital’’ under the HAC Reduction Program. Section 1886(p)(6)(C) of the Act requires the Secretary to post the HAC information for each applicable hospital on the Hospital Compare Web site in an easily understood format. Section 1886(p)(6)(B) of the Act also requires the Secretary to ‘‘ensure that an applicable hospital has the opportunity to review, and submit corrections for, the HAC information to be made public for each hospital.’’ To meet the requirements under section 1886(p)(6)(C) of the Act, in the FY 2014 IPPS/LTCH PPS final rule, we finalized policies that the following information will be made public on the Hospital Compare Web site relating to the HAC Reduction Program: (1) hospital scores with respect to each measure; (2) each hospital’s domain specific scores; and (3) the hospital’s Total HAC Score (78 FR 50725). Comment: One commenter supported the public availability of facility-specific data on HACs. The commenter was concerned that these data had previously been available on Hospital Compare but were no longer posted there and urged that CMS repost these data. One commenter recommended that, at a minimum, in spite of the absence of measures for some HACs, CMS should make the raw counts of HACs publicly available on Hospital Compare or https://data.medicare.gov/. Response: We appreciate the commenter’s recognition of the importance of having facility level HAC data available publicly. Although the commenter did not specify which data were being referenced, we interpret this comment to refer to the eight HAC measures that were removed from the Hospital IQR Program (Air Embolism, Blood Incompatibility, CAUTI, Falls and Trauma, Foreign Object Retained After Surgery, Manifestation of Poor Glycemic Control, Pressure Ulcer Stages III or IV, and Vascular Catheter Associated Infections). The rationale for removing these measures from the Hospital IQR Program can be found in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53506 through 53507). The measures included in the HAC Reduction Program (PSI–90 composite, CLABSI and CAUTI) have been available on Hospital Compare since December 2010, January 2012 and January 2013, respectively. The HAC Reduction Program scores will also be publicly available later this year. PO 00000 Frm 00247 Fmt 4701 Sfmt 4700 50099 (3) Review and Correction of Information Section 1886(p)(6)(B) of the Act requires the Secretary to ensure that each hospital has the opportunity to review and submit corrections for the information to be made available to the public with respect to each hospital under section 1886(p)(6)(A) of the Act prior to such information being made available to the public. In the FY 2014 IPPS/LTCH PPS final rule, we codified our regulation regarding the reporting of hospitalspecific information at § 412.172(f) (78 FR 50968). CMS will make information available to the public regarding HAC rates of all hospitals described in section 1886(d)(1)(B) of the Act, including hospitals in Maryland previously paid under section 1814(b)(3) of the Act, under the HAC Reduction Program (paragraph (f)). As noted in section IV.J.3.b. of the preamble of this final rule, in order to implement the new Maryland All-Payer Model, Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act, effective January 1, 2014. In summary, we established that CMS will provide each hospital with confidential hospital-specific reports and discharge level information used in the calculation of its Total HAC Score (paragraph (f)(1) of § 412.172). Hospitals will have a period of 30 days after receipt of the information provided under paragraph (f)(1) to review and submit corrections for the HACs measure scores, domain scores, and the Total HAC Score for the fiscal year. The administrative claims data used to calculate a hospital’s Total HAC Score for those conditions for a fiscal year will not be subject to review and correction (paragraph (f)(2)). CMS will post the HAC Reduction Program scores for the applicable conditions for a fiscal year for each applicable hospital on the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725 through 50728) for detailed discussions of the above provisions. CMS provided hospitals with their confidential hospital-specific reports and discharge level information used in the calculation of their Total HAC Score in late July 2014 on the Quality Net Web site. In order to have access to their hospital-specific report, hospitals must register for a Quality Net Secure Portal account. Hospitals have a period of 30 days after the information is posted on Quality Net to review and submit corrections for the calculation of their E:\FR\FM\22AUR2.SGM 22AUR2 50100 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV HACs measure scores, domain scores, and Total HAC Score for the fiscal year. (4) Preliminary Analysis of the HAC Reduction Program In order to model estimated payment changes for the FY 2015 IPPS/LTCH PPS proposed rule, we conducted a preliminary analysis of the HAC Reduction Program using currently available historical data as a proxy for the actual data that will be used to determine hospital performance under the program. The results of this preliminary analysis can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/ under the FY 2015 IPPS/LTCH PPS proposed rule Home Page link as Table 17.—FY 2015 Preliminary Analysis of the Hospital-Acquired Condition Reduction Program. We stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28142) that when the actual data for the performance periods finalized in the FY 2014 IPPS/LTCH PPS final rule for each measure are available, hospitals will have an opportunity to review and submit corrections as discussed in section IV.J.3.e. of the preamble of the proposed rule and this final rule. Comment: One commenter objected to CMS making Table 17—FY 2015 Preliminary Analysis of the HospitalAcquired Condition Reduction Program, publicly available via the CMS Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/ under the FY 2015 IPPS/LTCH PPS proposed rule Home Page link. This commenter stated that the data had not yet been reviewed and its sources auditable and in compliance with the requirements of the law. The commenter stated that the Table did not provide insight into how the Composite Score was developed. The commenter acknowledged that there was a methodology included in the proposed rule preamble, however, also noted that any attempts to recalculate and confirm the scores in the Table with other information available to the public (such as CMS’ Hospital Compare Web site) were not possible. Lastly, the commenter stated that the reporting periods used to calculate the Score in Table 17 (both for Domain 1 (Patient Safety) and Domain 2 (CLASBI and CAUTI) are not those that are set in law. Response: We acknowledge the commenter’s objection and point out that as stated in the FY 2015 IPPS/LTCH PPS proposed rule, we conducted a preliminary analysis of the HAC Reduction Program using currently VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 available historical data as a proxy for the actual data that will be used to determine hospital performance under the program to model estimated payments. In addition, as stated earlier in this section, we established that we will provide each hospital with confidential hospital-specific reports and discharge level information used in the calculation of its Total HAC Score (paragraph (f)(1) of § 412.172). Hospitals will have a period of 30 days after receipt of the information provided under paragraph (f)(1) to review and submit corrections for the HACs measure scores, domain scores, and Total HAC Score for the fiscal year. The administrative claims data used to calculate a hospital’s Total HAC Score for those conditions for a fiscal year will not be subject to review and correction (paragraph (f)(2)). CMS will post the HAC Reduction Program scores for the applicable conditions for a fiscal year for each applicable hospital on the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725 through 50728) for detailed discussions of the above provisions. Providing a preliminary analysis of the HAC Reduction Program using currently available historical data as a proxy for the actual data is consistent with the law. We clearly indicated that these were not the final data. However, because this is the first year of the HAC Reduction Program, we wish to gain some initial experience under the review and correction process discussed in section IV.J.3.e. of the preamble of this final rule and determine to what extent the review and corrections process in this first year changes the preliminary hospital level data we provided in Table 17 of the proposed rule before providing updated hospital level data. Updated hospital level data will be made publicly available following the review and corrections process. f. Limitation on Administrative and Judicial Review Section 1886(p)(7) of the Act provides that there will be no administrative or judicial review under Section 1869 of the Act, under Section 1878 of the Act, or otherwise for any of the following: • The criteria describing an applicable hospital under section 1886(p)(2)(A) of the Act. • The specification of hospital acquired conditions under section 1886(p)(3) of the Act. • The specification of the applicable period under section 1886(p)(4) of the Act. PO 00000 Frm 00248 Fmt 4701 Sfmt 4700 • The provision of reports to applicable hospitals under section 1886(p)(5) of the Act. • The information made available to the public under section 1886(p)(6) of the Act. In the FY 2014 IPPS/LTCH PPS final rule, we included these statutory provisions under § 412.172(g) of the regulations (78 FR 50729 and 50968). We note that section 1886(p)(6) of the Act requires the Secretary to make information available to the public regarding HAC scores of each applicable hospital under the HAC Reduction Program. Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure that an applicable hospital has the opportunity to review, and submit corrections for, the information to be made available to the public, prior to that information being made public. We believe that the review and correction process explained above in section IV.J.3.e. of the preamble of this final rule will provide hospitals with the opportunity to correct data prior to its release on the Hospital Compare Web site. 4. Maintenance of Technical Specifications for Quality Measures Technical specifications of the HAC measures for the Agency for Health Research and Quality (AHRQ) Patient Safety Indicator 90 (PSI–90) in Domain 1 can be found at AHRQ’s Web site at: https://qualityindicators.ahrq.gov/ Modules/PSI_TechSpec.aspx. Technical specifications for the CDC NHSN’s HAI measures in Domain 2 can be found at CDC’s NHSN Web site at: https:// www.cdc.gov/nhsn/acute-care-hospital/ index.html. Both Web sites provide measure updates and other information necessary to guide hospitals participating in the collection of HAC Reduction Program data. Many of the quality measures used in different Medicare and Medicaid reporting programs are NQF-endorsed. As part of its regular maintenance process for NQF-endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We note that NQF’s annual or triennial maintenance processes for endorsed measures may result in the NQF requiring updates to the measures. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates required by the NQF into the measure specifications we have adopted for the HAC Reduction Program, so that these measures remain up-to-date. For the HAC Reduction Program, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28142), we proposed to follow the finalized processes outlined for addressing changes to adopted measures in the Hospital IQR Program ‘‘Maintenance of Technical Specifications for Quality Measures’’ section found in section IX.A.1.b. of the preamble of this final rule. We believe this proposal adequately balances our need to incorporate updates to HAC Reduction Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We invited public comments on this proposal. Comment: One commenter supported the proposed method of maintaining and updating the technical specifications for the quality measures, including adoption of a subregulatory process for nonsubstantive changes released by measure developers. Response: We appreciate the commenter’s support. Comment: A few commenters believed that nonsubstantive changes identified during routine measure maintenance processes and during NQF measure maintenance review should all be subject to the annual notice-andcomment rulemaking process. Response: We disagree with the recommendation to have all measure changes subject to notice-and-comment rulemaking. As previously noted in FY 2014 IPPS/LTCH PPS final rule (78 FR 50776) we believe that the maintenance of technical specifications for quality measure policy for the Hospital IQR Program also is applicable to the HAC Reduction Program. We believe this policy adequately balances our need to incorporate nonsubstantive NQF updates to NQF-endorsed measures in the most expeditious manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. We also note that the NQF process incorporates an opportunity for public VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 50101 comment and engagement in the measure maintenance process. These policies regarding what is considered substantive versus nonsubstantive apply to all measures in the Hospital IQR Program and the HAC Reductions Program. Comment: One commenter indicated that any changes to a measure developed for adults but now including those less than 18 years of age should be considered nonsubstantive. Response: We refer the reader to our response to a similar suggestion in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50776). We will make a decision as to whether such changes constitute substantive changes on a case-by-case basis. After consideration of the public comments we received, we are finalizing the maintenance of technical specifications for quality measures in the HAC Reduction Program as proposed. advantage on their HAC scores long after a disaster period has ended. Other commenters recommended that hospitals be given 90 calendar days from the date of the disaster to request an exemption and that the exemption apply for at least 2 payment years because the HAC Reduction Program currently uses a 2-year performance period. Response. We appreciate the commenters’ support. We will take into consideration these recommendations as we consider whether an exemption process for the HAC Reduction Program should be implemented. 5. Extraordinary Circumstances Exceptions/Exemptions In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50711), we indicated that we had received public comments requesting a potential waiver or exemption process for hospitals located in areas that experience disasters or other extraordinary circumstances (EC), even though we did not propose an extraordinary circumstance exceptions/ exemptions (ECE) policy for the HAC Reduction Program. We stated in the FY 2014 IPPS/LTCH PPS final rule that we were reviewing this issue and might consider such a proposal in future rulemaking. We also noted that should we consider a policy we intend to focus on several policy and operational considerations in developing a disaster exemption process for the HAC Reduction Program. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28142), we welcomed public comments on whether an exemption process should be implemented and the policy and operational considerations for a potential HAC Reduction Program ECE policy. Comment: Many commenters supported the creation of an extraordinary circumstance exemption process for hospitals that experience a natural disaster. Some commenters recommended that CMS consider adopting several aspects of the Hospital VBP waiver process for the HAC Reduction Program, including allowing hospitals to have 60 days from the occurrence of the extraordinary circumstance to file for an exemption. The commenters believed this would ensure that hospitals do not seek an In the FY 2014 IPPS/LTCH PPS final rule, we finalized measures for FY 2015 and onwards, but only finalized a scoring methodology for FY 2015 for the HAC Reduction Program (78 FR 50712 through 50713). In the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28143), we did not propose any new additional measures for the HAC Reduction Program for FY 2016. We note that AHRQ’s PSI–90 composite measure and CDC’s NHSN CLABSI (NQF #0138) and CAUTI (NQF #0139) measures were submitted in January 2014 and December 2013, respectively, as part of the NQF maintenance endorsement process. As noted in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50719), should changes to the risk-adjustment models for the measures be adopted during NQF endorsement maintenance processes, CMS will adopt these changes as soon as possible. Finally, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule, although we are not required under section 1886(p) of the Act to address specific measure scoring methodologies regarding the HAC Reduction Program in notice-andcomment rulemaking, as required under the Hospital VBP Program, we believe that it is important to set forth such scoring methodologies for each individual HAC measure, in order for the public to understand how the measures discussed and finalized in this FY 2015 IPPS/LTCH PPS final rule relate to the performance methodology used to determine the applicable hospitals subject to the payment adjustment under the HAC Reduction Program. PO 00000 Frm 00249 Fmt 4701 Sfmt 4700 6. Implementation of the HAC Reduction Program for FY 2016 a. Measure Selection and Conditions, Including Risk-Adjustment Scoring Methodology (1) General Selection of Measures E:\FR\FM\22AUR2.SGM 22AUR2 50102 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (2) Measure Selection and Scoring Methodology for FY 2016 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized for FY 2016 and onwards CDC’s NHSN Surgical Site Infection (SSI) measure (NQF #0753) and its measure methodology. The SSI and other measure specifications are available at: https://www.qualityforum.org/QPS/ QPSTool.aspx. To locate a specific measure, search by the NQF number: (1) for the SSI measure use NQF #0753; (2) for the CLABSI measure use NQF #0139; and (3) for the CAUTI measure use NQF #0138. For SSI updates related to CMS programs and the use of CDC’s NHSN measures, we refer readers to the Web site at: https://www.cdc.gov/nhsn/acutecare-hospital/ssi. The SSI measure explanation of SIR in the NHSN enewsletter is available at: https:// www.cdc.gov/nhsn/PDFs/Newsletters/ NHSN_NL_OCT_2010SE_final.pdf. CDC’s SSI measure was finalized as a Domain 2 measure in the calculation of the Total HAC Score (78 FR 50717). In the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to change CDC’s measure methodology for the SSI measure. b. Measure Risk-Adjustment In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure riskadjustment for AHRQ’s PSI–90 composite measure for Domain 1 and the risk-adjustment for CDC’s NHSN measures for Domain 2 (78 FR 50718 through 50719). In the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28143), we did not propose any risk-adjustment changes for any of the measures finalized in the FY 2014 IPPS/LTCH PPS final rule. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV c. Measure Calculations In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure calculations for AHRQ’s PSI–90 composite measure for Domain 1 and the measure calculations for CDC’s NHSN measures for Domain 2 (78 FR 50718 through 50719). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28143), we did not propose any measure calculation changes for any of the measures finalized in the FY 2014 IPPS/ LTCH PPS final rule. d. Applicable Time Period In the FY 2014 IPPS/LTCH PPS final rule, we finalized and codified policy at § 412.170 that there will be a 2-year applicable time period to collect data used to calculate the Total HAC Score (78 FR 50717). For the Domain 1 AHRQ PSI–90 composite measure, in the FY 2015 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 IPPS/LTCH PPS proposed rule (79 FR 28143), we proposed for FY 2016 a 24month period from July 1, 2012 through June 30, 2014 as the applicable time period. The claims for all Medicare FFS beneficiaries discharged during this period would be included in the calculation of measure results for FY 2016. This includes claims data from the 2012, 2013, and 2014 Inpatient Standard Analytic Files (SAFs). The Domain 2 CDC NHSN measures (CAUTI, CLABSI, and SSI) are currently collected and calculated on a quarterly basis. However, for the purpose of the HAC Reduction Program, we finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717) that we will use 2 years of data to calculate the Domain 2 score for FY 2015 for the CAUTI and CLABSI measures. For FY 2016, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28143), we proposed to use calendar years 2013 and 2014 for all three Domain 2 measures in the HAC Reduction Program. e. Criteria for Applicable Hospitals and Performance Scoring For FY 2016, in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28143), we proposed a change to the scoring methodology of the Total HAC Score. This proposal, which is discussed below, was intended to address the implementation of CDC’s NHSN SSI measure in Domain 2 finalized for implementation in FY 2016. (1) Finalized Scoring Methodology for Domains 1 and 2 for FY 2015 We finalized a scoring methodology for the Total HAC Score in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722). This finalized scoring methodology is similar to the achievement scoring methodology currently used under the Hospital VBP Program. With respect to an applicable hospital, we finalized that CMS will identify the top quartile of all hospitals with respect to their Total HAC Score during the applicable period (§ 412.170). In addition, we finalized that the Total HAC Score will be determined by the following three steps: (1) each measure result will be scored as outlined in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723); (2) domain scores will be determined by the scores assigned to the measures within the domain; and (3) the Total HAC Score will be determined by the sum of the weighted domain scores. For FY 2015, the Total HAC Score is the sum of the Domain 1 score multiplied by 35 percent plus the Domain 2 score multiplied by 65 percent. For further details of the general scoring methodology finalized for the HAC PO 00000 Frm 00250 Fmt 4701 Sfmt 4700 Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50719 through 50725). (2) Scoring Methodology of Domain 2 and New Weighting of Domains 1 and 2 for FY 2016 In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28143), we proposed to adjust the scoring methodology of Domain 2 and the weighting of Domains 1 and 2 beginning in FY 2016 due to the addition of CDC’s NHSN SSI measure. We would like to clarify that the scoring methodology for Domain 1 in FY2016 is unchanged from the scoring methodology for Domain 1 in FY 2015. This methodology is described above under our discussion of Criteria for Applicable Hospitals and Performance Scoring Policy. For the scoring of CDC’s NHSN SSI measure, we proposed an identical process of assigning points to the SSI measure results. We note that the SSI measure, reported via CDC’s NHSN, is currently specified under the Hospital IQR program and is restricted to colon procedures (including incision, resection or anastomosis of the large intestine and large-to-small and smallto-large bowel anastomosis), and abdominal hysterectomy procedures including those performed by laparoscope. The SSI measure assesses SSIs based on the type of surgery procedures (that is, the SSI measure is stratified into infections that occur with colonic procedures and those that occur in abdominal hysterectomy procedures). We also note that patient age and a preoperative health score are risk factors taken into account using the Standardized Infection Ratio (SIR) (78 FR 20625). Use of an SIR is consistent with CDC’s NHSN CLABSI and CAUTI measures that also report SIRs. In order to calculate an SSI measure score for Domain 2, we proposed to calculate an abdominal hysterectomy procedure SSI SIR and a colonic procedure SSI SIR and pool both SIRs for each hospital. We proposed pooling the abdominal hysterectomy SSI SIR and colonic procedure SSI SIR as this would provide a single SSI SIR, which is consistent with reporting a single SSI SIR as meant by design of the NQF endorsed measure (NQF #0753), and would allow a riskadjusted weighting of the surgical volume among the two procedures. We proposed that a pooled SSI SIR for an applicable hospital is the sum of all observed infections among abdominal hysterectomy and colonic procedures divided by the sum of all predicted infections among abdominal hysterectomy and colonic procedures performed at the applicable hospital. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations The pooled SSI SIR would be scored in the same manner as all measures finalized for the HAC Reduction Program (refer to Figure A in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included above in this final rule). To determine a Domain 2 score, we proposed taking the average of the three CDC HAI SIR scores. We noted in the FY 2014 IPPS/LTCH PPS final rule that there will be instances in which applicable hospitals may not have data on all four measures and therefore a set of rules was finalized to determine how to score each Domain. We proposed to follow the same finalized rules used to determine scoring of Domains 1 and 2 (FY 2014 IPPS/LTCH PPS final rule (78 FR 50723 through 50725)), and the proposed changes in section IV.J.6.e. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28144), which are included in section IV.J.6.e. of the preamble of this final rule. We invited public comments on this proposal. In addition, for FY 2016 we proposed to weight Domain 1 at 25 percent and Domain 2 at 75 percent. We proposed to decrease the weight of Domain 1 from 35 percent to 25 percent for two reasons. First, with the implementation of CDC’s SSI measure, we believed the weighting of both domains needed to be adjusted to reflect the addition of a fourth measure; and second, in keeping with public comments from the FY 2014 IPPS/LTCH PPS final rule, MedPAC and others stated that Domain 2 should be weighted more than Domain 1. Finally, we proposed for FY 2016 that the Total HAC Score for applicable hospitals would be the sum of the weighted scores from Domain 1 (weighted at 25 percent) and Domain 2 (weighted at 75 percent). We invited public comments on this proposal. Comment: Several commenters supported the proposed approach of creating a pooled SIR for the SSI measure that includes colon surgeries and abdominal hysterectomy surgeries because this is consistent with how CDC currently reports the measure. A few commenters noted that this approach allows for risk adjusted weighting of the surgical volume between the two procedures. One commenter recommended that CMS collaborate with NHSN leadership and professional organization representing surgeons to develop a profile of surgical procedures that are high volume across the spectrum of acute care hospitals that might be added to the existing procedures in the SSI measure. The commenters suggested that an expansion of the number of procedures VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 may increase the likelihood that the SSI SIR is reliable. Response: We appreciate the commenters’ support for the approach of creating a pooled SIR for the SSI measure. We note that CDC maintains ongoing collaborations with a number of professional surgical organizations and is currently in process of developing additional SSI metrics for higher volume surgical procedures. Once these measures are finalized, we may consider them for future rulemaking. Comment: A few commenters suggested that CMS and CDC monitor the impact of the consolidated SIR for hospitals that perform a higher volume of hysterectomies. The commenters pointed out that based on Hospital Compare data, where the SSI rates for the two procedures are reported separately, hysterectomies have a higher infection rate compared to colon surgeries, and fewer hospitals have a reported hysterectomy SIR. Commenters recommended that when the consolidated SIR adversely impacts hospitals that perform more hysterectomies, then the SIR should be modified to account for the different mix of services. One commenter recommended CMS weigh each individual SSI metric separately as they believe the combined SIR is a complicated, burdensome composite metric. Response: We will consider these suggestions in future rulemaking. Comment: A few commenters were concerned that adding the SSI measure to Domain 2 could lead to an average score that lacks specificity in determining a hospital’s true HAI scores. In addition, one commenter stated that adding the MRSA bacteremia and C. difficile measures to Domain 2 score would further dilute the domain. The commenters suggested assigning each CDC NHSN HAI measure a separate percentage to total the domain weight versus averaging all HAIs in Domain 2. A few commenters stated that, with only two procedures in the SSI measure, it is reasonable to continue equally weighting the measures in Domain 2. However, if more procedures are added to the SSI measure, the commenters recommended that CMS consider providing a higher weight to the SSI measure. Response: We note that the purpose of the domain scores is to provide a summary of a hospital’s performance with regard to patient safety (Domain 1) and HAI (Domain 2) measures. A hospital’s performance with regard to the individual measures is available on Hospital Compare and is updated quarterly for hospitals that participate in PO 00000 Frm 00251 Fmt 4701 Sfmt 4700 50103 the Hospital IQR Program. We appreciate the suggestion for weighting the CDC NHSN HAI measures separately and will take this into consideration in future rulemaking. Comment: One commenter recommended that the weighting of measures in the Total HAC Score correspond to the relative amounts of harm found in the patient population based on what is reported in peerreviewed literature. Response: We will take this feedback into consideration as we add more measures to the program and evaluate if changes to the scoring methodology are needed. Comment: Many commenters supported the CMS proposal to increase the weight given to Domain 2 and decrease the weight given to Domain 1 because Domain 2 includes the chart abstracted NHSN measures which the commenters believed to be more reliable and actionable than the claims-based PSI–90 composite measure in Domain 1. One commenter recommended that CMS continue to decrease the Domain 1 weight in future years. A few commenters believed that the overlap of measures between the Hospital VBP Program and the HAC Reduction Program should be eliminated, but expressed their support for the domain weight change if CMS retained all measures that overlap despite the commenters’ objections. Response: We agree that an increase in the Domain 2 weight is warranted, given that the number of measures in the domain is increasing. Comment: A few commenters did not support the proposal to change the weight of Domain 1 to 25 percent from 35 percent and Domain 2 to 75 percent from 65 percent. One commenter stated that this approach would promote an overly narrow definition of HACs that places too much emphasis on infections alone and not enough on other patient safety risks. The commenter added that CMS should take a more balanced approach to weighting the existing domains in order to place a high bar for hospitals to avoid both infections and harmful complications that can be prevented, and seek and develop measures for hospital safety problems that have the most prevalence and impact. Response: We agree that both patient safety events and infections are important components of the HAC Reduction Program. In the FY 2014 IPPS/LTCH PPS proposed rule (79 FR 28143 through 29144), we explain the rationale for assigning a higher weight to Domain 2. We believe that the AHRQ PSI–90 measure plays a vital role in E:\FR\FM\22AUR2.SGM 22AUR2 50104 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations patient safety and it continues to comprise an integral part of the HAC Reduction Program with a weight of 25 percent of the Total HAC Score. After consideration of the public comments we received, we are finalizing the scoring methodology of Domain 2 and new weighting of Domains 1 and 2 for FY 2016 as proposed. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV f. Rules To Calculate the Total HAC Score for FY 2016 In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28141, 28144), and in section IV.J.3.d. of the preamble of this final rule, we discuss our proposal to adopt the ‘‘Clarification of FY 2015 Finalized Narrative of Rules to Calculate the Total HAC Score.’’ We invited public comments on this proposal. After consideration of the public comments we received, we finalized the proposed clarification of the FY 2015 rules to calculate the Total HAC Score. We received no public comments on this specific proposal for FY 2016; therefore, we are finalizing the clarification for FY 2016 as well. 7. Future Considerations for the Use of Electronically Specified Measures We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data submitted to CMS for the Hospital IQR Program. CMS has become aware of some hospitals and health systems that have developed or adopted a methodology to identify and measure all-cause harm through their electronic health record (EHR) systems. Some hospitals and health systems are able to use the results of these electronic measures to address adverse events at the point of care and to track improvement over time. Many of these measures capture a broad range of common hospital-acquired conditions that may not be captured by existing national measures (examples include measures of adverse drug events and hypoglycemia). Given that these measures are captured using clinical data from EHR systems, collection of HAC data will allow CMS to align measures across multiple settings. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28144), we sought comment as to whether the use of a standardized electronic composite measure of all-cause harm should be used in the HAC Reduction Program in future years in addition to, or in place VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of, claims-based measures assessing HACs. We welcomed any suggestions of specific all-cause harm electronic measures, including detailed measure specifications. Specifically, we invited public comments on the feasibility and the perceived value of such a measure, and what would be the most appropriate weighting of this measure in the Total HAC Score. In addition, we requested suggestions on the timeframe for which such a standardized electronic composite measure of all-cause harm should be proposed. We intend for the future direction of electronic quality measure reporting to significantly enhance the tracking of HACs under the HAC Reduction Program. We stated in the FY 2015 IPPS/LTCH PPS proposed rule that we will continue to work with measure stewards and developers to develop new measure concepts, and conduct pilot, reliability and validity testing as part of efforts to promote the adoption of Certified Electronic Health Record Technology in hospitals. Comment: Many commenters supported leveraging electronic technology to capture, calculate, and submit data. Commenters recommended that ultimately electronic measures could replace claims-based measures and could provide information in a timelier manner. Several commenters cautioned that electronic measures must undergo careful testing and that implementation occur in a phased manner and not mandated until technically feasible for all hospitals to comply. One commenter recommended that an e-measure related to antimicrobial stewardship be considered. One commenter recommended that, beginning in FY 2015, hospitals be given a waiver from complying with existing Domain 1 requirements, provided that they demonstrate transition toward or current use of an approach utilizing electronic measures in a manner supported by the peer reviewed literature. Response: We appreciate the commenters’ feedback and support for the use of electronic measures in general. We will take the suggestions into account in future rulemaking. Comment: Many commenters supported the development of an allcause harm measure derived from electronic health records. Some commenters believed that all-cause harm measures could capture information on never events, adverse drug events, ventilator-associated events, diagnostic errors, hypoglycemia, transfusion reactions, and medication reconciliation (unintentional PO 00000 Frm 00252 Fmt 4701 Sfmt 4700 medication discrepancies per patient (NQF #2456)). Another commenter encouraged innovative approaches and collaboration with organizations, hospitals and the CMS Innovation Center when developing all-cause patient harm measures derived from electronic health records. One commenter recommended an all cause harm measure be incorporated as a third domain. Several other commenters expressed concern about use of composite measures in general stating that they do not provide actionable data and that inappropriate weighting of measure components may skew results. If a composite measure is used, commenters recommended that data on the component measures and the weighting methodology also be reported. Response: We thank commenters for their viewpoints on the use of an electronic all-cause harm measure for inclusion in the HAC Reduction Program and will take them into consideration in future rule making. Comment: One commenter requested more insight into what CMS envisions for the measure and how the measure will be reported through the EHR system, in order to provide feedback to CMS. Response: At this time, we do not have a specific measure in mind but rather are soliciting feedback on the feasibility and perceived value of a standardized electronic composite measure of all-cause harm in the HAC Reduction Program. As we develop a more specific plan we will share that information in future rulemaking. K. Payments for Indirect and Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 Through 413.83) 1. Background Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99–272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital’s allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital’s cost reporting period E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations beginning in FY 1984 (that is, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital’s updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital’s Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the hospital inpatient prospective payment system (IPPS) for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital’s IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital’s number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital to the number of inpatient hospital beds. The calculation of both direct GME and IME payments is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. Therefore, Congress, through the Balanced Budget Act of 1997 (Pub. L. 105–33), established a limit on the number of allopathic and osteopathic residents that a hospital may include in its FTE resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital’s unweighted FTE count of residents for purposes of direct GME may not exceed the hospital’s unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap. The Affordable Care Act made a number of statutory changes relating to the determination of a hospital’s FTE resident count for direct GME and IME payment purposes and the manner in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 which FTE resident limits are calculated and applied to hospitals under certain circumstances. Regulations implementing these changes are discussed in the November 24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53416). 2. Changes in the Effective Date of the FTE Resident Cap, 3-Year Rolling Average, and Intern- and Resident-toBed (IRB) Ratio Cap for New Programs in Teaching Hospitals Section 1886(h)(4)(H)(i) of the Act requires the Secretary to establish rules for calculating the direct GME caps for new teaching hospitals that are training residents in new medical residency training programs established on or after January 1, 1995. Under section 1886(d)(5)(B)(viii) of the Act, such rules also apply to the establishment of a hospital’s IME cap on the number of FTE residents training in new programs. We implemented these statutory requirements in rules published in the August 29, 1997 Federal Register (62 FR 46002 through 46008) and in the May 12, 1998 Federal Register (63 FR 26323 through 26325 and 26327 through 26336). Generally, under existing regulations at 42 CFR 413.79(e)(1) (for direct GME) and 42 CFR 412.105(f)(1)(vii) (for IME), if a hospital did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or before December 31, 1996, and it begins to participate in training residents in a new medical residency training program (allopathic or osteopathic) on or after January 1, 1995, the hospital’s unweighted FTE resident cap (which would otherwise be zero) may be adjusted based on the sum of the product of the highest number of FTE residents in any program year during the third year of the first new program’s existence, for each new residency training program established during that 3-year period, and the minimum accredited length for each type of program. The number of FTE resident cap slots that a teaching hospital receives for each new program may not exceed the number of accredited slots that are available for each new program. Once a hospital’s FTE resident cap is established, no subsequent cap adjustments may be made for new programs, unless the teaching hospital is a rural hospital. A rural hospital’s FTE resident caps may be adjusted for participation in subsequent new residency training programs. A hospital that did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or PO 00000 Frm 00253 Fmt 4701 Sfmt 4700 50105 before December 31, 1996, may only receive a permanent FTE resident cap adjustment for training residents in a truly ‘‘new’’ residency training program; no permanent cap adjustment would be given for training residents associated with an existing program. That is, if a hospital that did not train any allopathic or osteopathic residents in its most recent cost reporting period ending on or before December 31, 1996, serves as a training site for residents in a program that exists or existed previously at another teaching hospital that remains open, that ‘‘new’’ teaching hospital does not receive a ‘‘new program’’ cap adjustment because it is not participating in training residents in a truly ‘‘new’’ program. However, it may be possible for that ‘‘new’’ teaching hospital to receive a temporary cap adjustment if it enters into a Medicare GME affiliation agreement with the existing teaching hospital as specified at § 413.79(f) (for direct GME) and § 412.105(f)(1)(vi) (for IME). (For a detailed discussion of the distinctions between a new medical residency training program and an existing medical residency training program, we refer readers to the August 27, 2009 final rule (74 FR 43908 through 43920). For a detailed discussion regarding participation in Medicare GME affiliation agreements, we refer readers to 74 FR 43574.) For new programs started prior to October 1, 2012, hospitals that did not yet have an FTE resident cap established had a ‘‘3-year window’’ in which to participate in and ‘‘grow’’ new programs, before the FTE resident caps for IME and direct GME were permanently set for the hospital beginning with the fourth program year of the first new program started. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425), we revised the regulations at § 413.79(e) to increase the cap-building period for new programs from 3 years to 5 years. That is, for a hospital that did not yet have an FTE resident cap established, the hospital’s FTE resident cap is effective beginning with the sixth program year of the first new program’s existence. This revised policy is effective for urban hospitals that first begin to participate in training residents in their first new program on or after October 1, 2012, and for rural hospitals that start a new program on or after October 1, 2012. In that final rule, we also finalized a methodology used to calculate a cap adjustment for an individual hospital if residents in a new program rotate to more than one hospital (or hospitals). The methodology is based on the sum E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50106 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of the products of the following three factors: (1) the highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate; (2) the number of years in which residents are expected to complete the program, based on the minimum accredited length for each type of program; and (3) the ratio of the number of FTE residents in the new program that trained at the hospital over the entire 5-year period to the total number of FTE residents that trained at all hospitals over the entire 5-year period. Finally, we made minor revisions to the regulation text at §§ 413.79(e)(2) through (e)(4) for purposes of maintaining consistency throughout § 413.79(e). We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) for further details regarding the methodology for calculating the FTE resident caps. While the FY 2013 IPPS/LTCH PPS final rule discussed the methodology for calculating the FTE resident caps to be effective beginning with the sixth program year of the first new program’s existence, for hospitals that do not yet have FTE resident caps established, that final rule did not discuss when the 3year rolling average for IME and direct GME or the intern- and resident-to-bed (IRB) ratio cap for IME is effective for FTE residents training in new programs. The regulations regarding the 3-year rolling average and the IRB ratio cap with respect to new medical residency training programs were established in the following Federal Register rules: the FY 1998 IPPS final rule with comment period (62 FR 46002 through 46008); the May 12, 1998 final rule (63 FR 26323 through 26325 and 26327 through 26336); FY 2000 IPPS final rule (64 FR 41518 through 41523); and the FY 2002 IPPS final rule (66 FR 39878 through 39883). Specifically, the regulations at § 412.105(f)(1)(v) regarding the 3-year rolling average and new medical residency training programs for IME states that if a hospital qualified for an adjustment to the limit established under paragraph (f)(1)(iv) of the section for new medical residency programs created under paragraph (f)(1)(vii) of the section, the count of residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in paragraph (f)(l)(v) for a period of years. Residents participating in new medical VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, for each new program started, the period of years equals the minimum accredited length for each new program. The period of years for each new program begins when the first resident begins training in each new program. In addition, the regulations for the interaction of the IRB ratio cap and new medical residency training programs for IME at § 412.105(a)(1)(ii) states that the exception for new programs described in paragraph (f)(1)(vii) of the section applies to each new program individually for which the full-time equivalent cap may be adjusted based on the period of years equal to the minimum accredited length of each new program. The regulations at § 413.79(d)(5) regarding the interplay of the 3-year rolling average with new medical residency training programs for direct GME similarly states that if a hospital qualifies for an adjustment to the limit established under paragraph (c)(2) of the section for new medical residency programs created under paragraph (e) of the section, the count of the residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in paragraph (d), for a period of years. Residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of paragraph (d), for each new program started, the period of years equals the minimum accredited length for each new program. The period of years begins when the first resident begins training in each new program. Therefore, the FTE resident caps for IME and direct GME are always effective beginning with the start of the sixth program year of the first new program started for urban hospitals that do not yet have FTE resident caps established (§ 413.79(e)(1)(iii)), and for rural hospitals, beginning with the start of the sixth program year of each new individual program started (§ 413.79(e)(3)), regardless of the fact that other new programs may have started after the start of the first new program. However, the timing of when the 3-year rolling average for IME and direct GME and the IRB ratio cap for IME are first applied is dependent upon the minimum accredited length of each PO 00000 Frm 00254 Fmt 4701 Sfmt 4700 new program started within the 5-year window. For example, new teaching Hospital A participates in training residents in new medical residency training programs for the first time beginning on July 1, 2013. On July 1, 2013, Hospital A participates in training residents in a new family medicine program (minimum accredited length is 3 years), on July 1, 2014, it also participates in training residents in a new sports medicine fellowship (minimum accredited length is 1 year), and on July 1, 2015, it also participates in training residents in a new general surgery program (minimum accredited length is 5 years). For the purpose of establishing Hospital A’s FTE resident caps, the 5-year growth window for Hospital A closes on June 30, 2018, and the IME and direct GME FTE resident caps for Hospital A are effective on July 1, 2018, the beginning of the sixth program year of the first new program’s existence; that is, family medicine. However, the 3-year rolling average and the IRB ratio cap are effective at different points in time. Because the family medicine residency is 3 years in length, FTE residents in the new family medicine program are subject to the 3year rolling average and the IRB ratio cap beginning on July 1, 2016. Because the sports medicine fellowship is a 1year program, and it started on July 1, 2014, the number of sports medicine FTE residents must be included in the 3-year rolling average and is subject to the IRB ratio cap effective on July 1, 2015. Lastly, the FTE residents in the new general surgery program would only be subject to the rolling average and the IRB ratio cap effective July 1, 2020. The Medicare cost report worksheets on CMS Form 2552–10 for IME (Worksheet E, Part A) and for direct GME (Worksheet E–4) currently can accommodate reporting of FTE residents separately based on whether those FTE residents are in new medical residency training programs and are not subject to the FTE resident cap (line 16 of Worksheet E, Part A, and line 15 of Worksheet E–4). However, these cost report worksheets are not designed to accommodate reporting of FTE residents that are exempt from the FTE resident cap, but are subject to the rolling average and IRB ratio cap, because the ‘‘period of years’’ equal to the minimum accredited length of each new program started has already expired. The reverse also may occur, as in the example above with the new general surgery program started by Hospital A, where the FTE resident caps are effective July 1, 2018, but the number of FTE residents in the general surgery program would not be E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations subject to the rolling average or the IRB ratio cap until July 1, 2020. Complicating matters further is the fact that, while the effective dates of these policies associated with new medical residency training program FTE residents are effective on a program year basis (that is, July 1), many teaching hospitals do not have a fiscal year that begins on July 1. Therefore, under the existing policy, the number of FTE residents needs to be prorated, and special accommodations need to be made to calculate the portion of FTE residents that are subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap for the respective portions of the hospital’s cost reporting period occurring on and after July 1. Integrating the rolling average, the IRB ratio cap, and the FTE resident caps for residents in new medical residency training programs in an accurate manner on the Medicare cost report has proved challenging to the point where we have had to deal with each instance brought to our attention by the new teaching hospital or by a Medicare contractor on an individual and manual basis (in order to ensure application of a consistent methodology). In fact, the Medicare cost report instructions direct the hospital to do the following: for CMS Form 2552–10, Worksheet E, Part A, line 10—‘‘. . . Contact your contractor for instructions on how to complete this line if you have a new program for which the period of years is less than or more than three years. . . .’’; for CMS Form 2552–10, Worksheet E–4, line 6—‘‘. . . Contact your contractor for instructions on how to complete this line if you have a new program for which the period of years is less than or greater than 3 years. . . .’’ The MACs, in turn, have been instructed to contact CMS for instructions on how to report the number of FTE residents that are still within the ‘‘period of years’’ of the new program. The ‘‘three years’’ referenced in the Form 2552–10 cost report instructions are based on the 3-year growth window for new medical residency training programs that is in effect for new programs started prior to October 1, 2012, when, within the 3year growth window, new teaching hospitals also may have started new medical residency training programs with different minimum accredited lengths. (We note that while the previous Form 2552–96 cost report did not include the same instructions, CMS did deal with the reporting of the number of FTE residents in new medical residency training programs on an individual basis when requests for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 assistance were brought to its attention.) However, these instructions also apply for new medical residency training programs started with different minimum accredited lengths on and after October 1, 2012. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28147), we proposed to simplify and streamline the timing of when FTE residents in new medical residency training programs are subject to the FTE resident cap, the 3year rolling average, and the IRB ratio cap, both for urban teaching hospitals that have not yet had FTE resident caps established under § 413.79(e)(1) and for rural teaching hospitals that may or may not have FTE resident caps established under § 413.79(e)(3). That is, we proposed that the methodology for calculating the FTE resident caps for hospitals that participate in training residents in new medical residency training programs would continue to be the same methodology instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) for new medical residency training programs started on or after October 1, 2012, specified at § 413.79(e)(1). However, once the FTE resident caps are calculated, we proposed to change the timing of when the FTE resident caps would be effective, to synchronize the effective dates and the application of the 3-year rolling average and the IRB ratio cap with each applicable hospital’s fiscal year begin date. Specifically, we proposed that the FTE resident caps would continue to be calculated as finalized in the FY 2013 IPPS/LTCH PPS final rule—the methodology is based on the sum of the products of the following three factors: (1) the highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate; (2) the number of years in which residents are expected to complete the program, based on the minimum accredited length for each type of program; and (3) the ratio of the number of FTE residents in the new program that trained at the hospital over the entire 5-year period to the total number of FTE residents that trained at all hospitals over the entire 5year period. However, once calculated in this manner, we proposed that, instead of the FTE resident caps being effective beginning with the sixth program year of the first new program started, those FTE resident caps, the 3year rolling average, and the IRB ratio cap would be effective beginning with the applicable hospital’s cost reporting period that precedes the start of the PO 00000 Frm 00255 Fmt 4701 Sfmt 4700 50107 sixth program year of the first new program started. Using the example of Hospital A that we presented earlier, assume Hospital A has a January 1 to December 31 cost reporting year. The first new program started, family medicine, was started on July 1, 2013. A sports medicine fellowship and a general surgery program also were started timely within the 5-year growth window. Hospital A has 5 program years to grow its FTE resident caps, from July 1, 2013 through June 30, 2018. The FTE resident caps would be calculated based on the 5 program years in accordance with the methodology established at § 413.79(e)(1) in the FY 2013 IPPS/LTCH PPS final rule; therefore, the hospital would wait until after June 30, 2018 to obtain the FTE counts to calculate the FTE resident caps. However, we proposed that those IME and direct GME FTE resident caps, once calculated after June 30, 2018, instead of being effective on July 1, 2018, would be effective at the beginning of Hospital A’s cost reporting period that precedes July 1, 2018; that is, the FTE resident caps for Hospital A would be effective permanently on January 1, 2018, the start of Hospital A’s cost reporting period that precedes the start of the sixth program year of the first new program started. The hospital could file its fiscal year end December 31, 2018 cost report including the FTE resident caps applicable to the entire cost reporting period accordingly. As noted earlier, we proposed that, for all new medical residency training programs in which the hospital participates during the 5-year growth window, the FTEs in those new programs also would be subject to the 3year rolling average and the IRB ratio cap simultaneously with the effective date of the FTE resident caps, at the beginning of the applicable hospital’s cost reporting period that precedes the beginning of the sixth program year of the first new program started. Again, using the example of Hospital A that we presented earlier, the FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would all be subject to the 3-year rolling average and IRB ratio cap beginning on January 1, 2018. With regard to reporting on the Medicare cost report, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, we proposed that the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported so as not to be included in the IME rolling average E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50108 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations or the IRB ratio cap, and so as not to be included in the direct GME rolling average. (On the CMS Form 2552–10, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, this means that the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported on Worksheet E, Part A, line 16, and on Worksheet E–4, line 15). However, on Hospital A’s cost report for fiscal year ending December 31, 2018, the number of FTE residents in these three programs would be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap and would be reported accordingly. (On the CMS Form 2552–10, for Hospital A’s cost report for fiscal year ending December 31, 2018, this means that none of the FTE residents in these three programs would be reported on Worksheet E, Part A, line 16 for IME, and Worksheet E–4, line 15 for direct GME. Instead, all of the FTE residents would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME, in order to be subject to the FTE resident cap, the 3year rolling average, and the IRB ratio cap.) We note that once the 3-year rolling average is effective in that cost reporting period that includes the sixth program year of the first new program started, the number of FTE residents in the new programs also must be reported both as part of the prior year FTE resident counts and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. In the example that we presented earlier, Hospital A has a fiscal year that begins on January 1. If Hospital A’s fiscal year begin date would have been October 1, then, while the sixth program year of the first new program started would still be July 1, 2018, the FTE residents caps, the 3-year rolling average, and the IRB ratio cap would be effective on October 1, 2017, the fiscal year begin date that precedes July 1, 2018, the sixth program year. If Hospital A’s fiscal year begin date would have been July 1, the FTE residents caps, the 3-year rolling average, and the IRB ratio cap would instead be effective on July 1, 2017, the fiscal year begin date that precedes July 1, 2018, the sixth program year. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148), we stated that we understood that this proposal, if finalized, would reduce the amount of time that the new medical residency VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 training programs would be exempt from the FTE resident caps. However, even though we proposed to make the effective date of the FTE resident caps earlier than under current policy, because we also proposed that the calculation of the FTE resident caps would still be based on the highest total number of FTE residents trained in any program year, during the fifth year of the first new program’s existence at all of the hospitals to which the residents in that program rotate, a new teaching hospital would still have the full 5 program years to grow its program(s), and its FTE resident caps would reflect a full 5 years of growth. Therefore, because, by the fifth program year, a program should, in most typical circumstances, have grown to its full capacity, barring unusual circumstances, the FTE resident caps that would take effect under the proposed policy at the beginning of the fiscal year that precedes the sixth program year should accommodate the FTE resident count training in the fifth and subsequent program years. Therefore, we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148) that we believe that this proposal to streamline and synchronize the effective dates of the FTE resident caps, the 3-year rolling average, and the IRB ratio cap not only is easier to comprehend and to implement, but also is reasonable and equitable in its effect on the IME and direct GME payments of hospitals establishing FTE resident caps. Specifically, we indicated that if the proposal is finalized, there would no longer be a need for CMS Form 2552– 10, Worksheet E, Part A, line 10 and Worksheet E–4, line 6 to instruct hospitals to contact their MACs for instructions on how to complete those lines, as both hospitals and MACs would understand how to report the number of FTE residents in new programs, even when those programs have different accredited lengths. Instead, hospitals and MACs would follow the methodology instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) to calculate the FTE resident caps for new medical residency training programs started on or after October 1, 2012, and once the FTE resident caps are calculated, hospitals and MACs would implement the FTE resident caps, the 3-year rolling average, and the IRB ratio cap effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started. Under the proposed methodology, FTE residents and FTE resident caps would no longer PO 00000 Frm 00256 Fmt 4701 Sfmt 4700 need to be prorated, and we would no longer need to make special accommodations to calculate the portion of FTE residents that are subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap for the respective portions of the hospital’s cost reporting period occurring on and after July 1. The existing CMS Form 2552–10 already accommodates the proposed methodology, unlike the complicated process currently in place. Therefore, clarity, efficiency, and payment accuracy would be improved for hospitals, MACs, and CMS. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148), we stated that with regard to rural hospitals that, under § 413.79(e)(3) of the regulations, may receive FTE resident cap adjustments at any time for participating in training residents in new programs, we proposed a similar policy, with modifications reflecting the fact that each new program in which the rural hospital participates receives its own 5year growth window before the rural hospital’s FTE resident cap is adjusted based on that new program. That is, we proposed that, for rural hospitals, the FTE resident caps, the 3-year rolling average, and the IRB ratio cap for each new program started would be effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each new program started. For example, rural Hospital B has a fiscal year that begins on January 1. It starts a family medicine program on July 1, 2013, and a general surgery program on July 1, 2016. The sixth program year for the family medicine program begins on July 1, 2018. The sixth program year for the general surgery program begins on July 1, 2021. With regard to Medicare cost reporting, during Hospital B’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, the number of family medicine FTE residents would be reported so as not to be included in the IME 3-year rolling average or the IRB ratio cap, and so as not to be included in the direct GME 3year rolling average. (This means that on CMS Form 2552–10, during Hospital B’s fiscal year end dates of December 31, 2013 through and including December 31, 2017, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 16 for IME, and on Worksheet E–4, line 15, for direct GME. Instead, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 16, and Worksheet E–4, line 15.) Then, beginning with Hospital B’s cost report for fiscal year ending December 31, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2018, the number of FTE residents in only the family medicine program would be subject to the FTE residents caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly in order to be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap. (This means that on CMS Form 2552–10, beginning with Hospital B’s cost report ending December 31, 2018, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME.) Because the general surgery program started on July 1, 2016, for Hospital B’s fiscal year end dates of December 31, 2016 through and including fiscal year end date of December 31, 2020, the number of general surgery FTE residents would be reported (on Worksheet E, Part A, line 16) so as not to be included in the IME 3-year rolling average or the IRB ratio cap, and (on Worksheet E–4, line 15), so as not to be included in the direct GME 3-year rolling average. Then, beginning with Hospital B’s cost report for fiscal year ending December 31, 2021, the number of FTE residents in the general surgery program would be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly (on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME), in order to be subject to the FTE resident cap, the 3-year rolling average, and the IRB ratio cap. We note that once the 3-year rolling average is effective in that cost reporting period that includes the sixth program year of each new program started, the number of FTE residents in the new programs also must be reported as part of the prior year FTE resident counts, and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. We proposed that this policy regarding the effective dates of the FTE residency caps, the 3-year rolling average, and the IRB ratio cap for FTE residents in new medical residency training programs would be consistent with the methodology for calculation of the FTE resident caps as described in the FY 2013 IPPS/LTCH PPS final rule, and implemented in the regulations at §§ 413.79(e)(1) and (e)(3). That is, because the policy providing a 5-year growth period for establishing the FTE resident caps (§§ 413.79(e)(1) and (e)(3)) is effective for new programs started on or after October 1, 2012, this proposal would be effective for urban hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that first begin to participate in training residents in their first new medical residency training program, and for rural hospitals, on or after October 1, 2012. We also proposed to revise the regulations for IME and direct GME, respectively, at § 412.105(a)(1)(ii) for the IME IRB ratio cap, at § 412.105(f)(1)(v) for the IME 3-year rolling average, and at § 413.79(d)(5) for the direct GME 3year rolling average to reflect that the exception from the IRB ratio cap and the 3-year rolling average for new programs applies to each new program individually during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and prior to the beginning of the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each individual new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3). After the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and after the applicable hospital’s cost reporting period that precedes the start of the sixth program year of each individual new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3), FTE residents participating in new medical residency training programs are included in the hospital’s IRB ratio cap and the 3-year rolling average. Comment: Many commenters supported CMS’ proposal to simplify and synchronize the timing of when FTE residents in new medical residency training programs are subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap. However, the commenters believed that the specific part of the proposal related to making the FTE resident caps effective beginning with the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started would result in premature application of the FTE resident cap while the hospital would still be within the 5-year cap building window, thereby reducing the number of FTEs to which the new teaching hospital would otherwise be entitled to payment. The commenters disputed CMS’ suggestion in the proposed rule that the effect on a hospital’s payment PO 00000 Frm 00257 Fmt 4701 Sfmt 4700 50109 would be inconsequential or nonexistent ‘‘in most typical circumstances.’’ The commenters provided examples of where they believed CMS’ proposal would result in the loss of payment for new teaching hospitals establishing an FTE resident cap. The commenters acknowledged CMS’ statement in the proposed rule that a new teaching hospital could experience a payment benefit from the proposed changes related to the synchronized implementation of the 3year rolling average and the IRB ratio cap. However, the commenters did not believe this ‘‘benefit justifies an imposition of the FTE resident cap within the 5-year cap building window.’’ The commenters urged CMS to finalize an alternative effective date that would be the start of the hospital’s cost reporting period that follows the start of the sixth program year of the start of the first new program. The commenters believed this alternative would achieve the simplicity that CMS seeks in its proposal, yet would also permit new teaching hospitals to retain the payments they are ‘‘entitled’’ to receive for at least a full 5 program years under existing regulations. Response: We appreciate the commenters’ support of the proposal, and the commenters’ concern that, by proposing that the effective date would be the applicable hospital’s cost reporting period that precedes the start of the sixth program year of the first new program started, this earlier application of the FTE resident cap might result in reduced payment because some amount of FTE residents would be in excess of the hospital’s newly calculated FTE resident caps. We also agree that the streamlining and simplification that we are seeking would be achieved by revising the proposal to instead take effect, as the commenters suggested, with the beginning of the hospital’s cost reporting period that follows the start of the sixth program year of the first new program started. Therefore, in this final rule, we are modifying our proposal as follows, both for urban teaching hospitals that have not yet had FTE resident caps established under § 413.79(e)(1), and for rural teaching hospitals that may or may not have FTE resident caps established under § 413.79(e)(3). That is, the FTE resident caps would continue to be calculated as finalized in the FY 2013 IPPS/LTCH PPS final rule—the methodology is based on the sum of the products of the following three factors: (1) the highest total number of FTE residents trained in any program year, during the fifth year E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50110 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of the first new program’s existence at all of the hospitals to which the residents in that program rotate; (2) the number of years in which residents are expected to complete the program, based on the minimum accredited length for each type of program; and (3) the ratio of the number of FTE residents in the new program that trained at the hospital over the entire 5-year period to the total number of FTE residents that trained at all hospitals over the entire 5year period. However, once calculated in this manner, we are finalizing a policy that, instead of the FTE resident caps being effective beginning with the sixth program year of the first new program started, those FTE resident caps, the 3-year rolling average, and the IRB ratio cap would be effective beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started. (We are specifying ‘‘that coincides with or follows’’ the start of the sixth program year of the first new program started, rather than only specifying ‘‘that follows’’ the start of the sixth program year of the first new program started as the commenters suggested, in consideration of hospitals that have a fiscal year begin date of July 1, for whom the cost reporting period that starts after completion of the 5-year cap building window coincides with the beginning of the sixth program year of the first new program started. Under this finalized policy, hospitals with a fiscal year begin date of July 1 would not wait an entire 12 months after completion of their 5-year cap building window for their next cost reporting period to start in order for the FTE resident caps, the 3-year rolling average, and the IRB ratio cap to take effect. Rather, for hospitals with a fiscal year begin date of July 1, the FTE resident caps, the 3-year rolling average, and the IRB ratio cap would be effective beginning with the applicable hospital’s cost reporting period that coincides with the start of the sixth program year of the first new program started.) Using the example of Hospital A that we presented in the proposed rule, assume Hospital A has a January 1 to December 31 cost reporting year. The first new program started, family medicine, was started on July 1, 2013. A sports medicine fellowship and a general surgery program also were started timely within the 5-year growth window. Hospital A has 5 program years to grow its FTE resident caps, from July 1, 2013 through June 30, 2018. The FTE resident caps would be calculated based on the 5 program years VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in accordance with the methodology established at § 413.79(e)(1) in the FY 2013 IPPS/LTCH PPS final rule. Therefore, the hospital would wait until after June 30, 2018, to obtain the FTE counts to calculate the FTE resident caps. However, those IME and direct GME FTE resident caps, once calculated after June 30, 2018, instead of being effective on July 1, 2018, would be effective at the beginning of Hospital A’s cost reporting period that follows July 1, 2018; that is, the FTE resident caps for Hospital A would be effective permanently on January 1, 2019, the start of Hospital A’s cost reporting period that follows the start of the sixth program year of the first new program started. The hospital would file its fiscal year end December 31, 2019 cost report including the FTE resident caps applicable to the entire cost reporting period accordingly. Regarding the application of the 3year rolling average and the IRB ratio cap, using the example of Hospital A, the FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would all be subject to the 3year rolling average and the IRB ratio cap beginning on January 1, 2019. With regard to reporting on the Medicare cost report, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2018, the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported so as not to be included in the IME rolling average or the IRB ratio cap, and so as not to be included in the direct GME rolling average. (On the CMS Form 2552–10, for Hospital A’s fiscal year end dates of December 31, 2013 through and including December 31, 2018, this means that the number of FTE residents in the family medicine program, the sports medicine fellowship, and the general surgery program would be reported on Worksheet E, Part A, line 16, and on Worksheet E–4, line 15.) However, on Hospital A’s cost report for fiscal year ending December 31, 2019, the number of FTE residents in these three programs would be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly. (On the CMS Form 2552–10, for Hospital A’s cost report for fiscal year ending December 31, 2019, this means that none of the FTE residents in these three programs would be reported on Worksheet E, Part A, line 16 for IME, and Worksheet E–4, line 15 for direct GME. Instead, all of the FTE residents PO 00000 Frm 00258 Fmt 4701 Sfmt 4700 would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME, in order to be subject to the FTE resident caps, the 3year rolling average, and the IRB ratio cap.) We note that once the 3-year rolling average is effective, the number of FTE residents in the new programs also must be reported both as part of the prior year FTE resident counts and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. In the example that we presented earlier, Hospital A has a fiscal year that begins on January 1. If Hospital A’s fiscal year begin date would have been October 1, while the sixth program year of the first new program started would still be July 1, 2018, the FTE residents caps, the 3-year rolling average, and the IRB ratio cap would be effective on October 1, 2018, the fiscal year begin date that follows July 1, 2018, the sixth program year. If Hospital A’s fiscal year begin date would have been July 1, the FTE residents caps, the 3-year rolling average, and the IRB ratio cap would be effective on July 1, 2018, the fiscal year begin date that follows completion of the fifth program year, and coincides with July 1, 2018, the sixth program year. With regard to rural hospitals that, under § 413.79(e)(3) of the regulations, may receive FTE resident cap adjustments at any time for participating in training residents in new programs, we are finalizing a similar policy, with modifications reflecting the fact that each new program in which the rural hospital participates receives its own 5year growth window before the rural hospital’s FTE resident cap is adjusted based on that new program. That is, we are finalizing that, for rural hospitals, the FTE resident caps, the 3-year rolling average, and the IRB ratio cap for each new program started would be effective beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of each new program started. For example, rural Hospital B has a fiscal year that begins on January 1. It starts a family medicine program on July 1, 2013, and a general surgery program on July 1, 2016. The sixth program year for the family medicine program begins on July 1, 2018. The sixth program year for the general surgery program begins on July 1, 2021. With regard to Medicare cost reporting, during Hospital B’s fiscal year end dates of December 31, 2013 through and including December 31, 2018, the number of family medicine FTE residents would be reported so as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations not to be included in the IME 3-year rolling average or the IRB ratio cap, and so as not to be included in the direct GME 3-year rolling average. (This means that on CMS Form 2552–10, during Hospital B’s fiscal year end dates of December 31, 2013 through and including December 31, 2018, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 16 for IME, and on Worksheet E–4, line 15, for direct GME.) Beginning with Hospital B’s cost report for fiscal year ending December 31, 2019, the number of FTE residents in only the family medicine program would be subject to the FTE residents caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly in order to be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap. (This means that on CMS Form 2552–10, beginning with Hospital B’s cost report ending December 31, 2019, the number of family medicine FTE residents would be reported on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME.) Because the general surgery program started on July 1, 2016, for Hospital B’s fiscal year end dates of December 31, 2016 through and including fiscal year end date of December 31, 2021, the number of general surgery FTE residents would be reported on Worksheet E, Part A, line 16 so as not to be included in the IME 3year rolling average or the IRB ratio cap, and on Worksheet E–4, line 15, so as not to be included in the direct GME 3-year rolling average. Beginning with Hospital B’s cost report for fiscal year ending December 31, 2022, the number of FTE residents in the general surgery program would be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap, and would be reported accordingly (on Worksheet E, Part A, line 10 for IME, and Worksheet E–4, line 6 for direct GME), in order to be subject to the FTE resident caps, the 3-year rolling average, and the IRB ratio cap. We note that once the 3-year rolling average is effective, the number of FTE residents in the new programs also must be reported as part of the prior year FTE resident counts, and the penultimate FTE resident counts, in order to effectuate the 3-year rolling average calculation on the IME Worksheet E, Part A, and the direct GME Worksheet E–4, respectively. After consideration of the public comments we received, we are finalizing our proposal with certain modifications. Specifically, the policy regarding the effective dates of the FTE VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 residency caps, the 3-year rolling average, and the IRB ratio cap for FTE residents in new medical residency training programs will be consistent with the methodology for calculation of the FTE resident caps as described in the FY 2013 IPPS/LTCH PPS final rule, and implemented in the regulations at §§ 413.79(e)(1) and (e)(3). That is, because the policy providing a 5-year growth period for establishing the FTE resident caps (§§ 413.79(e)(1) and (e)(3)) is effective for new programs started on or after October 1, 2012, this policy will be effective for urban hospitals that first begin to participate in training residents in their first new medical residency training program, and for rural hospitals, on or after October 1, 2012. We also are revising the regulations for IME and direct GME, respectively, at § 412.105(a)(1)(ii) for the IME IRB ratio cap, at § 412.105(f)(1)(v) for the IME 3year rolling average, and at § 413.79(d)(5) for the direct GME 3-year rolling average, to reflect that the exception from the IRB ratio cap and the 3-year rolling average for new programs applies to each new program individually during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of each individual new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3). Beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of each individual new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3), FTE residents participating in new medical residency training programs are included in the hospital’s IRB ratio cap and the 3-year rolling average. PO 00000 Frm 00259 Fmt 4701 Sfmt 4700 50111 3. Changes to IME and Direct GME Policies as a Result of New OMB Labor Market Area Delineations a. New Program FTE Resident Cap Adjustment for Rural Hospitals Redesignated as Urban As stated earlier in this final rule, under existing regulations, a new teaching hospital that starts training residents for the first time on or after October 1, 2012, has 5 years from when it first begins training residents in its first new program to build its FTE resident cap. If the teaching hospital is a rural teaching hospital, it can continue to receive permanent cap adjustments for training residents in new programs after the initial 5-year cap-building period that applies to new teaching hospitals ends. (We refer readers to section IV.K.2. of the preamble of this final rule for a discussion of our proposal and final policy to change the effective dates for when the FTE resident cap, the 3-year rolling average, and the IRB ratio cap are applied to new teaching hospitals and to new programs at rural teaching hospitals.) In section III.B. of the preamble of this final rule, we discuss the final policies we are implementing as a result of the new OMB labor market area delineations announced in the February 28, 2013 OMB Bulletin No. 13–01. As a result of the new OMB delineations, some teaching hospitals may be redesignated from being located in a rural area to an urban area, thereby losing their ability to increase their FTE resident caps for new programs started after their initial 5-year cap-building period ends. We have been asked whether a rural teaching hospital that already has a cap and is redesignated as urban while it is in the process of establishing another new program(s) can still receive a permanent cap adjustment for that new program(s). We believe that because the hospital had already started training residents in the new program(s) while it was rural, the former rural hospital should be permitted to continue building its new program(s) and receive a permanent FTE resident cap adjustment for that new program(s). Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28149 through 28150), we proposed to revise the regulations to allow a hospital that was rural as of the time it started training residents in a new program(s) and is redesignated as urban for Medicare payment purposes during its cap-building period for that program(s) to be able to continue building that program(s) for the remainder of the capbuilding period and receive a permanent FTE resident cap adjustment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50112 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations for that new program(s). Once the capbuilding period for the new program(s) that was started while the hospital was still rural expires, the teaching hospital that has been redesignated as urban would no longer be able to receive any additional permanent cap adjustments. We proposed that the teaching hospital must be actively training residents in the new program while it is still rural, that is, prior to the redesignation taking effect, in order for the hospital to continue receiving a cap adjustment for the new program. For example, if a rural hospital begins training residents in a new internal medicine program on July 1, 2013, and begins training residents in a new general surgery program on July 1, 2014, and the rural hospital is redesignated as urban effective on October 1, 2014, the teaching hospital would be able to continue receiving a cap adjustment for both the new internal medicine program and the new general surgery program after it has been redesignated as urban. However, if the rural hospital is redesignated as urban effective on October 1, 2014, and started training residents in a new internal medicine program on July 1, 2013, but did not start training residents in a new general surgery program while it was still rural, that is, prior to October 1, 2014, the teaching hospital would receive a permanent cap adjustment for the new internal medicine program, but would not receive a cap adjustment for the new general surgery program. We proposed to revise the regulations at § 412.105(f)(1)(iv)(D) for IME and § 413.79(c)(6) for direct GME to implement this proposed change. We proposed that these regulatory revisions be effective for cost reporting periods beginning on or after October 1, 2014. Comment: Commenters supported the proposal to allow a rural hospital that was training residents in a new program when it was redesignated as urban due to the most recent OMB delineations, to be able to continue with the capbuilding period for that new program and receive a permanent cap adjustment for that new program. Commenters stated that rural hospitals develop and build their new programs with the expectation that they will have a 5-year cap building period in which to grow these new programs. Commenters stated that the proposal is fair and equitable and helps address physician shortages in rural areas by promoting residency training in these areas. However, several commenters requested that CMS take the proposal one step further. These commenters stated that if a rural hospital has received a letter of accreditation for a new program prior to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the hospital being redesignated as urban, the hospital should be able to receive a permanent cap adjustment for that new program. One commenter stated that there are substantial resources and upfront costs that go into starting a new family medicine program. The commenter noted it may take some time for the program to begin training residents because the hospital must receive an initial letter of accreditation and then the program may have to wait for up to a year until it can participate in the match for residents to begin the following July 1. Response: We thank the commenters for their support of our proposal. We appreciate that significant resources go into developing a brand new residency training program and that there may be a lag between when a program is accredited and when residents begin training in that program. We are persuaded by these comments and, therefore, we are finalizing our proposed policy with a modification, such that a rural hospital that has been redesignated as urban can receive a permanent cap adjustment for a new program (after a 5-year cap building period for that new program), if it received a letter of accreditation for the new program, and/or started training residents in the new program, prior to being redesignated as urban. Expanding upon the example that was included in the proposed rule, if a rural hospital is redesignated as urban effective on October 1, 2014, and started training residents in a new internal medicine program on July 1, 2013, but did not start training residents in a new general surgery program while it was still rural, that is, prior to October 1, 2014, but did receive a letter of accreditation for the general surgery program prior to October 1, 2014, the rural hospital would receive a permanent cap adjustment for the new internal medicine program, and would receive a permanent cap adjustment for the new general surgery program. We are amending the regulations at § 412.105(f)(1)(iv)(D) and § 413.79(c)(6) to implement this policy. Consistent with the effective date of the implementation of the new OMB delineations, we are making this final policy effective October 1, 2014. Comment: Several commenters requested that CMS propose a policy through an interim final rule that would permit hospitals that remain rural referral centers (RRCs), even if they are no longer in a labor market designated as rural, to receive a cap increase for residents training in new programs. The commenters stated that RRCs are highvolume hospitals that treat complex PO 00000 Frm 00260 Fmt 4701 Sfmt 4700 cases, which may be referred to them from significant geographic distances. The commenters stated that RRCs meet important health care needs of rural communities because residency programs in RRCs train physicians who are equipped to deal with rural populations. The commenters requested that CMS specify that grandfathered RRCs are able to increase their caps for new programs so long as during the current Federal fiscal year, they continue to meet all RRC requirements other than being located in a rural area. Response: Section 1886(h)(4)(H)(i) of the Act states in part, ‘‘[i]n promulgating such rules for purposes of subparagraph (F), the Secretary shall give special consideration to facilities that meet the needs of underserved rural areas.’’ Subparagraph (F) refers to the establishment of a hospital’s FTE resident cap. We read this statutory language as providing special consideration only to rural hospitals for purposes of establishing their FTE resident caps, not that special consideration be provided to hospitals that are either not physically located in rural areas or have not reclassified as rural facilities (for IME payment purposes). Therefore, we are not making any special exceptions specific to RRCs that are no longer in rural areas in this final rule. As we have stated above for other hospitals that lose their rural status due to the new OMB delineations, an RRC that has been redesignated as urban may receive a permanent cap adjustment for a new program (after a 5year cap building period for that new program), if it received a letter of accreditation for the new program, and/ or started training residents in the new program, prior to being redesignated as urban. We note that if the redesignated RRC subsequently reclassified back to rural, it would be able to receive additional adjustments to its IME FTE resident cap for training residents in new programs. Comment: One commenter stated that it operates a rural teaching hospital that received the 30-percent cap increase applicable to rural teaching hospitals. The commenter stated that, due to the most recent OMB delineations proposed to be implemented, the hospital will be located in an urban area. The commenter asked whether the 30percent cap increase would carry over with the hospital’s urban status. Response: The regulations at § 412.105(f)(1)(iv)(D) and § 413.79(c)(6) implemented in this final rule state in part that effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations by CMS, the redesignated urban hospital may retain any existing increases to its FTE resident cap that it had received prior to when the redesignation became effective. Therefore, in the situation the commenter described, the hospital that is redesignated from rural to urban may retain the 30-percent cap increase it received while it was still rural. After consideration of the public comments we received, we are finalizing the proposed policy with a modification, such that a rural hospital that has been redesignated as urban can receive a permanent cap adjustment for a new program (after a 5-year cap building period for that new program), if it received a letter of accreditation for the new program, and/or started training residents in the new program, prior to being redesignated as urban. The finalized regulations at § 412.105(f)(1)(iv)(D) state the following: • A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, may retain the increases to its full-time equivalent resident cap that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of the section while it was located in a rural area. • Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may retain any existing increases to its FTE resident cap that it had received prior to when the redesignation became effective. • Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may receive an increase to its FTE resident cap for a new program, in accordance with paragraph (e) of the section, if it received a letter of accreditation for the new program and/ or started training residents in the new program, prior to the redesignation becoming effective. The finalized regulations at § 413.79(c)(6) state the following: • A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003, may retain the increases to its FTE resident cap that it received under paragraphs (c)(2)(i), (e)(1)(iii), and (e)(3) of the section while it was located in a rural area. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may retain any existing increases to its FTE resident cap that it had received prior to when the redesignation became effective. • Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may receive an increase to its FTE resident cap for a new program, in accordance with paragraph (e) of the section, if it received a letter of accreditation for the new program and/ or started training residents in the new program prior to the redesignation becoming effective. b. Participation of Redesignated Hospital in Rural Training Track To encourage the training of residents in rural areas, section 407(c) of Public Law 106–113 amended section1886(h)(4)(H) of the Act to add a provision (subsection (iv)) that, in the case of a hospital that is not located in a rural area (an urban hospital) that establishes separately accredited approved medical residency training programs (or rural tracks) in a rural area or has an accredited training program with an integrated rural track, the Secretary shall adjust the urban hospital’s cap on the number of FTE residents under subparagraph (F), in an appropriate manner in order to encourage training of physicians in rural areas. Section 407(c) of Public Law 106– 113 was made effective for direct GME payments to hospitals for cost reporting periods beginning on or after April 1, 2000, and for IME payments applicable to discharges occurring on or after April 1, 2000. We refer readers to the August 1, 2000 interim final rule with comment period (65 FR 47033 through 47037) and the FY 2002 IPPS final rule (66 FR 39902 through 39909) where we implemented section 407(c) of Public Law 106–113. The regulations at § 413.79(k) specify that, subject to certain criteria, an urban hospital may count the FTE residents in the rural track in addition to those FTE residents subject to its cap up to a ‘‘rural track FTE limitation’’ for that hospital. In the FY 2006 IPPS final rule, we revised the regulations at § 413.79(k) to add a new paragraph (7) to state that if an urban hospital had established a rural track program with a rural hospital and that hospital subsequently becomes urban due to the implementation of the new labor market area definitions PO 00000 Frm 00261 Fmt 4701 Sfmt 4700 50113 announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit for rural track programs established before the implementation of the new labor market area definitions. We also stated that, in order for the urban hospital to receive a cap adjustment for a new rural track program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location designations adopted by CMS (70 FR 47456; 47489). As discussed earlier in this section, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054), we proposed to implement, effective October 1, 2014, the new OMB labor market area delineations announced in the February 28, 2013 OMB Bulletin No. 13–01. As a result of the new delineations, certain areas are redesignated from urban to rural or from rural to urban, which may, in turn, affect GME policies that require the participation of rural teaching hospitals. For example, as noted above, in order for an urban teaching hospital to receive a FTE resident cap adjustment for training residents in a rural track, the residents must rotate for more than onehalf of the duration of the program to a rural hospital(s) or rural nonprovider(s) site. We have received a question as to what happens to a rural track when a rural hospital that is participating as the rural site is redesignated as urban, while the rural track for the urban hospital is in the process of being established. That is, what happens to the rural track when the rural hospital is redesignated as urban during the period that is used to establish the urban hospital’s rural track FTE limitation, prior to the effective date of the urban hospital’s rural track FTE limitation being established? Existing regulations at § 413.79(k)(7) address the scenario where a rural hospital that is participating as the rural site is redesignated as urban, after the rural track FTE limitation for the urban hospital has already become effective. Specifically, the regulations at § 413.79(k)(7) state that if an urban hospital had established a rural track with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of new labor market area definitions announced by OMB June 6, 2003, the urban hospital may continue to adjust its FTE resident limit for the rural track programs established prior to the adoption of the new labor market area definitions. Therefore, consistent with the existing regulations at § 413.79(k)(7) and with our proposal to allow rural hospitals redesignated as urban to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50114 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations continue receiving a FTE resident cap adjustment for new programs that started while the redesignated hospital was still rural, we proposed to revise the existing regulations applicable to urban hospitals generally. Specifically, we proposed to address the status of the ‘‘original’’ urban hospital’s (throughout this preamble, ‘‘original’’ urban hospital refers to the hospital that is the urban participant in the rural track program) rural track FTE limitation, in the situation where a rural hospital that is participating in the original urban hospital’s rural track is located in an area redesignated by OMB as urban during the 3-year period that is used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation. We proposed that, in these situations, the ‘‘original’’ urban hospital’s opportunity to receive a rural track FTE limitation would not be negatively impacted by the fact that the rural hospital with which it has partnered to be the rural site for its rural training track is located in an area redesignated by OMB as urban during the 3-year period that is used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation. That is, we proposed that the ‘‘original’’ urban hospital may receive a rural track FTE limitation for that new rural track program. With regard to the status of the rural hospital that is partnered with the ‘‘original’’ urban hospital to serve as a rural training site for the rural training track program, as mentioned earlier, existing regulations at § 413.79(k)(7) address the scenario where a rural hospital that is participating as the rural site is redesignated as urban, after the rural track FTE limitation for the ‘‘original’’ urban hospital has already become effective. (We note that we proposed to apply the existing policy at § 413.79(k)(7), which applies to redesignations that occurred on June 6, 2003, in a similar manner, to redesignations announced by OMB after June 6, 2003, as well.) In addition, we proposed that once the rural hospital is redesignated as located in an urban area due to the implementation of the new OMB labor market area delineations, regardless of whether that redesignation occurs during the 3-year period that is used to establish the rural track FTE limitation for the ‘‘original’’ urban hospital, or after the 3-year period that is used to establish the rural track FTE limitation for the ‘‘original’’ urban hospital, the redesignated urban hospital can no longer qualify as the rural site and the ‘‘original’’ urban hospital would not be able to count those residents under its rural track FTE VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 limitation if it continues to use the redesignated urban hospital as the rural site for purposes of the rural track. However, because the redesignated urban hospital was rural when residents started training in the rural track, we proposed to provide for a 2-year transition period during which either of the following two conditions must be met in order for the ‘‘original’’ urban hospital to be able to count the residents under its rural track FTE limitation when the 2-year transition period ends: (1) The redesignated newly urban hospital must reclassify back to rural under § 412.103 of the regulations; or (2) the ‘‘original’’ urban hospital must find a new geographically rural site to participate as the rural site for purposes of the rural track. We note that we proposed to apply these two criteria both in the case where the rural hospital is redesignated as urban after the ‘‘original’’ urban hospital already has its rural track FTE limit established, and also in the case where the rural hospital is redesignated as urban during the 3year period when the rural track program is still growing, prior to the rural track FTE limit being established. This 2-year transition period would begin when new OMB labor market area delineations take effect for Medicare payment purposes and would end exactly 2 years from that date. During this 2-year transition period, we would hold the ‘‘original’’ urban hospital harmless and would pay the ‘‘original’’ urban hospital for the FTE residents in the rural track. At the end of the 2-year transition period, in order for the ‘‘original’’ urban hospital to receive payment for a rural track program under § 413.79(k)(1) or (k)(2), either the redesignated urban hospital must be granted reclassification as rural under § 412.103 or the ‘‘original’’ urban hospital must already be training FTE residents at a geographically rural site. We note that, because the rural reclassification provision of § 412.103 only applies to IPPS hospitals and for purposes of section 1886(d) of the Act, it only applies to IPPS hospitals for IME payment purposes and not for direct GME payment purposes because direct GME is authorized under section 1886(h) of the Act. Therefore, if the redesignated hospital reclassifies as rural under § 412.103, the ‘‘original’’ urban hospital would only be able to count FTE residents towards its rural track FTE limitation for IME payment purposes, but not for direct GME payment purposes. In addition, we note that this discussion has centered on the scenario where a rural hospital that is the rural site for purposes of the rural PO 00000 Frm 00262 Fmt 4701 Sfmt 4700 track has been redesignated as urban. Under such a scenario, the redesignated urban hospital does have an option to reclassify as rural. However, as noted above, the reclassification only applies to IPPS hospitals for IME payment purposes. If a nonprovider site is functioning as the rural site under § 413.79(k)(2) for purposes of the rural track and the area where that nonprovider site is located is redesignated as urban, the nonprovider site would not have the option of reclassifying as rural and, therefore, the ‘‘original’’ urban hospital would be required to find a new geographically rural site within the 2-year transition period in order for the ‘‘original’’ urban hospital to receive payment for a rural track program under § 413.79(k)(1) or (k)(2). The following examples illustrate how the proposed policy would be applied to a rural track in which the rural site is a hospital and the rural hospital has been redesignated as urban: • An urban teaching hospital and a rural teaching hospital are participating in training residents in a new rural track program that begins July 1, 2014. Effective October 1, 2014, the rural hospital is redesignated as urban. We proposed that the timeframe for the ‘‘original’’ urban hospital to build the rural track program for purposes of calculating its rural track FTE limitation would continue to be through June 30, 2017. During the time period of October 1, 2014 to September 30, 2016, the redesignated urban hospital would continue participating as a rural hospital and the ‘‘original’’ urban hospital would count FTE residents it is training that are in the rural track for IME and direct GME. However, in order for the ‘‘original’’ urban hospital to continue to get paid for its rural track program after September 30, 2016, then, by September 30, 2016, the redesignated urban hospital must either reclassify as rural under § 412.103 of the regulations for purposes of IME payment only, or the ‘‘original’’ urban hospital must find a new geographically rural hospital or nonprovider site to train the residents in the rural track for more than one-half of their training. If neither of these conditions is met, by September 30, 2016, the ‘‘original’’ urban hospital would not able to receive payment for that specific program as a rural training track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training must be provided in a rural setting. • Another scenario could be one in which the rural hospital is redesignated as urban after the 3-year cap-building E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations period for the rural track has passed. For example, the rural track program began July 1, 2007, but effective October 1, 2014, the rural hospital is redesignated as urban. We proposed in this scenario that, by September 30, 2016, either the redesignated urban hospital must reclassify to rural under § 412.103 for purposes of IME payment only, or the ‘‘original’’ urban hospital must find a new geographically rural site that can participate as the rural site for purposes of the rural track. If neither of these conditions is met by September 30, 2016, the ‘‘original’’ urban hospital would not be able to receive payment for that specific program as a rural track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training must be provided in a rural setting. We noted that if the ‘‘original’’ urban hospital was not able to meet one of the two proposed conditions noted earlier in this section by the end of the 2-year transition period, but at some point later is able to meet one of the two proposed conditions, we proposed that the ‘‘original’’ urban hospital would be able to ‘‘revive’’ and use its already established rural track FTE limitation from that point forward. In the instance where the ‘‘original’’ urban hospital’s rural track FTE limitation was not set because the hospital was not able to meet one of the two proposed conditions by the end of the 2-year transition period, which fell within the 3-year cap-building timeframe, but at some point later is able to meet one of the two proposed conditions, we proposed that the ‘‘original’’ urban hospital would be able to have a rural track FTE limitation calculated and established based on the highest number of FTE residents in any program year training in the rural track in the third year of the program, even if during the third year of the program, the ‘‘original’’ urban hospital was not in compliance with the two proposed conditions. Consistent with similar policy discussed in the FY 2002 IPPS final rule (66 FR 39905), it would be the responsibility of the hospitals involved to provide the necessary information regarding the rotations of the residents in the third program year to the MAC in order for the calculation to be completed and the rural track FTE limit to be set. In summary, we proposed that any time a rural hospital participating in a rural track is in an area redesignated by OMB as urban after residents started training in the rural track and during the 3-year period that is used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation, the ‘‘original’’ urban hospital may receive a cap VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 adjustment for that rural track after the rural hospital has been redesignated as urban. Furthermore, we proposed that, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limitation, or after the 3-year period used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation, the redesignated urban hospital can continue to be considered a rural hospital for purposes of the rural track for up to 2 years. However, by the end of those 2 years, either the redesignated urban hospital must reclassify as rural under § 412.103 for purposes of IME payment only (in addition, this reclassification option only applies to IPPS hospitals, not nonprovider sites) or the ‘‘original’’ urban hospital must have found a new site in a geographically rural area that will serve as the rural site for purposes of the rural track in order for the ‘‘original’’ urban hospital to receive payment under § 413.79(k)(1) or (k)(2). We proposed to revise the regulations at § 413.79(k)(7) to implement these provisions and to establish that these changes would be effective for cost reporting periods beginning on or after October 1, 2014. Comment: In general, commenters supported the rural track proposals. Some commenters requested that, instead of providing for a 2-year transition period, CMS provide a 3-year transition period for the original urban hospital to find a new rural site. Commenters stated that it usually takes 3 years of financial and operational planning in order to develop a new training site and that it may take more time in rural areas where staffing is limited. Commenters stated that the program would also need time to request approval from the ACGME or the AOA to move its training site. Response: We appreciate the commenters’ support of our proposals related to rural track programs. As a result of commenters’ concerns that 2 years is not a sufficient transition period to allow the ‘‘original’’ urban hospital to find another rural hospital to participate as the rural site for purposes of the rural track, we are finalizing a policy providing for an alternative transition period. The transition period will begin effective with the date of the implementation of the new OMB delineations and extend through the end of the second residency training year following the implementation date of the new OMB delineations. For example, if as a result of the OMB delineations implemented effective October 1, 2014, the rural hospital PO 00000 Frm 00263 Fmt 4701 Sfmt 4700 50115 participating in a rural track program is redesignated as urban, the transition period for the ‘‘original’’ urban hospital to find a new rural site or for the redesignated hospital to reclassify back to rural for IME payment purposes, would last from October 1, 2014 through June 30, 2017. In addition, consistent with the effective date of the new OMB delineations, we are making these final policies effective October 1, 2014. We are revising the regulations at § 413.79(k)(7) to implement this change. The following examples illustrate how the policy finalized in this rule would be applied to an urban hospital that is training residents as part of a rural track program in the case where the rural hospital participating in the rural track program is redesignated as urban. • In this scenario, the rural hospital is redesignated as urban during the capbuilding period for the urban hospital’s rural track FTE limitation. The urban hospital (referred to as the ‘‘original’’ urban hospital) and the rural hospital are participating in training residents in a rural track program that begins July 1, 2014. Effective October 1, 2014, the rural hospital is redesignated as urban. Because urban teaching hospitals have a 3-year cap-building period in which to grow their rural track FTE limitation, the timeframe for the ‘‘original’’ urban hospital to build the rural track program for purposes of calculating its rural track FTE limitation will be July 1, 2014 (when the program begins) through June 30, 2017. In addition, for purposes of meeting the requirement that residents in a rural track program spend more than one-half of their time training at a rural site, the ‘‘original’’ urban hospital will have a transition period that lasts from October 1, 2014 (the implementation date of the new OMB delineations) through June 30, 2017 (the end of the second residency training year following the implementation date of the new OMB delineations, instead of September 30, 2016, as proposed). During the time period of October 1, 2014 through June 30, 2017, the redesignated urban hospital would continue participating as a rural hospital and the ‘‘original’’ urban hospital would count FTE residents it is training that are in the rural track for IME and direct GME. However, in order for the ‘‘original’’ urban hospital to receive a rural track FTE limitation effective July 1, 2017, and to continue to get paid for its rural track program after June 30, 2017, by June 30, 2017, the redesignated urban hospital must either reclassify as rural under § 412.103 of the regulations for purposes of IME payment only, or the ‘‘original’’ urban E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50116 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital must find a new geographically rural hospital or nonprovider site to train the residents in the rural track for more than one-half of their training. If neither of these conditions is met, by June 30, 2017, the ‘‘original’’ urban hospital would not able to receive payment for that specific program as a rural training track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training be provided in a rural setting. If at some point later, the ‘‘original’’ urban hospital is able to find a new rural site to participate in the rural track program, the ‘‘original’’ urban hospital would be able to receive a rural track FTE limitation based on the training that occurred from July 1, 2014 through June 30, 2017, and be paid for residents training in the rural track. • Another scenario could be one in which the rural hospital is redesignated as urban after the 3-year cap-building period for the ‘‘original’’ urban hospital’s rural track FTE limitation has passed. For example, the rural track program began July 1, 2007, but effective October 1, 2014, the rural hospital is redesignated as urban. Again, in this example, the ‘‘original’’ urban teaching hospital has a transition period that runs from October 1, 2014 through June 30, 2017 (instead of September 30, 2016, as proposed). In this scenario, by June 30, 2017, either the redesignated urban hospital must reclassify to rural under § 412.103 for purposes of receiving IME payment only, or the ‘‘original’’ urban hospital must find a new geographically rural site that can participate as the rural site for purposes of the rural track. If neither of these conditions is met by June 30, 2017, the ‘‘original’’ urban hospital would not be able to receive payment for that specific program as a rural track under § 413.79(k)(1) or (k)(2) because it would no longer meet the requirement that more than one-half of the training must be provided in a rural setting. If at some point later, the ‘‘original’’ urban hospital is able to find a new rural site to participate in the rural track program, the ‘‘original’’ urban hospital would be able to use its rural track FTE limitation and be paid for residents training in the rural track. Comment: Several commenters had concerns regarding rural tracks in general and concerns about what they believed would be unintended consequences resulting from the proposed policies. Commenters recommended that changes to OMB delineations be carefully managed with respect to rural track programs. Commenters stated that rural track programs are one of the best ways to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 expose residents to practicing in rural areas which, in turn, helps to address physician shortages in those areas. Commenters stated that if a rural hospital is the rural site for a rural track program and that rural hospital is subsequently redesignated as urban, it may not want to reclassify back to rural for a variety of reasons. Commenters stated that if the newly redesignated urban hospital does not want to reclassify back to rural and the ‘‘original’’ urban hospital wants to train residents in another rural area, the ‘‘original’’ urban hospital does not have any means by which to grow its cap. Commenters stated that even if the rural track program would be able to find and move to a different rural site, because the program would usually have the same staff and program director, CMS’ policies would consider the program to be an existing program rather than a new program, and therefore, a rural hospital that is a new site for purposes of the rural track program would not be able to receive a cap adjustment for training residents in that program. Commenters stated that it is within CMS’ purview to address this problem by changing the definition of a ‘‘new’’ program through the authority provided to the Secretary under section 1886(h)(4)(H)(i) of the Act, which states, ‘‘[in] promulgating such rules for purposes of subparagraph (F), the Secretary shall give special consideration to facilities that meet the needs of underserved rural areas.’’ Commenters believed CMS could use this authority to allow rural hospitals that are new rural track participants to receive a cap adjustment for training residents in the existing rural track program. One commenter expressed concern that CMS, in its rulemaking, has not provided enough consideration to the promoting of physician training in rural areas. The commenter referred to a study by Candice Chen, MD, et al, in Academic Medicine, which ‘‘reports that only 4.8% of all graduates of 759 sponsoring institutions practiced in rural areas and 198 of those 759 institutions produced no rural physicians. This percentage compares extremely unfavorably to the 19.3% of the population classified as rural by the 2010 census.’’ The commenter stated that it expects that hospitals that have been reclassified as urban will still have a focus on training residents to practice in rural areas. The commenter stated that CMS should realize that the training these hospitals provide is more important than the location of these hospitals, and therefore, CMS should PO 00000 Frm 00264 Fmt 4701 Sfmt 4700 give special consideration to residents training in programs at these hospitals by changing its definition of ‘‘new’’ programs. The commenter included comments it previously submitted on the clarification of the definition of new residency training programs in the rule in the May 22, 2009 Federal Register. Response: We appreciate the commenters’ support of residency training in rural areas, and we may consider their general concerns regarding CMS’ policies related to new programs and training in rural areas for future rulemaking. However, because we did not specifically propose any changes to our existing policy regarding what constitutes a ‘‘new’’ versus an ‘‘existing’’ program, we are not addressing those comments at this time. Instead, we wish to focus on several of the commenters’ concerns specifically related to our proposals in the FY 2015 IPPS/LTCH PPS proposed rule. In response to the commenters’ concerns that if the ‘‘original’’ urban hospital wishes to establish training in another rural area, there is no way for the ‘‘original’’ urban hospital to grow its cap, we believe that the commenters have misunderstood our proposal. We proposed that if the ‘‘original’’ urban hospital does find a new rural hospital for its existing rural track program, the original urban hospital would be able to apply its existing rural track FTE limitation to the residents that train at its hospital as part of that rural track. In addition, if the ‘‘original’’ urban hospital was not able to receive a rural track FTE limitation because either the redesignated urban hospital did not reclassify back to rural for IME payment purposes during the transition period or the ‘‘original’’ urban hospital was not able to find a new rural site during the transition period, but either of these conditions is met in the future, the ‘‘original’’ urban hospital would receive a rural track FTE limitation at that time, based on the training that occurred during the 3-year cap-building period for the rural track FTE limitation. We also point out that if the ‘‘original’’ urban hospital moves the rural portion of its training to a nonprovider site that is located in a geographically rural area, under existing regulations at 42 CFR 413.79(k)(2), the ‘‘original urban’’ hospital may continue to count the FTE residents training in the rural nonprovider site for more than one-half the duration of the program up to its own existing rural track FTE limitation. In addition, if in the future, the ‘‘original’’ urban hospital would want to develop a rural track program in a different specialty, it would be able to receive a separate rural track FTE E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations limitation for that rural track program in a different specialty. In terms of any potential cap adjustment for a rural hospital that trains residents as part of the rural track, if the rural track is considered a new program for Medicare payment purposes, and if at the time that the ‘‘original’’ urban hospital moves the program to the new rural hospital, the new rural training track is still within its cap-building period, any rural hospital that trains residents in that new program during the cap-building period for that new program will receive a permanent cap adjustment. Therefore, if the ‘‘original’’ urban hospital is able to find a new rural hospital to participate in the rural track during the capbuilding period for the new rural track program, that new rural hospital will, in fact, also be able to receive a cap adjustment and receive direct GME and IME payments for training residents in the new rural track program. After consideration of the public comments we received, we are finalizing a policy that if a rural hospital is training residents in a rural training track and is in an area redesignated by OMB as urban during the 3-year period that is used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation, the ‘‘original’’ urban hospital may receive a cap adjustment for that rural track after the rural hospital has been redesignated as urban. However, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation, or even after the 3year period used to calculate the ‘‘original’’ urban hospital’s rural track FTE limitation, the redesignated urban hospital may continue to be considered a rural hospital for purposes of the rural track for the term of a transition period. That transition period begins effective with the date the new OMB delineations are implemented by CMS and lasts through the end of the second residency training year following the implementation date of the new OMB delineations. By the end of the transition period, either the redesignated urban hospital must reclassify as rural under § 412.103 for purposes of IME payment only (in addition, this reclassification option only applies to IPPS hospitals, not nonprovider sites), or the ‘‘original’’ urban hospital must have found a new site in a geographically rural area that will serve as the rural site for purposes of the rural track in order for the ‘‘original’’ urban hospital to receive payment under § 413.79(k)(1) or (k)(2). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 The finalized regulations at § 413.79(k)(7) state the following: • Effective prior to October 1, 2014, if an urban hospital had established a rural track training program under the provisions of paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit in accordance with paragraph (k) for the rural track programs established prior to the adoption of such new labor market area definitions. In order to receive an adjustment to its FTE resident cap for a new rural track residency program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location designations adopted by CMS. • Effective October 1, 2014, if an urban hospital started a rural track training program under the provisions of paragraph (k) with a hospital located in a rural area and, during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, the urban hospital may continue to adjust its FTE resident limit in accordance with paragraph (k) and subject to paragraph (k)(7)(iii) for the rural track programs started prior to the adoption of such new OMB standards for delineating statistical areas. • Effective October 1, 2014, if an urban hospital started a rural track training program under the provisions of paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, or after the 3-year period used to calculate the urban hospital’s rural track FTE limit, the urban hospital may continue to adjust its FTE resident limit in accordance with paragraph (k) based on the rural track programs started prior to the change in the hospital’s geographic designation. In order for the urban hospital to receive or use the adjustment to its FTE resident cap for training FTE residents in the rural track residency PO 00000 Frm 00265 Fmt 4701 Sfmt 4700 50117 program that was started prior to the most recent OMB standards for delineating statistical areas adopted by CMS, one of the following two conditions must be met by the end of a period that begins when the most recent OMB standards for delineating statistical areas are adopted by CMS and continues through the end of the second residency training year following the date the most recent OMB delineations are adopted by CMS: the hospital that has been redesignated from rural to urban must reclassify as rural under § 412.103, for purposes of IME only; or the urban hospital must find a new site that is geographically rural consistent with the most recent geographical location delineations adopted by CMS. In order to receive an adjustment to its FTE resident cap for an additional new rural track residency program, the urban hospital must participate in a rural track program with sites that are geographically rural based on the most recent geographical location delineations adopted by CMS. We also have determined that there is an outdated, incorrect reference included in the definition of ‘‘Rural track FTE limitation’’ under § 413.75(b). The reference included in the definition is ‘‘§ 413.79(l)’’. The correct reference is ‘‘§ 413.79(k)’’. Therefore, as we proposed, we are making a technical correction to the definition of ‘‘Rural track FTE limitation’’ so that it means the maximum number of residents (as specified in § 413.79(k)) training in a rural track residency program that an urban hospital may include in its FTE count and that is in addition to the number of FTE residents already included in the hospital’s FTE cap. 4. Clarification of Policies on Counting Resident Time in Nonprovider Settings Under Section 5504 of the Affordable Care Act In the November 24, 2010 final rule with comment period (75 FR 71808, 72134 through 72141, and 72153), we implemented section 5504 of the Affordable Care Act regarding counting resident time in nonprovider settings. We also mentioned the scope of section 5504 of the Affordable Care Act in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27638) and final rule (78 FR 50735). Section 5504(a) of the Affordable Care Act made changes to section 1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of Medicare direct GME payments, but did so only on a prospective basis in connection with certain specified cost reporting E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50118 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations periods. Notably and more specifically, section 5504(a)(3) of the Affordable Care Act amended the Act effective only for ‘‘cost reporting periods beginning on or after July 1, 2010,’’ for direct GME, to permit hospitals to count the time that a resident trains in activities related to patient care in a nonprovider site in its FTE count if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site. Section 5504(b)(2) of the Affordable Care Act made similar changes to section 1886(d)(5)(B)(iv) of the Act for IME payment purposes, with the provision being effective only for discharges occurring on or after July 1, 2010, for IME. In connection with those periods and discharges, if more than one hospital incurs the residency training costs in a nonprovider setting, under certain circumstances, sections 5504(a)(3) and (b)(2) of the Affordable Care Act allow each hospital to count a proportional share of the training time that a resident spends training in that setting, as determined by a written agreement between the hospitals. When Congress enacted section 5504 of the Affordable Care Act, it retained the statutory language which provides that a hospital can only count the time so spent by a resident under an approved medical residency training program in its FTE count if that one single hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting.’’ In doing so, Congress also revised the statutory language in sections 5504(a)(1) and (b)(1) to explicitly make this longstanding substantive standard and requirement applicable to ‘‘cost reporting periods beginning before July 1, 2010’’ for direct GME, and to ‘‘discharges occurring on or after October 1, 1997, and before July 1, 2010,’’ for IME (sections 1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act). Beginning at least as early as 1988, the Secretary consistently noted in the preamble of various rules that the statute only allowed a hospital to count the time that its residents spent training in a nonprovider site in the FTE resident count for direct GME and IME purposes if that single hospital incurred ‘‘all of substantially all’’ of the costs of the training program in that setting. Indeed, in Borgess Medical Center v. Sebelius (966 F.Supp.2d at *6–*7 (D.D.C. 2013)), a court noted that CMS had done so in 1998, 2003, and 2007 preambles of rules. For a full discussion of the longstanding substantive standard and requirement that a hospital can only count residents training if that one single hospital incurs all or VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 substantially all of the costs for the training, we refer readers to the discussion in the November 24, 2010 final rule with comment period (75 FR 72134 through 72141), the May 11, 2007 final rule (72 FR 26953 and 26969), the August 1, 2003 final rule (68 FR 45439), the July 31, 1998 final rule (63 FR 40954 and 40995), the September 29, 1989 final rule (54 FR 40286 and 40288), and the September 21, 1988 proposed rule (53 FR 36589 and 36591). Section 5504(c) of the Affordable Care Act specifies that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of the date of the enactment of this Act on the issue of payment for indirect costs of medical education . . . or for direct graduate medical education costs. . . .’’ The date of enactment of the Affordable Care Act was March 23, 2010. In the November 24, 2010 final rule with comment period, we revised the regulations at § 412.105(f)(1)(ii)(E) for IME and §§ 413.78(f) and (g) for direct GME to reflect the changes made by section 5504 of the Affordable Care Act. Section 413.78(g) is the implementing regulation that corresponds to the statutory amendments set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act. The introductory regulatory language of § 413.78(g) explicitly states that paragraph (g) governs only ‘‘cost reporting periods beginning on or after July 1, 2010.’’ Paragraph (g)(5) of § 413.78 also expressly states that the paragraph is limited to ‘‘cost reporting periods beginning on or after July 1, 2010.’’ Accordingly, we have repeatedly stated, and we believe that the existing regulation makes plain, that paragraph (g) of § 413.78 ‘‘is explicitly made applicable only to ‘cost reporting periods beginning on or after July 1, 2010,’ whereas earlier cost reporting periods are governed by other preceding paragraphs of § 413.78’’ (78 FR 50735). In addition, we also revised the definition of ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ in the regulations at § 413.75(b) to reflect that both the statute and regulations require that, for cost reporting periods beginning on and after July 1, 2007 and before July 1, 2010, one hospital must by itself incur ‘‘all or substantially all of the costs’’ of the residents training in the nonprovider site in order for the hospital to receive Medicare IME and direct GME payment for that training. Finally, we also revised the IME PO 00000 Frm 00266 Fmt 4701 Sfmt 4700 regulations at § 412.105 to reflect these statutory amendments, by incorporating by reference § 413.78(g). Despite the fact that sections 5504(a) and (b) of the Affordable Care Act provide clear effective dates with respect to the amendments provided therein to sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act, and that the preamble discussion of the implementation of these provisions and further discussion of the statutory amendments in the November 24, 2010 final rule with comment period and in the August 19, 2013 final rule provide further explanation that, specifically, nothing in section 5504(c) overrides those effective date (75 FR 72136), we have received questions about the applicability of section 5504(c) and the associated regulation text at § 413.78(g)(6). Specifically, questions have been raised with respect to the applicability of sections 5504(c) of the Affordable Care Act and § 413.78(g)(6) of the regulations to periods prior to July 1, 2010, particularly if a hospital had, as of March 23, 2010, appealed an IME or direct GME issue for a settled cost reporting period occurring prior to July 1, 2010. As noted earlier, section 5504(c) of the Affordable Care Act provides that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of . . . [March 23, 2010] on the issue of payment for indirect costs of medical education . . . or for direct graduate medical education costs. . . .’’ In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28153), we stated that upon revisiting the existing regulation text, we determined that § 413.78(g)(6) was not written in a manner that is as consistent with section 5504(c) of the Affordable Care Act and reflective of our reading of section 5504 and our policy as it could be. Specifically, § 413.78(g)(6) states that the provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of the section cannot be applied in a manner that would require the reopening of settled cost reports, except those cost reports on which there is a jurisdictionally proper appeal pending on direct GME or IME payments as of March 23, 2010. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28152 through 28154 and 28307), we reiterated our existing interpretation of the statutory amendments made by sections 5504(a), (b), and (c) of the Affordable Care Act and also proposed to clarify the regulation text implementing these provisions by revising the language at § 413.78(g)(6) to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations read more consistently with our reading of section 5504 and the language in section 5504(c) of the Affordable Care Act and to ensure no further confusion with respect to the applicability of section 5504(c) of the Affordable Care Act and § 413.78(g)(6) of the regulations. We believe that sections 5504(a) and (b) of the Affordable Care Act contained three primary directives (a fourth regarding recordkeeping requirement is tangential to this discussion): (1) under sections 5504(a)(1) and (b)(1) of the Affordable Care Act (sections 1886(h)(4)(E)(i) and 1886(d)(5)(B)(iv)(I) of the Act), for ‘‘cost reporting periods beginning before July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after October 1, 1997, and before July 1, 2010’’ for IME, these sections explicitly retained the statutory language that provides that a hospital can only count the time so spent by a resident under an approved medical residency training program in its FTE count if a hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting’’; (2) under sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after July 1, 2010’’ for IME, these sections eliminated the ‘‘all or substantially all’’ requirement, instead requiring a hospital to incur the residents’ salaries and fringe benefits for the time spent at the nonprovider site; and (3) under sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, and for ‘‘discharges occurring on or after July 1, 2010’’ for IME, these sections created a new provision with regard to allowing more than one hospital to share the costs of residents training in a nonprovider setting under certain circumstances, in order for each hospital to count a proportional share of the FTE training time in the nonprovider setting. Separately from sections 5504(a) and (b) of the Affordable Care Act, section 5504(c) of the Affordable Care Act, as mentioned earlier, specifies that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of’’ March 23, 2010, the date of the enactment of the Affordable Care Act, on the issue of payment for IME and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 direct GME. When we proposed to implement section 5504(c) in the August 3, 2010 proposed rule (75 FR 46385) and when we implemented section 5504(c) in the November 24, 2010 final rule with comment period (75 FR 72136), we had to consider what new meaning it was adding to sections 5504(a) and (b) of the Affordable Care Act because unlike, for example, section 5505 of the Affordable Care Act which has an effective date prior to enactment of the Affordable Care Act and, therefore, would apply to prior cost reporting periods, section 5504’s applicable effective date for the new standards it creates was July 1, 2010, a date that came after enactment of the Affordable Care Act and was fully prospective. As we stated in the November 24, 2010 final rule with comment period (75 FR 72136), ‘‘Section 5504 is fully prospective with an explicit effective date of July 1, 2010, for the new standards it creates. Nothing in section 5504(c) overrides that effective date. Section 5504(c) merely notes that the usual discretionary authority of Medicare contractors to reopen cost reports is not changed by the provisions of section 5504; it simply makes clear that Medicare contractors are not required by reason of section 5504 to reopen any settled cost report as to which a provider does not have a jurisdictionally proper appeal pending. It does not require reopening in any circumstance; and the new substantive standard is, in any event, explicitly prospective. We believe if Congress had wanted to require such action or to apply the new standards to cost years or discharges prior to July 1, 2010, it would have done so in far more explicit terms.’’ We also noted in that rule (75 FR 72139) that ‘‘[the] statute does not provide CMS discretion to allow the counting of resident time spent in shared nonprovider site rotations for cost reporting periods beginning prior to July 1, 2010.’’ We continue to believe that Congress was clear in amending sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to provide for new standards to be applied only prospectively, effective for cost reporting periods beginning on or after, and discharges occurring on or after, July 1, 2010. We also continue to believe that the plain meaning of section 5504(c) of the Affordable Care Act is that the Secretary is not required to reopen a cost report when there is no jurisdictionally proper appeal pending as of March 23, 2010, the date of the enactment of the Affordable Care Act, on the issue of payment for IME and direct GME. Therefore, we believe that PO 00000 Frm 00267 Fmt 4701 Sfmt 4700 50119 section 5504(c) of the Affordable Care Act is merely a confirmation of the Secretary’s existing discretionary authority in one particular context, and that sections 5504(a) and (b) of the Affordable Care Act and their effective dates become all the more prominent, and are not affected by section 5504(c). As noted earlier, we revised the regulations at § 412.105(f)(1)(ii)(E) for IME, and § 413.78(g) for direct GME, to reflect the changes made by section 5504 of the Affordable Care Act in the November 24, 2010 final rule with comment period. We reiterate here that the introductory language of § 413.78(g) explicitly states that paragraph (g) governs only ‘‘cost reporting periods beginning on or after July 1, 2010’’ and paragraph (g)(5) also expressly states that the paragraph is limited to ‘‘cost reporting periods beginning on or after July 1, 2010’’ (78 FR 50735 and 78 FR 27639). As we noted before, we believe that the paragraphs of the regulations which precede paragraph (g), particularly paragraphs (c) through (f), consistent with the statute, make clear that a hospital may only count the time so spent by a resident under an approved medical residency training program in its FTE count, in connection with its pre-July 1, 2010 cost reporting periods and pre-July 1, 2010 patient discharges, if that one single hospital by itself ‘‘incurs all, or substantially all, of the costs for the training program in that setting.’’ Separately, we believe that the new standards set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act and implemented by regulation at §§ 413.78(g) and 412.105(f)(1)(ii)(E), allowing cost sharing under certain circumstances do not ever apply to preJuly 1, 2010 cost reporting periods and pre-July 1, 2010 patient discharges. Moreover, we continue to believe the language in paragraph (g)(6) (along with the remainder of paragraph (g)) only applies to cost reporting periods beginning on or after July 1, 2010 and does not apply retroactively to cost reporting periods beginning before July 1, 2010. We had intended that the language under § 413.78(g)(6) do no more than simply paraphrase the language in section 5504(c) of the Affordable Care Act. Accordingly, we believe that it is apparent that the provisions of sections 5504(a)(3) and (b)(2) of the Affordable Care Act are not to be applied prior to July 1, 2010, irrespectively of whether a hospital may have had a jurisdictionally proper appeal pending as of March 23, 2010, on an IME or direct GME issue from a cost reporting period occurring prior to July 1, 2010. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50120 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations In the FY 2015 IPPS/LTCH PPS proposed rule, we reiterated our existing interpretation of the statutory amendments made by sections 5504(a) and (b) of the Affordable Care Act and also proposed to clarify the regulatory text that implements these provisions by revising the § 413.78(g)(6) to be more consistent with the language at section 5504(c) of the Affordable Care Act. We proposed to revise the regulatory language to read as follows: ‘‘The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section shall not be applied in a manner that requires reopening of any settled cost reports as to which there is a jurisdictionally proper appeal pending as of March 23, 2010, on direct GME or IME payments. Cost reporting periods beginning before July 1, 2010 are not governed by paragraph (g) of this section.’’ The IME regulation at § 412.105(f)(1)(ii)(E) includes a reference to § 413.78(g)(6); therefore, no proposed change was needed to this section. Comment: One commenter supported CMS’ proposed changes with regard to implementation of section 5504 of the Affordable Care Act. Other commenters objected to CMS’ interpretation that section 5504 is fully prospective with an effective date of July 1, 2010, and that CMS’ proposed revision of § 413.78(g)(6) would be with a ‘‘retroactive effective date.’’ The commenters asserted that CMS’ interpretation is contrary to the plain meaning of the statute because Congress expected that cost reports that were settled prior to 2010 would not be reopened, thereby explicitly adding under section 5504(c) that if the cost report was not settled, and if there was a jurisdictionally proper appeal pending as of the date of the enactment of the Affordable Care Act, the provisions of section 5504 would apply. One commenter noted that an interpretation must ‘‘give effect, if possible, to every clause and word of the statute’’ (United States v. Menasche, 348 U.S. 528, 538– 39 (1955)). The commenter therefore believed that subsection (c) would be superfluous if section 5504 were only prospective, particularly considering that Congress had no need to instruct the Secretary not to do something that she would not have done anyway (that is, reopen cost reports without a statutory mandate). The commenters asserted that CMS, in the August 3, 2010 proposed rule (75 FR 46385), initially interpreted section 5504(c) to effectively override the directives in sections 5504(a) and (b) and to require reopening and application of the new standards set forth in section 5504(a)(3) and section 5504(b)(2) to pre-July 1, 2010 cost VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reporting periods and patient discharges whenever a hospital had a pending, jurisdictionally proper appeal pending on a direct GME or IME issue as of March 23, 2010. The commenters also did not believe it is appropriate for CMS to contend that section 5504 is strictly prospective but, at the same time, propose to clarify an amendment to the regulations at § 413.78(g)(6) ‘‘with retroactive effect to 2010.’’ One commenter argued that a final rule must be a ‘‘logical outgrowth’’ of the proposed rule, and the final regulation implemented in the November 24, 2010 final rule with comment period was the same as that proposed. The commenter surmised that CMS ‘‘likely did not revise the final codified regulation in order to avoid a challenge that the final rule was not the ‘logical outgrowth’ of the proposed rule,’’ and asserted that CMS’ proposed clarification of § 413.78(g)(6) in the FY 2015 IPPS/ LTCH PPS proposed rule cannot be applied prior to October 1, 2014. The commenters suggested that the Secretary and CMS reconsider its proposal to change § 413.78(g)(6), and acknowledge that, as promulgated in the November 24, 2010 final rule with comment period, § 413.78(g)(6) required reopening of a hospital cost report for which a jurisdictionally proper appeal was pending regarding GME and/or IME as of the date of enactment of the Affordable Care Act. Response: We agree with the commenters that some meaning must be attributed to the statutory language at section 5504(c) of the Affordable Care Act that the amendments made by the provisions of sections 5504(a) and (b) ‘‘shall not be applied in a manner that requires reopening of any settled hospital cost reports as to which there is not a jurisdictionally proper appeal pending as of the date of the enactment of this Act on the issue of payment for indirect costs of medical education . . . or for direct graduate medical education costs. . . .’’ Congress knows how to explicitly provide for retroactive application or apply new standards to pending appeals when it so desires. Indeed, the same statute at issue here, the Affordable Care Act, contains numerous sections that, unlike section 5504 of the Affordable Care Act, are either explicitly retroactive or expressly apply new standards to pending appeals. For example, section 5505 of the Affordable Care Act (unlike section 5504) contains explicitly retroactive language. Section 5505 (c)(1) of the Affordable Care Act states, ‘‘[e]xcept as otherwise provided, the Secretary . . . shall implement the amendments made PO 00000 Frm 00268 Fmt 4701 Sfmt 4700 by this section in a manner so as to apply to cost reporting periods beginning on or after January 1, 1983’’; section 5505(c)(2) instructs that a subsection ‘‘shall apply to cost reporting periods beginning on or after July 1, 2009’’); section 5505(c)(3) instructs that another subsection ‘‘shall apply to cost reporting periods beginning on or after October 1, 2001’’. Section 5504 has nothing comparable to the express retroactive language which is to be found in section 5505. As another example, section 1556(c) is explicitly retroactively and expressly applies a standard to pending appeals, unlike section 5504 of the Affordable Care Act. Section 1556(c) of the Affordable Care Act states, ‘‘[t]he amendments made by this section shall apply with respect to claims filed under [a 1976 statute] after January 1, 2005, that are pending on or after the date of enactment of this Act’’. The fact that Congress was explicit when it intended for particular provisions of the Affordable Care Act to apply retroactively and/or to apply to pending proceedings, but section 5504 of the Affordable Care Act contains no such statements, suggests that Congress did not intend for the new substantive standards set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act to apply to earlier periods and discharges and/or to pending appeals. Instead, we can presume that Congress acted intentionally and purposely by omitting such language in section 5504 of the Affordable Care Act. As we explained in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28152 through 28154), when we proposed to implement section 5504(c) in the August 3, 2010 proposed rule (75 FR 46385), and when we implemented section 5504(c) in the November 24, 2010 final rule with comment period (75 FR 72136), we had to consider what new meaning it was adding to sections 5504(a) and (b) of the Affordable Care Act because unlike, for example, section 5505 of the Affordable Care Act, which has an effective date prior to enactment of the Affordable Care Act and, therefore, would apply to prior cost reporting periods, section 5504’s applicable effective date for the new standards it creates was July 1, 2010, a date that came after enactment of the Affordable Care Act and was fully prospective (the new standards being that hospitals would be permitted to count the time that a resident trains in activities related to patient care in a nonprovider site in its FTE count if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site, and if E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations more than one hospital incurs the residency training costs in a nonprovider setting, under certain circumstances, each hospital could count a proportional share of the training time that a resident spends training in that setting). As we stated in the November 24, 2010 final rule with comment period (75 FR 72136), ‘‘Section 5504 is fully prospective with an explicit effective date of July 1, 2010, for the new standards it creates. Nothing in section 5504(c) overrides that effective date. Section 5504(c) merely notes that the usual discretionary authority of Medicare contractors to reopen cost reports is not changed by the provisions of section 5504; it simply makes clear that Medicare contractors [MACs] are not required by reason of section 5504 to reopen any settled cost report as to which a provider does not have a jurisdictionally proper appeal pending. It does not require reopening in any circumstance; and the new substantive standard is, in any event, explicitly prospective. We believe if Congress had wanted to require such action or to apply the new standards to cost years or discharges prior to July 1, 2010, it would have done so in far more explicit terms.’’ Therefore, we believe we were clear in the November 24, 2010 final rule with comment period that we did not interpret section 5504(c) to override the clear directives in sections 5504(a) and (b) concerning the substantive standards that would apply to pre- and post-July 1, 2010 cost reporting periods and discharges. We rejected the notion there that section 5504(c) requires reopening and application of the new, more generous standard (which sections 5504(a)(3) and (b)(2) created and expressly made ‘‘effective’’ only for cost reporting periods beginning and discharges occurring ‘‘on or after July 1, 2010’’) to earlier periods and discharges whenever a hospital had a jurisdictionally proper appeal pending on direct or indirect GME as of the Affordable Care Act’s enactment. Since that time, we have maintained our position that the new, more generous standard set forth in sections 5504(a)(3) and (b)(2) only apply to cost reporting periods beginning, and discharges occurring, ‘‘on or after July 1, 2010.’’ We have at the same time noted that Congress chose in sections 5504(a) and (b) to explicitly and pointedly retain the longstanding statutory substantive standard (that requires a single hospital to incur ‘‘all, or substantially all’’ of the costs of the nonprovider residency training before it may receive Medicare direct GME and IME payment for that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 training), and make it applicable to preJuly 1, 2010 cost reporting periods and discharges, while creating a new, more generous standard which it directed would apply to later periods and discharges. It is Congress who decided that the July 1, 2010 date would be significant, and we are honoring the choice Congress made. Therefore, we disagree with the commenters that it is inappropriate for CMS to propose to clarify an amendment to the regulations at § 413.78(g)(6) ‘‘with retroactive effect to 2010.’’ Moreover, we have consistently expressed our position that the new substantive standards which sections 5504(a)(3) and (b)(2) added to the Medicare statute apply only to cost reporting periods beginning, and discharges occurring, on or after July 1, 2010 (75 FR 46385) and 75 FR 72136). Accordingly, our proposed clarification of § 413.78(g)(6) reiterating our existing interpretation of the statutory amendments made by sections 5504(a) and (b) of the Affordable Care Act is appropriate. Commenters argued that CMS’ statements in the August 3, 2010 proposed rule initially interpreted section 5504(c) to mean that section 5504 could be applied retroactively to hospitals that indeed had a pending, jurisdictionally proper appeal pending on a direct GME or IME issue as of March 23, 2010. However, the commenters misapprehended the position we took in the August 3, 2010 proposed rule. While it is true that the proposed rule defined the meaning of the term ‘‘pending, jurisdictionally proper appeal’’ that appears in section 5504(c) of the Affordable Care (75 FR 46385), it did not state that reopening was required when a hospital had such an appeal pending as of the date of enactment or in other circumstances. In addition, it never stated that the new standard set forth in sections 5504(a) and (b) could ever apply to a cost reporting period beginning prior to July 1, 2010 for direct GME purposes, or to a discharge occurring before July 1, 2010 for IME purposes. Quite to the contrary, the proposed rule noted that ‘‘[f]or direct GME payments, [section 5504] is effective for cost reporting periods beginning on or after July 1, 2010; for IME payments, the provision is effective for discharges occurring on or after July 1, 2010’’ (75 FR 46385 and 46386 (along similar lines)), and advised that: ‘‘We are proposing to revise our regulation at § 413.75(b) accordingly to conform to these new statutory requirements [in section 5504 of the Affordable Care Act]. Specifically, we are proposing to revise the existing definition of ‘‘all or PO 00000 Frm 00269 Fmt 4701 Sfmt 4700 50121 substantially all of the costs for the training program in the nonhospital setting’’ to be effective for cost reporting periods beginning on or after July 1, 2007, and before July 1, 2010. We also are proposing to add a new § 413.78(g) that details how hospitals should count residents that train in nonhospital sites for cost reporting periods beginning on or after July 1, 2010.’’ Therefore, the August 3, 2010 proposed rule recognized that section 5504 required pre-July 1, 2010 cost reporting periods and discharges to be subject to the longstanding requirement that a single hospital incur all or substantially all of the costs of residents training in a nonprovider site, not the new, more generous standard set forth in section 5504(a) and (b) of the Affordable Care Act. As noted, in the November 24, 2010 final rule, in response to comments, the Secretary only made it even more explicit that she did not read section 5504(c) to require her to retroactively apply the new substantive standard in sections 5504(a) and (b) to pre-July 1, 2010 cost reporting periods and discharges (75 FR 72136 and 72153). At least one court has held that our reading of section 5504 and the implementing regulation is reasonable and has rejected many of the arguments that the commenters made. The Eastern District of Michigan has recognized that ‘‘while section 5504(c) [of the Affordable Care Act] establishes that if there was not a pending appeal concerning a final cost report when the Affordable Care Act was enacted, that cost report will not be reopened, section 5504(c) does not establish that if there was a pending appeal concerning a final cost report when the Affordable Care Act was enacted, that cost report must be reopened; on this point the statute is silent,’’ and ‘‘Congress expressly indicated in the statute itself what standards apply to what cost periods’’ in sections 5504(a) and (b) of the Affordable Care Act (Covenant Medical Center v. Sebelius, No. 12–12901, 2014 WL 340247, at *8–*10 (E.D. Mich. Jan. 30, 2014)). The district court also noted that our reading of section 5504 gives effect to every clause and word of the provision as it honors the effective dates and standards prescribed in sections 5504(a) and (b). The court further noted that the current version of 42 CFR 413.78(g)(6) is ‘‘almost identical to section 5504(c)’’ and held that CMS’ ‘‘interpretation of § 5504(c) is not undermined by her identical conclusion regarding section 413.78(g)(6)’’ (Covenant Medical Center v. Sebelius, No. 12–12901, 2014 WL 340247, at *11– 12 (E.D. Mich. Jan. 30, 2014)). Therefore, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50122 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations we disagree with the commenter that surmised that, in the November 24, 2010 final rule with comment period, CMS ‘‘likely did not revise the final codified regulation in order to avoid a challenge that the final rule was not the ‘logical outgrowth’ of the proposed rule.’’ Rather, as the court noted, the current version of 42 CFR 413.78(g)(6) is ‘‘almost identical to section 5504(c)’’ and held that CMS’ ‘‘interpretation of § 5504(c) is not undermined by her identical conclusion regarding section 413.78(g)(6)’’ (Covenant Medical Center v. Sebelius, No. 12–12901, 2014 WL 340247, at *11–12 (E.D. Mich. Jan. 30, 2014)). We had intended that the language under § 413.78(g)(6) do no more than simply paraphrase the language in section 5504(c) of the Affordable Care Act. Accordingly, we did not believe that it was necessary to revise the final regulation in the November 24, 2010 final rule with comment period. Nevertheless, as stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28153), because we have received questions about the applicability of section 5504(c) and the associated regulation text at § 413.78(g)(6), we took the opportunity to revisit the regulations and clarify them so that they would be even more consistent with the language at section 5504(c). Comment: One commenter asked that CMS clarify that section 5504 ‘‘filled a gap in the law’’ regarding funding of residency training occurring in a nonprovider setting ‘‘by establishing for the first time the definitive law regarding Medicare payment for medical education to hospitals jointly funding training in a nonprovider setting,’’ and that section 5504 applies to hospitals with jurisdictionally proper appeals regarding that issue that were pending as of the date of the enactment of the Affordable Care Act. Response: We do not agree with the commenter that section 5504 ‘‘filled a gap in the law’’ regarding more than one hospital incurring the costs of training residents in a nonprovider setting. Beginning at least as early as 1988, the Secretary has consistently noted in the preamble of various rules that the statute only allowed a hospital to count the time that its residents spent training in a nonprovider site in the FTE resident count for direct GME and IME purposes if that single hospital incurred ‘‘all of substantially all’’ of the costs of the training program in that setting. Indeed, in Borgess Medical Center v. Sebelius (966 F.Supp.2d 1 at *6–*7 (D.D.C. 2013)), a court noted that CMS had done so in 1998, 2003, and 2007 preambles of rules. For a full discussion VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of the longstanding substantive standard and requirement that a hospital can only count residents training if that one single hospital incurs all or substantially all of the costs for the training, we refer readers to the discussion in the November 24, 2010 final rule with comment period (75 FR 72134 through 72141), the May 11, 2007 final rule (72 FR 26953 and 26969), the August 1, 2003 final rule (68 FR 45439), the July 31, 1998 final rule (63 FR 40954 and 40995), the September 29, 1989 final rule (54 FR 40286 and 40288), and the September 21, 1988 proposed rule (53 FR 36589 and 36591). We continue to believe that Congress was clear in amending sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to provide for new standards to be applied only prospectively, effective for cost reporting periods beginning on or after, and discharges occurring on or after, July 1, 2010. Moreover, we continue to believe the language in paragraph (g)(6) of § 413.78 (along with the remainder of paragraph (g)) only applies to cost reporting periods beginning on or after July 1, 2010, and does not apply retroactively to cost reporting periods beginning before July 1, 2010. We believe that the new standards set forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act and implemented by regulation at §§ 413.78(g) and 412.105(f)(1)(ii)(E), allowing cost sharing under certain circumstances, do not ever apply to pre-July 1, 2010 cost reporting periods and pre-July 1, 2010 patient discharges. We had intended that the language under § 413.78(g)(6) do no more than simply paraphrase the language in section 5504(c) of the Affordable Care Act. Accordingly, after consideration of the comments we received, we are not making any changes to our proposed clarification to the regulatory language at § 413.78(g)(6). The regulatory language at § 413.78(g)(6) states that the provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of the section shall not be applied in a manner that requires reopening of any settled cost reports as to which there is not a jurisdictionally proper appeal pending as of March 23, 2010, on direct GME or IME payments. Cost reporting periods beginning before July 1, 2010 are not governed by paragraph (g) of the section. The IME regulations at § 412.105(f)(1)(ii)(E) include a reference to § 413.78(g)(6); therefore, no change is needed to this section of the IME regulations. PO 00000 Frm 00270 Fmt 4701 Sfmt 4700 5. Changes to the Review and Award Process for Resident Slots Under Section 5506 of the Affordable Care Act In the past, if a teaching hospital closed, its direct GME and IME FTE resident cap slots would be ‘‘lost’’ because those cap slots are associated with a specific hospital’s Medicare provider agreement, which would be retired upon the hospital’s closure. Under existing regulations at § 413.79(h) for direct GME and § 412.105(f)(1)(ix) for IME, a hospital that is training FTE residents at or in excess of its FTE resident caps and takes in residents displaced by the closure of another teaching hospital may receive a temporary increase to its FTE resident caps so that it may receive direct GME and IME payment associated with those displaced FTE residents. However, those temporary FTE resident caps are tied to those specific displaced FTE residents, and the temporary caps expire when those displaced residents complete their training program. Section 5506 of the Affordable Care Act amended section 1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital’s FTE resident caps. The Secretary is directed to ensure that the aggregate number of FTE resident cap slots distributed shall be equal to the aggregate number of slots in the closed hospital’s direct GME and IME FTE resident caps, respectively. For a detailed discussion of the regulations implementing section 5506 of the Affordable Care Act, we refer readers to the November 24, 2010 final rule with comment period (75 FR 72212 through 72238) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through 53448). a. Effective Date of Slots Awarded Under Section 5506 of the Affordable Care Act In distributing slots permanently under the provisions of section 5506 of the Affordable Care Act, section 5506(d) provides that ‘‘the Secretary shall give consideration to the effect of the amendments made by this section on any temporary adjustment to a hospital’s FTE cap under § 413.79(h) . . . (as in effect on the date of enactment of this Act) in order to ensure that there is no duplication of FTE slots . . .’’ In consideration of this statutory language, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53437), we stated that in distributing slots permanently E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations under section 5506, we would be cognizant of the number of FTE residents for whom a temporary FTE cap adjustment was provided under existing regulations at § 413.79(h), and when those residents will complete their training, at which point the temporary slots associated with those displaced residents would then be available for permanent redistribution. Therefore, in initially developing ranking criteria and application materials that we would use to award available slots, we considered how to interpret this statutory language at section 5506(d) of the Affordable Care Act within the context of our existing GME regulations and section 5506’s amendment to section 1886(h) of the Act generally. In the November 24, 2010 final rule with comment period and the FY 2013 IPPS/LTCH PPS final rule (75 FR 72216 and 77 FR 53436, respectively), we discussed the various ranking criteria that we would use for hospitals applying for slots from closed hospitals. Currently, if after distributing the slots from a closed hospital to increase the FTE caps for applying hospitals that fall within Ranking Criteria One, Two, and Three, there are still excess slots available and any of those excess slots are associated with displaced residents for whom temporary cap adjustments under § 413.79(h) are in place, any slots awarded to hospitals that fall within Ranking Criteria Four through Eight are permanently assigned only once the displaced residents have completed their training and the temporary cap adjustments associated with those residents have expired. That is, in applying the requirement for ‘‘no duplication of FTE slots’’ set forth in section 5506(d), we currently consider all temporary cap adjustments received by hospitals on a national basis and not specifically the hospital that is applying for cap slots under section 5506, when deciding the effective date for slots permanently awarded to hospitals applying under Ranking Criteria Four through Eight. Specifically, in the November 24, 2010 final rule with comment period, we stated that we believe the ‘‘no duplication of FTE slots’’ requirement applies across all hospitals. Therefore, although a hospital may not have received a temporary cap adjustment under § 413.79(h), other hospitals may have taken in residents and received temporary cap adjustments for the same program, and we believed that the appropriate policy was to delay the slots associated with that program from being permanently distributed until it is known that any and all VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 temporary cap adjustments for those slots have expired (75 FR 72227) Applying this policy to an example, if Hospital A is training displaced residents and is receiving a temporary cap adjustment under § 413.79(h) for training those residents and Hospital B, which is not receiving a temporary cap adjustment for training any displaced residents, has applied under Ranking Criterion Five to expand its internal medicine program, as explained in the November 24, 2010 final rule with comment period, we would only award permanent slots under section 5506 to Hospital B on a flow basis; that is, effective after each displaced resident completes his/her training, and, therefore, the temporary cap adjustments associated with that resident expire at Hospital A. However, the policy of applying the ‘‘no duplication of FTE slot’’ requirement at section 5506(d) of the Affordable Care Act to all hospitals rather than simply to each specific hospital that is applying for slots has thus far proven to be a very complex process due to the number of displaced residents and the timing of multiple graduation dates which must be tracked and considered when awarding slots on a permanent basis. We believe this practice has delayed the awarding of slots and is also unnecessarily burdensome for hospitals applying under Ranking Criteria Four through Eight that are not receiving any cap adjustments for training displaced residents under § 413.79(h). We believe the current policy that we apply for ‘‘no duplication of FTE slots’’ is unnecessarily burdensome for these hospitals because, instead of receiving their permanent slots under section 5506 as soon as possible, the hospitals may receive their section 5506 awards with staggered effective dates due to the graduation dates of displaced FTE residents training at other hospitals that did receive temporary adjustments under § 413.79(h). While we believe that awarding permanent slots to a hospital that is simultaneously receiving a temporary cap adjustment for training displaced FTE residents under § 413.79(h) would clearly be a duplication of FTE slots and contrary to the statutory directive, we believe there is flexibility in interpreting this statutory language and that the statute does not require such a policy to be applied to hospitals that are not receiving temporary cap adjustments under § 413.79(h). Furthermore, in considering the specific statutory language regarding ‘‘no duplication of FTE slots,’’ section 5506(d) in part PO 00000 Frm 00271 Fmt 4701 Sfmt 4700 50123 provides that ‘‘The Secretary of Health and Human Services shall give consideration to the effect of the amendments made by this section on any temporary adjustment to a hospital’s FTE cap under section 413.79(h) of title 42, Code of Federal Regulations (as in effect on the date of enactment of this Act) in order to ensure that there is no duplication of FTE slots.’’ Because this language refers to ‘‘a hospital,’’ we believe the statute provides us with the flexibility to apply the ‘‘no duplication of FTE slots’’ requirement on a hospital-specific basis, considering separately whether each hospital did or did not receive a temporary cap adjustment under § 413.79(h), rather than on a national all-hospital basis. Bearing in mind the statutory language and our experience to date in awarding slots as well as the unnecessary burden placed on hospitals that are receiving section 5506 slots, but are not receiving temporary cap adjustments under § 413.79(h), we stated in the FY 2015 IPPS/LTCH PPS proposed rule our belief that it was appropriate to propose a policy that would provide for a more efficient and faster method for awarding of slots to hospitals applying under Ranking Criteria Four through Eight. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28155), we proposed that, effective for section 5506 application rounds announced on or after October 1, 2014, for purposes of applying the requirement for ‘‘no duplication of FTE slots,’’ we would only require that there be no duplication of FTE slots on a hospital-specific basis. That is, in determining the effective date for slots awarded permanently under section 5506, we would only be concerned with whether the hospital that is applying for slots is also receiving a temporary cap adjustment under § 413.79(h) for training displaced residents. When awarding slots to the applying hospital, we would not be concerned whether any other hospital is receiving a temporary cap adjustment for training displaced residents under § 413.79(h). For example, if Hospital A is receiving a temporary cap adjustment under § 413.79(h) for training displaced residents in its general surgery program but is applying under Ranking Criterion Five to start a pediatrics program and Hospital B is not receiving a temporary cap adjustment for training displaced residents and is applying under Ranking Criterion Eight to expand a cardiology program, in awarding section 5506 slots, we would only allow Hospital A to receive a permanent adjustment to its FTE cap for training residents in its E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50124 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations pediatrics program once its temporary adjustments for the displaced residents training in the general surgery program have expired. We would not consider displaced residents when awarding section 5506 slots to Hospital B. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28156), we stated that, in conjunction with our proposal to interpret the ‘‘no duplication of FTE slots’’ requirement to apply on a hospital-specific basis to hospitals that are receiving temporary cap adjustments under § 413.79(h), we proposed to amend the effective dates of section 5506 slots received under Ranking Criteria Four through Eight for those hospitals that are not receiving temporary cap adjustments under § 413.79(h). (We refer readers to section IV.K.5.c. of the preamble of this final rule where we discuss our proposal and final policy to amend Ranking Criteria Seven and Eight.) Existing policy requires that slots awarded under Ranking Criteria Four through Eight for expanding an existing residency training program or starting a new residency training program are effective the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after displaced residents complete their training. If a hospital is awarded slots under Ranking Criterion Eight for cap relief, slots are effective the date of CMS’ award announcement, or the July 1 after displaced residents complete their training, whichever is later. However, because we proposed an alternative approach to interpreting section 5506(d) that would permit us to apply the ‘‘no duplication of FTE slots’’ requirement on a hospital-specific basis, we proposed to change the effective date for slots received under Ranking Criteria Four through Eight so that if a hospital is not receiving a temporary cap adjustment under § 413.79(h), the slots awarded under section 5506 would be effective when the hospital can demonstrate to its MAC that the slots needed for a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). If a hospital is awarded slots under Ranking Criteria Four through Eight and is receiving a temporary cap adjustment to train displaced residents under § 413.79(h), the existing policy would apply such that the slots are awarded on a permanent basis, the later of when a VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after an equivalent amount of displaced FTE residents complete their training. In the proposed rule (79 FR 28156), we stated that, assume in a hypothetical situation that there is a closed teaching hospital and that another hospital takes in two displaced FTE residents for which the hospital is receiving a temporary cap adjustment under § 413.79(h). One resident is graduating on June 30, 2016, and the second resident is graduating on June 30, 2018. Assume that when the section 5506 Round is announced, the hospital also applies for two slots to expand an internal medicine program under Ranking Criterion Five. In January 2017, CMS awards two permanent slots to the hospital under Ranking Criterion Five. For the program year starting July 1, 2017, the hospital successfully demonstrates to the MAC that it filled the two additional internal medicine positions. Because one displaced FTE resident already graduated on June 30, 2016, the MAC may approve one slot on a permanent basis effective July 1, 2017. However, the hospital would have to wait until July 1, 2018, to receive from the MAC the permanent slot for the second displaced internal medicine resident because the second displaced FTE resident is not graduating until June 30, 2018. Comment: Several commenters supported the proposal and agreed that applying the ‘‘no duplication of slots’’ policy on a national level, as opposed to a hospital-specific level, results in a very complex and unnecessarily burdensome review process which further delays the permanent distribution of slots from a closed hospital. Response: We appreciate the commenters’ support. Comment: Two commenters opposed the proposal because they believed it added an unnecessary restriction to the effective dates of permanent section 5506 awards received under Ranking Criteria Four through Eight for hospitals that have temporary cap adjustments under § 413.79(h) and are training displaced residents from the closed hospital. The commenters noted that the proposal would require a hospital that has a temporary cap adjustment and is training a displaced resident from the closed hospital and is awarded slots under Ranking Criteria Four through Eight to wait until the displaced resident graduates in order to receive PO 00000 Frm 00272 Fmt 4701 Sfmt 4700 the permanent cap slot. On the other hand, if a hospital does not have a temporary cap adjustment and is awarded slots under Ranking Criteria Four through Eight, those slots would be effective when the hospital can demonstrate to its MAC that the slots needed for a new program or program expansion are actually filled without consideration of any temporary cap adjustment at another hospital. The commenters asserted that only Ranking Criteria One and Three are specifically tied to the training of displaced residents, and if a hospital applies under Ranking Criteria Four through Eight, they are, in fact, acknowledging that they do not qualify under Ranking Criterion One or Three and therefore should not be subject to limitations of the effective date of its award related to a temporary cap adjustment associated with a displaced resident. The commenters suggested that the revised effective date of slots awarded under Ranking Criteria Four through Eight apply for all hospitals and award slots, regardless of whether the hospitals received a temporary cap adjustment under § 413.79(h), and that the ‘‘no duplication of slots’’ policy should not apply when section 5506 slots are being awarded for a completely different program or purpose than the program for which the hospital was awarded a temporary cap adjustment. Response: We appreciates the commenters’ concerns and suggestions regarding our application of the ‘‘no duplication of slots’’ policy as it applies to the effective dates for Ranking Criterion Four through Eight. However, we continue to believe that allowing a hospital to receive a permanent cap slot under section 5506 while at the same time receiving a temporary cap adjustment under § 413.79(h) would be contrary to the statutory directive of the ‘‘no duplication of slots’’ policy because as long as the displaced resident is still training and the hospital has a temporary cap adjustment for that resident and is receiving IME and direct GME payments, that slot is still in use by the hospital. Section 5506(d) in part provides that ‘‘The Secretary of Health and Human Services shall give consideration to the effect of the amendments made by this section on any temporary adjustment to a hospital’s FTE cap under section 413.79(h) of title 42, Code of Federal Regulations (as in effect on the date of enactment of this Act) in order to ensure that there is no duplication of FTE slots’’ (emphasis added). Thus, we disagree with the commenters’ overly broad interpretation of the statutory E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations language, and continue to believe that the statute does not allow for duplication of slots within a hospital overall, even when those slots are awarded for completely different programs or purposes. In addition, prior to our proposal, our existing policy regarding effective dates for slots awarded under Ranking Criteria Four through Eight has been that where a temporary cap adjustment was in effect for displaced residents from a closed hospital, the effective dates for awards under Ranking Criteria Four through Eight are tied to the graduation dates of the displaced residents because as long as a hospital was awarded a temporary cap adjustment for a particular displaced resident, the slot associated with that resident is not yet available, regardless of the ranking criteria or the program or purpose for which the permanent section 5506 FTE cap slot was awarded. We believe that our proposed policy strikes the necessary balance of avoiding unnecessary complexity in the review of section 5506 applications and maintaining a policy that conforms to the statutory requirement for ‘‘no duplication of slots’’ under section 5506. Consistent with policy implemented in subregulatory guidance in Change Request 7746, Transmittal 1171 (issued January 31, 2013; https://www.cms.gov/ Regulations-and-Guidance/Guidance/ Transmittals/downloads/ R1171OTN.pdf) where we stated that slots awarded under a given round may only replace temporary FTE cap adjustments associated with residents displaced from that same round, we would like to clarify that our proposed application of the ‘‘no duplication of slots’’ policy would only apply for temporary cap adjustments and permanent section 5506 FTE cap slots associated with the same closed hospital (§ 413.79(h)). In addition, we note that, as we stated in the proposed rule (79 FR 28156), if a hospital is awarded slots under Ranking Criteria Four through Eight and is receiving a temporary cap adjustment to train displaced residents under § 413.79(h), the existing policy would apply such that the slots are awarded on a permanent basis, the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after an equivalent amount of displaced FTE residents complete their training. That is, so long as a hospital continues to receive a temporary cap adjustment under § 413.79(h) for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 residents displaced from a specific closed hospital, that hospital’s section 5506 award under Ranking Criteria Four through Eight associated with that specific closed hospital would also not be fully effective. Stating it simply, if a hospital has a temporary FTE cap adjustment of three FTEs due to the closure of Hospital Z, and the hospital is also awarded three permanent FTE cap slots under the section 5506 Round associated with Hospital Z, this hospital’s permanent FTE cap adjustment of three would not take full effect until all three displaced FTEs from Hospital Z graduate, when the hospital’s temporary FTE cap would go down to zero (§ 413.79(h)). When determining the effective dates of section 5506 FTE cap slots awarded under Ranking Criteria Four through Eight for a given Round of section 5506 from a given closed hospital, the hospital receiving the section 5506 slots would consider (1) whether it has a temporary cap adjustment associated with residents displaced from the closed hospital associated with that Round of section 5506, and (2) the difference (if any) between its section 5506 FTE cap slot award from that closed hospital, and the temporary cap adjustment associated with the same closed hospital. If a hospital is receiving a temporary cap adjustment for training displaced residents and its section 5506 award is less than or equal to the temporary cap adjustment, the section 5506 slots would become effective the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed, or the July 1 after displaced residents complete their training. If a hospital is receiving a temporary cap adjustment for training displaced residents and its section 5506 award is greater than the temporary cap adjustment, the number of slots by which the section 5506 award exceeds the temporary cap adjustment would be available for use when the hospital can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). The effective dates for those slots in excess of the hospital’s temporary cap adjustment in a given round would not hinge on whether a displaced resident has completed his/ her training and, therefore, the temporary cap adjustment associated with that resident expires because there would be no duplication of slots for that hospital with respect to the slots PO 00000 Frm 00273 Fmt 4701 Sfmt 4700 50125 awarded in excess of the hospital’s temporary cap adjustment. However, the portion of the hospital’s section 5506 award that is equal to or less than its temporary cap adjustment for displaced residents associated with the closed hospital from the same round would be subject to the ‘‘no duplication of FTE slots’’ requirement, and those section 5506 slot awards would become available only as an equivalent amount of temporary cap adjustment expires. The following examples illustrate the interplay between section 5506 slots awarded and temporary cap adjustments under § 413.79(h) associated with the same closed hospital: Example 1: Hospital A takes in two displaced FTE residents from a closed teaching hospital for which the hospital is receiving a temporary cap adjustment of 2.0 FTEs under § 413.79(h). One resident is graduating on June 30, 2016, and the second resident is graduating on June 30, 2018. When the section 5506 Round is announced, Hospital A also applies for two slots to expand an internal medicine program under Ranking Criterion Five. In January 2017, CMS awards two permanent slots to the hospital under Ranking Criterion Five. Hospital A would consider (1) whether it has a temporary cap adjustment associated with residents displaced from the closed hospital associated with that Round of section 5506 (yes, 2.0 FTEs), and (2) the difference (if any) between its section 5506 FTE cap slot award from that closed hospital, and the temporary cap adjustment associated with the same closed hospital (2.0 temporary cap—2.0 section 5506 award = 0, no difference). Because Hospital A’s section 5506 award is (less than or) equal to the temporary cap adjustment, the section 5506 slots would become effective on a flow basis; that is, effective after each displaced resident completes his/her training, and as the temporary cap adjustment associated with that resident expires. For the program year starting July 1, 2017, Hospital A successfully demonstrates to the MAC that it filled the two additional internal medicine positions. Because one displaced FTE resident already graduated on June 30, 2016, the MAC may approve one slot on a permanent basis effective July 1, 2017. However, Hospital A would have to wait until July 1, 2018, to receive from the MAC the permanent slot for the second displaced internal medicine resident because the second displaced FTE resident is not graduating until June 30, 2018. Example 2: Hospital B takes in two displaced FTE residents from a closed teaching hospital for which Hospital B is receiving a temporary cap adjustment of 2.0 FTEs under § 413.79(h). One resident is graduating on June 30, 2018, and the second resident is graduating on June 30, 2019. When the section 5506 Round is announced, Hospital B applies for five slots to expand a geriatrics program under Ranking Criterion Four. In January 2017, CMS awards five permanent slots to Hospital B under Ranking Criterion Four. Hospital B would consider (1) whether it has a temporary cap adjustment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50126 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations associated with residents displaced from the closed hospital associated with that Round of section 5506 (yes, 2.0 FTEs), and (2) the difference (if any) between its section 5506 FTE cap slot award from that closed hospital, and the temporary cap adjustment associated with the same closed hospital (2.0 temporary cap—5.0 section 5506 award = 3, absolute value). Because Hospital B’s section 5506 award is greater than the temporary cap adjustment, then the number of slots by which the section 5506 award exceeds the temporary cap adjustment would be available for use when the hospital can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed. For the program year starting July 1, 2017, Hospital B successfully demonstrates to the MAC that it filled all five additional geriatrics positions. Even though the displaced residents did not yet graduate, the MAC may approve three slots on a permanent basis effective July 1, 2016 because Hospital B’s section 5506 award exceeds its temporary cap adjustment and Hospital B can use up to three of its five slots while the displaced residents are still training. However, Hospital B would have to wait until July 1, 2018, to receive from the MAC the fourth slot for the geriatrics program because the first displaced FTE resident is not graduating until June 30, 2018, and would then have to wait until July 1, 2019, to receive from the MAC the fifth slot for the geriatrics program because the second displaced resident is not graduating until June 30, 2019. Example 3: Hospital C does not take in any displaced residents and does not receive a temporary cap adjustment under § 413.79(h). When the section 5506 Round is announced, Hospital C applies for five slots to expand geriatrics program under Ranking Criterion Four. In January 2017, CMS awards five permanent slots to Hospital C under Ranking Criterion Four. For the program year starting July 1, 2017, Hospital C successfully demonstrates to the MAC that it filled all five additional geriatrics positions. Because Hospital C did not receive a temporary cap adjustment, there would be no need to consider displaced residents at other hospitals when awarding permanent slots and determining effective dates under section 5506 for Hospital C. Therefore, Hospital C could receive a permanent adjustment of five FTEs to its cap for training residents in its geriatrics program effective July 1, 2017. With regard to a hospital that is training displaced FTE residents, has a temporary cap adjustment under § 413.79(h), and also applies both under Ranking Criteria One or Three, and under Ranking Criteria Four through Eight, the current policy with regard to the effective date of slots awarded under Ranking Criteria One and Three would still apply, and would not impact the policy described above for Ranking Criteria Four through Eight. That is, as stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53443), slots awarded under Ranking Criteria One or Three would continue to become permanent (or effective) on a flow basis as displaced FTEs finish their training programs. If a hospital has a temporary cap adjustment under § 413.79(h) and is awarded VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 slots under Ranking Criteria One or Three for training those displaced residents, then as the displaced FTE residents graduate, an equivalent amount of permanent section 5506 slots can become effective under Ranking Criterion One or Three (thereby avoiding duplication of FTE cap slots). If the amount of section 5506 slots awarded under Ranking Criterion One or Three is equal to the amount of the temporary cap adjustment, there would be no concern of duplication of FTE slots with respect to a hospital’s other awards under Ranking Criteria Four through Eight because ‘‘no duplication’’ would already be addressed with regard to slots awarded within Ranking Criterion One or Three. Accordingly, other slots that the hospital is awarded under Ranking Criteria Four through Eight would not depend on whether a displaced resident has completed his/her training and, therefore, would be made available for use when the hospital can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed. The following example illustrates this policy: Example Four: Hospital D takes in two displaced FTE residents from a closed teaching hospital for which Hospital D is receiving a temporary cap adjustment of 2.0 FTEs under § 413.79(h). One resident is graduating on June 30, 2018, and the second resident is graduating on June 30, 2019. When the section 5506 Round is announced, Hospital D applies for two slots under Ranking Criterion Three, and also applies for five slots to expand a geriatrics program under Ranking Criterion Four. In January 2017, CMS awards to Hospital D two permanent slots under Ranking Criterion Three, and five permanent slots under Ranking Criterion Four. With regard to the effective dates of the slots awarded under Ranking Criteria Four through Eight, Hospital D would consider (1) whether it has a temporary cap adjustment associated with residents displaced from the closed hospital associated with that Round of section 5506 (yes, 2.0 FTEs), and (2) the difference (if any) between its section 5506 FTE cap slot award from that closed hospital, and the temporary cap adjustment associated with the same closed hospital (2.0 temporary cap—7.0 section 5506 award = 5, absolute value). Because Hospital D’s section 5506 award is greater than the temporary cap adjustment, the number of slots by which the section 5506 award exceeds the temporary cap adjustment (5 slots) would be available for use when Hospital D can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed. For the program year starting July 1, 2017, Hospital D successfully demonstrates to the MAC that it filled all five additional geriatrics positions. Even though the displaced residents did not yet graduate, the MAC may approve all five slots on a permanent basis effective July 1, 2017, because Hospital D’s section 5506 award exceeds its temporary cap adjustment by five slots and the amount of section 5506 slots awarded under Ranking Criterion Three is equal to the amount of the temporary cap adjustment. Therefore, ‘‘no duplication’’ is PO 00000 Frm 00274 Fmt 4701 Sfmt 4700 already addressed with regard to slots awarded within Ranking Criterion Three. On July 1, 2018, one displaced FTE graduated, and if Hospital D can demonstrate to the MAC that it filled a slot to replace the displaced resident under Ranking Criterion Three, Hospital D may receive from the MAC one permanent slot awarded under Ranking Criterion Three effective on that date. Similarly, on July 1, 2019, when the second displaced resident graduates, and Hospital D’s temporary cap adjustment goes down to zero, if Hospital D recruits an additional resident to replace that second displaced resident, Hospital D may receive from the MAC its final permanent slot awarded under Ranking Criterion Three effective on that date. However, if a hospital’s number of permanent slots awarded under section 5506 Ranking Criterion One or Three is less than its temporary cap adjustment, and the hospital is also awarded slots under Ranking Criteria Four through Eight, the amount of the section 5506 slots awarded under Ranking Criterion Four through Eight that is equal to the remaining portion of the temporary cap adjustment would become effective the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed on the July 1 after the appropriate amount of displaced residents complete their training. After consideration of the public comments we received, we are finalizing, as proposed, the policy that effective for section 5506 application rounds announced on or after October 1, 2014, the statutory provision at section 5506(d) requiring the Secretary when awarding slots under section 5506 to consider any temporary cap adjustment to a hospital’s FTE cap under § 413.79(h) to ensure no duplication of FTE slots, be interpreted in a manner such that the requirement for ‘‘no duplication of FTE slots’’ is applied on a hospital-specific basis rather than across all hospitals receiving temporary cap adjustments under § 413.79(h). Consistent with this change, we are finalizing our proposal to amend the effective date for slots received under Ranking Criteria Four through Eight so that if a hospital is not receiving a temporary cap adjustment under § 413.79(h), the slots awarded under section 5506 would be effective when the hospital can demonstrate to its MAC that the slots needed for a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). However, if a hospital is receiving a temporary cap adjustment under § 413.79(h), we would consider E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the number of displaced residents in determining the effective date of the slots awarded under section 5506 such that as long as a hospital continues to receive a temporary cap adjustment under § 413.79(h) for residents displaced from a specific closed hospital, that hospital’s section 5506 award under Ranking Criteria Four through Eight associated with that specific closed hospital would also not be fully effective. When determining the effective date of section 5506 FTE cap slots awarded under Ranking Criteria Four through Eight for a given round of section 5506 from a given closed hospital, the hospital receiving the section 5506 slots would consider (1) whether it has a temporary cap adjustment associated with residents displaced from the closed hospital associated with that round of section 5506, and (2) the difference (if any) between its section 5506 FTE cap slot award from that closed hospital, and the temporary cap adjustment associated with the same closed hospital. If a hospital is receiving a temporary cap adjustment for training displaced residents and its section 5506 award is less than or equal to the temporary cap adjustment, the section 5506 slots would become effective the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed or the July 1 after displaced residents complete their training. If a hospital is receiving a temporary cap adjustment for training displaced residents, and its section 5506 award is greater than the temporary cap adjustment, the number of slots by which the section 5506 award exceeds the temporary cap adjustment would be available for use when the hospital can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). The effective dates for those slots in excess of the hospital’s section 5506 award in a given round would not depend on whether a displaced resident has completed his/her training. However, the portion of the hospital’s section 5506 award that is equal to or less than its temporary cap adjustment for displaced residents associated with the closed hospital from the same round would continue to be subject the ‘‘no duplication of FTE slots’’ requirement, and the section 5506 slots would become available only as an equivalent amount of temporary cap adjustment expires. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We did not propose any changes to the effective date for slots awarded under Ranking Criterion One, Ranking Criterion Two, or Ranking Criterion Three. Consistent with existing policy, if a hospital is applying under Ranking Criterion One or Ranking Criterion Three and is not receiving a temporary cap adjustment for training displaced residents under § 413.79(h), the effective date of the section 5506 slots is the date of the hospital closure. If a hospital is applying under Ranking Criterion One or Ranking Criterion Three and is receiving a temporary cap for training displaced residents under § 413.79(h), the effective date of the section 5506 slots is after the displaced resident(s) graduate. If a hospital is receiving a temporary cap for training displaced residents under § 413.79(h), and is applying under Ranking Criterion One or Ranking Criterion Three and is also separately applying under Ranking Criterion Four or subsequent Ranking Criteria, for slots awarded under Ranking Criteria One or Three, the effective date of the section 5506 slots is after the displaced resident(s) graduate. For slots awarded under Ranking Criteria Four or subsequent Ranking Criteria, the slots are awarded the later of when a hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive), or the July 1 after an equivalent amount of a displaced FTE resident(s) at the hospital complete their training. Therefore, for such a hospital, the effective dates of slots awarded under Ranking Criteria One/Three, and Ranking Criteria Four through Eight might coincide. Also, consistent with existing policy, if a hospital is applying under Ranking Criterion Two, the effective date of the permanent award of section 5506 slots is the date of the hospital closure. We discuss these existing policies in greater detail in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53437 through 53445). b. Removal of Seamless Requirement Under current policy, if a hospital is applying under Ranking Criterion One or Three, the hospital must show that it is seamlessly replacing displaced FTE residents with new FTE residents once the displaced residents graduate (75 FR 72219 and 72221 through 72222). We have stated that in instances where a hospital seamlessly operates an entire program or part of a program from the closed hospital (or takes over an entire program prior to the hospital’s closure), such a hospital is demonstrating a PO 00000 Frm 00275 Fmt 4701 Sfmt 4700 50127 strong commitment to maintain GME programs in the community for the long term and should be awarded slots under higher ranking criteria (75 FR 72216). Therefore, we required that, in order to receive slots under Ranking Criterion One and Three, the applying hospital must demonstrate that upon graduation of the displaced FTE residents that it is training, the slots held by those displaced FTEs are seamlessly replaced with new FTE residents (75 FR 72219 and 72221 through 72222). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53441), in response to concerns associated with the seamless requirement and timeline used by the National Resident Match Program and other resident match services, we revised the seamless requirement. We stated that, in the instance where a teaching hospital closed after December 31 of an academic year, in order for a hospital to qualify under Ranking Criterion One or Three for cap slots associated with displaced FTE residents who will graduate June 30 of the academic year in which the applying hospital took in the displaced FTE residents, the applying hospital must be able to demonstrate that it will fill slots vacated by displaced FTE residents by July 1 of the second academic year following the hospital closure. However, in the instance where a teaching hospital closed before December 31 of an academic year, in order for a hospital to qualify under Ranking Criterion One or Three for cap slots associated with displaced FTE residents who will graduate June 30 of the academic year in which the applying hospital took in the displaced FTE residents, the applying hospital must be able to demonstrate that it will seamlessly fill slots vacated by displaced FTE residents by that July 1; that is, the day immediately after the June 30 that the displaced FTE residents graduate (77 FR 53441 through 53442). We also revised the CMS Application Form to instruct a hospital applying under Ranking Criterion One or Three to list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents (77 FR 53446). Because Ranking Criteria One and Three fall under Demonstrated Likelihood Criterion 2, the hospital is taking over all of part of an existing residency program from the closed hospital, or expanding an existing residency training program, the requirement to include a list with the names and graduation dates of specific displaced residents who have been or will be seamlessly replaced was added E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50128 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations under Demonstrated Likelihood Criterion 2 on the CMS Application Form. In addition to the match deadlines associated with the National Resident Matching Program and match deadlines associated with matching into osteopathic programs, we have recently been made aware of other match deadlines associated with certain fellowship programs. From the experience we have had so far in reviewing section 5506 applications, where we have observed the complexity of tracking various match deadlines as well as the intersection between these deadlines and when the section 5506 awards are announced by CMS, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28158), we proposed to remove the seamless requirement for slots awarded under Ranking Criterion One and Three effective for section 5506 application rounds announced on or after October 1, 2014. We did not propose to make any other additional changes to Ranking Criterion One or Three; that is, the hospital must still be training displaced residents and must either take over or have taken over an entire program from the closed hospital and continue operating that program in the same manner in which it was operated by the closed hospital or the hospital must take over part of a closed hospital’s program and permanently expand its own program as a result of training displaced residents. Hospitals would continue to be required to submit supporting documentation when applying under Ranking Criterion One or Three that indicates that they have made a commitment to take over the closed hospital’s program or that they have made the commitment to permanently expand their own residency training program resulting from taking over part of a closed hospital’s program. In determining the effective date of slots awarded under Ranking Criterion One or Three where the hospital has been training residents that were displaced by the closed hospital and receiving a temporary cap adjustment under § 413.79(h), the hospital would work with its MAC to determine when it could be permanently awarded the slots based on the graduation dates of the displaced residents it is training. Consistent with our proposal, we proposed to remove the following requirement under Demonstrated Likelihood Criterion 2 on the CMS Application Form: ‘‘Hospitals applying for slots under option (a) which correlates to Ranking Criterion 1 or (b) which correlates to Ranking Criterion 3 must list the names and graduation VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents. The list may be added as an attachment to this application.’’ We proposed to replace this requirement with the following requirement under Demonstrated Likelihood Criteria 1 and 2’’ ‘‘Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (Y/N)’’ so that we are aware which hospitals are receiving temporary cap adjustments for training displaced residents under § 413.79(h), and when we award slots, we would know which hospitals to instruct to work with their MACs to determine when the slots could be permanently awarded to them based on the graduation dates of the displaced residents they are training. In summary, we proposed to remove the seamless requirement currently included as part of Ranking Criterion One or Three. We also proposed to remove from the CMS Application Form, the following requirement: ‘‘Hospitals applying for slots under option a) which correlates to Ranking Criterion 1 or b) which correlates to Ranking Criterion 3 must list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents. This list may be added as an attachment to this application.’’ Comment: Commenters supported the proposal to remove the seamless requirement for slots awarded under Ranking Criteria One and Three effective for section 5506 application rounds announced on or after October 1, 2014. One commenter stated that, in addition to complicating the CMS review process of section 5506 applications, the seamless requirement created an administrative burden for hospitals applying under Ranking Criteria One and Three. Another commenter stated it supported removing the seamless requirement because it has become very complicated and burdensome for hospitals that legitimately plan to continue training residents in a program once the displaced residents training in that program graduate. However, commenters requested that CMS ‘‘provide clear and consistent guidance’’ to explain the type of documentation that would meet the requirement that a hospital has made a commitment to take over the closed hospital’s program or has made the commitment to PO 00000 Frm 00276 Fmt 4701 Sfmt 4700 permanently expand their own residency training program resulting from taking over part of a closed hospital’s program. Response: We thank the commenters for their support of our proposed policy to remove the seamless requirement under Ranking Criteria One and Three. We are finalizing the policy as proposed. Effective for section 5506 rounds announced on or after October 1, 2014, we are removing the seamless requirement previously required as part of Ranking Criterion One and Three. We are removing from the CMS Application Form the following language: ‘‘Hospitals applying for slots under option a) which correlates to Ranking Criterion 1 or b) which correlates to Ranking Criterion 3 must list the names and graduation dates of specific displaced residents who, upon their graduation, have been or will be seamlessly replaced by new residents. This list may be added as an attachment to this application.’’ We are adding to the CMS Application Form the following language under Demonstrated Likelihood Criteria 1 and 2 ‘‘Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (Y/N).’’ In response to the commenters’ request that CMS ‘‘provide clear and consistent guidance’’ to explain the type of documentation that would meet the requirement under Ranking Criterion One or Three, commenters should submit documentation as part of their application which indicates a commitment to take over the closed hospital’s program or permanently expand their own residency training program resulting from taking over part of a closed hospital’s program. We believe that the documentation that the hospital submits to demonstrate the likelihood that it would fill the requested slots under Demonstrated Likelihood Criterion 2 is sufficient. Demonstrated Likelihood Criterion 2 is for taking over all or part of an existing residency program from the closed hospital, or expanding an existing residency program. Applicants should refer to the description of documentation included on the CMS Application Form under ‘‘Demonstrated Likelihood Criterion 2: Taking Over All or Part of an Existing Residency Program from the Closed Hospital, or Expanding an Existing Residency Program,’’ for examples of acceptable documentation. For example, if a hospital is applying under Ranking Criterion Three because it is E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV permanently expanding its surgery program as a result of training residents displaced from a closed hospital’s surgery program and it has submitted documentation to the accrediting body requesting approval of additional positions, or it has already received approval from the accrediting body for the expansion, such documentation would meet the requirement that a hospital applying under Ranking Criterion Three has made the commitment to permanently expand its own surgery program as a result of training displaced residents. c. Revisions to Ranking Criteria One, Seven, and Eight for Applications under Section 5506 In the November 24, 2010 final rule with comment period (75 FR 72223), we finalized the Ranking Criteria within each of the three first statutory priority categories (that is, same or contiguous CBSAs, same State, and same region) to be used to rank applications for assignment of slots under section 5506 of the Affordable Care Act. For each application, we assigned slots based on Ranking Criteria, with Ranking Criterion One being the highest ranking and Ranking Criterion Seven being the lowest. For a detailed discussion of the ranking categories, we refer readers to the November 24, 2010 final rule with comment period (75 FR 72212 through 72240). After reviewing applications submitted during the first section 5506 application process (those applications that were due to CMS on April 1, 2011), we observed that the overwhelming majority of applications fell under Ranking Criterion Seven; that is, the applying hospital seeks the slots for purposes that do not fit into any of Ranking Criterion One through Ranking Criterion Six. These applications included applications from hospitals that applied for FTE cap slots for both primary care and/or general surgery and for nonprimary care specialties as well as applications for general cap relief. The sheer number of applications we received under Ranking Criterion Seven indicated a need to further prioritize among the applicants that would have qualified under Ranking Criterion Seven. Therefore, in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53434 through 53437), we finalized changes to the Ranking Criteria, replacing Ranking Criterion Seven with two separate Ranking Criteria (Ranking Criterion Seven and Ranking Criterion Eight) resulting in a total of eight Ranking Criteria. Under the Ranking Criteria, as modified by the FY 2013 IPPS/LTCH PPS final rule, a hospital that is VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applying both for the purpose of establishing or expanding primary care or general surgery programs, and in addition is requesting slots for the purpose of establishing or expanding nonprimary care or nongeneral surgery programs and/or for cap relief must submit an application requesting additional FTE slots for its primary care or general surgery programs under Ranking Criterion Seven. The hospital’s request for additional FTE slots to establish or expand a nonprimary care or nongeneral surgery program and/or for additional FTE slots for cap relief would then be made under Ranking Criterion Eight. Prior to this change, if a hospital applied for additional FTE slots to establish or expand both a primary care or general surgery program in addition to a nonprimary care or nongeneral surgery program and/or for additional FTE slots for cap relief, all of its applications (with the exception of Ranking Criteria One through Three) would fall under Ranking Criteria Seven. For a complete list of the Ranking Criteria, we refer readers to section IV.K.5.a. of the preamble of this final rule, which discusses the background for preservation of resident cap positions from closed hospitals under section 5506 of the Affordable Care Act. After reviewing applications and making awards under several more rounds of section 5506 applications, we have observed that, as hospital closings continue to occur, there has been a significant increase in the time between a hospital’s closure and the announcement of section 5506 awards by CMS. We believe that this delay is partly due to the administratively burdensome task of processing, reviewing, and responding to such a large number of applications for each hospital closure, or each round of section 5506 awards. When implementing section 5506 in the November 24, 2010 final rule with comment period (75 FR 72212 through 72249), we initially envisioned the reviewing of applications and awarding of section 5506 FTE slots as being a more streamlined and expedient process. However, as a practical matter, we have found that the process has been much more resource and time intensive than we had originally anticipated. This is partly due to the time and resources needed to properly apply the process established by CMS in reviewing section 5506 applications and awarding FTE cap slots. Since the initial implementation of section 5506, we have attempted to be responsive to these unexpected delays by refining the PO 00000 Frm 00277 Fmt 4701 Sfmt 4700 50129 ranking criteria to make the review process less administratively burdensome. However, these changes did not alleviate the process to the desired extent. Furthermore, we have observed that, while many of the applications submitted to CMS are applications requesting FTE slots for purposes of general cap relief, we have more often than not awarded no slots at all for cap relief. This is due in large part to the limited number of slots available (many of the closed teaching hospitals did not have large FTE resident caps) and an overwhelming demand for those slots from applicants who apply for FTE slots for reasons other than cap relief. Since we finalized the modified Ranking Criterion Seven and added Ranking Criterion Eight in the FY 2013 IPPS/LTCH PPS final rule, and as of the issuance of the FY 2015 IPPS/LTCH PPS proposed rule, we had announced three new rounds of section 5506 applications due to the closures of six hospitals. We have received a total of 424 applications from hospitals seeking cap relief. Of those 424 applications, only 6 applications were ultimately awarded FTE slots, which is only 1.42 percent of the total cap relief applications. We believe that the ratio of cap relief awardees to cap relief applications does not warrant the administrative burden and the delay in announcements of section 5506 awards that result from the large number of cap relief applications submitted to CMS that are invariably denied. Therefore, in an effort to streamline the review process and to facilitate publishing section 5506 awards in a more timely manner, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28159 through 28160), we proposed to modify Ranking Criterion Eight so that Ranking Criterion Eight would only apply to hospitals seeking FTE slots to establish or expand a nonprimary care or nongeneral surgery program. Ranking Criterion Eight would no longer be applicable to hospitals seeking FTE cap slots for cap relief. Our proposal to eliminate section 5506 awards of FTE slots for cap relief is consistent with current policy goals to increase training in primary care and general surgery. By proposing to eliminate awarding of FTE slots for residents that are already being trained by a hospital, there will be more FTE resident slots available to award to other hospitals seeking to establish or expand a primary care or general surgery program under Ranking Criteria Four through Seven. Accordingly, we proposed to revise Ranking Criterion Eight so that it reads as follows: E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50130 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Proposed Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. In light of the modifications we proposed to Ranking Criterion Eight, we believe it is also necessary to modify the language of proposed Ranking Criterion Seven to specify the types of applications that would properly be made under this Ranking Criterion; that is, we proposed to remove the reference to cap relief from Ranking Criterion Seven so that it read as follows: Proposed Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. Comment: One commenter supported CMS’ proposal to eliminate awarding of FTE slots for cap relief because doing so would increase the chance for a rural hospital that is located near very few teaching hospitals in the same or contiguous CBSA to apply under Level Priority Category One, to be awarded slots from a closed teaching hospital in the same state or region. One commenter supported the proposal because it would make more FTE resident slots available to award to other hospitals seeking to establish or expand a primary care or general surgery program. Many commenters opposed CMS’ proposal to eliminate awarding of FTE slots for cap relief. They asserted that hospitals are, in fact, being awarded slots under Ranking Criterion Eight for cap relief, albeit sparingly, and therefore CMS should not remove hospitals’ one and only opportunity to receive funding for training residents above their caps. Several commenters offered suggestions and alternate ways to modify Ranking Criterion Eight in order to ease CMS’ administrative burden. One commenter noted that under section 5506, the only requirement that Congress mandated was that hospitals need to demonstrate the likelihood of filling the slots within 3 years, and that hospitals applying for cap relief meet this requirement. Response: We appreciate the commenters’ support and the numerous comments and suggestions regarding the awarding of FTE slots under section 5506 for cap relief. One of the objectives behind our proposal to eliminate awarding of slots for cap relief was to find a way to reduce the number of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applications submitted to CMS, most of which are not approved for awards due to the limited number of slots available for redistribution. By eliminating the possibility of applying for cap relief, the volume of applications that CMS would receive, process, and review would be reduced, allowing CMS to award slots in a more timely fashion. While we appreciate that hospitals are training residents above their caps and that being awarded section 5506 slots for general cap relief would be a welcome opportunity to receive some funding for these positions, we believe that general cap relief is inconsistent with the intent of section 5506 and incompatible with the underlying principles of section 5506. We continue to believe that Congress intended that section 5506 be used to maintain the level of residents training in the area after the closure of a hospital by awarding permanent FTE cap slots to the hospital that take in and continue to train displaced residents from the closed hospital. In addition, the regulations promulgated under section 5506 are consistent with current policy goals to focus on increasing training in primary care and general surgery. By eliminating cap relief for residents that are already being trained by a hospital, more slots would be available to award to other hospitals in the same State as the closed hospital seeking to establish or expand a primary care or general surgery program. Moreover, we believe awarding slots for cap relief is contrary to the historical premise of Medicare GME payments, as it allows hospitals to shift costs borne by other means to the Medicare Trust Fund. Furthermore, we continue to believe that Congress did not intend for section 5506 awards to be used to pay hospitals for residents that they were already training, possibly even before the closure of the hospital whose slots are being redistributed. For the reasons mentioned above, coupled with our efforts to streamline the review process and facilitate publishing section 5506 awards in a more timely manner, we are finalizing our proposal to modify Ranking Criterion Eight so that Ranking Criterion Eight would only apply to hospitals seeking FTE slots to establish or expand a nonprimary care or nongeneral surgery program, and would no longer be applicable to hospitals seeking cap slots for cap relief. In light of the modifications to Ranking Criterion Eight, we also are finalizing our proposed change to Ranking Criteria Seven to correctly specify the types of applications that would properly be made under this Ranking Criterion by PO 00000 Frm 00278 Fmt 4701 Sfmt 4700 removing the reference to cap relief from Ranking Criterion Seven. Accordingly, we are finalizing Ranking Criterion Seven and Ranking Criterion Eight as follows: Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. We are making changes to the Section 5506 Application Form to remove language associated with cap relief, including removal of the existing Demonstrated Likelihood Criterin 3, which was for cap relief. Separately, we also proposed a change related to Ranking Criterion One. Current ranking Criterion One is for an applying hospital that assumed an entire program or programs from the hospital that closed. We proposed to revise Ranking Criterion One to provide priority to hospitals in one scenario. Section 5503 of the Affordable Care Act amended section 1886(h) of the Act by adding new paragraph (8), which provided for the permanent reduction and distribution of residency slots. Section 1886(h)(8)(A)(ii) of the Act provides specific exceptions to the application of the reduction at section 1886(h)(8)(A)(i) of the Act, and expressly states: ‘‘Exceptions—This subparagraph shall not apply to (I) a hospital located in a rural area (as defined in subsection (d)(2)(D)(ii)) with fewer than 250 acute care inpatient beds.’’ The November 24, 2010 final rule with comment period (75 FR 72147) describes the agency’s interpretation of this statutory provision. As of the time that the proposed rule was posted on the CMS Web site, we were aware of one instance in which CMS erroneously reduced a hospital’s FTE resident cap contrary to this statutory exception. We proposed to amend Ranking Criterion One under section 5506 to provide priority to a hospital which had FTE resident cap slots erroneously removed under section 5503 contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act. We proposed to revise Ranking Criterion One as follows: b Ranking Criterion One. The applying hospital is requesting the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff). The applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS proposed rule on the CMS Web site. Comment: One commenter asked that CMS clarify that this modification to Ranking Criterion One does not override the statutory priority of the categories included in the text of section 5506. The commenter suggested that CMS clarify this by indicating that the applying hospitals located within or contiguous to the same CBSA as the closed hospital would be eligible to receive cap slots, regardless of their ranking criteria before an applying hospital that meets the new second clause included within Ranking Criterion One but is not located within the same or contiguous CBSA as the closed hospital. Response: We are clarifying, as the commenter requested, that the applying hospitals located within or contiguous to the same CBSA as the closed hospital would be eligible to receive cap slots, regardless of their ranking criteria, before an applying hospital that meets the new second clause included within Ranking Criterion One but is not located within the same or contiguous CBSA as the closed hospital. Comment: One commenter expressed concern that the proposed change to Ranking Criterion One does not ensure that a hospital that is located more than 70 miles from any other medical education program, and whose FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, can regain its lost slots when a teaching hospital closes in another part of its State. The commenter noted that CMS must follow the statutory categories in distributing slots under section 5506, and that, generally, the number of slots requested under the first priority category (same or contiguous CBSA as the closed hospital) far exceeds the number of slots available from the closed hospital, leaving no slots available for hospitals in the second or other priority category levels. The commenter cautioned that unless CMS takes steps to ensure that slots are VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 awarded not only to hospitals in the first priority category, but also to hospitals in the second (same state) or third (same region) priority categories, the proposed change to Ranking Criterion One will not help a hospital that is located more than 70 miles from the nearest medical education program. The commenter stated that ‘‘CMS has several options in the FY 2015 IPPS final rule to ensure that hospitals located in the same State, and not just the same or contiguous CBSA as the closed hospital, have an opportunity to add new resident slots under section 5506.’’ The commenter made the following recommendations for CMS to finalize: (1) In addition to finalizing the proposal to eliminate cap relief from Ranking Criterion Eight, CMS could further revise Ranking Criteria Seven and Eight so that even fewer hospitals located in the same or contiguous CBSA can satisfy either criterion. CMS could further narrow its Demonstrated Likelihood Criteria to achieve the same result. (2) CMS could construe the language at section 1886(h)(4)(H)(vi)(II) of the Act to require the agency to follow the statutory priority categories, but to do so in a manner that at least some slots are awarded to hospitals within each of the first three priority categories, such as making a large proportion of slots available for the first priority category, and then successively smaller proportions of the slots available for the second and third priority categories. (3) CMS could balance the competing statutory importance expressed within the statutory priority categories with the need to maintain and grow primary care residency programs in rural and underserved areas and maintain an adequate distribution of physicians, in general. CMS could conclude that one way to recognize this balance is to ensure that a hospital that had less than 250 beds and that was located in a rural area and had its FTE resident cap erroneously reduced by CMS would be awarded some of those slots after another teaching hospital in its State closes, even if the closed hospital is not located in the same or contiguous CBSA as such a hospital. (4) CMS could conclude that section 1886(h)(4)(H)(vi)(II) of the Act did not contemplate the exact scenario where a hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, and that the hospital’s remote location means it almost certainly will never be in the first priority level category. Response: We regret that the commenter believes that CMS’ proposed PO 00000 Frm 00279 Fmt 4701 Sfmt 4700 50131 revision to Ranking Criterion One is not sufficient to rectify the scenario where a hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act. We do not agree with the commenter’s options because each of the options that the commenter recommended would have an impact on other hospitals and stakeholders with an interest in how CMS implements section 5506. That is, the commenter’s suggestions could potentially reduce the amount of slots available to other stakeholders. Moreover, accepting any such suggested options would require notice-andcomment rulemaking on each recommendation, respectively. We continue to believe that it is appropriate to provide priority to a hospital which had FTE resident cap slots erroneously removed under section 5503 contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and for which CMS CentralOffice was made aware of the error prior to posting of the FY 2015 IPPS/LTCH PPS proposed rule on the CMS Web site. Therefore, we are finalizing this policy, as proposed, in this final rule. Comment: One commenter stated that the proposed language revising Ranking Criterion One could lead one to believe that a hospital must satisfy both conditions to qualify under this criterion. To clarify that this is not the case, the commenter recommended that CMS modify the language within Ranking Criterion One by adding an ‘‘or’’ as follows: Ranking Criterion One. The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff); or, the applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS/LTCH PPS proposed rule on the CMS Web site. Response: We agree with the commenter that the conditions in the revised Ranking Criterion One are separate and distinct, and a hospital applying for slots under Ranking Criterion One would need to satisfy only one of the requirements, not both. Therefore, we are adopting the E:\FR\FM\22AUR2.SGM 22AUR2 50132 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV commenter’s suggestion of adding ‘‘or’’ between the two conditions, and we are modifying the language of Ranking Criterion One in the CMS Application Form as well. After consideration of the public comments we received, we are finalizing the following change to the text of Ranking Criterion One: Ranking Criterion One. The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff); OR, the applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS proposed rule on the CMS Web site. d. Clarification to Ranking Criterion Two Regarding Emergency Medicare GME Affiliation Agreements Ranking Criterion Two gives preference to applying hospitals that received slots under the terms of a Medicare GME affiliation agreement from the closed hospital. Under section 1886(h)(4)(H)(ii) of the Act, hospitals may form a Medicare GME affiliated group and elect to aggregate their respective FTE resident caps and apply them on an aggregate basis. The regulations at 42 CFR 413.75(b) and 413.79(f) implemented this statutory provision, providing specific rules for sharing FTE resident cap slots among members of the Medicare GME affiliated group, one such rule being that member hospitals must have a ‘‘shared rotational arrangement.’’ A ‘‘shared rotational arrangement’’ is defined at 42 CFR 413.75(b) as a residency training program under which a resident(s) participates in training at two or more hospitals in that program. Specifically, Ranking Criterion Two states the following: Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. A question has been raised as to whether hospitals that were members of an emergency Medicare GME affiliation agreement with the closed hospital prior to its closure may be considered under Ranking Criterion Two as well. The regulations at 42 CFR 413.79(f)(7) govern emergency Medicare GME affiliation agreements, which are applicable in the instance where a statutory section 1135 waiver is invoked. In this situation, due to emergency conditions, the ‘‘home’’ hospital is unable to continue to train its residents. Therefore, under the terms of the emergency Medicare GME affiliation agreement, the ‘‘home’’ hospital may agree to temporarily transfer FTE resident cap slots to ‘‘host’’ hospitals that would train the displaced residents during the emergency period. In the November 24, 2010 final rule with comment period (75 FR 72216), we stated that ‘‘section 1886(h)(4)(H)(vi) of the Act, as added by section 5506(a) of the Affordable Care Act, directs the Secretary to give preference to hospitals that are members of the same affiliated group as the hospital that closed. We believe that, generally, if the applying hospital was affiliated to receive slots from the hospital that closed, then the applying hospital was relying on that number of FTE resident slots that it received in order to maintain its fair share of the cross-training of the residents in the jointly operated programs. In the absence of those slots received from the closed hospital, the applying hospital may not be able to continue training that number of FTE residents, and those same residents would not only be displaced from the closed hospital, but might essentially become ‘displaced’ from the affiliated hospitals in which they were used to doing a portion of their training. Accordingly, we proposed this ranking PO 00000 Frm 00280 Fmt 4701 Sfmt 4700 criterion to allow hospitals that were affiliated with the closed hospitals to at least maintain their fair share of the training of the residents in the programs that they had jointly operated with the closed hospital.’’ In determining whether Ranking Criterion Two may encompass emergency Medicare GME affiliation agreements, we considered the key differences and similarities between regular Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements. Regarding the differences, in the case of emergency affiliations, there may not have been historical cross-training or jointly operated programs between the applicant hospital and the hospital that closed. Furthermore, after the natural disaster that precipitates the section 1135 waiver, the ‘‘home’’ hospital would be in no condition to train its share of residents, which is why the ‘‘shared rotational arrangement’’ requirements at 42 CFR 413.79(f)(2) for regular Medicare GME affiliation agreements are waived for emergency Medicare GME affiliation agreements. However, it is often true with emergency affiliations that a hospital agrees to take over the training of the hospital in need, ‘‘receiving’’ FTE cap slots and residents from the ‘‘home’’ hospital, thereby creating the training relationship. In the event where, following the disaster that triggers the section 1135 waiver, a hospital should actually close, the ‘‘host’’ hospital that accepted the residents perhaps might even continue to train its share of the residents in the program after the hospital closes. Therefore, emergency affiliation agreements are similar to regular affiliation agreements in that the ‘‘host’’ hospital received FTE cap slots from the ‘‘home’’ hospital to train the ‘‘home’’ hospital’s residents. Further, in the event that the ‘‘home’’ hospital closes, triggering a Round of section 5506, the ‘‘host’’ hospital also would need those FTE cap slots in order to continue training the share of its program for which it had taken responsibility under the emergency Medicare GME affiliation agreement before the ‘‘home’’ hospital closed. As we stated in the November 24, 2010 final rule with comment period (75 FR 72219 through 72220), ‘‘we believe the intent of section 5506 is to promote continuity and limit disruption in residency training. In that light, we believe it is logical to give preference to a hospital that received slots under the terms of the Medicare GME affiliation agreement so that the hospital could continue to train at least the number of FTE residents it had trained under the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations terms of the Medicare GME affiliation agreement, avoiding the displacement of even more residents. . . .’’ We further stated that we ‘‘. . . are only giving preference to hospitals that received slots from the closed hospital under the terms of the Medicare GME affiliation agreement, so that the hospital could continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement. . . .’’ Finally, we stated ‘‘that the hospital or hospitals that were most recently affiliated with and received slots from the closed hospital would have the most immediate need for those slots.’’ While the circumstances may vary, we believe that ‘‘host’’ hospitals under emergency Medicare GME affiliation agreements could fulfill much of the same role as hospitals that received slots from the hospital that closed under regular Medicare GME affiliation agreements. That is, continuity of training would be encouraged and disruption would be mitigated, to the extent that the ‘‘host’’ hospital could document to CMS that it would continue to ‘‘train at least the number of FTE residents it had trained under the terms of the’’ emergency Medicare GME affiliation agreement, and in doing so, would demonstrate it has the ‘‘most immediate need for those slots’’ as compared to another hospital. Given these similarities between regular Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements, we believe that the existing Ranking Criterion Two may be read to already encompass emergency Medicare GME affiliation agreements. Accordingly, we are clarifying the existing Ranking Criterion Two to include emergency Medicare GME affiliation agreements, to read as follows: b Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. We are making these changes to Ranking Criterion Two in the Section 5506 Application Form. Comment: Commenters supported CMS’ clarification that the existing Ranking Criterion Two includes emergency Medicare GME affiliation agreements. Response: We thank the commenters for their support. The revised description of Ranking Criterion Two on the CMS Application Form refers to both Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements. The following list includes the final ranking criteria along with the final effective dates. • Ranking Criterion One: The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program(s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff); OR, the applying hospital’s FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS/LTCH PPS proposed rule on the CMS Web site. (This language reflects the finalized modification of Ranking Criterion One. We refer readers to section IV.K.5.c. of the preamble of this final rule where we discuss this proposed modification.) • Effective Date: If the hospital is receiving a temporary cap adjustment, slots are effective the day after the graduation date(s) of actual displaced resident(s). If the hospital is not receiving a temporary cap adjustment, slots are effective with the date of the hospital closure. PO 00000 Frm 00281 Fmt 4701 Sfmt 4700 50133 • Clarified Ranking Criterion Two: The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital’s closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. (This language reflects our clarification in the proposed rule and this final rule regarding inclusion of emergency Medicare GME affiliation agreements in Ranking Criterion Two. We refer readers to section IV.K.5.d. of the preamble of this final rule where we discuss this clarification.) • Effective Date: Slots are effective with the date of the hospital closure. • Ranking Criterion Three: The applying hospital took in residents displaced by the closure of the hospital, but is not assuming an entire program or programs, and will use the additional slots to continue training residents in the same programs as the displaced residents, even after those displaced residents complete their training (that is, the applying hospital is permanently expanding its own existing programs). • Effective Date: If the hospital is receiving temporary cap adjustment, slots are effective the day after the graduation date(s) of actual displaced resident(s). If the hospital is not receiving a temporary cap adjustment, slots are effective with the date of the hospital closure. • Ranking Criterion Four: The program does not meet Ranking Criteria E:\FR\FM\22AUR2.SGM 22AUR2 50134 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1, 2, or 3, and the applying hospital will use additional slots to establish a new or expand an existing geriatrics residency program. • Ranking Criterion Five: The program does not meet Ranking Criteria 1 through 4, the applying hospital is located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. • Ranking Criterion Six: The program does not meet Ranking Criteria 1 through 5, and the applying hospital is not located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. • Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or nongeneral surgery program. (This language reflects our proposal in this proposed rule to revise Ranking Criteria Seven and Eight. We refer readers to section IV.K.5.c. of the preamble of this final rule where we discuss our proposals and final policies to amend Ranking Criteria Seven and Eight.) • Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. (This language reflects our proposal in the proposed rule to revise Ranking VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Criterion Eight. We refer readers to section IV.K.5.c. of the preamble of this final rule where we discuss our proposals and final policies to amend Ranking Criterion Eight.) Æ Effective Date Policy for Ranking Criterion Four through Ranking Criterion Eight: If the hospital is receiving a temporary cap adjustment for training displaced residents and its section 5506 award is less than or equal to the temporary cap adjustment, the section 5506 slots would become effective the later of when the hospital can demonstrate to the MAC that the slots associated with a new program or program expansion are actually filled, and therefore, are needed, or the July 1 after displaced residents complete their training. If the hospital is receiving a temporary cap adjustment for training displaced residents and its section 5506 award is greater than the temporary cap adjustment, the number of slots by which the section 5506 award exceeds the temporary cap adjustment would be available for use when the hospital can demonstrate to its MAC that the slots associated with the new program or program expansion are filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). If the hospital is not receiving a temporary cap adjustment, slots would become effective when the hospital can demonstrate to the MAC that the slots needed for a new program or program expansion are actually filled and, therefore, are needed as of a particular date (usually July 1, possibly retroactive). At the end of this GME section, we are including a revised Section 5506 PO 00000 Frm 00282 Fmt 4701 Sfmt 4700 Application Form that reflects all of the final changes discussed above. Out of Scope GME Comments We received several comments that were not related to the GME proposals in the FY 2015 IPPS/LTCH PPS proposed rule. Some commenters urged CMS to be more transparent and provide data on the effects of the section 5503 and the section 5506 redistributions. One commenter asked that CMS consider changing the calculation of the FTE cap for new teaching hospitals so that it is based on the final 1-year period of the 5-year growth window, as opposed to the entire 5 years. Another commenter stated that policies to redirect funding from specialty to primary care do not take into consideration the serious consequences of a potential shortage of specialty physicians, and that Medicare GME should fully fund the entire length of training required for initial board certification for neurosurgery, which is 6 to 7 years. Several commenters urged CMS to publish a clear statement that neither a hospital’s PRA nor its capbuilding window is triggered by the presence of a small number of residents performing brief rotations at the hospital. Another commenter asserted that second-year pharmacy residencies should receive Medicare pass-through reimbursement. We appreciate these comments. However, because we did not propose any changes related to these issues in the proposed rule, we consider these comments to be outside the scope of the proposed rule and are not addressing these comments at this time. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50135 CMS Application Form As Part of the Application for the Increase in a Hospital's FTE Cap(s) under Section 5506 of the Affordable Care Act: Preservation of FTE Cap Slots from Teaching Hospitals that Close Directions: Please fill out the information below for each residency program for which the applicant hospital intends to use the increase in its FTE cap(s).lfthe hospital is applying for slots for a particular program, but the requested slots in that program qualify under two different ranking criteria, submit two separate application forms accordingly. If the hospital is applying for slots associated with a Medicare GME affiliation agreement with a hospital that closed, that application must be submitted separately from an individual program request. NAME OF H O S P I T A L : - - - - - - - - - - - - - - - - - - MEDICARE PROVIDER NUMBER (CCN): _ _ _ _ _ _ _ _ _ _ __ NAME OF MEDICARE ADMINISTRATIVE CONTRACTOR: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ CORE-BASED STATISTICAL AREA (CBSA in which the hospital is physically located--write the 5 digit code here): - - - - - - - - - - - - - - - COUNTY NAME (in which the hospital is physically located): _ _ _ _ _ __ Indicate the following, as applicable: 1. Name of Specialty Training Program: _ _ _ _ _ _ _ _ _ _ _ _ _ __ 2. Medicare GME Affiliated Group: _ _ _ _ _ _ _ _ _ _ _ _ __ (Check one): o Allopathic Program o Osteopathic Program NUMBER OF FTE SLOTS REQUESTED FOR SPECIFIC PROGRAM (OR OVERALL IF SEEKING SLOTS ASSOCIATED WITH A MEDICARE GME AFFILIATED GROUP) AT YOUR HOSPITAL: Direct GME:- - - - - - - IME: - - - - - - - The applicant hospital must provide documentation to demonstrate the likelihood of filling requested slots under section 5506 within the 3 academic years immediately following the application deadline to receive slots after a particular hospital closes. Please indicate the specific use for which you are requesting an increase in your hospital's FTE VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00283 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.002</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Section A: Demonstrated Likelihood Criteria (DLC) of Filling the FTE Slots 50136 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations cap(s). If you are requesting an increase in the hospital's FTE cap(s) for a combination of DLCl, DLC2, or DLC3, you must complete a separate CMS Application Form for each DLC and specify the distinct criterion from the list below within each Form. Demonstrated Likelihood Criterion 1: Establishing a New Residency Program The hospital does not have sufficient room under its direct GME FTE cap or IME FTE cap, or both, and will establish a new residency program in the specialty. Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (YIN) _ _ _ __ The hospital must check at least one of the following: Application for approval of the new residency program has been submitted to the ACGME, AOA or the ABMS (The hospital must attach a copy.) --- ___The hospital has submitted an institutional review document or program information form concerning the new program in an application for approval of the new program. (The hospital must attach a copy.) ___The hospital has received written correspondence from the ACGME, AOA or ABMS acknowledging receipt of the application for the new program, or other types of communication from the accrediting bodies concerning the new program approval process (such as notification of site visit). (The hospital must attach a copy.) ___The hospital has other documentation demonstrating that it has made a commitment to start a new program (The hospital must attach a copy.) Demonstrated Likelihood Criterion 2: Taking Over All or Part ofan Existing Residency Program from the Closed Hospital, or Expanding an Existing Residency Program Please indicate Y or N: As of the time of submitting this application, are you receiving a temporary cap adjustment for IME and/or direct GME under 42 CFR 413.79(h) for residents displaced by the closure of the hospital subject to this Round of section 5506? (YIN) _ _ _ __ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00284 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.003</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV The hospital does not have sufficient room under its direct GME FTE cap or IME FTE cap, or both, and (a) has permanently taken over the closed hospital's entire residency program, or (b) is permanently expanding its own previously established and approved residency program resulting from taking over part of a residency program from the closed hospital, or (c) is permanently expanding its own existing residency program. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50137 The hospital must check at least one of the following: _ __:Application for approval to take over the closed hospital's residency program has been submitted to the ACGME, AOA, or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) ___~Application for approval of an expansion of the number of approved positions in its residency program resulting from taking over part of a residency program from the closed hospital has been submitted to the ACGME, AOA or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) ___.Application for approval of an expansion of the number of approved positions in its residency program has been submitted to the ACGME, AOA or the ABMS, or approval has been received from the ACGME, AOA, or the ABMS. (The hospital must attach a copy.) ___The hospital currently has unfilled positions in its residency program that have previously been approved by the ACGME, AOA, or the ABMS, and is now seeking to fill those positions. (The hospital must attach documentation clearly showing its current number of approved positions, and its current number of filled positions). ___The hospital has submitted an institutional review document or program information form concerning the program in an application for approval of an expansion to the program (The hospital must attach a copy). The hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number of FTE residents it had trained under the terms of the Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, the applying hospital was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital's closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00285 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.004</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Demonstrated Likelihood Criterion 3: Receiving Slots by Virtue ofMedicare GME Affiliated Group Agreement or Emergency Medicare GME Affiliated Group Agreement with Closed Hospital 50138 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital under the terms of that affiliation agreement. (Copies of EACH of the following must be attached.) Copies of the recent Medicare GME affiliation agreement (or emergency Medicare GME affiliation agreement) of which the applying hospital and the closed hospital were a member of before the hospital closed. For regular Medicare GME affiliation agreements, copies of the most recent accreditation letters for all of the hospital's training programs in which the hospital had a shared rotational arrangement (as defined at §413.75(b)) with the closed hospital. Section B. Level Priority Category (Place an "X" in the appropriate box that is applicable to the level priority category that describes the applicant hospital.) o First, to hospitals located in the same core-based statistical area (CBSA) as, or in CBSA contiguous to, the hospital that closed. a o Second, to hospitals located in the same State as the closed hospital. o Third, to hospitals located in the same region as the hospital that closed. o Fourth, if the slots have not yet been fully distributed, to qualifying hospitals in accordance with the criteria established under section 5503, "Distribution of Additional Residency Positions" Section C. Ranking Criteria (Place an "X" in the box for each criterion that is appropriate for the applicant hospital and for the program for which the increase in the FTE cap is requested.) o Ranking Criterion Two. The applying hospital was listed as a participant of a Medicare GME affiliated group on the most recent Medicare GME affiliation agreement or VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00286 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.005</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV o Ranking Criterion One. The applying hospital is requesting the increase in its FTE resident cap(s) because it is assuming (or assumed) an entire program (or programs) from the hospital that closed, and the applying hospital is continuing to operate the program (s) exactly as it had been operated by the hospital that closed (that is, same residents, possibly the same program director, and possibly the same (or many of the same) teaching staff); OR, the applying hospital's FTE resident caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware of the error prior to posting of the FY 2015 IPPS/LTCH PPS proposed rule on the CMS Web site. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50139 emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed, and under the terms of that Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement, the applying hospital received slots from the hospital that closed, and the applying hospital will use the additional slots to continue to train at least the number ofFTE residents it had trained under the terms of the Medicare GME affiliation agreement, or emergency Medicare GME affiliation agreement. If the most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement of which the closed hospital was a member before the hospital closed was with a hospital that itself has closed or is closing, preference would be given to an applying hospital that was listed as a participant in the next most recent Medicare GME affiliation agreement or emergency Medicare GME affiliation agreement (but not one which was entered into more than 5 years prior to the hospital's closure) of which the first closed hospital was a member before the hospital closed, and that applying hospital received slots from the closed hospital under the terms of that affiliation agreement. o Ranking Criterion Three. The applying hospital took in residents displaced by the closure of the hospital, but is not assuming an entire program or programs, and will use the additional slots to continue training residents in the same programs as the displaced residents, even after those displaced residents complete their training (that is, the applying hospital is permanently expanding its own existing programs). o Ranking Criterion Four. The program does not meet Ranking Criteria 1,2, or 3, and the applying hospital will use additional slots to establish a new or expand an existing geriatrics residency program. o Ranking Criterion Five: The program does not meet Ranking Criteria 1 through 4, the applying hospital is located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. o Ranking Criterion Six: The program does not meet Ranking Criteria 1 through 5, and the applying hospital is not located in a HPSA, and will use all the additional slots to establish or expand a primary care or general surgery residency program. o Ranking Criterion Seven: The applying hospital will use additional slots to establish or expand a primary care or general surgery program, but the program does not meet Ranking Criterion 5 or 6 because the hospital is also separately applying under Ranking Criterion 8 for slots to establish or expand a nonprimary care or non-general surgery program. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00287 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.006</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV o Ranking Criterion Eight: The program does not meet Ranking Criteria 1 through 7, and the applying hospital will use additional slots to establish or expand a nonprimary care or a nongeneral surgery program. 50140 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Application Process and CMS Central Office Mailing Address for Receiving Increases in FTE Resident Caps In order for hospitals to be considered for increases in their FTE resident caps, each qualifying hospital must submit a timely application. The following information must be submitted on applications to receive an increase in FTE resident caps: • The name and Medicare provider number, and Medicare administrative contractor (to which the hospital submits its cost report) of the hospital. • The total number of requested FTE resident slots for direct GME or IME, or both. • A completed copy of the CMS Application Form for each residency program for which the hospital intends to use the requested increase in FTE residents. • Source documentation to support the assertions made by the hospital on the CMS Application Form. • FTE resident counts for direct GME and IME and FTE resident caps for direct GME and IME reported by the hospital in the most recent as-filed cost report. Include copies of Worksheets E, Part A, and E-4. An attestation, signed and dated by an officer or administrator of the hospital who signs the hospital's Medicare cost report, with the following information: "I hereby certify that I understand that misrepresentation or falsification of any information contained in this application may be punishable by criminal, civil, and administrative action, fine and/or imprisonment under federal law. Furthermore, I understand that if services identified in this application were provided or procured through payment directly or indirectly of a kickback or were otherwise illegal, criminal, civil, and administrative action, fines and/or imprisonment may result. I also certify that, to the best of my knowledge and belief, it is a true, correct, and complete application prepared from the books and records of the hospital in accordance with applicable instructions, except as noted. I further certify that I am familiar with the laws and regulations regarding Medicare payment to hospitals for the training of interns and residents." 6. Clarification and Policy Change Applicable to Direct GME Payments to Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for Training Residents in Approved Programs Under section 1886(k) of the Act, and as implemented in the regulations at 42 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 CFR 405.2468(f), federally qualified health centers (FQHCs) and rural health clinics (RHCs) may receive payment for the costs of direct GME for training residents in an approved program under certain circumstances. Specifically, the regulations at § 405.2468(f)(1) state that effective for that portion of cost PO 00000 Frm 00288 Fmt 4701 Sfmt 4700 reporting periods occurring on or after January 1, 1999, if an RHC or an FQHC incurs ‘‘all or substantially all’’ of the costs for the training program in the nonhospital setting as defined in § 413.75(b), the RHC or FQHC may receive direct graduate medical education payment for those residents. E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.007</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV CMS Central Office Mailing Address Centers for Medicare & Medicaid Services (CMS) Director, Division of Acute Care 7500 Security Boulevard Mailstop C4-08-06 Baltimore, MD 21244-1850 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We refer readers to the July 31, 1998 final rule (63 FR 40986) for a detailed discussion of this longstanding policy. As noted earlier, the regulatory text of § 405.2468(f)(1) incorporates the definition of ‘‘all or substantially all of the costs for the training program in a nonhospital setting’’ that is defined at § 413.75(b), as part of a number of definitions applicable generally to hospital direct GME payments and those regulations at § 413.76 through § 413.83. Section 413.75(b) is based on the statutory provision at section 1886(h)(4)(E) of the Act, which establishes the requirements that hospitals must meet in order to receive direct GME payment for residents training in nonprovider settings. The statutory use of the phrase ‘‘all or substantially all of the costs for the training program in that setting’’ is located in section 1886(h)(4)(E) of the Act, as added by section 9314 of the Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99–509) (OBRA ‘86). For a detailed discussion of the implementation of section 9314 of OBRA ‘86, we refer readers to the September 29, 1989 final rule (54 FR 40292). Section 1886(h)(4)(E) of the Act, as added by OBRA ’86, established the requirements that hospitals must meet in order to receive direct GME payment for residents training in nonprovider settings. However, section 5504(a) of the Affordable Care Act made changes to section 1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of direct GME payments. In making these changes to section 1886(h)(4)(E) of the Act, section 5504(a) of the Affordable Care Act amended the Act prospectively, effective with ‘‘cost reporting periods beginning on or after July 1, 2010’’ for direct GME, by removing the phrase ‘‘all or substantially all of the costs for the training program in that setting’’ and instead permitting hospitals to count the time that residents train in activities related to patient care in a nonprovider site if the hospital incurs the costs of the residents’ salaries and fringe benefits for the time that the resident spends training in the nonprovider site. In effect, this amendment reduced the costs that hospitals must incur for residents training in nonprovider settings. Based on this statutory amendment, in the November 24, 2010 final rule with comment period (75 FR 72134), we revised the regulations at § 412.105(f)(1)(ii)(E) for IME and §§ 413.78(f) and (g) for direct GME to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reflect the changes made by section 5504(a) of the Affordable Care Act. In addition, we revised the regulatory definition of ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ in order to implement the statutory amendment and apply the effective date as set forth in the statute to cost reporting periods beginning on or after July 1, 2010. Specifically, the regulations at § 413.75(b), which define ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ were revised to state: • Effective on or after January 1, 1999 and for cost reporting periods beginning before July 1, 2007, the residents’ salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physicians’ salaries and fringe benefits attributable to direct graduate medical education (GME); and • Effective for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2010, at least 90 percent of the total of the costs of the residents’ salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physicians’ salaries attributable to nonpatient care direct GME activities. Ultimately, with regard to the costs that hospitals must incur for residents training in nonprovider sites in order to count the FTE residents for purposes of direct GME payments, the phrase ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ no longer applies, effective for cost reporting periods beginning on and after July 1, 2010. In the November 24, 2010 final rule with comment period (75 FR 72134), we amended the regulations applicable to direct GME payments to hospitals at §§ 413.75(b) and 413.78(g) to reflect the changes made by section 5504(a) of the Affordable Care Act. However, at that time, we inadvertently did not make conforming changes to the regulations at § 405.2468(f)(1) to clarify the requirements that FQHCs and RHCs must meet in order to receive direct GME payment for training residents in their facilities. Therefore, in compliance with our longstanding policy that FQHCs and RHCs must meet the same requirements applicable to teaching hospitals for direct GME payments with respect to training residents in nonprovider settings, as we did in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28164), we are providing clarification that, based on statutory amendments discussed earlier, the applicable policy cross-referenced in § 405.2468(f)(1) has changed for cost PO 00000 Frm 00289 Fmt 4701 Sfmt 4700 50141 reporting periods beginning on or after July 1, 2010. In addition, to ensure statutory and regulatory consistency, we proposed to revise the regulations at § 405.2468(f)(1) to add a sentence at the end of the paragraph that stated that in connection with cost reporting periods for which ‘‘all or substantially all of the costs for the training program in the nonhospital setting’’ is not defined in § 413.75(b), if an RHC or an FQHC incurs the salaries and fringe benefits (including travel and lodging where applicable) of residents training at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical education payment for those residents. We did not receive any public comments regarding our proposed clarification and policy change applicable to direct GME payments to FQHCs and RHCs for training residents in approved programs. Therefore, we are finalized this policy as proposed. L. Rural Community Hospital Demonstration Program 1. Background Section 410A(a) of Public Law 108– 173 required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing ‘‘rural community’’ hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost-based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that— • Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act; • Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report; • Provides 24-hour emergency care services; and • Is not designated or eligible for designation as a CAH under section 1820 of the Act. Section 410A(a)(4) of Public Law 108– 173 specified that the Secretary was to select for participation no more than 15 rural community hospitals in rural areas of States that the Secretary identified as having low population densities. Using 2002 data from the U.S Census Bureau, we identified the 10 States with the lowest population density in which rural community hospitals were to be located in order to participate in the demonstration: Alaska, Idaho, Montana, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50142 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). CMS originally solicited applicants for the demonstration in May 2004; 13 hospitals began participation with cost reporting periods beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals withdrew from the program and converted to CAH status. This left nine hospitals participating at that time. In 2008, we announced a solicitation for up to six additional hospitals to participate in the demonstration program. Four additional hospitals were selected to participate under this solicitation. These four additional hospitals began under the demonstration payment methodology with the hospital’s first cost reporting period starting on or after July 1, 2008. At that time, 13 hospitals were participating in the demonstration. Five hospitals (3 of the hospitals were among the 13 hospitals that were original participants in the demonstration program and 2 of the hospitals were among the 4 hospitals that began the demonstration program in 2008) withdrew from the demonstration program during CYs 2009 and 2010. (Three of these hospitals indicated that they would be paid more for Medicare inpatient hospital services under the rebasing option allowed under the SCH methodology provided for under section 122 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110–275). One hospital restructured to become a CAH, and one hospital closed.) In CY 2011, one hospital that was among the original set of hospitals that participated in the demonstration withdrew from the demonstration. These actions left seven of the originally participating hospitals (that is, hospitals that were selected to participate in either 2004 or 2008) participating in the demonstration program as of June 1, 2011. Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111–148) amended section 410A of Public Law 108–173, which established the rural community hospital demonstration program. Sections 3123 and 10313 of the Affordable Care Act changed the rural community hospital demonstration program in several ways. First, the Secretary is required to conduct the demonstration program for an additional 5-year period that begins on the date immediately following the last day of the initial 5-year period. Further, the Affordable Care Act requires, in the case of a rural community hospital that is participating VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in the demonstration program as of the last day of the initial 5-year period, the Secretary to provide for the continued participation of such rural hospital in the demonstration program during the 5-year extension, unless the hospital makes an election, in such form and manner as the Secretary may specify, to discontinue participation (section 410A(g)(4)(A) of Pub. L. 108–173, as added by section 3123(a) of the Affordable Care Act and further amended by section 10313 of such Act). In addition, the Affordable Care Act provides that, during the 5-year extension period, the Secretary shall expand the number of States with low population densities determined by the Secretary to 20 (section 410A(g)(2) of Public Law 108–173, as added by section 3123(a) and amended by section 10313 of the Affordable Care Act). Further, the Secretary is required to use the same criteria and data that the Secretary used to determine the States under section 410A(a)(2) of Public Law 108–173 for purposes of the initial 5year period. The Affordable Care Act also allows not more than 30 rural community hospitals in such States to participate in the demonstration program during the 5-year extension period (section 410A(g)(3) of Public Law 108–173, as added by section 3123(a) of the Affordable Care Act and as further amended by section 10313 of such Act). We published a solicitation for applications for additional participants in the rural community hospital demonstration program in the Federal Register on August 30, 2010 (75 FR 52960). Applications were due on October 14, 2010. The 20 States with the lowest population density that were eligible for the demonstration program are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). We approved 19 new hospitals for participation in the demonstration program. We determined that each of these new hospitals would begin participating in the demonstration with its first cost reporting period beginning on or after April 1, 2011. Three of these 19 hospitals declined participation prior to the start of the cost reporting periods for which they would have begun the demonstration. In addition to the 7 hospitals that were selected in either 2004 or 2008, the new selection led to a total of 23 hospitals in the demonstration. During CY 2013, one additional hospital among the set PO 00000 Frm 00290 Fmt 4701 Sfmt 4700 selected in 2011 withdrew from the demonstration, similarly citing a relative financial advantage to returning to the customary SCH payment methodology, which left 22 hospitals participating in the demonstration. In addition, section 410A(c)(2) of Public Law 108–173 required that, ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ This requirement is commonly referred to as ‘‘budget neutrality.’’ Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral in its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. Typically, this form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program’s participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, makes it extremely unlikely that this demonstration program could be viable under the usual form of budget neutrality. Specifically, cost-based payments to participating small rural hospitals are likely to increase Medicare outlays without producing any offsetting reduction in Medicare expenditures elsewhere. Therefore, a rural community hospital’s participation in this demonstration program is unlikely to yield benefits to the participant if budget neutrality were to be implemented by reducing other payments for these same hospitals. In the past 10 IPPS final regulations, spanning the period for which the demonstration program has been implemented, we have adjusted the national inpatient PPS rates by an amount sufficient to account for the added costs of this demonstration program, thus applying budget neutrality across the payment system as a whole rather than merely across the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations participants in the demonstration program. As we discussed in the FYs 2005 through 2014 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922; 75 FR 50343; 76 FR 51698; 77 FR 53449; and 78 FR 50740; respectively), we believe that the language of the statutory budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. In light of the statute’s budget neutrality requirement, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28166 through 28167), we proposed to continue to use the methodology we finalized in FY 2013 to calculate a budget neutrality adjustment factor to the FY 2015 national IPPS rates. In general terms, in each of these previous years, we used available cost reports for the participating hospitals to derive an estimate of the additional costs attributable for the demonstration. Prior to FY 2013, we used finalized, or settled, cost reports, as available, and ‘‘as submitted’’ cost reports for hospitals for which finalized cost reports were not available. Annual market basket percentage increase amounts provided by the CMS Office of the Actuary reflecting the growth in the prices of inputs for inpatient hospitals were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53452), we used ‘‘as submitted’’ cost reports (for cost reporting periods ending in CY 2010) for each hospital participating in the demonstration in estimating the costs of the demonstration. In addition, in FY 2013, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. Finally, in each of the previous years, an annual update factor provided by the CMS Office of the Actuary reflecting growth in the volume of inpatient operating services was also applied. For the budget neutrality calculations in the IPPS final rules for FYs 2005 through 2011, the annual volume adjustment applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, and 2014, it was 3 percent. For a detailed discussion of our budget neutrality offset calculations, we refer readers to the IPPS final rule applicable to the fiscal year involved. In general, for FYs 2005 through 2009, we based the budget neutrality offset estimate on the estimated cost of the demonstration in an earlier given year. For these periods, we derived that estimated cost by subtracting the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 estimated amount that would otherwise be paid without the demonstration in an earlier given year from the estimated amount for the same year that would be paid under the demonstration under the reasonable cost-based methodology authorized by section 410A of Public Law 108–173. (We note that section 410A of Public Law 108–173 was later amended by the Affordable Care Act.) The reasonable cost-based methodology authorized by section 410A of Public Law 108–173, as amended, is hereafter referred to as the ‘‘reasonable cost methodology.’’ (We ascertained the estimated amount that would be paid in an earlier given year under the reasonable cost methodology and the estimated amount that would otherwise be paid without the demonstration in an earlier given year from ‘‘as submitted’’ cost reports that were submitted by the hospitals prior to the inception of the demonstration.) We then updated the estimated cost described above to the current year by multiplying it by the market basket percentage increases applicable to the years involved and the applicable annual volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule, data from finalized cost reports reflecting the participating hospitals’ experience under the demonstration were available. Specifically, the finalized cost reports for the first 2 years of the demonstration, that is, cost reports for cost reporting years beginning in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These data showed that the actual costs of the demonstration for these years exceeded the amounts originally estimated in the respective final rules for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we included in the budget neutrality offset amount an amount in addition to the estimate of the demonstration costs in that fiscal year. This additional amount was based on the amount that the costs of the demonstration for FYs 2005 and 2006 exceeded the budget neutrality offset amounts finalized in the IPPS rules applicable for those years. Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we continued to propose and use a methodology for calculating the budget neutrality offset amount to account for both the estimated demonstration costs in the upcoming fiscal year and an amount by which the actual demonstration costs corresponding to an earlier, given year (which would be known once finalized cost reports became available for that year) exceeded the budget neutrality offset amount finalized in the PO 00000 Frm 00291 Fmt 4701 Sfmt 4700 50143 corresponding year’s IPPS final rule. However, we noted in the FYs 2011, 2012, and 2013 IPPS final rules that, because of a delay affecting the settlement process for cost reports for IPPS hospitals occurring on a larger scale than merely for the demonstration, we were unable to finalize this component of the budget neutrality offset amount accounting for the amount by which the actual demonstration costs in a given year exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule for cost reports of demonstration hospitals dating to those beginning in FY 2007. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we adopted changes to the methodology for calculating the budget neutrality offset amount in an effort to further improve and refine it. We noted that the revised methodology varied, in part, from that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698 through 51705). Specifically, in adopting refinements to the methodology, our objective was to simplify the calculation so that it included as few steps as possible. In addition, we incorporated different update factors (the market basket percentage increase and the applicable percentage increase, as applicable, to several years of data as opposed to solely using the market basket percentage increase) for the calculation of the budget neutrality offset amount. We stated that we believed this approach would maximize the precision of our calculation because it would more closely replicate payments made with and without the demonstration. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453) for a detailed discussion of the methodology we used for FY 2013. We noted that, although we were making changes to certain aspects of the budget neutrality offset amount calculation for FY 2013, several core components of the methodology would remain unchanged. For example, we continued to include in the budget neutrality offset amount methodology the estimate of the demonstration costs for the upcoming fiscal year and the amount by which the actual demonstration costs corresponding to an earlier year (which would be determined once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. However, finalized cost reports for the hospitals participating in the demonstration were not available for FYs 2007, 2008, 2009, and 2010 at the time of development of the FY 2013 E:\FR\FM\22AUR2.SGM 22AUR2 50144 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV IPPS/LTCH PPS final rule. Therefore, we were unable to finalize this component of the budget neutrality offset calculation. We stated in the final rule that we expected settled cost reports for all of the demonstration hospitals that participated in the applicable fiscal year (FYs 2007, 2008, 2009, and 2010) to be available prior to the FY 2014 IPPS/LTCH PPS proposed rule. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through 50744), we determined the final budget neutrality offset amount to be applied to the FY 2014 IPPS rates to be $52,589,741. This amount was comprised of two distinct components: (1) the final resulting difference between the estimated reasonable cost amount to be paid under the demonstration to the 22 participating hospitals in FY 2014 for covered inpatient hospital services and the estimated amount that would otherwise be paid to such hospitals in FY 2014 without the demonstration (this amount was $46,549,861); and (2) the amount by which the actual costs of the demonstration for FY 2007, as shown in the finalized cost reports for the hospitals that participated in the demonstration during FY 2007, exceeded the budget neutrality offset amount that was finalized in the FY 2007 IPPS final rule (this amount, $6,039,880, was derived from finalized cost reports for cost reporting periods beginning in FY 2007 for the 9 hospitals that participated in the demonstration during that year). 2. FY 2015 Budget Neutrality Offset Amount For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), we proposed in the FY 2015 IPPS/LTCH PPS proposed rule (78 FR 28167) to continue to use the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule to calculate a budget neutrality adjustment factor to be applied to the FY 2015 national IPPS payment rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we revised our methodology in that final rule to further improve and refine the calculation of the budget neutrality offset amount and to simplify the methodology so that it includes only a few steps. Consistent with the methodology finalized in the FY 2013 IPPS/LTCH PPS final rule, the methodology proposed for calculating the estimated FY 2015 demonstration cost for the participating hospitals was as follows: Step 1: For each of the participating hospitals, we proposed to identify the general reasonable cost amount VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 calculated under the reasonable cost methodology for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for the hospital’s cost reporting period ending in CY 2012). The general reasonable cost amount calculated under the reasonable cost methodology is hereafter referred to as the ‘‘reasonable cost amount.’’ As we explained in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to streamline our methodology for calculating the budget neutrality offset amount would be to use cost reports with the same status and from the same time period for all hospitals participating in the demonstration. Because ‘‘as submitted’’ cost reports ending in CY 2012 are the most recent available cost reports, we believe they would be an accurate predictor of the costs of the demonstration in FY 2015 because they give us a recent picture of the participating hospitals’ costs. Because section 410A of Public Law 108–173 stipulates swing-bed services are to be included among the covered inpatient hospital services for which the demonstration payment methodology applies, we proposed to include the cost of these services, as reported on the cost reports for the hospitals that provide swing-bed services, within the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services under the demonstration. As indicated above, we proposed to use ‘‘as submitted’’ cost reports for the hospital’s cost reporting period ending in CY 2012 for this calculation. We proposed to sum the two abovereferenced amounts to calculate the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We proposed to multiply this sum (that is, the general total estimated FY 2012 reasonable cost amount for covered inpatient hospital services for all participating hospitals) by the FY 2013, FY 2014, and FY 2015 IPPS market basket percentage increases, which are formulated by the CMS Office of the Actuary. In this final rule, we are using the current estimate of the FY 2015 IPPS market basket percentage increase provided by the CMS Office of the Actuary as specified in section IV.B.1. of the preamble of this final rule. We then multiply the product of the general total estimated FY 2012 reasonable cost amount for all participating hospitals and the market basket percentage increases applicable to the years involved by a 3-percent annual volume adjustment for FYs 2013 through 2015—the result is the general PO 00000 Frm 00292 Fmt 4701 Sfmt 4700 total estimated FY 2015 reasonable cost amount for covered inpatient hospital services for all participating hospitals. We proposed to apply the IPPS market basket percentage increases applicable for FYs 2013 through 2015 to the FY 2012 reasonable cost amount described above to model the estimated FY 2015 reasonable cost amount under the demonstration. We proposed to use the IPPS market basket percentage increases because we believe that these update factors appropriately indicate the trend of increase in inpatient hospital operating costs under the reasonable cost methodology for the years involved. The 3-percent annual volume adjustment was stipulated by the CMS Office of the Actuary and is being used because it is intended to accurately reflect the tendency of hospitals’ inpatient caseloads to increase. On account of the possibility that inpatient caseloads for small hospitals may fluctuate, we are incorporating into the estimate of demonstration costs a factor to allow for a potential increase in inpatient hospital services. Step 2: For each of the participating hospitals, we proposed to identify the general estimated amount that would otherwise be paid in FY 2012 under applicable Medicare payment methodologies for covered inpatient hospital services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2012) if the demonstration was not implemented. Similarly, as in Step 1, for the hospitals that provide swing-bed services, we proposed to identify the estimated amount that generally would otherwise be paid for these services (as indicated on the ‘‘as submitted’’ cost report for cost reporting periods ending in CY 2012) and include it in the total FY 2012 general estimated amount that would otherwise be paid for covered inpatient hospital services without the demonstration. We proposed to sum these two amounts in order to calculate the estimated FY 2012 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration. We proposed to multiply the above amount (that is, the estimated FY 2012 total payments that generally would otherwise be paid for covered inpatient hospital services for all participating hospitals without the demonstration) by the FYs 2013 through 2015 IPPS applicable percentage increases. For the proposed rule, the estimate of the FY 2015 applicable percentage increase was specified in section IV.B. of the preamble. This methodology differs E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations from Step 1, in which we proposed to apply the market basket percentage increases to the sum of the hospitals’ general total FY 2012 estimated reasonable cost amount for covered inpatient hospital services. We believe that the IPPS applicable percentage increases are appropriate factors to update the estimated amounts that generally would otherwise be paid without the demonstration. This is because IPPS payments would constitute the majority of payments that would otherwise be made without the demonstration and the applicable percentage increase is the factor used under the IPPS to update the inpatient hospital payment rates. Hospitals participating in the demonstration would be participating under the IPPS payment methodology if they were not in the demonstration. Then we proposed to multiply the product of the estimated FY 2012 total payments that generally would otherwise be made without the demonstration and the applicable IPPS percentage increases for the years involved by a 3-percent annual volume adjustment for FYs 2013 through 2015. The result represents the general total estimated FY 2015 costs that would otherwise be paid without the demonstration for covered inpatient hospital services to the participating hospitals. Step 3: We proposed to subtract the amount derived in Step 2 (representing the sum of estimated amounts that generally would otherwise be paid to the participating hospitals for covered inpatient hospital services for FY 2015 if the demonstration were not implemented) from the amount derived in Step 1 (representing the sum of the estimated reasonable cost amount that generally would be paid under the demonstration to all participating hospitals for covered inpatient hospital services for FY 2015). We proposed that the resulting difference would be one component of the estimated amount for which an adjustment to the national IPPS rates would be calculated (as further discussed below). For the proposed rule, the resulting difference was $53,673,008. This estimated amount is based on the specific assumptions identified regarding the data sources used, that is, ‘‘as submitted’’ recently available cost reports. We did not receive any public comments on our proposed budget neutrality offset methodology, as discussed above. Therefore, we are finalizing the budget neutrality offset methodology as proposed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28165 through 28168). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that if updated data became available prior to the FY 2015 IPPS/LTCH PPS final rule, we would use them to the extent appropriate to estimate the costs of the demonstration program in FY 2015. Therefore, we noted that the estimated budget neutrality offset amount might change in the final rule, depending on the availability of updated data. In this final rule, we have used the market basket update and applicable percentage increase that have been finalized for FY 2015. Using these updated data, the difference between the total estimated FY 2015 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals for covered inpatient hospital services and the total estimated amount that would otherwise be paid to the participating hospitals in FY 2015 without the demonstration is $54,177,144. In addition, similar to previous years, we proposed to include in the budget neutrality offset amount the amount by which the actual demonstration costs corresponding to an earlier given year (which would be determined once we had finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. In the FY 2015 IPPS/LTCH PPS proposed rule, we calculated the amount by which the actual costs of the demonstration in FY 2008 (that is, the costs of the demonstration for the 10 hospitals that participated in FY 2008, as shown in these hospitals’ finalized cost reports for the cost report period beginning in that fiscal year), exceeded the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule. The amount calculated for the FY 2015 IPPS/LTCH PPS proposed rule, $10,389,771, remains unchanged for this final rule. We did not receive any public comments on this aspect of the proposed budget neutrality offset methodology, and therefore, are finalizing this aspect of the methodology as proposed. We continue to examine the cost report data for FY 2009, and to work with the MACs that service the hospitals participating in the demonstration to obtain finalized cost reports for FYs 2010, 2011, and 2012. We note that if settled cost reports for all of the demonstration hospitals that participated in an applicable year (FYs 2009, 2010, 2011, or 2012) are available prior to the FY 2016 IPPS/LTCH PPS proposed rule, we intend to adjust the budget neutrality offset amount for FY 2016 for any amounts by which the final settled costs of the demonstration for PO 00000 Frm 00293 Fmt 4701 Sfmt 4700 50145 the year (FYs 2009, 2010, 2011, or 2012) differ from the budget neutrality offset amount applicable to such year as finalized in the respective year’s IPPS final rule. Therefore, the total budget neutrality offset amount that we are applying to the FY 2015 IPPS rates is $64,566,915. This is the sum of two separate components: (1) the difference between the total estimated FY 2015 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals for covered inpatient hospital services and the total estimated amount that would otherwise be paid to the participating hospitals in FY 2015 without the demonstration ($54,177,144); and (2) the amount by which the actual costs of the demonstration for FY 2008 (as shown in the finalized cost reports for cost reporting periods beginning in FY 2008 for the hospitals that participated in the demonstration during FY 2008) exceed the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule ($10,389,771)). In this final rule, we are adjusting the national IPPS rates by this total amount ($64,566,915). We discuss the final payment rate adjustment that is required to ensure the budget neutrality of the demonstration program for FY 2015 (the budget neutrality adjustment factor) in section II. of the Addendum to this final rule. M. Requirement for Transparency of Hospital Charges Under the Affordable Care Act 1. Overview Hospitals determine their charges for items and services provided to patients and are responsible for those charges. While Medicare does not pay billed charges, hospital reported charges are used in determining Medicare’s national payment rates (for example, billed charges are adjusted to cost to determine how much to pay for one type of case relative to another). Although the Medicare payment amount for a discharge under the IPPS or a service furnished under the OPPS is not based directly on the hospital’s charges for the individual services provided, we believe that hospital charges nevertheless remain an important component of our healthcare system. For example, hospital charges are often billed, in full, to uninsured patients who cannot benefit from discounts negotiated by insurance companies. Hospital charges also vary significantly by hospital, making it challenging for patients to compare the cost of similar services across hospitals. E:\FR\FM\22AUR2.SGM 22AUR2 50146 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV In 2013, we released data that demonstrated significant variation across the country and within communities in what hospitals charge for a number of common inpatient and outpatient services. These data also showed that hospital charges for services furnished in both the inpatient setting and the outpatient setting were, in general, significantly higher than the amount paid by Medicare under the IPPS or the OPPS. The data that we released are posted on the Web site at: https://www/cms.gov/ResearchStatistics-Data-and-Systems/StatisticsTrends-and-Reports/Medicare-ProviderCharge-Data/. Our intent in releasing these data was to enable the public to examine the relationship between the amounts charged by individual hospitals for comparable services and Medicare’s payment for that inpatient or outpatient care. We believe that providing charge data comparisons is introducing both transparency and accountability to hospital pricing, and we are continuing to pursue opportunities to report on hospital charging practices. 2. Transparency Requirement Under the Affordable Care Act The Affordable Care Act contains a provision that is consistent with our effort to improve the transparency of hospital charges. As a result of the Affordable Care Act, section 2718(e) of the Public Health Service Act requires that ‘‘[e]ach hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.’’ In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28169), we reminded hospitals of their obligation to comply with the provisions of section 2718(e) of the Public Health Service Act. We appreciate the widespread public support we received for including the reminder in the proposed rule. We reiterate that our guidelines for implementing section 2718(e) of the Public Health Service Act are that hospitals either make public a list of their standard charges (whether that be the chargemaster itself or in another form of their choice), or their policies for allowing the public to view a list of those charges in response to an inquiry. MedPAC suggested that hospitals be required to post the list on the Internet, and while we agree that this would be one approach that would satisfy the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 guidelines, we believe hospitals are in the best position to determine the exact manner and method by which to make the list public in accordance with the guidelines. We encourage hospitals to undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals. We expect that hospitals will update the information at least annually, or more often as appropriate, to reflect current charges. We are confident that hospital compliance with this statutory transparency requirement will improve the public accessibility of charge information. As hospitals continue to make data publicly available in compliance with section 2718(e) of the Public Health Service Act, we also will continue to review and post relevant charge data in a consumer friendly way, as we previously have done by posting on the CMS Web site the following hospital and physician charge information: May and June 2013 hospital charge data releases; 2013 physician data requests for information; and the April 2014 physician data releases and data provided on geographic variation in payments and payments per beneficiary. N. Medicare Payment for Short Inpatient Hospital Stays As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28169), some members of the hospital community have expressed support for the general concept of an alternative payment methodology under the Medicare program for short inpatient hospital stays. We sought public comments on such a payment methodology, specifically how it might be designed. We outlined some specific questions and considerations that we identified as critical for developing such a methodology. We noted that this list of questions and considerations was not exhaustive, and we welcomed additional questions, suggestions, and input from stakeholders. • Defining short or low cost inpatient hospital stays: One issue would be how to define a short inpatient hospital stay for the purpose of determining the appropriate Medicare payment. For instance, would a short inpatient hospital stay be one where the average length of stay for the MS–DRG is short or would it be atypically short or low cost cases relative to other cases within same MS– PO 00000 Frm 00294 Fmt 4701 Sfmt 4700 DRG? There are significant differences in mean lengths of stay among MS– DRGs. For example, many frequently billed MS–DRGs have historically had mean lengths of stay of approximately 2 days, such as MS–DRG 313 (Chest Pain). Other MS–DRGs such as MS–DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours with MCC) have had longer lengths of stay. If we adopted a policy that paid less for atypically low-cost or short-stay cases relative to the average case in the same MS–DRG, we believe such a policy is more likely to affect an MS–DRG like MS–DRG 871 that has a longer average length of stay or higher average cost associated with the typical patient. Such a policy is less likely to apply to MS– DRG 313 because the typical case is already low cost or short stay. • Determining appropriate payment for short inpatient hospital stays: Another issue would be how to determine the appropriate payment once a short stay has been identified. Some have suggested a per diem based payment amount, perhaps modelled on the existing transfer payment policy. Again, such a policy is far more likely to affect payment for an atypically shortstay or low-cost case in an MS–DRG with a longer average length of stay. For short-stay cases in an MS–DRG where the average length of stay for the MS– DRG is short, this methodology would be unlikely to affect payment as the full IPPS payment would be made in 1 or 2 days. For these types of short-stay cases, one relevant issue to address may be that payment for the same case will be very different under the OPPS and the IPPS depending upon whether the patient has been formally admitted to the hospital as an inpatient, pursuant to a physician order. Under what circumstances should the IPPS payment amount be limited to the OPPS payment amount and under what circumstances might it be appropriate for the payment amount to be higher? If it were appropriate for the payment amount to be higher, how would the amount of the additional payment be determined? In the proposed rule, we welcomed input on these and other issues related to an alternative payment methodology under the Medicare program for short inpatient hospital stays. Comment: Many commenters indicated that any short-stay policy should adhere to certain general principles, specifically citing some or all of the following: a short-stay policy should provide more appropriate and adequate payment for medically necessary inpatient services that span less than 2 midnights—payment should E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations be higher than the outpatient PPS rate for the service, but should not exceed the full IPPS payment; a short-stay policy should not apply to those procedures on the ‘‘inpatient only’’ list; a short-stay policy should be budget neutral; hospitals should be eligible for all add-on payments they would otherwise receive (for example, DSH and IME), either in full or on a pro rata basis; beneficiaries requiring short inpatient hospital stays paid under a short-stay policy should be considered inpatients and cost-sharing obligations should be calculated under Medicare Part A; a short-stay policy should be developed in a way that would not increase administrative burden for hospitals, physicians, or other medical providers; and CMS should provide clear and consistent guidance and allow adequate time for hospitals to implement the short-stay policy prior to its effective date. Other commenters indicated that CMS could or should consider approaches such as a per diem approach modeled after the existing transfer policy, creating separate MS–DRG weights for short-stay cases and nonshort-stay cases, or allowing the full MS–DRG payment on an interim basis while the issue is studied further. Some commenters also stated that the MS–DRG system is predicated on the understanding that there will be a diversity of treatment patterns and individual patient circumstances for any given clinical condition, and that this diversity balances out—high-intensity cases are balanced by low-intensity cases. These commenters contended that creating a new category of ‘‘short stays’’ and paying for them differentially undermines the MS–DRG system. Many commenters stated that additional research and collaboration were needed before a formal short-stay policy proposal could be made. MedPAC indicated that it intended to explore alternative short-stay policies in its upcoming work cycle. Almost all commenters provided their comments on Medicare payment for short hospital stays in the context of broader comments on the current 2midnight policy. Response: We thank commenters for the many comments submitted on this issue, and we will take these into account in any potential future rulemaking. Although there was no consensus among the commenters, we look forward to continuing to actively work with stakeholders to address the complex question of how to further improve payment policy for short inpatient hospital stays. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 O. Suggested Exceptions to the 2Midnight Benchmark In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through 50954), we modified and clarified CMS’ longstanding policy on how Medicare contractors review inpatient hospital and CAH admissions for payment purposes. Under that final rule, we established a 2-midnight benchmark for determining the appropriateness of an inpatient hospital admission versus treatment on an outpatient basis. We provided in regulations at § 412.3(e)(1) that, in addition to services designated as inpatient only, surgical procedures, diagnostic tests, and other treatments are generally appropriate for inpatient hospital admission and payment under Medicare Part A when the physician (1) expects the beneficiary to require a medically necessary hospital stay that crosses at least 2 midnights and (2) admits the beneficiary to the hospital based upon that expectation. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50944), we stated that the medical judgment of the physician and the physician’s order for inpatient admission should be based on the expectation of care surpassing 2 midnights, with both the expectation of time and the determination of the underlying need for medical care at the hospital supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. We also indicated that, in accordance with longstanding policy, factors that may result in an inconvenience to a beneficiary or family would not justify an inpatient hospital admission. The factors that lead a physician to admit a particular beneficiary based on the physician’s clinical expectation are significant clinical considerations and must be clearly and completely documented in the medical record. Medicare review contractors consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2midnight benchmark. The FY 2014 policy responded to both hospital calls for more guidance about when an inpatient admission and Part A payment are appropriate, and beneficiaries’ concerns about increasingly long stays as outpatients due to hospital uncertainties about payment. In the FY 2014 IPPS/LTCH PPS final rule, at § 412.3(e)(2), we recognized that if an unforeseen circumstance, such as a beneficiary’s death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 PO 00000 Frm 00295 Fmt 4701 Sfmt 4700 50147 midnights, the patient may be considered to be appropriately treated on an inpatient basis and hospital inpatient payment may be made under Medicare Part A. We also clarified, in both the final rule and subsequent subregulatory guidance, that the unforeseen circumstances specified at § 412.3(e)(2) are not all-inclusive and could include additional circumstances such as unexpected clinical improvement, election of hospice care, or departure against medical advice. The FY 2014 IPPS/LTCH PPS final rule also indicated that there are exceptions to the 2-midnight benchmark. In other words, there will be cases in which an admitting practitioner expects the beneficiary’s length of stay to last less than 2 midnights and yet inpatient admission would still be appropriate. For example, we specified that procedures on the OPPS inpatient only list are always appropriately inpatient, regardless of the actual time expected at the hospital, so long as the procedure is medically necessary and performed pursuant to a physician order and formal admission. In addition to procedures contained on the OPPS inpatient only list, we noted in the FY 2014 IPPS/LTCH PPS final rule that there may be other rare and unusual circumstances in which a hospital stay expected to last less than 2 midnights would nonetheless be appropriate for inpatient hospital admission and Part A payment. We indicated that we would explore other potential exceptions to the generally applicable benchmark and would detail any such rare and unusual circumstances in subregulatory guidance. As part of this process, throughout the year, we have accepted and considered suggestions from stakeholders on this topic. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 280170), we described the process for submitting suggestions regarding potential additional exceptions to the 2-midnight benchmark. Such suggestions may be sent to CMS via written correspondence or via email to SuggestedExceptions@ cms.hhs.gov. As noted in the proposed rule, CMS will notify providers of any additional guidance regarding 2midnight exceptions through subregulatory means, such as postings on the CMS Web site or manual instruction. Although the FY 2015 IPPS/LTCH PPS proposed rule did not include any proposed regulatory changes relating to the 2-midnight benchmark, we nonetheless received a number of public comments regarding the current regulation. Commenters opined on the E:\FR\FM\22AUR2.SGM 22AUR2 50148 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations usefulness of the 2-midnight benchmark for making inpatient admission decisions and provided suggestions for improving the policy. During the summer and fall of 2014, CMS plans to evaluate the results of the ‘‘probe & educate’’ process (a process by which MACs are reviewing a prepayment, provider-specific probe sample of inpatient Part A claims for appropriateness of inpatient admission under the revised 2-midnight benchmark and providing providerspecific education, as necessary, to correct improper payments) and issue additional subregulatory guidance to our claim review contractors, if necessary, to ensure consistency in application of the 2-midnight policy. We will consider all suggestions as we develop this subregulatory guidance. We also will continue to maintain open communication with stakeholders to ensure that the inpatient classification and payment policies provide a uniform process for beneficiary treatment and claim submission. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV P. Finalization of Interim Final Rule With Comment Period on the Extension of the Payment Adjustment for LowVolume Hospitals and the MedicareDependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges Through March 31, 2014 1. Background In the interim final rule with comment period (IFC) that appeared in the Federal Register on March 18, 2014 (79 FR 15022) (hereinafter referred to as the March 2014 IFC), we implemented the extension of temporary changes to the payment adjustment for low-volume hospitals and the MDH program under the IPPS for FY 2014 discharges through March 31, 2014, in accordance with sections 1105 and 1106, respectively, of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67) enacted on December 26, 2013. In this final rule, we are providing a brief summary of the provisions of that IFC, responding to the public comments we received, and stating our final policy. Section 1105 of the Pathway for SGR Reform Act extended changes to the payment adjustment for low-volume hospitals for an additional 6 months, through March 31, 2014, of FY 2014. Section 1106 of the Pathway for SGR Reform Act extended the MDH program for an additional 6 months, through March 31, 2014, of FY 2014. (As discussed previously in sections IV.D. and IV.G. of the preamble of this final rule, the provisions of the PAMA, enacted on April 1, 2014, further extended changes to the payment VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 adjustment for low-volume hospitals and the MDH program for an additional year, through March 31, 2015.) 2. Summary of the Provisions of the Interim Final Rule With Comment Period a. Extension of the Payment Adjustment for Low-Volume Hospitals (1) Background Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital under the IPPS beginning in FY 2005. The regulations describing the payment adjustment for low-volume hospitals are at 42 CFR 412.101. Sections 3125 and 10314 of the Affordable Care Act provided for a temporary change in the low-volume hospital payment policy for FYs 2011 and 2012. Section 605 of the American Taxpayer Relief Act of 2012 (ATRA) extended, for FY 2013, the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act. Prior to the enactment of the Pathway for SGR Reform Act, for FY 2014 (and subsequent years), the lowvolume hospital qualifying criteria and payment adjustment returned to the statutory requirements under section 1886(d)(12) of the Act that were in effect prior to the amendments made by the Affordable Care Act and the ATRA. (As previously noted, the provisions of the PAMA, enacted on April 1, 2014, further extended changes to the payment adjustment for low-volume hospitals and the MDH program for an additional year, through March 31, 2015. The extension of the temporary changes to the low-volume hospital payment adjustment for FY 2014 discharges occurring on or after April 1, 2014 through September 30, 2014 was announced in a notice that appeared in the Federal Register on June 17, 2014 (79 FR 34444). The extension of the temporary changes to the low-volume hospital payment adjustment for FY 2015 discharges occurring on or after October 1, 2014 through March 31, 2015, is discussed in section IV.D. of the preamble of this final rule. The Affordable Care Act expanded the definition of low-volume hospital and modified the methodology for determining the payment adjustment for hospitals meeting that definition for FYs 2011 and 2012. In general, the amendments made by the Affordable Care Act modified the qualifying criteria for low-volume hospitals such that a hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and PO 00000 Frm 00296 Fmt 4701 Sfmt 4700 has less than 1,600 Medicare discharges during the fiscal year. In addition, the amendments made by the Affordable Care Act provide that the low-volume hospital payment adjustment (that is, the percentage increase) is determined ‘‘using a continuous linear sliding scale’’ that ranges from 25 percent for low-volume hospitals with 200 or fewer Medicare discharges in the fiscal year to 0 percent for low-volume hospitals with greater than 1,600 Medicare discharges. For additional information on the implementation of the temporary changes in the low-volume hospital payment policy provided by the Affordable Care Act, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51677 through 51680). Section 605 of the ATRA extended the temporary changes in the low-volume hospital payment policy provided for in FYs 2011 and 2012 by the Affordable Care Act for FY 2013, that is, for discharges occurring before October 1, 2013. For additional information on the extension of the temporary changes in the low-volume hospital payment policy for FY 2013 as provided by the ATRA, we refer readers to the notice that appeared in the Federal Register on March 7, 2013 (78 FR 14689 through 14694). Additional information on the expiration of the temporary changes in the low-volume hospital payment policy for FYs 2011 through 2013 provided for by the Affordable Care Act and the ATRA can be found in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610 through 50613). (2) Summary of the Implementation of the Extension of the Low-Volume Hospital Payment Adjustment for FY 2014 (through March 31, 2014) Section 1105 of the Pathway for SGR Reform Act extended the changes made by the Affordable Care Act and extended by the ATRA by amending sections 1886(d)(12)(B), (C)(i), and (D) of the Act. In the March 2014 IFC (79 FR 15023 through 15025), we amended the regulations text at 42 CFR 412.101 to make conforming changes to the qualifying criteria and the payment adjustment for low-volume hospitals according to the amendments made by section 1105 of the Pathway for SGR Reform Act as discussed in that rule. To implement the extension of the temporary change in the low-volume hospital payment policy through the first half of FY 2014 (that is, for discharges occurring through March 31, 2014) provided for by the Pathway for SGR Reform Act, we updated the discharge data source used to identify E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations qualifying low-volume hospitals and calculate the payment adjustment (percentage increase) for FY 2014 discharges occurring before April 1, 2014. This approach was consistent with the existing regulations at § 412.101(b)(2)(ii) and with our implementation of the changes in FYs 2011 and 2012 and the extension of those changes in FY 2013. Specifically, for FY 2014 discharges occurring before April 1, 2014, consistent with our historical policy, we established that qualifying low-volume hospitals and their payment adjustment are determined using Medicare discharge data from the March 2013 update of the FY 2012 MedPAR file, as these data were the most recent data available at the time of the development of the FY 2014 payment rates and factors established in the FY 2014 IPPS/LTCH PPS final rule. Table 14 of the March 2014 IFC (which is available only through the Internet on the CMS Web site at https://www.cms.hhs.gov/ AcuteInpatientPPS/01_overview.asp) lists the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the March 2013 update of the FY 2012 MedPAR files and their FY 2014 low-volume payment adjustment (if eligible). However, that list of hospitals with fewer than 1,600 Medicare discharges in Table 14 does not reflect whether or not the hospital meets the distance criterion for FY 2014 discharges occurring before April 1, 2014. We explained in the March 2014 IFC (79 FR 15024 through 15025) that in order to receive a low-volume hospital payment adjustment under § 412.101, in accordance with our previously established procedure, a hospital must notify and provide documentation to its MAC that it meets the distance criterion. We explained that the MAC would refer to the hospital’s Medicare discharge data determined by CMS (as provided in Table 14) to determine whether or not the hospital meets the discharge criterion, and the amount of the payment adjustment for FY 2014 discharges occurring before April 1, 2014, once it is determined that the distance criterion has been met. Consistent with our previously established procedure, we implemented a procedure for a hospital to request low-volume hospital status for FY 2014 discharges occurring before April 1, 2014. Specifically, we established that in order for the applicable low-volume percentage increase to be applied to payments for its discharges beginning on or after October 1, 2013 (that is, the beginning of FY 2014), a hospital must make its request for low-volume VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospital status in writing and this request must be received by its MAC no later than March 31, 2014. We also stated that a hospital that qualified for the low-volume payment adjustment in FY 2013 may continue to receive a lowvolume payment adjustment for FY 2014 discharges occurring before April 1, 2014 without reapplying if it continues to meet the Medicare discharge criterion based on the March 2013 update of the FY 2012 MedPAR data (shown in Table 14 of the March 2014 IFC), and the distance criterion. However, the hospital must send written verification that was received by its MAC no later than March 31, 2014, that it continued to be more than 15 miles from any other ‘‘subsection (d)’’ hospital. We noted that this procedure is similar to the policy we established when we implemented the extension of the temporary changes to the lowvolume hospital payment adjustment for FY 2013 provided by the ATRA, as well as the procedure for a hospital to request low-volume hospital status for FYs 2011 and 2012 under the provisions of the Affordable Care Act. b. Extension of the MDH Program Section 1106 of the Pathway for SGR Reform Act of 2013 provided for a 6month extension of the MDH program, effective from October 1, 2013 to March 31, 2014. Specifically, section 1106 of the Pathway for SGR Reform Act amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking ‘‘October 1, 2013’’ and inserting ‘‘April 1, 2014’’. Section 1106 of the Pathway for SGR Reform Act also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. In the March 2014 IFC (79 FR 15025 through 15027), we stated that, in general, as a result of the extension of the MDH program under the Pathway for SGR Reform Act, a provider that was classified as an MDH as of the September 30, 2013 expiration of the MDH program, would be reinstated as an MDH effective October 1, 2013 through March 31, 2014, subject to the requirements of the regulations at § 412.108, with no need to reapply for MDH classification. In that same IFC, we amended the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program through March 31, 2014, as provided for by section 1106 of the Pathway for SGR Reform Act. We also discussed that, while generally hospitals that previously qualified for MDH status would be reinstated as an MDH retroactively to October 1, 2013, there were two situations where the effective PO 00000 Frm 00297 Fmt 4701 Sfmt 4700 50149 date of MDH status may not have been retroactive to October 1, 2013 (that is, MDHs that classified as SCHs on or after October 1, 2013, and MDHs that requested a cancellation of their rural classification under § 412.103(b)). We provided examples of various scenarios that illustrate how and when MDH status under section 1106 of the Pathway to SGR Reform Act would be determined for hospitals that were MDHs as of the September 30, 2013 expiration of the MDH program, subject to the timing considerations described in that IFC. c. Summary of Public Comments, Responses, and Statements of Final Policies We received approximately four timely pieces of correspondence in response to the March 2014 IFC. Comment: Commenters generally supported CMS’ implementation of the extension of the temporary changes to the payment adjustment for low-volume hospitals and the MDH program through March 31, 2014. However, they expressed concern that the March 31, 2014 deadline for hospitals to submit a written request for low-volume hospital status to the MAC did not allow sufficient and reasonable time period for hospitals to submit the documentation necessary to qualify for the low-volume payment adjustment during the 6-month extension. Therefore, the commenters urged CMS to extend this deadline to allow hospitals a minimum of 30 days to submit the documentation necessary to qualify for the low-volume payment adjustment for FY 2014 discharges through March 31, 2014. Response: We appreciate the commenters’ general support for our implementation of the extension of the temporary changes to the payment adjustment for low-volume hospitals and the MDH program through March 31, 2014. While we understand the commenters’ concern regarding the time available for hospitals to request lowvolume hospital status for FY 2014 discharges occurring before April 1, 2014, we note that, at this time, we are not aware of any hospitals that were unable to meet the March 31, 2014 deadline for hospitals to request the low-volume hospital payment adjustment for FY 2014 discharges occurring before April 1, 2014. Furthermore, as we stated in the March 2014 IFC, a hospital that qualified for the low-volume payment adjustment in FY 2013 did not need to reapply for FY 2014 if it continues to meet the applicable discharge and the distance criteria (that is, such a hospital did not have to resubmit a low-volume hospital E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50150 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations request with supporting documentation to demonstrate that it continues to meet the distance criterion). Rather, such a hospital was only required to send written verification to its MAC that it continues to meet the distance criterion (that is, that it continues to be more than 15 miles from any other ‘‘subsection (d)’’ hospital) by the March 31, 2014 notification deadline. As in prior years, a short letter to the MAC stating that the hospital continues to meet the lowvolume hospital distance criterion as documented in a prior low-volume hospital status request would be considered sufficient for this verification requirement. For hospitals newly eligible for the low-volume hospital payment adjustment, in the March 2014 IFC, we included guidance, consistent with our previously established procedure, to provide focus to their request preparation efforts. Specifically, we stated that the use of a Web-based mapping tool, such as MapQuest, as part of documenting that the hospital meets the distance criterion for low-volume hospitals, is acceptable for the lowvolume hospital request, along with providing other relevant information such as the name and street address of the nearest hospitals, location on a map, and distance from the hospital requesting low-volume hospital status. We also stated that the MAC may follow up with the hospital to obtain additional necessary information to determine whether or not the hospital meets the low-volume hospital status distance criterion. Given the limited nature of the information required to satisfy the request and notification requirement, and the opportunity to provide additional information if needed, we believe that the March 31, 2014 deadline allowed for sufficient and reasonable time for hospitals to submit their requests. In addition, as we noted in the March 2014 IFC, the process for requesting and obtaining the lowvolume hospital payment adjustment for FY 2014 discharges occurring before April 1, 2014 was similar to the policy we established when we implemented the extension of the temporary changes to the low-volume hospital payment adjustment for FY 2013 provided by the ATRA. For the reasons stated above, we are not adopting the commenters’ request to allow hospitals a minimum of 30 days to submit the documentation necessary to qualify for the low-volume payment adjustment for FY 2014 discharges occurring before April 1, 2014. Comment: One commenter opposed using Medicare discharge data from the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 March 2013 update of the FY 2012 MedPAR file (as listed in Table 14 of the March 2014 IFC) to assess the discharge criterion for low-volume hospital eligibility (that is, to determine if the hospital had less than 1,600 Medicare discharges) and to determine the amount of the payment adjustment for FY 2014 discharges occurring before April 1, 2014. The commenter believed certain scenarios were not accounted for by using historical Medicare discharge data in the MedPAR file to prospectively determine low-volume hospital eligibility and payment. For example, a hospital that became an IPPS hospital (either as a newly participating hospital or conversion from another provider type, like a CAH) would not be included in the historical MedPAR discharge data, or a hospital that previously did not meet the discharge criterion based on the historical Medicare discharge data in the MedPAR file that now has fewer than 1,600 Medicare discharges in the current year. The commenter requested that CMS modify its established policy of using historical MedPAR discharge data to determine if a hospital meets the discharge criterion to allow for scenarios such as the ones described above, and noted that CMS could develop a settlement procedure on the Medicare cost report for hospitals that did not have fewer than 1,600 Medicare discharges in the historical Medicare discharge data in the MedPAR file but have fewer than 1,600 Medicare discharges in the payment year. Response: As explained in the March 2014 IFC (79 FR 15024), under the existing regulations at § 412.101(b)(2)(ii), for FYs 2011, 2012 and 2013, a hospital’s Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the low-volume payment adjustment in the current year. Since its initial implementation in FY 2005, we established a policy of using historical discharge data to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year. Prior to the temporary changes to the lowvolume hospital payment adjustment policy under the amendments made by the Affordable Care Act, discharges from a prior cost reporting period were used to determine if the hospital qualified for the low-volume payment adjustment in the current year. We adopted the use of historical Medicare discharge data from the MedPAR files when we implemented the amendments made by PO 00000 Frm 00298 Fmt 4701 Sfmt 4700 the Affordable Care Act because MedPAR data are the most recent available data that provide the number of discharges for individuals that are entitled to or enrolled for Medicare Part A, as required by statute (75 FR 50241). The most recent Medicare discharge data are generally available in the MedPAR files before the corresponding Medicare discharges from the cost report data are available due to the established timeframes for completion and submission of the Medicare cost report. (We note that the MedPAR file contains only Medicare discharge information, and does not contain discharge information for non-Medicare patients. Therefore, hospital cost report data are the best available data source for total discharges under the discharge criterion in § 412.101(b)(2)(i).) As we discussed when we initially implemented the low-volume hospital payment adjustment in the FY 2005 IPPS final rule (69 FR 49100 through 49101), if the determination of whether hospitals qualify for low-volume payment adjustments and the computation of the payment adjustment amount are based on the number of discharges in the current fiscal year, neither CMS nor the hospital will know with certainty whether a hospital qualifies for the adjustment, or what the amount of the adjustment would be, until after the end of the payment year (probably not until the time of final cost report settlement for the year). In such circumstances, CMS could be faced with the prospect of recouping large overpayments in some cases or reimbursing for large underpayments in others, and hospitals would face similar uncertainties. On the other hand, if these determinations are based on discharge counts from a prior fiscal year, hospitals will know in advance whether they will be receiving a payment adjustment and what the size of the adjustment will be, which provides fiscal stability by allowing both hospitals and CMS to plan accordingly. Therefore, we established that the count of discharges, for purposes both of meeting the qualifying definition of a low-volume hospital and determining the amount of the lowvolume hospital payment adjustment, is based on the number of discharges occurring during the cost reporting period for the most recent submitted cost report. In that same final rule, we also recognized that this policy may temporarily disadvantage certain hospitals, such as the situations mentioned by the commenter. However, we believe that the fiscal stability provided under a policy based on E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations historical data offsets any temporary disadvantage hospitals in such situations may experience until their historical data are used to meet the lowvolume hospital payment adjustment discharge criterion in a future year, and for these reasons we believe a settlement process on the Medicare cost report is not needed. Therefore, we are not adopting the commenter’s suggestion to modify our established policy of using historical MedPAR discharge data to determine if a hospital meets the lowvolume hospital discharge criterion or to determine the amount of the lowvolume hospital payment adjustment for FY 2014 discharges occurring before April 1, 2014. After consideration of the public comments we received, we are finalizing all of the provisions set forth in the March 2014 IFC without modification. We note that the revisions to the low-volume hospital payment adjustment regulations at § 412.101 and the MDH program regulations at § 412.108 under the March 2014 IFC are superseded by the final conforming changes to these same regulatory provisions to reflect the subsequent extension of the changes to the qualifying criteria and the payment adjustment methodology for lowvolume hospitals and the MDH program through March 31, 2015 under the PAMA. We refer readers to sections IV.D. and IV.G. of the preamble of this final rule, respectively, for more information on these final conforming changes. For information on the estimated change in payments to IPPS hospitals in FY 2014 as a result of the implementation of sections 1105 and 1106 of the Pathway for SGR Reform Act, we refer readers to the regulatory impact section of the March 2014 IFC (79 FR 15028 through 15030). tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Q. Finalization of Interim Final Rule With Comment Period Relating to Changes to Certain Cost Reporting Procedures for Medicare Disproportionate Share Hospital (DSH) Uncompensated Care Payments 1. Background Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same Act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111–152), added a new section 1886(r) to the Social Security Act (the Act) that modified the methodology for computing the Medicare disproportionate share hospital (DSH) payment adjustment beginning in FY 2014. We implemented section 1886(r) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of the Act in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647). For a detailed discussion of the background on the reduction in DSH payments under section 1886(d)(5)(F) of the Act and the uncompensated care payment under section 1886(r) of the Act, we refer readers to section IV.F.3.a. of the preamble of this final rule. Following the publication of the FY 2014 IPPS/LTCH PPS final rule, we issued an interim final rule with comment period (CMS–1599–IFC) in which we revised certain policies and processes described in the FY 2014 IPPS/LTCH PPS final rule. The interim final rule with comment period appeared in the Federal Register on October 3, 2013 (78 FR 61191 through 61197). In the interim final rule with comment period, we revised certain operational considerations for hospitals with Medicare cost reporting periods that span more than one Federal fiscal year and also made changes to the data that will be used in the uncompensated care payment calculation in order to ensure that data from Indian Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of that calculation. We found that there was good cause to waive prior notice and comment and the delay in effective date with respect to the revisions discussed in the interim final rule with comment period (78 FR 61195 through 61196). Accordingly, the provisions of the interim final rule with comment period went into effect on October 1, 2013. We received 12 timely pieces of correspondence in response to the interim final rule with comment period. Below we summarize the provisions of the interim final rule with comment period and the public comments we received, present our responses, and finalize the policies that were originally implemented in the interim final rule with comment period. 2. Summary of Provisions of the Interim Final Rule With Comment Period, Public Comments Received, Responses, and Finalized Policy a. Operational Considerations for Hospitals With Medicare Cost Reporting Periods That Span More Than One Federal Fiscal Year In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50645), we finalized ‘‘a process to distribute interim uncompensated care payments under the IPPS on a per-discharge basis through our claims processing system, with a reconciliation of the hospitals’ [uncompensated care] payments at cost report settlement to ensure that hospitals receive no more than the PO 00000 Frm 00299 Fmt 4701 Sfmt 4700 50151 estimated amount included in this final rule’’. We described that process as follows (78 FR 50646): ‘‘[A]t cost report settlement, the . . . fiscal intermediary/MAC will issue a notice of program reimbursement that includes a determination concerning whether each hospital is eligible for empirically justified Medicare DSH payments and, therefore, eligible for uncompensated care payments in FY 2014 and each subsequent year. In the case where a hospital received interim payments for its empirically justified Medicare DSH payments and uncompensated care payments for FY 2014 or a subsequent year on the basis of estimates prior to the payment year, but is determined to be ineligible for the empirically justified Medicare DSH payment at cost report settlement, the hospital would no longer be eligible for either payment and CMS would recoup those monies. For a hospital that did not receive interim payments for its empirically justified Medicare DSH payments and uncompensated care payments for FY 2014 or a subsequent year, but at cost report settlement is determined to be eligible for DSH payments, the uncompensated care payment for such a hospital is calculated based on the Factor 3 value determined prospectively for that fiscal year. . . . The reconciliations at cost report settlement would be based on the values for Factor 1, Factor 2, and Factor 3 that we have finalized prospectively for a Federal fiscal year.’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50646), we provided an example in which a DSH eligible hospital has a cost reporting period of January 1, 2014 through December 31, 2014. We stated that this hospital would receive interim payments for its uncompensated care payments beginning on October 1, 2013. For cost reporting purposes, we stated that the uncompensated care payments for federal FY 2014 would be assigned to cost reporting periods beginning on or after October 1, 2013, and would be reconciled on those cost reports. Thus, in the example of the hospital with a cost reporting period beginning on January 1, 2014, if the hospital remained eligible for empirically justified DSH payments at cost report settlement, it would receive its full FY 2014 uncompensated care payment on its cost report for the cost reporting period beginning on January 1, 2014. Although we acknowledged that it is possible to align interim and final payments for the uncompensated care payment with an individual hospital’s cost reporting periods, we believed it would be administratively efficient and practical E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50152 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations to pay the uncompensated care payment on the basis of the Federal fiscal year because that is how it is determined, and to reconcile that amount in the cost reporting period that begins in the respective Federal fiscal year. We stated in the final rule (78 FR 50647) that we believed this methodology would not delay the full payment of FY 2014 payments to hospitals with cost reporting periods that begin after October 1, 2013. However, as we prepared to implement the FY 2014 IPPS/LTCH PPS final rule, several difficulties regarding this approach that we had not previously considered came to our attention. We initially proposed to make interim uncompensated care payments on a biweekly basis, finalizing a different process to make interim uncompensated care payments on a per discharge basis in response to comments. In addition to proposing and finalizing a process for making interim uncompensated care payments, we also proposed and finalized a reconciliation process that would reconcile the uncompensated care payment for a given fiscal year, such as FY 2014, on the cost report for the cost reporting period beginning in that fiscal year (that is, for FY 2014, the cost report for the cost reporting period beginning in FY 2014). We proposed and finalized this approach because we believed it would be administratively efficient and practical. As indicated previously and in the FY 2014 IPPS/LTCH PPS final rule, we initially believed that this policy would neither delay nor substantially affect the disbursement of final uncompensated care payments; but, since the final rule was issued, we came to doubt these conclusions. In the interim final rule with comment period, we stated that we had come to believe that the policy we adopted in the FY 2014 IPPS/LTCH PPS final rule was inconsistent with longstanding cost reporting requirements. As a general rule, payments for discharges are reported in the cost reporting period in which they occur, and all payments made for discharges during a cost reporting period are reconciled on the cost report for that period (PRM–I, Section 2805 and 42 CFR 412.1(a)). We did not specifically address or propose to change the cost reporting rules in either the FY 2014 IPPS/LTCH PPS proposed or final rules. However, for hospitals with cost reporting periods that were not concurrent with the Federal fiscal year, the policy adopted in the FY 2014 IPPS/LTCH PPS final rule departed from these cost reporting requirements by reconciling interim uncompensated care VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 payments made for discharges occurring during the hospital’s 2013 cost reporting period on the hospital’s 2014 cost report. Under ordinary cost reporting requirements, those payments (having been made during the hospital’s 2013 cost reporting period) would have to be treated as an overpayment on the hospital’s 2013 cost report and therefore recouped. However, as finalized in the FY 2014 IPPS/LTCH PPS final rule, if the hospital was found to be eligible for DSH payments for its cost reporting period that began during FY 2014, we would pay the hospital its full FY 2014 uncompensated care payment during the settlement of the hospital’s 2014 cost report (that is, we would repay the previously recouped uncompensated care payments when we reconciled the hospital’s 2014 cost report). We stated that these administrative issues would effectively delay uncompensated care payments, frustrate our policy of making uncompensated care payments promptly, and would likely lead to serious cash flow difficulties for some hospitals. In summary, we did not believe the policy we finalized in the FY 2014 IPPS/LTCH PPS final rule of reconciling uncompensated care payments for hospitals with cost reporting periods that begin after October 1, 2013 would work as intended for the large majority of IPPS hospitals that have cost reporting periods that are not concurrent with the Federal fiscal year. To effectuate a revised process, in the interim final rule with comment period, we sought to align final payments for the uncompensated care payment with each individual hospital’s cost reporting periods and to reconcile interim uncompensated care payment amounts on the hospital’s cost report for the proportion of the cost reporting period that overlaps a Federal fiscal year and in which the interim payments were made or should have been made. Therefore, the final uncompensated care payment amounts that would be included on a cost report spanning 2 Federal fiscal years would be the pro rata share of the uncompensated care payment associated with each Federal fiscal year. This pro rata share would be determined based on the proportion of the applicable Federal fiscal year that is included in that cost reporting period. We considered the same example from the FY 2014 IPPS/LTCH PPS final rule, where a hospital is estimated to be eligible for the empirically justified DSH payment and also an uncompensated care payment in FY 2014 and has a cost reporting period of January 1, 2014 through December 31, 2014. Under the PO 00000 Frm 00300 Fmt 4701 Sfmt 4700 revised process we adopted in the interim final rule with comment period, in that example, that hospital would still begin to receive interim payments for its uncompensated care on October 1, 2013. However, instead of having the entire FY 2014 payment reconciled on its cost report for the cost reporting period beginning on January 1, 2014 (which ends on December 31, 2014, and would therefore require the hospital to pay back monies received for the portion of its cost reporting period beginning on January 1, 2013, that occurs in Federal fiscal year 2014), we would reconcile the interim FY 2014 uncompensated care payments received for discharges from October 1, 2013 through December 31, 2013 on the hospital’s cost report for the cost reporting period beginning on January 1, 2013 against a pro rata share of its FY 2014 uncompensated care payment. If this hospital were eligible for DSH on its cost report for the cost reporting period ending on December 31, 2013, it would receive a pro rata share of its FY 2014 uncompensated care payment. This pro rata share would be approximately three-twelfths (that is, the period of time from October 1, 2013 through December 31, 2013, divided by the period of time from January 1, 2013 through December 31, 2013) of the hospital’s FY 2014 uncompensated care payment. If the hospital’s subsequent cost reporting period is January 1, 2014 through December 31, 2014, we also would reconcile the interim FY 2014 uncompensated care payments received for discharges from January 1, 2014 through September 30, 2014 on the hospital’s cost report for the cost reporting period beginning on January 1, 2014 against a pro rata share of its FY 2014 uncompensated care payment. We also would reconcile the interim FY 2015 uncompensated care payments received for discharges from October 1, 2014 through December 31, 2014 (that is, discharges occurring in FY 2015 during that hospital’s cost reporting period) on the hospital’s cost report for the cost reporting period beginning on January 1, 2014 against a pro rata share of its FY 2015 uncompensated care payment. Accordingly, for the hospital in this example, if it remained eligible for Medicare DSH on its cost report for the cost reporting period beginning on January 1, 2014, it would receive the sum of two pro rata shares of uncompensated care payments, one pro rata share equal to approximately ninetwelfths (that is, the period of time from January 1, 2014 through September 30, 2014 divided by the period of time from January 1, 2014 through December 31, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2014) of the hospital’s FY 2014 uncompensated care payment and one pro rata share equal to approximately three-twelfths (that is, the period of time from October 1, 2014 through December 31, 2014 divided by the period of time from January 1, 2014 through December 31, 2014) of the hospital’s FY 2015 uncompensated care payment. Under the interim final rule with comment period, and in accordance with the policies we finalized in the FY 2014 IPPS/LTCH PPS final rule regarding eligibility for the uncompensated care payment, hospitals with cost reporting periods that span more than one Federal fiscal year will be eligible for the respective pro rata shares of their uncompensated care payment if they were eligible for DSH in that cost reporting period. If they were ineligible for DSH in that cost reporting period, they would be ineligible to receive the respective pro rata share of the uncompensated care payment for the respective Federal fiscal year (or years). We stated that we believed this approach remained fundamentally consistent with the policy we finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) where we stated that ‘‘our final determination on the hospital’s eligibility for uncompensated care payments would be based on the hospital’s actual DSH status on the cost report for that payment year.’’ However, it avoided the cost reporting difficulties that would have arisen from the reconciliation process originally adopted in the final rule. Comment: Several commenters supported the modifications to align uncompensated care payments based on the Federal fiscal year, instead of based on a hospital’s cost reporting period. Commenters supported the change in policy such that the final uncompensated care payment amounts that would be included on a hospital’s cost report that spans 2 Federal fiscal years will be the pro rata share of the uncompensated care payment associated with each Federal fiscal year. Response: We appreciate the commenters’ support. Comment: One commenter recommended that when CMS reconciles uncompensated care payments on a pro rata basis based on the portion of a hospital’s cost reporting period that falls in the Federal fiscal year, CMS prorate on a calendar month basis as opposed to calendar day basis for administrative simplicity. Response: We appreciate the commenter’s recommendation. Under the policy finalized in the interim final rule with comment period, we determine a pro rata share based on the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 proportion of the applicable Federal fiscal year that is included in that cost reporting period. We intend to establish the pro rate share on a calendar day basis, as opposed to a calendar month basis. We believe we can more accurately account for the uncompensated care payment amounts when we reconcile on a calendar day basis, as we can easily obtain the number of days from a hospital’s cost reporting period on the hospital’s Medicare Hospital Cost Report. Therefore, this process will not be administratively burdensome. Furthermore, we disagree that it would be administratively easier or simpler to prorate on a monthly basis, particularly in cases where a hospital’s cost report may end in the middle of the month. b. Treatment of Indian Health Service Hospitals In the FY 2014 IPPS/LTCH PPS final rule, we discussed the hospitals that are eligible to receive the uncompensated care payments under section 1886(r)(2) of the Act. Specifically, we stated (78 FR 50622) that the ‘‘new payment methodology under subsection (r) applies to ‘subsection (d) hospitals’ that would otherwise receive a ‘disproportionate hospital share payment . . . made under subsection (d)(5)(F).’ ’’ Therefore, eligibility for empirically justified Medicare DSH payments is unchanged under this new provision. Consistent with the law, hospitals must receive empirically justified Medicare DSH payments in FY 2014 or a subsequent year to receive an additional Medicare uncompensated care payment for that year. In the FY 2014 IPPS/LTCH PPS final rule, we finalized our methodology for calculating the new uncompensated care payments. As we discussed in that final rule, section 1886(r)(2) of the Act provides that for each eligible hospital in FY 2014 and subsequent years, the new uncompensated care payment is the product of three factors. Factor 1 of that methodology is the ‘‘difference between our estimates of: (1) the amount that would have been paid in Medicare DSH payments for FY 2014 and subsequent years, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for FY 2014 and subsequent years, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would PO 00000 Frm 00301 Fmt 4701 Sfmt 4700 50153 otherwise be made, in the absence of section 1886(r) of the Act, for FY 2014 and subsequent years’’ (78 FR 50627). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50630), we finalized our proposal to use the most recently available estimates, as calculated by the CMS Office of the Actuary, to determine both the aggregate amount of empirically justified DSH payments under section 1886(r)(1) of the Act and the aggregate amount of payments that would otherwise have been made under section 1886(d)(5)(F) of the Act. In order to calculate these estimates, the Office of the Actuary used the March 2013 update of the Medicare Hospital Cost Report Information System (HCRIS) and the proposed rule’s IPPS Impact file. The estimate excluded Maryland hospitals, SCHs paid under their hospital-specific rate, and hospitals in the Rural Community Hospital Demonstration Program, as these hospitals do not receive a Medicare DSH payment. The CMS Office of the Actuary’s final estimate for Medicare DSH payments for FY 2014 without regard to the application of section 1886(r)(1) of the Act, was approximately $12.772 billion. The estimate for empirically justified Medicare DSH payments for FY 2014, with the application of section 1886(r)(1) of the Act, was approximately $3.193 billion. Factor 1 is the difference of these two estimates by our Office of the Actuary; therefore, in the FY 2014 IPPS/LTCH PPS final rule, we calculated Factor 1 to be approximately $9.579 billion. IHS hospitals are subsection (d) hospitals that can receive empirically justified Medicare DSH payments under section 1886(r)(1) of the Act if they meet the eligibility requirements under subsection (d)(5)(F). Therefore, eligible IHS hospitals also receive the new uncompensated care payment under subsection (r)(2). However, following the issuance of the FY 2014 IPPS/LTCH PPS final rule, it came to our attention that, although IHS hospitals can receive Medicare DSH payments, they submit Medicare hospital cost reports to CMS that are not uploaded in the HCRIS database. Therefore, their Medicare DSH payments were not included in the estimates by our Office of the Actuary that were used to calculate Factor 1. We stated in the interim final rule with comment period that because IHS hospitals are eligible to receive Medicare DSH payments and the new uncompensated care payments, we believe it is inappropriate to exclude the Medicare DSH payments to IHS hospitals from the estimates used to calculate Factor 1. In addition, we acknowledged that we did not intend to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50154 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations finalize a policy that specifically excludes DSH payments to IHS hospitals from our estimate of Medicare DSH payments for purposes of calculating Factor 1 in the calculation of the uncompensated care payment. Therefore, in the interim final rule with comment period, we revised the policy originally adopted in the FY 2014 IPPS/LTCH PPS final rule in order to change the data that will be considered in calculating Factor 1 for FY 2014 and subsequent years. Specifically, in addition to the March 2013 update of HCRIS, we will also consider cost report data provided by IHS hospitals to CMS as of March 2013. We also will recalculate Factor 1, to reflect the Office of the Actuary’s estimate of Medicare DSH payments to IHS hospitals, based on these cost report data. With the inclusion of the Medicare DSH payments to IHS hospitals, our Office of the Actuary’s revised estimate of Medicare DSH payments for FY 2014 without regard to the application of 1886(r)(1) of the Act was approximately $12.791 billion (this revised estimate also includes the correction for Factor 1 made in the correcting document for the FY 2014 IPPS/LTCH PPS final rule that also appeared in the Federal Register on October 3, 2013 (78 FR 61198)). The CMS Office of the Actuary’s revised estimate of empirically justified Medicare DSH payments for FY 2014, with the application of section 1886(r)(1) of the Act, was approximately $3.198 billion (this revised estimate also includes the correction for Factor 1 made in the correcting document for the FY 2014 IPPS/LTCH PPS final rule (78 FR 61198)). Factor 1 is the difference of these two estimates of our Office of the Actuary; therefore, in the interim final rule with comment period, we recalculated Factor 1 to be approximately $9.593 billion (this revised estimate also includes the correction for Factor 1 made in the correcting document for the FY 2014 IPPS/LTCH PPS final rule (78 FR 61198)). We noted that, based on the recalculation of Factor 1, the amount available for uncompensated care payments for FY 2014 would be approximately $9.046 billion (our determination of Factor 2 as finalized in the FY 2014 IPPS/LTCH PPS final rule of 0.943 times our revised Factor 1 estimate of $9.593 billion). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50643), we discussed the methodology used to calculate Factor 3 in the calculation of the uncompensated care payment. Under the final policy adopted in that final rule, for FY 2014 we determined a DSH hospital’s Factor 3 as the sum of its VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicaid days and SSI days (numerator) relative to the total number of Medicaid days and SSI days for all DSH hospitals (denominator). We determined a hospital’s SSI days based on the most recent SSI fraction. As we stated in the FY 2014 IPPS/LTCH PPS final rule, the most recent SSI fractions available for making this determination for FY 2014 were the FY 2011 SSI fractions. The FY 2011 SSI fractions for each subsection (d) hospital were published on the CMS Web site on June 27, 2013. In addition, under the final policy adopted in the FY 2014 IPPS/LTCH PPS final rule, we determine a hospital’s Medicaid days based on the Medicaid days reported on the 2011, or if not available, the 2010 Medicare Hospital Cost Report, using the March 2013 update of HCRIS. Because the cost reports submitted by IHS hospitals are not uploaded into HCRIS, we did not include their Medicaid days in our calculation of Factor 3. Specifically, Medicaid days for IHS hospitals were excluded from the numerator of Factor 3 for those IHS hospitals and from the denominator of Factor 3 for all hospitals. As a result, in the interim final rule with comment period, we indicated that we believed that the Factor 3 that was calculated for each IHS hospital under the policies adopted in the 2014 IPPS/LTCH PPS final rule, based only on FY 2011 SSI days, significantly understated the actual amount of uncompensated care furnished by these hospitals. The uncompensated care payment amounts calculated for these hospitals were also significantly lower than they would have been had these days been included. We were concerned that, under the policy originally adopted in the FY 2014 IPPS/LTCH PPS final rule, IHS hospitals that serve a significant low income population would be subject to the 75-percent reduction to their Medicare DSH payments under section 1886(r)(1) of the Act but would receive reduced uncompensated care payments under section 1886(r)(2) of the Act due to their cost reports not being included in the HCRIS database. Given that we intended to base our estimate of the uncompensated care provided by IHS hospitals, in part, on the care they provide to Medicaid patients, we believed it was appropriate to make a change to the data that are considered in determining Factor 3 of the new uncompensated care payment to allow the Medicaid days for IHS hospitals to be included. This change would also help to ensure that eligible IHS hospitals receive an uncompensated care payment that does not significantly understate the amount of PO 00000 Frm 00302 Fmt 4701 Sfmt 4700 uncompensated care they provide. Accordingly, in the interim final rule with comment period, we revised the policy adopted in the FY 2014 IPPS/ LTCH PPS final rule to permit us to consider cost report data submitted to CMS as of March 2013 only by IHS hospitals in addition to data reflected in the March 2013 update of HCRIS, in calculating Factor 3 of the uncompensated care payment. The Medicaid days for IHS hospitals that are reflected in the cost report data would be included in the numerator of the Factor 3 calculation for IHS hospitals and would be included in the denominator of Factor 3 for all hospitals eligible to receive the uncompensated care payment. Comment: Several commenters supported the change in policy to incorporate hospital cost report data for IHS hospitals that was not included in the HCRIS database in the calculation of Factor 1 and Factor 3. Commenters agreed that it was inappropriate to exclude cost report data for IHS hospitals from the calculation of Factor 1 and supported the inclusion of cost report data for these hospitals in the calculation of Factor 1, which represents the Secretary’s estimate of 75 percent of Medicare DSH payments in FY 2014. In addition, commenters supported using IHS cost report data to identify Medicaid days to incorporate into the calculation of Factor 3 for these IHS hospitals. One commenter sought clarification of the definition of an IHS hospital in order to clarify what category of hospitals are subject to the policies finalized in the interim final rule with comment period. The commenters sought confirmation that an IHS hospital includes ‘‘any hospital operated by an Indian Tribe or Tribal health program carrying out IHS programs under the Indian SelfDetermination and Education Assistance Act (ISDEAA).’’ In other words, the commenters sought clarification that IHS hospitals include facilities that are either owned or leased by IHS or are deemed by CMS to be IHS facilities because they are operated by an Indian Tribe or Tribal organization under the ISDEAA. The commenters also sought clarification that CMS will treat cost reports from all such qualifying hospitals in the same way that it treats IHS directly operated hospitals in determining the amount of uncompensated care payments. Response: We appreciate the commenters’ support of our policy change. An IHS hospital is defined under section 1880 of the Act as a ‘‘hospital or skilled nursing facility of the Indian Health Service, whether E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations operated by such Service or by an Indian tribe or tribal organization (as those terms are defined in section 4 of the Indian Health Care Improvement Act) . . . .’’ Therefore, with regard to the policies in the interim final rule with comment period related to IHS hospitals, we do not make a distinction with respect to whether the hospital is owned or operated by the Indian Health Service or by an Indian tribe or tribal organization. Cost report data submitted both by hospitals operated by the IHS and by hospitals operated by an Indian tribe or tribal organization are excluded from HCRIS. Therefore, the policies described in the interim final rule with comment period regarding the use of cost report data submitted by IHS hospitals in order to calculate Factor 1 and Factor 3 apply to all IHS hospitals whether they are owned or operated by the Indian Health Service or by an Indian tribe or tribal organization. Comment: Several commenters raised concerns that CMS did not adequately address mergers in the calculation of the uncompensated care payment. The commenters disagreed with CMS’ treatment of mergers under the policy finalized in the FY 2014 IPPS/LTCH PPS final rule that if one DSH-eligible hospital merges with another DSHeligible hospital, only the data associated with the surviving hospital is used to calculate the hospital’s share of uncompensated care payments. Commenters asserted that the policy on mergers understates uncompensated care payments for merged providers and does not accurately reflect the merged hospital’s uncompensated care costs. Response: We thank the commenters for these comments. However, we consider these comments to be out of the scope of the policies addressed in the interim final rule with comment period. We discuss our policies regarding the treatment of mergers in the calculation of the Factor 3 in section IV.F. of the preamble of this FY 2015 IPPS/LTCH PPS final rule. Comment: One commenter suggested that, for hospitals that had low-income insured days calculated using a cost report for a cost reporting period that was less than 12 months, CMS should use low-income insured days based on an older cost reporting period that was 12 months. Response: We thank the commenter for this comment. However, we consider this comment to be out of the scope of the policies addressed in the interim final rule with comment period. We discuss our methodology to calculate Factor 3, including our treatment of short cost reporting periods, in section VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 IV.F. of the preamble of this FY 2015 IPPS/LTCH PPS final rule. Comment: One commenter addressed the calculation of the interim per claim uncompensated care payment amounts that are paid to hospitals projected to be eligible to receive DSH payments in a Federal fiscal year; the per claim amount is based on a hospital’s total uncompensated care amount divided by the hospital’s average number of claims from the most recent 3 years of data. Specifically, the commenter requested that CMS use the claims published in the case-mix files to calculate the 3-year average because, in the commenter’s view, CMS’ data source understates the average number of claims potentially resulting in an overpayment on a per claim basis. The commenter also recommended that CMS use a growth factor to account for new enrollees that may increase the number of claims in the calculation of the three year average number of claims. The commenter also noted the wide variation in per claim amounts from approximately $9 to $167,000 and requested that CMS place a cap on the per claim amount to minimize swings in cash flow at cost report settlement and because it did not make sense that Medicare or MA plans pay such a high amount. Response: We thank the commenter for this comment. However, we consider the issues raised in the comment to be out of the scope of the policies addressed in the interim final rule with comment period. We received a similar comment on the FY 2015 IPPS/LTCH PPS proposed rule and address the comment in section IV.F. of the preamble of this FY 2015 IPPS/LTCH PPS final rule. After consideration of the public comments we received, we are finalizing all of the provisions set forth in the interim final rule with comment period without modification, to allow final uncompensated care payments to be paid on the same schedule as Medicare DSH payments, so that both the uncompensated care payment and Medicare DSH payments will be paid and reconciled on a hospital’s cost report, based on the applicable Federal fiscal year(s) and to allow information included in the cost reports submitted by IHS hospitals to be used in the calculation of Factor 1 and Factor 3. For information on the estimated change in payments to hospitals in FY 2014 as a result of the provisions set forth in the interim final rule with comment period, we refer readers to the regulatory impact statement in the interim final rule with comment period (78 FR 61197). We note that the impact of our decision to finalize the interim final rule with PO 00000 Frm 00303 Fmt 4701 Sfmt 4700 50155 comment period is included in the regulatory impact statement in Appendix A of this FY 2015 IPPS/LTCH PPS final rule as part of the discussion of the estimated change in payments to hospitals in FY 2015 as a result of the policies regarding Medicare DSH payments and uncompensated care payments that we are adopting in the final rule. V. Changes to the IPPS for CapitalRelated Costs A. Overview Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capitalrelated costs. The IPPS for capitalrelated costs was initially implemented in the Federal fiscal year (FY) 1992 IPPS final rule (56 FR 43358), in which we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). FY 2001 was the last year of the 10year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.) The basic methodology for determining capital prospective payments using the Federal rate is set forth in § 412.312 of the regulations. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). In addition, under § 412.312(c), hospitals also may receive outlier payments under the capital IPPS for E:\FR\FM\22AUR2.SGM 22AUR2 50156 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations extraordinarily high-cost cases that qualify under the thresholds established for each fiscal year. B. Additional Provisions 1. Exception Payments The regulations at § 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under §§ 412.348(b) through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at § 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). Under § 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital’s control. Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186). 2. New Hospitals Under the capital IPPS, § 412.300(b) of the regulations defines a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with § 412.304(c)(2), under the capital IPPS a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital-related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 3. Hospitals Located in Puerto Rico Section 412.374 of the regulations provides for the use of a blended payment amount for prospective payments for capital-related costs to hospitals located in Puerto Rico. Accordingly, under the capital IPPS, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capitalrelated costs. In general, hospitals located in Puerto Rico are paid a blend VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of the applicable capital IPPS Puerto Rico rate and the applicable capital IPPS Federal rate. Capital IPPS payments to hospitals located in Puerto Rico are computed based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate. For additional details on capital IPPS payments to hospitals located in Puerto Rico, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725). C. Annual Update for FY 2015 The annual update to the capital PPS Federal and Puerto Rico-specific rates, as provided for at § 412.308(c), for FY 2015 is discussed in section III. of the Addendum to this final rule. We note that, in section II.D. of the preamble of this final rule, we present a discussion of the MS–DRG documentation and coding adjustment, including previously finalized policies and historical adjustments, as well as the recoupment adjustment to the standardized amounts under section 1886(d) of the Act that we are finalizing for FY 2015 in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110–90 by section 631 of the ATRA. As we discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28171), because section 631 of the ATRA requires CMS to make a recoupment adjustment only to the operating IPPS standardized amount, we are not making a similar adjustment to the national or Puerto Rico capital IPPS rates (or to the operating IPPS hospitalspecific rates or Puerto Rico-specific standardized amount). This approach is consistent with our historical approach regarding the application of the recoupment adjustment authorized by section 7(b)(1)(B) of Public Law 110–90. In section II.D.7. of the preamble of this final rule, we also note our discussion in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50747) of the possibility of applying an additional prospective adjustment to account for the cumulative MS–DRG documentation and coding effect through FY 2010. In that same final rule (78 FR 50515 through 50517 and 50747), we stated that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, we believe the most appropriate additional adjustment is ¥0.55 percent. We did not apply an additional prospective adjustment in FY 2014 for the cumulative MS–DRG documentation and coding effect through FY 2010, consistent with the approach taken for the operating IPPS standardized amount (and hospital-specific rates). We PO 00000 Frm 00304 Fmt 4701 Sfmt 4700 continue to believe that if we were to apply an additional prospective adjustment for the cumulative MS–DRG documentation and coding effect through FY 2010, the most appropriate additional adjustment is ¥0.55 percent. However, we did not propose such an adjustment to the capital Federal rate in FY 2015, consistent with the approach taken for the operating IPPS standardized amount (and hospitalspecific rates) as discussed in section II.D.7. of the preamble of this final rule. We will consider whether such an adjustment to the capital IPPS Federal rate is appropriate in future years’ rulemaking. VI. Changes for Hospitals Excluded From the IPPS A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2015 Certain hospitals excluded from a prospective payment system, including children’s hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. A per discharge limit (the target amount as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital’s own cost experience in its base year, and updated annually by a rate-of-increase percentage. For each cost reporting period, the updated target amount is multiplied by total Medicare discharges during that period and applies as an aggregate upper limit (the ceiling as defined in § 413.40(a)) of Medicare reimbursement for total inpatient operating costs for a hospital’s cost reporting period. In accordance with § 403.752(a) of the regulations, RNHCIs also are subject to the rate-ofincrease limits established under § 413.40 of the regulations discussed above. As explained in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50747), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children’s hospitals, cancer hospitals, and RNHCIs. Consistent with §§ 412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update the target amounts for short–term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Islands, and American Samoa. For the reasons explained in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50747), we proposed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28171) to continue to use the percentage increase in the IPPS operating market basket to update the target amounts for children’s hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2015 and subsequent fiscal years. In addition, because we have revised and rebased the IPPS operating market basket to a FY 2010 base year, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28172) we proposed to continue to use the percentage increase in the FY 2010-based IPPS operating market basket to update these target amounts for FY 2015 and subsequent fiscal years. (We refer readers to the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50596 through 50603) for a further discussion of the revision and rebasing of the IPPS operating market to a FY–2010 base year.) We did not receive any public comments on these proposals. Therefore, we are finalizing our proposals as discussed above and in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28171 through 28172). Accordingly, for FY 2015, the rate-ofincrease percentage to be applied to the target amount for these children’s hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is the FY 2015 percentage increase in the FY 2010based IPPS operating market basket. For the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28172), based on IHS Global Insight, Inc.’s 2014 first quarter forecast, we estimated that the FY 2010-based IPPS operating market basket update for FY 2015 was 2.7 percent (that is, the estimate of the market basket rate-of-increase). We indicated in the proposed rule that if more recent data became available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2015. For this FY 2015 IPPS/LTCH PPS final rule, based on IHS Global Insight, Inc.’s 2014 second quarter forecast (which is the most recent data available), we calculated the FY 2010-based IPPS operating market basket update for FY 2015 to be 2.9 percent. Therefore, the FY 2015 rate-of-increase percentage that is applied to the FY 2014 target amounts in order to calculate the final FY 2015 target amounts for children’s hospitals, cancer hospitals, RNHCIs, and shortterm acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is 2.9 percent, in accordance with the applicable regulations at 42 CFR 413.40. B. Report on Adjustment (Exceptions) Payments Section 4419(b) of Public Law 105–33 requires the Secretary to publish annually in the Federal Register a report describing the total amount of adjustment payments made to excluded hospitals and hospital units by reason of section 1886(b)(4) of the Act during the previous fiscal year. The process of requesting, adjusting, and awarding an adjustment payment is likely to occur over a 2-year period or longer. First, generally, an excluded Class of hospital 50157 hospital must file its cost report for a fiscal year in accordance with § 413.24(f)(2). The MAC reviews the cost report and issues a notice of program reimbursement (NPR). Once the hospital receives the NPR, if its operating costs are in excess of the ceiling, the hospital may file a request for an adjustment payment. After the MAC receives the hospital’s request in accordance with applicable regulations, the MAC or CMS, depending on the type of adjustment requested, reviews the request and determines if an adjustment payment is warranted. This determination is sometimes not made until more than 180 days after the date the request is filed because there are times when the applications are incomplete and additional information must be requested in order to have a completed application. However, in an attempt to provide interested parties with data on the most recent adjustments for which we do have data, we are publishing data on adjustment payments that were processed by the MAC or CMS during FY 2013. The table below includes the most recent data available from the MACs and CMS on adjustment payments that were adjudicated during FY 2013. As indicated above, the adjustments made during FY 2013 only pertain to cost reporting periods ending in years prior to FY 2012. Total adjustment payments given to excluded hospitals during FY 2013 are $1,829,578. The table depicts for each class of hospitals, in the aggregate, the number of adjustment requests adjudicated, the excess operating costs over the ceiling, and the amount of the adjustment payments. Excess cost over ceiling Number Adjustment payments 4 0 3 $2,032,227 N/A 1,056,142 $1,182,011 N/A 647,567 Total ...................................................................................................................................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Children’s ..................................................................................................................................... Cancer ......................................................................................................................................... Religious Nonmedical Health Care Institution (RNHCI) .............................................................. ........................ ........................ 1,829,578 C. Updates to the Reasonable Compensation Equivalent (RCE) Limits on Compensation for Physician Services Provided in Providers (§ 415.70) 1. Background Under section 1848 of the Act and 42 CFR Parts 414 and 415, medical or surgical services furnished by physicians to individual Medicare beneficiaries generally are billed and paid under Medicare Part B on a fee-forservice basis under the Medicare VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Physician Fee Schedule (MPFS). As required by section 1887(a)(2)(B) of the Act, the amount of allowable compensation for services furnished by physicians to providers that are paid by Medicare on a reasonable cost basis is subject to reasonable compensation equivalent (RCE) limits. Under these limits, Medicare recognizes as reasonable, for purposes of payment to the provider, the lower of the actual cost of the services furnished by the physician to the provider (that is, any PO 00000 Frm 00305 Fmt 4701 Sfmt 4700 form of compensation to the physician) or an RCE. The allowable compensation costs for physicians’ services to a provider are described in § 415.55 of the regulations. Under § 415.60(a) of the regulations, for purposes of applying the RCE limits, physician compensation costs means monetary payments, fringe benefits, deferred compensation, and any other items of value (excluding office space and billing and collection services) that a provider or other organization furnishes a physician in E:\FR\FM\22AUR2.SGM 22AUR2 50158 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations return for the physician’s services to the provider. On March 2, 1983, we published a final rule in the Federal Register that codified regulations to implement section 1887(a)(2)(B) of the Act (currently at 42 CFR 415.70) and established the first set of RCE limits (48 FR 8902). In accordance with § 415.70(a)(2), RCE limits do not apply to the costs of physician compensation attributable to furnishing inpatient hospital services for which payment is made under the IPPS or to the costs of physician compensation attributable to approved GME programs that are payable under §§ 413.75 through 413.83 of the regulations. In addition, under § 415.70(a)(3), compensation that a physician receives for activities that may not be paid for under either Medicare Part A or Part B is not considered in applying these RCE limits. Furthermore, in accordance with § 413.70, RCE limits are not used in determining the reasonable costs that CAHs incur in compensating physicians for services furnished to the CAH. The RCE limits apply equally to all physicians’ services to providers that are payable on a reasonable cost basis under Medicare. If a physician receives any compensation from one or more providers for his or her services to the provider (that is, those services that benefit patients generally), payment to those providers for the costs of such compensation is subject to the RCE limits. The RCE limits are not applied to payment for services that are identifiable medical or surgical services to individual patients and paid under the MPFS, even if the physician agrees to accept compensation (for example, from a hospital) for those services. Payments to teaching hospitals that have elected cost reimbursement for their physicians’ direct medical and surgical services in accordance with section 1861(b)(7) of the Act are subject to the RCE limits (68 FR 45458). 2. Overview of the Current RCE Limits tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Application of the RCE Limits Currently, we use the RCE limits to compute Medicare payments when a physician is compensated by a provider that is subject to the RCE limits. We also use these limits when the physician is compensated by any other providerrelated organization for physician administrative, supervisory, and other services to the provider under Medicare. In applying the RCE limits, we compute the Medicare payments using information submitted on the cost report, and ensure that each compensated physician is assigned to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the most appropriate specialty category. The current physician specialty categories for RCE limits are General/ Family Practice, Internal Medicine, Surgery, Pediatrics, OB/GYN, Radiology, Psychiatry, Anesthesiology, Pathology, and Total. If there is no specific specialty category (for example, for an emergency room physician), we use the ‘‘Total’’ category, for which the RCE limits are calculated based on mean annual income data for all physicians. If the physician’s contractual compensation covers all duties, activities, and services furnished to the provider and, under a reassignment, all physicians’ services furnished to individual patients of the provider, and the physician is employed by the provider full time, we use the RCE limit for the appropriate specialty, adjusted by the physician’s allocation agreement (which reflects the percentage of total time spent performing services furnished to the provider) to arrive at the Medicare program’s share of the provider’s allowable physician compensation costs (§ 415.60). In the absence of an allocation agreement, we would assume that 100 percent of the compensation paid to the physician by the provider is related to physicians’ services for which payment is made under the MPFS and that there are no allowable physician compensation costs to the provider (§ 415.60(f)(2)). If a physician’s compensation from the provider represents payment only for services that benefit patients generally (that is, the physician bills for all services furnished to individual patients), we use the appropriate specialty RCE limit. If a physician is employed by a provider to furnish services of general benefit to patients on other than a full-time basis, the RCE limit will be adjusted to reflect the hours the physician actually worked, as reported on the provider’s cost report, related to a full work year of 2,080 hours. b. Exceptions to the RCE Limits Some providers such as small or rural hospitals may be unable to recruit or maintain an adequate number of physicians at a compensation level within the prescribed RCE limits. In accordance with section 1887(a)(2)(C) of the Act and § 415.70(e) of the regulations, if a provider can demonstrate to the MAC its inability to recruit or maintain physicians at a compensation level allowable under the RCE limits (as documented, for example, by unsuccessful advertising through national medical or health care publications), the MAC may grant the provider an exception to the RCE limits PO 00000 Frm 00306 Fmt 4701 Sfmt 4700 established under these rules. Such exceptions would allow the provider to be paid based on costs for compensation higher than the RCE limit. c. Methodology for Establishing the RCE Limits In the March 2, 1983 final rule with comment period (48 FR 8902), we published the initial RCE limits, along with the methodology used to calculate those limits, that were applicable to cost reporting periods beginning during CYs 1982 and 1983. As part of that same rule, we established regulations that outline our general authority to develop, publish, and apply RCE limits (currently at § 415.70). Section 415.70(b) of the regulations specifies that we establish the methodology for determining annual RCE limits, considering, to the extent possible, average physician incomes by specialty and type of location, using the best available data. The methodology for establishing the initial RCE limits was based on the analysis contained in an internal working paper, ‘‘A Methodology for Determination of Reasonable FTE Compensation for Hospital-Based Physicians.’’ 56 (Copies of this working paper are available on the CMS Web site at: https://www.cms.gov/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/.) As outlined in this working paper, our methodology for establishing the initial reasonable levels of compensation includes the following five steps (for additional discussion of this methodology, we refer readers to the March 2, 1983 final rule with comment period (48 FR 8902)): Step 1: We estimated the national average (mean) income for all physicians using 1979 physician net incomes from the American Medical Association (AMA) Periodic Survey of Physicians (PSP), published by the AMA in its Profile of Medical Practices, 1981. Step 2: We projected physicians’ 1979 base net income levels to the appropriate future year to account for changes in net income levels occurring after the period for which we have data using the Consumer Price Index for All Urban Consumers (CPI–U), and projected the results using forecasts of the CPI–U for future years. Step 3: We determined the relationship between average net income for all physicians (estimated in the first step above) and net income of 56 Cantwell, James R. and Sobaski, William J., A Methodology for Determination of Reasonable FTE Compensation for Hospital-Based Physicians, Working Paper No. OR–32, revised December 1982. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations certain categories of specialist physicians that are commonly compensated by providers for services that generally benefit Medicare beneficiaries resulting in separate specialty adjusters for nine physician specialties as well as the adjuster for the ‘‘Total’’ category. Step 4: We also adjusted each of these specialty (including the ‘‘Total’’) adjusters for differences in costs between types of geographic locations using Standard Metropolitan Statistical Areas (SMSAs) as defined by the Office of Management and Budget (OMB). Step 5: Using the AMA PSP data, we calculated the average hours practiced per year for each specialty and location adjuster combination, which we then related to a standard full-time equivalent (FTE) work year of 2,080 hours. We used these ratios to weight the specialty-location adjusters from the previous step. This same methodology was used to update the RCE limits published in a notice in the Federal Register on May 5, 1997 (62 FR 24483). These updated RCE limits were effective for cost reporting periods beginning on or after May 5, 1997. For RCE limits established prior to January 1, 1998, we used the CPI–U to update the RCE limits. In a final rule with comment period published in the Federal Register on October 31, 1997 (62 FR 59075), we finalized a policy to use the Medicare Economic Index (MEI) to update the RCE limits (rather than the CPI–U), effective for cost reporting periods beginning on or after January 1, 1998. We adopted the MEI as the applicable update factor in order to achieve a measure of consistency in the methodologies used to determine payments to physicians for direct medical and surgical services furnished to individual patients and reasonable compensation levels for services that are of general benefit to a provider’s patients. However, we did not update the RCE limits at that time. In the FY 2004 IPPS final rule published in the Federal Register on August 1, 2003 (68 FR 45458), we published updated RCE limits that were effective for cost reporting periods beginning on or after January 1, 2004. We updated the RCE limits using the CPI–U to adjust the data to 1997, and the MEI to adjust the data from 1998 to 2004. In addition, we continued to adjust the RCE limits to account for differences in salary levels by location, as well as by specialty. For the location adjustment, we continued to base the geographical classifications of the providers on Metropolitan Statistical Areas (MSAs) (the OMB changed the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 area name to describe metropolitan areas in the 1980’s from SMSAs to MSAs, but the definition of MSAs differed only slightly from the previously used SMSAs). 3. Changes to the RCE Limits In accordance with § 415.70(b), when establishing the methodology to determine the RCE limits, we consider, to the extent possible, the average physician incomes by specialty and type of location using the best available data. Since the initial RCE limits were developed, we have adjusted the RCE data to account for specialty and location (as discussed earlier in this section). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28173), we proposed to use the most recent MEI data to update the RCE limits and to replace the RCE limits that have been in effect since January 1, 2004. We believed that doing so will enhance the accuracy of the RCE limits. In addition, for the reasons discussed below, we proposed to eliminate the location adjustment to the RCE data, while continuing to adjust the RCE limits by specialty. We did not propose changes to any of the other existing policies with respect to the application of and exceptions to the RCE limits. We invited public comments on our proposals to update the RCE limits and to eliminate the location adjustment for the RCE limits for cost reporting periods beginning on or after January 1, 2015. In addition, we invited public comments on our proposal to revise § 415.70(b) of the regulations to eliminate consideration of the type of location as part of the methodology to establish RCE limits for cost reporting periods beginning on or after January 1, 2015. Comment: One commenter expressed appreciation that CMS is updating the RCE limits and suggested that CMS update the RCEs on an annual basis. The commenter also requested that the proposed RCEs be effective for cost reporting periods beginning on or after January 1, 2014, instead of cost reporting periods beginning on or after January 1, 2015. Response: We will continue to review the RCE limits on a regular basis by applying the most recent economic index data and publish updates as necessary. We plan to keep the proposed effective date for the updated RCEs, as we do not believe it would be appropriate in this situation to make this provision retroactively effective. As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28173 through 28175), in establishing the initial and subsequently updated RCE limits, we included an adjustment to PO 00000 Frm 00307 Fmt 4701 Sfmt 4700 50159 account for differences in salary levels based on the location of the provider using geographic classifications based on the MSAs as defined by the OMB. We assigned an appropriate MSA designation based on the State/county in which the provider is located. We included a table in each of the previous RCE limit notices and rules, whereby each MSA designation was grouped into one of three categories: Metropolitan areas with a population greater than 1 million, metropolitan areas with a population less than 1 million, and nonmetropolitan areas. The MSA designation of the provider is then used to identify the appropriate RCE limit. To update the current RCE limits by location under the current methodology, we would need to use, as in past updates, the MSA designations that correspond with the update period. However, since 2003, the OMB no longer updates or uses MSAs. We considered continuing to use the MSA designations, as we have in the past, but we would have no way to account for shifts in populations among MSAs because the OMB no longer updates geographic classifications based on MSA designations. The OMB regularly updates the geographic definitions, and the counties included in each area, to account for population shifts due to migrations, birth, and death rates but currently the OMB uses Core-Based Statistical Area (CBSA) designations rather than MSAs. If we were to continue to use the MSA designation, providers could potentially be underpaid or overpaid if the population of their MSA changed significantly from 2004. Therefore, we determined that, because the MSA designations are no longer updated, it would not be appropriate to continue using the previous location adjustment methodology. The most recent geographic delineations used by the OMB are CBSAs, a term used to refer to both Metropolitan and Micropolitan Statistical Areas. However, CBSA delineations do not match the MSA definitions that were used to develop the initial and subsequently updated RCE limits. As noted above, we have used the AMA PSP data to develop previous and current RCE limits. The AMA PSP data were collected from 1970 to 1980 and included physicians’ income, hours worked, and MSA-based population information. The data that have been used to develop and update the RCE limits were developed using MSAs as the geographic unit. It is not possible to exactly crosswalk the MSA designations to the CBSA designations in order to update the RCE limits using E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50160 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the current location adjustment methodology. Even if it was possible to crosswalk the MSAs to the CBSAs, it would not be appropriate to use the MSA-based AMA PSP data to develop CBSA-based RCE limits. There have been significant changes in the populations of the MSA-based locations contained in the AMA PSP data that could not be translated into CBSAs. As such, that data would no longer be valid as the basis to develop RCE limits based on CBSAs. The OMB has cautioned users about using the new CBSA designations. For instance, in OMB’s 2010 ‘‘Standards for Delineating Metropolitan and Micropolitan Statistical Areas (CBSAs)’’ published on June 28, 2010 in the Federal Register (75 FR 37246), OMB states: ‘‘OMB establishes and maintains these areas solely for statistical purposes. In reviewing and revising these areas, OMB does not take into account or attempt to anticipate any public or private sector nonstatistical uses that may be made of the delineations. These areas are not designed to serve as a general-purpose geographic framework applicable for nonstatistical activities or for use in program funding formulas. ‘‘Furthermore, the Metropolitan and Micropolitan Statistical Area Standards do not produce an urban-rural classification, and confusion of these concepts can lead to difficulties in program implementation. Counties included in Metropolitan and Micropolitan Statistical Areas and many other counties may contain both urban and rural territory and populations. . . . OMB urges agencies, organizations, and policy makers to review carefully the goals of nonstatistical programs and policies to ensure that appropriate geographic entities are used to determine eligibility for the allocation of Federal funds.’’ (Emphasis in original.) For CMS to accurately update the location-adjusted RCE limits using the CBSAs, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28174), we believe it would be necessary to use a new data source for information on physician salaries, specialties, location, and hours worked; and the data would need to be allocated to different geographic areas based on CBSAs. The AMA PSP collected data from a large sample of office-based physicians. We considered using data that are currently collected and publicly available. We could not find a reliable dataset that contained all of the necessary data elements needed to update the location-adjusted RCE limits based on CBSAs. The most reliable data VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 we could find came from the Bureau of Labor Statistics (BLS) Occupational Employment Statistics (OES). The BLS OES data are collected annually, and capture a large and diverse population of physicians and corresponding CBSAs. We believe the BLS OES data are the most current, reliable source of income data for physicians. Although, the BLS OES is very reliable and collects data points for physician specialties, salary, and location, it does not collect detailed information for all 10 specialties; the ‘‘Radiology’’ and ‘‘Pathology’’ specialties are not separately captured. As such, we did not believe it was appropriate to use the BLS OES data to create an updated RCE limit if we would not have data available for two specialties. We also weighed the benefit of collecting updated information from physicians (through use of a new nationwide survey) in order to obtain the data necessary for application of an appropriate locality adjustment based on CBSAs against the burden placed on such physicians in providing such data. In order to have a dataset that could accurately capture all the necessary information, we would need to collect data from a large population of physicians, including a sufficient sample size for each physician specialty in each CBSA. We weighed the burden that such a nationwide survey would entail for all physicians, including office-based physicians, to be asked to respond to an in-depth survey regarding their salary, specialty, location, hours worked, and other practice information against the benefit of using updated, CBSA-based information to include a location adjustment for the providers that are subject to the RCE limits. When the RCE limits were developed in 1983, other than inpatient acute care hospitals paid under the IPPS, most provider types were reimbursed on a reasonable cost basis. Since then, providers such as skilled nursing facilities (SNFs), long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs), and home health agencies (HHAs) that previously were paid on a reasonable cost basis have transitioned to prospective payment systems and are no longer subject to the RCE limits. As of FY 2011 (the most recent cost report year for which we have complete data), our data show that there were only 59 children’s hospitals and cancer hospitals and 46 teaching hospitals (that have elected cost reimbursement for their physicians’ direct medical and surgical services) that are subject to the RCE limits. As such, we believe the benefit that could PO 00000 Frm 00308 Fmt 4701 Sfmt 4700 be gained by gathering the new data that would be necessary to maintain a location adjustment for the RCE limits is outweighed by the burden of conducting such a comprehensive survey of physicians. Furthermore, we analyzed how the elimination of the location adjustment would affect the accuracy and appropriateness of the proposed RCE limits. To perform this analysis, we needed a reliable source of physician income data (without a location adjustment) which could be compared to the RCE limits without a location adjustment. We determined that the best available source of physician income data is the mean annual income data for similar RCE physician specialties collected by the BLS OES. As mentioned above, the BLS OES data are collected annually and capture a large and diverse population of physicians. These data are the most current, reliable source of income data by physician specialties. In addition, when comparing salaries, it is important to compare salary amounts that reflect the same number of hours worked per year. Because many physicians do not work a 2,080 hour work year, their salary may seem higher or lower due to the number of hours actually worked. The RCE limits are based on physicians who worked a 2,080 hour work year. The BLS OES data also are based on a 2,080 hour work year; therefore, we believe that comparing the RCE limits to these BLS OES data is appropriate for purposes of our analysis. We performed an analysis comparing RCE limits for 2012, calculated without a location adjustment and solely for purposes of the analysis, to the most recently published (at the time of the analysis) BLS OES physician mean annual income data for the same year, to determine whether RCE limits based on the AMA PSP data, but without a location adjustment, would continue to reasonably reflect mean annual physician income data. For 2012, the BLS OES had income information for 8 of the 10 RCE specialties, which include the ‘‘Total’’ category; the BLS OES data did not capture the ‘‘Radiology’’ and ‘‘Pathology’’ specialties. We searched for another reliable data source for ‘‘Radiology’’ and ‘‘Pathology’’ but we could not find one with sufficient data elements to compare with the RCE limits. We used the MEI to update the RCE limits for these eight specialties to 2012 without including the location factor. We then compared these 2012 RCE limits to the 2012 BLS OES data for these same eight specialties. As shown in the table below, we found that the RCE limits ranged from 10.41 percent E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations above the BLS OES mean annual income data to 3.58 percent below the BLS OES data. Only three of the eight specialties had RCE limits slightly less than the then-current BLS OES mean annual wages for their specialty. The 50161 remaining five specialties had RCE limits above the current BLS OES mean annual wages for the specialties. ANALYSIS CHART RCE Limits updated to 2012* Specialty Total ............................................................................................................................................. General/Family Practice .............................................................................................................. Internal Medicine ......................................................................................................................... Surgery ........................................................................................................................................ Pediatrics ..................................................................................................................................... OB/GYN ....................................................................................................................................... Radiology ..................................................................................................................................... Psychiatry .................................................................................................................................... Anesthesiology ............................................................................................................................. Pathology ..................................................................................................................................... $206,300 174,600 192,700 240,300 165,500 231,200 265,200 176,800 233,500 253,900 BLS OES Mean 2012 annual wage $184,820 180,850 191,520 230,540 167,640 216,760 N/A 177,520 232,820 N/A Percent difference 10.41% ¥3.58% 0.61% 4.06% ¥1.29% 6.25% N/A ¥0.41% 0.29% N/A tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * These limits were calculated using the methodology only for purposes of this impact analysis. The RCE amounts updated to 2012 and the BLS OES numbers for 2012 varied only slightly, and in most cases, the RCE limit was higher than the BLS OES mean annual wage. Based on this analysis, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28175), we believe that RCE limits calculated using the AMA PSP data, and our proposed elimination of the location adjustment for the updated RCE limits, would result in RCE limits that are a reasonable reflection of mean annual physician income and would continue to ensure that providers subject to the RCE limits are paid in a fair and accurate manner. Because there are a relatively small number of providers currently affected by the RCE limits and because, as discussed above, we believe the revised RCE limits without a location adjustment would continue to ensure appropriate payment to such providers, we believe that eliminating the location adjustment would have a minimal overall effect on providers subject to the RCE limits and on the industry as a whole. For the reasons discussed above, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28175), we proposed to eliminate the location adjustment under the RCE limit methodology, and to revise § 415.70(b) of the regulations to remove consideration of the ‘‘type of location’’ as part of the methodology used to establish RCE limits. Comment: One commenter suggested CMS work with the BLS to obtain the information needed to calculate the RCE limits with a location adjustment. One commenter suggested that CMS develop an alternative method of establishing a location adjustment. Response: We plan to evaluate the BLS Occupational Employment VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Statistics and any other alternative data sources to further determine if a location adjustment is a viable option for future RCE updates. Comment: A few commenters suggested that CMS keep the location adjustment as part of the RCE limits. They stated that location-adjusted RCE limits continue to be important in capturing accurate physician salary costs for all providers because all hospitals apply the RCE limits to physician salaries on Worksheet A–8–2 of the Medicare cost report. A few commenters expressed concern over the accuracy of costs, such as GME costs, that would result from applying RCE limits without a location adjustment. Response: RCE limits currently have a payment impact on 105 Medicare providers, including 8 cancer hospitals, 51 children’s hospitals and 46 electing teaching amendment (ETA) hospitals that elected cost reimbursement for their physicians’ direct medical and surgical services. While it is true that all hospitals use the RCE limits on Worksheet A–8–2, for hospitals paid under the IPPS, the application of the RCE limits on Worksheet A–8–2 does not have a Medicare payment impact. Specifically, Worksheet C that is used for payment purposes calculates cost-tocharge ratios for IPPS hospitals using data prior to the application of the RCE limits on Worksheet A–8–2. Therefore, RCE limits have no effect on payments to providers paid under the IPPS. For the 46 ETA hospitals, Worksheet D–5 is used to apply the RCE limits to determine the proper payment on a reasonable cost basis of direct medical and surgical services of the physician. Given the current limitations of the location designation data described in the proposed rule, we believe it is appropriate to eliminate the location PO 00000 Frm 00309 Fmt 4701 Sfmt 4700 adjustment to the RCE limits. Based on the analysis discussed above and in the proposed rule, we believe that the RCE limits calculated without a location adjustment are a reasonable reflection of mean annual physician income and will continue to ensure that providers subject to the RCE limits are paid in a fair and accurate manner. Because of this, and because the RCE limits impact a relatively small number of providers, we believe that eliminating the location adjustment will have a minimal overall effect on providers subject to the RCE limits and on the industry as a whole. While a few commenters expressed concern over the accuracy of GME costs, we note that, under § 415.70(a)(2) of the regulations, RCE limits do not apply to costs of physician compensation attributable to approved GME programs that are payable under §§ 413.75 through 413.83. After consideration of the public comments we received, in this final rule, we are adopting as final the proposed methodology for establishing the RCE limits. We are setting forth the final updated RCE limits on the amount of allowable compensation for services furnished by physicians to providers (and for ETA hospitals, for direct medical and surgical services of physicians) for cost reporting periods beginning on or after January 1, 2015. To calculate these final RCE limits, we used the same methodology that was used to calculate the original and previous updates to the RCE limits, but did not apply an adjustment based on geographical classification. As noted earlier, this methodology was derived from the 1982 working paper. We used the mean physician income by specialty from that working paper to calculate the RCE limits without adjusting for geographical classification. We then E:\FR\FM\22AUR2.SGM 22AUR2 50162 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2. Proposed and Final Policy Changes Related to Reclassification as Rural for CAHs Under section 1820(c)(2)(B)(i) of the Act, a facility is eligible for designation as a CAH only if it is located in a county or equivalent unit of local government in a rural area (as defined in section 1886(d)(2)(D) of the Act), or is being treated as being located in a rural area in accordance with section 1886(d)(8)(E) of the Act. The regulations implementing this location requirement are located at § 485.610(b). The regulations governing the process for a facility located in an urban area to apply for reclassification as a rural facility under section 1886(d)(8)(E) of the Act are located at § 412.103. As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28054 FINAL CY 2015 RCE LIMITS through 28064), we proposed to implement the most recently published Total ...................................... $211,500 OMB delineations announced in OMB General/Family Practice ....... 179,000 Internal Medicine .................. 197,500 Bulletin No. 13–01. (We refer readers to Surgery ................................. 246,400 section III.B. of the preamble of this Pediatrics .............................. 169,700 final rule for a discussion of our final OB/GYN ................................ 237,100 decision to implement the new OMB Radiology .............................. 271,900 delineations announced in OMB Psychiatry ............................. 181,300 Bulletin No. 13–01.) As previously Anesthesiology ..................... 239,400 stated, a facility must be located in a Pathology .............................. 260,300 rural area in order to be eligible for designation as a CAH. Therefore, a new OMB delineation that redesignates an In addition, we are adopting as final area from rural to urban, affects the our proposed revision of § 415.70(b) of status of a facility that is currently a the regulations to eliminate CAH and had met the CAH location consideration of the type of location as requirements prior to implementation of part of the methodology to establish the new OMB delineation. A facility RCE limits for cost reporting periods that is located in an urban area cannot beginning on or after January 1, 2015. remain a CAH unless it is reclassified as rural under § 412.103 of the regulations. D. Critical Access Hospitals (CAHs) In both the FY 2005 IPPS final rule (69 1. Background FR 49221 through 49222 and 69 FR 60242 and 60252) and the FY 2010 Sections 1820 and 1861(mm) of the IPPS/LTCH PPS final rule (74 FR 43939 Act, as amended by section 4201 of the through 43940), we amended the Balanced Budget Act (BBA) of 1997, regulations at § 412.103(a) and replaced the Essential Access § 485.610(b) to provide for a transition Community Hospitals and Rural period during which CAHs that had Primary Care Hospitals (EACH/RPCH) previously been located in rural areas program with the Medicare Rural but, as a result of new OMB Hospital Flexibility Program (MRHFP), delineations, were now located in urban under which a qualifying facility can be areas, could reclassify as rural under designated as a CAH. CAHs § 412.103. Specifically, in both the FY participating in the MRHFP must meet 2005 IPPS final rule and the FY 2010 the conditions for designation by the IPPS/LTCH PPS final rule, we provided State and be certified by the Secretary for a 2-year period during which a CAH in accordance with section 1820 of the located in an urban area as a result of Act. Further, in accordance with section the new OMB delineations could 1820(e)(3) of the Act, a CAH must meet continue participating without other criteria that the Secretary interruption as a CAH, thereby allowing specifies. the CAH sufficient time to reclassify as The regulations that govern the rural under § 412.103. If the facility did conditions of participation (CoPs) for not reclassify as a rural facility by the CAHs under the statutory requirements end of that 2-year period, the CAH of section 1820 are codified at 42 CFR would not be able to retain its CAH Part 485, Subpart F. status beyond that 2-year period. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV updated these data by the CPI–U (from 1982 to 1997) and then by the MEI (from 1998 to 2015) to compute the updated RCE limits. The RCE limits implemented by this final rule vary slightly from those in the proposed rule due to a more recent estimate of the MEI for 2015. The chart below sets forth the final updated RCE limits on the amount of allowable compensation for services furnished by physicians to providers for cost reporting periods beginning on or after January 1, 2015, established using the same methodology that was used to calculate the original and previous updates to the RCE limits, but not applying an adjustment based on geographical classification. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00310 Fmt 4701 Sfmt 4700 However, under the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule, the application of the regulation was limited to October 1, 2004 through September 30, 2006, and October 1, 2009 through September 30, 2011, respectively. As a result, in the absence of a new amendment to the regulations each time there are new OMB delineations, a CAH that becomes located in an urban area as a result of those OMB delineations would not be given 2 years to reclassify as rural under § 412.103 of the regulations. In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43940), we stated that we would consider whether it would be appropriate to propose, in future IPPS rulemaking, to revise § 485.610 and § 412.103 to provide for a transition period any time a CAH that was formerly located in a rural area is designated as being located in an urban area as a result of the redesignation of its county from rural to urban. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28176), we stated that after further consideration, we believe that it is appropriate to propose to change the regulations to provide for a transition period that is not restricted to a timeframe, but rather can be applied any time a facility that is currently designated as a CAH becomes located in an urban area as a result of a new OMB delineation. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28176), we proposed that, effective October 1, 2014, a CAH that was previously located in a rural area but is now located in an urban area as a result of a new OMB labor market area delineation will continue to be treated as rural for 2 years from the date the OMB delineation is implemented. Accordingly, we stated in the proposed rule that if the OMB delineations announced in OMB Bulletin No. 13–01 on February 28, 2013 discussed in section III.B. of the preamble of the proposed rule are implemented in this FY 2015 IPPS/ LTCH PPS final rule, effective October 1, 2014, any CAH affected by the new OMB delineations in OMB Bulletin No. 13–01 would retain its rural status through September 30, 2016. An affected CAH would be required to reclassify as a rural facility under § 412.103 within that 2-year period in order to continue participating in the Medicare program as a CAH after the 2year transition period ends. Therefore, taking into consideration the example above, any CAH affected by a new OMB delineation that is implemented in this FY 2015 IPPS/LTCH PPS final rule would be required to reclassify as rural by September 30, 2016, in order to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations retain its CAH status after September 30, 2016. To implement this proposed change, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28176), we proposed to revise § 412.103 by adding a new paragraph (a)(6), and to revise § 485.610 by making a conforming change to the introductory text of paragraph (b) and adding a new paragraph (b)(5) to provide for a 2-year transition period that will apply any time a new OMB delineation causes a facility that was previously located in a rural area and is designated as a CAH to be located in an urban area. We stated we believe that this proposal to revise the regulations to automatically provide for a 2-year transition period following the implementation of new OMB delineations is more efficient than providing for a regulatory change limited to a timeframe, and, as a result, will be more effective in reducing any disruption caused by new OMB delineations. Comment: Commenters supported CMS’ proposal to provide for a 2-year transition period to allow CAHs affected by the implementation of new OMB delineations time to reclassify as rural in order to retain their CAH status after the 2-year transition period ends. Several commenters requested that CMS work with and provide notification to affected CAHs to alert them to the need to reclassify as rural in order to retain their CAH status. One commenter asked how new OMB delineations would impact necessary provider CAHs previously reclassified under prior updates. Another commenter requested that CMS provide for a 3-year transition period to allow affected CAHs additional time to reclassify as rural or to prepare to transition to urban PPS facilities. The commenter stated that the size of CAHs and the number of regulations they must follow make it difficult for these facilities to process and respond to new requirements. The commenter stated that although only a small number of CAHs are affected by the new OMB delineations, those affected require considerable time to locate applicable State law, examine Rural Urban Commuting Area (RUCA) scores, and in general determine whether they are eligible to reclassify as rural facilities. The commenter stated that CMS has a precedent for providing a 3-year transition period because it proposed to apply such a grace period to urban facilities redesignated as rural so that these facilities have time to prepare for lower reimbursement resulting from several factors, including a lower wage index. The commenter VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 stated that CAHs that lose their CAH status would also be subject to these lower payment rates and therefore would also benefit from being provided with a 3-year transition period. Response: We appreciate the commenters’ support of our proposal to provide CAHs affected by new OMB delineations with a 2-year transition period to reclassify as rural in order to retain their CAH status after the 2-year transition period ends. In response to the commenters’ request that CMS notify each CAH affected by a change in OMB delineations, we encourage CAHs to contact CMS if they have questions regarding their rural status and whether this status has changed as a result of the implementation of the new OMB delineations as discussed in section III.B. of the preamble of this final rule. In response to the question concerning necessary provider CAHs, section 1820(c)(2)(B)(i) of the Act requires that in order for a facility to be certified as a CAH, it must be located in a rural area or have reclassified as a rural facility. Therefore, if a necessary provider CAH is located in an urban area as a result of the new OMB delineations implemented in this final rule effective October 1, 2014, that CAH must now reclassify as rural in order to keep its CAH status after September 30, 2016. If a necessary provider CAH had previously reclassified as rural due to a prior change in OMB delineations, that CAH’s rural status remains unchanged. In response to the request to provide affected CAHs with a 3-year transition period during which they could either reclassify as rural or prepare to transition to an PPS facility, we continue to believe that 2 years is the appropriate amount of time for such a transition period. Consistent with the regulation changes made in FY 2005 and FY 2010 final rules (69 FR 49221through 49222, 69 FR 60242 and 60252, and 74 FR 43939 through 43940), we believe 2 years is a sufficient period of time in order for the CAH to work with its State to be designated as rural and engage in any other research it believes is necessary to determine whether it should reclassify as rural. Therefore, we are finalizing our proposal to provide CAHs affected by our implementation of the new OMB delineations with a 2-year transition period during which they must reclassify as rural in order to retain their CAH status after the 2-year period ends. Comment: Commenters requested that, in addition to providing CAHs affected by the implementation of a new OMB delineation with a 2-year transition period to reclassify as rural, SCHs and MDHs affected by the PO 00000 Frm 00311 Fmt 4701 Sfmt 4700 50163 implementation of a new OMB delineation also be provided with a transition period to reclassify as rural. One commenter requested that CMS clarify that a hospital’s SCH status would not be affected by a CAH that is now located in an urban area as a result of a new OMB delineation while that CAH is in its 2-year transition period to reclassify as rural. Specifically, the commenter requested that a CAH not be considered a ‘‘like hospital’’ as defined at § 412.92(c)(2) during its transition period. Response: We are clarifying that during an affected CAH’s 2-year transition period, the facility will continue to be considered a CAH. We respond to the public comments related to transition periods for SCHs and MDHs in sections IV.G.4. and IV.G.5. of the preamble of this final rule. After consideration of the public comments we received, we are finalizing our policy as proposed to provide for a 2-year transition period for CAHs affected by the implementation of a new OMB delineation during which the CAH must reclassify as rural in order to retain its CAH status after the 2-year transition period ends. To implement this change, we are revising § 412.103 by adding a new paragraph (a)(6), and revising § 485.610 by making a conforming change to the introductory text of paragraph (b) and adding a new paragraph (b)(5) to provide for a 2-year transition period that will apply any time the implementation a new OMB delineation causes a facility that was previously located in a rural area and is designated as a CAH to be located in an urban area. These regulation changes are effective October 1, 2014. For purposes of applying these regulation changes to the new OMB delineations implemented in this final rule effective October 1, 2014, CAHs affected by these most recent OMB delineations will be treated as CAHs through September 30, 2016 and will have until September 30, 2016, to reclassify as rural in order to keep their CAH status after September 30, 2016. 3. Revision of the Requirements for Physician Certification of CAH Inpatient Services For inpatient CAH services to be payable under Medicare Part A, section 1814(a)(8) of the Act requires that a physician certify ‘‘that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the critical access hospital.’’ The regulations implementing this statutory requirement are located at § 424.15. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50164 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Prior to FY 2014, this physician certification was required no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. In the FY 2014 IPPS/LTCH PPS final rule, we revised the CAH regulations concerning the timing requirements for certification of inpatient CAH services. Specifically, we revised § 424.15(b) to state that certification begins with the order for inpatient admission. The certification must be completed, signed, and documented in the medical record prior to discharge (78 FR 50970). This change was effective October 1, 2013. However, in order to provide CAHs with greater flexibility in meeting this certification requirement, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28176 through 28177), we proposed to amend the regulations governing the timing of the 96-hour certification requirement at § 424.15(b) such that physician certification is required no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. That is, we proposed to remove the requirement that certification of the 96hour requirement must be completed prior to discharge and we proposed to reinstate the timing requirement that was in place prior to October 1, 2013. We proposed to revise § 424.15(b) to remove the phrase ‘‘prior to discharge’’ and replace it with ‘‘no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted’’. In addition, we proposed to make a conforming amendment to § 424.11(d)(5). Section 424.11(d)(5) states that for all inpatient hospital or critical access hospital inpatient services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. Because we proposed to change the timing requirement for physician certification of CAH inpatient services at § 424.15(b), such that the certification could be completed past discharge, we proposed to revise § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient’’. We sought public comment on these proposed changes to the regulations governing the requirement for physician certification of CAH inpatient services. Comment: Most commenters supported the proposed change to allow physician certification to be completed 1 day prior to when the claim for the inpatient service is submitted. Commenters requested that CMS provide additional flexibility and avoid further confusion by clarifying that CAHs have until no later than 1 day prior to the day on which the claim for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the inpatient service is submitted to complete all certification requirements. One commenter stated that the proposed change could cause inaccurate and delayed chart entries because the certification may take place 30, 60, or 90 days after the inpatient is discharged. The commenter recommended that physician certification be completed within 24 hours of admission and that the medical record be used to meet all certification requirements. One commenter stated that asking a physician to certify his or her expectation for an individual’s length of stay after the individual’s inpatient stay has exceeded 96 hours will create additional confusion and will be met with greater resistance from physicians. Commenters asked for clarification in understanding how the proposal would help CAHs if the certification is still required to state that the individual will be discharged or transferred to another hospital within 96 hours after admission to the CAH. Response: We appreciate the commenters’ support of our proposal. In response to commenters who requested that CMS clarify that all certification requirements can be met no later than 1 day prior to when the claim is submitted, we are revising our proposed amendment to § 424.15(b) to provide that a CAH has until 1 day prior to when the claim for the inpatient service is submitted to complete all certification requirements. In order to finalize this policy, we are amending the regulation text at § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient.’’ In addition we are revising the regulations at § 424.15(b) to state that certification begins with the order for inpatient admission. All certification requirements must be completed, signed, and documented in the medical record no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. We believe these changes are consistent with the 96-hour certification requirement and the existing CoP requirements. In response to commenters’ concerns about providing a delayed certification, the policy finalized in this rule requires that all certification requirements be completed no later than 1 day prior to when the claim for the inpatient service is submitted. Therefore, CAHs are not precluded from completing these certification requirements in advance of this deadline if they believe an earlier completion of certification requirements is appropriate. We note that we are not making any changes related to the order requirements for admission and that in accordance with § 412.3, an order is PO 00000 Frm 00312 Fmt 4701 Sfmt 4700 required before or at the time of admission to admit an individual as an inpatient. In addition, we refer readers to the CY 2015 OPPS/ASC proposed rule, specifically section ‘‘XVI. Proposed Revision of the Requirements for Physician Certification of Hospital Inpatient Services Other Psychiatric Inpatient Services’’ (79 FR 41056 through 41058). In the CY 2015 OPPS/ ASC proposed rule, we proposed to require inpatient admission orders as a condition of payment based upon our general rulemaking authority under section 1871 of the Act rather than as an element of the physician certification under section 1814(a)(3) of the Act. In addition, in the CY 2015 OPPS/ASC proposed rule, we proposed to change our interpretation of section 1814(a)(3) of the Act to require a physician certification only for long-stay cases and outlier cases. In that rule, we proposed that 20 days is an appropriate minimum threshold for physician certification and we proposed to define long-stay cases as cases with stays of 20 days or longer. These proposed changes refer to the general physician certification requirements under section 1814(a)(3) of the Act and do not address the 96-hour certification requirement at section 1814(a)(8) of the Act Comment: Although many commenters supported the proposed change, many commenters indicated that they continue to have significant concerns with the 96-hour certification requirement and that the proposed change does not do enough to alleviate these concerns. Commenters stated they continue to support the Critical Access Hospital Relief Act of 2014, which would remove the 96-hour certification requirement for payment. Commenters requested that CMS exercise its discretion and make clear it will not enforce the 96-hour certification requirement because as long as this requirement is enforced, CAHs may not be eligible for Medicare payment. One commenter stated that occasionally admitting a patient who is expected to stay longer than 96 hours is permissible and should be paid. Commenters stated that physicians have been given the impossible task of coordinating the 96hour certification requirement for payment with the 2-midnight policy and that, in some cases, the physician must certify that the patient will be transferred or discharged within a 49hour timeframe. Another commenter stated that the 96-hour certification requirement is obsolete and does not recognize advancements in services which CAHs provide, including telehealth services. Commenters E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations requested that CMS seek a legislative change that would align the certification requirement for payment with the CAH CoP requirement, which requires an annual average length of stay of 96 hours. Commenters stated that the certification requirement for payment could be met by requiring that the CAH certify that it has the appropriate resources and staff to treat the inpatient. Commenters stated that the CAH program was established to provide individuals living in rural areas with access to critical health care services so that these individuals can receive high quality and cost efficient care close to home even though providing this type of care may prove to be unprofitable for a CAH. Commenters stated that CAHs provide services that may require longer lengths of stay, and while the provision of these services does not violate the CoP requirement for an annual average length of stay of 96 hours, CAHs are prevented from providing these types of services because they cannot meet the 96-hour certification requirement for payment. Commenters stated they are concerned about their ability to treat patients, employ new providers, and maintain services essential to their community. Commenters expressed concern about the impact of the 96-hour certification requirement for payment on surgical procedures. Commenters stated CAHs have put much effort into providing these procedures so that beneficiaries, particularly elderly individuals, can receive these services close to home. One commenter stated that surgeons who practice in rural areas rely on performing specific surgical procedures such as colon resections. The commenter stated that if these surgeons are only able to provide short-stay procedures and can no longer provide procedures that require longer lengths of stay, they would likely discontinue practicing at CAHs. One commenter stated that delaying the 96-hour certification requirement is not a resolution because it does not eliminate the fact that a surgeon will be unable to admit an individual to a CAH if he or she ethically believes that the individual will need 5 days as an inpatient. One commenter recommended CMS withdraw the policy related to the 96hour certification requirement for payment in the final rule for several reasons. The commenter stated that the policy jeopardizes a physician’s ability to care for his or her patient as required by the patient’s condition because admission should be based on medical judgment once an individual’s condition and symptoms are evaluated. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 The commenter stated that implementation of the policy will result in dissatisfaction and confusion because patients will have to become accustomed to new hospitals and new medical staff and a decline in patient satisfaction scores is something from which a hospital may not be able to recover. The commenter stated that although the 96-hour certification requirement is in statute, it was not enforced by CMS until FY 2014 and that CAHs were not given advance notification of the enforcement and there has been little preparation, training or guidance from CMS until very recently. The commenter noted that medical staff of its member CAHs are angry and frustrated especially because of the detrimental effect of the 96-hour certification requirement on their patients. Response: As stated earlier in this preamble, we believe the policy we are finalizing in this rule is consistent with the 96-hour certification requirement and the existing CoP requirements. The remainder of this response provides a review of the 96-hour certification requirement. For inpatient CAH services, section 1814(a)(8) of the Act requires for Medicare Part A payment that ‘‘in the case of inpatient critical access hospital services, a physician certifies that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the critical access hospital.’’ Because this statutory requirement is based on an expectation, if a physician certifies in good faith, that an individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH and then something unforeseen occurs that causes the individual to stay longer at the CAH, Medicare will pay for the costs of treating that patient and there would not be a problem with regard to the CAH designation as long as that individual’s stay does not cause the CAH to exceed its 96-hour annual average CoP requirement. However, if a physician cannot in good faith certify that an individual may reasonably be expected to be discharged or transferred within 96 hours after admission to the CAH, the CAH will not receive Medicare Part A payment for any portion of that individual’s inpatient stay. In addition, time as an outpatient at the CAH is not included in applying the 96-hour requirement, nor does time in a CAH swing bed, which is being used to provide skilled nursing services, count towards the 96-hour requirement. The clock for the 96 hours only begins once PO 00000 Frm 00313 Fmt 4701 Sfmt 4700 50165 the individual is admitted to the CAH as an inpatient. After consideration of the public comments we received, we are finalizing a policy that a CAH is required to complete all physician certification requirements no later than 1 day before the date on which the claim for the inpatient service is submitted. In order to finalize this change, we are amending the regulation text at § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient.’’ In addition, we are revising the regulations at § 424.15(b) to state that certification begins with the order for inpatient admission. All certification requirements must be completed, signed, and documented in the medical record no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. These changes are effective October 1, 2014. VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2015 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority Section 123 of the Medicare, Medicaid, and SCHIP (State Children’s Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113) as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554) provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs: specifically, a hospital that first received payment under section 1886(d) of the Act in 1986 and has an average inpatient length of stay (LOS) (as determined by the Secretary of Health and Human Services (the Secretary)) of greater than 20 days and has 80 percent or more of its annual Medicare inpatient discharges with a principal diagnosis that reflects a finding of neoplastic E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50166 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations disease in the 12-month cost reporting period ending in FY 1997. Section 123 of the BBRA requires the PPS for LTCHs to be a ‘‘per discharge’’ system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs. Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. In the August 30, 2002 Federal Register, we issued a final rule that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 55954). For the initial implementation of the LTCH PPS (FYs 2003 through FY 2007), the system used information from LTCH patient records to classify patients into distinct long-term care diagnosis-related groups (LTC–DRGs) based on clinical characteristics and expected resource needs. Beginning in FY 2008, we adopted the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) as the patient classification system used under the LTCH PPS. Payments are calculated for each MS–LTC–DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register. The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97–248) for payments for inpatient services provided by a LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable cost-based payment provisions are located at 42 CFR Part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98–21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and were paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospitalspecific ceiling on payments was determined by multiplying the hospital’s updated target amount by the number of total current year Medicare discharges. (Generally, in section VII. of the preamble of this final rule, when we refer to discharges, we describe VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicare discharges.) The August 30, 2002 final rule further details the payment policy under the TEFRA system (67 FR 55954). In the August 30, 2002 final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, a LTCH’s total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless a LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs’ cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR Part 412, Subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51733 through 51743) for a chronological summary of the main legislative and regulatory developments affecting the LTCH PPS through the annual update cycles prior to the FY 2014 rulemaking cycle. In addition, in this final rule, we discuss the provisions of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, that affect the LTCH PPS. In section VII.I.2. of the preamble of this final rule, we discuss the provisions of section 1206(a) of Public Law 113–67, which amended section 1886(m) of the Act by adding paragraph (6) and established, among other things, patient-level criteria for payments under the LTCH PPS for implementation beginning with FY 2016. In section VII.E. of the preamble of this final rule, we discuss the provisions of section 1206(b)(1) of Public Law 113–67, which provide for the retroactive reinstatement and PO 00000 Frm 00314 Fmt 4701 Sfmt 4700 extension, for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment policy (except for ‘‘grandfathered’’ hospitalswithin-hospitals (HwHs), which are permanently exempt from this policy). In section VII.G. of the preamble of this final rule, we discuss the provisions of section 1206(b)(2) of Public Law 113–67 (as amended by section 112(b) of the Protecting Access to Medicare Act (Pub. L. 113–93), which, subject to certain defined exceptions, provide for statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities and a new statutory moratorium on the increase in the number of hospital beds in LTCHs or LTCH satellite facilities for the period beginning April 1, 2014 and ending September 30, 2017. In section IX.C. of the preamble of this final rule, we discuss the provisions of section 1206(c) of Public Law 113–67, which amended the LTCH Quality Reporting Program established under section 1886(m)(5) of the Act by requiring the Secretary to establish a functional status quality measure to evaluate the in mobility among inpatients requiring ventilator support no later than October 1, 2015. In section VII.H. of the preamble of this final rule, we discuss the findings of a review of payments to certain LTCHs (that is, LTCHs classified under subclause (II) of section 1886(d)(1)(B)(iv) of the Act) that was conducted in accordance with section 1206(d) of Public Law 113–67, and finalize a policy to apply a payment adjustment under the LTCH PPS to ‘‘subclause (II)’’ LTCHs beginning in FY 2015 that will result in payments to this type of LTCH resembling payments under the reasonable cost TEFRA payment system model. 2. Criteria for Classification as an LTCH a. Classification as an LTCH Under the regulations at § 412.23(e)(1), to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare. Furthermore, § 412.23(e)(2)(i), which implements section 1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an average Medicare inpatient length of stay of greater than 25 days to be paid under the LTCH PPS. Alternatively, § 412.23(e)(2)(ii) states that, for cost reporting periods beginning on or after August 5, 1997, a hospital that was first excluded from the PPS in 1986 and can demonstrate that at least 80 percent of its annual Medicare inpatient discharges in the 12month cost reporting period ending in E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations FY 1997 have a principal diagnosis that reflects a finding of neoplastic disease must have an average inpatient length of stay for all patients, including both Medicare and non-Medicare inpatients, of greater than 20 days. b. Hospitals Excluded From the LTCH PPS The following hospitals are paid under special payment provisions, as described in § 412.22(c) and, therefore, are not subject to the LTCH PPS rules: • Veterans Administration hospitals. • Hospitals that are reimbursed under State cost control systems approved under 42 CFR Part 403. • Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90–248) (42 U.S.C. 1395b–1) or section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92–603) (42 U.S.C. 1395b–1 (note)) (Statewide all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the Act). • Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 3. Limitation on Charges to Beneficiaries In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we clarified that the discussion of beneficiary liability in the August 30, 2002 final rule was not meant to establish rates or payments for, or define Medicare-eligible expenses. Under § 412.507, if the Medicare payment to the LTCH is the full LTC–DRG payment amount, consistent with other established hospital prospective payment systems, a LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87 and for items and services specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for days for which the beneficiary has coverage until the shortstay outlier (SSO) threshold is exceeded. Therefore, if the Medicare payment was for a SSO case (§ 412.529) that was less than the full LTC–DRG payment amount because the beneficiary had insufficient remaining Medicare days, the LTCH could also charge the beneficiary for services delivered on those uncovered days (§ 412.507). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance Claims submitted to Medicare must comply with both the Administrative Simplification Compliance Act (ASCA) (Pub. L. 107–105), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104–191). Section 3 of the ASCA requires that the Medicare Program deny payment under Part A or Part B for any expenses incurred for items or services ‘‘for which a claim is submitted other than in an electronic form specified by the Secretary.’’ Section 1862(h) of the Act (as added by section 3(a) of the ASCA) provides that the Secretary shall waive such denial in two specific types of cases and may also waive such denial ‘‘in such unusual cases as the Secretary finds appropriate’’ (68 FR 48805). Section 3 of the ASCA operates in the context of the HIPAA regulations, which include, among other provisions, the transactions and code sets standards requirements codified under 45 CFR Parts 160 and 162 (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct certain electronic health care transactions according to the applicable transactions and code sets standards. The Department of Health and Human Services has a number of initiatives designed to encourage and support the adoption of health information technology and promote nationwide health information exchange to improve health care. The Office of the National Coordinator for Health Information Technology (ONC) leads these efforts in collaboration with other agencies, including CMS and the Office of the Assistant Secretary for Planning and Evaluation (ASPE). Through a number of activities, including several open government initiatives, HHS is promoting the adoption of electronic health record (EHR) technology certified under the ONC Health Information Technology (HIT) Certification Program developed to support secure, interoperable, health information exchange. The HIT Policy Committee (a Federal Advisory Committee) has recommended areas in which HIT certification under the ONC HIT Certification Program would help support providers that are eligible for the Medicare and Medicaid EHR Incentive Programs, such as long-term and postacute care (including LTCHs) and behavioral health care providers. PO 00000 Frm 00315 Fmt 4701 Sfmt 4700 50167 We believe that the use of certified EHRs by LTCHs (and other types of providers that are ineligible for the Medicare and Medicaid EHR Incentive Programs) can effectively and efficiently help providers improve internal care delivery practices, support the exchange of important information across care partners and during transitions of care, and could enable the reporting of electronically specified clinical quality measures (eCQMs) (as described elsewhere in this rule). More information on the ONC HIT Certification Program and efforts to develop standards applicable to LTCHs can be found by accessing the following Web sites and resources: • https://www.healthit.gov/sites/ default/files/ generalcertexchangeguidance_final_9-913.pdf; • https://www.healthit.gov/facas/ FACAS/health-it-policy-committee/ hitpc-workgroups/certificationadoption; • https://wiki.siframework.org/ LCC+LTPAC+Care+Transition+SWG; and • https://wiki.siframework.org/ Longitudinal+Coordination+of+Care. B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights for FY 2015 1. Background Section 123 of the BBRA requires that the Secretary implement a PPS for LTCHs (that is, a per discharge system with a diagnosis-related group (DRG)based patient classification system reflecting the differences in patient resources and costs). Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine ‘‘the feasibility and the impact of basing payment under such a system [the longterm care hospital (LTCH) PPS] on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients, as well as the use of the most recently available hospital discharge data.’’ When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system (that is, the CMS DRGs) that was utilized at that time under the IPPS. As a component of the LTCH PPS, we refer to this patient classification system as the ‘‘long-term care diagnosis-related groups (LTC– DRGs).’’ Although the patient classification system used under both the LTCH PPS and the IPPS are the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50168 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect ‘‘the differences in patient resource use . . .’’ of LTCH patients (section 123(a)(1) of the BBRA (Pub. L. 106–113)). As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), the MS–DRGs and the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) were adopted under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS–DRGs and MS–LTC– DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy descriptions and payment calculations, all references to LTC– DRGs would be considered a reference to MS–LTC–DRGs. For the remainder of this section, we present the discussion in terms of the current MS–LTC–DRG patient classification system unless specifically referring to the previous LTC–DRG patient classification system that was in effect before October 1, 2007.) The MS–DRGs adopted in FY 2008 represent an increase in the number of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS–DRG classifications are updated annually. There are currently 751 MS–DRG groupings. After finalizing the proposed changes to the MS–DRG groupings described in section II.G. of this preamble, there are a total of 753 MS– DRG groupings for FY 2015. Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515 of the regulations, we used information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS–LTC– DRGs based on clinical characteristics and estimated resource needs. We then assigned an appropriate weight to the MS–LTC–DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs. Below we provide a general summary of our existing methodology for determining VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the FY 2015 MS–LTC–DRG relative weights under the LTCH PPS. In a departure from the IPPS, and as discussed in greater detail below in section VII.B.3.f. of this preamble, we are continuing to use low-volume MS– LTC–DRGs (that is, MS–LTC–DRGs with less than 25 LTCH cases) in determining the MS–LTC–DRG relative weights because LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. For purposes of determining the relative weights for the large number of low-volume MS–LTC–DRGs, we grouped all of the low-volume MS– LTC–DRGs into five quintiles based on average charge per discharge. (A detailed discussion of the initial development and application of the quintile methodology appears in the August 30, 2002 LTCH PPS final rule (67 FR 55978).) Under our existing methodology, we accounted for adjustments to payments for short-stay outlier (SSO) cases (that is, cases where the covered length of stay at the LTCH is less than or equal to five-sixths of the geometric average length of stay for the MS–LTC–DRG). Furthermore, we made adjustments to account for nonmonotonically increasing weights, when necessary. That is, theoretically, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges such that, in the severity levels within a base MS–LTC–DRG, the relative weights should increase monotonically with severity from the lowest to highest severity level. (We discuss nonmonotonicity in greater detail and our methodology to adjust the MS–LTC– DRG relative weights to account for nonmonotonically increasing relative weights in section VII.B.3.g. (Step 6) of this preamble.) 2. Patient Classifications into MS–LTC– DRGs a. Background The MS–DRGs (used under the IPPS) and the MS–LTC–DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted above in this section, we refer to the DRGs under the LTCH PPS as MS–LTC–DRGs although they are structurally identical to the MS–DRGs used under the IPPS. The MS–DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical PO 00000 Frm 00316 Fmt 4701 Sfmt 4700 hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD–9–CM procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKGs), or minor surgical procedures (for example, a biopsy of skin and subcutaneous tissue (procedure code 86.11)) do not affect the MS–LTC–DRG assignment based on their presence on the claim. Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge and that payment varies by the MS–LTC–DRG to which a beneficiary’s stay is assigned. Cases are classified into MS–LTC–DRGs for payment based on the following six data elements: • Principal diagnosis; • Additional or secondary diagnoses; • Surgical procedures; • Age; • Sex; and • Discharge status of the patient. Through FY 2010, the number of diagnosis and procedure codes considered for MS–DRG assignment was limited to nine and six, respectively. However, for claims submitted on the 5010 format beginning January 1, 2011, we increased the capacity to process diagnosis and procedure codes up to 25 diagnoses and 25 procedures. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. We refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for a complete discussion of this change (75 FR 50127). Under HIPAA transactions and code sets regulations at 45 CFR Parts 160 and 162, covered entities must comply with the adopted transaction standards and operating rules specified in Subparts I through S of Part 162. Among other requirements, by January 1, 2012, covered entities were required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3— Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102). HIPAA requires covered entities to use the applicable medical data code set requirements when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations patient, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the Internal Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). For additional information on the ICD–9–CM coding system, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47241 through 47243 and 47277 through 47281). We also refer readers to the detailed discussion on correct coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 55981 through 55983). Additional coding instructions and examples are published in the Coding Clinic for ICD–9–CM, a product of the American Hospital Association. (We refer readers to section II.G.13. of the preamble of this final rule for additional information on the annual revisions to the ICD–9–CM codes.) Providers use the code sets under the ICD–9–CM coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS–DRG system. We have been discussing the conversion to the ICD–10 coding system for many years. In the FY 2015 IPPS/LTCH PPS proposed rule, we referred readers to section II.G.1. of the preamble of that proposed rule for additional information on the implementation of the ICD–10 coding system. Comment: One commenter requested that CMS develop a crosswalk between ICD–9–CM codes and ICD–10 codes to specifically assist LTCH providers in determining the appropriate MS–LTC– DRGs that are affected as a result of the transition to ICD–10–PCS. The commenter stated that additional guidance is needed regarding the specific MS–LTC–DRGs that LTCHs should concentrate their efforts on during the delay in the implementation of ICD–10–PCS. Response: As noted above, the MS– LTC–DRGs under the LTCH PPS are structurally identical to the MS–DRGs used under the IPPS. For a detailed discussion of the conversion from the ICD–9–CM to the ICD–10–PCS code set and the ICD–9–CM to ICD–10 MS– DRGs, we refer readers to section II.G.1.a. of the preamble of this FY 2015 IPPS/LTCH PPS final rule. Included in this discussion are all the ICD–10 resources publicly available via the Internet on the CMS ICD–10 Web site: https://www.cms.gov/Medicare/Coding/ ICD10/. For example, the General Equivalence Mappings (GEMs) that consist of forward and backward mappings of ICD–9–CM and ICD–10– PCS coding sets are available for providers to review their current list of ICD–9–CM codes and map (or VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 crosswalk) them to the appropriate available ICD–10–PCS codes. However, we note that the GEMs are not a substitute for coding from actual medical record documentation using the ICD–10–PCS code set. We also have held several ICD–10–PCS National Provider Calls where interested parties can listen to past presentations and review the accompanying slide presentations available. We refer readers to the following Web site: https:// www.cms.gov/Medicare/Coding/ICD10/ CMS-Sponsored-ICD-10Teleconferences.html. To create the MS–DRGs (and by extension, the MS–LTC–DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a detailed discussion about the creation of MS– DRGs based on severity of illness levels (72 FR 47141 through 47175). Medicare administrative contractors (MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS–LTC–DRG can be made. During this process, certain cases are selected for further development (74 FR 43949). After screening through the MCE, each claim is classified into the appropriate MS–LTC–DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS–LTC–DRG assignment, the Medicare contractor determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospitalspecific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS–LTC–DRG assignments made by the Medicare contractor and to submit additional information within a specified timeframe as provided in § 412.513(c). PO 00000 Frm 00317 Fmt 4701 Sfmt 4700 50169 The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS–LTC–DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS–DRG and MS–LTC–DRG classification changes and to recalibrate the MS–DRG and MS–LTC–DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively. b. Changes to the MS–LTC–DRGs for FY 2015 As specified by our regulations at § 412.517(a), which require that the MS– LTC–DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, we proposed to update the MS–LTC–DRG classifications effective October 1, 2014, through September 30, 2015 (FY 2015) consistent with the proposed changes to specific MS–DRG classifications (that is, proposed GROUPER Version 32.0). We did not receive any public comments on this proposal. Therefore, we are adopting the proposal without modification in this final rule. In accordance with § 412.517(a) and consistent with our historical practice, we are updating the MS–LTC–DRG classifications effective October 1, 2014, through September 30, 2015 (FY 2015) consistent with the changes to specific MS–DRG classifications presented in section II.G. of this preamble (that is, GROUPER Version 32.0). Therefore, the MS–LTC–DRGs for FY 2015 presented in this final rule are the same as the MS–DRGs that are being used under the IPPS for FY 2015. In addition, because the MS–LTC–DRGs for FY 2015 are the same as the MS–DRGs for FY 2015, the other changes that affect MS–DRG (and by extension MS–LTC–DRG) assignments under GROUPER Version 32.0 as discussed in section II.G. of the preamble of this final rule, including the changes to the MCE software and the ICD–9–CM coding system, also are applicable under the LTCH PPS for FY 2015. 3. Development of the FY 2015 MS– LTC–DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights One of the primary goals for the implementation of the LTCH PPS is to E:\FR\FM\22AUR2.SGM 22AUR2 50170 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH’s case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment system rate by the applicable relative weight in determining payment to LTCHs for each case. The basic methodology used to develop the MS–LTC–DRG relative weights is generally consistent with the general methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), with the exception of some modifications of our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity resulting from the adoption of the MS–LTC–DRGs. (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550).) Under the LTCH PPS, relative weights for each MS–LTC–DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS–LTC–DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS–LTC–DRG that represents the resources needed by an average inpatient LTCH case in that MS–LTC–DRG. For example, cases in a MS–LTC–DRG with a relative weight of 2 will, on average, cost twice as much to treat as cases in a MS–LTC–DRG with a relative weight of 1. b. Development of the MS–LTC–DRG Relative Weights for FY 2015 In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755 through 50760), we presented our policies for the development of the MS–LTC–DRG relative weights for FY 2014. The basic methodology we used to develop the FY 2014 MS–LTC–DRG relative weights was the same as the methodology we used to develop the FY 2013 MS–LTC– DRG relative weights in the FY 2013 IPPS/LTCH PPS final rule and was consistent with the general methodology established when the LTCH PPS was VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28181 through 28187), we proposed to continue to use our existing methodology to determine the MS LTC– DRG relative weights for FY 2015, including the application of established policies related to the data, the hospitalspecific relative value methodology, the treatment of severity levels in the MS LTC–DRGs, low-volume and no-volume MS–LTC–DRGs, adjustments for nonmonotonicity, and the steps for calculating the proposed MS–LTC–DRG relative weights with a budget neutrality factor. Beginning with the FY 2008 update, we established a budget neutrality requirement for the annual update to the MS–LTC–DRG classifications and relative weights at § 412.517(b) (in conjunction with § 412.503), such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the classification and relative weight changes (72 FR 26882 through 26884). Consistent with § 412.517(b), we proposed to continue to apply our established two-step budget neutrality methodology. As such, the proposed update to the MS–LTC–DRG classifications and relative weights for FY 2015 was based on the FY 2014 MS– LTC–DRG classifications and relative weights established in Table 11 listed in section VI. of the Addendum to the FY 2014 IPPS/LTCH PPS final rule (78 FR 51002). Comment: A few commenters recommended that CMS review its calculation of the proposed FY 2015 MS–LTC–DRG relative weights with the proposed budget neutrality factor to confirm that the those weights resulted in no change in aggregate LTCH PPS payments under § 412.517. The commenters made this request after performing their own analysis of the proposed relative weight calculations. One commenter performed a comparative analysis using the LTCH discharges from the MedPAR data and its estimate of LTCH PPS payments using the FY 2014 MS–LTC–DRGs relative weights and the proposed FY 2015 MS–LTC–DRGs relative weights, and found an aggregate reduction in LTCH PPS payments, in which the majority of that reduction was due to the proposed decrease in the relative weight for MS–LTC–DRG 207. Another commenter’s analysis found a reduction in the proposed relative weight for 11 of the 20 most frequently utilized MS– PO 00000 Frm 00318 Fmt 4701 Sfmt 4700 LTC–DRGs, which the commenter believed suggested that the proposed MS–LTC–DRGs relative weights result in an aggregate decrease in LTCH PPS payments. Because these commenters believed that their analyses revealed an estimated aggregate decrease in LTCH PPS payments, they further believed that the proposed MS–LTC–DRGs relative are not ‘‘budget neutral’’ and, therefore, are not consistent with the requirement under § 412.517(b) that CMS ensure that estimated LTCH PPS payments are not affected by the annual update to the MS–LTC–DRGs classifications and relative weights. We note that the commenters did not comment specifically on any of our specific proposals related to the determination of the MS–LTC–DRGs relative weights for FY 2015, which includes our calculation of the normalization factor and the budget neutrality factor determined under the proposed application of our two-step budget neutrality methodology (discussed in Step 7 of section VII.B.3.g. of the proposed rule). Response: We appreciate the commenters’ analysis of the determination of the proposed MS– LTC–DRG relative weight calculations. In consideration of these public comments, we have reviewed the application of our methodology and the calculation of the MS–LTC–DRGs relative weights for FY 2015. We found no methodological or computational errors. In particular, in light of the commenter’s focus on MS–LTC–DRG 207, we reviewed our budget neutrality calculations to ensure that the proposed decrease in the relative weight for MS– LTC–DRG 207 was accurately reflected in our aggregate LTCH PPS payment estimates. As described in step 7 under section VII.B.3.g. of the proposed rule, after determining and applying the normalization factor, we compared estimated aggregate LTCH PPS payments using the FY 2014 MS–LTC– DRGs and relative weights to estimate aggregate LTCH PPS payments using the proposed FY 2015 MS–LTC–DRGs and relative weights using LTCH claims data from the December 2013 update of the FY 2013 MedPAR file. Prior to the application of the proposed budget neutrality factor, we estimated that aggregate LTCH PPS payments using the proposed FY 2015 MS–LTC–DRGs and normalized relative weights would have resulted in an increase in aggregate LTCH PPS payments in FY 2015. To remove this estimated increase in aggregate LTCH PPS payments, we determined that a factor of 0.995275 needed to be applied to each of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations proposed normalized FY 2015 MS– LTC–DRG relative weights. Therefore, we disagree with the commenters that the proposed MS LTC DRG relative weights are not ‘‘budget neutral,’’ and are not consistent with the budget neutrality requirement under § 412.517(b). As noted above, the commenters did not comment specifically on our calculation of the normalization factor and the budget neutrality factor determined under the proposed application of our two-step budget neutrality methodology. The budget neutrality provision under § 412.517(b) requires that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the classification and relative weight changes (72 FR 26882 through 26884). Consistent with § 412.517(b), we proposed to continue to apply our established two-step budget neutrality methodology. Under both steps of this methodology, based on the best data available, we assess the aggregate effects of the annual classification and relative weight changes. Specifically, as described in the proposed rule, in the first step we determine a normalization factor to ensure that estimated payments are not affected by changes in the composition of case types or the changes to the classification system using a ratio of average CMIs calculated across all LTCH PPS cases used for recalibration. Similarly, in the second step, the comparison of estimated aggregate LTCH PPS payments used to determine the budget neutrality factor is based on the sum of the estimated payments for all LTCH claims in the specified database. While the commenter is correct that the proposed relative weights for 11 of the 20 most frequently utilized MS–LTC–DRGs (or approximately 55 percent) are decreasing (which includes MS–LTC– DRG 207), the LTCH cases in those MS– LTC–DRGs only includes less than 60 percent of the LTCH claims. When the analysis is expanded to the 50 most frequently utilized MS–LTC–DRGs, which includes over 80 percent of the LTCH claims, the percentage of MS– LTC–DRGs with a proposed decrease in its relative weight drops to approximately 45 percent. This demonstrates that the number of MS– LTC–DRGs included in such an analysis can show contrary results. Therefore, we disagree with the commenter’s assertion that its analysis of the proposed relative weights for 11 of the 20 most frequently utilized MS–LTC–DRGs is an indication VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 that the proposed MS–LTC–DRG relative weights will result in an aggregate decrease in LTCH PPS payments and, therefore, are not budget neutral. In this FY 2015 IPPS/LTCH PPS final rule, after consideration of public comments we received, as proposed, we are continuing to apply our established methodology to develop the MS–LTC– DRG relative weights for FY 2015. Specifically, we are finalizing our proposed methodology for developing the FY 2015 MS–LTC–DRG relative weights without modification, including the proposed application of established policies related to the data, hospitalspecific relative value methodology, the treatment of severity levels in the MS– LTC–DRGs, low-volume and no-volume MS–LTC–DRGs, adjustments for nonmonotonicity, and the proposed steps for calculating the MS–LTC–DRG relative weights with a budget neutrality factor. Below we present the methodology that we are continuing to use to determine the MS–LTC–DRG relative weights for FY 2015, which is consistent with the methodology presented in the FY 2014 IPPS/LTCH PPS final rule. In addition, after consideration of the public comments we received, we are adopting as final the continued application our established two-step budget neutrality methodology, which is based on the current year MS–LTC–DRG classifications and relative weights (that is, the annual update to the MS–LTC– DRG classifications and relative weights for FY 2015 are based on the FY 2014 MS–LTC–DRG classifications and relative weights established in Table 11 listed in section VI. of the Addendum to the FY 2014 IPPS/LTCH PPS final rule (78 FR 51002)). For additional information on the established two-step budget neutrality methodology, we refer readers to the FY 2008 IPPS final rule (72 FR 47295 through 47296). c. Data For the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755), to calculate the MS– LTC–DRG relative weights for FY 2014, we obtained total charges from FY 2012 Medicare LTCH bill data from the December 2012 update of the FY 2012 MedPAR file, which were the best available data at that time, and used the finalized Version 31.0 of the GROUPER to classify LTCH cases. As stated previously in this section, this approach is consistent with our proposals regarding the continued application of established policies related to the data as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28181 through 28182), which we are finalizing PO 00000 Frm 00319 Fmt 4701 Sfmt 4700 50171 without modification in this final rule. Consistent with our historical practice, to calculate the MS–LTC–DRG relative weights for FY 2015 in this final rule, we obtained total charges from the FY 2013 Medicare LTCH bill data from the March 2014 update of the FY 2013 MedPAR file, which are the best available data at this time, and used Version 32.0 of the GROUPER to classify LTCH cases. In this final rule and consistent with our historical methodology, we excluded the data from LTCHs that are all-inclusive rate providers and LTCHs that are reimbursed in accordance with demonstration projects authorized under section 402(a) of Public Law 90– 248 or section 222(a) of Public Law 92– 603. Furthermore, consistent with our historical practice, we excluded Medicare Advantage (Part C) claims, which are now included in the MedPAR files, in the calculations for the relative weights under the LTCH PPS that are used to determine payments for Medicare fee-for-service claims. Specifically, we did not use any claims from the MedPAR files that had a GHO Paid indicator value of ‘‘1,’’ which effectively removed Medicare Advantage claims from the relative weight calculations. Accordingly, in the development of the FY 2015 MS–LTC– DRG relative weights in this final rule, we excluded the data of 12 all-inclusive rate providers and one LTCH that is paid in accordance with demonstration projects that had claims in the March 2014 update of the FY 2013 MedPAR file, as well as any Medicare Advantage claims. d. Hospital-Specific Relative Value (HSRV) Methodology By nature, LTCHs often specialize in certain areas, such as ventilatordependent patients and treatment of infections and wound care. Some case types (MS–DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS–LTC– DRGs has the potential to inappropriately distort the measure of average charges. As stated previously in this section, this approach is consistent with our proposals regarding the continued use of the HSRV methodology as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28182), which we are finalizing without modification in this final rule. Therefore, in this final rule, to account for the fact that cases may not be randomly distributed across LTCHs, consistent with the methodology we E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50172 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations have used since the implementation of the LTCH PPS, we are continuing to use a hospital-specific relative value (HSRV) methodology to calculate the MS–LTC– DRG relative weights for FY 2015. We believe this method removes this hospital-specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, under this methodology, we reduce the impact of the variation in charges across providers on any particular MS–LTC–DRG relative weight by converting each LTCH’s charge for a case to a relative value based on that LTCH’s average charge. Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjusting those values for the LTCH’s case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for a LTCH is its case-mix, so it is reasonable to scale each LTCH’s average relative charge value by its case-mix. In this way, each LTCH’s relative charge value is adjusted by its case-mix to an average that reflects the complexity of the cases it treats relative to the complexity of the cases treated by all other LTCHs (the average case-mix of all LTCHs). In accordance with our established methodology, we are continuing to standardize charges for each case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in section VII.B.3.g. (Step 3) of this preamble) by the average adjusted charge for all cases at the LTCH in which the case was treated. SSO cases are cases with a length of stay that is less than or equal to five-sixths the average length of stay of the MS–LTC– DRG (§ 412.529 and § 412.503). The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio is multiplied by that LTCH’s case-mix index to determine the standardized charge for the case (67 FR 55989). Multiplying the resulting ratio by the LTCH’s case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH’s relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same casemix, but an average adjusted charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account. e. Treatment of Severity Levels in Developing the MS–LTC–DRG Relative Weights For purposes of determining the MS– LTC–DRG relative weights, under our historical methodology, there are three different categories of MS–DRGs based on volume of cases within specific MS– LTC–DRGs: (1) MS–LTC–DRGs with at least 25 cases are each assigned a unique relative weight; (2) low-volume MS–LTC–DRGs (that is, MS–LTC–DRGs that contain between 1 and 24 cases based on a given year’s claims data) are grouped into quintiles (as described below) and assigned the relative weight of the quintile; and (3) no-volume MS– LTC–DRGs (that is, no cases in the given year’s claims data are assigned to those MS–LTC–DRGs) are cross-walked to other MS–LTC–DRGs based on the clinical similarities and assigned the relative weight of the cross-walked MS– LTC–DRG (as described in greater detail below). As stated previously in this section, this approach is consistent with our proposals regarding the continued use of our existing methodology related to the treatment of severity levels as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28182), which we are finalizing without modification in this final rule. Therefore, in this final rule, we are continuing to utilize these same three categories of MS–LTC–DRGs for purposes of the treatment of severity levels in determining the MS–LTC–DRG relative weights for FY 2015. (We provide in-depth discussions of our policy regarding weight-setting for lowvolume MS–LTC–DRGs in section VII.B.3.f. of the preamble of this final rule and for no-volume MS–LTC–DRGs, under Step 5 in section VII.B.3.g. of the preamble of this final rule.) Furthermore, in determining the FY 2015 MS–LTC–DRG relative weights, when necessary, we made adjustments to account for nonmonotonicity, as discussed in greater detail below in Step 6 of section VII.B.3.g. of this preamble. We refer readers to the discussion in the PO 00000 Frm 00320 Fmt 4701 Sfmt 4700 FY 2010 IPPS/RY 2010 LTCH PPS final rule for our rationale for including an adjustment for nonmonotonicity (74 FR 43953 through 43954). f. Low-Volume MS–LTC–DRGs In order to account for MS–LTC– DRGs with low volume (that is, with fewer than 25 LTCH cases), consistent with our existing methodology for purposes of determining the FY 2015 MS–LTC–DRG relative weights, we are continuing to employ the quintile methodology for low-volume MS–LTC– DRGs, such that we grouped the ‘‘lowvolume MS–LTC–DRGs’’ (that is, MS– LTC–DRGs that contained between 1 and 24 cases annually) into one of five categories (quintiles) based on average charges (67 FR 55984 through 55995 and 72 FR 47283 through 47288). As stated previously in this section, this approach is consistent with our proposals regarding the continued use of our existing methodology for the treatment of low-volume MS–LTC– DRGs as presented in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28182 through 28183), which we are finalizing without modification in this final rule. Therefore, in determining the FY 2015 MS–LTC–DRG relative weights in this final rule, in cases where the initial assignment of a low-volume MS–LTC– DRG to a quintile results in nonmonotonicity within a base-DRG, in order to ensure appropriate Medicare payments, consistent with our historical methodology, we made adjustments to the treatment of low-volume MS–LTC– DRGs to preserve monotonicity, as discussed in detail below in section VII.B.3.g. (Step 6) of the preamble of this final rule. In this final rule, using LTCH cases from the March 2014 update of the FY 2013 MedPAR file (which is currently the best available data), we identified 295 MS–LTC–DRGs that contained between 1 and 24 cases. This list of MS– LTC–DRGs was then divided into one of the 5 low-volume quintiles, each containing 59 MS–LTC–DRGs (295/5 = 59). We assigned a low-volume MS– LTC–DRG to a specific low-volume quintile by sorting the low-volume MS– LTC–DRGs in ascending order by average charge in accordance with our established methodology. Based on the data available for this final rule, the number of MS–LTC–DRGs with less than 25 cases was evenly divisible by 5, and therefore, it was not necessary to employ our historical methodology for determining which of the low-volume quintiles contain an additional lowvolume MS–LTC–DRG. Specifically for this final rule, after organizing the MS– LTC–DRGs by ascending order by E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV average charge, we assigned the first fifth (1st through 59th) of low-volume MS–LTC–DRGs (with the lowest average charge) into Quintile 1. The MS–LTC– DRGs with the highest average charge cases were assigned into Quintile 5. Table 13A, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, lists the composition of the low-volume quintiles for MS–LTC–DRGs for FY 2015. Accordingly, in order to determine the FY 2015 relative weights for the MS–LTC–DRGs with low volume, we used the five low-volume quintiles described above. We determined a relative weight and (geometric) average length of stay for each of the five lowvolume quintiles using the methodology that we applied to the MS–LTC–DRGs (25 or more cases), as described below in section VII.B.3.g. of the preamble of this final rule. We assigned the same relative weight and average length of stay to each of the low-volume MS– LTC–DRGs that made up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS–LTC–DRGs with a low volume of LTCH cases will vary in the future. Furthermore, we note that we will continue to monitor the volume (that is, the number of LTCH cases) in the lowvolume quintiles to ensure that our quintile assignments used in determining the MS–LTC–DRG relative weights result in appropriate payment for such cases and do not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases. g. Steps for Determining the FY 2015 MS–LTC–DRG Relative Weights In this final rule, we determined the FY 2015 MS–LTC–DRG relative weights based on our existing methodology. (For additional information on the original development of this methodology, and modifications to it since the adoption of the MS–LTC–DRGs, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43951 through 43966).) As stated previously in this section, this approach is consistent with our proposals regarding the continued use of our existing methodology to determine the FY 2015 MS–LTC–DRG relative weights as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28183 through 28187), which we are finalizing without modification in this final rule. In summary, to determine the FY 2015 MS–LTC–DRG relative weights, we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 grouped LTCH cases to the appropriate MS–LTC–DRG, while taking into account the low-volume quintile (as described above). After grouping the cases to the appropriate MS–LTC–DRG (or low-volume quintile), we calculated the FY 2015 relative weights by first removing statistical outliers and cases with a length of stay of 7 days or less (Steps 1 and 2 below). Next, we adjusted the number of cases in each MS–LTC– DRG (or low-volume quintile) for the effect of SSO cases (Step 3 below). After removing statistical outliers (Step 1 below) and cases with a length of stay of 7 days or less (Step 2 below), the SSO adjusted discharges and corresponding charges were then used to calculate ‘‘relative adjusted weights’’ for each MS–LTC–DRG (or low-volume quintile) using the HSRV method. Below we discuss in detail the steps for calculating the FY 2015 MS–LTC–DRG relative weights. We note that, as we discussed in section VII.B.3.c. of the preamble of this final rule, we excluded the data of all-inclusive rate LTCHs, LTCHs that are paid in accordance with demonstration projects, and any Medicare Advantage claims in the March 2014 update of the FY 2013 MedPAR file. Step 1—Remove statistical outliers. The first step in the calculation of the FY 2015 MS–LTC–DRG relative weights is to remove statistical outlier cases. Consistent with our historical relative weight methodology, we are continuing to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS–LTC–DRG. These statistical outliers were removed prior to calculating the relative weights because we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the relative weights could result in an inaccurate relative weight that does not truly reflect relative resource use among the MS–LTC–DRGs. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 2—Remove cases with a length of stay of 7 days or less. The MS–LTC–DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in a LTCH because these stays do not fully receive or benefit from treatment that is typical in a LTCH stay, and full resources are often not used in the earlier stages of admission to a LTCH. If we were to PO 00000 Frm 00321 Fmt 4701 Sfmt 4700 50173 include stays of 7 days or less in the computation of the FY 2015 MS–LTC– DRG relative weights, the value of many relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at a LTCH by including data from these very short stays. Therefore, consistent with our historical relative weight methodology, in determining the FY 2015 MS–LTC–DRG relative weights, we removed LTCH cases with a length of stay of 7 days or less. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 3—Adjust charges for the effects of SSOs. After removing cases with a length of stay of 7 days or less, we were left with cases that have a length of stay of greater than or equal to 8 days. As the next step in the calculation of the FY 2015 MS– LTC–DRG relative weights, consistent with our historical relative weight methodology, we adjusted each LTCH’s charges per discharge for those remaining cases for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). In this final rule, we made this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the MS– LTC–DRG for non-SSO cases. This has the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the MS–LTC–DRG. This process produces the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient’s length of stay been equal to the average length of stay of the MS–LTC–DRG. Counting SSO cases as full discharges with no adjustment in determining the FY 2015 MS–LTC–DRG relative weights would lower the FY 2015 MS–LTC–DRG relative weight for affected MS–LTC– DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within a MS–LTC–DRG. This would result in an ‘‘underpayment’’ for nonSSO cases and an ‘‘overpayment’’ for SSO cases. Therefore, we adjusted for SSO cases under § 412.529 in this manner because it results in more appropriate payments for all LTCH cases. (For additional information on this step of the relative weight E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50174 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) Step 4—Calculate the FY 2015 MS– LTC–DRG relative weights on an iterative basis. Consistent with our historical relative weight methodology, we calculated the FY 2015 MS–LTC–DRG relative weights using the HSRV methodology, which is an iterative process. First, for each LTCH case, we calculated a hospitalspecific relative charge value by dividing the SSO adjusted charge per discharge (see Step 3) of the LTCH case (after removing the statistical outliers (see Step 1) and LTCH cases with a length of stay of 7 days or less (see Step 2)) by the average charge per discharge for the LTCH in which the case occurred. The resulting ratio was then multiplied by the LTCH’s case-mix index to produce an adjusted hospitalspecific relative charge value for the case. An initial case-mix index value of 1.0 was used for each LTCH. For each MS–LTC–DRG, we calculated the FY 2015 relative weight by dividing the average of the adjusted hospital-specific relative charge values (from above) for the MS–LTC–DRG by the overall average hospital-specific relative charge value across all cases for all LTCHs. Using these recalculated MS–LTC–DRG relative weights, each LTCH’s average relative weight for all of its cases (that is, its case-mix) was calculated by dividing the sum of all the LTCH’s MS–LTC–DRG relative weights by its total number of cases. The LTCHs’ hospital-specific relative charge values (from above) were then multiplied by the hospital-specific case-mix indexes. The hospital-specific case-mix adjusted relative charge values were then used to calculate a new set of MS–LTC–DRG relative weights across all LTCHs. This iterative process was continued until there was convergence between the relative weights produced at adjacent steps, for example, when the maximum difference was less than 0.0001. Step 5—Determine a FY 2015 relative weight for MS–LTC–DRGs with no LTCH cases. As we stated above, we determined the FY 2015 relative weight for each MS–LTC–DRG using total Medicare allowable total charges reported in the best available LTCH claims data (that is, the March 2014 update of the FY 2013 MedPAR file for this final rule). Using these data, we identified the MS–LTC– DRGs for which there were no LTCH cases in the database, such that no patients who would have been classified to those MS–LTC–DRGs were treated in LTCHs during FY 2013 and, therefore, no charge data were available for these MS–LTC–DRGs. Therefore, in the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 process of determining the MS–LTC– DRG relative weights, we were unable to calculate relative weights for the MS– LTC–DRGs with no LTCH cases using the methodology described in Steps 1 through 4 above. However, because patients with a number of the diagnoses under these MS–LTC–DRGs may be treated at LTCHs, consistent with our historical methodology, we assigned a relative weight to each of the no-volume MS–LTC–DRGs based on clinical similarity and relative costliness (with the exception of ‘‘transplant’’ MS–LTC– DRGs and ‘‘error’’ MS–LTC–DRGs, as discussed below). (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through 43960.) In general, we determined FY 2015 relative weights for the MS–LTC–DRGs with no LTCH cases in the March 2014 update of the FY 2013 MedPAR file used in this final rule (that is, ‘‘novolume’’ MS–LTC–DRGs) by crosswalking each no-volume MS–LTC–DRG to another MS–LTC–DRG with a calculated relative weight (determined in accordance with the methodology described above). Then, the ‘‘novolume’’ MS–LTC–DRG was assigned the same relative weight (and average length of stay) of the MS–LTC–DRG to which it was cross-walked (as described in greater detail below). Of the 753 MS–LTC–DRGs for FY 2015, we identified 237 MS–LTC–DRGs for which there are no LTCH cases in the database (including the 8 ‘‘transplant’’ MS–LTC–DRGs and 2 ‘‘error’’ MS–LTC–DRGs). As stated above, we assigned relative weights for each of the 237 no-volume MS–LTC– DRGs (with the exception of the 8 ‘‘transplant’’ MS–LTC–DRGs and the 2 ‘‘error’’ MS–LTC–DRGs, which are discussed below) based on clinical similarity and relative costliness to one of the remaining 516 (753¥237= 516) MS–LTC–DRGs for which we were able to determine relative weights based on FY 2013 LTCH claims data using the steps described above. (For the remainder of this discussion, we refer to the ‘‘cross-walked’’ MS–LTC–DRGs as the MS–LTC–DRGs to which we crosswalked one of the 237 ‘‘no volume’’ MS–LTC–DRGs, with the exception of the 8 ‘‘transplant’’ MS–LTC–DRGs and the 2 ‘‘error’’ MS–LTC–DRGs, for purposes of determining a relative weight.) Then, we assigned the novolume MS–LTC–DRG the relative weight of the cross-walked MS–LTC– DRG. (As explained below in Step 6, when necessary, we made adjustments to account for nonmonotonicity.) PO 00000 Frm 00322 Fmt 4701 Sfmt 4700 For this final rule, we cross-walked the no-volume MS–LTC–DRG to an MS– LTC–DRG for which there were LTCH cases in the March 2014 update of the FY 2013 MedPAR file, and to which it was similar clinically in intensity of use of resources and relative costliness as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. We evaluated the relative costliness in determining the applicable MS–LTC–DRG to which a no-volume MS–LTC–DRG was cross-walked in order to assign an appropriate relative weight for the no-volume MS–LTC– DRGs in FY 2015. (For more details on our process for evaluating relative costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in the rare event that there would be a few LTCH cases grouped to one of the no-volume MS–LTC–DRGs in FY 2015, the relative weights assigned based on the crosswalked MS–LTC–DRGs would result in an appropriate LTCH PPS payment because the crosswalks, which are based on similar clinical similarity and relative costliness, generally require equivalent relative resource use. We then assigned the relative weight of the cross-walked MS–LTC–DRG as the relative weight for the no-volume MS–LTC–DRG such that both of these MS–LTC–DRGs (that is, the no-volume MS–LTC–DRG and the cross-walked MS–LTC–DRG) have the same relative weight for FY 2015. We note that if the cross-walked MS–LTC–DRG had 25 cases or more, its relative weight, which was calculated using the methodology described in Steps 1 through 4 above, was assigned to the no-volume MS– LTC–DRG as well. Similarly, if the MS– LTC–DRG to which the no-volume MS– LTC–DRG was cross-walked had 24 or less cases and, therefore, was designated to one of the low-volume quintiles for purposes of determining the relative weights, we assigned the relative weight of the applicable low-volume quintile to the no-volume MS–LTC–DRG such that both of these MS–LTC–DRGs (that is, the no-volume MS–LTC–DRG and the cross-walked MS–LTC–DRG) have the same relative weight for FY 2015. (As we noted above, in the infrequent case where nonmonotonicity involving a novolume MS–LTC–DRG resulted, additional adjustments as described in Step 6 were required in order to maintain monotonically increasing relative weights.) For this final rule, a list of the novolume MS–LTC–DRGs and the MS– LTC–DRGs to which each was cross- E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations walked (that is, the cross-walked MS– LTC–DRGs) for FY 2015 is shown in Table 13B, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. To illustrate this methodology for determining the relative weights for the FY 2015 MS–LTC–DRGs with no LTCH cases, we are providing the following example, which refers to the no-volume MS–LTC–DRGs crosswalk information for FY 2015 provided in Table 13B. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Example: There were no cases in the FY 2013 MedPAR file used for this final rule for MS–LTC–DRG 61 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We determined that MS–LTC–DRG 70 (Nonspecific Cerebrovascular Disorders with MCC) was similar clinically and based on resource use to MS–LTC–DRG 61. Therefore, we assigned the same relative weight of MS– LTC–DRG 70 of 0.8632 for FY 2015 to MS– LTC–DRG 61 (obtained from Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet). Again, we note that, as this system is dynamic, it is entirely possible that the number of MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify no-volume MS–LTC–DRGs and to determine the relative weights in this final rule. Furthermore, for FY 2015, consistent with our historical relative weight methodology, we are establishing a relative weight of 0.0000 for the following transplant MS–LTC–DRGs: Heart Transplant or Implant of Heart Assist System with MCC (MS–LTC–DRG 1); Heart Transplant or Implant of Heart Assist System without MCC (MS–LTC– DRG 2); Liver Transplant with MCC or Intestinal Transplant (MS–LTC–DRG 5); Liver Transplant without MCC (MS– LTC–DRG 6); Lung Transplant (MS– LTC–DRG 7); Simultaneous Pancreas/ Kidney Transplant (MS–LTC–DRG 8); Pancreas Transplant (MS–LTC–DRG 10); and Kidney Transplant (MS–LTC–DRG 652). This is because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. At the present time, we include these eight transplant MS– LTC–DRGs in the GROUPER program for administrative purposes only. Because we use the same GROUPER program for LTCHs as is used under the IPPS, removing these MS–LTC–DRGs would be administratively burdensome. (For additional information regarding our treatment of transplant MS–LTC– DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Step 6—Adjust the FY 2015 MS–LTC– DRG relative weights to account for nonmonotonically increasing relative weights. As discussed earlier in this section, the MS–DRGs contain base DRGs that have been subdivided into one, two, or three severity of illness levels. Where there are three severity levels, the most severe level has at least one secondary diagnosis code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one secondary diagnosis code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as ‘‘without CC/MCC.’’ When data do not support the creation of three severity levels, the base MS–DRG is subdivided into either two levels or the base MS–DRG is not subdivided. The two-level subdivisions could consist of the MS–DRG with CC/MCC and the MS–DRG without CC/MCC. Alternatively, the other type of twolevel subdivision may consist of the MS–DRG with MCC and the MS–DRG without MCC. In those base MS–LTC–DRGs that are split into either two or three severity levels, cases classified into the ‘‘without CC/MCC’’ MS–LTC–DRG are expected to have a lower resource use (and lower costs) than the ‘‘with CC/MCC’’ MS– LTC–DRG (in the case of a two-level split) or both the ‘‘with CC’’ and the ‘‘with MCC’’ MS–LTC–DRGs (in the case of a three-level split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the relative weights decrease as severity increases (that is, if within a base MS–LTC–DRG, an MS– LTC–DRG with CC has a higher relative weight than one with MCC, or the MS– LTC–DRG ‘‘without CC/MCC’’ has a higher relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base MS–LTC–DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base MS–LTC–DRG (which are generally expected to have lower resource use and costs). Therefore, in determining the FY 2015 MS–LTC–DRG relative weights in this final rule, consistent with our historical methodology, we combined PO 00000 Frm 00323 Fmt 4701 Sfmt 4700 50175 MS–LTC–DRG severity levels within a base MS–LTC–DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity was maintained. For a comprehensive description of our existing methodology to adjust for nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any adjustments for nonmonotonicity that were made in determining the FY 2015 MS–LTC–DRG relative weights in this final rule by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. Step 7—Calculate the FY 2015 budget neutrality factor. In accordance with the regulations at § 412.517(b) (in conjunction with § 412.503), the annual update to the MS–LTC–DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS– LTC–DRG classification and relative weight changes. (For a detailed discussion on the establishment of the budget neutrality requirement for the annual update of the MS–LTC–DRG classifications and relative weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 26881 and 26882).) The MS–LTC–DRG classifications and relative weights are updated annually based on the most recent available LTCH claims data to reflect changes in relative LTCH resource use (§ 412.517(a) in conjunction with § 412.503). Under the budget neutrality requirement at § 412.517(b), for each annual update, the MS–LTC–DRG relative weights are uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, we are updating the MS–LTC–DRG classifications and relative weights for FY 2015 based on the most recent available LTCH data, and applying a budget neutrality adjustment in determining the FY 2015 MS–LTC–DRG relative weights. To ensure budget neutrality in the update to the MS–LTC–DRG classifications and relative weights under § 412.517(b), we are continuing to use our established two-step budget neutrality methodology. As discussed previously in this section, this approach is consistent with our proposals regarding the continued use of our existing methodology to calculate the FY 2015 budget neutrality factor for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50176 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations FY 2015 MS–LTC–DRG relative weights as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28183 through 28187), which we are finalizing without modification after consideration of public comments we received in this final rule. In this final rule, in the first step of our MS–LTC–DRG budget neutrality methodology, for FY 2015, we calculated and applied a normalization factor to the recalibrated relative weights (the result of Steps 1 through 6 above) to ensure that estimated payments were not affected by changes in the composition of case types or the changes to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the MS–LTC–DRG relative weights (that is, the process itself) neither increases nor decreases the average CMI. To calculate the normalization factor for FY 2015 (the first step of our budget neutrality methodology), we used the following three steps: (1.a.) we used the most recent available LTCH claims data (FY 2013) and grouped them using the FY 2015 GROUPER (Version 32.0) and the recalibrated FY 2015 MS–LTC–DRG relative weights (determined in Steps 1 through 6 of the Steps for Determining the FY 2015 MS–LTC–DRG Relative Weights above) to calculate the average CMI; (1.b.) we grouped the same LTCH claims data (FY 2013) using the FY 2014 GROUPER (Version 31.0) and FY 2014 MS–LTC–DRG relative weights and calculated the average CMI; and (1.c.) we computed the ratio of these average CMIs by dividing the average CMI for FY 2014 (determined in Step 1.b.) by the average CMI for FY 2015 (determined in Step 1.a.). In determining the MS–LTC– DRG relative weights for FY 2015, each recalibrated MS–LTC–DRG relative weight was multiplied by 1.12464 (determined in Step 1.c.) in the first step of the budget neutrality methodology, which produced ‘‘normalized relative weights.’’ In the second step of our MS–LTC– DRG budget neutrality methodology, we determined a budget neutrality factor to ensure that estimated aggregate LTCH PPS payments (based on the most recent available LTCH claims data) after reclassification and recalibration (that is, the FY 2015 MS–LTC–DRG classifications and relative weights) are equal to estimated aggregate LTCH PPS payments before reclassification and recalibration (that is, the FY 2014 MS– LTC–DRG classifications and relative weights). Accordingly, consistent with our existing methodology, we used FY 2013 discharge data to simulate payments and compared estimated aggregate LTCH PPS payments using the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 FY 2014 MS–LTC–DRGs and relative weights to estimate aggregate LTCH PPS payments using the FY 2015 MS–LTC– DRGs and relative weights. Specifically, for this final rule, as discussed previously in section VII.B.3.c. of this preamble, we used LTCH claims data from the March 2014 update of the FY 2013 MedPAR file, as these are the best available data at this time. For this final rule, we determined the FY 2015 budget neutrality adjustment factor using the following three steps: (2.a.) we simulated estimated total LTCH PPS payments using the normalized relative weights for FY 2015 and GROUPER Version 32.0 (as described above); (2.b.) we simulated estimated total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY 2014 MS–LTC–DRG relative weights in Table 11 of the Addendum to the FY 2014 IPPS/LTCH PPS final rule available on the Internet (78 FR 51002); and (2.c.) we calculated the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY 2014 MS–LTC–DRG relative weights (determined in Step 2.b.) by the estimated total LTCH PPS payments using the FY 2015 GROUPER (Version 32.0) and the normalized MS–LTC–DRG relative weights for FY 2015 (determined in Step 2.a.). In determining the FY 2015 MS–LTC–DRG relative weights, each normalized relative weight was multiplied by a budget neutrality factor of 0.9956326 (determined in Step 2.c.) in the second step of the budget neutrality methodology to determine the budget neutral FY 2015 relative weight for each MS–LTC–DRG. Accordingly, in determining the FY 2015 MS–LTC–DRG relative weights in this final rule, consistent with our existing methodology, we applied a normalization factor of 1.12464 and a budget neutrality factor of 0.9956326 (computed as described above). Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, lists the MS– LTC–DRGs and their respective relative weights, geometric mean length of stay, five-sixths of the geometric mean length of stay (used to identify SSO cases under § 412.529(a)), and the ‘‘IPPS Comparable Thresholds’’ (used in determining SSO payments under § 412.529(c)(3)), for FY 2015 (and reflect both the normalization factor of 1.12464 and the budget neutrality factor of 0.9956326). PO 00000 Frm 00324 Fmt 4701 Sfmt 4700 C. LTCH PPS Payment Rates for FY 2015 1. Overview of Development of the LTCH Payment Rates The basic methodology for determining LTCH PPS Federal prospective payment rates is set forth at § 412.515 through § 412.536. In this section, we discuss the factors that we are using to update the LTCH PPS standard Federal rate for FY 2015, that is, effective for LTCH discharges occurring on or after October 1, 2014 through September 30, 2015. For further details on the development of the FY 2003 standard Federal rate when the LTCH PPS was initially implemented, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent updates to the LTCH PPS standard Federal rate as implemented under § 412.523(c)(3), we refer readers to the following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY 2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72 FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800 through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021 through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through 50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773); FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481); and FY 2014 IPPS/LTCH PPS final rule (78 FR 50760 through 50765). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28187 through 28190), we presented our proposals related to the update to the LTCH PPS standard Federal rate for FY 2015, which included the proposed annual market basket update to the LTCH PPS standard Federal rate. Consistent with our historical practice of using the best data available, we also proposed to use more recent data, if available, to determine the FY 2015 annual market basket update to the LTCH PPS standard Federal rate in the final rule. We did not receive any public comments in response to these proposals and, therefore, are adopting the proposals as final without modification in this final rule, using the most recent available data. The update to the LTCH PPS standard Federal rate for FY 2015 is presented in section V.A. of the Addendum to this final rule. The components of the annual market basket update to the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations LTCH PPS standard Federal rate for FY 2015 are discussed below, including the reduction to the annual update for LTCHs that fail to submit quality reporting data for fiscal year FY 2015 as required by the statute (as discussed in section VII.C.2.c. of the preamble of this final rule). Furthermore, as discussed in section VII.C.3. of the preamble of this final rule, for FY 2015, in addition to the update factor, under the final year of the 3-year phase-in under the current regulations at § 412.523(d)(3), we are making a one-time prospective adjustment to the standard Federal rate for FY 2015 so that the effect of any significant difference between the data used in the original computations of budget neutrality for FY 2003 and more recent data to determine budget neutrality for FY 2003 is not perpetuated in the prospective payment rates for future years. In addition, as discussed in section V.A. of the Addendum of this final rule, we are making an adjustment to the standard Federal rate to account for the estimated effect of the changes to the area wage level adjustment for FY 2015 on estimated aggregate LTCH PPS payments, in accordance with § 412.523(d)(4). (We refer readers to the discussion of the reduction to the annual update for LTCHs that fail to submit quality reporting data under section VII.C.2.c. of the preamble of this final rule, the application of the onetime prospective adjustment under the final year of the 3-year phase-in under section VII.C.3. of this preamble, and the budget neutrality adjustment for changes in the area wage levels under section V.A. of the Addendum of this final rule.) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 2. FY 2015 LTCH PPS Annual Market Basket Update a. Overview Historically, the Medicare program has used a market basket to account for price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we adopted the newly created FY 2009based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. For additional details on the historical development of the market basket used under the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53468) and this preamble. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Section 3401(c) of the Affordable Care Act provides for certain adjustments to any annual update to the standard Federal rate and refers to the timeframes associated with such adjustments as a ‘‘rate year’’ (which are discussed in more detail in section VII.C.2.b. of the preamble of this final rule.) We note that because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010, to conform with the standard definition of the Federal fiscal year (October 1 through September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the language of sections 3004(a) 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years. b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year through 2019, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the ‘‘other adjustment’’ specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other PO 00000 Frm 00325 Fmt 4701 Sfmt 4700 50177 annual period). Under our methodology, the end of the 10-year moving average of changes in the MFP coincides with the end of the appropriate FY update period. In addition, the MFP adjustment that is applied in determining any annual update to the LTCH PPS standard Federal rate is the same adjustment that is required to be applied in determining the applicable percentage increase under the IPPS under section 1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year. The MFP adjustment is derived using a projection of MFP that is currently produced by IHS Global Insight, Inc. (For additional details on the development of the MFP adjustment and its application under the LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51691 through 51692 and 51770 through 51771).) For FY 2015, as we proposed, we are continuing to use our methodology for calculating and applying the MFP adjustment to determine the annual update to the LTCH PPS standard Federal rate for FY 2015. (For details on the development of the MFP adjustment, including our finalized methodology for calculating and applying the MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692).) c. Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background In accordance with section 1886(m)(5) of the Act, as added by section 3004(a) of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As noted above, although the language of section 3004(a) of the Affordable Care Act refers to years 2011 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) Under the LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for FY 2014 and each subsequent year, in the case of an LTCH that does not submit quality reporting data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a year, any annual update to a standard Federal rate for discharges for E:\FR\FM\22AUR2.SGM 22AUR2 50178 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV the hospital during the year, and after application of section 1886(m)(3) of the Act, shall be reduced by 2.0 percentage points. Section 1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 percentage points reduction may result in an annual update that is less than 0.0 for a year, and may result in LTCH PPS payment rates for a year being less than such LTCH PPS payment rates for the preceding year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the 2.0 percentage points reduction is applied in a noncumulative manner, such that any reduction made under section 1886(m)(5)(A) of the Act shall apply only with respect to the year involved, and shall not be taken into account in computing the LTCH PPS payment amount for a subsequent year. For additional information on the history of the LTCHQR Program, including the statutory authority and the selected measures, we refer readers to section IX.C. of the preamble of this final rule. 2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate under the LTCHQR Program Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014 and subsequent fiscal years, for LTCHs that do not submit quality reporting data under the LTCHQR Program with respect to such a fiscal year, any annual update to a standard Federal rate for discharges for the LTCH during the fiscal year and after application of the market basket update adjustments required by section 1886(m)(3) of the Act, is further reduced by 2.0 percentage points. That is, in establishing an update to the LTCH PPS standard Federal rate for FY 2014 and subsequent fiscal years, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is further reduced by 2.0 percentage points for LTCHs that fail to submit quality reporting data under the LTCHQR Program. The reduction in the annual update to the LTCH PPS standard Federal rate for failure to report quality data under the LTCHQR Program for FY 2014 and subsequent fiscal years is codified under § 412.523(c)(4) of the regulations. Specifically, consistent with section 1886(m)(5)(A)(i) of the Act, under § 412.523(c)(4)(i), for an LTCH that does not submit quality reporting data in the form and manner and at the time specified by the Secretary under the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 LTCHQR Program, the annual update to the standard Federal rate under § 412.523(c)(3) is further reduced by 2.0 percentage points. In addition, consistent with section 1886(m)(5)(A)(ii) of the Act, § 412.523(c)(4)(ii) specifies that any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) will apply only to the fiscal year involved and will not be taken into account in computing the annual update to the standard Federal rate for a subsequent fiscal year. Lastly, consistent with section 1886(m)(5)(B) of the Act, under § 412.523(c)(4)(iii), the application of any reduction of the annual update to the standard Federal rate under § 412.523(c)(4)(i) may result in an annual update that is less than 0.0 percent for a fiscal year, and may result in payment rates for a fiscal year that would be less than such payment rates for the preceding rate year. We discuss the application of the 2.0 percentage point reduction under § 412.523(c)(4)(i) in our discussion of the annual market basket update to the LTCH PPS standard Federal rate for FY 2015 below in section VII.C.2.e. of the preamble of this final rule. d. Market Basket Under the LTCH PPS for FY 2015 Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468), we adopted a newly created FY 2009-based LTCH-specific market basket for use under the LTCH PPS beginning in FY 2013. The FY 2009-based LTCH-specific market basket is based solely on the Medicare cost report data submitted by LTCHs and, therefore, specifically reflects the cost structures of only LTCHs. For additional details on the development of the FY 2009-based LTCH-specific market basket, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). For FY 2015, as we proposed, we are continuing to use the FY 2009-based LTCH-specific market basket to update the LTCH PPS for FY 2015. We continue to believe that the FY 2009-based LTCHspecific market basket appropriately reflects the cost structure of LTCHs for the reasons discussed when we adopted the FY 2009-based LTCH-specific market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476). e. Annual Market Basket Update for LTCHs for FY 2015 Consistent with our historical practice and as we proposed, we estimate the market basket update and the MFP adjustment based on IGI’s forecast using PO 00000 Frm 00326 Fmt 4701 Sfmt 4700 the most recent available data. Based on IGI’s second quarter 2014 forecast, the FY 2015 full market basket estimate for the LTCH PPS using the FY 2009-based LTCH-specific market basket is 2.9 percent. Using our established methodology for determining the MFP adjustment, the current estimate of the MFP adjustment for FY 2015 based on IGI’s second quarter 2014 forecast is 0.5 percent, as discussed in section IV.B. of the preamble of this final rule. In addition, consistent with our historical practice of using the best available data, as we proposed, we used the most recent data available to estimate the market basket update and the MFP adjustment for FY 2015 in this final rule. For FY 2015, section 1886(m)(3)(A)(i) of the Act requires that any annual update to the standard Federal rate be reduced by the productivity adjustment (‘‘the MFP adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are reducing the full FY 2015 market basket update by the FY 2015 MFP adjustment. To determine the market basket update for LTCHs for FY 2015, as reduced by the MFP adjustment, consistent with our established methodology, as we proposed, we subtracted the FY 2015 MFP adjustment from the FY 2015 market basket update. Furthermore, sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act requires that any annual update to the standard Federal rate for FY 2015 be reduced by the ‘‘other adjustment’’ described in paragraph (4), which is 0.2 percentage point for FY 2015. Therefore, following application of the productivity adjustment, as we proposed, we are reducing the adjusted market basket update (that is, the full market basket increase less the MFP adjustment) by the ‘‘other adjustment’’ specified by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on our established methodology for adjusting the market basket increase by the MFP and the ‘‘other adjustment’’ required by the statute, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).) As discussed previously in section VII.C.2.c. of the preamble of this final rule, for FY 2015, section 1886(m)(5) of the Act requires that for LTCHs that do not submit quality reporting data under the LTCHQR Program, any annual update to a standard Federal rate, after application of the adjustments required by section 1886(m)(3) of the Act, is further reduced by 2.0 percentage points. Therefore, the update to the LTCH PPS standard Federal rate for FY 2015 for LTCHs that fail to submit E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations quality reporting data under the LTCHQR Program, the full LTCH PPS market basket increase estimate, subject to an adjustment based on changes in economy-wide productivity (‘‘the MFP adjustment’’) as required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, will also be further reduced by 2.0 percentage points. In this final rule, in accordance with the statute, we are reducing the FY 2015 full market basket estimate of 2.9 percent (based on IGI’s second quarter 2014 forecast of the FY 2009-based LTCH-specific market basket) by the FY 2015 MFP adjustment (that is, the 10year moving average of MFP for the period ending FY 2015, as described in section IV.B. of the preamble of this final rule) of 0.5 percentage point (based on IGI’s second quarter 2014 forecast). Following application of the productivity adjustment, the adjusted market basket update of 2.4 percent (2.9 percent minus 0.5 percentage point) is then reduced by 0.2 percentage point, as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act. Therefore, in this final rule, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we are establishing an annual market basket update under the LTCH PPS for FY 2015 of 2.2 percent (that is, the most recent estimate of the LTCH PPS market basket update of 2.9 percent, less the MFP adjustment of 0.5 percentage point, and less the 0.2 percentage point required under section 1886(m)(4)(E) of the Act), provided the LTCH submits quality reporting data in accordance with section 1886(m)(5) of the Act. Accordingly, consistent with our proposal, we are revising § 412.523(c)(3) by adding a new paragraph (xi), which specifies that the standard Federal rate for FY 2015 is the standard Federal rate for the previous LTCH PPS year updated by 2.2 percent, and as further adjusted, as appropriate, as described in § 412.523(d). For LTCHs that fail to submit quality reporting data under the LTCHQR Program, under § 412.523(c)(3)(xi) in conjunction with § 412.523(c)(4), we are further reducing the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points in accordance with section 1886(m)(5) of the Act. Accordingly, consistent with our proposal, we are establishing an annual update to the LTCH PPS standard Federal rate of 0.2 percent (that is, 2.2 percent minus 2.0 percentage points) for FY 2015 for LTCHs that fail to submit quality VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reporting data under the LTCHQR Program. As stated above, consistent with our historical practice of using the best available data, we used the most recent data available to establish an annual update to the LTCH PPS standard Federal rate for FY 2015 under § 412.523(c)(3)(xi) in this final rule. (We note that, we also are adjusting the FY 2015 standard Federal rate by applying a one-time prospective adjustment under the final year of the 3-year phasein under § 412.523(d)(3) (discussed in section VII.C.3. of the preamble of this final rule) and by an area wage level budget neutrality factor in accordance with § 412.523(d)(4) (as discussed in section V.B.5. of the Addendum of this final rule).) 3. Adjustment for the Final Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate under § 412.523(d)(3) We set forth regulations implementing the LTCH PPS, based upon the broad authority granted to the Secretary, under section 123 of the BBRA (as amended by section 307(b) of the BIPA). Section 123(a)(1) of the BBRA required that the system ‘‘maintain budget neutrality’’ in the August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget neutrality requirement means that estimated aggregate payments under the LTCH PPS for FY 2003 would be equal to the estimated aggregate payments that would have been made if the LTCH PPS were not implemented for FY 2003. The methodology for determining the LTCH PPS standard Federal rate for FY 2003 that would ‘‘maintain budget neutrality’’ is described in considerable detail in the August 30, 2002 final rule (67 FR 56027 through 56037). Our methodology for estimating payments for the purposes of budget neutrality calculations used the best available data, and necessarily reflected several assumptions (for example, costs, inflation factors, and intensity of services provided) in estimating aggregate payments that would have been made if the LTCH PPS had not been implemented (without accounting for certain statutory provisions that affect the level of payments to LTCHs in years prior to the implementation of the LTCH PPS, as required by the statute). In the August 30, 2002 final rule, we also stated our intentions to monitor LTCH PPS payment data to evaluate whether later data varied significantly from the data available at the time of the original budget neutrality calculations (for example, data related to inflation factors, intensity of services provided, or behavioral response to the implementation of the LTCH PPS). To PO 00000 Frm 00327 Fmt 4701 Sfmt 4700 50179 the extent the later data significantly differed from the data employed in the original calculations, the aggregate amount of payments during FY 2003 based on later data may be higher or lower than the estimates upon which the budget neutrality calculations were based. Therefore, in that same final rule, under the broad authority conferred upon the Secretary in developing the LTCH PPS, including the authority for establishing appropriate adjustments, under section 123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, we provided in § 412.523(d)(3) of the regulations for the possibility of making a one-time prospective adjustment to the LTCH PPS rates, so that the effect of any significant difference between actual payments and estimated payments for the first year of the LTCH PPS would not be perpetuated in the LTCH PPS rates for future years. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53488) for a complete discussion of the history of the development of the onetime prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized our policy to make a one-time prospective adjustment to the standard Federal rate so that it will be permanently reduced by approximately 3.75 percent to account for the estimated difference between projected aggregate FY 2003 LTCH PPS payments and the projected aggregate payments that would have been made in FY 2003 under the TEFRA payment system if the LTCH PPS had not been implemented. Specifically, using the methodology we adopted in that same final rule, we determined that permanently applying a factor of 0.9625 (that is, a permanent reduction of approximately 3.75 percent) to the standard Federal rate is necessary to ensure estimated total FY 2003 LTCH PPS payments equal estimated total FY 2003 TEFRA payments consistent with our stated policy goal of the one-time prospective adjustment under § 412.523(d)(3) (that is, to ensure that the difference between estimated total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA payments is not perpetuated in the LTCH PPS payment rates in future years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53487 through 53502) for a complete discussion of the evaluation approach, methodology, and determination of the one-time prospective adjustment to the LTCH PPS standard Federal rate at § 412.523(d)(3).) E:\FR\FM\22AUR2.SGM 22AUR2 50180 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53501 through 53502), under § 412.523(d)(3), we established a policy to phase-in the permanent adjustment of 0.9625 to the standard Federal rate over a 3-year period. To achieve a permanent adjustment of 0.9625, under the phasein of this adjustment, in that same final rule, we explained that we will apply a factor of 0.98734 to the standard Federal rate in each year of the 3-year phase-in, that is, in FY 2013 (which does not apply to payments for discharges occurring on or after October 1, 2012, and on or before December 28, 2012, consistent with current law), FY 2014, and FY 2015. By applying a permanent factor of 0.98734 to the standard Federal rate in each year for FYs 2013, 2014, and 2015, we will completely account for the entire adjustment by having applied a cumulative factor of 0.9625 (calculated as 0.98734 × 0.98734 × 0.98734 = 0.9625) to the standard Federal rate. Accordingly, under § 412.523(d)(3), we applied a permanent factor of 0.98734 to the standard Federal rate in both FY 2013 and FY 2014 under the established 3-year phase-in of the one-time prospective adjustment. In this final rule, for FY 2015, as we proposed, we are applying a permanent one-time prospective adjustment factor of 0.98734 to the standard Federal rate for FY 2015 under the last year of the 3-year phase-in of the one-time prospective adjustment, in accordance with the existing regulations under § 412.523(d)(3). 4. Summary of Other Public Comments Received on the Proposed LTCH PPS Payment Rates for FY 2015 We received a number of public comments that were not within the scope of the proposed rule, but we appreciate the commenters for providing that feedback. We also received a few public comments on issues related to the proposed LTCH PPS payment rates for FY 2015, but these issues were not specifically addressed by the proposals and related discussion presented in the FY 2015 IPPS/LTCH PPS proposed rule. Comment: One commenter requested that CMS provide additional payment for end-stage renal disease (ESRD) patients under the same circumstances as under the IPPS under the LTCH PPS, noting that section 1881(b) of the Act does not limit the adjustment to subsection (d) hospitals. The commenter indicated that included information and analysis previously provided to CMS supports their request for this additional payment amount. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: Despite the fact that this comment is beyond the scope of the proposed rule, we note that we have responded to the issue that this commenter raised in a detailed response in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50767). As discussed in that final rule, based on an our analysis of FY 2012 LTCH PPS claims data, we continue to believe that the costs of treating ESRD patients in LTCHs are adequately reflected in data used to determine the MS–LTC–DRG relative weights for non-dialysis MS–LTC– DRGs, and that the additional resources associated with renal dialysis treatments are include in the LTCH PPS payments. Therefore, we are not adopting the commenters’ request to provide for an additional payment for ESRD patients under the LTCH PPS. D. Revision of LTCH PPS Geographic Classifications 1. Background As discussed in the August 30, 2002 LTCH PPS final rule, which implemented the LTCH PPS (67 FR 56015 through 56019), in establishing an adjustment for area wage levels, the labor-related portion of an LTCH’s standard Federal payment rate is adjusted by using an appropriate wage index based on the labor market area in which the LTCH is located. Specifically, the application of the LTCH PPS area wage-level adjustment, which is codified under existing § 412.525(c) of the regulations, is based on the location of the LTCH—either in an ‘‘urban’’ area or a ‘‘rural’’ area. Currently, under the LTCH PPS, as codified under § 412.503 of the regulations, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area (which includes a Metropolitan division, where applicable) as defined by the Executive OMB, and a ‘‘rural area’’ is defined as any area outside of an urban area. In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), we revised § 412.525(c) to update the labor market area definitions used under the LTCH PPS, effective for discharges occurring on or after July 1, 2005, based on the Executive OMB’s Core-Based Statistical Area (CBSA) designations (‘‘CBSA designations’’), which are based on 2000 Census data. We made this revision because we believed that the CBSA designations (geographic classifications) would ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We noted that these PO 00000 Frm 00328 Fmt 4701 Sfmt 4700 were the same CBSA designations implemented for acute care hospitals under the IPPS, which were codified under § 412.64(b) of the regulations, beginning in FY 2005. (For a further discussion of the CBSA-based labor market area designations currently used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182 through 24191).) We have generally updated the LTCH PPS CBSA designations annually since they were adopted for RY 2006 when updates from OMB were available (73 FR 26812 through 26814, 74 FR 44023 through 44204, and 75 FR 50444 through 50445). In OMB Bulletin No. 10–2, issued on December 1, 2009, OMB announced that the CBSA changes in that bulletin would be the final update prior to the 2010 Census of Population and Housing. We adopted those changes under the LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444 through 50445), effective October 1, 2010. We continued to use these CBSA designations for FYs 2012 and 2013 (76 FR 51808 and 77 FR 53710, respectively). New OMB labor market area delineations (which we refer to in this section as ‘‘new OMB delineations’’) based on 2010 standards and the 2010 Decennial Census data were announced by OMB on February 28, 2013. OMB issued Bulletin No. 13– 01, which announced revisions to the delineation of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the uses of the delineation of these labor market areas. (For a copy of this bulletin, we refer readers to the following Web site: https://www.whitehouse.gov/sites/ default/files/omb/bulletins/2013/b-1301.pdf. This bulletin specifically provides the delineations of all Metropolitan Statistical Areas (MSAs), Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published in the Federal Register on June 28, 2010 (75 FR 37246 through 37252) and 2010 Census data. (We note that, as discussed in section III.B. of the preamble of this final rule, consistent with the terminology used in the OMB Bulletin No. 13–01 and the standards published in the Federal Register on June 28, 2010, when referencing the new OMB geographic boundaries of Metropolitan Statistical Areas (MSAs) based on 2010 standards, we are using the term ‘‘new OMB delineations’’ rather than the term ‘‘CBSA-based labor market area definitions’’ that we have used in the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations past to refer to OMB geographic boundaries of statistical areas (75 FR 37249).) As discussed in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50994 through 50995), in order to implement these changes for the LTCH PPS (as in the case of the IPPS), it is necessary to identify the new OMB delineations for each county and hospital in the country. While the revisions OMB published on February 28, 2013, are not as sweeping as the changes OMB announced in 2003, the February 28, 2013 bulletin does contain a number of significant changes. For example, under the new OMB delineations, there are new CBSAs, urban counties that have become rural, rural counties that have become urban, and existing CBSAs that have been split apart and moved to other CBSAs. Because the update was not issued until February 28, 2013, and it was necessary for the changes made by the update and their ramifications to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 rulemaking cycle. That is, by the time the update was issued, the FY 2014 IPPS/LTCH PPS proposed rule was in the advanced stages of development, and the proposed FY 2014 LTCH PPS wage indexes based on the CBSA designations that are currently used under the LTCH PPS had been developed. Therefore, we did not propose to use the changes to the LTCH PPS CBSA designations for FY 2014 based on the new OMB delineations. Rather, to allow for sufficient time to assess the new changes and their ramifications, we stated that we intended to propose the adoption of the new OMB delineations and the corresponding changes to the wage index based on those delineations under the LTCH PPS for FY 2015 through notice and comment rulemaking, consistent with the approach used under the IPPS (78 FR 50994 through 50995). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28191 through 28194), we proposed to adopt the new OMB delineations announced in the February 28, 2013 OMB Bulletin No. 13–01, effective for FY 2015 under the LTCH PPS. As discussed below, after consideration of the public comments we received, in this final rule, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are adopting the new OMB delineations announced in the February 28, 2013 OMB Bulletin No. 13–01, effective for FY 2015 under the LTCH PPS as proposed without modification. We note that this policy consistent with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the approach being adopted under the IPPS as discussed in section III.B. of the preamble of this final rule. 2. Use of the New OMB Labor Market Area Delineations (‘‘New OMB Delineations’’) Historically, Medicare prospective payment systems have utilized labor market area definitions developed by the OMB. As discussed above, the CBSA designations currently used under the LTCH PPS are based on the most recent market area definitions issued by the OMB. The OMB reviews its market area definitions/delineations based on data from the preceding decennial census to reflect more recent population changes. As discussed above and in section III.B. of the preamble of this final rule, the new OMB delineations are based on the OMB’s latest market area delineations based on the 2010 Decennial Census data. Because we believe that the OMB’s latest labor market area delineations are the best available data that reflect the local economies and wage levels of the areas in which hospitals are currently located, as we proposed, we are adopting the new OMB delineations based on the 2010 Decennial Census data under the LTCH PPS, beginning in FY 2015, for the reasons discussed below (which are consistent with the IPPS policy discussed in section III.B. of the preamble of this final rule). When we implemented the wage index adjustment under § 412.525(c) for the LTCH PPS, and updated the LTCH PPS labor market area definitions based on the CBSA designations beginning in RY 2006, we explained that the LTCH PPS wage index adjustment was intended to reflect the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56016) and the RY 2006 LTCH PPS final rule (70 FR 24184).) Because we believe that the new OMB delineations based on 2010 Decennial Census data (reflect the most recent available geographic classifications (market area delineations), as we proposed, we are revising the geographic classifications used under the LTCH PPS based on these new OMB delineations to ensure that the LTCH PPS wage index adjustment continues to most appropriately account for and reflect the relative hospital wage and wage-related costs in the geographic area of the hospital as compared to the national average hospital wage and wage-related costs. Specifically, as we proposed, we are adopting the new OMB delineations (as discussed in greater detail below), effective for LTCH PO 00000 Frm 00329 Fmt 4701 Sfmt 4700 50181 PPS discharges occurring on or after October 1, 2014 (that is, effective for FY 2015). As we noted in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28191), because the application of the LTCH PPS area wage-level adjustment under existing § 412.525(c) is made on the basis of the location of the LTCH— either in an ‘‘urban’’ area or a ‘‘rural’’ area as those terms are defined under existing § 412.503. Under § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area as defined by the Executive OMB. A ‘‘rural area’’ is defined as any area outside of an urban area. Therefore, we did not make any changes to the existing regulations under this policy. As discussed in section III.B. of this preamble, while CMS and other stakeholders have explored potential alternatives to the current CBSA-based labor market system, no consensus has been achieved regarding how best to implement a replacement system. While we recognize that MSAs are not designed specifically to define labor market areas, we believe that they do represent a useful proxy for this purpose. Consistent with the approach taken for the IPPS, we have used MSAs to define labor market areas for purposes of Medicare wage indices under the LTCH PPS since its implementation in FY 2003. MSAs also are used to define labor market areas for purposes of the wage index for many of the other Medicare payment systems (for example, the IRF PPS, the SNF PPS, the HHA PPS, the OPPS, and the IPF PPS). (We refer readers to the RY 2006 LTCH PPS final rule (70 FR 24184).) Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28191 through 28194), under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we proposed to adopt the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for FY 2015 under the LTCH PPS. In addition, we proposed to use the new OMB delineations to calculate area wage indexes in a manner that is consistent with the CBSA-based methodologies finalized in the RY 2006 LTCH PPS final rule, as refined in subsequent rulemaking. We also proposed to implement a transitional wage index policy (as discussed in more detail below) for LTCHs that would experience a negative payment impact due to the adoption of the new OMB delineations. This proposed policy, including the transitional wage index policy, is consistent with the policy proposed under the IPPS for FY 2015, as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50182 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations discussed in section III.B. of this preamble. Comment: A few commenters supported the proposal to adopt the new OMB delineations and to use these new OMB delineations to calculate area wage indexes effective for FY 2015 under the LTCH PPS. We did not receive any public comments opposing the proposed adoption of the new OMB delineations under the LTCH PPS. We also note that we did not receive any public comments that specifically addressed the details of our proposals with regard to the adoption of the new OMB labor market area delineations relating to Micropolitan Statistical Areas, urban counties that would become rural, rural counties that would become urban, or urban counties that moved to a different urban CBSA. (We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28192 through 28193) for details regarding these proposals.) A few commenters also commented on the proposed transitional wage index policy, which we discuss below in section VII.D.2.e. of this preamble. Response: We appreciate the commenters’ support for the proposal to adopt the new OMB delineations under the LTCH PPS, as we believe that the new OMB delineations based on 2010 Decennial Census data reflect the most recent data available to define geographic classifications (market area delineations) for LTCHs and ensure that the LTCH PPS wage index adjustment continues to most appropriately account for and reflect the relative hospital wage and wage-related costs in the geographic area of the hospital as compared to the national average hospital wage and wage-related costs. Therefore, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, in this final rule, we are adopting the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for FY 2015 under the LTCH PPS, as we proposed without modification. We also are using these new OMB delineations to calculate area wage indexes in a manner that is consistent with the CBSA-based methodologies finalized in the RY 2006 LTCH PPS final rule, as refined in subsequent rulemaking. In addition, as discussed below in section VII.D.2.e. of this preamble, after consideration of the public comments we received, as we proposed, we are implementing a budget neutral transitional wage index policy for LTCHs that will experience a negative payment impact due to the use of the new OMB delineations. This policy, including the transitional wage index policy, is consistent with the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 policy being adopted under the IPPS presented in section III.B. of the preamble of this final rule. The discussion below focuses on issues related to the use of the new OMB delineations to define labor market areas for purposes of the wage index adjustment under the LTCH PPS, and as we explained in the proposed rule, is consistent with what is being adopted under the IPPS. a. Micropolitan Statistical Areas When we adopted the CBSA designations under the LTCH PPS in RY 2006, we discussed CMS’ consideration of whether to use Micropolitan Statistical Areas to define the labor market areas for the purpose of the LTCH PPS wage index. OMB defines a ‘‘Micropolitan Statistical Area’’ as a Consolidated Metropolitan Statistical Area (CMSA) ‘‘associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000’’ (70 FR 24183). We refer to these areas as ‘‘Micropolitan Areas.’’ After conducting an extensive impact analysis, we determined that the best course of action would be to treat all hospitals located in ‘‘Micropolitan Areas’’ as ‘‘rural,’’ and to include these hospitals in the calculation of each State’s rural wage index. Because Micropolitian Areas tend to encompass smaller population centers and contain fewer hospitals than MSAs, we determined that if Micropolitan Areas were to be treated as separate labor market areas, the IPPS wage index would include drastically more singleprovider labor market areas. This larger number of labor market areas with fewer providers could create instability in year-to-year wage index values for a large number of hospitals; could reduce the averaging effect of the wage index, lessening some of the efficiency incentive inherent in a system based on the average hourly wages for a large number of hospitals; and could arguably create an inequitable system when so many hospitals would have wage indexes based solely on their own wage data while other hospitals’ wage indexes would be based on an average hourly wage across many hospitals. For these reasons, we adopted a policy to include Micropolitan Areas in the State’s rural wage area, and have continued this policy through the present. (We refer reader to the RY 2006 LTCH PPS final rule (70 FR 24187).) Based upon the 2010 Decennial Census data, a number of rural and urban counties have joined or have become Micropolitan Areas, while other counties that once were part of a Micropolitan Area under previous OMB PO 00000 Frm 00330 Fmt 4701 Sfmt 4700 CBSA designations, have become either urban or rural under the new OMB delineations. Overall, there are fewer Micropolitan Areas (541) under the new OMB delineations based on 2010 Decennial Census data than existed under the data from the 2000 Census (581). As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28192), we believe that it is appropriate to continue the policy established in the RY 2006 LTCH PPS final rule, and we are treating Micropolitan Areas as rural labor market areas under the LTCH PPS. These areas continue to be defined as having relatively small urban cores (populations of 10,000–49,999). We do not believe that it would be appropriate to calculate a separate wage index for areas that typically may include only a few hospitals for the reasons set forth in the RY 2006 LTCH PPS final rule, as discussed above. As previously noted, we did not receive any public comments on our proposals relating to the adoption of the new OMB labor market area delineations with regard to Micropolitan Statistical Areas. Therefore, we are adopting these policies as final without modification in this final rule. In conjunction with our policy to adopt the new OMB labor market area delineations, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, for FY 2015, we are continuing to treat Micropolitan Areas as ‘‘rural,’’ and will assign the Micropolitan Area the statewide rural wage index for the State in which the LTCH is located. We also are establishing that, beginning in FY 2015, the wage data for any IPPS hospitals located in the Micropolitan Areas will be included in the calculation of each State’s LTCH PPS rural area wage index. (As discussed in section V.B.2. of the Addendum to this final rule, the LTCH PPS area wage index values are calculated using the wage data of IPPS hospitals.) We note that this policy is consistent with the policy adopted under the IPPS discussed in section III.B.2.a. of the preamble of this final rule. For a discussion of our policies to moderate the impact of our adoption of the new OMB delineations under the LTCH PPS, we refer readers to section VII.D.2.e. of the preamble of this final rule. b. Urban Counties That Became Rural under the New OMB Labor Market Area Delineations Under the new OMB delineations, which are based upon 2010 Decennial Census data, for FY 2015, we found that there are a number of counties (or county equivalents) that are defined as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations ‘‘urban’’ under the previous CBSA designations that are now defined as ‘‘rural’’ under the new OMB delineations. As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28193) and in section III.B. of this preamble, an analysis of the new OMB delineations shows that a total of 37 counties (and county equivalents) that were considered to be part of an ‘‘urban’’ CBSA will now be considered to be located in a ‘‘rural’’ area, beginning in FY 2015, based on the new OMB delineations. We refer readers to a table presented in section III.B.2.b. of the preamble of this final rule that lists the 37 urban counties that are defined as rural under our adoption of the new OMB delineations. As previously noted, we did not receive any public comments on our proposals relating to the adoption of the new OMB labor market area delineations with regard to urban counties that would become rural. Therefore, we are adopting these policies as final without modification in this final rule. Under our adoption of the new OMB delineations for the LTCH PPS, we are establishing that LTCHs located in any of the 37 counties listed in the table under section III.B.2.b. of the preamble of this final rule will be considered ‘‘rural,’’ and will receive their respective State’s rural area wage index for FY 2015 under the LTCH PPS. We note that, currently, there are no LTCHs located in any of the 37 counties listed in the table that are currently considered to be part of an ‘‘urban’’ CBSA and that will be considered to be located in a ‘‘rural’’ area, beginning in FY 2015. The wage data for any IPPS hospitals located in those 37 counties listed in the table now will be considered ‘‘rural’’ when calculating the respective State’s LTCH PPS rural area wage index beginning in FY 2015. (As discussed in section V.B.2. of the Addendum to this final rule, the LTCH PPS area wage index values are calculated using the area wage data of IPPS hospitals.) We note that this policy is consistent with the policy adopted under the IPPS discussed in section III.B.2.b. of the preamble of this final rule. We refer readers to section VII.D.2.e. of this preamble for a discussion of our policies to moderate the impact of our policy to implement the new OMB delineations under the LTCH PPS. 2015, we found that there are a number of counties (or county equivalents) that are defined as ‘‘rural’’ under the previous OMB definitions (that is, CBSA designations) will be considered ‘‘urban’’ based on the adoption of the new OMB delineations. As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28193) and in section III.B.2.c. of the preamble of this final rule, an analysis of the new OMB labor market area delineations shows that a total of 105 counties (and county equivalents) that were previously located in ‘‘rural’’ areas now are located in an ‘‘urban’’ area under the new OMB delineations. We refer readers to a table in section III.B.2.c. of the preamble of this final rule that lists the 105 ‘‘rural’’ counties that will now be located in an ‘‘urban’’ area, based on our policy to adopt the new OMB delineations presented in section III.B.2.c. of the preamble of this final rule. There are currently no LTCHs located in the 105 ‘‘rural’’ counties listed in that table. As previously noted, we did not receive any public comments on our proposals relating to the adoption of the new OMB labor market area delineations with regard to rural counties that would become urban. Therefore, we are adopting these policies as final without modification in this final rule. Under our adoption of the new OMB labor market area delineations, we are establishing that LTCHs located in any of those 105 counties will now be included in their new respective ‘‘urban’’ CBSAs and will receive the respective ‘‘urban’’ CBSA’s area wage index. We also are establishing that, beginning in FY 2015, the wage data for any IPPS hospitals located within those 105 counties will now be included in the calculation of the LTCH PPS area wage index for those hospitals’ respective ‘‘urban’’ CBSAs. (As discussed in section V.B.2. of the Addendum to this final rule, the LTCH PPS area wage index values are calculated using the area wage data of IPPS hospitals.) We note that this policy is consistent with the policy adopted under the IPPS discussed in section III.B.2.c. of the preamble of this final rule. We refer readers to section VII.D.2.e. of the preamble of this preamble for a discussion of our policies to moderate the impact of our policy to implement the new OMB delineations under the LTCH PPS. c. Rural Counties That Became Urban under the New OMB Labor Market Area Delineations In using the new OMB labor market area delineations (which are based upon 2010 Decennial Census data) for FY d. Urban Counties Moved to a Different Urban CBSA under the New OMB Labor Market Area Delineations In addition to ‘‘rural’’ counties that became ‘‘urban’’ and ‘‘urban’’ counties that became ‘‘rural’’ under the new VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00331 Fmt 4701 Sfmt 4700 50183 OMB delineations, we found that several urban counties shifted from one urban CBSA to another urban CBSA. In certain cases, the new OMB delineations involved a change only in the CBSA name or code, while the CBSA continued to encompass the same constituent counties. However, in other cases, under the new OMB delineations, some counties are shifted between existing urban CBSAs and new urban CBSAs, changing the constituent makeup of those CBSAs. For example, in some cases, entire CBSA are subsumed by another CBSA. In other cases, some CBSAs have counties that are split off as part of a different urban CBSA, or to form entirely new labor market areas. We refer readers to section III.B.2.d. of the preamble of this final rule for additional information, including examples, on urban counties that have moved from one urban CBSA to a different urban CBSA under the new OMB delineations. As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28193), LTCHs located in these affected counties that will move from one urban CBSA to a different urban CBSA under our policy to adopt the new OMB delineations will experience both negative and positive impacts in regard to the LTCH’s specific area wage index values. We refer readers to section VII.D.2.e. of this preamble for a discussion of our policies to moderate the impact imposed upon hospitals because of our policy to adopt the new OMB labor market area delineations under the LTCH PPS. As previously noted, we did not receive any public comments on our proposals relating to the adoption of the new OMB labor market area delineations with regard to urban counties that moved to a different urban CBSA. Therefore, we are adopting these policies as final without modification in this final rule. e. Transition Period As indicated above, overall, we believe that our policy to adopt the new OMB delineations will result in LTCH PPS wage index values being more representative of the actual costs of labor in a given area. However, as we discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28193), we also recognize that some LTCHs would experience decreases in their area wage index values as a result of our policy. We also realize that many LTCHs would have higher area wage index values under our policy. To mitigate the impact imposed upon hospitals, we have in the past provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50184 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations While we believe that using the new OMB delineations would create a more accurate payment adjustment for differences in area wage levels, we also recognize that adopting such changes may cause some short-term instability in LTCH PPS payments. Therefore, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we proposed to implement a transitional wage index policy for LTCHs that would experience a decrease in their area wage index values due to our proposal to adopt the new OMB delineations under the LTCH PPS. Specifically, we proposed a 1-year transitional wage index policy under which any LTCH that would experience a decrease in its area wage index value solely due to the adoption of the new OMB delineations would get a ‘‘50/50 blended area wage index’’ value that would be calculated as the sum of 50 percent of the wage index computed under the FY 2014 CBSA designations and 50 percent of the wage index computed under the new OMB delineations proposed for FY 2015. Furthermore, we proposed that this proposed transitional wage index policy would be applied in a budget neutral manner, consistent with the existing requirement under § 412.525(c)(2) that any changes to the adjustment for differences in area wage levels will be made in a budget neutral manner. We also presented a proposed methodology for calculating an area wage level adjustment budget neutrality factor for FY 2015 that included the proposed 50/ 50 blended wage index as applicable (79 FR 28193 through 28194). Comment: Commenters that supported the proposed adoption of the new OMB delineations under the LTCH PPS also supported our proposed transitional wage index policy for LTCHs that would experience a negative payment impact due to the adoption of the new OMB delineations. While the commenters conveyed their appreciation for the proposed transitional wage index policy to help mitigate any negative financial ramifications, they requested that the proposed transitional wage index policy be extended beyond FY 2015 to allow hospitals more time to operationally adjust to the change to their area wage adjustment. We note that we did not receive any public comments on our proposal to apply the proposed transitional wage index policy in a budget neutral manner, or on our proposed methodology for calculating an area wage level adjustment budget neutrality factor for FY 2015 that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 included the proposed 50/50 blended wage index as applicable. Response: We appreciate the commenters’ support for the proposed transitional wage index policy for LTCHs that would experience a negative payment impact due to the adoption of the new OMB delineations. While we understand the commenters’ concern regarding the potential financial impact, as we explained in the proposed rule, the revisions under the new OMB delineations are not as extensive as the changes that OMB announced in 2003 that were adopted under the IPPS in FY 2005 with a 1-year transition and adopted under the LTCH PPS in RY 2006 with no additional transitional policy other than the transitional wage index policy in effect at that time. While it is our longstanding policy to provide temporary adjustments to mitigate negative impacts from the adoption of new policies or procedures, we continue to believe that the 1-year ‘‘50/50 blended wage index’’ transitional policy provides an adequate safeguard against any significant payment reductions, allows for sufficient time to make operational changes for future fiscal years, and provides a reasonable balance between mitigating some short-term instability in LTCH PPS payments and improving the accuracy of the payment adjustment for differences in area wage levels. While we acknowledge that some LTCHs will experience a reduction in their wage index as a result of the adoption of the new OMB delineations, we also point out that several LTCHs will experience an increase in their wage index based on the adoption of the new OMB delineations. Because the new OMB delineations reflect the most recent data available to define geographic classifications (market area delineations) for LTCHs, we believe that the wage index values computed under those delineations will result in more appropriate payments to providers by more accurately accounting for and reflecting the differences in area wage levels (that is, the relative hospital wage and wage-related costs in the geographic area of the hospital as compared to the national average hospital wage and wage-related costs). Because we believe that the implementation of the new OMB delineations will create more accurate representations of a LTCH’s labor market areas and result in LTCH PPS wage index values being more representative of the actual costs of labor in a given area, we believe that it is important to implement the wage index values calculated under new OMB delineations with as minimal a transition as possible. Extending the PO 00000 Frm 00332 Fmt 4701 Sfmt 4700 transitional ‘‘50/50 blended wage index’’ policy beyond FY 2015 would only further delay the improved accuracy of area wage level adjustments to LTCH PPS payments under the new OMB delineations. In addition, because the proposed transitional 50/50 blended wage index policy would be made in a budget neutral manner, all LTCH PPS payments are reduced to offset the additional payments that result under the transitional policy. For these reasons, we are not adopting the commenters’ suggestion to extend the proposed transitional 50/50 blended wage index policy beyond FY 2015. Therefore, in this final rule, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are adopting a 1-year transitional wage index policy for LTCHs that will experience a decrease in their area wage index values due to our policy to adopt the new OMB delineations under the LTCH PPS, as we proposed without modification. In addition, we are finalizing our proposal to apply the transitional area wage index policy in a budget neutral manner, and our methodology for calculating an area wage level adjustment budget neutrality factor for FY 2015, which includes the proposed 50/50 blended wage index as applicable, as proposed without modification. Under the transitional wage index policy that we are establishing for FY 2015 we computed a blended area wage index value for any LTCH that will experience a decrease in its area wage index value solely due to the adoption of the new OMB delineations. That is, for purposes of determining an LTCH’s area wage index for FY 2015, we computed LTCH PPS wage index values using the area wage data (discussed in section V.B.4. of the Addendum to this final rule) under both the FY 2014 CBSA designations and the FY 2015 new OMB delineations based on the 2010 OMB Decennial Census data. For each LTCH, we compared these two wage indexes. If an LTCH’s wage index for FY 2015 under the new OMB delineations was lower than the LTCH’s wage index under the FY 2014 CBSA designations, we are establishing that, for FY 2015, the LTCH will be paid based on a blended wage index that is computed as the sum of 50 percent of each of the two wage index values described above (referred to as the 50/ 50 blended wage index). If an LTCH’s wage index for FY 2015 under the new OMB delineations is higher than the LTCH’s wage index under the FY 2014 CBSA designations, we are establishing that, for FY 2015, the LTCH will be paid based on 100 percent of the wage index E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations under the FY 2015 new OMB delineations (and will not receive the 50/50 blended wage index). Furthermore, we are establishing that the transitional area wage index policy will be adopted in a budget neutral manner. Under § 412.525(c)(2), any changes to the adjustment for differences in area wage levels will be made in a budget neutral manner such that estimated aggregate FY 2015 LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage-level adjustment budget neutrality factor that is applied to the standard Federal rate (under § 412.523(d)(4)) to ensure that any changes to the area wage level adjustments are budget neutral such that any changes to the wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Because our transitional wage index policy for LTCHs that will experience a decrease in their area wage index values solely as a result of our finalized policy to adopt the new OMB delineations under the LTCH PPS will result in an increase in estimated aggregate LTCH PPS payments without such changes, we are including the finalized 50/50 blended wage index values in our calculations for the area wage level adjustment budget neutrality factor that is applied to the standard Federal rate to ensure that any changes to the area wage level adjustment are budget neutral. Specifically, consistent with our established methodology, we used the following methodology to determine an area wage level adjustment budget neutrality factor for FY 2015: • Step 1—We simulated estimated aggregate LTCH PPS payments using the FY 2014 wage index values as established in Tables 12A and 12B for the FY 2014 IPPS/LTCH PPS final rule (which is available via the Internet on the CMS Web site) and the FY 2014 labor-related share of 62.537 percent as established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50996). • Step 2—We simulated estimated aggregate LTCH PPS payments using the FY 2015 wage index values as shown in Tables 12A through 12D for this final rule (which are available via the Internet on the CMS Web site), including the transitional 50/50 blended wage index values, if applicable (as discussed above and in section V.B.4. of the Addendum of this final rule), and the FY 2015 labor-related share of 62.306 percent (as VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 discussed in section V.B.3. of the Addendum to this final rule). • Step 3—We determined the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2014 area wage level adjustments (calculated in Step 1) by the estimated total LTCH PPS payments using the FY 2015 area wage level adjustments (calculated in Step 2) to determine the FY 2015 area wage level adjustment budget neutrality factor. • Step 4—We applied the FY 2015 area wage level adjustment budget neutrality factor from Step 3 to the FY 2015 LTCH PPS standard Federal rate after the application of the FY 2015 annual update as discussed in section V.A.2. of the Addendum to this final rule. As explained above, we are applying this factor in determining the FY 2015 standard Federal rate to ensure that the updates to the area wage level adjustment for FY 2015 will be implemented in a budget neutral manner. For this final rule, using the steps in the methodology described above, we determined a FY 2015 area wage level adjustment budget neutrality factor of 1.0016703. We note that this transitional wage index policy under our policy to adopt the new OMB delineations for FY 2015 under the LTCH PPS is consistent with the policies adopted under the IPPS presented in sections III.B.2.e.(5) and (6) of the preamble of this final rule. As noted previously in section VII.D.2.b. of the preamble of this final rule, there are currently no LTCHs located in an ‘‘urban’’ county that became ‘‘rural’’ under the policy to adopt the new OMB delineations. Therefore, as we discussed in the FY 2015 IPPS/LTCH PPS proposed rule, we are not establishing a transitional wage index policy that is consistent with the IPPS policy presented in section III.B.2.e.(2) of the preamble of this final rule for hospitals that are currently located in an ‘‘urban’’ county that became ‘‘rural’’ under the adoption of the new OMB delineations. We also note that we are not establishing any transitional policies under the LTCH PPS that are consistent with those presented under the IPPS for hospitals with a reclassification or redesignation as discussed in section III.B.2.e.(3) of the preamble of this final rule, or for hospitals deemed urban under section 1886(d)(8)(B) of the Act as discussed in section III.B.2.e.(4) of the preamble of this final rule, as those reclassifications, redesignations, and statutory deems are not applicable to LTCHs. PO 00000 Frm 00333 Fmt 4701 Sfmt 4700 50185 E. Reinstatement and Extension of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment 1. Background Section 1206(b)(1)(A) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, provides for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25percent threshold payment adjustment (hereinafter referred to as ‘‘the 25percent policy’’) under the LTCH PPS established under section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act. In addition, section 1206(b)(1)(B) of Pub. L. 113–67 provides for a permanent exemption from the application of the 25-percent policy for certain grandfathered co-located LTCHs. Section 1206(b)(1)(C) of Public Law 113–67 also requires that ‘‘. . . [n]ot later than 1 year before the end of the 9-year period referred to in section 114(c)(1) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 U.S.C. 1395ww note), as amended by subparagraph (B) [of section 1206 of Pub. L. 113–67], the Secretary of Health and Human Services shall submit to Congress a report on the need for any further extensions (or modifications of the extensions) of the 25 percent rule described in sections 412.534 and 412.536 of title 42, Code of Federal Regulations, particularly taking into account the application of section 1886(m)(6) of the Social Security Act, as added by subsection (a)(1) [of section 1206 of Pub. L. 113–67].’’ The 25-percent policy is a payment adjustment under the LTCH PPS, originally established in our regulations at 42 CFR 412.534 for LTCHs and LTCH satellite facilities and their co-located referring hospitals in the FY 2005 IPPS final rule (69 FR 49191), and at 42 CFR 412.536 for all other LTCHs and referring hospitals in the RY 2007 LTCH PPS final rule (72 FR 26870), based on analyses of Medicare discharge data that indicated that patterns of patient shifting appeared to be occurring more for provider financial advantage than for patient benefit. In order to discourage such activity, a payment adjustment was applied for LTCH discharges of patients who were admitted to the LTCH from the same referring hospital in excess of an applicable percentage threshold, which was to transition to a 25-percent threshold after specified phase-in periods. (For rural and single-urban LTCHs and those with MSA-dominant E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50186 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations referring hospitals, a 50-percent threshold was applied.). Under this policy, discharges in excess of the threshold are paid at an ‘‘IPPS equivalent’’ rate, instead of the much higher LTCH PPS rate. (We refer readers to detailed discussions of the 25-percent policy for LTCH HwHs and LTCH satellite facilities in the FY 2005 IPPS final rule (69 FR 49191 through 49214) and its application to all other LTCHs in the RY 2008 LTCH PPS final rule (72 FR 26919 through 26944).) The results of the different rulemaking schedules in effect when §§ 412.534 and 412.536 were implemented (FY 2005 (October 1, 2004) and RY 2007 (July 1, 2006), respectively) are as follows: for colocated LTCHs and LTCH satellite facilities governed under § 412.534, the 25-percent policy was effective for cost reporting periods beginning on or after October 1, 2005 (‘‘October’’ LTCHs); for LTCHs and LTCH satellite facilities governed under § 412.536, the 25percent policy was effective for cost reporting periods beginning on or after July 1, 2007 (‘‘July’’ LTCHs). In addition, even though grandfathered LTCH HwHs and LTCH satellite facilities are governed under § 412.534(h), they are ‘‘July’’ LTCHs because the 25-percent policy was applied to these facilities in the RY 2008 LTCH PPS final rule. Section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, provided for a 5-year moratorium on the full application of the 25-percent policy that expired for some LTCHs and LTCH satellite facilities for cost reporting periods beginning on or after October 1, 2012 (‘‘October’’ LTCHs) and for other LTCHs and LTCH satellite facilities for cost reporting periods beginning on or after July 1, 2012 (‘‘July’’ LTCHs). (For a detailed description of the moratorium on the application of the 25-percent policy, we refer readers to the May 22, 2008 Interim Final Rule with Comment Period (73 FR 29699 through 29704) and the August 27, 2009 Interim Final Rule with Comment Period for the ARRA, which was published in the FY 2010 IPPS final rule and Changes to the LTCH PPS and Rate Years 2010 and 2009 Rates final rule (74 FR 43990 through 43992). The expiration of the statutory moratorium for both ‘‘July’’ and ‘‘October’’ LTCHs was delayed because CMS established regulatory extensions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484), as amended by the FY 2013 IPPS/LTCH PPS correcting amendment (77 FR 63751 through 63753). Specifically, we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 established a 1-year extension (that is, for cost reporting periods beginning on or after October 1, 2012, and before October 1, 2013) on the full application of the 25-percent policy for ‘‘October’’ LTCHs. For those ‘‘July’’ LTCHs that would have been affected by the ‘‘gap’’ between the expiration of the statutory moratorium (for cost reporting periods beginning on or after July 1, 2012) and our prospective regulatory relief (for cost reporting periods beginning on or after October 1, 2012), we also provided for an additional moratorium based on LTCH discharges occurring on or after October 1, 2012 and ending at the start of the LTCHs’ next cost reporting period. For those ‘‘July’’ LTCHs with cost reporting periods beginning on or after October 1, 2012, the regulatory extension of the statutory moratorium, described above, effective for the hospital’s first cost reporting period beginning on or after October 1, 2012, resulted in seamless coverage for that group. However, for those ‘‘July’’ LTCHs with cost reporting periods beginning on or after July 1, 2012, and before October 1, 2012, that would have otherwise been subject to the ‘‘gap’’ between the expiration of the statutory moratorium and the effective date of the regulatory moratoria, we established a second regulatory moratorium effective with discharges occurring beginning October 1, 2012, through the end of the LTCH’s cost reporting period (that is, the end of the cost reporting period that began on or after July 1, 2012, and before October 1, 2012). Therefore, by providing for the above described regulatory extension for ‘‘July’’ LTCHs, we eliminated the distinction between ‘‘July’’ and ‘‘October’’ LTCHs, which resulted in the 25-percent policy being applied for all cost reporting periods beginning on or after October 1, 2012, following the expiration of the moratorium. For more details about these moratoria, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through 53484). Because we did not extend the regulatory moratorium on the 25percent policy in the FY 2014 IPPS/ LTCH PPS final rule, the full application of the payment adjustment policy was effective for all LTCHs (both ‘‘October’’ and ‘‘July’’ LTCHs) for cost reporting periods beginning on or after October 1, 2013 (78 FR 50772). 2. Implementation of Section 1206(b)(1) of Pub. L. 113–67 As stated earlier, section 1206(b)(1)(A) of Public Law 113–67 provides an additional amendment to section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections PO 00000 Frm 00334 Fmt 4701 Sfmt 4700 3106(c) and 10312(a) of the Affordable Care Act, that extends the ‘‘original’’ statutory moratorium on the full implementation of the 25-percent policy to a total of 9 years from the original effective dates established by the MMSEA (July 1 or October 1, 2007, as applicable). As a result, the lapse of the regulatory moratorium on the full implementation of the 25-percent policy is moot. This ‘‘seamless’’ statutory moratorium provides relief until cost reporting periods beginning on or after July 1, or October 1, 2016, as applicable. Section 1206(b)(1)(B) provides a permanent exemption from the 25percent policy for certain grandfathered co-located LTCHs. In this final rule, based on the statutory changes made by sections 1206(b)(1)(A) and (b)(1)(B) of Public Law 113–67, we are making conforming amendments to the regulations governing application of the 25-percent policy. Specifically, we are revising §§ 412.534(c)(1)(i) and (c)(1)(ii), (c)(2), (c)(3), (d)(1) and (d)(1)(i), (d)(2), (d)(3), (e)(1) and (e)(1)(i), (e)(2), (e)(3), the introductory text of paragraph (h), (h)(4), and (h)(5) and removing paragraph (h)(6); and removing paragraphs (a)(1)(iii) and (a)(2)(ii), revising (a)(2), and removing paragraph (a)(3) of § 412.536 to reflect the statutory changes. Comment: One commenter suggested that the costs associated with the new limitations provided by the application of the 25-percent policy, that is, any additional costs to the Medicare program because of the moratorium on full implementation of the 25-percent policy, be absorbed by the hospitals that receive the benefit from the extension of this moratorium. The commenter questioned whether this absorption of costs could be accomplished by a hospital-specific adjustment similar to the one presently used for failure to submit quality data, and whether the suggested adjustment amount could be calculated based on a facility’s compliance with 25-percent policy. Response: We appreciate the commenter’s suggestion, but note that these suggestions are beyond the scope of the proposals presented in the FY 2015 IPPS/LTCH PPS proposed rule. We believe that Congress specified how we are to implement this policy when it instructed the Secretary to extend the relief provided by section 114(c) of the MMSEA of 2007, and its amendments, until the moratorium expires, or in the case of certain grandfathered LTCHs, indefinitely. The provisions of section 114(c) of the MMSEA of 2007, nor its amendments, include any measures to absorb any Medicare program costs associated with the moratorium on the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations full application of this policy. We do not believe that further regulatory initiatives are appropriate at this time. Comment: Several commenters urged CMS to repeal the 25-percent policy immediately. Some commenters reasoned that ‘‘Congress has not required the partial implementation of the 25 percent rule, but rather has prohibited the full implementation of the 25 percent rule.’’ Other commenters believed that applying the 25-percent policy after patient-level criteria are implemented would ‘‘violate’’ the provisions in Public Law 113–67 that require use of patient-level criteria to determine which cases receive standard or site neutral Medicare payments. Some commenters also believed that the 25-percent policy is unnecessary recognizing the forthcoming changes to the LTCH PPS, and stated that the 25percent policy would reduce the payment distinctions between the number of cases receiving payments based on standard payment rates and the number of cases receiving payments based on site-neutral payment rates, thereby ‘‘weakening’’ the incentives that the commenters believed Congress intended to impose under the statute. Response: Although we initially implemented the 25-percent policy under §§ 412.534 and 412.536 of the regulations through our general rulemaking authority, the 25-percent policy is now mandated under section 114(c) of the MMSEA, as amended. This statutory moratorium currently expires effective with cost reporting periods beginning on July 1, 2016, or October 1, 2016, as applicable. Therefore, CMS does not have the authority to ‘‘repeal’’ a statutory provision. As discussed in the May 22, 2008 interim final rule with comment period, and as we further discussed in the FY 2010 IPPS/LTCH final rule (74 FR 43980 through 43986), we believe that section 114(c)(1) of the MMSEA provided a 3-year delay in the application of §§ 412.534 and 412.536 to ‘‘only two categories of LTCHs . . . [s]imilarly, the 3-year relief . . . in section 114(c)(2) in the form of increased thresholds . . . was narrowly targeted to only those ‘applicable LTCHs and LTCH satellite facilities,’ that is, those ‘subject to the transition rules under § 412.534(g) of title 42 Code of Federal Regulations’ ’’ (74 FR 43982). In fact, with the enactment of the extension of the original moratorium under section 1206(b)(1)(B) of Public Law 113–67, and the extended relief provided from the 25-percent policy, Congress added only one specific change to the provisions of the original moratorium, that is, the permanent exemption of grandfathered LTCHs from VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the 25-percent policy. We also note that there is an additional provision of the statute that specifies the viability of the 25-percent policy, at least until the initial implementation of the new payment framework under the LTCH PPS. Specifically, section 1206(b)(1)(C) requires CMS to submit a report to Congress ‘‘[n]ot later than 1 year before the end of the 9-year period referred to in section 114(c) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 . . . on the need for any further extensions (or modifications of the extensions) of the 25 percent rule . . . particularly taking into account the application of section 1886(m)(6) of the Social Security Act as added by subsection (a)(1).’’ In response to the commenters expressed concerns relating to an ‘‘overlapping’’ of the full implementation of the 25-percent policy and the new payment framework specified under section 1206(a) of Public Law 113–67, we assure the commenters that any such interplay will be fully considered during the development of the required July 2015 Report to Congress. This date is at least a full year prior to the expiration of the current moratorium. Furthermore, as the statutory payment methodology revisions to the LTCH PPS will be phased-in under a ‘‘blended’’ payment methodology effective with LTCH cost reporting periods beginning during FY 2016, there still may be a need for the 25-percent policy during that phase-in period, although our study may or may not conclude that this policy is not required after full implementation of the new statutory payment methodology under the LTCH PPS. F. Discussion of the ‘‘Greater Than 3Day Interruption of Stay’’ Policy and the Transfer to Onsite Providers Policies Under the LTCH PPS The interrupted stay policy is a payment adjustment that was included under the LTCH PPS from the inception; that is, for cost reporting periods beginning on or after October 1, 2002 (FY 2003). In this discussion, we use the terms ‘‘interrupted stay’’ and ‘‘interruption of stay’’ interchangeably. An ‘‘interruption of stay’’ occurs when, during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by a readmittance to the same LTCH. We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56002). When we established this policy, we believed that the readmission to the LTCH represented a continuation of the initial treatment, a stay in which PO 00000 Frm 00335 Fmt 4701 Sfmt 4700 50187 an ‘‘interruption’’ occurred, rather than a new admission if the length of stay at the intervening facility was within a specified number of days. If an ‘‘interruption of stay’’ occurred, payment for both ‘‘halves’’ of the LTCH discharge were then ‘‘bundled,’’ and Medicare would make one payment based on the second date of discharge. Specifically, under this policy, we established a fixed-day threshold, which applied to the specified number of days a Medicare beneficiary spends as an inpatient at an acute care hospital, an IRF, or a SNF. In the RY 2003 LTCH PPS final rule, we explained that we were implementing this policy because we wanted ‘‘. . . to reduce the incentives inherent in a discharged-based prospective payment system of ‘shifting’ patients between Medicare-covered sites of care in order to maximize Medicare payments. This policy is particularly appropriate for LTCHs because, as a group, these hospitals differ considerably in the range of services offered such that where some LTCHs may be able to handle certain acute conditions, others will need to transfer their patients to acute care hospitals. ‘‘For instance, some LTCHs are equipped with operating rooms and intensive care units and are capable of performing minor surgeries. However, other LTCHs are unable to provide those services and will need to transfer the beneficiary to an acute care hospital. We believed that our policy also provided for a patient . . . ‘‘who no longer requires hospital-level care, but is not ready to return to the community,’’ and who ‘‘. . . could be transferred to a SNF.’’ (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 56002).) In the regulations under 42 CFR 412.531, we defined two types of interruptions of stays. Under § 412.531(a)(1), ‘‘[a] 3-day or less interruption of stay’’ means a stay at a LTCH during which a Medicare inpatient is discharged from the LTCH to an acute care hospital, IRF, SNF, or the patient’s home and readmitted to the same LTCH within 3 days of the discharge from the LTCH. Under the ‘‘3 day or less interruption of stay policy,’’ the fixed-day threshold period begins with the calendar date of discharge from the LTCH and ends not later than midnight of the third day. If an LTCH patient’s ‘‘interruption’’ exceeds this threshold, payment is governed by the ‘‘greater than 3-day interruption of stay’’ policy. (We refer readers to the RY 2005 LTCH PPS final rule (69 FR 25690 through 25700), the RY 2006 LTCH PPS final rule (70 FR 24206), and the RY 2007 LTCH PPS final rule (71 FR 27872 through 27875) for detailed discussions E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50188 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of the 3-day or less interruption of stay policy.) In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28196), we did not propose to revise the 3-day or less category of interrupted stays, but we make mention of the policy for clarity in making a distinction between the 3day or less interruption of stay policy and the greater than 3-day interruption of stay policy that we proposed to revise in our proposed rule. The ‘‘greater than 3-day interruption of stay policy,’’ is defined under § 412.531(a)(2) as a stay during which a Medicare inpatient is transferred upon discharge to an acute care hospital, an IRF, or a SNF for treatment or services that are not available in the long-term care hospital and returns to the same long-term care hospital within the applicable fixed-day period specified in regulations under § 412.531(a)(2)(i) through (a)(2)(iii). For a discharge to an acute care hospital, the applicable fixedday period is between 4 and 9 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 9th day when the patient is readmitted to the LTCH. For a discharge to an IRF, the applicable fixed-day period is between 4 and 27 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 27th day. For a discharge to a SNF, the applicable fixedday period is between 4 and 45 consecutive days; the counting of the days begins on the calendar day of discharge from the LTCH and ends on the 45th day. We refer readers to our proposed rule for a more detailed description of the derivation of our day thresholds (79 FR 28196). Under the greater than 3-day interrupted stay policy, if an LTCH readmission occurs within the fixed-day period both halves of the LTCH discharge are treated as a single discharge for the purposes of payment under the LTCH PPS. In such instances, the beneficiary’s readmittance to the LTCH is paid for with a single MS– LTC–DRG payment that covers the initial admission to the LTCH and the subsequent readmission. That is, a single Medicare payment is made for the entire two-part discharge. Payment to the acute care hospital, the IRF, or the SNF is then made in accordance with the applicable payment policies for those providers when the interruption of stay exceeds 3 days. Therefore, we balanced the payment incentives of both the LTCH and the acute care hospital, the IRF, or the SNF to which the LTCH patient might be discharged before being readmitted to the LTCH. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 As we discussed in the RY 2003 LTCH PPS final rule (67 FR 56007), our concerns about patient shifting were significantly increased in the context of transfers between co-located LTCHs and LTCH satellite facilities, or for LTCH hospital-within-hospital transfers. Collectively, we refer to these arrangements as transfers to ‘‘onsite’’ providers. In the regulations under § 412.532(b), we define a facility that is ‘‘co-located or ‘‘onsite’’ as a hospital, satellite facility, unit, or SNF that occupies space in a building also used by another hospital or unit or in one or more buildings on the same campus, as defined in § 413.65(a)(2), as buildings used by another hospital or unit. Under this LTCH PPS policy, if more than 5 percent of the Medicare patients discharged from an LTCH during a cost reporting period were discharged to an ‘‘onsite’’ SNF, IRF, or psychiatric facility, or to an ‘‘onsite’’ acute care hospital, and directly readmitted to the same LTCH, the LTCH would be paid one MS–LTC–DRG payment to cover both LTCH discharges, regardless of the length of the interrupted stay. As is the case in regard to the greater than 3-day interruption of stay policy, payment to an acute care hospital, an IRF, or a SNF would not be affected under the 5percent policy. Our concern about patient shifting among ‘‘onsite’’ providers did not originate with the implementation of the LTCH PPS. The LTCH 5-percent policy under § 412.532 was recodified from an earlier regulation under § 413.40(a)(3), which applied a payment adjustment to hospitals paid under the TEFRA payment system, including LTCHs, to address inappropriate discharges of patients to a host hospital paid under the IPPS from an excluded hospitalwithin-a-hospital (such as a LTCH) that culminated in a readmission to the hospital-within-a-hospital. We refer readers to the FY 2000 IPPS final rule, the RY 2003 LTCH PPS final rule, and the FY 2015 IPPS/LTCH PPS proposed rule for a detailed description of the 5percent policy, its initial application under the TEFRA payment system, and our policy concerns (64 FR 41535, 67 FR 56007 through 56014, and 79 FR 28196 through 28197). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28196), we proposed to revise our policies on interrupted stays. Specifically, we proposed to modify the fixed-day thresholds under the greater than 3-day interruption of stay policy to provide for a 30-day fixed threshold as an ‘‘acceptable standard’’ for determining a linkage between an index discharge and a readmission from an inpatient facility PO 00000 Frm 00336 Fmt 4701 Sfmt 4700 as specified under this policy (that is, an IPPS hospital, an IRF, or a SNF) consistent with the intervals presently used in two recently implemented Medicare initiatives: the Hospital Readmissions Reductions Program and the Hospital Inpatient Quality Reporting Program. (We refer readers to our proposed rule for a description of these two policies (79 FR 28197). We also proposed to remove our regulation at § 412.532, Special payment provisions for patients who are transferred to onsite providers and readmitted to a long-term care hospital, stating that as an ‘‘after the fact’’ payment adjustment (that is, following cost report settlement), we believed that this policy had a limited impact on provider behavior, and additionally our proposed changes to the interrupted stay policy make it unnecessary. Comment: Commenters objected to the CMS proposal to modify the fixedday threshold for the greater than 3-day interrupted stay policy. The commenters provided many reasons for their objections to the proposal, including that: • CMS should first implement the new statutory framework under Public Law 113–67 that applies patient-level criteria to payments under the LTCH PPS in FY 2016 and then ‘‘. . . assess whether any problems related to the interrupted stay policy exist under the transformed payment system.’’ • CMS used an ‘‘inappropriate analogy’’ in its proposal to change the fixed-day threshold under the greater than 3-day interrupted stay policy to 30 days because the referenced thresholds for the Hospital IQR Program and the Hospital Readmissions Reduction Program are used under the IPPS, but not under the LTCH PPS. Therefore, the commenters believed that 30 days is an inappropriate benchmark for the LTCH PPS policy. The commenters further noted that the LTCH PPS greater than 3day interrupted stay policy applies a payment adjustment when an LTCH discharges a patient for access to clinical services not available at the LTCH and the patient is readmitted to the LTCH within the fixed-day threshold. In contrast, under the Hospital Readmissions Reduction Program, a payment reduction is applied to the hospital’s payment if the patient returns to the hospital for care within the fixed-day threshold, and it was not expected that the patient would return to the hospital for continuation of care in relation to the most recent discharge. The commenters specifically stated that ‘‘the interrupted stay thresholds are intended . . . to define a point at which the care required for a E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations current episode of illness changes significantly enough to warrant ‘resetting the clock’ to an entirely separate episode of care for the subsequent readmission . . .’’ to the LTCH. They added that ‘‘The 30-day readmission threshold, on the other hand, can be likened to a 30-day warranty period during which a readmission could indicate suboptimal quality of care during the initial admission.’’ The commenters believed that comparing the interrupted stay policy to the readmissions initiatives would result in ‘‘crucial incongruence’’ because the two policies address fundamentally different clinical care scenarios. Furthermore, the commenters stated that a clinical threshold is not the same as a quality initiative. Some commenters stated that CMS had not demonstrated that an LTCH stay interrupted by 30 days at an IPPS hospital followed by a readmission to the LTCH constitutes a single episode of care or hospital stay. Several commenters asserted that ‘‘the agency’s previous research contradicts this premise upon which the proposed policy change is based.’’ • The proposal did not include an adequate discussion of CMS’ rationale as an explanation of the Agency’s proposal. The commenters asserted that the publically available data sets did not provide adequate information for stakeholders to study the potential impact on hospitals based on this proposed policy. The commenters noted that the inclusion of such material in the FY 2012 proposal enabled LTCH stakeholders to meaningfully comment in response to the proposals. Furthermore, the commenters believed that as a result of the policy changes that will be implemented in FY 2016, LTCHs would be subject to significant financial and operational upheaval if this new policy is implemented as well. • CMS did not offer evidence to indicate that LTCHs have been overpaid under the current policy or adequate data detailing the impact this proposed policy would have on LTCHs. The commenters suggested a more detailed impact analysis for this policy, including whether patient access to care would be harmed. • Given that the potential impact imposed upon LTCHs based on the proposal to change the fixed-day threshold from 9 to 30 days for an intervening IPPS stay is so ‘‘drastic,’’ if finalized, there should be 3-year transition period from the current policy if CMS were to finalize such a policy, and CMS should change the MS–LTC– DRG relative payment weights to account for the resulting changes in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 LTCH treatment costs and Medicare payments. Response: We appreciate the commenters’ responses. After careful consideration of the public comments we received, we agree with the commenters who indicated that, in light of the forthcoming modifications to the LTCH PPS, a major revision to the existing greater than 3-day interrupted stay policy may be premature at this time. We will take the other comments we received into consideration in preparation for any potential future rulemaking on this issue. Despite our decision to not finalize our proposal to change the fixed-day threshold under the LTCH PPS greater than 3-day interrupted stay policy, our goal continues to be to help ensure that readmission decisions are made on a clinical basis and not based on payment considerations. During the past several years, the Office of the Inspector General (OIG) has been evaluating the effects of the interrupted stay policies for LTCHs, primarily focusing on readmissions from acute care hospitals. In the OIG’s March 28, 2014 report, ‘‘Vulnerabilities in Medicare’s Interrupted-Stay Policy’’ (OEI–04–12– 00490), the OIG stated that ‘‘we identified several vulnerabilities in the LTCH interrupted-stay policy, including inappropriate payments (and) financial incentives to delay readmissions. . . .’’ The report further stated that ‘‘. . . 59 LTCHs had a high number of readmissions after the fixed-day period. . . .’’ (We refer readers to the Executive Summary of the OIG’s March 28, 2014 report for further details.) The report also noted that ‘‘[f]orty-five of the 59 LTCHs were part of a chain, and 23 of these LTCHs were part of the same chain . . . For 50 of these 59 LTCHs, the number of returns doubled immediately after the fixed-day period.’’ (We refer readers to page 17 of the OIG’s March 28, 2014 report for further details.) The OIG recommended, among other things, that CMS take appropriate action regarding LTCHs with a high number of readmissions immediately after the fixed-day period and LTCHs with a high number of readmissions following multiple short intervening facility stays. In our response to the OIG’s report, CMS agreed that LTCH readmission decisions should be based on the patient’s clinical needs and not the hospital’s financial benefit. We stated that if we find evidence that an individual hospital or chain is making readmission decisions based on financial considerations rather than the patient’s clinical needs, we would take the appropriate action in those cases to rectify the inconsistencies in adhering PO 00000 Frm 00337 Fmt 4701 Sfmt 4700 50189 to the current policy. In addition, as noted earlier, we will consider potential changes to the greater than 3-day interrupted stay policy as we gain experience under the new framework for the LTCH PPS. Comment: Commenters supported the proposal to remove the regulation at § 412.532 (Special payment provisions for patients who are transferred to onsite providers and readmitted to a long-term care hospital), noting that the existing greater than 3-day interrupted stay policy addresses many of CMS’ concerns about patient shifting. Commenters also indicated that they believed that the patient-level criteria that we will be implementing for FY 2016 will result in changes to LTCH PPS that further reduce the need for this policy. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to remove the regulatory requirements under § 412.532 because we believe that this policy has had a limited impact on provider behavior. In summary, in this final rule, we are not finalizing our proposal to change the fixed day threshold under the greater than 3-day interrupted stay policy under §§ 412.531(a)(2) and (b)(4) of the regulations. However, we are finalizing the proposal to remove § 412.532 in its entirety and to make a conforming change to § 412.525 by removing and reserving paragraph (d)(3), which references payments under § 412.532. G. Moratoria on the Establishment of LTCHs and LTCH Satellite Facilities and on the Increase in the Number of Beds in Existing LTCHs or LTCH Satellite Facilities As previously noted, Public Law 113– 67 was enacted on December 26, 2013. Section 1206(b)(2) of Public Law 113–67 amended section 114(d) of the MMSEA of 2007, as previously amended by section 4302 of the American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111–5) and sections 3106(b) and 10312(b) of the Affordable Care Act (Pub. L. 111–148). As further amended by section 112(b) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), section 114(d) of the MMSEA includes a ‘‘new’’ statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities, and on the increase in the number of hospital beds in existing LTCHs and LTCH satellite facilities, ‘‘for the period beginning April 1, 2014 and ending September 30, 2017, which mirrors nearly identical provisions of the ‘‘expired’’ moratoria under section 114(d)(1) of the MMSEA, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50190 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations as amended by sections 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act. These prior, yet nearly identical, provisions of section 114(d)(1) of the MMSEA, as amended by the ARRA and the Affordable Care Act, expired on December 28, 2012. For clarity and brevity, we will refer to the ‘‘expired’’ moratoria or moratorium to reference those that expired on December 28, 2012, and the ‘‘new’’ moratoria or moratorium to reference those that began on April 1, 2014, as applicable, throughout this discussion. The primary difference between the ‘‘expired’’ moratoria and the ‘‘new’’ moratoria is that, while the ‘‘expired moratoria’’ provided for specific exceptions to both the moratorium on the establishment of new LTCHs and LTCH satellite facilities and on increases in the number of beds in existing LTCHs and LTCH satellite facilities, the ‘‘new’’ moratoria only provides exceptions to the moratorium on the establishment of new LTCHs and LTCH satellite facilities. No exceptions are provided under the ‘‘new’’ moratorium on increases in the number of hospital beds in existing LTCHs and LTCH satellite facilities. (For a detailed description of the ‘‘expired’’ moratoria provisions (including the applicable exceptions) that were in effect from December 29, 2007 through December 28, 2012, we refer readers to the May 22, 2008 Interim Final Rule with Comment Period (73 FR 29705 through 29708). In light of the expiration date of the ‘‘expired’’ moratoria on December 28, 2012, and the effective date of the ‘‘new’’ moratoria on April 1, 2014, there has been a period of time in which new LTCHs and LTCH satellite facilities have been allowed to be established, and during which time there may have been increases in the number of hospital beds in LTCHs and LTCH satellite facilities. In accordance with section 114(d)(1) of the MMSEA, as amended by section 112(b) of Public Law 113–93, for the period beginning April 1, 2014 through September 30, 2017, CMS will be unable to designate any hospital as an LTCH or recognize a new LTCH satellite facility as such, unless one of the exceptions (described below) is met. Additionally, as of April 1, 2014, in accordance with sections 114(d)(6) and (d)(7) of the MMSEA, as amended by section 112(b) of Public Law 113–93, an existing LTCH may not increase the number of its hospital beds. This moratorium will extend through September 30, 2017, and is not subject to any exceptions. To qualify for an exception under the ‘‘new’’ moratorium to establish a new VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 LTCH or LTCH satellite facility during the timeframe between April 1, 2014, and September 30, 2017, a hospital or entity must meet the following criteria: • The hospital or entity must have begun its qualifying period for payment as an LTCH under 42 CFR 412.23(e). • The hospital or entity must have a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for an LTCH, and must have expended before April 1, 2014, at least 10 percent of the estimated cost of the project or, if less, $2,500,000. • The hospital or entity must have obtained an approved certificate of need in a State where one is required. While this exception only applies to the ‘‘new’’ moratorium on the establishment of new LTCHs and LTCH satellite facilities under section 114(d)(7) of the MMSEA, as amended by section 112(b) of Public Law 113–93, the mechanics of the exception are analogous to those established under the ‘‘expired’’ moratorium, which ended in 2012. The ‘‘expired’’ moratoria were implemented in a May 22, 2008 Interim Final Rule with Comment Period (73 FR 29704 through 29707). As discussed in that rule, some of the terminology in the statutory provision was internally inconsistent. A strictly literal reading of the statutory language under section 114(d)(2) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, presented practical challenges for implementation in light of the established LTCH classification criteria under § 412.23(e) of the regulations. Therefore, we adopted interpretations that we believed would reasonably reconcile seemingly inconsistent provisions and that would result in a logical and workable mandate. Specifically, as drafted, the exception only applies to a hospital or entity when it is already classified as an ‘‘LTCH.’’ Such entities will not need an exception to the moratorium on becoming an ‘‘LTCH’’ because they will already be an LTCH. As such, we are interpreting this provision under the new exception as we interpreted the exceptions to the ‘‘expired’’ moratorium. We discuss our interpretations below. At the outset of this discussion, we want to clarify which provisions of section 114(d) of the MMSEA, as amended, were subject to the ‘‘expired’’ moratoria, as distinguished from those which are subject to the ‘‘new’’ moratoria. Sections 114(d)(2) and 114(d)(3) of the MMSEA, as amended, only address exceptions under the ‘‘expired’’ moratoria. Section 114(d)(6) of the MMSEA, as amended, defines PO 00000 Frm 00338 Fmt 4701 Sfmt 4700 when the exceptions addressed in sections 114(d)(2) and 114(d)(3) expired. Section (d)(7) of the MMSEA addresses the exception under the ‘‘new’’ moratorium on the establishment of new LTCHs and LTCH satellite facilities. There are no exceptions to the ‘‘new’’ moratorium on the increases in the number of beds in existing LTCHs and LTCH satellite facilities, as noted above. Section 114(d)(7)(A) of the MMSEA, as amended, mirrors the expired provisions of section 114(d)(2)(A). Both provisions refer to an LTCH that began its qualifying period for payment as a ‘‘long-term care hospital’’ on or before a given date. However, a hospital would not be classified as an LTCH during that qualifying period; the facility or entity would typically be classified as an IPPS hospital. For a full discussion of our rationale for interpreting section 114(d)(2)(A) of the MMSEA to refer to an IPPS hospital meeting the stated requirements, we refer readers to our May 22, 2008 Interim Final Rule with Comment Period (73 FR 20704 through 29707) regarding the implementation of the ‘‘expired’’ moratorium. In this final rule, we are applying the same rationale in regard to the interpretation of section 114(d)(7)(A), that is, we are interpreting the provision to refer to an acute care hospital meeting the stated requirements as the hospital or entity seeking classification as an LTCH. As we did when interpreting the same language under the ‘‘expired’’ moratorium exception under section 114(d)(2)(A) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, we note that the exception under section 114(d)(7)(A) of the MMSEA cannot provide any relief to LTCH satellite facilities because there is no ‘‘qualifying period’’ for the establishment of a LTCH satellite facility for payment as a LTCH under § 412.23(e). Therefore, an LTCH satellite facility cannot meet the stated requirements for an exception under section 114(d)(7)(A) of the MMSEA. Section 114(d)(7)(B) of the MMSEA specifies the conditions for an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities having: (1) a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for an LTCH; and (2) expended, before the date of enactment of Public Law 113–93, April 1, 2014, ‘‘at least 10 percent of the estimated cost of the project (or, if less, $2,500,000).’’ As drafted, this provision is also problematic. In cases in which a hospital has not yet been built, but there is a binding written agreement for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations actual construction of a hospital that intends to be classified as an LTCH, the entity hiring those who would complete the construction would not be classified as an LTCH. Prior to the designation or classification of a hospital or an entity as an LTCH, a hospital must first be established and certified and must then complete the procedures specified under § 412.23(e) in order to qualify as an LTCH, at which point the hospital would be reclassified as an LTCH. In accordance with our interpretation of section 114(d)(2)(B) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, we are interpreting the contracting and expenditure provisions under section 114(d)(7)(B) of the MMSEA, as added by section 112(b) of Public Law 113–93, to apply to the hospital/entity requesting an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities between April 1, 2014, and September 30, 2017—the entity that would be classified as an LTCH if it meets the stated requirements. That entity must have a binding written agreement with an outside unrelated party for the actual construction, renovation, lease, or demolition for converting the hospital to an LTCH, and it must have expended at least 10 percent of the estimated cost of the project (or, if less, $2,500,000) by the date of enactment of Public Law 113– 93—April 1, 2014. Furthermore, with regard to the first prong, as when we implemented the ‘‘expired’’ moratoria, we continue to believe that the use of the term ‘‘actual’’ in the context of the ‘‘actual construction, renovation, lease, or demolition’’ indicates that the provision focuses only on the specific actions cited in the statute, and does not include those actions that are being contemplated or are not yet substantially underway. Although we are aware that a hospital or some other type of entity may enter into binding written agreements regarding services and items (for example, feasibility studies or land purchase) and incur costs for those services and items prior to actual construction, renovation, lease or demolition, we believe that those services or items are not included in what we are permitted to consider under the statutory language of the exception requirements. With respect to the second prong, the statute specifies that the hospital or entity must have ‘‘expended’’ at least 10 percent of the estimated cost of the project (or, if less, $2,500,000) by April 1, 2014. As we did in regard to the interpretation of section 114(d)(2)(B) of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the MMSEA, as amended by section 4302 of the ARRA and section 3106(b) and 10312(b) of the Affordable Care Act, we are interpreting the phrase ‘‘cost of the project’’ to mean the activities enumerated in the first prong: ‘‘the actual construction, renovation, lease, or demolition for a long-term care hospital.’’ That is, the statute requires the hospital or entity to have spent the amount specified in the statute on the actual construction, renovation, lease, or demolition for the contemplated LTCH. Furthermore, as we did previously in regard to the interpretation of section 114(d)(2)(B) of the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b) and 10312(b) of the Affordable Care Act, because the statute uses the phrase ‘‘has expended’’ (that is, a past tense phrase), we are limiting funds counting toward the 10 percent or $2,500,000 minimum to those funds that have actually been transferred as payment for the stated aspects of the project prior to April 1, 2014, as opposed to merely obligating capital and posting the cost of the project on its books. We believe that the provision addressed the concept of ‘‘obligate’’ in the first prong of the test where the statute specifies ‘‘a binding written agreement . . . for the actual construction, renovation, lease, or demolition of the long-term care hospital. . . .’’ and there is no reason to believe that the second prong of the test, which requires the ‘‘expenditure’’ of 10 percent of the project or, if less, $2,500,000, was intended as a redundancy. The ability to post the expense on the hospital’s or entity’s books could be satisfied by merely having a binding written agreement under the first prong of section 114(d)(7)(B) of the MMSEA. The fact that a second requirement is included that involves an expenditure indicates that an additional threshold must be met. Finally, section 114(d)(7)(C) of the MMSEA includes an exception to the moratorium if an LTCH, prior to April 1, 2014, has ‘‘obtained an approved certificate of need in a State where one is required’’. As discussed above, we are applying this exception requirement to the entity that is requesting approval for an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities between April 1, 2014, and September 30, 2017—the entity that would be classified as an ‘‘LTCH’’ if the stated requirements are met. However, with that said, we are clarifying what kind of certificate of need we will accept under the provisions of section 114(d)(7) of the MMSEA. We believe that the certificate PO 00000 Frm 00339 Fmt 4701 Sfmt 4700 50191 of need exception applies to a ‘‘hospital’’ or entity that was actively engaged in developing an LTCH, as evidenced by the fact that either an entity that wanted to create a LTCH but did not exist as a hospital prior to April 1, 2014, had obtained a certificate of need for a hospital by the date of enactment, or an existing hospital had obtained a certificate of need to convert the hospital into a new LTCH by that date. We are applying this exception requirement to a hospital that is already in existence prior to the date of enactment of Public Law 113–93, and that had previously obtained an approved certificate of need for a hospital (other than a LTCH) prior to April 1, 2014. We believe that Congress intended the exception to the moratorium to save those entities that were already actively engaged in becoming an LTCH. The fact that a hospital may have had a certificate of need issued to it years before April 1, 2014, to operate a hospital (other than a LTCH) is not indicative of such active engagement, and, we believe, is outside of what is contemplated in these LTCHspecific statutory provisions. We are only applying this exception requirement where the certificate of need is specifically for an LTCH. Because the certificate of need process is controlled at the State level, in determining whether the hospital or entity has obtained an approved certificate of need prior to April 1, 2014, we will consult the applicable State on a case-by-case basis for that determination. Decisions regarding the application of these moratoria and exceptions provided within the provisions of section 114(d) of the MMSEA will be handled on a case-by-case basis by the applicant’s MAC and the CMS Regional Office. ‘‘Final’’ instructions on implementing the moratoria will be posted following the publication of this final rule. In accordance with these policies, in this final rule we also are revising our regulations under § 412.23(e)(6) and (e)(7) to include a description of the ‘‘new’’ moratoria, which is in effect from April 1, 2014, through September 30, 2017, on the establishment of new LTCHs and LTCH satellite facilities (with specific exceptions), and on increasing the number of beds in existing LTCHs and existing LTCH satellite facilities. Comment: Several commenters urged CMS to establish a regulatory exception to the statutory moratorium on the increase in the number of beds in existing LTCHs and LTCH satellite facilities. The commenters pointed out E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50192 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations that, unlike the ‘‘expired’’ moratoria, the ‘‘new’’ moratoria under section 1206(b)(2) of Public Law 113–67 do not provide for such exceptions. The commenters further stated that when the statute was further amended by section 112(b) of the PAMA of 2014, Congress elected to provide an exception for the establishment of new LTCHs and LTCH satellite facilities, but not for the increase in the number of LTCH beds. Specifically, the commenters requested that CMS provide two regulatory exceptions to the moratorium to allow for the increase in the number of beds in existing LTCHs and LTCH satellite facilities if: (1) the LTCH has a binding written agreement as of the date of the enactment of this paragraph with an outside, unrelated party for the actual construction, renovation, lease or demolition for long-term care hospital beds, and has expended, before such date of enactment, at least 10 percent of the estimated cost of the project (or, if less, $2,500,000) (the ‘‘binding written agreement exception’’); or (2) if the LTCH has obtained an approved certificate of need (CON) from the State where one is required on or before the date of enactment (the ‘‘CON exception’’). The commenters believed that the creation of these exceptions would be within CMS’ authority because: (1) the statute is ‘‘ambiguous’’ and, therefore, CMS may exercise its authority under the general rulemaking provisions under sections 1102 and 1871 of the Act to ‘‘resolve the ambiguity’’; (2) with the enactment of section 112(b) of the PAMA, the effective date of the new moratorium on the increase in the number of beds in existing LTCHs and LTCH satellite facilities was changed from January 1, 2015, to April 1, 2014, which creates a disadvantage for those LTCHs that were in the process of increasing the number of beds in their facilities based on ‘‘reasonable reliance’’ on the January 1, 2015 effective date; (3) Congress acted in haste when enacting the PAMA, and not including a bed number exception was an error; and (4) the health needs of the critically ill Medicare beneficiary population will go unmet without these additional beds. Response: We do not agree with the commenters’ assertion regarding CMS’ authority to establish two regulatory exceptions to the statutory moratorium on the increase in the number of beds in existing LTCHs and LTCH satellite facilities. Unlike the ‘‘expired’’ moratoria, the ‘‘new’’ moratoria under section 1206(b)(2) of Public Law 113–67 expressly noted that such exceptions would not apply under the ‘‘new’’ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 moratoria. We refer readers to section 1206(b)(2)(B) of Public Law 113–67. When further amended by section 112(b) of the PAMA of 2014, Congress only elected to provide exceptions for the establishment of new LTCHs and LTCH satellite facilities, but not for the increase in the number of LTCH beds. We do not believe that these two laws, read in concert, are ambiguous. Congress explicitly addressed the former exceptions as they relate to the ‘‘new’’ moratorium. In doing so, Congress clearly demonstrated its awareness of the prior exceptions, and by stating that the exceptions do not apply under the ‘‘new’’ moratorium while concurrently not offering new exceptions, clearly indicated that Congress intended to offer no such exceptions. Furthermore, there is no reason for CMS to presume that the subsequent provisions for exceptions under the ‘‘new’’ moratoria on the establishment of new LTCHs and LTCH satellite facilities, but not for the increase in the number of LTCH beds was anything other than intentional, absent evidence to the contrary. The commenters did not present any evidence of this nature. Therefore, in the absence of some indication that Congress intended to reverse its specific statement under section 1206(b)(2)(B) of Public Law 113–67 that limits the application of exceptions, such as it did in establishing exceptions to the moratorium on the establishment of new LTCHs and LTCH satellite facilities, we see no reason to infer that the absence of any exceptions in regard to the moratorium on the increase in the number of beds in existing LTCHs and LTCH satellite facilities was anything other than intentional. Furthermore, in response to the commenters’ ‘‘reasonable reliance’’ assertions, while we may understand the commenters’ concerns regarding wasted resources, such concerns do not permit us to offer rulemaking that would be contrary to the express intent of Congress. Finally, while we understand the commenters’ concerns regarding access to care for Medicare beneficiaries, we believe that Congress would have provided exceptions if it believed that beneficiary access to LTCH and LTCH satellite facility beds would be negatively impacted. Furthermore, we expect that Congress would address any unanticipated access issues, should these issues arise. Therefore, we disagree with the commenters’ assertions. Comment: One commenter urged CMS to revise its interpretation of the exceptions provisions under the moratorium on the development of new PO 00000 Frm 00340 Fmt 4701 Sfmt 4700 LTCHs and LTCH satellite facilities so as to include ‘‘ownership’’ of the property in the list of permitted activities that could be included in the criteria for qualifying for the ‘‘binding written agreement’’ exception. The commenter also urged CMS to include the purchase of architectural plans as a necessary element that would count towards quantifying the total expenditure amount. Response: In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that the ‘‘new’’ moratorium on the development of new LTCHs and LTCH satellite facilities provided under section 1206(b)(2) of Public Law 113–67, as amended by section 112(b) of the PAMA, and incorporated as section 114(d)(7) of the MMSEA ‘‘. . . mirrors the expired provisions of section 114(d)(2)(A)’’ of the ‘expired’ moratorium.’’ Because Congress used the identical wording for these provisions, we proposed to apply the same interpretation of the exceptions provisions that we used for the ‘‘expired’’ moratorium in regard to the ‘‘new moratorium. (We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28198).) The specific exception provision that the commenters are questioning is outlined under section 114(d)(7)(B) of the MMSEA, as amended, and is defined as the ‘‘binding written agreement’’ exception. Section 114(d)(7)(B) of the MMSEA of 2007, as amended, specifies one of the qualifying criterion for this exception, namely, the requirement for the facility to have a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for a long-term care hospital, and have expended, before the date of the enactment of the PAMA, at least 10 percent of the estimated cost of the project (or, if less, $2,500,000). After we implemented the provisions of the ‘‘expired’’ moratorium, published in the May 22, 2008 interim final rule with comment period (73 FR 29699), in response to the FY 2010 IPPS/LTCH PPS final rule, commenters urged CMS to revise its interpretation of the ‘‘binding written agreement’’ exception under section 114(d)(2)(B) of the MMSEA to include ‘‘. . . feasibility studies, land purchases, architectural fees, attorneys’ fees, appraisals, purchase of rights of way, as well as other activities that occur during the development of a hospital . . .’’ At that time, we stated in our response that, ‘‘. . . Congress expressly specified only four ‘actual’ activities in the statute.’’ We also believe, as we stated in the May 22, 2008 interim final rule with E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV comment period, that the use of the term ‘‘actual’’ in the context of the exception provisions terminology of ‘‘actual construction, renovation, lease, or demolition’’ limits the activities that Congress considers to represent a substantial commitment to that particular project of developing an LTCH or an LTCH satellite facility. By using the term ‘‘cost of the project,’’ we believe that the statute refers to the activities enumerated in the first prong, ‘‘the ‘actual’ construction, renovation, lease, or demolition for a long-term care hospital.’’ (We refer readers to the FY 2010 IPPS/LTCH PPS final rule with comment period (74 FR 43988).) Our interpretation of the exception provisions for a ‘‘binding written agreement’’ under the ‘‘expired’’ moratorium was implemented in FY 2008 with the publication of the May 22, 2008 interim final rule with comment period (73 FR 29699), and finalized in the FY 2010 IPPS/LTCH PPS final rule with comment period (74 FR 43754). While we understand that our longstanding interpretation of the language in this exception may cause hardship to developing LTCHs and LTCH satellite facilities that seek to qualify for the exception under the ‘‘expenditure’’ prong, we continue to believe that only the specific costs cited in the statute may be considered in evaluating and granting exceptions to the ‘‘new’’ moratorium. Furthermore, we also believe that by using the same language in the exceptions provisions under the ‘‘new’’ moratorium that was used in the provisions of the ‘‘expired’’ moratorium, Congress had reason to expect that CMS would apply the same interpretation under the ‘‘new’’ exception provisions as were applied under the ‘‘expired’’ moratorium exception provisions. If Congress disagreed with our interpretation, or believed that other costs should be included or considered in determining whether an LTCH or LTCH satellite facility would qualify for this exception to the moratorium, it could have revised the language used under section 112(b) of the PAMA, which applies the exceptions, accordingly. H. Evaluation and Treatment of LTCHs Classified Under Section 1886(d)(1)(B)(iv)(II) of the Act Section 1206(d) of the Pathway for SGR Reform Act (Pub. L. 113–67) instructs the Secretary to evaluate payments and regulations governing ‘‘hospitals which are classified under subclause (II) of subsection (d)(1)(B)(iv) . . .’’ as part of the annual rulemaking for payment rates under subsection (d) of section 1886 of the Act for FY 2015 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 or FY 2016. (We refer to hospitals ‘‘classified under subclause (II) of subsection (d)(1)(B)(iv) . . .’’ as ‘‘subclause (II) LTCHs.’’) Based on the results of this evaluation, the Secretary is authorized to adjust the payment rates under section 1886(b)(3) of the Act for this type of hospital (such as by applying a payment adjustment such that the payments resemble those under a ‘‘TEFRA-payment model’’). To implement such a payment adjustment, the Secretary would have to propose changes to the existing regulations governing subclause (II) LTCHs. For this final rule, under the requirements of section 1206(d)(1) of Public Law 113–67 to evaluate the payment rates and regulations governing subclause (II) LTCHs, we have reviewed Medicare data from the only hospital meeting the statutory definition of a subclause (II) LTCH. As a result of these analyses, we are applying a payment adjustment to subclause (II) LTCHs beginning in FY 2015, which will result in payments for this category of LTCHs that resemble a payment based upon a TEFRA payment model (that is, a reasonable cost payment, subject to a ceiling). Section 4417(b) of the BBA established the meaning of ‘‘subsection (d) hospitals,’’ which are paid under the IPPS, and in doing so, excluded two categories of hospitals that experience extended average inpatient length of stays. It also authorized the Secretary to define how an average inpatient length of stay would be calculated for these excluded hospitals. These provisions are included under sections 1886(d)(1)(B)(iv)(I) and (d)(1)(B)(iv)(II) of the Act, and the two categories of hospitals are generally referred to as subclause (I) and subclause (II) LTCHs. Subclause (I) LTCHs are required to have an average inpatient length of stay that is greater than 25 days. Subclause (II) LTCHs are only required to have an average inpatient length of stay of greater than 20 days. The subclause (II) LTCH definition further limited the classification of a subclause (II) LTCH by including the requirement that the LTCH must have been first excluded from the IPPS in CY 1986, and treated a Medicare inpatient population in which 80 percent of the discharges in the 12-month reporting period ending in Federal FY 1997 had a principal diagnosis that reflected a finding of neoplastic disease. This statutory requirement is implemented under 42 CFR 412.23(e)(2)(ii). In establishing the category of subclause (II) LTCHs, Congress essentially authorized special treatment of a hospital that, since 1986, had PO 00000 Frm 00341 Fmt 4701 Sfmt 4700 50193 focused on the provision of palliative care to Medicare beneficiaries diagnosed with end-stage cancer. In consideration of the distinction between hospitals qualifying as LTCHs, either as a subclause (I) LTCH or a subclause (II) LTCH, we established different standards for counting the average inpatient length of stay values for these two categories of LTCHs. We calculate the greater than 25-day average length of stay criteria using only Medicare claims data for subclause (I) LTCHs. However, for subclause (II) LTCHs, we calculate the average length of stay based on its entire patient population. We refer readers to the RY 2003 LTCH PPS final rule (67 FR 55974) for a full discussion of our rationale for implementing these average length of stay calculation methodologies. The theoretical foundations of any PPS are based on a system of averages, where the costs of some cases may exceed the payment, while other cases’ costs will be less than the payment, creating an adequate balance in payments. Therefore, it is assumed that a hospital paid under a PPS would be able to maintain a balance of patients that will allow the hospital to achieve fiscal stability. With that said, in developing the LTCH PPS we were aware that a per discharge PPS system that pays the same amount for every case in a specific MS–LTC–DRG could encourage hospitals to make decisions based on financial considerations (such as prematurely discharging patients to reduce the cost of such cases). As per discharge payments under the LTCH PPS are based on the extended lengths of stay that characterize LTCHs, at the outset of the LTCH PPS, we established a short-stay outlier (SSO) policy under which we apply a payment adjustment for LTCH discharges with lengths of stay that do not exceed 5/6 of the geometric average length of stay of the MS–LTC– DRG. Equally, we were aware that there would be exceptionally expensive cases that could create financial disincentives to treat such patients and, therefore, we adopted a high-cost outlier (HCO) policy as well. However, given the nature of a subclause (II) LTCH’s patient population, it may not be reasonable to expect a balancing of more and less costly cases, as these LTCHs are generally only treating a subset of very sick patients. As such, we modified our original SSO payment policy for subclause (II) LTCHs, and we exempted this category of LTCHs from additional changes to the SSO policy to account for the extremely high percentage of cases that our data analysis revealed would have been subject to our SSO policy if E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50194 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations that policy were to be applied to subclause (II) LTCHs. In accordance with the requirements of section 1206(d)(1) of Public Law 113– 67, we conducted an evaluation of the payment rates and regulations governing subclause (II) LTCHs. We analyzed MedPAR claims data for FY 2010 and estimated Medicare costs incurred by the one LTCH currently classified as a subclause (II) LTCH, a 225-bed LTCH located in New York. We also evaluated the same metrics for two comparison groups of LTCHs, that is, approximately 40 LTCHs located in the same census region (that is, the Northeast Census Region, which includes Connecticut, Maine, New Jersey, and Pennsylvania), and approximately 25 LTCHs with the same bed size category (that is, between 150 and 250 beds) in order to assess the distinctions between a subclause (I) LTCH and a subclause (II) LTCH. For purposes of this analysis, LTCH PPS payments were calculated from the payment field in the MedPAR claims data, and the estimated costs for those claims were calculated using the covered charges and CCRs in the Provider-Specific File (PSF) that correlate to the discharge date on each claim. We calculated the aggregate average margins (ratio of payment to costs) for the subclause (II) LTCH and for the two sets of comparison groups of LTCHs using the calculated FY 2010 costs and payments. Our analysis found that, under current LTCH PPS payment policy, the subclause (II) LTCH has much lower margins than comparable LTCHs located in the Northeast Census Region or LTCHs with 150–250 beds. Specifically, the subclause (II) LTCH had a negative margin for its Medicare patients paid under LTCH PPS in FY 2010, while both the Northeast Census Region LTCHs and LTCHs with 150–250 beds had positive aggregate margins for its Medicare patients paid under LTCH PPS for the same period. In our evaluation of subclause (II) LTCHs under the LTCH PPS, in accordance with the requirements of section 1206(d) of Public Law 113–67, we also compared the types of patients treated at subclause (I) and subclause (II) LTCHs. The top five MS–LTC–DRGs for patients treated at the subclause (II) LTCH in FY 2010 account for almost one-third of all of its Medicare discharges. Four of the top five MS– LTC–DRGs for the subclause (II) LTCH involve a neoplastic disease, and its case-mix differs significantly from the subclause (I) LTCHs, which had large proportions of ventilator and respiratory patients. The five most common MS– LTC–DRGs for the subclause (I) LTCHs were: Respiratory system diagnosis with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 ventilator support 96+ hours (MS–LTC– DRG 207); Pulmonary edema and respiratory failure (MS–LTC–DRG 189); Septicemia or severe sepsis without ventilator support 96+ hours with MCC (MS–LTC–DRG 870); Skin ulcers with MCC (MS–LTC–DRG 592); and Respiratory system diagnosis with ventilator support < 96 hours (MS–LTC– DRG 208). In comparison, for the subclause (II) LTCH, the five most common MS–LTC–DRGs were: Respiratory neoplasms with CC (MS– LTC–DRG 181); Digestive malignancy with CC (MS–LTC–DRG 375); Respiratory neoplasms with MCC (MS– LTC–DRG 180); Organic disturbances & mental retardation (MS–LTC–DRG 884); and Malignancy, female reproductive system w CC (MS–LTC–DRG 755). These data highlight significant differences between a subclause (I) LTCH and a subclause (II) LTCH based on patient-mix and Medicare margins, notwithstanding the considerations that have been made in structuring the current LTCH regulations to acknowledge the uniqueness of an LTCH meeting the statutory definition of a subclause (II) LTCH. In evaluating ‘‘both the payment rates and regulations governing hospitals which are classified under subclause (II) . . . ,’’ as required by section 1206(d) of Public Law 113–67, we also analyzed the impacts of upcoming changes to the LTCH PPS under section 1206(a) of Public Law 113–67. In discussing these analyses, we note that, as discussed in section VII.I.2. of the preamble of this final rule, we are not making any specific policy and payment changes in this final rule to implement the provisions of section 1206(a) of Public Law 113–67. We intend to establish policies related to the types of LTCH cases expected to meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ and cases expected to meet the criteria for the ‘‘site neutral’’ payments under the LTCH PPS in the FY 2016 rulemaking cycle. Although we are not making any specific policy or payment changes in this final rule related to the provisions of section 1206(a) of Public Law 113–67 at this time, we discuss these provisions in this section because they relate to our analysis of the LTCH PPS payment rates and regulations governing subclause (II) LTCHs. Absent the adoption of policies for the implementation of section 1206(d) of Public Law 113–67, the payment changes required by section 1206(a) of Public Law 113–67 will apply to subclause (II) LTCHs beginning with discharges occurring in cost reporting periods beginning on or after October 1, PO 00000 Frm 00342 Fmt 4701 Sfmt 4700 2015 (that is, FY 2016 and beyond). Due to the changes required by the provisions of section 1206(a) of Public Law 113–67 (discussed at greater length under section VII.I. of the preamble of this final rule), beginning in FY 2016, only those LTCH discharges meeting specified patient-level clinical criteria will be paid a ‘‘standard LTCH PPS payment amount.’’ Discharges not meeting those criteria will be paid based on a ‘‘site neutral’’ payment amount (the lesser of the ‘‘IPPS comparable’’ amount, as applied under our SSO policy at § 412.529, or 100 percent of the estimated costs of the case). The statutory requirements to be paid the ‘‘standard LTCH PPS payment amount’’ are that the LTCH discharge does not have a principal diagnosis relating to a psychiatric diagnosis or to rehabilitation, and: • The stay in the LTCH was immediately preceded by a discharge from an acute care hospital that included at least 3 days in an intensive care unit (ICU); or • The stay in the LTCH was immediately preceded by a discharge from an acute care hospital and the patient’s LTCH stay is assigned to an MS–LTC–DRG based on the receipt of ventilator services of at least 96 hours. Furthermore, section 1206(a)(1)(C)(ii)(II) of Public Law 113– 67 specifies that, effective with cost reporting periods beginning on or after FY 2020, any LTCH with an ‘‘LTCH discharge payment percentage’’ that demonstrates that more than 50 percent of that LTCH’s discharges were paid for based on the ‘‘site neutral’’ payment rate will subsequently be paid for all discharges at the rate ‘‘. . . that would apply under subsection (d) for the discharge if the hospital were a subsection (d) hospital.’’ We refer readers to section VII.I. of the preamble of this final rule for a further discussion of the provisions of section 1206(a) of Public Law 113–67. In light of these forthcoming statutory changes, we evaluated MedPAR claims data from the only hospital meeting the statutory definition of a subclause (II) LTCH for FY 2010 to project the impact of the revisions to the LTCH PPS made by section 1206(a) of Public Law 113– 67. Our simulations included analyses of the potential financial impact of applying the patient-level criteria and ‘‘site neutral’’ payment policies to a subclause (II) LTCH, and the financial impact on payments if that LTCH were to be paid for more than 50 percent of its discharges at the ‘‘site neutral’’ payment rate. In conducting this analysis in the absence of rules implementing the changes mandated by E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations section 1206(a) of Public Law 113–67, we assumed that there would be no changes in LTCH admission patterns in response to the LTCH PPS payment changes required by section 1206(a) of Public Law 113–67. Furthermore, we used the FY 2010 claims data for the subclause (II) LTCH and the two LTCH comparison groups described above in order to compare the potential effects of the payment changes under the LTCH PPS required by section 1206(a) of Public Law 113–67 between subclause (I) LTCHs and subclause (II) LTCHs. We simulated payments for those discharges that would be expected to meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ and for discharges that would be expected to receive ‘‘site neutral’’ payments under the LTCH PPS. Our analysis found that the subclause (II) LTCH would be expected to have significantly fewer (approximately 5 times fewer) discharges that would be expected to meet the legislative patient-level criteria for the ‘‘standard LTCH PPS payment’’ than the comparison groups of subclause (I) LTCHs (that is, Northeast Census Region LTCHs and LTCHs with 150–250 beds). Additionally, we analyzed the potential effects of the ‘‘LTCH discharge payment percentage’’ provision under the requirements of section 1206(a)(1)(C)(ii)(II) of Public Law 113– 67, as noted above. We evaluated FY 2010 claims data from the subclause (II) LTCH to project the potential impact of this provision. Based on our simulations in which we projected which FY 2010 LTCH claims would be expected to receive ‘‘site neutral’’ payments under the LTCH PPS (as described above), and having found a significant number, we project that a significant negative financial impact would be imposed upon the subclause (II) LTCH’s payments. Without considerable behavioral changes, the subclause (II) LTCH would be expected to have more than 50 percent of its discharges paid based on a ‘‘site neutral’’ payment and, therefore, would receive a payment adjustment under the provisions of section 1206(a)(1)(C)(ii)(II) of Public Law 113–67 for all of its discharges. Furthermore, our analysis revealed that, given the particular medical profile of their patient population, that the ‘‘subsection (d)’’ comparable payment amount under the payment adjustment required by section 1206(a)(1)(C)(ii)(II) of Public Law 113–67 would not likely cover the costs for a significant number of their discharges. Consequently, our analysis shows that the subclause (II) LTCH is projected to experience a large VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 negative aggregate average margin for its Medicare discharges under the payment changes required by section 1206(a) of Public Law 113–67. Based on our findings under our evaluation of payments to subclause (II) LTCHs under the LTCH PPS and consistent with the provisions of section 1206(d) of Public Law 113–67, we evaluated adjustments that could be applied to ensure appropriate payments under the LTCH PPS for a subclause (II) LTCH under the LTCH PPS. This analysis included consideration of a reasonable-cost based model, such as the TEFRA payment system under which certain PPS-excluded hospitals (such as children’s and cancer hospitals) are currently paid. The TEFRA payment system, which was established under the provisions of Public Law 97–248, is implemented under the regulations at 42 CFR 413.40. In addition to governing the current payment of certain PPS-excluded hospitals, the TEFRA payment system was also previously used to pay LTCHs prior to the implementation of the LTCH PPS. As described in the RY 2003 LTCH PPS final rule (67 FR 55957), the TEFRA payment system was ‘‘. . . established [to make] payments based on hospitalspecific limits for inpatient operating costs. A ceiling on payments to such hospitals is determined by calculating the product of a facility’s base year costs (the year on which its target reimbursement limit is based) per discharge, updated to the current year by a rate-of-increase percentage, and multiplied by the number of total current year discharges.’’ (A detailed discussion of target amount payment limits under Public Law 97–248 can be found in the September 1, 1983 final rule published in the Federal Register (48 FR 39746).)’’ Under the TEFRA payment system, in accordance with section 1886(g) of the Act, Medicare allowable capital costs are paid on a reasonable cost basis. We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule for a detailed description of our analysis and evaluation of the application of the TEFRA payment model to a subclause (II) LTCH (78 FR 28202 through 28203). We note that in describing our estimated operating and capital payments under the TEFRA payment system principles in the proposed rule, we mistakenly stated that we used FY 2010 cost report data when those estimates were determined using FY 2011 cost report data. Our analysis of the subclause (II) LTCH’s projected payments under a TEFRA-payment model indicated that such payments would reasonably cover the costs for most of their discharges, PO 00000 Frm 00343 Fmt 4701 Sfmt 4700 50195 and consequently, the subclause (II) LTCH is not projected to experience a negative aggregate margin for its Medicare discharges, unlike our projections under both the current LTCH PPS and the forthcoming payment changes to the LTCH PPS required by section 1206(a) of Public Law 113–67. In the above analyses, we evaluated the current regulations as well as anticipated payment rates under various statutorily mandated policies for FY 2016 on a subclause (II) LTCH under the LTCH PPS based on FY 2010 discharge data, including payments, costs and case-mix. As discussed above, our evaluation indicates that, given the required patient-mix for a subclause (II) LTCH, the forthcoming changes to the LTCH PPS are likely to result in a financial situation that is not sustainable for the subclause (II) LTCH evaluated above. Furthermore, our analysis also shows that current LTCH PPS payments for a subclause (II) LTCH, even with taking into account the considerations that have been made in structuring current LTCH PPS policies to acknowledge the uniqueness of a subclause (II) LTCH, may not be sufficient to cover the costs incurred for the treatment of patients of the particular medical profile of the subclause (II) patient population prescribed by the statute. Furthermore, we believe that in establishing subclause (II) LTCHs, Congress endorsed the support of the unique mission of this particular category of hospital. In fact, while mandating a significant revision to the LTCH PPS under section 1206(a) of Public Law 113–67, under section 1206(d) of the same statute, Congress directed the Secretary to evaluate the impact of the LTCH PPS on subclause (II) LTCHs, and, based on those findings, authorized the Secretary to adjust payment rates and other regulations, as appropriate, for this category of LTCHs. Accordingly, in recognition of the subclause (II) LTCH’s current estimated payment-to-cost ratio under the LTCH PPS and further anticipated losses that would likely otherwise occur under the forthcoming statutory changes to the LTCH PPS, which would render this type of specially recognized facility fiscally untenable, we believe that it is appropriate to exercise the authority under section 1206(d)(2) of Public Law 113–67. Therefore, in this final rule, for cost reporting periods beginning on or after October 1, 2014 (FY 2015 and beyond), we are applying a payment adjustment to subclause (II) LTCH payments under the LTCH PPS such that these LTCH PPS payments will E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50196 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations resemble payments made under the reasonable cost-based TEFRA payment system. We believe that it is appropriate to apply this payment adjustment for a subclause (II) LTCH’s first cost reporting period beginning on or after October 1, 2014, rather than discharges occurring on or after October 1, 2014, because it is consistent with the annual update of the hospital-specific limits (ceiling) for inpatient operating costs under the TEFRA payment system (as described below). We are implementing this payment adjustment for subclause (II) LTCHs in the regulations by adding new § 412.526 under 42 CFR Part 412, Subpart O. Specifically, in this final rule we are establishing new regulations under § 412.526 that will provide that, for cost reporting periods beginning on or after October 1, 2014, payments to a ‘‘subclause (II)’’ LTCH will be made under the LTCH PPS under Subpart O of Part 412, as adjusted. This adjusted payment amount will generally be equivalent to an amount determined under the reasonable cost-based reimbursement rules for both operating and capital-related costs under 42 CFR Part 413. As described above, Medicare payments for inpatient operating costs under the reasonable-cost based TEFRA payment system are subject to a hospital-specific ceiling on payments that is determined as the product of a hospital’s base year costs per discharge (‘‘target amount per discharge’’), updated to the current year by a rate-ofincrease percentage, and multiplied by the number of its Medicare discharges for the year. Medicare allowable inpatient capital-related costs are paid on a reasonable cost basis, in accordance with section 1886(g) of the Act. Under this payment adjustment under new § 412.526 for inpatient operating costs, the adjusted payment amount will generally be determined in accordance with the cited provisions of § 413.40. Accordingly, we are establishing a ‘‘target amount’’ for a subclause (II) LTCH for purposes of calculating a hospital-specific ceiling on payments for inpatient operating costs under this payment adjustment. We will determine such a target amount based on the subclause (II) LTCH’s target amount that was used to determine its payments for inpatient operating costs under the TEFRA payment system prior to the implementation of the LTCH PPS, updated by the TEFRA payment system rate-of-increase percentages under § 413.40(c)(3). Furthermore, in determining a subclause (II) LTCH’s target amount for purposes of this payment adjustment, consistent with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the statute (as explained below), we are not including the increases to LTCHs’ TEFRA target amounts and caps provided for by section 307(a) of the BIPA. As discussed previously, prior to the implementation of the LTCH PPS, section 307(a) of the BIPA provided a 2percent increase to the wage-adjusted 75th percentile cap on the TEFRA target amounts for existing LTCHs for cost reporting periods beginning in FY 2001 and a 25-percent increase to the hospital-specific TEFRA target amounts for LTCHs, subject to the increased 75th percentile cap. Section 307(a)(2) of the BIPA also specifies that the 2-percent increase to the 75th percentile cap and the 25-percent increase to the TEFRA target amounts were not to be taken into account in the development and implementation of the LTCH PPS. Therefore, consistent with the statutory requirement under section 307(a)(2) of the BIPA, under new § 412.526, we will determine a subclause (II) LTCH’s updated target amount based on its FY 2000 TEFRA payment system target amount, the year prior to when the increases under section 307(a) of the BIPA were effective. Using its FY 2000 TEFRA payment system target amount will ensure that the increases provided for by section 307(a) of the BIPA will not be included in the LTCH PPS payments to subclause (II) LTCHs under this LTCH PPS payment adjustment. This approach for excluding those increases to the TEFRA payment system target amounts is consistent with the methodology that was used to develop the one-time prospective adjustment to the standard Federal rate in which we calculated what amount would have been paid under the TEFRA payment system had the LTCH PPS not been implemented (77 FR 53497 through 53500). Therefore, under the payment adjustment for subclause (II) LTCHs under new § 412.526, we will determine a FY 2015 LTCH PPS target amount by updating the subclause (II) LTCH’s FY 2000 TEFRA target amount using the applicable rate-of-increase percentages for FYs 2001 through 2015 established under § 413.40(c)(3). In addition, as with TEFRA payment system, we will pay for inpatient capital-related costs in accordance with the regulations under 42 CFR Part 413, under which Medicare allowable capital costs are paid on a reasonable cost basis, consistent with section 1886(g) of the Act. Comment: Several commenters supported the proposed policy to apply a payment adjustment to subclause (II) LTCHs payments modeled on the TEFRA payment system. In addition, the commenters suggested that CMS PO 00000 Frm 00344 Fmt 4701 Sfmt 4700 provide the authority for this LTCH to request and receive an adjustment to its rate-of-increase ceiling, as specified in our TEFRA regulations at 42 CFR 413.40 (e), (g), and (i) for other hospitals paid on a TEFRA basis ‘‘. . . to address circumstances that arise that are beyond a hospital’s control and render an applicable TEFRA ceiling amount inadequate.’’ Response: We have evaluated the provisions specified by the commenters and considered the fiscal circumstances of the one subclause (II) LTCH that will be affected by the payment system revisions finalized in this final rule. In response to the commenters’ concerns, we believe that it would be reasonable to consider circumstances that may arise that are beyond a hospital’s control and that may render an applicable LTCH PPS ceiling amount inadequate. Therefore, we are adding new paragraph (c)(5)(i) under new § 412.526 entitled ‘‘Adjustments for Extraordinary circumstances.’’ Paragraph (c)(5)(i)(A) under new § 412.526 states that CMS may adjust the ceiling determined under paragraph (c)(1) of the section for one or more cost reporting periods when unusual inpatient operating costs have resulted in the hospital exceeding its ceiling imposed under this section due to extraordinary circumstances beyond the hospital’s control. These circumstances include, but are not limited to, strikes, fire, earthquakes, floods, or similar unusual occurrences with substantial cost effects. The other suggestion recommended by the commenters deal with the LTCH’s ability to request an adjustment to their allowed LTCH PPS rate-ofincrease ceiling, if their costs during a specific period are no longer comparable to the base year and the authority to request a new base year for its LTCH PPS target amount. Because our data reveal that, on average, for the past 6 years, this LTCH’s costs are considerably below the amount that OACT calculated as its FY 2015 target amount, we believe that these additional features are unnecessary at this time. Moreover, if future data indicate that a change is warranted, we will consider proposing to add these features to our policy in future rulemaking. In summary, for cost reporting periods beginning on or after October 1, 2014, we are establishing that payment to a ‘‘subclause (II)’’ LTCH will be made under the LTCH PPS, as adjusted. The adjusted payment amount will be comprised of an amount determined under the reasonable cost-based reimbursement rules for both operating and capital-related costs in accordance with the cited portions of Part 413. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Under this payment adjustment, Medicare inpatient operating costs will be reimbursed on a reasonable cost basis, subject to a ceiling; that is, subject to an aggregate upper limit on the amount of a hospital’s net Medicare inpatient operating costs that will be recognized for payment purposes. For each cost reporting period, the ceiling on payments for Medicare inpatient operating costs will be determined by multiplying the updated target amount for that period by the number of LTCH PPS discharges during that period. For cost reporting periods beginning during FY 2015, the target amount will be equal to the hospital’s target amount determined under § 413.40(c)(4) for its cost reporting period beginning during FY 2000, updated by the applicable annual rate-of-increase percentages specified in § 413.40(c)(3) to the subject period (that is, for FYs 2001 through 2015). For subsequent cost reporting periods, the target amount will equal the hospital’s target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period. Payment for Medicare allowable inpatient capital-related costs under this payment adjustment will be made on a reasonable cost basis, in accordance with the cited portions of 42 CFR Part 413. In this final rule, we are codifying the provisions of this payment adjustment to subclause (II) LTCHs under new § 412.526 of the regulations. We are adding paragraph (c)(5), which establishes the general rules for requesting adjustments and also includes a provision to provide adjustments for unusual costs arising from extraordinary circumstances. In addition, we are making conforming changes to § 412.521(a)(2) to cross reference this payment adjustment under new § 412.526. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV I. Description of Statutory Framework for Patient-Level Criteria-Based Payment Adjustment Under the LTCH PPS Under Pub. L. 113–67 1. Overview In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through 27676), we presented a description of our research on the development of patient-level and facility-level criteria for LTCHs and a potential framework for developing changes to the LTCH PPS. The framework was based on the preliminary findings of two projects conducted by Kennell and Associates (Kennell) and its subcontractor, RTI, under the guidance of CMS’ Center for Medicare and Medicaid Innovation (the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Innovation Center). We stated that we believed that the findings from these projects, in large part, could be used to identify the subpopulation of Medicare beneficiaries that should form the core group of patients under the LTCH PPS (that is, a chronically critical ill/ medically complex (CCI/MC) framework for the LTCH PPS). Although this research was not completed at the time of issuance of the FY 2014 IPPS/LTCH PPS proposed rule, we solicited feedback from LTCH stakeholders in the FY 2014 IPPS/LTCH PPS proposed rule on the description of the interim framework, and indicated that any public comments submitted would be evaluated and considered by our contractors with the expectation of formulating a proposal for FY 2015 based on this research (78 FR 27668 through 27676). Section 1206(a) of Public Law 113–67 amended section 1886(m) of the Act by adding paragraph (6), which establishes patient-level criteria for payments under the LTCH PPS for implementation beginning in FY 2016. Therefore, our prior intention to present a proposal for a CCI/MC framework for the LTCH PPS (as discussed in the FY 2014 IPPS/LTCH PPS proposed and final rules) in the FY 2015 IPPS/LTCH PPS proposed rule was superseded. Accordingly, we did not propose revisions to the LTCH PPS based upon the Kennell/RTI framework for FY 2015. Rather, we stated that we intend to propose to implement the requirements established by section 1206(a) of Public Law 113–67 in the FY 2016 LTCH PPS rulemaking cycle. (We note that the final report on the CCI/MC framework developed by Kennell/RTI under our research contract is expected to be available later this year and will be made available to the public through a Web site.) We refer readers to section VII.I.2. of the preamble of the proposed rule in which we summarized the statutory provisions of section 1206(a) of Public Law 113–67 (78 FR 28204). In section VII.I.2. of the preamble of this final rule, we discuss several significant issues arising from these statutory changes to the LTCH PPS, on which we requested stakeholder feedback prior to developing our proposals for FY 2016 implementation. We intend to propose the specific policy and payment changes that will be necessary to implement the provisions of Public Law 113–67 for cost reporting periods beginning on or after October 1, 2015, during the FY 2016 rulemaking cycle. Although we did not propose to make any policy and payment changes mandated by section 1206(a)(1) of Public Law 113–67 in the FY 2015 IPPS/LTCH PPS proposed rule, PO 00000 Frm 00345 Fmt 4701 Sfmt 4700 50197 in light of the degree of the forthcoming changes, in section VII.I.3. of the preamble of the proposed rule, we discussed some of the changes and requested public feedback to inform our proposals for FY 2016. 2. Additional LTCH PPS Issues The LTCH PPS was originally established for cost reporting periods beginning on or after October 1, 2002, by section 123(a) of the BBRA (Pub. L. 106–113) and section 307(b) of the BIPA (Pub. L. 106–554). (We also refer readers to section 1886(m) of the Act, as added by section 114(e) of the MMSEA.) Section 307(b) of the BIPA granted the Secretary considerable authority in developing the LTCH PPS, specifying that the Secretary shall ‘‘. . . examine and may provide for appropriate adjustments to the long-term hospital payment system, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. . . .’’ Accordingly, as we evaluate the revisions to the LTCH PPS required by section 1206(a)(1) of Public Law 113–67, we believe that the broad authority permitted by the original statutory mandates continues to grant us the authority to modify, if appropriate, methodologies for our payment determinations under the LTCH PPS. (We refer readers to the RY 2003 LTCH PPS final rule (67 FR 55954), which describes the development and implementation of the LTCH PPS for FY 2003.) Specifically, section 1206(a) of Public Law 113–67 establishes two distinct payment groups for LTCH discharges under the revised system: discharges meeting specified patientlevel criteria that will be paid under the ‘‘standard LTCH PPS payment amount’’ and all other patient discharges that will be paid under the ‘‘site neutral’’ payment rate and methodology (discussed above). In setting the payment rates and factors under the LTCH PPS as required by section 1206(a) of Public Law 113–67 for certain LTCH PPS payment adjustments, such as the MS–LTC–DRG relative weights and high-cost outlier payments, we plan to evaluate whether it would be appropriate to modify our historical methodology to account for the establishment of the two distinct payment methodologies for LTCHs. For example, we intend to examine whether, beginning in FY 2016, it is still appropriate to include data for all LTCH PPS cases, including ‘‘site neutral’’ payment cases, in our methodology for setting relative payment weights for MS–LTC–DRGs. We also intend to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50198 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations explore the need for changes to the LTCH PPS high-cost outlier payment policies. Given the fact that, for a number of LTCH patients, payment will be made based on the lower of the ‘‘IPPS comparable’’ per diem payment and the estimated cost of the case, we will need to decide whether to maintain a single high-cost outlier ‘‘target’’ for all LTCH PPS cases (including ‘‘site neutral’’ payment cases) or whether it may be more appropriate to establish separate high-cost outlier ‘‘targets’’ for each of the two payment groups under the revised LTCH PPS. Our existing methodology for calculating the MS– LTC–DRG relative weights is discussed during the annual rulemaking cycle and was, most recently, included in the FY 2014 IPPS/LTCH final rule (78 FR 50753 through 50760). Our detailed description of our existing high-cost outlier payment policy, which has remained the same since being implemented, can be found in the RY 2003 LTCH PPS final rule (67 FR 56022 through 56027). (We note that our methodology for calculating the MS– LTC–DRG relative payment weights for FY 2015 can be found in section VII.B.3. of the preamble of this final rule, and our policies under the high-cost outlier payment policy for FY 2015 can be found in section V.D. of the Addendum to this final rule.) In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we were interested in receiving feedback from LTCH stakeholders on our plans to evaluate whether it would be appropriate to modify any of our historical methodologies as we implement the payment changes to the LTCH PPS under section 1206(a) of Public Law 113–67. In particular, we were interested in public feedback on the issues mentioned earlier (that is, policies relating to establishing the relative payment weights and high-cost outliers) so that we may evaluate various options in preparation for developing proposals to implement the statutory changes beginning in FY 2016. Comment: In response to our request for feedback from LTCH stakeholders, numerous commenters addressed the setting of relative payment weights for MS–LTC–DRGs and establishing a highcost outlier policy under the new LTCH PPS framework. MedPAC urged CMS to establish ‘‘. . . new LTCH base payment rates and new relative payment weights for each MS–LTC–DRG based solely on the most recent available standardized data associated with discharges meeting the specified patient-level criteria.’’ MedPAC stated that the change in methodology required by the new LTCH PPS framework should not result in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 increased aggregate payments for the cases paid under the standard LTCH PPS rate under the new LTCH PPS framework. MedPAC also recommended that both standard and site neutral payments receive high-cost outliers, and that total outlier payments under the LTCH PPS continue to account for 8 percent of total LTCH payments for all cases (both payment types combined) with the ‘‘same uniform national fixedloss amount . . . applied to both cases being paid the standard LTCH PPS payment amount and to cases being paid the site neutral amount.’’ Most of the other commenters recommended that the high-cost outlier threshold and MS–LTC–DRG relative payment weights be calculated only using data from cases that meet the patient-level criteria established by section 1206 of Public Law 113–67; that is, cases for whom Medicare will make standard payments under the LTCH PPS, without including data on ‘‘site neutral’’ payments. Some of the commenters urged CMS to focus on keeping payments for standard cases at the same payment level as they have recently been, and recommended focusing only on standard cases for the calculation of the high-cost outlier threshold and for establishing MS–LTC– DRG relative payment weights. Other commenters recommended setting the fixed-loss threshold for high-cost outliers at 8 percent initially and then readjusting the threshold as more data become available. Several commenters conducted individual analyses and specifically recommended setting the fixed-loss threshold at 8 percent for each of the two payment types, standard and site neutral. A number of commenters made recommendations regarding specific aspects of the law. Other commenters opined that site neutral payments should be based on a full IPPS payment rather than the lesser of an IPPS comparable payment and the estimated costs of the case. Many commenters expressed concern regarding the severity of illness of many LTCH patients for whom site neutral payments would be made under the new LTCH PPS framework, and noted that the costs of treating such patients would not be covered under the statutory framework and could result in patient access problems for LTCH care. Other commenters suggested that the patient-level criteria that would have to be met in order for an LTCH to receive the standard payment rate be expanded to include severe wound care patients and diabetes diagnoses with postsurgical complications. Several commenters suggested that the statutory language be clarified regarding the PO 00000 Frm 00346 Fmt 4701 Sfmt 4700 application of IPPS ICU and CCU codes 020X and 021X to determine compliance with the 3-day criteria, and urged CMS to consider all categories within those codes. Several commenters requested that CMS hold public meetings for stakeholders to address the issues presented by the implementation of section 1206 of Public Law 113–67. Response: We appreciate the commenters’ thoughtful and detailed feedback, particularly those comments received regarding setting relative payment weights for MS–LTC–DRGs and establishing a high-cost outlier policy under the new LTCH PPS framework. In preparation for proposing the new LTCH PPS framework in the FY 2016 IPPS/LTCH PPS proposed rule, we will consider these suggestions and respond to stakeholders’ concerns with openness and transparency. Comment: MedPAC included additional comments on CMS’ SSO policy in light of the new LTCH PPS framework that it believed are appropriate for inclusion in this final rule. MedPAC believed that the existing SSO policy, which pays an adjusted amount for cases with lengths of stay less than or equal to five-sixths of the geometric average length of stay for the MS–LTC–DRG, provides an incentive for LTCHs to make discharge decisions based on financial gain rather than purely clinical reasons. MedPAC analyses of LTCH discharge patterns indicate that the frequency of discharges rises sharply immediately after the SSO threshold. Once the statutory changes to the LTCH PPS are implemented, MedPAC recommended limiting the application of the existing SSO policy solely to cases paid under the standard LTCH PPS rate, and modifying the SSO policy to reduce the existing financial incentives by lowering the payment penalty for discharging patients before the SSO threshold. MedPAC recommended adopting the methodology used under the IPPS transfer policy; that is, for the first day of SSO cases payments would be twice the per diem rate for the MS–LTC–DRG with payment for each additional day set at the per diem rate up to the maximum of the full standard per discharge payment, which would only be reached 1 day before the average length of stay for the MS–LTC–DRG. For LTCH cases paid based on the site neutral payment methodology under the forthcoming statutory framework, MedPAC suggested that CMS adopt the short-stay policies that apply under the IPPS. Another commenter urged CMS to consider implementing a number of the SSO suggestions made by MedPAC. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We appreciate MedPAC’s detailed and thoughtful suggestions. J. Technical Change In this final rule, we are updating the legislative authorities cited for the regulations governing the LTCH PPS under Subpart O of Part 412. Specifically, we are adding references under new paragraphs (a)(4), (a)(5), and (a)(6) of § 412.500 of the regulations to the revisions to the Act made by section 4302(a) of Public Law 111–5, sections 3106(a) and 10312(a) of Public Law 111–148, and section 1206 of Public Law 113–67, respectively. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VIII. Administrative Appeals by Providers and Judicial Review A. Proposed and Final Changes Regarding the Claims Required in Provider Cost Reports and for Provider Administrative Appeals In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we proposed to revise the cost reporting regulations in 42 CFR Part 413, Subpart B, by requiring a provider to include an appropriate claim for a specific item in its Medicare cost report in order to receive or potentially qualify for Medicare payment for the specific item. If the provider’s cost report does not include an appropriate claim for a specific item, we proposed that payment for the item will not be included in the notice of program reimbursement (NPR) issued by the Medicare administrative contractor (MAC) (formerly known as fiscal intermediary and herein referred to as ‘‘contractor’’) or in any decision or order issued by a reviewing entity (as defined in 42 CFR 405.1801(a) of the regulations) in an administrative appeal filed by the provider. In addition, we proposed to revise the appeals regulations in 42 CFR Part 405, Subpart R, by eliminating the requirement that a provider must include an appropriate claim for a specific item in its cost report in order to meet the dissatisfaction requirement for jurisdiction before the Provider Reimbursement Review Board (Board), and by specifying the procedures for Board review of whether the provider’s cost report meets the proposed substantive reimbursement requirement of an appropriate cost report claim for a specific item. We also proposed technical revisions to other Board appeal regulations to conform those regulations to the main revisions (described above) to the cost reporting regulations and the provider appeal regulations, and proposed similar revisions to the Part 405, Subpart R regulations for appeals before the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 contractor hearing officers. We proposed that these revisions to the cost reporting regulations and the provider appeals regulations would apply to provider cost reporting periods beginning on or after the effective date of the final IPPS annual update rule. We received numerous public comments of varied legal and procedural opinions in response to our proposals to revise the cost reporting regulations and the provider appeals regulations. The concerns raised by commenters about the breadth of the proposed provisions, and the questions raised in public comments about the interpretations we provided in the preamble to the proposed rule, have instead provided us with an opportunity to further and more fully dissect and digest the public comments. Therefore, we are not finalizing our proposals to revise the cost reporting regulations and the provider appeals regulations as set forth in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978). We note that, in this final rule, we are not addressing public comments received with respect to the provisions of the proposed rule that we are not finalizing at this time. Rather, we will address them at a later time, in a subsequent rulemaking document, as appropriate. B. Proposed and Final Changes To Conform Terminology From ‘‘Intermediary’’ to ‘‘Contractor’’. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we proposed to conform the terminology in Part 405, Subpart R and all subparts of Part 413 from ‘‘intermediary’’ or ‘‘fiscal intermediary’’ to ‘‘contractor’’ pursuant to sections 1816, 1874A and 1878 of the Act. We did not receive any public comments on our proposal to conform the terminology in Part 405, Subpart R and all subparts of Part 413 from ‘‘intermediary’’ or ‘‘fiscal intermediary’’ to ‘‘contractor’’ pursuant to sections 1816, 1874A and 1878 of the Act. Therefore, we are finalizing our proposal to conform the terminology in Part 405, Subpart R and all subparts of Part 413 from ‘‘intermediary’’ or ‘‘fiscal intermediary’’ to ‘‘contractor’’. C. Technical Correction to § 405.1835 of the Regulations and Corresponding Amendment to § 405.1811 of the Regulations 1. Background and Technical Correction to §§ 405.1811 and 405.1835 of the Regulations Section 1878(a) of the Act allows providers to appeal to the Provider Reimbursement Review Board (the PO 00000 Frm 00347 Fmt 4701 Sfmt 4700 50199 Board) final determinations of program reimbursement made by a contractor, as well as certain final determinations by the Secretary involving payment under section 1886(d) (the inpatient hospital prospective payment system) and section 1886(b) (commonly known as the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) payment system) of the Act. In addition, by regulation, providers are given the right to appeal to the Board or to contractor hearing officers certain other determinations. Under section 1878(a)(1)(A), (2), and (3) of the Act, and § 405.1835(a)(1), (2), and (3)(i) of the regulations, a provider may obtain a Board hearing if it meets three jurisdictional requirements: (1) the provider is dissatisfied with a final determination of the contractor or the Secretary; (2) the amount in controversy is at least $10,000; and (3) the provider files a request for a hearing to the Board within 180 days of notice of the final determination of the contractor or the Secretary. The same jurisdictional requirements govern provider appeals to contractor hearing officers under § 405.1811(a)(1), (a)(2), and (a)(3)(i) of the regulations, except that the amount in controversy requirement is at least $1,000 but less than $10,000. However, the statutory requirements for Board jurisdiction are somewhat different if the provider does not receive a final determination of the contractor on a timely basis. Under section 1878(a)(1)(B), (a)(2), and (a)(3) of the Act, a provider may obtain a Board hearing if: (1) the provider does not receive a final determination of the contractor on a timely basis; (2) the amount in controversy is at least $10,000; and (3) the provider files a request for a hearing to the Board within 180 days after notice of the contractor’s final determination would have been received if such contractor determination had been issued on a timely basis. Moreover, § 405.1835(a)(3)(ii) of the regulations provides that a contractor determination is not timely if it is not issued, through no fault of the provider, within 12 months of the contractor’s receipt of the provider’s perfected cost report or amended cost report (as specified in § 413.24(f) of the regulations). The same jurisdictional requirements govern provider appeals to contractor hearing officers, based on an untimely contractor determination, under § 405.1811(a), except that the amount in controversy requirement is at least $1,000 but less than $10,000. As noted, section 1878(a)(1)(A) of the Act requires that the provider ‘‘is dissatisfied with a final determination’’ of the contractor or the Secretary. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50200 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations However, section 1878(a)(1)(B) of the Act does not require provider dissatisfaction for Board appeals based on an untimely final contractor determination. Before a 2008 final rule (73 FR 30190; May 23, 2008) substantially amended the appeals rules, the regulations tracked fully the statute as to whether provider dissatisfaction was a prerequisite for Board jurisdiction. In the 2007 edition of the appeals regulations, § 405.1835(a) addressed the requirements for Board appeals of final contractor determinations, and referred to § 405.1841(a), which required the provider to set forth its dissatisfaction with specific aspects of the contractor determination. Thus, consistent with section 1878(a)(1)(A) of the Act, § 405.1835(a) and § 405.1841(a) of the 2007 regulations required provider dissatisfaction for Board appeals of final contractor determinations. By contrast, Board appeals based on untimely contractor determinations were addressed in § 405.1835(c), which did not reference provider dissatisfaction. Instead, § 405.1835(c) simply provided that notwithstanding the provisions of paragraph (a)(1) of the section, the provider also has a right to a hearing before the Board if an intermediary’s determination is not rendered within 12 months after receipt of a provider’s perfected cost report or amended cost report provided such delay was not occasioned by the fault of the provider. Thus, as with section 1878(a)(1)(B) of the Act, § 405.1835(c) of the 2007 regulations did not require provider dissatisfaction for Board appeals based on untimely final contractor determinations. In the 2008 final rule (73 FR 30190), § 405.1835 was substantially revised, § 405.1841 was removed, and the prior provisions in paragraph (c) of § 405.1835 for Board appeals based on untimely contractor determinations were also eliminated. As amended, § 405.1835(a) now states that a provider has a right to a Board hearing ‘‘only if’’ three criteria are satisfied. First, the provider must have ‘‘preserved its right to claim dissatisfaction with the amount of Medicare payment’’ by making a cost report claim for the item in dispute, or by ‘‘self-disallowing’’ the item by listing it as a ‘‘protested amount’’ in the cost report. Second, the amount in controversy must be at least $10,000. Third, the Board must receive the provider’s hearing request within 180 days after the provider received the final determination of the intermediary or the Secretary. However, if a final contractor determination is not issued (through no fault of the provider) within 12 months VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 of the contractor’s receipt of the provider’s perfected cost report or amended cost report, a Board hearing must be requested within 180 days after the expiration of that 12 month period. Under the existing regulations, provider dissatisfaction is a requirement for Board jurisdiction over appeals based on an untimely contractor determination, as well as for appeals of a final determination of the contractor or the Secretary. As amended by the 2008 final rule (73 FR 30190), § 405.1835(a)’s provisions for Board appeals based on untimely contractor determinations no longer track fully the provisions for such appeals in section 1878(a)(1)(B) of the Act. Specifically, § 405.1835(a) of the regulations now requires provider dissatisfaction as a condition for Board jurisdiction over appeals based on an untimely contractor determination, but section 1878(a)(1)(B) of the Act does not impose a provider dissatisfaction requirement for such appeals. When this difference between § 405.1835(a) of the regulations and section 1878(a)(1)(B) of the Act came to our attention, we looked into this matter. After reviewing the 2008 final rule and the corresponding parts of the 2004 proposed rule (69 FR 35716; June 25, 2004), we determined that the inclusion in § 405.1835(a) of a provider dissatisfaction requirement for Board appeals based on an untimely contractor determination reflects an inadvertent error in the drafting of the 2008 final rule and the 2004 proposed rule. In this final rule, we are revising § 405.1835 of the regulations to eliminate provider dissatisfaction as a requirement for Board jurisdiction over appeals based on untimely contractor determinations. This is simply a technical correction inasmuch as this amendment to § 405.1835 conforms the regulations to the provisions in section 1878(a)(1)(B) of the Act for Board appeals based on an untimely contractor determination. In effect, this amendment to § 405.1835 of the regulations restores the full conformity of the regulations with the statutory requirements for Board jurisdiction over appeals based on untimely contractor determinations—a conformity that obtained before the 2008 final rule (73 FR 30190) inadvertently imposed a provider dissatisfaction requirement for Board appeals based on untimely contractor determinations. Moreover, in order to maintain consistency between the regulations for Board appeals and the rules for contractor hearing officer appeals, we also are revising § 405.1811 of the regulations to eliminate provider dissatisfaction as a requirement for PO 00000 Frm 00348 Fmt 4701 Sfmt 4700 contractor hearing officer jurisdiction over appeals based on untimely contractor determinations. 2. Waiver of Notice of Proposed Rulemaking We ordinarily publish a notice of proposed rulemaking in the Federal Register to provide a period for public comment before the provisions of a rule take effect in accordance with section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). However, we can waive this notice and comment procedure if the Secretary finds, for good cause, that the notice and comment process is impracticable, unnecessary, or contrary to the public interest, and incorporates a statement of the finding and the reasons therefore in the notice. We find it unnecessary to undertake notice-and-comment rulemaking for the above-described revisions because those revisions are simply technical corrections that bring § 405.1835 of the Board appeals regulations into full conformity with section 1878(a)(1)(B) of the Act, and maintain consistency between § 405.1811 of the intermediary (contractor) hearing officer appeals regulations and § 405.1835 of the Board appeals regulations. The revisions do not represent changes in policy, nor do they have a substantive effect, and the public interest would be best served by timely correction of these technical errors. Therefore, we find good cause to waive notice and comment procedures. 3. Effective Date and Applicability Date; Finality and Reopening The technical correction to § 405.1835 of the Board appeals regulations and the corresponding revision to § 405.1811 of the intermediary (contractor) hearing officer appeals regulations is effective October 1, 2014. The revisions to § 405.1835 of the Board appeals regulations and § 405.1811 of the intermediary (contractor) hearing officer appeals regulations are applicable, subject to the rules of administrative finality and reopening in § 405.1807 and § 405.1885 of the regulations, to appeals pending or filed on or after the August 21, 2008 effective date of the 2008 final rule (73 FR 30190). The technical correction to § 405.1835 of the Board appeals regulations and the corresponding revision to § 405.1811 of the intermediary (contractor) hearing officer appeals regulations apply automatically to appeals, based on an untimely contractor determination, pending or filed on or after the October 1, 2014 effective date of this final rule. If the Board or the Administrator of CMS finally dismissed an appeal, based E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations on an untimely contractor determination, due to the provider’s failure to make an appropriate cost report claim for the matter at issue, the provider may ask the Board or the Administrator, as applicable, to reopen such decision pursuant to § 405.1885 of the regulations and apply this technical correction to § 405.1835 of the Board appeals regulations, provided that such final jurisdictional dismissal decision was issued no more than 3 years before the October 1, 2014 effective date of this final rule. Similarly, if the contractor hearing officer or the CMS reviewing official finally dismissed an appeal, based on an untimely contractor determination, due to the provider’s failure to make an appropriate cost report claim for the matter at issue, the provider may ask the contractor hearing officer or the CMS reviewing official, as applicable, to reopen such decision pursuant to § 405.1885 of the regulations and apply this technical correction to § 405.1811 of the intermediary (contractor) hearing officer appeals regulations, provided that such final jurisdictional dismissal decision was issued no more than 3 years before the October 1, 2014 effective date of this final rule. We believe that, because the abovedescribed regulatory amendments are simply technical corrections that do not make substantive changes to the regulations for appeals to the Board and the contractor hearing officers, the public interest is served by correcting the inadvertent drafting errors in the 2008 final rule’s provisions for appeals to the Board and the contractor hearing officers based on untimely contractor determinations. As technical corrections to the 2008 final rule, we believe the above-described amendments to § 405.1811 and § 405.1835 should apply as of the August 21, 2008 effective date of the 2008 final rule, subject to the rules of administrative finality and reopening in § 405.1807 and § 405.1885 of the regulations. We believe that fixing the applicability date, subject to the rules of administrative finality and reopening in § 405.1807 and § 405.1885 of the regulations, of these amendments by reference to the August 21, 2008 effective date of the 2008 final rule is not impermissibly retroactive in effect because the amendments simply correct and clarify longstanding agency policy and practice, and are procedural in nature. For example, we refer readers to Heimmermann v. First Union Mortgage Corp., 305 F.3d 1257, 1260–61 (11th Cir. 2002) (a rule clarifying the law, especially in an unsettled or confusing area of the law, is not a substantive VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 change in the law, and thus the rule may apply to matters that preceded issuance of the rule.) However, if the above-described amendments to § 405.1811 and § 405.1835 were deemed a retroactive application of a substantive change to a regulation, section 1871(e)(1)(A) of the Act permits retroactive application of a substantive change to a regulation if the Secretary determines that such retroactive application is necessary to comply with statutory requirements or that failure to apply the change retroactively would be contrary to the public interest. We have determined that any retroactive application of these amendments to § 405.1811 and § 405.1835 is necessary to ensure full compliance with the statutory provisions for Board appeals based on untimely contractor determinations (under section 1878(a)(1)(B) of the Act). We have further determined that it would be in the public interest to apply these amendments, subject to the rules of administrative finality and reopening in § 405.1807 and § 405.1885 of the regulations, to Board appeals and contractor hearing officer appeals that were initiated or pending on or after the August 21, 2008 effective date of the 2008 final rule. The alternative, of not applying these amendments to § 405.1811 and § 405.1835 to Board appeals and contractor hearing officer appeals that were initiated or pending on or after the August 21, 2008 effective date of the 2008 final rule, would be inconsistent with the statutory provisions for Board appeals based on untimely contractor determinations (under section 1878(a)(1)(B) of the Act) and would undermine the public interest in maintaining consistency between the requirements for Board appeals and contractor hearing officer appeals. IX. Quality Data Reporting Requirements for Specific Providers and Suppliers We seek to promote higher quality and more efficient health care for Medicare beneficiaries. This effort is supported by the adoption of widely agreed-upon quality measures. We have worked with relevant stakeholders to define quality measures for most settings and to measure various aspects of care for most Medicare beneficiaries. These measures assess structural aspects of care, clinical processes, patient experiences with care, care coordination, and improving patient outcomes. We have implemented quality reporting programs for multiple care settings, including: PO 00000 Frm 00349 Fmt 4701 Sfmt 4700 50201 • Hospital inpatient services under the Hospital Inpatient Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program); • Hospital outpatient services under the Hospital Outpatient Quality Reporting (OQR) Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)); • Care furnished by physicians and other eligible professionals under the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI)); • Inpatient rehabilitation facilities under the Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP); • Long-term care hospitals under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program; • PPS-exempt cancer hospitals under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program; • Ambulatory surgical centers under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program; • Inpatient psychiatric facilities under the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program; • Home health agencies under the home health quality reporting program (HH QRP); and, • Hospice facilities under the Hospice Quality Reporting Program. We have also implemented the EndStage Renal Disease Quality Incentive Program and Hospital Value-Based Purchasing Program (described further below) that link payment to performance. In implementing the Hospital IQR Program and other quality reporting programs, we have focused on measures that have high impact and support CMS and HHS priorities for improved quality and efficiency of care for Medicare beneficiaries. Our goal for the future is to align the clinical quality measure requirements of the Hospital IQR Program with various other Medicare and Medicaid programs, including those authorized by the Health Information Technology for Economic and Clinical Health (HITECH) Act, so that the reporting burden on providers will be reduced. As appropriate, we will consider the adoption of clinical quality measures with electronic specifications so that the electronic collection of performance information is part of care delivery. Establishing such a system will require interoperability between EHRs and CMS data collection systems, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50202 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations additional infrastructural development on the part of hospitals and CMS, and adoption of standards for capturing, formatting, and transmitting the data elements that make up the measures. However, once these activities are accomplished, adoption of measures that rely on data obtained directly from EHRs will enable us to expand the Hospital IQR Program measure set with less cost and reporting burden to hospitals. We believe that in the near future, collection and reporting of data elements through EHRs will greatly simplify and streamline reporting for various CMS quality reporting programs, and that hospitals will be able to switch primarily to EHR-based data reporting for many measures that are currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. We also have implemented a Hospital Value-Based Purchasing (VBP) Program under section 1886(o) of the Act. In 2011, we issued the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547). We most recently adopted additional policies for the Hospital VBP Program in section XIV. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121). We are finalizing additional policies for this program in section IV.I. of the preamble of this final rule. Under the Hospital VBP Program, hospitals will receive value-based incentive payments based on their quality performance with respect to performance standards for a performance period for the fiscal year involved. The measures under the Hospital VBP Program must be selected from the measures (other than readmission measures) specified under the Hospital IQR Program as required by section 1886(o)(2)(A) of the Act. In selecting measures for the Hospital IQR Program, we are mindful of the conceptual framework we have described for the Hospital VBP Program. The Hospital IQR Program is linked with the Hospital VBP Program because many of the measures and the reporting infrastructure for the programs overlap. We view the Hospital VBP Program as the next step in promoting higher quality care for Medicare beneficiaries by transforming Medicare from a passive payer of claims into an active purchaser of quality healthcare for its beneficiaries. Value-based purchasing is an important step to revamping how care and services are paid for, moving increasingly toward rewarding better value, outcomes, and innovations instead of merely volume. We also view the Hospital-Acquired Condition (HAC) payment adjustment VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 program authorized by section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, and the Hospital VBP Program, as related but separate efforts to reduce HACs. The Hospital VBP Program is an incentive program that awards payments to hospitals based on quality performance on a wide variety of measures, while the HAC Reduction Program creates a payment adjustment resulting in payment reductions for the lowest performing hospitals based on their rates of HACs. Newly finalized policies for the Hospital VBP Program are included in section IV.I. of the preamble of this final rule. Newly finalized policies for the HAC Reduction Program are included in section IV.J. of the preamble of this final rule. Although we intend to monitor the various interactions of programs authorized by the Affordable Care Act and their overall impact on providers and suppliers, we also view programs that could potentially affect a hospital’s Medicaid payment as separate from programs that could potentially affect a hospital’s Medicare payment. In the preamble of this final rule, we are finalizing changes to the following Medicare quality reporting systems: • In section IX.A., the Hospital IQR Program. • In section IX.B., the PCHQR Program. • In section IX.C., the LTCHQR Program. In addition, in section IX.D. of the preamble of this final rule, we are finalizing changes to the Medicare EHR Incentive Program. A. Hospital Inpatient Quality Reporting (IQR) Program 1. Background a. History of the Hospital IQR Program We refer readers to the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through 50181) for detailed discussions of the history of the Hospital IQR Program, including the statutory history, and to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50789 through 50807) for the measures we have adopted for the Hospital IQR measure set through the FY 2016 payment determination and subsequent years. b. Maintenance of Technical Specifications for Quality Measures The technical specifications for the Hospital IQR Program measures, or links to Web sites hosting technical specifications, are contained in the CMS/The Joint Commission (TJC) PO 00000 Frm 00350 Fmt 4701 Sfmt 4700 Specifications Manual for National Hospital Quality Measures (Specifications Manual). This Specifications Manual is posted on the QualityNet Web site at https:// www.qualitynet.org/. We generally update the Specifications Manual on a semiannual basis and include in the updates detailed instructions and calculation algorithms for hospitals to use when collecting and submitting data on required measures. These semiannual updates are accompanied by notifications to users, providing sufficient time between the change and the effective date in order to allow users to incorporate changes and updates to the specifications into data collection systems. The technical specifications for the HCAHPS patient experience of care survey are contained in the current HCAHPS Quality Assurance Guidelines manual, which is available at the HCAHPS On-Line Web site, https:// www.hcahpsonline.org. We maintain the HCAHPS technical specifications by updating the HCAHPS Quality Assurance Guidelines manual annually, and include detailed instructions on survey implementation, data collection, data submission and other relevant topics. As necessary, HCAHPS Bulletins are issued to provide notice of changes and updates to technical specifications in HCAHPS data collection systems. Many of the quality measures used in different Medicare and Medicaid reporting programs are endorsed by the National Quality Forum (NQF). As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards to submit annual measure maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating and maintaining the currency and relevance of the measure and will confirm existing or minor specification changes with NQF on an annual basis. NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. The NQF regularly maintains its endorsed measures through annual and triennial reviews, which may result in the NQF making updates to the measures. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates made by the NQF into the measure specifications we have adopted for the Hospital IQR Program so that these measures remain up-to-date. We also recognize that some E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations changes the NQF might make to its endorsed measures are substantive in nature and might not be appropriate for adoption using a subregulatory process. Therefore, In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505), we finalized a policy under which we use a subregulatory process to make nonsubstantive updates to measures used for the Hospital IQR Program. With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-bycase basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe that nonsubstantive changes may include updates to NQF-endorsed measures based upon changes to guidelines upon which the measures are based. We will continue to use rulemaking to adopt substantive updates made to measures we have adopted for the Hospital IQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example, changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. These policies regarding what is considered substantive versus nonsubstantive would apply to all measures in the Hospital IQR Program. We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. We believe this policy adequately balances our need to incorporate updates to Hospital IQR Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. c. Public Display of Quality Measures Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section 3001(a)(2) of the Affordable Care Act, requires that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the Secretary establish procedures for making information regarding measures submitted available to the public after ensuring that a hospital has the opportunity to review its data before they are made public. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28218 through 28219), we did not propose to change our current policy of reporting data from the Hospital IQR Program as soon as it is feasible on CMS Web sites such as the Hospital Compare Web site (https://www.medicare.gov/ hospitalcompare) and/or the interactive https://data.medicare.gov Web site, after a preview period. The Hospital Compare Web site is an interactive Web tool that assists beneficiaries by providing information on hospital quality of care to those who need to select a hospital. For more information on measures reported to Hospital Compare, please see https:// www.medicare.gov/hospitalcompare. Other information not reported to Hospital Compare may be made available on other CMS Web sites such as https://www.cms.hhs.gov/ HospitalQualityInits/ data.medicare.gov. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50777 through 50778) we responded to public comments on what additional quality measures and information featured on Hospital Compare may be highly relevant to patients and other consumers of health care, and how we may better display this information on the Hospital Compare Web site. 2. Removal and Suspension of Hospital IQR Program Measures a. Considerations in Removing Quality Measures From the Hospital IQR Program As discussed further below, we generally retain measures from the previous year’s Hospital IQR Program measure set for subsequent years’ measure sets except when we specifically propose to remove or replace them. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), the criteria that we consider when determining whether to remove Hospital IQR Program measures are the following: (1) Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (‘‘topped-out’’ measures); (2) availability of alternative measures with a stronger relationship to patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broadly applicable PO 00000 Frm 00351 Fmt 4701 Sfmt 4700 50203 (across settings, populations, or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic; (5) performance or improvement on a measure does not result in better patient outcomes; (6) the availability of a measure that is more strongly associated with desired patient outcomes for the particular topic; and (7) collection or public reporting of a measure leads to negative unintended consequences other than patient harm. We also take into account the views of the Measure Applications Partnership (MAP) when determining when a measure should be removed, and we strive to eliminate redundancy of similar measures (77 FR 53505 through 53506). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28219), we proposed to change the criteria for determining when a measure is ‘‘topped-out.’’ A measure is ‘‘toppedout’’ when measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (‘‘topped-out’’ measures) (77 FR 53505 through 53506). We do not believe that measuring hospital performance on ‘‘topped-out’’ measures provides meaningful information on the quality of care provided by hospitals. We further believe that quality measures, once ‘‘topped-out,’’ represent care standards that have been widely adopted by hospitals. We believe such measures should be considered for removal from the Hospital IQR Program because their associated reporting burden may outweigh the value of the quality information they provide. In order to determine ‘‘topped-out’’ status, we proposed to apply the following two criteria, the first of which was previously adopted by the Hospital VBP Program in the Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497), to Hospital IQR Program measures. The second criterion is a modified version of what was previously adopted by the Hospital VBP Program in the above mentioned final rule, with the change from the ‘‘less than’’ operator (<) to the ‘‘less than or equal to’’ operator (≥): • Statistically indistinguishable performance at the 75th and 90th percentiles; and • Truncated coefficient of variation ≤ 0.10. The coefficient of variation (CV) is a common statistic that expresses the standard deviation as a percentage of the sample mean in a way that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad distribution of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50204 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations individual hospital scores, with large and presumably meaningful differences between hospitals in relative performance. A small CV would indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not useful to draw distinctions among individual hospitals’ measure performance. By adopting ‘‘less than or equal to’’ in our ‘‘topped-out’’ test, we are clarifying the interpretation of the CV when a tie at 0.1 occurs due to rounding. We believe that the proposed criteria distinguish measures with significant variation in performance among hospitals. In the Hospital VBP Program context, we used a modified version of the CV, namely a truncated CV, for each measure, in which the 5 percent of hospitals with the lowest scores, and the 5 percent of hospitals with highest scores were first truncated (set aside) before calculating the CV. This was done to avoid undue effects of the highest and lowest outlier hospitals, which if included, would tend to greatly widen the dispersion of the distribution and make the measure appear to be more reliable or discerning. Comment: A number of commenters supported the criteria for determining when a measure is ‘‘topped-out.’’ Some commenters specifically noted that removing ‘‘topped-out’’ measures will reduce hospital reporting burden. Several commenters supported removing ‘‘topped-out’’ chart-abstracted measures. Some commenters specifically supported the removal of structural measures. Response: We appreciate the commenters’ support for removing ‘‘topped-out’’ measures. We will consider removal of topped-out structural measures in future years consistent with our measure removal and topped-out status policies. Comment: A commenter stated that the process of care measures that are ‘‘topped-out’’ should be removed both in their chart-abstracted and electronic clinical quality measure versions. The commenter believed that interpreting disparate and incorrect performance rates for the measures as reported in their electronic versions is burdensome to stakeholders, and that the specifications for the chart-abstracted and electronic versions of measures would be misaligned which may lead to issues in capturing the full range of patient care. The commenter also expressed concern about which electronic versions of these measures will be submitted to CMS. Finally, the commenter stated that process of care measures, whether submitted as chart- VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 abstracted or electronic versions, distract from measures of outcomes and hospital-acquired conditions. Response: We would like to clarify that we consider both the chartabstracted and the electronically specified versions to be ‘‘topped-out.’’ However, we would like to retain the electronically specified versions of these ‘‘topped-out’’ measures for the following reasons: (1) To align the Hospital IQR Program and the Medicare EHR Incentive Program, (2) to allow us to monitor the effectiveness of measure reporting by EHRs, and (3) to familiarize hospitals with reporting electronically specified measures to us. As we continue aligning the Hospital IQR Program and the Medicare EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. We believe that the benefits outweigh the possible disadvantages to reporting the electronic clinical quality measure versions of these measures. Collecting the electronic version of these measures would prepare hospitals for data submission using our electronic measure specifications prior to electronic clinical quality measures becoming a requirement in the Hospital IQR Program. Retaining of the electronic versions of these topped-out measures creates alignment with the Medicare EHR Incentive Program. We remind commenters that hospitals could choose whether to submit the voluntary electronic clinical quality measures. We also would allow the voluntary submission of the chartabstracted version of the ‘‘topped-out’’ measures for those hospitals that prefer to submit measure data in that format. In this way, we believe that we are representing the full range of care provided to patients and responding to commenters’ concerns. We acknowledge the commenter’s concerns that with multiple versions of a particular electronic clinical quality measure creates confusion for hospitals to determine which one to use. To address this concern, we are modifying our proposal to finalize a policy that hospitals must submit the April 2014 version of the electronic clinical quality measures as discussed in section IX.A.2.h.(1) of the preamble of this final rule. Comment: Several commenters urged CMS to consider the broader context and uses of measures before removing them based on quantitative data only, noting that some measures meeting the PO 00000 Frm 00352 Fmt 4701 Sfmt 4700 ‘‘topped-out’’ criteria may still provide value to patients and hospitals. Response: We agree that both quantitative criteria and clinically-based qualitative criteria should be used in assessing ‘‘topped-out’’ measures. These criteria are part of the existing criteria available to us to determine whether to remove a measure from the Hospital IQR Program. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), the criteria that we consider when determining whether to remove Hospital IQR Program measures are the following: (1) Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (‘‘topped-out’’ measures); (2) availability of alternative measures with a stronger relationship to patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broadly applicable (across settings, populations, or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic; (5) performance or improvement on a measure does not result in better patient outcomes; (6) the availability of a measure that is more strongly associated with desired patient outcomes for the particular topic; and (7) collection or public reporting of a measure leads to negative unintended consequences other than patient harm. We also take into account the views of the Measure Applications Partnership (MAP) when determining when a measure should be removed, and we strive to eliminate redundancy of similar measures (77 FR 53505 through 53506). Comment: A few commenters wanted CMS to continue publicly reporting topped-out measures used in pay-forperformance or payment penalty programs or to maintain focus on issues hospitals achieved high performance. Response: We will allow those hospitals that would like to submit the voluntary measures in chart-abstracted format or as electronic clinical quality measures. After consideration of the public comments we received, we are finalizing our proposal to update the criteria to determine ‘‘topped-out’’ measure status as proposed. b. Removal of Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years As we continue moving towards including more clinical outcomes measures as opposed to process-of-care measures in the Hospital IQR Program E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measure set, we have considered removing additional measures using our previously-adopted removal criteria. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28219 through 28220), we proposed to remove five measures from the Hospital IQR Program for the FY 2017 payment determination and subsequent years, which begins in the CY 2015 reporting period: (1) AMI–1 Aspirin at arrival (NQF #0132); (2) AMI–3 ACEI/ARB for left ventricular systolic dysfunction (NQF #0137); (3) AMI–5 Beta-blocker prescribed at discharge (NQF #0160); (4) SCIP Inf-6 Appropriate Hair Removal; and (5) Participation in a systematic database for cardiac surgery (NQF #0113). We proposed to remove the first four measures because they were previously determined to be ‘‘topped-out’’ and suspended (77 FR 53509). We proposed to remove the fifth measure because the MAP recommended the measure’s removal in its MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs, which is available at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_Report_ 2014_Recommendations_on_Measures_ for_More_than_20_Federal_ Programs.aspx. The MAP report states that the measure’s NQF endorsement has been placed on reserve status because the measure is ‘‘topped-out.’’ The purpose of reserve status is to retain endorsement of reliable and valid quality performance measures that have overall high levels of performance with little variability so that performance could be monitored in the future if necessary to ensure that performance does not decline. This status would apply only to highly credible, reliable, and valid measures that have high levels of performance due to quality improvement actions (often facilitated or motivated through public reporting and other accountability programs). More information about NQF reserve status is available at: https:// www.qualityforum.org/docs/Reserve_ Endorsement_Status.aspx. By removing these measures, we would alleviate the maintenance costs and administrative burden to hospitals associated with retaining them. Should we determine that hospital adherence to these practices has unacceptably declined, we would propose to resume data collection in future rulemaking. In addition, we would comply with any requirements imposed by the Paperwork Reduction Act before re-proposing these measures. We also analyzed the remainder of the Hospital IQR Program measure set for other potential ‘‘topped-out’’ measures using the previously adopted criteria. The analysis was based on the most recent two quarters of clinical process of care data available in the CMS Clinical Data Warehouse for IPPS eligible hospitals, which covers a measurement period from 01/01/2013 to 06/30/2013 (Q1 2013–Q2 2013). Based on this analysis and using the previously 50205 adopted criteria, we noted that an additional 15 chart-abstracted measures were ‘‘topped-out,’’ and we proposed to remove them from the measure set for the FY 2017 payment determination and subsequent years. However, we proposed to retain the electronic clinical quality measure version of 10 of these chart-abstracted measures for Hospital IQR Program reporting as discussed further in section IX.A.7.f. of the preamble of this final rule. As we continue aligning the Hospital IQR Program and Medicare EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. Further, allowing hospitals the option to electronically report topped-out measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. We believe that retaining ‘‘topped-out’’ measures under certain circumstances enables us to continue monitoring the clinical topic covered by the measure to ensure that hospitals continue to maintain high levels of performance. Further, we believe the additional reporting burden associated with retaining these measures is mitigated by retaining electronic versions of those measures, which are more easily reported by hospitals. These 10 measures are denoted in the chart below by an asterisk. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV ‘‘TOPPED-OUT’’ CHART-ABSTRACTED MEASURES PROPOSED FOR REMOVAL FOR THE FY 2017 PAYMENT DETERMINATION AMI–1: Aspirin at Arrival (previously suspended) AMI–3: ACEI or ARB for left ventricular systolic dysfunction—Acute Myocardial Infarction (AMI) Patients (previously suspended) (NQF #0137) AMI–5: Beta-Blocker Prescribed at Discharge for AMI (previously suspended) (NQF #0160) AMI–8a: Primary PCI received within 90 minutes of hospital arrival * (NQF #0163) HF–2: Evaluation of left ventricular systolic function (NQF #0135) PN–6: Initial antibiotic selection for community-acquired pneumonia (CAP) in immunocompetent patients* (NQF #0147) SCIP–Card–2: Surgery patients on beta blocker therapy prior to arrival who received a beta blocker during the perioperative period (NQF #0284) SCIP–Inf–1: Prophylactic antibiotic received within one hour prior to surgical incision* (NQF #0527) SCIP–Inf–2: Prophylactic antibiotic selection for surgical patients* (NQF #0528) SCIP–Inf–3: Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery) (NQF #0529) SCIP–Inf–4: Cardiac surgery patients with controlled postoperative blood glucose (NQF #0300) SCIP–Inf–6: Surgery patients with appropriate hair removal (previously suspended) (NQF #0301) SCIP–Inf–9: Urinary catheter removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with day of surgery being day zero* (NQF #0453) SCIP–VTE–2: Surgery Patients Who Received Appropriate Venous Thromboembolism (VTE) Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery (NQF #0218) STK–10: Assessed for rehabilitation* (NQF #0441) STK–2: Discharged on antithrombotic therapy * (NQF #0435) STK–3: Anticoagulation therapy for atrial fibrillation/flutter* (NQF #0436) STK–5: Antithrombotic therapy by the end of hospital day two* (NQF #0438) VTE–4: Patients receiving un-fractionated Heparin with doses/labs monitored by protocol* Participation in a systematic database for cardiac surgery (NQF #0113) * To be retained as an electronic clinical quality measure. We welcomed public comments on our proposal to remove these measures. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Comment: Many commenters supported the removal of ‘‘topped-out’’ PO 00000 Frm 00353 Fmt 4701 Sfmt 4700 measures, some saying that by doing so CMS is reducing hospital burden. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50206 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We thank the commenters for their support. Comment: A commenter opposed the removal of the AMI–1 measure. The commenter noted that aspirin after a myocardial infarction is a potentially life-saving measure and should continue to be tracked. Response: We thank the commenter for their recommendation. We are removing AMI–1 because the measure is ‘‘topped-out’’ and was previously suspended in FY 2012 IPPS/LTCH PPS final rule. We believe that the practice of providing aspirin to patients on arrival to the hospital addressed by this measure continues to be routinely practiced. As the practice measured by the AMI–1 measure is standard procedure among most hospitals, we do not believe that retaining it as a chartabstracted measure would be a value to hospitals or for monitoring quality performance. Comment: A commenter opposed the removal of AMI–8a: Primary PCI Received within 90 Minutes of Hospital Arrival because it is ‘‘topped-out.’’ The commenter did not believe that it is appropriate to retire a measure without first finding a replacement measure. The commenter was concerned that the retirement of numerous AMI and heart failure measures may unintentionally shift hospital resources to other measures and adversely affect the quality of care received by these patients. Response: We respectfully disagree with the commenter that we should not remove a measure until a replacement is found. We believe that we should retire measures once we determine that there is no further value to hospitals or patients because the process of care the measure is monitoring has become standard practice. We believe that removing ‘‘topped-out’’ measures are appropriate and necessary to improve patient care. As we stated in the proposed rule, we believe that quality measures, once ‘‘topped-out,’’ represent care standards that have been widely adopted by hospitals (79 FR 28219). Therefore, it makes sense to remove the ‘‘topped-out’’ measures and adopt other measures which may represent care standards that are not widely adopted by hospitals, but which we believe should be widely adopted. We invite the commenter to recommend measures for the Hospital IQR Program through the Measures Under Consideration process for our consideration. Information on how to recommend measures for the Hospital IQR Program is available at https:// www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment- VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Instruments/MMS/ CallForMeasures.html. Comment: One commenter opposed the removal of HF–2: Evaluation of Left Ventricular Systolic Function because it is ‘‘topped-out.’’ With the removal of this measure, the commenter noted that the only heart failure measures left in the program will be the 30-day readmission and 30-day mortality measures. The commenter is concerned that removing this measure will signal to hospitals that heart failure is not a CMS priority. Response: We respectfully disagree with the commenter that the removal of ‘‘topped-out’’ measures will result in hospitals no longer focusing on the practice the measure is monitoring. Hospitals are committed to providing good quality care to patients and we do not have any indication that they will stop doing so in these areas for which the quality of care measured has become standard practice. Comment: A commenter suggested that CMS continue to collect chartabstracted data on SCIP–Inf–3 for another year because is inappropriate to assume that the measure will be ‘‘topped-out’’ given that the measure had significant data definition changes effective January 1, 2014. SCIP–Inf–3 no longer excludes for patients on home antibiotics or that do not receive general anesthesia. Response: We acknowledge that SCIP–Inf–3 no longer excludes for patients on home antibiotics, however our analysis showed that these patients were being excluded by documentation of infection. For this reason, this change was not considered to be substantive enough to withhold removal of the measure. With regard to the concern about the exclusion for patients that do not receive general anesthesia, SCIP–Inf 3 measure has never had an exclusion for anesthesia type so this would have no impact on the measure results, and would not change our topped-out status analysis. We continue to believe SCIP– Inf–3 is ‘‘topped-out’’ and should be removed from the Hospital IQR Program. Comment: Several commenters questioned the removal of SCIP–Inf–4, stating that CMS cannot assess whether the measure is topped-out. These commenters stated that CMS revised the specifications for the SCIP–Inf–4: Cardiac Surgery Patients with Controlled Postoperative Blood Glucose measure to incorporate the recent NQF endorsement maintenance decisions, beginning with January 1, 2014, discharges. These commenters stated that the NQF changed the measure from controlled glucose at 6AM to a more PO 00000 Frm 00354 Fmt 4701 Sfmt 4700 comprehensive measure of controlled glucose 18–24 hours post-cardiac surgery, and required that corrective action be documented if post-operative glucose is over 180mg/dl. These commenters expressed concern that these substantial changes would change the performance scores. Response: We acknowledge that there were refinements made to SCIP–Inf–4 that were finalized in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50787 through 50788). The ‘‘topped-out’’ analysis cited in the proposed rule (79 FR 28220) was completed using SCIP– Inf–4 data before these refinements were implemented. Because we do not yet have sufficient data to accurately assess whether this refined measure meets ‘‘topped-out’’ criteria, we are modifying our proposal and will not remove this measure. Instead, we will continue to require reporting on SCIP–Inf–4 in the Hospital IQR Program as previously finalized. Comment: Several commenters supported the removal of STK–2, STK– 3, STK–5, and STK–10. Response: We thank the commenters for their support. We believe that these four measures are ‘‘topped-out’’ and will be removed from the Hospital IQR Program in their chart-abstracted measure version. Please note, however, that we will continue to accept STK–2, STK–3, STK–5, and STK–10 data as electronic clinical quality measures. Comment: A commenter opposed the removal of STK–2, STK–3, STK–5, and STK–10 measures because they are ‘‘topped-out.’’ The commenter believed that CMS should allow hospitals to choose whether they wish to report these measures via EHR or via claims registry. The commenter stated that providing hospitals with alternate mechanisms for reporting is important at this juncture, and can allow for the measure developer to identify any issues with the electronic specifications of the measures. Response: We note that the commenter seeks alternative reporting mechanisms for measures. However, submission via a claims registry, which would be such an alternative reporting mechanism, is not a feasible option at this time as these measures do not have claims-based specifications nor do we have a claims registry for the Hospital IQR Program. Hospitals may report on these measures using the electronic clinical quality measure specifications and submit using QRDA Category I. We believe that these four measures are ‘‘topped-out’’ and should be removed as a requirement from the Hospital IQR Program in their chart-abstracted measure versions. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: A commenter supported the proposal to remove the six ‘‘toppedout’’ measures noted for permanent removal and the 4 ‘‘topped-out,’’ previously suspended measures proposed for permanent removal. This same commenter did not support the retention of the electronic version of 10 measures to support the voluntary electronic reporting option due to the cost of implementing electronic tools, and having the loss or convenience of chart abstracted measures that help the commenter keep track of their performance of these medical conditions. The commenter was also concerned that without clearly established goals and expectations for core measures by CMS and TJC that there will be discrepancies in performance. Response: We thank the commenter for this feedback. We appreciate how the commenter is making full use of the ‘‘topped-out’’ measures and applaud their striving towards constant quality improvement. We note, however that we are encouraging, through alignment with Medicare EHR Incentive Program, to have all facilities move to electronic measures. We also believe that aligning electronic measures across facilities will minimize confusion between quality reporting programs. Regarding the concern that without clearly established goals and expectations for core measures by CMS and TJC there will be discrepancies in performance, we appreciate this concern and will take this into consideration during our daily operations. Comment: A commenter asked CMS to clarify how the SCIP measures can be topped-out for the Hospital IQR Program but required for PPS-exempt Cancer Hospitals (PCHs). The commenter asked whether the measures specifications will be provided in a manual other than the Inpatient Specifications Manual if they are removed from the Hospital IQR Program. The commenter also asked whether the measures will still be programmed into the CMS Abstraction and Reporting Tool (CART). Response: Although the SCIP measures are ‘‘topped-out’’ under the Hospital IQR Program, for the reasons discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50840 through 50841), we believe that the SCIP measures are appropriate for the PCH setting. At this time, we do not have sufficient data to determine whether these SCIP measures are ‘‘topped-out’’ in the PCH setting, given that hospital inpatient facilities and PCHs treat different patient populations and the lack of evidence that the SCIP measures are ‘‘topped-out’’ in the PCH setting. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We will assess ‘‘topped-out’’ status of the SCIP measures as part of our PCHQR measure analysis in our annual measures consideration. We believe that this analysis must focus on evidence specific to the PCH setting. We recognize that the PCHQR patient population is exclusively comprised of cancer patients, unlike ‘‘subsection (d)’’ hospitals included in the Hospital IQR Program. We will, however, continue to monitor and evaluate the PCHQR SCIP measures. In addition, we will consider adopting the ‘‘topped-out’’ criteria and measure removal policies for the PCHQR Program similar to those adopted by other quality reporting programs, including the Hospital IQR Program, in future years. We will also support PCHQR program reporting of patient level data to QualityNet by updating the CART tool to reflect the current SCIP measure specifications. We intend to post SCIP and other PCHQR measures in the PCHQR Specifications Manual. As a result, the existing information technology infrastructure will be available for the PCHQR Program. Comment: A commenter supported the transition of SCIP–Inf–1, SCIP–Inf– 2, and SCIP–Inf–9 to voluntary electronic clinical quality measures. Response: We thank the commenter for their support. Comment: Some commenters opposed the proposal to retain the electronic versions of 10 of the ‘‘topped-out’’ chartabstracted measures to support the voluntary electronic measure reporting option. A commenter stated that the proposed modification in the voluntary electronic reporting program holds the form of the data collected for quality measurement to a higher scientific significance than the data collected as a metric to assess the delivery of care. The commenter stated that this proposal would neither lead to improved hospital quality nor offer us insight on how to improve electronic clinical quality measures. The commenter recommended that CMS work with the Office of the National Coordinator (ONC) and the Agency for Healthcare Research and Quality (AHRQ) to study the feasibility, reliability and validity of electronic clinical quality measures to effectively calculate and report clinical quality measures that are at least as accurate as chart-abstracted measures. Response: As discussed above, we believe that retaining electronic versions of chart-abstracted measures in certain circumstances enables us to continue monitoring the covered clinical topic while reducing hospitals’ reporting burden, and we view both of those actions as desirable. We note further PO 00000 Frm 00355 Fmt 4701 Sfmt 4700 50207 that we are encouraging hospitals to familiarize themselves with the electronic measure submission process by retaining electronic versions of certain measures, and we will also be able to assess differences in clinical quality measure data between the two data capture methods. We believe that understanding any discrepancies between the two data capture methods will help us as we transition to electronic reporting of clinical quality measures. This also will lead to hospitals improving how they report clinical quality data electronically, which can be used to improve patient care. We respectfully disagree that the proposed measures lack scientific significance. Each measure, as it is fully described, provides evidence of its significance. We thank the commenter for their suggestion to work with the ONC and AHRQ to study the feasibility, reliability and validity of electronic clinical quality measures to effectively calculate and report clinical quality measures that are at least as accurate as chartabstracted measures. We will take this suggestion under consideration. Comment: Some commenters asked CMS to delay adopting ‘‘topped-out’’ measures as voluntary electronic clinical quality measures for one year to allow hospitals time to prepare to collect the measure electronically. Another commenter suggested that including these measures sends the wrong message about the goals of the Hospital IQR Program and the Stage 3 Meaningful Use Program and inappropriately distracts resources from areas that would more readily benefit from targeted attention. Instead, the commenter recommended that we address further alignment through the advancement of electronic quality measures required for the Medicare EHR Incentive Program. If CMS decide to move forward with this policy, the commenter urged CMS to publicly report the measures somewhere other than Hospital Compare to leave the space for measures that are more meaningful to consumers and purchasers. Response: We respectfully disagree with the commenters. We do not agree that delaying by one year the adoption of ‘‘topped-out’’ measures as voluntary electronic clinical quality measures would be useful because reporting is voluntary. Any hospital can choose not to report these ‘‘topped-out’’ measures as electronic clinical quality measures. By retaining ‘‘topped-out’’ chartabstracted measures as voluntary electronic clinical quality measures, we E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50208 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations are encouraging hospital to familiarize themselves with the electronic measure submission process and we can assess differences in clinical quality measure data between the two data capture methods. Allowing voluntary submission of the ‘‘topped-out’’ measures will help us monitor for declines in performance. We also disagree with the commenter that the removal of ‘‘topped-out’’ measures will result in hospitals no longer focusing on the practice the measure is monitoring. We believe that hospitals are committed to providing good quality care to patients and we do not have any indication that they will stop doing so in these areas for which the quality of care measured has become standard practice. We thank the commenter for their suggestion to publicly report the measures somewhere other than Hospital Compare. We will take this suggestion under consideration. We welcome any suggestions commenters have on further aligning the Hospital IQR Program with the EHR Incentive Program. Comment: A few commenters advised that although CMS may no longer require hospitals to submit data on topped-out measures, hospitals will be required to submit data on measures required by TJC for accreditation. The commenters stated that this lack of alignment creates a burden for hospitals and does not allow hospitals to plan for the future. A commenter encouraged us to work with TJC when proposing measures to remove from the Hospital IQR Program because many of these measures remain core measure reporting requirements for TJC. Response: We wish to reduce burden on hospitals for reporting ‘‘topped-out’’ measures to us, and believe that our proposal accomplishes that intent and focuses measurement on quality areas that can be improved. We invite the commenter to relay their concerns to TJC as to why TJC requires hospitals to report ‘‘topped-out’’ measures. Comment: A commenter asked that CMS move cautiously with respect to removing measures and adopting more clinical outcome measures noting it should be done with ample opportunity for public comment to ensure these measures are tested and validated prior to adoption. The commenter noted that vetting is important, as hospitals need sufficient lead in time to implement measures, especially those with information technology requirements. Response: We thank the commenter for the suggestion and will provide the public the necessary time period to comment. We have six criteria for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 determining whether to remove a measure from the Hospital IQR Program, including a measure’s ‘‘topped-out’’ status as described above in section IX.A.2.a. of the preamble of this final rule. We would like to clarify that the public has many opportunities to comment on potential measures through the measure adoption process, which includes the public posting of the MUC (Measures Under Consideration) list, the NQF measure endorsement process, and comments on the annual rulemaking process for the Hospital IQR Program. Comment: A commenter requested clarification regarding why CMS is proposing to remove all of the suspended/voluntary measures except IMM–1 and if IMM–1 will continue to be suspended for FY 2017. Response: We proposed to remove the suspended voluntary measures because of their ‘‘topped-out’’ status. IMM–1 was not proposed for removal because this measure will be reported in another program and we are responding to the need for more harmonized and global clinical quality measures. This measure was finalized for reporting in the PQRS in the CY 2013 Medicare Physician Fee Schedule final rule with comment period (see Table 95 at 77 FR 69215). As we stated above in section IXA.2.(a), ‘‘topped-out’’ status is only one of the six considerations we use in determining whether to remove a clinical quality measure from the Hospital IQR Program. Comment: One commenter expressed concern that CMS may use a subregulatory process to make ‘‘nonsubstantive’’ updates to measures and that CMS may consider changes to age groups to be ‘‘nonsubstantive.’’ The commenter recommended that any review of changes to include individuals under the age of 18 in measures that were initially developed for adult populations include a process for review by a panel of pediatric experts, opportunity for broad stakeholder comment and appropriate testing of the revised measure. Response: We thank the commenter for the suggestion. We will consider the suggestion to include a pediatric expert review process when considering the inclusion of the under 18 population to measures exclusively including the adult population. After consideration of the public comments we received, we are finalizing our policy as proposed with one modification. We are finalizing removal of 19 measures for the FY 2017 payment determination and subsequent years as noted in the chart above with the exception of the SCIP–Inf–4 PO 00000 Frm 00356 Fmt 4701 Sfmt 4700 measure, which we are retaining in the Hospital IQR Program measure set in its chart-abstracted form as previously finalized. We are also finalizing our proposal to retain reporting for 10 of these ‘‘toppedout’’ measures as electronic clinical quality measures as noted in the chart above. We believe this approach provides CMS an opportunity to monitor topped-out measures for performance decline. This policy simplifies alignment between the Hospital IQR and Medicare EHR Incentive Programs for eligible hospitals and provides a more straight-forward approach to educate stakeholders on electronic reporting options. 3. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53512 through 53513), for our finalized measure retention policy. When we adopt measures for the Hospital IQR Program beginning with a particular payment determination, these measures are automatically adopted for all subsequent payment determinations unless we propose to remove, suspend, or replace the measures. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220) we did not propose any changes to our policy for retaining previously adopted measures for subsequent payment determinations. 4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53510 through 53512) for a discussion of the considerations we use to expand and update quality measures under the Hospital IQR Program. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220) we did not propose any changes to the considerations in expanding or updating quality measures. 5. Previously Adopted Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220 through 28221), for currently adopted and future condition-specific, claims-based measures, beginning with the FY 2017 payment determination and subsequent years, we proposed to use 3 years of data to calculate measures unless otherwise specified. In other words, this reporting period would apply to all E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations future calculations of condition specific measures already adopted in the Hospital IQR Program and any condition-specific measures that may be subsequently adopted in future years. The currently adopted, applicable measures are: • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older (NQF #0230). • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older (NQF #0229). • Hospital 30-day, all-cause, riskstandardized mortality rate (RSMR) following pneumonia hospitalization (NQF #0468). • Stroke 30-day mortality rate. • Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893). • 30-day all-cause, Acute Myocardial Infarction (AMI) 30-day risk standardized readmission rate (RSMR) following Acute Myocardial Infarction (AMI) hospitalization (NQF #0505). • 30-day all-cause, risk standardized readmission rate (RSMR) following Heart Failure (HF) hospitalization (NQF #0330). • 30-day all-cause, risk standardized readmission rate (RSMR) following Pneumonia (PN) hospitalization (NQF #0506). • 30-day risk standardized readmission rate (RSMR) following Total Hip/Total Knee Arthroplasty (NQF #1551). • 30-day risk standardized readmission rate (RSMR) following Stroke hospitalization. • 30-day risk standardized readmission rate (RSMR) following COPD hospitalization (NQF #1891). • Hip/Knee Complication: Hospitallevel Risk-Standardized Complication 50209 Rate (RSCR) following Elective Primary Total Hip Arthroplasty (NQF #1550). We welcomed public comments on our proposal to use 3 years of data to calculate current and future conditionspecific, claims-based measures. Comment: Several commenters supported CMS’ proposal to use 3 years of claim-based data for all currently adopted and future condition-specific, claims-based measures, for the FY 2017 payment determination and subsequent years. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing our proposal to use 3 years of data to calculate current and future condition-specific, claims-based measures as proposed. The following table shows measures previously adopted for the Hospital IQR Program, including suspended measures. HOSPITAL IQR PROGRAM MEASURES PREVIOUSLY ADOPTED FOR THE FY 2016 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Short name Measure name NQF No. AMI–1 ............... AMI–3 ............... AMI–5 ............... AMI–7a ............. Aspirin at Arrival ................................................................. ACEI or ARB for LVSD ...................................................... Beta-Blocker Prescribed at Discharge ............................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Primary PCI Received Within 90 Minutes of Hospital Arrival. Evaluation of LVS Function ............................................... Initial Antibiotic Selection for community-acquired pneumonia (CAP) in Immunocompetent Patients. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients ...... Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time—Overall Rate. Cardiac Surgery Patients with Controlled Postoperative Blood Glucose. Surgery Patients with Appropriate Hair Removal .............. Urinary catheter removed on Postoperative Day 1 (POD 1) or Postoperative Day 2 (POD 2) with day of surgery being day zero. Surgery Patients on Beta-Blocker Therapy Prior to Arrival Who Received a Beta-Blocker During the Perioperative Period. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery. National Healthcare Safety Network (NHSN) Central lineassociated Bloodstream Infection (CLABSI) Outcome Measure. American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. Colon procedures ............................................................... Hysterectomy procedures .................................................. National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure. N/A ....................................... NQF #0137 .......................... NQF #0160 .......................... NQF #0164 .......................... Data collection suspended. Data collection suspended. Data collection suspended. Required. NQF #0163 .......................... Required. NQF #0135 .......................... NQF #0147 .......................... Required. Required. NQF #0527 .......................... Required. NQF #0528 .......................... NQF #0529 .......................... Required. Required. NQF #0300 .......................... Refined measure specifications. NQF #0301 .......................... NQF #0453 .......................... Data collection suspended. Required. NQF #0284 .......................... Required. NQF #0218 .......................... Required. NQF #0139 .......................... Required. NQF #0753 .......................... Required. NQF #0138 .......................... Required. AMI–8a ............. HF–2 ................. PN–6 ................. SCIP–Inf–1 ....... SCIP–Inf–2 ....... SCIP–Inf–3 ....... SCIP–Inf–4 ....... SCIP–Inf–6 ....... SCIP–Inf–9 ....... SCIP–Card–2 .... SCIP–VTE–2 .... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV CLABSI ............. SSI .................... CAUTI ............... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00357 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM FY 2016 payment determination 22AUR2 50210 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations HOSPITAL IQR PROGRAM MEASURES PREVIOUSLY ADOPTED FOR THE FY 2016 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued Short name Measure name NQF No. MRSA ............... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure. Influenza vaccination coverage among healthcare personnel (HCP). Median time from ED arrival to ED departure for admitted ED patients. NQF #1716 .......................... Required. NQF #1717 .......................... Required. NQF #0431 .......................... Required. NQF #0495 .......................... ED–2 ................. Admit Decision Time to ED Departure Time for Admitted Patients. NQF #0497 .......................... Imm-1 ................ Imm-2 ................ Stroke-1 ............ Stroke-2 ............ Pneumoccocal Immunization ............................................. Influenza Immunization ...................................................... Venous thromboembolism (VTE) prophylaxis ................... Discharged on antithrombotic therapy ............................... NQF NQF NQF NQF Stroke-3 ............ Anticoagulation therapy for atrial fibrillation/flutter ............. NQF #0436 .......................... Stroke-4 ............ Thrombolytic therapy ......................................................... NQF #0437 .......................... Stroke-5 ............ Antithrombotic therapy by the end of hospital day two ..... NQF #0438 .......................... Stroke-6 ............ Discharged on statin medication ....................................... NQF #0439 .......................... Stroke-8 ............ Stroke education ................................................................ N/A ....................................... Stroke-10 .......... Assessed for rehabilitation ................................................. NQF #0441 .......................... VTE–1 ............... Venous thromboembolism prophylaxis .............................. NQF #0371 .......................... VTE–2 ............... Intensive care unit venous thromboembolism prophylaxis NQF #0372 .......................... VTE–3 ............... Venous thromboembolism patients with anticoagulation overlap therapy. NQF #0373 .......................... VTE–4 ............... Patients receiving un-fractionated Heparin with doses/ labs monitored by protocol. N/A ....................................... VTE–5 ............... VTE discharge instructions ................................................ N/A ....................................... VTE–6 ............... Incidence of potentially preventable VTE .......................... N/A ....................................... PC–01 ............... Elective delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure). NQF #0469 .......................... MORT–30–AMI Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older. Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older. Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following pneumonia hospitalization. NQF #0230 .......................... Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Data collection suspended. Required. Required. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required submission, but voluntary electronic clinical quality measure. Required. NQF #0229 .......................... Required. NQF #0468 .......................... Required. CDI .................... HCP .................. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV ED–1 ................. MORT–30–HF .. MORT–30–PN .. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00358 Fmt 4701 Sfmt 4700 #1653 #1659 #0434 #0435 FY 2016 payment determination .......................... .......................... .......................... .......................... E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50211 HOSPITAL IQR PROGRAM MEASURES PREVIOUSLY ADOPTED FOR THE FY 2016 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued Short name Measure name NQF No. COPD Mortality Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. Stroke 30-day mortality rate .............................................. Hospital 30-day all-cause risk-standardized readmission rate (RSRR) following acute myocardial infarction (AMI) hospitalization. Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following heart failure hospitalization. Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following pneumonia hospitalization. Hospital-level 30-day, all-cause risk-standardized readmission rate (RSRR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA). Hospital-Wide All-Cause Unplanned Readmission (HWR) NQF #1893 .......................... Required. N/A ....................................... NQF #0505 .......................... Required. Required. NQF #0330 .......................... Required. NQF #0506 .......................... Required. NQF #1551 .......................... Required. NQF #1789 .......................... Required. NQF #1891 .......................... Required. N/A ....................................... Required. STK Mortality .... READM–30–AMI READM–30–HF READM–30–PN READM–30–TH/ TKA. READM–30– HWR. COPD READMIT. STK READMIT MSPB ................ AMI payment .... Hip/knee complications. PSI 4 (PSI/NSI) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV PSI 90 ............... Database for Cardiac Surgery. Registry for Nursing Sensitive Care. Registry for General Surgery. Safe Surgery Checklist. HCAHPS ........... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. 30-day risk standardized readmission rate (RSMR) following Stroke hospitalization. Payment-Standardized Medicare Spending Per Beneficiary (MSPB). AMI Payment per Episode of Care .................................... Hospital-level risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA). Death among surgical inpatients with serious, treatable complications. Patient safety for selected indicators (composite) ............. Participation in a systematic database for cardiac surgery NQF #2158 .......................... Required. N/A ....................................... NQF #1550 .......................... Required. Required. NQF #0351 .......................... Required. NQF #0531 .......................... NQF #0113 .......................... Required. Required. Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. N/A ....................................... Required. Participation in a Systematic Clinical Database Registry for General Surgery. N/A ....................................... Required. Safe Surgery Checklist Use ............................................... N/A ....................................... Required. HCAHPS + CTM–3 ............................................................ NQF #0166 .......................... NQF #0228 .......................... Required. 6. Refinements and Clarification to Existing Measures in the Hospital IQR Program In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28223 through 28226), we proposed to incorporate refinements for several measures that were previously adopted in the Hospital IQR Program. These refinements have either arisen out of the NQF endorsement maintenance process, or during our internal efforts to harmonize measure approaches. The measure refinements include the following: (1) refining the planned readmission algorithm for all seven readmission measures included in the Hospital IQR Program; (2) modifying the hip/knee readmission and complication measure cohorts to exclude index admissions with a secondary fracture diagnosis; and (3) modifying the hip/knee complication VerDate Mar<15>2010 FY 2016 payment determination 18:25 Aug 21, 2014 Jkt 232001 measure to not count as complications coded as ‘‘present on admission’’ (POA) during the index admission. We received one general comment on our proposed refinements. Comment: One commenter supported CMS’ continued refinements to the readmission measures. Response: We thank the commenter for their support. a. Refinement of Planned Readmission Algorithm for 30-Day Readmission Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787) we adopted the CMS Planned Readmission Algorithm Version 2.1 (the Algorithm) for the Hospital IQR Program. In the same final rule (78 FR 50785 through 50787, 50790 through 50792, and 50794 through 50798), we also finalized the PO 00000 Frm 00359 Fmt 4701 Sfmt 4700 use of the CMS Planned Readmission Algorithm Version 2.1 in the AMI, HF, PN, THA/TKA, HWR, and COPD measures. This algorithm identifies readmissions that are planned and occur within 30 days of discharge from the hospital. A complete description of the Algorithm, which includes lists of planned diagnoses and procedures, is available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html in the ‘‘Planned Readmission’’ folder. NQF has endorsed the use of the Algorithm for these measures. In that final rule (78 FR 50652) and in response to comments, we agreed to continually review the Algorithm and make updates as needed. Since its development, we have identified and E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50212 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations made improvements to the Algorithm. As a result, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28223 through 28224) we proposed to use an updated, revised version, the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/ TKA, HWR, COPD, and Stroke readmission measures for the FY 2015 payment determination and subsequent years. As discussed further below, we also proposed to use Version 3.0 of this algorithm for the CABG readmission measure that we proposed to include in the Hospital IQR Program starting in FY 2017, proposed in section IX.A.7.a. of the preamble of the proposed rule. Version 3.0 incorporates improvements made based on a validation study of the algorithm. Researchers reviewed 634 patients’ charts at 7 hospitals, classified readmission as planned or unplanned based on the chart review, and compared the results to the claimsbased algorithm’s classification of the readmissions. The findings suggested the algorithm was working well but could be improved. Specifically, the study suggested the need to make small changes to the tables of procedures and conditions used in the algorithm to classify readmission as planned or unplanned. The algorithm uses AHRQ’s Clinical Classification Software (CCS) to group thousands of procedure and diagnosis codes into fewer categories of related procedures or diagnoses. The algorithm then uses four tables of procedures and diagnoses categories and a flow diagram to classify tables as planned or unplanned. Additional information on this software is available at: https://www.hcupus.ahrq.gov/toolssoftware/ccs/ccs.jsp. For all measures, the first table identifies procedures that, if present in a readmission, classify the readmission as planned. The second table identifies primary discharge diagnoses that always classify readmissions as planned. Because almost all planned admissions are for procedures or surgeries, a third table identifies procedures for which patients are typically admitted; if any of these procedures is coded in the readmission, we classify a readmission as planned as long as that readmission does not have an acute (unplanned) primary discharge diagnosis. The fourth table lists the acute (unplanned) primary discharge diagnoses that disqualify readmissions that include one or more of the potentially planned procedure in the third table as planned. These tables are structured similarly across all measures, but the specific procedure and conditions they contain vary slightly for certain measures based VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 on clinical considerations for each cohort. The current tables for each measure can be found in the measure methodology reports at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. Version 3.0 modifies two of these tables by removing or adding procedures or conditions to improve the accuracy of the algorithm. First, the validation study revealed that the algorithm could be improved by removing two procedure CCS categories from the third table, the potentially planned procedure table: CCS 211— Therapeutic Radiation and CCS 224— Cancer Chemotherapy. Typically, patients do not require admission for scheduled Therapeutic Radiation treatments (CCS 211). The study found that readmissions that were classified as planned because they included Therapeutic Radiation were largely unplanned. The algorithm was also more accurate when CCS 224—Cancer Chemotherapy was removed from the potentially planned procedure table. The second table of the algorithm classifies all readmissions with a principal diagnosis of Maintenance Chemotherapy as planned. Most patients who receive cancer chemotherapy have both a code for Cancer Chemotherapy (CCS 224) and a principal discharge diagnosis of Maintenance Chemotherapy (CCS 45). In the validation study, the readmissions for patients who received Cancer Chemotherapy (CCS 224), but who did not have a principal diagnosis of Maintenance Chemotherapy were largely unplanned, therefore removing CCS 224 from the potentially planned procedure table improved the algorithm’s accuracy. Therefore, Version 3.0 removes CCS 211 and CCS 224 from the list of potentially planned procedures to improve the accuracy of algorithm. As noted above, the algorithm uses a table of acute principal discharge diagnoses to help identify unplanned readmissions. Readmissions that have a principal diagnosis listed in the table are classified as unplanned, regardless of whether they include a procedure in the potentially planned procedure table. The validation study identified one diagnosis CCS that should be added to the table of acute diagnoses to more accurately identify truly unplanned admissions as unplanned: Hypertension with Complications (CCS 99). Hypertension with complications is a diagnosis that is rarely associated with planned readmissions. PO 00000 Frm 00360 Fmt 4701 Sfmt 4700 In addition, the validation study identified a subset of ICD–9 diagnosis codes within two CCS diagnosis categories that should be added to the acute diagnosis table to improve the algorithm. CCS 149, Pancreatic Disorders, includes the code for acute pancreatitis; clinically there is no situation in which a patient with this acute condition would be admitted for a planned procedure. Therefore, Version 3.0 adds the ICD–9 code for acute pancreatitis, 577.0, to the acute primary diagnosis table to better identify unplanned readmissions. Finally, CCS 149, Biliary Tract Disease, is a mix of acute and non-acute diagnoses. Adding the subset of ICD–9 codes within this CCS group that are for acute diagnoses to the list of acute conditions improves the accuracy of the algorithm for these acute conditions while still ensuring that readmissions for planned procedures, like cholecystectomies, are counted accurately as planned. For more detailed information on how the algorithm is structured and the use of tables to identify planned procedures and diagnoses, we refer readers to CMS’ Planned Readmission Algorithm Version 2.1: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. As noted above, readers can find the specific Version 3.0 tables for each measure in the measure updates and specifications reports at the above link. We invited public comment on our proposal to use the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/TKA, HWR, COPD, and Stroke readmission measures for the FY 2015 payment determination and subsequent years. Comment: One commenter supported the use of the planned readmission algorithm for the COPD readmission measure. Several commenters believed updates to the COPD readmission rate calculation will increase the measures precision. Response: We thank the commenters for their support. Comment: Several commenters did not support the Cancer Exclusions and urged CMS to continue excluding therapeutic radiation and cancer chemotherapy from readmissions penalties. Commenters stated that given the immunosuppression associated with these conditions and treatments, it is in the best interest of the patients to be sent home as soon as possible as it reduces their chances of getting hospital acquired infections that are often more virulent than community-acquired pathogens. One commenter was E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations concerned that the proposed exclusion may not be able to fully account for the increased readmissions associated with this population that are often not preventable. Another commenter also noted that some hospitals may treat more patients who receive these treatments compared to other hospitals, which would not be accounted for in the measures. Another commenter did not believe that CMS presented convincing evidence that the cancer codes proposed for exclusion are appropriate to exclude at this time. The commenter urged CMS to report its findings to NQF for a transparent review prior to implementation. Response: We recognize that cancer care readmissions are often not preventable. In response to commenters’ concerns regarding the cancer exclusions and certain hospitals treating more cancer patients than other hospitals, we are removing both CCS 211—Therapeutic Radiation and CCS 224—Cancer Chemotherapy from the potentially planned procedure table of the planned readmission algorithm to improve the accuracy of the algorithm. We are removing Therapeutic Radiation because patients are not typically admitted for therapeutic radiation, and admissions with this treatment in a validation study we conducted of the algorithm were generally unplanned. Further, our validation study showed admissions for people who receive cancer chemotherapy, but do not have a principal diagnosis of maintenance chemotherapy are typically unplanned admissions. Therefore, we expect that removal of CCS 211 and CCS 224 will improve the algorithm’s accuracy and we do not anticipate it will have the unintended consequence of discouraging needed cancer care. We acknowledge that in many cases it is in the best interest of the patients to be sent home as soon as possible as it reduces their chances of getting hospital acquired infections that are often more virulent than community-acquired pathogens. As we are removing these cancer exclusions, we believe that we would not need to report additional information to NQF, as requested by the commenter. Comment: Several commenters believed that the readmission algorithm is critically important in the appropriate attribution of readmissions. One commenter was disappointed that CMS have not sent the planned readmissions algorithm back to the NQF and several suggested that CMS seek an ad hoc review before proposing changes to the readmission measures that are used in the Hospital IQR Program and the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Hospital Readmissions Reduction Program. Response: We would like to reassure the commenters that our proposed changes to the readmission algorithm will have minimal effect on how it attributes readmissions. We believe the changes should undergo NQF review as part of the endorsement maintenance and annual update processes for individual measures instead of an ad hoc review because the changes to the algorithm have a minimal effect on the planned readmission rates for each measure as detailed in the proposed rule (Table IV.H.1) (79 FR 28107 through 28108) and improve the accuracy of the algorithm. We have submitted changes related to the heart failure, pneumonia, and hip/knee, COPD and CABG readmission measures with Version 3.0 to NQF, all under annual update review with the exception of the CABG readmission measures which are new. For the AMI measure, endorsement maintenance occurred in 2013 prior to CMS’ updating the algorithm to Version 3.0; therefore, we will submit the AMI readmission measure with the revised algorithm in the next NQF review cycle. We acknowledge the commenter’s view that the readmission algorithm is critically important in the appropriate attribution of readmissions. After consideration of the public comments we received, we are finalizing our policy to use the CMS Planned Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/ TKA, HWR, COPD, and Stroke readmission measures for the FY 2015 payment determination and subsequent years as proposed. b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/ TKA) 30-Day Complication and Readmission Measures In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28224 through 28225), for the FY 2015 payment determination and subsequent years, we proposed to refine: (1) the measure outcome and cohort for the Elective Primary THA/TKA All-Cause 30-Day Risk-Standardized Complication Measure (NQF #1550); and (2) the measure cohort for the Elective Primary THA/TKA All-Cause Unplanned 30-Day Risk-Standardized Readmission Measure (NQF #1551). As part of measure implementation, we conducted a dry run for both the THA/TKA readmission and complication measures in September/ October of 2012. More information on the dry run is available at: https:// www.qualitynet.org/dcs/ BlobServer?blobkey=id&blobno PO 00000 Frm 00361 Fmt 4701 Sfmt 4700 50213 cache=true&blobwhere= 1228889945763&blobheader=multipart %2Foctet-stream&blobheadername1= Content-Disposition&blobheader value1=attachment%3Bfile name%3DDryRun_HWR-HK_Summ Rept_122112.pdf&blobcol=urldata&blob table=MungoBlobs. During the dry run, several commenters suggested that we evaluate the use of Present on Admission (POA) codes for both the hip/knee readmission and complication measures. We agreed with the suggestion and have been monitoring POA data collection and testing its readiness for use in claimsbased measures. We also noted our intent to evaluate the use of POA codes in Hospital IQR Program measures, such as the stroke mortality rate measure, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50801). We have since tested the use of the POA codes and proposed to incorporate POA codes into the hip/ knee complication measure for FY 2015 payment determination and subsequent years in order to prevent identifying a condition as a complication of care if it was present during admission. In addition, currently, the THA/TKA Readmission Measure (NQF #1551) adopted for the Hospital IQR Program is intended to only include patients who have an elective THA or TKA. Currently, this measure excludes patients who have a principal discharge diagnosis of femur, hip, or pelvic fracture on their index admission since hip replacement for hip fracture is not an elective procedure. However, after hospitals reviewed their hospitalspecific THA/TKA Readmission Measure data during the national dryrun, we learned that hospitals code hip fractures that occur during the same admission as a THA as not only a principal diagnosis, but also alternatively, a secondary diagnosis, instead of just a principal diagnosis as currently specified by the measure. According to feedback received from hospitals participating in the dry-run, the measure methodology failed to identify, and, appropriately exclude, a small number of patients (that is, 0.42 percent of patients in 2009–2010 data) with a hip fracture that had non-elective total hip arthroplasty as captured by these secondary diagnoses. Therefore, to ensure that all such nonelective hip fracture patients are excluded from the measure, we proposed to refine the measure to exclude patients with hip fractures coded as either a principal or secondary diagnosis during the index admission beginning with the FY 2015 payment determination and subsequent years. We believe this refinement is responsive to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50214 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations comments previously received from hospitals (78 FR 50709) and will allow us to accurately exclude patients who were initially admitted for a hip fracture and who then subsequently underwent total hip arthroplasty, making their procedure non-elective. We invited public comment on these proposed refinements. Comment: Many commenters supported these refinements. Specifically, commenters supported CMS’ proposals to: • Add POA condition codes to the THA/TKA measures, contending that doing so will minimize the misidentification of pre-existing conditions as complications related to the procedure. • Exclude from this 30-day readmission measure cohort patients with hip fracture who had a nonelective total hip anthroplasty. • Exclude patients who have a hip fracture coded as either a principal or secondary diagnosis during the index admission from the THA/TKA complication and readmission measures. • Remove cases where the hip/knee complication was present prior to the relevant admission as such complications should accrue to the hospitals furnishing the procedure prior to follow-up care. • Evaluate the performance of the Risk Standardized Readmission and Complication Rate (RSRR and RSCR) measures for total hip and total knee arthroplasty. Response: We thank the commenters for their support. Comment: Several commenters appreciated CMS’ efforts to make measure improvements but explained that they did not support the update until measures have completed the NQF measure maintenance process, arguing that changes should not be made through the subregulatory process. Response: To clarify, since we are using the notice and comment rulemaking process to make these measure refinements here, we are not making these changes using subregulatory methods. We believe these refinements are necessary to ensure that the measure accurately reflects the care provided to patients. We do not believe that we should delay making efforts to improve the measure’s accuracy. Comment: One commenter did not support the modifications to the THA and TKA readmission and complication measures, noting that the need to make corrections reinforces the view that there should be sufficient VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 comprehensive testing before they are adopted for use. Response: We agree with the commenter that the measures should undergo extensive testing prior to inclusion in reporting programs. The modifications here were identified during field testing of the THA/TKA readmission and complication measures and were incorporated prior to inclusion of the measures in the Hospital IQR Program. In addition, we reevaluate our measures on an annual basis in order to make methodological refinements required by: (1) Ongoing changes in clinical practice; (2) coding update; and (3) evolving input from stakeholders. Comment: One commenter was concerned about the accuracy of administrative claims data used for the Hip/Knee Complication measure. The commenter suggested that the claims data used for the measure has been known to underreport significant comorbidities, particularly obesity. Response: We believe that the administrative claims data used for the Hip/Knee Complication measure are accurate. We have validated the AMI, HF, and pneumonia readmission and mortality measures by building comparable models using medical record data for risk adjustment for heart failure patients (National Heart Failure data), AMI patients (Cooperative Cardiovascular Project data), and pneumonia patients (National Pneumonia Project dataset). When the medical record-based models were applied to the corresponding patient population, the hospital riskstandardized rates estimated using the claims-based risk adjustment models had a high level of agreement with the results based on the medical record model. This supports the use of the claims-based models for public reporting. Regarding the commenters’ concern about under-reporting significant comorbidities, particularly morbid obesity, we have also conducted a medical record validation study of the THA/TKA complications measure. The goal of that study was to determine the overall agreement between arthroplasty patients identified as having a complication (or no complication) in the claims-based measure and those who had a complication (or no complication) also documented in the medical record. Overall measure data agreement was 93 percent (598/644 patients) before any changes were made to the model specifications. After the measure specifications were changed based upon the results of this validation study, the measure agreement between claims data PO 00000 Frm 00362 Fmt 4701 Sfmt 4700 and the medical record was 99 percent (635/644). We also acknowledge the commenters’ concern that obesity is associated with poorer outcomes after joint replacement; however, evidence supports that the potential greatest risk lies in patients who are morbidly obese.57 Administrative codes for morbid obesity have been shown to have greater sensitivity and specificity than obesity codes overall, with a specificity of 99 percent,58 and morbid obesity (ICD–9–CM code 278.01) is currently included in the measure risk model. Comment: Several commenters requested that the Hip/Knee Complication measure be adjusted for socioeconomic status (SES). Response: We appreciate the commenters’ concerns and note that these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673 through 50674). As described in prior rulemaking, we do not currently risk adjust for SES in the Hospital IQR Program. However, we do risk adjust for comorbidities (that is, correlated illnesses) and other factors to ensure that hospitals are not penalized for serving populations that are sicker or have higher incidences of chronic disease. We are aware that there are differing opinions regarding this approach. We appreciate the commenters’ suggestions on the importance of addressing SES in the Hospital IQR Program. We have continued to consider and evaluate stakeholder concerns regarding the influence of patient socioeconomic status on clinical quality measures. We refer readers to section IV.H.4. of the preamble of this final rule for a discussion of the use of SES in our quality programs. After consideration of the public comments we received, we are finalizing the refinements to the THA/ TKA measure as proposed. c. Anticipated Effect of Refinements to Existing Measures Based on our analyses of discharges between July 2009 and June 2012, our proposal to use the Planned Readmission Algorithm Version 3.0 would have the following effects on measures had these changes been 57 Horan F. Obesity and joint replacement. J Bone Joint Surg [Br] 2006;88–B:1269–71. 58 Nicholas S. Golinvaux, Daniel D. Bohl, Bryce A. Basques, Michael C. Fu, Elizabeth C. Gardner, Jonathan N. Grauer. Limitations of Administrative Databases In Spine Research: A Study in Obesity. Spine Journal, In Press, Accepted Manuscript, Available online 26 April 2014. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV applied for the FY 2014 payment determination as an example. We are sharing this information to provide the public with a sense of the extent to which these refinements to the measures will change the measure scores. As the results show, while the refinements improve the accuracy of the measures, the changes in actual scores are very slight. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 The proposed 30-day readmission rate (excluding the planned readmissions) would increase by 0.1 percentage points for AMI; 0.2 percentage points for HF; 0.1 percentage points for PN; 0.1 percentage points for COPD; 0.0 percentage points for hip/knee; 0.1 percentage points for HWR; and 0.0 percentage points for stroke. The new national measure (unplanned) rate for each condition PO 00000 Frm 00363 Fmt 4701 Sfmt 4700 50215 would have been 18.4 percent for AMI; 23.2 percent for HF; 17.7 percent for PN; 21.1 percent for COPD; 5.4 percent for hip/knee; 16.1 percent for HWR; and 13.8 percent for stroke. The number of readmissions considered planned (and, therefore, not counted as a readmission) would decrease by 334 for AMI; 1,375 for HF; 981 for PN, 574 for COPD; 309 for hip/ knee; 7,417 for HWR; and 242 for stroke. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50216 VerDate Mar<15>2010 Jkt 232001 PO 00000 Frm 00364 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 ER22AU14.008</GPH> Comparison of Planned Readmission Algorithms V 2.1 and 3.0 for AMI!HF/PN/COPD/HK/HWR/Stroke Readmission Measures (Based on 2009-2012 Discharges) AMI HF PN COPD Hip/Knee HWR Stroke V3.0 V2.1 V3.0 V2.1 V3.0 V2.1 V3.0 V2.1 V3.0 V2.1 V3.0 V2.1 V3.0 V2.1 Number of 513,33 513,33 1,262,8 1,262,8 1,089,7 1,089,7 989,38 989,38 879,64 879,64 6,918,4 6,918,4 502,37 502,37 1 1 1 1 Discharges 1 1 26 26 58 58 67 67 6 6 Number of Unplanned 208,75 207,77 1,112,8 1,105,3 94,453 93,940 292,976 290,450 192,887 191,797 47,236 47,236 69,323 69,081 0 Readmissio 85 78 9 ns Readmissio 18.4% 18.3% 23.2% 23.0% 17.7% 17.6% 21.1% 21.0% 5.4% 5.4% 16.1% 16.0% 13.8% 13.8% nRate Number of Planned 11,947 12,281 16,230 17,605 6,545 7,526 6,447 7,021 2,326 2,635 85,673 93,180 5,750 5,992 Readmissio ns Planned 2.4% 1.3% 1.4% 0.6% 0.7% 0.7% 0.7% 0.3% 0.3% 1.2% 1.3% 1.1% 1.2% Readmissio 2.3% nRate %of Readmissio 11.2% 11.6% 5.3% 5.7% 3.3% 3.8% 3.0% 3.3% 4.7% 5.3% 7.1% 7.8% 7.7% 8.0% ns that are Planned tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations d. Clarification Regarding Influenza Vaccination for Healthcare Personnel The Influenza Vaccination Coverage Among Healthcare Personnel (HCP) (NQF #0431) measure was finalized for the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51633) and the Hospital Outpatient Quality Reporting (HOQR) in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75099). We received public comments regarding the burden of separately collecting and reporting HCP influenza vaccination statuses for both the inpatient and outpatient settings. In response to these concerns, we clarified that beginning with the 2014–2015 influenza season (CY 2014 reporting period and FY 2016 payment determination), facilities should collect and report a single vaccination count for each healthcare facility by CMS Certification Number (CCN), instead of separately by inpatient or outpatient setting, in order to reduce burden. We announced this clarification regarding how to designate HCP for this measure in an Operational Guidance document which can be found on our on our Web page at: https:// origin.glb.cdc.gov/nhsn/PDFs/HCP/ Operational-Guidance-ACH–HCPFlu.pdf. Using the CCN will allow healthcare facilities with multiple care settings to simplify data collection and submit a single count applicable across the inpatient and outpatient settings. We will then publicly report the percentage of HCP who received an influenza vaccination per CCN. This single count per CCN will inform the public of the percentage of vaccinated HCP at a particular healthcare facility, which would still provide meaningful data and help to improve the quality of care. Specific details on data submission for this measure can be found at: https://www.cdc.gov/nhsn/acute-carehospital/hcp-vaccination/ and at https:// www.cdc.gov/nhsn/acute-care-hospital/ index.html. (We discussed this clarification in section IX.A.5. of the preamble to the proposed rule (79 FR 28221).) Comment: Several commenters supported the collection and submission of the influenza vaccination measure as a single facility count, which the commenters agreed will reduce the burden on providers and lead to more meaningful results. One commenter specifically supported the healthcare personnel influenza vaccination coverage clarification because it accommodates injectable and nasal spray vaccines. Response: We thank the commenters for their support. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Comment: A commenter requested clarification on reporting for the inpatient and outpatient settings, stating that it reports to NHSN separately for these settings through a Facility Organization Identification (Org ID) rather than by CCN. The commenter believed that, after all data have been submitted by Org ID, the CDC will rollup the data reported by Org ID to the CCN level, in order to report data to CMS. Response: We agree with the commenter’s assessment and clarify that hospitals should report by enrolled facility, according to their NHSN OrgID, in order to be consistent with CDC NHSN infrastructure. These data are to be reported for all patient care units included within the enrolled facility’s OrgID that also share the same CCN (some patient care units within the OrgID may have separate CCNs and those should not be included in these counts). Therefore, data will be submitted to NHSN by facility Org ID, not CCN. CDC will then aggregate the facility level data into a CCN HCP rate and submit aggregate hospital-level measure rates at the CCN level to us on behalf of facilities for Hospital Compare public reporting purposes. After consideration of public comments we received, we are clarifying that hospitals should report a single count per enrolled facility, and not CCN, for the previously finalized Influenza Vaccination Coverage Among Healthcare Personnel (HCP) (NQF #0431) measure. We will require facilities to collect and submit a single vaccination count for each health care facility enrolled in NHSN by facility OrgID. This modifies our statement in the proposed rule indicating that facilities should submit data by CCN, and better aligns with the FY 2015 OPPS Proposed rule (79 FR 41035) as well as NHSN guidance documents. 7. Additional Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years For purposes of the Hospital IQR Program, section 1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act. However, the statutory requirements under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may PO 00000 Frm 00365 Fmt 4701 Sfmt 4700 50217 specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28227 through 28243) we proposed to add a total of 11 measures to measure set for the FY 2017 payment determination and subsequent years. The first nine new measures are: (1) Hospital 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery (claims-based); (2) Hospital 30day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery (claims-based); (3) Hospitallevel, risk-standardized 30-day episodeof-care payment measure for pneumonia (claims-based); (4) Hospital-level, riskstandardized 30-day episode-of-care payment measure for heart failure (claims-based); (5) Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) (chart-abstracted); (6) EHDI–1a Hearing Screening Prior to Hospital Discharge (NQF #1354) (electronic clinical quality measure); (7) PC–05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (NQF #0480) (electronic clinical quality measure); (8) CAC–3 Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver (electronic clinical quality measure); and, (9) Healthy Term Newborn (NQF #0716) (electronic clinical quality measure). In addition, to align the Hospital IQR Program with the Medicare EHR Incentive Program for Eligible Hospitals and CAHs and allow hospitals as many measure options as possible that overlap both programs, we proposed to readopt two measures previously removed from the Hospital IQR Program as voluntary electronic clinical quality measures: (10) AMI–2 Aspirin Prescribed at Discharge for AMI (NQF #0142) (electronic clinical quality measure); and (11) AMI–10 Statin Prescribed at Discharge (NQF #0639) (electronic clinical quality measure). These two measures are part of the Stage 2 Medicare EHR Incentive Program measure set for eligible hospitals and CAHs. The four proposed claims-based measures (1–4, above) were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2013’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP 2014 Recommendations on Measures for More Than 20 Federal E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50218 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Programs final report, available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. The proposed chart-abstracted measure (5 above) Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) was included in the MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS final report, available at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. The proposed measures 6–9 above were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS final report, available at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. Measures 10 and 11 were included on a publicly available document entitled ‘‘Measures Under Consideration for Calendar Year 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its Pre-Rulemaking Report: Input on Measures Under Consideration by HHS for 2012 Rulemaking available at https://www.qualityforum.org/ Publications/2012/02/MAP_Pre-Rule making_Report__Input_on_Measures_ Under_Consideration_by_HHS_for_ 2012_Rulemaking.aspx. We received a number of comments applying across proposed measures and will address those comments first before individually addressing comments related to specific measures. Comment: One commenter supported the inclusion of the CABG mortality and readmission, heart failure payment, and pneumonia payment measures in the Hospital IQR Program. The commenter preferred that the measures be NQFendorsed. Another commenter supported CMS’ proposal to increase the number of outcome measures. Response: We thank the commenters for their support. Comment: Several commenters expressed concern that four of the five measures proposed for adoption under the Hospital IQR Program were not NQF-endorsed and have not been recommended by the MAP. The most frequently expressed concerns were in regards to the CABG mortality, CABG readmission, heart failure and pneumonia payment measures, although VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 there were several comments addressing the other proposed measures that are not NQF-endorsed. A commenter noted the NQF process is important to the reliability and validity of the measures used in the programs and to monitor adverse events. Response: As described above, we may adopt non-NQF-endorsed measures under the Hospital IQR Program exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act. This provision provides that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Although we proposed some measures that are not currently NQF-endorsed, they are pending NQF endorsement. We also considered other available measures that have been endorsed by the NQF and found no other feasible and practical measures. In addition, the MAP has supported or conditionally supported several of the measures. We are actively seeking NQF endorsement for the claims-based measures. More detailed discussions for individual measures are below. Comment: A commenter requested that CMS outline its standards for conducting an environmental scan of available measures in the absence of a non-NQF-endorsed measure. Response: We conduct thorough environmental scans of available measures using a standardized system set out in A Blueprint for the CMS Measures Management System (https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/MMS/Measures ManagementSystemBlueprint.html). We follow these core processes set out in the Blueprint as we develop, implement, and maintain quality measures. Our process for conducting an environmental scan of existing or related measures is set out below. First we search for similar or related measures (existing or in development) that will help achieve the quality goals. We keep the search parameters broad to obtain an overall understanding of the measures in existence, including measures that closely meet the contract requirements and other potential sources of information. We then look for measures endorsed and recommended by multi-stakeholder organizations whenever applicable and include a PO 00000 Frm 00366 Fmt 4701 Sfmt 4700 search for measures developed and/or implemented by the private sector. Then we determine what types of measures are needed to promote the quality goals for a particular topic/condition or setting and determine what measurement gaps exist for the topic area, as well as existing measures that may be adopted or adapted for the project. For example, if the objective is the development of immunization measures for use in the home health setting, it will be necessary to identify and review existing home health measures. In addition, it might also be helpful to analyze immunization measures used in other settings such as nursing homes and hospitals. The CMS Measures Management staff assists in identifying measures in development to ensure that no duplication occurs or to ensure related measures are developed with harmonization in mind. Search parameters include: (1) Measures in the same setting, but for a different topic; (2) Measures in a different setting, but for the same topic; (3) Measures that are constructed in a similar manner; (4) Quality indicators; (5) Accreditation standards; and (5) NQF preferred practices for the same topic. Searching for existing and related measures may involve two steps: (1) searching databases, and (2) searching for other sources of information, such as performance indicators, accreditation standards, or preferred practices. We use a variety of databases and sources to search for existing and related measures. Below are links to a few readily available sources: • National Quality Measures Clearinghouse (https://www.quality measures.ahrq.gov/); • HHS Inventory (https://www.quality measures.ahrq.gov/hhs-measureinventory/browse.aspx); • CMS Measures Inventory and Pipeline (https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/QualityMeasures/CMSMeasures-Inventory.html); • National Quality Forum (https:// www.qualityforum.org/Measures_ List.aspx); • AHRQ (https:// www.qualityindicators.ahrq.gov/; and, • American Medical AssociationPhysician Consortium for Performance Improvement (https://www.amaassn.org/apps/listserv/x-check/ qmeasure.cgi?submit=PCPI). We also search other HHS agency pipeline measures. We search for other sources of information, such as performance indicators, accreditation standards, or preferred practices, that may pertain to the contract topic. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Though they may not be as fully developed as a quality measure, quality indicators could be further developed to create a quality measure by providing detailed and precise specifications. Measures aligned with those standards may be easier to implement and be more readily accepted by the providers. These standards are linked to specific desired outcomes, and quality measures may be partially derived from the preferred practices reflected in the standards. Comment: Several commenters believed that all measures should be risk-adjusted for SES, explaining that failing to risk adjust for SES factors will skew our data measurements and produce inaccurate and unreliable outcomes. One commenter emphasized the need for adjusting for SES factors in all outcomes measures, arguing that such variables have an impact on patient outcomes, but are outside of a hospitals control. The commenter added that CMS as not provided data that shows this point to be untrue. One commenter stated that CMS should analyze the differences in performance for safety net providers to other hospitals by determining if the means of performance distribution are significantly different thus resulting in penalties. If it does, the commenter believed that SES risk adjustment would provide incentives for hospitals to improve as quality differences for reasons outside of a hospital’s control would be illuminated. Another commenter explained that many studies show reliable statistical results that SES is a risk factor for patient outcomes and that we have not demonstrated otherwise. As a result, the commenter believed that not adjusting for this risk factor obscures quality differences. One commenter believed that empirical studies demonstrate that patient SES impacts outcomes and failure to account for such impact disadvantages hospitals that treat them. Another commenter believed that hospitals should not be accountable for outcomes attributable to patient risk factors. Instead, the commenter believed that risk adjustment should be performed if data-stratified by SES show that safety net hospitals are providing poorer care for reasons unrelated to quality. Another commenter suggested that CMS’ argument for not risk adjusting for SES factors is that it would hold hospitals serving these areas to a different standard than others. The commenter stated that CMS’ belief that risk adjusting for SES obscures true quality differences is based on the assumption that SES is not a risk factor beyond the hospital’s control. Another VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 commenter listed unintended consequences that may result from not risk adjusting for SES which were echoed by several commenters. These potential consequences included not providing care for disadvantaged patients so as to not be labeled a poor performer, shifts in funds to hospitals caring for affluent patients, and consumers avoiding providers labeled poor performers when they are not. Several commenters were concerned that not risk-adjusting for SES could result in safety net providers losing scarce resources that are necessary to care for vulnerable patients, which would potentially make disparities worse. Further, one commenter stated that current CMS measures do not improve quality and weaken the social safety net. Another commenter believed that the current policy to exclude ‘‘factors related to the disparities in care’’ from all measures creates a ‘‘one size fits all’’ approach that ignores fundamentally the challenges that many academic health centers face in delivering high-quality care to their entire patient population, regardless of race, income, or other socioeconomic characteristics. Commenters urged CMS to review important studies published about risk adjustment for SES and revise measure methodology to account for SES. One commenter suggested that CMS comply with the NQF’s recommendations related to the use of risk adjustment versus stratification for patient SES. Response: We have received many comments regards risk-adjusting measures for SES in several quality programs. We appreciate the commenters’ concerns and note that these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673 through 50674). As described in prior rulemaking, we do not currently risk adjust for SES in the Hospital IQR Program. However, we do risk adjust for comorbidities (that is, correlated illnesses) and other factors to ensure that hospitals are not penalized for serving populations that are sicker or have higher incidences of chronic disease. We are aware that there are differing opinions regarding this approach. We appreciate the commenters’ suggestions on the importance of addressing SES in the Hospital IQR Program. We have continued to consider and evaluate stakeholder concerns regarding the influence of patient socioeconomic status on clinical quality measures. We refer readers to section IV.H.4. of the preamble of this final rule for further discussion of this issue. PO 00000 Frm 00367 Fmt 4701 Sfmt 4700 50219 Comment: One commenter stated that ‘‘a large proportion of low-income patients sometimes achieve good quality scores even as compared the scores for hospitals that have a lower proportion of low-income patients. But this is simply an anecdotal observation. It is not a statistically acceptable and reliable analysis.’’ Response: We thank the commenter for their feedback, we understand this comment to mean a hospital with a high proportion of low SES patients can perform high in comparison with hospitals with a relatively low proportion of SES patients. We note similar findings in our Chartbook that follows the trends of hospital performance on readmission, mortality, and complication (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook2013.pdf.) The statement referred to was based on descriptive statistics of the measure scores that can be found in our 2013 Medicare Hospital Quality Chartbook at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook2013.pdf. The risk-adjustment for clinical factors likely captures much of the variation due to SES, therefore resulting in an attenuation of the impact of SES factors on hospitals’ results. We continue to monitor related activities at NQF, such as the July 23, 2014 decision by the NQF Board to approve a trial period to test the impact of sociodemographic factor risk adjustment of performance measures (available at: https://www.qualityforum.org/Press_ Releases/2014/NQF_Board_Approves_ Trial_Risk_Adjustment.aspx), and in Congress. As we stated in the past, we are committed to working with the NQF and other stakeholder communities to continuously refine our measures and to address the concerns associated with SES and risk adjustment. We believe that continued collaboration with the stakeholder communities will enable us to identify feasible ways to appropriately address any unintended consequences for providers serving high proportions of low SES patients. Comment: A commenter was concerned that CMS proposed several new measures for the Hospital IQR Program that the commenter believes lack the scientific rigor needed for public reporting. However, the commenter did not specify which proposed measures caused concern. E:\FR\FM\22AUR2.SGM 22AUR2 50220 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We respectfully disagree with the commenter that the proposed measures lack the scientific rigor needed for public reporting. We believe that these measures, as they are detailed below, are scientifically rigorous as they are described. Comment: Several commenters did not support the use of the pneumonia payment measure in the Hospital IQR Program since it is not NQF-endorsed. One commenter believed that, because the measure is not NQF endorsed, it is too soon to finalize the measure for the FY 2017 Hospital IQR Program. Response: We received numerous comments that concerned both the Hospital-level, risk-standardized 30-day episode-of-care payment measure for pneumonia and Hospital-level, riskstandardized 30-day episode-of-care payment measure for heart failure payment measures. We are addressing those comments here first before addressing the individual measures. a. Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Background CABG is a priority area for outcomes measure development because it is a common procedure associated with considerable morbidity, mortality, and health care spending. In 2007, there were 114,028 hospitalizations for CABG surgery and 137,721 hospitalizations for combined surgeries for CABG and valve procedures (‘‘CABG plus valve’’ surgeries) in the U.S.59 Readmission rates following CABG surgery are high and vary across hospitals. For example, in 2009 Medicare fee-for-service (FFS) data, the median hospital-level risk-standardized readmission rate after CABG was 17.2 percent and ranged from 13.9 percent to 22.1 percent.60 This is consistent with published data as the average 30-day allcause, hospital-level readmission rate in New York state was 16.5 percent and ranged from 8.3 percent to 21.1 percent among all patients who underwent CABG surgery between January 1, 2005 and November 30, 2007.61 Among 59 Drye E, Krumholz H, Vellanky S, Wang Y. Probing New Conditions and Procedures for New Measure Development: Yale New Haven Health Systems Corporation; Center for Outcomes Research and Evaluation.; 2009:1–7. 60 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 61 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 patients readmitted within 30 days, 87.3 percent of readmissions were for reasons related to CABG surgery, with a 30-day rate of readmissions due to complications of CABG surgery of 14.4 percent. Patients readmitted within 30 days also experienced a 2.8 percent inhospital mortality rate during their readmission(s), three-fold higher than the 30-day mortality rate for patients without readmissions.62 Hence, addressing the causes of readmission will improve outcomes for patients. Readmissions after CABG also impose significant health care costs. In 2007, the Medicare Payment Advisory Committee (MedPAC) published a report to Congress in which it identified the seven conditions associated with the most costly potentially preventable readmissions in the U.S.63 Among these seven, CABG ranked as having the highest potentially preventable readmission rate within 15 days following discharge (13.5 percent) and the second highest average Medicare payment per readmission ($8,136).64 The annual cost to Medicare for potentially preventable CABG readmissions was estimated at $151 million. High readmission rates and wide variation in these rates suggest that there is room for improvement. Reducing readmissions after CABG surgery has been identified as a target for quality measurement. An all-cause readmission measure for patients who undergo CABG surgery will provide hospitals with an incentive to reduce readmissions through prevention and/or early recognition and treatment of postoperative complications, and improved coordination of peri-operative care and discharge planning. The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. We proposed to include this nonNQF-endorsed measure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this final rule. surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. 62 Ibid. 63 Medicare Payment Advisory Committee. Report to the Congress: Promoting Greater Efficiency in Medicare, 2007. 64 Ibid. PO 00000 Frm 00368 Fmt 4701 Sfmt 4700 Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF. We also are not aware of any other 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The measure has been reviewed by the MAP and was conditionally supported pending NQF endorsement as detailed in its Pre-Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/ Setting_Priorities/Partnership/MAP_ Final_Reports.aspx. This measure was submitted to NQF on February 5, 2014 and is currently under review. (2) Overview of Measure The CABG readmission measure assesses hospitals’ 30-day, all-cause risk-standardized rate of unplanned readmission following admission for a CABG procedure. In general, the measure uses the same approach to risk adjustment and hierarchical logistic modeling (HLM) methodology that is specified for CMS’ other readmission measures previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (3) Data Sources The proposed measure is claimsbased. It uses Medicare administrative data from hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG procedure. (4) Outcome The outcome for this measure is 30day, all-cause readmission, defined as an unplanned subsequent inpatient admission to any applicable acute care facility for any cause within 30 days of the date of discharge from the index hospitalization. This outcome period is consistent with other NQF-endorsed publicly reported readmission measures (AMI, HF, PN, COPD, HWR, and THA/ TKA). The measure assesses all-cause unplanned readmissions (excluding planned readmissions) rather than readmissions for CABG only for several reasons. First, from the patient perspective, a readmission for any reason is likely to be an undesirable E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV outcome of care, even though not all readmissions are preventable. Second, limiting the measure to CABG-related readmissions may limit the effort focus too narrowly rather than encouraging broader initiatives aimed at improving the overall care within the hospital and transitions from the hospital setting. Moreover, it is often hard to exclude quality issues and accountability based on the documented cause of readmission. For example, a patient who underwent a CABG surgery and develops a hospital-acquired infection may ultimately be readmitted for sepsis. It would be inappropriate to consider such a readmission to be unrelated to the care the patient received for their CABG surgery. Finally, while the measure does not presume that each readmission is preventable, interventions generally have shown reductions in all types of readmissions.65 66 The measure does not count planned readmissions as readmissions. Planned readmissions would be identified in claims data using the CMS Planned Readmission Algorithm Version 3.0 that detects planned readmissions that may occur within 30 days of discharge from the hospital. Version 2.1 of the algorithm was finalized for use in the current Hospital IQR Program readmission measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787, 50790 through 50792 and 50794 through 50798). However, we proposed to update the algorithm to version 3.0, and details on the updates to this algorithm can be found in section IX.A.6.a. of the preamble of this final rule. The proposed CABG readmission measure uses the planned readmission algorithm tailored for CABG patients. We adapted the algorithm for this group of patients with input from CABG surgeons and other experts, narrowing the types of readmissions considered planned since planned readmissions following CABG are less common and less varied than among patients discharged from the hospital following a medical admission. More detailed information on how the CABG measure incorporates the Planned Readmission Algorithm Version 3.0 can be found on the CMS Web site at: https:// www.cms.gov/Medicare/Quality65 Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency Department Visit and Readmission in Patients Hospitalized for Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct. 2010;170:1664– 1670. 66 Nelson EA, Maruish ME, Axler JL.: Effects of Discharge Planning and Compliance with Outpatient Appointments on Readmission Rates. Psychiatr Serv. July 1 2000;51(7):885–889. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. Once at the Web site, users should open the Coronary Artery Bypass Graft (CABG) Readmission ZIP file, then open the file labeled, ‘‘Version10_Readmission_ CABG_Measure_Methodology_Report_3 19 2014’’ and refer to Section 2.3.3. For the CABG measure, unplanned readmissions that fall within the 30-day post-discharge timeframe from the index admission would not be counted as readmissions for the index admission if they were preceded by a planned readmission. (5) Cohort The cohort includes patients aged 65 years and older who received a qualifying CABG procedure at an acute care facility. Patients are eligible for inclusion if they had a qualifying CABG procedure and continuous enrollment in Medicare FFS one year prior to the first day of the index hospital stay and through 30 days post-discharge. The index stay is the stay that triggers the 30-day measurement period. In order to include a clinicallycoherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and non-cardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures, that is, CABG procedures performed without concomitant high-risk cardiac and non-cardiac procedures.67 Limiting the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes9; therefore, the measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort for quality measurement. For detailed information on the cohort definition, we refer readers to the 2012 CABG Readmission Measure Methodology Report on the CMS Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-Assessment67 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. PO 00000 Frm 00369 Fmt 4701 Sfmt 4700 50221 Instruments/HospitalQualityInits/ Measure-Methodology.html. (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients who are 65 years of age or older at the time of index admission and for whom there was a complete 12 months of Medicare FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who are discharged against medical advice (excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); (2) admissions for patients who die during the initial hospitalization (these patients are not eligible for readmission); (3) admissions for patients with subsequent qualifying CABG procedures during the measurement period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery, therefore we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort); and (4) admissions for patients without at least 30 days post-discharge enrollment in Medicare FFS (excluded because the 30day readmission outcome cannot be assessed in this group). (7) Risk-Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for readmission relative to patients cared for by other hospitals. The measure uses claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. We refer readers to section IV.4.H of the reamble of this final rule for further discussion of risk-adjustment for socioeconomic factors. (8) Calculating the Risk-Standardized Readmission Ratio (RSRR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50222 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measure varies from hospital to hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the CABG hospitalization, as well as those present in the claims for care at admission. The methodology, however, specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSRR is calculated as the ratio of the number of predicted readmissions to the number of expected readmissions and then the ratio is multiplied by the national unadjusted readmission rate. The ratio is greater than one for hospitals that have more readmissions that would be expected for an average hospital with similar cases and less than one if the hospital has fewer readmissions than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSRR is a point estimate—the best estimate of a hospital’s readmission rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// cms.gov/Medicare/QualityInitiatives PatientAssessmentInstruments/ HospitalQualityInits/MeasureMethodology.html. We invited public comment on this proposal. Comment: Several commenters supported the inclusion of CABG readmission into the Hospital IQR Program. One commenter specifically believes the CABG measure will lead to increased attention to care after discharge. Response: We thank the commenters for their support. Comment: Several commenters recommended that CMS focus on developing an electronically specified measure based on the ICD–10–CM/PCS coding system for future adoption instead of the current proposed measure. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We thank the commenters and will take this suggestion into consideration as we move towards use of electronic clinical quality measures for CABG measures. Comment: Several commenters did not support inclusion of the CABG readmission measure in the Hospital IQR Program because the measure is not NQF-endorsed. Response: We proposed to include this non-NQF-endorsed measure under the Hospital IQR Program exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF. We also are not aware of any other similar measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. We refer readers to section IX.A.7. of the preamble of this final rule where we discuss other comments on our adoption of non-NQF-endorsed measures. On February 5, 2014, we submitted the Hospital-Level 30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery measure to NQF for endorsement. Comment: Several commenters oppose the CABG readmission measure because it is not risk-adjusted for SES. Another commenter also suggested removing other readmission measures from the Hospital IQR Program until they are risk-adjusted for SES. Several commenters suggest following NQFendorsed panel recommendations that propose evidence be presented in either support for or against the inclusion of SES in the measure. A commenter requested we risk-adjust the measure for SES and stated that this materially impacts the patient’s likelihood of being readmitted, and the members on NQF’s panel to examine adjusting for SES recommended adjusting for SES when appropriate. A commenter stated that the lack of risk-adjustment of this measure materially impacts the patient’s likelihood of being readmitted. Response: We appreciate the commenters’ concerns and note that these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673 through 50674). As described in prior rulemaking, we do not currently risk adjust for SES in the Hospital IQR Program. However, we do risk adjust for comorbidities (that is, correlated illnesses) and other factors to ensure that hospitals are not penalized for serving populations that are sicker or PO 00000 Frm 00370 Fmt 4701 Sfmt 4700 have higher incidences of chronic disease. We are aware that there are differing opinions regarding this approach. We appreciate the commenters’ suggestions on the importance of addressing SES in the Hospital IQR Program. We have continued to consider and evaluate stakeholder concerns regarding the influence of patient socioeconomic status on clinical quality measures. We have received many comments regards risk-adjusting measures for SES in several quality programs. We refer readers to section IV.H.4. of the preamble of this final rule for further discussion of this issue. Comment: Several commenters noted that there could be unintended consequences from adopting this measure. One commenter believed it is equally likely to result in hospitals avoiding complex cases in order to avoid potential penalty. Another commenter requested that CMS carefully monitor CABG utilization in high-risk, older patients to ensure hospitals are not avoiding performing them for high risk patients in order to appear as lower readmission. If evidence is found that CABG surgeries are not being offered to high-risk patients, the commenters suggested that CMS may need to reconsider its risk adjustment methodology to mitigate this unintended consequence. Response: We note that the measures are risk-adjusted to take into account clinically complicated conditions. We appreciate commenters’ concerns for potential unintended consequences of the measure. We believe the measure is adequately risk-adjusted for high-risk patients and so will not create a disincentive to treat these patients, but we will consider monitoring for any shift in their care (for example, by evaluating the risk profile of Medicare patients undergoing surgery before and after commencement of public reporting). The proposed CABG readmission measure adjusts for differences across hospitals in the level of risk their patients have for readmission relative to patients cared for by other hospitals. The measure uses administrative claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. Comment: One commenter opposed the measure construction and riskadjustment methodology, citing concerns that the low R-squared meant that the measure does not truly differentiate performance between hospitals. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Response: The commenter refers to the R-squared statistic, but this is not a statistic used to evaluate the CABG measures. Therefore, we are assuming the commenter’s primary concern is with the c-statistic of the measure. The c-statistic evaluates the measure’s ability to discriminate or differentiate among low- versus high-risk patients. For measures used to profile hospital performance the goal is not always to achieve the highest c-statistic possible. The role of risk-adjustment in hospital profiling models is to level the playing field for hospitals for measures that assess relative performance—that is, how well hospitals fare compared to others with a similar patient case-mix. The risk-adjustment variables should be only those that are inherent to the patient and present at the time of admission. Some variables that might increase predictive power, such as complications of care, would not be appropriate for inclusion in an outcome quality measure, even if they would lead to a higher c-statistic. The cstatistic of this CABG measure is similar to other measures that are NQFendorsed and in use, such as the AMI/ HF/PN readmission measures. In addition, this measure’s risk model has been validated using registry data from the Society of Thoracic Surgeons’ (STS) Adult Cardiac Surgery Database, which produced nearly identical cstatistics in a matched set of patients with correlation coefficients between 0.92 and 0.96, depending upon the statistic used.68 Comment: One commenter does not support the CABG readmission measure, because it holds hospitals responsible for pre-existing underlying conditions. The commenter expected that risk adjusting is unlikely to be sufficient. Response: We believe that the measure should appropriately account for patient case mix, including preexisting conditions. This measure’s risk model includes a range of medical and surgical comorbidities predictive of complications and readmissions following CABG surgery. In addition, as noted above, the risk model has been validated against a clinical risk model using registry data from the STS’ Adult Cardiac Surgery Database.69 68 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. 69 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Comment: One commenter noted that the CABG readmission measure has poor discrimination ability. Response: As outlined above, we believe the commenter’s primary concern is with the c-statistic of the measure. Discrimination refers to the ability to distinguish high risk subjects from low risk. The c-statistic is one of the statistical tools used to assess discrimination. We would like to clarify the important difference between predictive models intended for patientlevel risk-stratification versus models used to profile hospital performance. In a patient-level predictive model, the objective is to best predict patient outcomes; the risk-adjustment variables are a means to better predict these outcomes. As an example, a patient who has a serious complication of care may be at higher risk of mortality and readmission; therefore, complications might be useful to include in a model used for patient-level prediction. By contrast, the role of riskadjustment in a hospital profiling model is to level the playing field for hospitals for measures that assess relative performance—that is, how well hospitals are doing compared to others with similar patients. The riskadjustment variables should be only those that are inherent to the patient and present at admission. Although risk adjusting for complications of care could increase the statistical power of a profiling model, it would not make sense to risk-adjust for complications here since it could lead hospitals with high rates of complications to appear to be performing better than hospitals with similar patients even though the quality of care is worse. In addition, as noted above, this measure’s risk model has been validated using registry data from the STS’ Adult Cardiac Surgery Database and produced nearly identical c-statistics in a matched set of patients with correlation coefficients between 0.92 and 0.96, depending upon the statistic used.70 Comment: One commenter requested that the measure differentiate between readmissions within and outside the control of the bypass surgeon. Response: We interpret readmissions ‘‘within and outside the control of the bypass surgeon’’ to mean those that are only related to the CABG surgery. We proposed this measure for hospitalspecific performance measurement, not for measurement of surgeon-level 70 Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J., Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. PO 00000 Frm 00371 Fmt 4701 Sfmt 4700 50223 performance. The measure defines the outcome as ‘‘all-cause’’ unplanned readmissions rather than readmissions only related to the CABG surgery for several reasons. First, from the patient perspective, readmission for any reason is likely to be an undesirable outcome of care. Second, there is no reliable way to determine whether a readmission is related to the previous hospitalization based on the documented cause of readmission. For example, a CABG patient with post-operative left ventricular dysfunction inadequately managed by the hospital performing the surgery may ultimately be readmitted for heart failure. It would be inappropriate to treat this readmission as unrelated to the care the patient received for their CABG surgery. Third, the range of potentially avoidable readmissions also includes those not directly related to the index condition such as those resulting from medication reconciliation errors, poor communication at discharge, or inadequate follow-up post-discharge. Therefore, we believe that creating a comprehensive list of potentially avoidable readmissions related to the previous hospitalization’s condition category would be arbitrary and, ultimately, challenging to implement. Fourth, all existing CMS readmission measures report all-cause readmission, making this approach consistent with existing measures. Fifth, research shows that readmission reduction interventions can reduce all-cause readmission, not only condition-specific readmission. Finally, defining the outcome as allcause readmissions may encourage hospitals to implement broader initiatives aimed at improving the overall care within the hospital and transitions from the hospital setting instead of limiting the focus to a narrow set of condition-specific approaches. Comment: One commenter cited a study71 that concluded that readmission rates for the majority of hospitals were unreliable due to low case volume over the measurement period. Response: The study cited uses a different approach to calculate hospitalspecific risk-adjusted readmission rates, including a logistic regression model and distinct risk variables, than that used in our proposed measure. Our proposed measure uses a hierarchical logistic regression model to account for the clustering of patients within 71 Shih and Dimick. Reliability of readmission rates as a hospital quality measure in cardiac surgery. Annals of Thoracic Surgery. April 2014; 97:1214–1219. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50224 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospitals while risk-adjusting for differences in patient case-mix. Therefore, we do not believe that conclusions drawn from this study are generalizable to this measure. Reliability testing of this measure score using a split-sample approach, in which each hospitals’ patients are divided into two completely distinct groups and the measure score is calculated for each group and compared, produces an intraclass correlation coefficient of 0.33 on a three year data sample (which is the equivalent of a year and a half of data for each comparison group). One limitation of this split-sample approach is that the reliability is estimated under the assumption of only half the number of patients per hospital that would normally be used. Using the Spearman Brown prophecy formula 72 to estimate the reliability of the measure if the entire three year cohort was used (that is, if the number of items in a test increases by a factor of N, then the new reliability r’ can be estimated from the original reliability. Validity for this measure has been documented by both: (1) face validity assessment by a Technical Expert Panel (TEP)—79 percent of TEP members agreed (71 percent moderately or strongly agreed) that the measure will provide an accurate reflection of quality, and (2) in a formal validation study against clinical registry data that documented correlations in excess of 0.90 between clinical data and claims-based risk models.73 To assess face validity, we surveyed the Technical Expert Panel and asked each member to rate the following statement using a six-point scale (1=Strongly Disagree, 2=Moderately Disagree, 3=Somewhat Disagree, 4=Somewhat Agree, 5=Moderately Agree, and 6=Strongly Agree): ‘‘The readmission rates obtained from the readmission measure as specified will provide an accurate reflection of quality.’’ Fourteen TEP members provided the following responses: Moderately Disagreed (2), Somewhat Disagreed (2), Somewhat Agreed (4), Moderately Agreed (5), and Strongly Agreed (1). Therefore, 71 percent of TEP members agreed (43 percent moderately or strongly agreed) that the measure will provide an accurate reflection of quality. 72 Traub, R. (1994).MMSS Reliability for the Social Sciences: Theory and Applications (Page 100). Sage Publications. Newbury Park CT. 73 Suter L.G., Wang C., Araas M., Joyce E., Vellanky S., Potteiger J., Lin Z., Curtis J., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day All-Cause Mortality Following Coronary Artery Bypass Graft Surgery: Report prepared for the Centers for Medicare & Medicaid Services. 2012. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 After consideration of the public comments we received, we are finalizing the Hospital 30-day, Allcause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure as proposed. b. Hospital 30-day, All-cause, RiskStandardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery.74 (1) Background CABG is a priority area for outcomes measure development because it is a common procedure associated with considerable morbidity, mortality, and health care spending. In 2007, there were 114,028 hospitalizations for CABG surgery and 137,721 hospitalizations for combined surgeries for CABG and valve procedures (‘‘CABG plus valve’’ surgeries) among Medicare FFS patients in the U.S.75 CABG surgeries are costly procedures that account for the majority of major cardiac surgeries performed nationally. In FY 2009, isolated CABG surgeries accounted for almost half (47.6 percent) of all cardiac surgery hospital admissions in Massachusetts.76 This provides an example of the frequency in which a CABG Is performed for a patient admitted for cardiac surgery. In 2008, the average Medicare payment was $30,546 for CABG without valve and $47,669 for CABG plus valve surgeries.77 Mortality rates following CABG surgery are not insignificant and vary across hospitals. For example, in 2009 Medicare FFS data indicated that the median hospital-level, risk-standardized mortality rate after CABG was 3.0 percent and ranged from 1.5 percent to 7.9 percent.78 Even within a single state, the observed in-hospital, 30-day allcause, hospital-level mortality rate was 1.81 percent and ranged from 0.0 percent to 5.6 percent among patients who were discharged after CABG surgery (without any other major heart 74 Krumholz H. CABG Mortality Measure Methodology Report Section 1, Subtask 3.1, Deliverable #49a: Yale New Haven Systems Corporation; Center for Outcomes Research and Evaluation; 2012. 75 Drye E, Krumholz H, Vellanky S, Wang Y. Probing New Conditions and Procedures for New Measure Development: Yale New Haven Systems Corporation; Center for Outcomes Research and Evaluation; 2009:7. 76 Massachusetts Data Analysis Center. Adult Coronary Artery Bypass Graft Surgery in the Commonwealth of Massachusetts: Hospital and Surgeons Risk-Standardized 30-Day Mortality Rates. In: Health MDoP, ed. Boston; 2009:77. 77 Pennsylvania Health Care Cost Containment Council. Cardiac Surgery in Pennsylvania 2008– 2009. Harrisburg; 2011:60. 78 Ibid. PO 00000 Frm 00372 Fmt 4701 Sfmt 4700 surgery earlier in the hospital stay) in New York in 2008. The risk-adjusted mortality rate ranged from 0.0 percent to 8.2 percent.79 Variation in these rates suggests that there is room for improvement. An allcause mortality measure for patients who undergo CABG surgery will provide hospitals with an incentive to reduce mortality through improved coordination of perioperative care and discharge planning. This is further supported by the success of registrybased mortality measures in reducing CABG mortality rates. For example, California reports that CABG mortality in that state has steadily declined from 2.9 percent in 2003, the first year of mandatory reporting of their state registry measure, to 2.2 percent in 2008.80 The specifics of the measure methodology are included in the measure methodology report we have posted on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. We refer readers to the report for further details on the riskadjustment statistical model. We proposed to include this nonNQF-endorsed measure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery. We also are not aware of any other 30-day, allcause, RSMR measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The measure has been reviewed by the MAP and was conditionally supported pending NQF endorsement as detailed in its Pre-Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Report__2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. 79 New York State Department of Health. Adult Cardiac Surgery in New York State 2006–2008; 2010:54. 80 California CABG Outcomes Reporting Program. The California Report on Coronary Artery Bypass Graft Surgery: 2007–2008 Hospital and Surgeon Data. 2011:119. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations This measure was submitted to NQF on March 17, 2014 and is currently under review. (2) Overview of Measure The CABG mortality measure assesses hospitals’ 30-day, all-cause riskstandardized rate of mortality following admission for a CABG procedure. In general, the measure uses the same approach to risk adjustment and hierarchical logistic modeling (HLM) methodology that is specified for CMS’ other mortality measures previously adopted for this program. Information on how the measure employs HLM can be found in the 2012 CABG Mortality Measure Methodology Report (available at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (3) Data Sources The proposed measure is claimsbased. It uses Medicare administrative data from hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG procedure. (4) Outcome The outcome for this measure is 30day, all-cause mortality, defined as death for any cause within 30 days of the date of the index procedure date. We use a standard period of assessment so that the outcome for each patient is measured consistently. Without a standard period, variation in length of stay would have an undue influence on mortality rates, and institutions would have an incentive to adopt strategies to shift deaths out of the hospital without improving quality. The measure differs from the timeframe used in the other 30day mortality measures in the Hospital IQR Program by starting the outcome window from the procedure date rather than the admission date. Data from 2009 Medicare FFS patients demonstrates that 25 percent of CABG procedures occurred more than 3 days after the admission date. Therefore, dating the measurement period from admission would potentially underestimate the period of risk for a substantial number of hospitals. We chose 30-day mortality because it is an outcome that can be strongly influenced by hospital care and the early transition to the outpatient setting. Clinical experts concur that a 30-day timeframe is clinically sensible for measuring outcomes following CABG surgery. The measure assesses all-cause mortality rather than CABG-specific mortality for several reasons. First, limiting the measure to CABG-related VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 mortalities may limit the focus of efforts to improve care to a narrow set of approaches as opposed to encouraging broader initiatives aimed at improving the overall in-hospital care. Second, cause of death may be unreliably recorded and it is often not possible to exclude quality issues and accountability based on the documented cause of mortality. Finally, from a patient perspective, death due to any cause is the outcome that matters. (5) Cohort The cohort includes patients aged 65 years and older who received a qualifying CABG procedure at an acute care facility. Patients are eligible for inclusion if they had a qualifying CABG procedure and continuous enrollment in Medicare FFS one year prior to the first day of the index hospital stay and through 30 days post-procedure. In order to include a clinicallycoherent set of patients in the measure, we sought input from clinical experts regarding the inclusion of other concomitant cardiac and non-cardiac procedures, such as valve replacement and carotid endarterectomy. Adverse clinical outcomes following such procedures are higher than those following ‘‘isolated’’ CABG procedures, that is, CABG procedures performed without concomitant high-risk cardiac and non-cardiac procedures.81 Limiting the measure cohort to ‘‘isolated’’ CABG patients is consistent with published reports of CABG outcomes; 82 therefore, the measure cohort considers only patients undergoing isolated CABG as eligible for inclusion in the measure. We defined isolated CABG patients as those undergoing CABG procedures without concomitant valve or other major cardiac, vascular or thoracic procedures. In addition, our clinical experts, consultants, and Technical Expert Panel (TEP) members agreed that an isolated CABG cohort is a clinically coherent cohort for quality measurement. For detailed information on the cohort definition, we refer readers to the 2012 CABG Mortality Measure Methodology Report on the CMS Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. (6) Inclusion and Exclusion Criteria The measure includes hospitalizations for patients who are 65 years of age or older at the time of index 81 Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions after coronary artery bypass graft surgery in New York State. JACC Cardiovasc Interv. 2011;4(5):569–576. 82 Ibid. PO 00000 Frm 00373 Fmt 4701 Sfmt 4700 50225 admission and for whom there was a complete 12 months of Medicare FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients who leave hospital against medical advice excluded because providers do not have the opportunity to deliver full care and prepare the patient for discharge); and (2) admissions for patients with subsequent qualifying CABG procedures during the measurement period (a repeat CABG procedure during the measurement period very likely represents a complication of the original CABG procedure and is a clinically more complex and higher risk surgery, therefore we select the first CABG admission for inclusion in the measure and exclude subsequent CABG admissions from the cohort). (7) Risk-Adjustment The measure adjusts for differences across hospitals in how at risk their patients are for death relative to patients cared for by other hospitals. The measure uses claims data to identify patient clinical conditions and comorbidities to adjust patient risk for readmission across hospitals, but does not adjust for potential complications of care. We refer readers to section IV.H.4 of the preamble of this final rule for further discussion of risk-adjustment for socioeconomic factors. (8) Calculating the Risk-Standardized Mortality Ratio (RSMR) The measure is calculated using hierarchical logistic modeling (HLM). This approach appropriately accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The HLM is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and the number of eligible patients for the measure varies from hospital to hospital. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the CABG hospitalization, as well as those present in the claims for care at admission. The methodology, however, specifically does not account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50226 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations The RSMR is calculated as the ratio of the number of predicted deaths to the number of expected deaths and then the ratio is multiplied by the national unadjusted mortality rate. The ratio is greater than one for hospitals that have more deaths than would be expected for an average hospital with similar cases and less than one if the hospital has fewer deaths than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or risk-adjusted rate used in other similar types of statistical analyses. The RSMR is a point estimate—the best estimate of a hospital’s mortality rate based on the hospital’s case mix. For displaying the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate. We use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We invited public comment on this proposal. Comment: Several commenters supported the inclusion of CABG mortality into the Hospital IQR Program. Response: We thank the commenters for their support. Comment: Several commenters opposed adoption of this measure because it is not NQF-endorsed. Response: We proposed to include this non-NQF-endorsed measure under the Hospital IQR Program exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act. This provision provides that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We refer readers to section IX.A.7. of the preamble of this final rule where we discuss other commenters concerns regarding our use of non-NQF-endorsed measures. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Although the proposed measure is not currently NQF-endorsed, it is pending NQF endorsement. We considered available measures that have been endorsed or adopted by the NQF. We also are not aware of any other similar measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. We refer readers to section IX.A.7. of the preamble of this final rule for a general discussion on adoption of non-NQFendorsed measures. This measure was submitted to NQF for endorsement and is currently under review. Comment: One commenter recommended that CMS focus on developing an electronically-specified measure based on ICD–10–CM/PCS for future adoption instead of the current proposed measure. Response: We will take this suggestion into consideration as we move towards use of electronic clinical quality measures for CABG measures. Comment: One commenter did not support the measure construction and risk-adjustment methodology, citing concerns that the low R-squared meant that the measure does not truly differentiate performance between hospitals. Response: We refer readers to our discussion of this issue above in response to the same concern regarding our proposed Hospital 30-day, Allcause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure. Comment: One commenter expressed concerns about the reliability and validity of CMS’ mortality measures. Several commenters opposed this measure because they believed that a more robust methodology is needed to appropriately hold hospitals accountable. Response: We refer readers to our discussion of this issue above in response to the same concern expressed for reliability, validity, and robust methodology regarding our proposed Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure. We understand ‘‘robust’’ as having good reliability and validity and we believe we demonstrated this in the response below which is the similar to the response for the CABG readmission measure. Comment: Several commenters believed that the CABG mortality measure has poor discrimination ability. One commenter expressed concern regarding the ability of claims data to PO 00000 Frm 00374 Fmt 4701 Sfmt 4700 adequately adjust for mortality risk. The commenter suggested comparing results for this measure with results for the STS CABG mortality measure. A commenter expressed concern regarding the ability of claims data to adequately adjust for mortality risk. The commenter suggested comparing results for this measure with results for the RiskAdjusted Operative Mortality for CABG mortality measure. Response: We thank the commenters for their feedback. The STS CABG measure provides a clinical model based upon registry data and the CMS CABG mortality measures uses administrative claims data. These measures have similar but not identical mortality outcomes STS NQF #0119, includes inpatient deaths beyond 30 days, and NQF #2558, excludes inpatient deaths beyond 30 days. For these reasons we would not compare the results of these measures. We refer readers to our discussion of this issue in response to the same concern above regarding our proposed Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure. Comment: Several commenters did not support the CABG mortality measure as it does not risk adjust for SES. Commenters requested CMS risk adjust the measure for SES and stated that this materially impacts the patient’s likelihood of death and the members on NQF’s panel to examine adjusting for SES recommended adjusting for SES when appropriate. Response: We refer readers to our earlier responses in sections IX.A.6. and 7. Of the preamble to this final rule under our Hospital IQR Program discussion. We also refer readers to our responses in section IV.H.4. of the preamble to this final rule for further discussion of this issue. Comment: One commenter requested that CMS carefully monitor CABG utilization in high-risk, older patients to ensure hospitals are not avoiding performing them for high risk patients in order to appear as lower mortality. The commenter noted that if evidence is found that CABG surgeries are not being offered to high-risk patients, CMS may need to reconsider its risk adjustment methodology to mitigate this unintended consequence. Response: We refer readers to our discussion of this issue in response to the same concern regarding our proposed Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery measure. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations After consideration of the public comments we received, we are finalizing the Hospital 30-day, Allcause, Risk-standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery measure as proposed. c. Hospital-level, Risk-standardized 30day Episode-of-Care Payment Measure for Pneumonia tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Background Providing high-value care is an essential part of our mission to provide better health care for individuals, better health for populations, and lower costs for health care. In order to incentivize innovation that promotes high-quality care at high value it is critical to examine measures of payment and patient outcomes concurrently. There is evidence of variation in payments at hospitals for pneumonia patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for pneumonia in 2008–2009 was $13,237, and ranged from $8,281 to $27,975 across 4,155 hospitals. However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the value of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Therefore, we proposed to include this non-NQF-endorsed measure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed, we considered available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital riskstandardized payment associated with a 30-day episode-of-care for pneumonia. We also are not aware of any other 30day episode-of- care pneumonia measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure but reiterated the need for this measure to be submitted for NQF-endorsement: https://www.qualityforum.org/Setting_ Priorities/Partnership/MAP_Final_ Reports.aspx. This measure was submitted to the NQF for endorsement on April 18, 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 We believe it is important to adopt this measure as pneumonia is one of the leading causes of hospitalization for Americans 65 and over, and pneumonia patients incur roughly $10 billion in aggregate health care costs.83 Furthermore, because 30-day all-cause mortality and readmission measures for pneumonia are already publicly reported, pneumonia serves as a model condition for assessing relative value for an episode of care that begins with an acute hospitalization because including this measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information about a hospital’s quality and cost of care for pneumonia. The measure reflects differences in the management of care for patients with pneumonia both during hospitalization and immediately post-discharge. By focusing on one specific condition, value assessments may provide actionable feedback to hospitals and incentivize targeted improvements in care. (2) Overview of Measure and Rationale for Examining Payments for a 30-Day Episode-of-Care The pneumonia payment measure assesses hospital risk-standardized payment associated with a 30-day episode-of-care for pneumonia for any hospital participating in the Hospital IQR Program. The measure includes Medicare FFS patients aged 65 or older admitted for pneumonia and calculates payments for these patients over a 30day episode-of-care beginning with the index admission. In general, the measure uses the same approach to riskadjustment as our 30-day outcome measures previously adopted for the Hospital IQR Program. We refer readers to our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital QualityInits/MeasureMethodology.html. When examining variation in payments, consideration of the episodeof-care triggered by admission is meaningful for several reasons. First, hospitalizations represent a brief period of illness that requires ongoing management post-discharge and decisions made at the admitting hospital affect payments for care in the immediate post-discharge period. Second, attributing payments for a continuous episode-of-care to admitting 83 Lindenauer PK, Lagu T, Shieh M, Pekow PS, Rothberg MB. Association of diagnostic coding with trends in hospitalizations and mortality of patients with pneumonia, 2003–2009. JAMA: The Journal of the American Medical Association. 2012;307(13):1405–1413. PO 00000 Frm 00375 Fmt 4701 Sfmt 4700 50227 hospitals may reveal practice variations in the full care of the illness that can result in increased payments. Third, a 30-day preset window provides a standard observation period by which to compare all hospitals. Lastly, the pneumonia payment measure is intended to be paired with our 30-day pneumonia mortality and readmission measures and capture payments for Medicare patients across care settings, services, and supplies, except for Medicare Part D (that is, inpatient, outpatient, skilled nursing facility, home health, hospice, physician/ clinical laboratory/ambulance services, supplier Part B items, and durable medical equipment, prosthetics/ orthotics, and supplies). We have posted the measure methodology report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We refer readers to the report for further details on the risk adjustment statistical model as well as the model results. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations and payments for Medicare FFS beneficiaries hospitalized with pneumonia. (4) Outcome The primary outcome of the pneumonia payment measure is the hospital-level risk-standardized payment for a pneumonia episode-ofcare. The measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. By risk-standardizing the payment measure, we are able to adjust for case-mix at any given hospital and compare a specific hospital’s pneumonia payment to other hospitals with the same case-mix. The analytic time frame for the pneumonia payment measure begins with the index admission for pneumonia and ends 30 days post-admission. In order to isolate payment variation that reflects practice patterns rather than CMS payment adjustments, the pneumonia payment measure excludes policy and geography payment adjustments unrelated to clinical care decisions. We achieve this by ‘‘stripping’’ or ‘‘standardizing’’ payments for each care setting. Stripping refers to removing geographic differences and policy adjustments in payment rates for individual services from the total payment for that service. Standardizing refers to averaging E:\FR\FM\22AUR2.SGM 22AUR2 50228 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payments across geographic areas for those services where geographic differences in payment cannot be stripped. Stripping and standardizing the payment amounts allows for a fair comparison across hospitals based solely on payments for decisions related to clinical care of pneumonia. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (5) Cohort We created the pneumonia payment measure cohort to be aligned with the publicly reported pneumonia mortality measure cohort. Consistent with these measures, the pneumonia payment measure includes hospitalizations with a principal hospital discharge diagnosis of pneumonia using the International Classification of Diseases, 9th Edition, Clinical Modification (ICD–9–CM). These measures will use data from July 2010–June 2013, which does not yet include the period for which ICD–10 codes are mandatory. We refer readers to our discussion of data collection for this measure during the transition period from ICD–9–CM codes to ICD– 10–CM/PCS codes (79 FR 28232). A full list of ICD–9–CM codes included in the final cohort can be found in Appendix B of the technical report on our Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. The measure includes only those hospitalizations from short-stay acute care hospitals in the index cohort and restricts the cohort to patients enrolled in FFS Medicare Parts A and B (with no Medicare Advantage coverage). (6) Inclusion and Exclusion Criteria The pneumonia payment measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk adjustment. An index admission/hospitalization is the initial pneumonia admission that triggers the 30-day episode-of-care for this payment calculation. The measure excludes the following admissions from the measure cohort: (1) Admissions for patients with fewer than 30 days of post-admission enrollment in Medicare because this is necessary in order to identify the outcome (payments) in the sample over the analytic period; (2) admissions for patients having a principal diagnosis of pneumonia during the index hospitalization who were transferred from another acute care facility are excluded, because the hospital where the patient was initially admitted made the critical acute care decisions (including the decision to transfer and where to transfer); (3) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 admissions for pneumonia patients who were discharged on the same or next day as the index admission and did not die or get transferred are excluded, because it is unlikely these patients suffered a clinically significant pneumonia; (4) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded, because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; (5) admissions for patients who are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (6) admissions for patients transferred to or from federal or Veterans Administration hospitals are excluded, because we do not have claims data for these hospitals; thus, including these patients would systematically underestimate payments; and (7) admissions without a DRG or DRG weight for the index hospitalization are excluded, because we cannot calculate a payment for these patients’ index admission using the IPPS; this would underestimate payments for the entire episode-of-care. There are two portions of the DRG system that determine how much a provider is reimbursed. The first is the DRG itself which indicates the reason a patient was admitted. The second is the DRG weight which determines the severity of the admission. Without either of these, we were unable to calculate the payment for the index admission. (7) Risk Adjustment The measure adjusts for differences across hospitals in how payments are affected by patient comorbidities relative to patients cared for by other hospitals. We refer readers to section IV.H.4 of the preamble of this final rule for further discussion of risk-adjustment for socioeconomic factors. (8) Calculating the Risk-Standardized Payment (RSP) The measure is calculated using a hierarchical generalized linear model with a log link and a Poisson error distribution. This is a widely accepted statistical method that enables fair evaluation of relative hospital performance by taking into account patient risk factors as well as the number of patients that a hospital treats. This statistical model accounts for the structure of the data (patients clustered within hospitals) and calculates: (1) how much variation in hospital PO 00000 Frm 00376 Fmt 4701 Sfmt 4700 payment overall is accounted for by patients’ individual risk factors (such as age and other medical conditions); and (2) how much variation is accounted for by hospital-specific performance. This approach appropriately models a positive, continuous, right-skewed outcome like payment and also accounts for the types of patients a hospital treats (that is, hospital case mix), the number of patients it treats, and the quality of care it provides. The hierarchical generalized linear model is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals and sample sizes vary across hospitals. Clustered patients are within the same hospital, and the quality of care of the hospital effects all patients, so the outcomes for each hospital’s patients are not fully independent (that is, completely unrelated) as is assumed by many statistical models. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the pneumonia hospitalization, as well as those present in the claims for care at admission. This methodology specifically does not, however, account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSP is calculated as the ratio of predicted payments to expected payments and then the ratio is multiplied by the national unadjusted average payment for an episode of care. The ratio is greater than one for hospitals that have higher payments than would be expected for an average hospital with similar cases and less than one if the hospital has lower payments than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or ‘‘risk-adjusted’’ rate used in other similar types of statistical analyses. The RSP is a point estimate—the best estimate of a hospital’s payment based on the hospital’s case mix. To calculate the measure for the Hospital IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate, we use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). The interval estimate indicates that the true value of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payment ratio lies between the lower limit and the upper limit of the interval. For more detailed information on the calculation methodology, we refer readers to our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. This measure is meant to be paired with our 30-day pneumonia mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We invited public comment on this proposal. Comment: One commenter did not support inclusion of the heart failure and pneumonia payment measures in the Hospital IQR Program because of concern that much of the variation in 30-day episode measures is attributable to factors outside of the hospitals control, most notably post-acute care (PAC) services. The commenter felt that measures of accountability should hold all entities accountable as opposed to focusing only on hospitals. Response: We appreciate the commenter’s suggestion and note that we addressed this question in the FY 2014 IPPS/LTCH PPS final rule. In that final rule (78 FR 50804), we stated that ‘‘when considering payments to hospitals, we attributed payments for a 30-day episode of care to the hospital since the episode is triggered by admission to an inpatient hospitalization. Hospitalizations represent a brief period of acute illness that requires ongoing management postdischarge and hospitals are often directly responsible for scheduling postdischarge follow-up. Therefore decisions made at the admitting hospital affect not only the hospitalization payments, but payments for care in the immediate post-discharge period.’’ Comment: Several commenters generally supported and appreciated CMS’ proposal to report 30-day riskstandardized episode of care payment measures for pneumonia and heart failure, as a way to optimally measure care for these patients. A commenter urged CMS to monitor measure results with respect to volume of procedures. A commenter supported conditionspecific or more granular, episode-based payment measures over the Medicare Spending Per Beneficiary (MSPB) measure. Response: We thank the commenters for their support, We will take their recommendations to monitor measure results with respect to volume of procedures and the request to add condition-specific or more granular, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 episode-based payment measures into consideration when planning future measure development. Comment: Several commenters believed payment measures are necessary, but do not support payment measures that examine episodes of care beyond the inpatient admission due to variations in availability of PAC services. Response: Because acute care providers make decisions that affect PAC spending, including scheduling follow-up care and others, we believe it is appropriate to attribute payments arising from the PAC setting to the acute care provider. Comment: A commenter stated that CMS should adjust episode-based payment measures for outcome differences that accrue over clinically relevant time horizons. Response: We thank the commenter for this suggestion, and will consider these comments in the future. We appreciate the commenter’s feedback. However we believe that the proposed measure does account for outcome differences over clinically relevant time horizons as the measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. Comment: Several commenters did not support the use of the Hospitallevel, Risk-standardized 30-day Episode-of-Care Payment Measure for Pneumonia measure in the Hospital IQR Program because they believed that the proposed measure reflected actions of many health care entities that are beyond the hospital’s control, such as cost variation in Medicare spending and notably PAC services. The commenters felt measures of accountability should hold all entities accountable as opposed to focusing only on hospitals. Commenters noted that hospitals are legally unable to direct patient toward high-quality, cost-efficient providers. Several commenters were concerned that the payment measures assume hospitals have more control over costs that occur post hospitalization than what is realistic and it reflects actions of many health care entities that are beyond the hospital’s control. Therefore, the commenters stated that the pneumonia and heart failure payment measures were not appropriate for evaluating care exclusively in the inpatient setting. Commenters suggested the measures would be more appropriate for physician, LTCH, home health, and PAC reporting programs. Several commenters believed measures should hold accountable all entities so that incentives are aligned across PO 00000 Frm 00377 Fmt 4701 Sfmt 4700 50229 continuum. A commenter noted that legal and regulatory challenges at the State and federal level prevent hospitals from coordinating care as fully as possible and episode of care measures holding only the hospital accountable create misaligned incentives which could lead to unintended consequences. Response: We appreciate the commenters’ suggestions and note that we addressed many of these questions in the FY 2014 IPPS/LTCH PPS final rule. In that final rule (78 FR 50804), we stated that, ‘‘when considering payments to hospitals, we attributed payments for a 30-day episode of care to the hospital since the episode is triggered by admission to an inpatient hospitalization. Hospitalizations represent a brief period of acute illness that requires ongoing management postdischarge and hospitals are often directly responsible for scheduling postdischarge follow-up. Therefore decisions made at the admitting hospital affect not only the hospitalization payments, but payments for care in the immediate post-discharge period.’’ Finally, the objective of these episode of care payment measures is to encourage efficiencies gained by well-coordinated care across a patient’s experience of illness. We understand the commenters concerns about differences among hospitals in the availability of postacute services, such as LTCHs. We hope that the differences in episode payments revealed by these measures will catalyze hospitals, other providers and communities to engage in an examination of local service availability to encourage efficient and sufficient services are available to all patients. Without the reporting of standardized episode payment measures, the knowledge of differences among hospitals payment patterns would not be available to provide incentives for such efforts. Although hospitals are not responsible for all differences in episode payments alone, they are wellpositioned to participate in such collaborations. Comment: A commenter was disappointed that CMS continue to develop and adopt measures that examine episodes of care beyond the inpatient admission. The commenter stated that measures of accountability, such as the proposed episode measures, should hold accountable all entities so that the incentives are aligned across the continuum. Another commenter opposed measures that reflect the broad spectrum of care inside and outside of the hospital. The commenter did not believe that measures that encompass a range of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50230 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations services from admission until 30 days post-discharge should be used as an indicator of hospital-specific care. Response: We respectfully disagree with the commenters. We refer readers to our discussion of this issue in response to the same concern in the response above. In addition, we believe that these measures should reflect the broad spectrum of care inside a hospital as well as care transitions, which are important for hospitals’ and for the health care system’s efforts to reduce readmissions and prevent hospitals from being financially penalized. We believe measures that look beyond the discharge will encourage hospitals to communicate more effectively with their patients and their peers thereby, improving care, reducing costs, and improving the health of the nation. Comment: A commenter did not support inclusion of the pneumonia or heart failure payment measures in in the Hospital IQR Program, because they do not exclude certain high-cost patients (patients with ESRD, cancer, or HIV/ AIDS). Response: We appreciate the concern about high-cost patients. The payment measures are intended to assess differences in payment associated with different practice patterns for the broad range of patients cared for by a hospital. We note that the episode of care measures account for the fact that some hospitals care for more patients with needs for high-cost care by risk adjusting for patients’ conditions, such as cancer, rather than excluding such patients. In the course of selecting variables for risk-adjustment, high-cost chronic conditions such as cancer, endstage renal disease, HIV/AIDS, and others are considered. Once the variables are considered, we determined if the variable should be included in the measure. To be included in the measure, each risk variable must be found to be significantly and consistently related to the payment outcome in the risk-model selection process. We note that the Agency for Healthcare Research and Quality’s Condition Categories for HIV/ AIDS; Metastatic Cancer and Acute Leukemia; Lung, Upper Digestive Tract, and Other Severe Cancers; Lymphatic, Head And Neck, Brain, and Other Major Cancers; Dialysis Status; and Renal Failure are included in the final risk adjustment model for pneumonia payment. The Condition Categories for HIV/AIDS; Dialysis Status; and Renal Failure were also included the final risk-adjustment model for HF payment. The HF measures’ risk-adjustment was discussed at length by the NQF Cost and Resource Steering Committee. In its final vote, the NQF Cost and Resource VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Steering Committee recommended endorsement of the episode-of-care payment measure for heart failure. Comment: A commenter was concerned that the measures unfairly disadvantage hospitals that treat sicker patients. For example, patients with heart failure who receive a defibrillator are sicker, however they are not excluded from the measures, so hospitals that perform this service appear less efficient. Response: We appreciate the commenter’s concern about complex patient factors that may contribute to the cost of care. The payment measures are risk-adjusted in order to account for differences in case-mix, or patient complexity, between hospitals. For each patient, the claims for the 12-months prior to the measured hospitalization are examined to identify additional clinical conditions that patients may have which could contribute to costs of care. These conditions are included in the risk-model for the measure to ensure that all providers are assessed fairly and avoid putting providers at risk of appearing to have patient costs that are higher than other hospitals due to the clinical complexity of their patients. Although we do not believe that the use of defibrillators is likely to substantially change hospitals’ results, we appreciate this comment and plan to investigate the prevalence of defibrillators in the heart failure cohort and its effect on the payment outcome. Comment: A commenter did not support the inclusion of the PN and HF payment measures in the Hospital IQR Program and recommended using a single hospital-wide payment measure instead of condition-specific payment measures to pool information for all patients to increase sample size and improve reliability. Response: We believe the conditionspecific payment measures are useful for several reasons. By focusing on one specific condition, payment measures may provide actionable feedback to hospitals and incentivize targeted improvements in care. Heart failure and pneumonia are both common conditions in the elderly with a substantial range in payments due to different practice patterns. Furthermore, because 30-day all-cause mortality and readmission measures for heart failure and pneumonia are already publicly reported, heart failure and pneumonia serve as model conditions for examining both payments for an episode-of-care and the quality of a hospital’s care for the same patient population. Comment: Commenters recommended that CMS pilot the PN and HF payment measures prior to implementation. PO 00000 Frm 00378 Fmt 4701 Sfmt 4700 Response: We thank the commenter for their recommendation. We will consider this as we plan dry runs in the future. A dry run provides the opportunity for hospitals to review their measure results and ask questions about the measure methodology. The measure results used during a dry run are based on data outside of the performance period designated for a given fiscal year, and the measure results are made available to hospitals on a secure Web site and are not publically reported. From our perspective, a dry run is type of pilot in which hospitals become familiar with their measure results and the measure methodology. Comment: A commenter requested that CMS transparently assess the reliability of the PN and HF payment measures prior to adoption into the Hospital IQR Program. Response: We appreciate this feedback. We note that we have been transparent in assessing the reliability of the PN and HF payment measures, in that the measure methodologies for these measures contain the reliability testing results and have been posted at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html in May 2015 We note that the Intraclass Correlation Coefficient (ICC) is a statistical process used to assess the reliability of measures. The ICC score can be used to determine the extent to which assessments of a hospital using different, but randomly selected subsets of patients produces similar measures of hospital performance. To the extent that the calculated measures of these two subsets agree, we have evidence that the measure assesses an attribute of the hospital, not of the patients. The agreement between the two independent assessments of each hospital was 0.825 for the PN measure and 0.752 for the HF measure, which according to the conventional interpretation, is ‘‘almost perfect’’ for the PN measure and ‘‘substantial’’ for the HF measure.84 Comment: A commenter was concerned about CMS measuring overuse, as there are patient scenarios that are not addressed by available evidence. The commenter stated that proper evaluation of validity and reliability is lacking; however, current registry-based measures are filling this gap. The commenter recommends halting the development and implementation of these measures. 84 Landis JR, Koch GG. The measurement of observer agreement for categorical data. Biometrics. 1977:159–174. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: These measures are not specifically designed to identify overuse. We interpret overuse to mean using more resources than expected given how sick the patients are. Rather, the measures are designed to evaluate broad patterns of care, both within the inpatient environment and in the transition to the outpatient setting, that might lead to higher overall payments. As noted in another response above, the reliability and validity of these measures has been evaluated by both a Technical Expert Panel and the NQF Cost and Resource Use Standing Committee. We also analyzed the ICC score for these measures to help assess reliability. Although registry data offers some advantages, it is much more burdensome for hospitals to collect and is not uniformly available. Comment: Several commenters requested that CMS adjust the payment measures for SES based on the NQFs expert panel recommendations. Response: We refer readers to section IV.H.4. of the preamble to this final rule for further discussion of this issue. After consideration of the public comments we received, we are finalizing the Hospital-Level, RiskStandardized Payment Associated with a 30-Day Episode of Care for Pneumonia measure, as proposed. d. Hospital-Level, Risk-Standardized 30Day Episode-of-Care Payment Measure for Heart Failure tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Background There is evidence of variation in payments at hospitals for heart failure patients; mean 30-day risk-standardized payment among Medicare FFS patients aged 65 or older hospitalized for heart failure in 2008–2009 was $13,922, and ranged from $9,630 to $20,646 across 3,714 hospitals. However, high or low payments to hospitals are difficult to interpret in isolation. Some high payment hospitals may have better clinical outcomes when compared with low payment hospitals while other high payment hospitals may not have better outcomes. For this reason, the value of hospital care is more clearly assessed when pairing hospital payments with hospital quality. Therefore, we proposed to include this non-NQF-endorsed measure: hospital risk-standardized payment associated with a 30-day episode-of-care for heart failure in the Hospital IQR Program under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section IX.A.7. of the preamble of this final rule. Although the proposed measure is not currently NQF-endorsed, we considered VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 available measures that have been endorsed or adopted by the NQF, and we were unable to identify any measures that assess hospital riskstandardized payment associated with a 30-day episode-of-care for heart failure. We also are not aware of any other 30day episode-of-care heart failure measures that have been endorsed or adopted by a consensus organization, and found no other feasible and practical measures on this topic. The MAP supports this measure but reiterated the need for this measure to be submitted for NQF endorsement: https://www.qualityforum.org/Setting_ Priorities/Partnership/MAP_Final_ Reports.aspx. The HF measure was submitted to the NQF and is currently under review as part of the cost and resource use project. We believe it is important to adopt this measure as heart failure is one of the leading causes of hospitalization for Americans 65 and over and costs roughly $34 billion annually.85 86 Furthermore, because 30-day all-cause mortality and readmission measures for heart failure are already publicly reported, heart failure serves as a model condition for assessing relative value for an episode of care that begins with an acute hospitalization. Including this measure in the Hospital IQR Program and publicly reporting it on Hospital Compare will allow stakeholders to assess information about a hospital’s quality and cost of care for heart failure. The measure reflects differences in the management of care for patients with heart failure both during hospitalization and immediately post-discharge. By focusing on one specific condition, value assessments may provide actionable feedback to hospitals and incentivize targeted improvements in care. (2) Overview of Measure and Rationale for Examining Payments for a 30-Day Episode-of-Care The heart failure payment measure assesses hospital risk-standardized payment associated with a 30-day episode-of-care for heart failure for any hospital participating in the Hospital IQR Program. The measure includes Medicare FFS patients aged 65 or older admitted for heart failure and calculates payments for these patients over a 30day episode-of-care beginning with the 85 Russo CA, Elixhauser, A. Hospitalizations in the Elderly Population, 2003. Agency for Healthcare Research and Quality. 2006. 86 Heidenriech PA, Trogdon JG, Khavjou OA, Butler J, Dracup K, Ezekowitz MD, et al. Forecasting the future of cardiovascular disease in the United States: a policy statement from the American Heart Association. Circulation. 2011;123(8):933–44. PO 00000 Frm 00379 Fmt 4701 Sfmt 4700 50231 index admission. In general, the measure uses the same approach to riskadjustment as our 30-day outcome measures previously adopted for the Hospital IQR Program. We refer readers to the measure methodology report on our Web site at: https://cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. When examining variation in payments, consideration of the episodeof-care triggered by admission is meaningful for several reasons. First, hospitalizations represent brief periods of illness that require ongoing management post-discharge; and decisions made at the admitting hospital affect payments for care in the immediate post-discharge period. Second, attributing payments for a continuous episode-of-care to admitting hospitals may reveal practice variations in the full care of the illness that can result in increased payments. Third, a 30-day preset window provides a standard observation period by which to compare all hospitals. The term preset window means that every admission will be tracked 30 days post admission in order to apply a standardized measurement window. In order to compare payments across providers it is important that the comparison window is identical for each admission at each hospital. Lastly, the heart failure payment measure is intended to be paired with our 30-day heart failure mortality and readmission measures and capture payments for Medicare patients across all care settings, services, and supplies, except for Medicare Part D (that is, inpatient, outpatient, skilled nursing facility, home health, hospice, physician/clinical laboratory/ambulance services, supplier Part B items, and durable medical equipment, prosthetics/ orthotics, and supplies). We have posted the measure methodology report on our Web site at: https://cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. We refer readers to the report for further details on the risk adjustment statistical model as well as the model results. (3) Data Sources The proposed measure is claimsbased and uses Medicare administrative data that contain hospitalizations and payments for Medicare FFS beneficiaries hospitalized with heart failure. E:\FR\FM\22AUR2.SGM 22AUR2 50232 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (4) Outcome The primary outcome of the heart failure payment measure is the hospitallevel risk-standardized payment for a heart failure episode-of-care. The measure captures payments for Medicare patients across all care settings, services, and supplies, except Part D. By risk-standardizing the payment measure, we are able to adjust for case-mix at any given hospital and compare a specific hospital’s heart failure payment to other hospitals with the same case-mix. The analytic time frame for the heart failure payment measure begins with the index admission for heart failure and ends 30 days post-admission. The index admission is any admission included in the measure calculation that begins the 30-day heart failure episode of care. In order to isolate payment variation that reflects practice patterns rather than CMS payment adjustments, the heart failure payment measure excludes policy and geography payment adjustments unrelated to clinical care decisions. We achieve this by ‘‘stripping’’ or ‘‘standardizing’’ payments for each care setting. These concepts were also discussed previously in the proposed hospital-level, riskstandardized 30-day episode-of-care payment measure for pneumonia measure in section IX.A.7.c.(4) of the preamble of this final rule. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (5) Cohort We created the heart failure payment measure cohort to be aligned with the publicly reported heart failure mortality measure cohort. Consistent with these measures, the heart failure payment measure includes hospitalizations with a principal hospital discharge diagnosis of heart failure using ICD–9–CM codes included in the final cohort can be found in Appendix B of the technical report on our Web site at: https:// cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ HospitalQualityInits/MeasureMethodology.html. The measure will be using data from July 2010–June 2013, which does not yet include the period when ICD–10 codes are mandatory. We refer readers to our discussion of data collection for this measure during the transition period from ICD–9–CM codes to ICD–10–CM/PCS codes (79 FR 28234). An index admission/hospitalization is the initial heart failure admission that triggers the 30-day episode-of-care for this payment calculation. The measure includes only those hospitalizations from short-stay acute care hospitals in the index cohort and restricts the cohort VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to patients enrolled in FFS Medicare Parts A and B (with no Medicare Advantage coverage). These hospitalizations are the admissions which were included in the measure after applying all inclusion/exclusion criteria. (6) Inclusion and Exclusion Criteria The heart failure payment measure includes hospitalizations for patients 65 years or older at the time of index admission and for whom there was a complete 12 months of FFS enrollment to allow for adequate risk adjustment. The measure excludes the following admissions from the measure cohort: (1) admissions for patients with fewer than 30 days of post-admission enrollment in Medicare because this is necessary in order to identify the outcome (payments) in the sample over the analytic period; (2) admissions for patients having a principal diagnosis of heart failure during the index hospitalization who were transferred from another acute care facility are excluded, because the hospital where the patient was initially admitted made the critical acute care decisions (including the decision to transfer and where to transfer); (3) admissions for heart failure patients who were discharged on the same or next day as the index admission and did not die or get transferred are excluded, because it is unlikely these patients suffered a clinically significant heart failure; (4) admissions for patients enrolled in the Medicare Hospice program any time in the 12 months prior to the index hospitalization, including the first date of the index admission are excluded, because it is likely that these patients are continuing to seek comfort care and their goal may not be survival; (5) admissions for patients who are discharged alive and against medical advice are excluded because providers did not have the opportunity to deliver full care and prepare the patient for discharge; (6) admissions for patients transferred to or from federal or Veterans Administration hospitals are excluded, because we do not have claims data for these hospitals; thus, including these patients would systematically underestimate payments; (7) admissions without a DRG or DRG weight for the index hospitalization are excluded, because we cannot calculate a payment for these patients’ index admission using the IPPS; this would underestimate payments for the entire episode-of-care; and (8) admissions for patients who receive a heart transplant or LVAD during the index admissions or episode of care because these patients are clinically distinct, generally very PO 00000 Frm 00380 Fmt 4701 Sfmt 4700 high payment cases, and not representative of the typical heart failure patient that this measure aims to capture. (7) Risk Adjustment The measure adjusts for differences across hospitals in how payments are affected by patient comorbidities relative to patients cared for by other hospitals. We refer readers to section IV.H.4 of the preamble of this final rule for further discussion of risk-adjustment for socioeconomic factors. (8) Calculating the Risk-Standardized Payment (RSP) The measure is calculated using hierarchical generalized linear statistical models with a log link and a Gamma error distribution. This approach appropriately models a positive, continuous, right-skewed outcome like payment and also accounts for the types of patients a hospital treats (that is, hospital case-mix), the number of patients it treats, and the quality of care it provides. The hierarchical generalized linear model is an appropriate statistical approach to measuring quality based on patient outcomes when the patients are clustered within hospitals (and therefore the patients’ outcomes are not statistically independent) and sample sizes vary across hospitals. As noted above, the measure methodology defines hospital case mix based on the clinical diagnoses provided in the hospital claims for their patients’ inpatient and outpatient visits for the 12 months prior to the heart failure hospitalization, as well as those present in the claims for care at admission. This methodology specifically does not, however, account for diagnoses present in the index admission that may indicate complications rather than patient comorbidities. The RSP is calculated as the ratio of predicted payments to expected payments and then the ratio is multiplied by the national unadjusted average payment for an episode of care. The ratio is greater than one for hospitals that have higher payments than would be expected for an average hospital with similar cases and less than one if the hospital has lower payments than would be expected for an average hospital with similar cases. This approach is analogous to a ratio of ‘‘observed’’ or ‘‘crude’’ rate to an ‘‘expected’’ or ‘‘risk-adjusted’’ rate used in other similar types of statistical analyses. The RSP is a point estimate—the best estimate of a hospital’s payment based on the hospital’s case mix. For displaying the measure for the Hospital E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations IQR Program, we computed an interval estimate, which is similar to the concept of a confidence interval, to characterize the level of uncertainty around the point estimate, we use the point estimate and interval estimate to determine hospital performance (for example, higher than expected, as expected, or lower than expected). For more detailed information on the calculation methodology, we refer readers to our Web site at: https://cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html. This measure is meant to be paired with our 30-day heart failure mortality and/or readmission measure in order for us to gain a better understanding of the value of care for a hospital’s patients and the nation as a whole. We invited public comment on this proposal. Comment: Several commenters opposed the payment measures because they did not believe it is fair to hold a hospital responsible for payments that occur outside of its walls. The commenters recommended that these mortality and readmissions measures instead be adopted in the PQRS, as well as long-term care, PAC, home health, and other entities that participate in the patient’s care. One commenter cited a study that stated that 80 percent of the variability in the payment measures is driven by PAC and noted that areas with more LTCHs will likely have higher spending. Several commenters believed measures should hold accountable all entities so that incentives are aligned across the continuum of care. Another commenter noted that legal and regulatory challenges at the State and federal levels prevent hospitals from coordinating care as fully as possible and episode of care measures holding only the hospital accountable create misaligned incentives, which could lead to unintended consequences. Response: We interpret the commenter’s statement that, ‘‘these types of measures should instead be adopted in the PQRS, as well as longterm care, PAC, home health, and other entities that participate in the patient’s care,’’ to mean the Long-Term Care Quality Reporting (LTCHQR) Program, PAC (all care provided after a patient is discharged from an index hospitalization), Home Health Quality Reporting Program and other CMS quality reporting programs applicable to entities that participate in the patient’s care. As described above, because heart failure is one of the leading causes of hospitalization for Americans 65 and over, and its associated care costs VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 roughly $34 billion annually, we believe it is appropriate to pair a measure of Medicare payments for heart failure with the existing quality measures on this topic. We intend to closely monitor the measure’s effects on hospitals’ and PAC providers’ behavior. We developed these measures in accordance with national guidelines 87 and in consultation with clinical and measurement experts, key stakeholders, and the public. Furthermore, the AMI/ HF measures were recommended for endorsement by the NQF Standing Committee for Cost and Resource Use, Phase 2. This information can be located in the following report: https:// www.qualityforum.org/WorkArea/link it.aspx?LinkIdentifier= id&ItemID=76905. Comment: Several commenters expressed concern that the heart failure payment measure did not receive NQF endorsement, and specifically, that the Cardiovascular Technical Advisory Panel or the Cost and Resource Use Standing Committee did not endorse the measure. These commenters noted that the Cost and Resource Use Standing Committee felt the risk model did not properly account for differences in patient risk and it was not until CMS pressed for a third vote that it received endorsement (see https://www.quality forum.org/WorkArea/ linkit.aspx?LinkIdentifier= id&ItemID=76905). Consequently, the commenters believed the measure is premature and should not be implemented. Response: We appreciate this comment. We note the following sequence of events regarding the recommendation for endorsement of this measure confirms that this measure is not premature in consideration for implementation. Earlier this year the measure was assessed by the Cost and Resource Use Standing Committee. During this part of the endorsement process the Standing Committee did not reach consensus on a recommendation 87 Krumholz HM, Brindis RG, Brush JE, et al. Standards for statistical models used for public reporting of health outcomes: an American Heart Association Scientific Statement from the Quality of Care and Outcomes Research Interdisciplinary Writing Group: cosponsored by the Council on Epidemiology and Prevention and the Stroke Council. Endorsed by the American College of Cardiology Foundation. Circulation. Jan 24 2006;113(3):456–462) and ‘‘Standards for Measures Used for Public Reporting of Efficiency in Health Care’’ (Krumholz HM, Keenan PS, Brush JE, Jr., et al. Standards for measures used for public reporting of efficiency in health care: a scientific statement from the American Heart Association Interdisciplinary Council on Quality of Care and Outcomes Research and the American College of Cardiology Foundation. Circulation. Oct 28 2008;118(18):1885–1893. PO 00000 Frm 00381 Fmt 4701 Sfmt 4700 50233 for endorsement and the measure was submitted for public comment. After review of CMS’ responses to the public comments the Consensus Standards Approval Committee (CSAC) voted to recommend the Hospital-Level, Riskstandardized 30-day Episode-of-Care Payment Measure for Heart Failure for endorsement. The NQF Board is expected to review this measure in August 2014. We are actively seeking NQF endorsement for this measure. A Voting Draft Report of the Cost and Resource Use Standing Committee can be found at https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=76905. Comment: A commenter suggested the need for innovative solutions for providers in addition to outcome measures. This commenter believed that hospitals should: consider innovative ways to identify heart failure patients early in admission; implement evidence-based clinical pathways to assure the patient moves efficiently through their stay with optimal outcomes; develop a tight network of post-acute providers; and implement an enhanced communication system to identify where the patient is at any point in timed during the 30-day window. Response: We agree with the commenter’s points about the need for continued innovation to drive highquality and efficient care. We believe the measures that we have selected will help drive hospitals to provide that care. Comment: One commenter noted that much of the care expended during the first 30 days is aimed at increasing longterm survival and requested that CMS consider a measure with a longer outcome window to pair with the measure. Response: We agree that it is possible that some of the variation in hospital payments will be due to patterns of care that are intended to improve longer term outcomes. However at this time, we are not aware of a publicly reported, or nonNQF endorsed NQF-endorsed quality metric that considers a longer-term outcome with which we can harmonize the payment measure. As part of ongoing measure reevaluation and surveillance, we will evaluate the relationship between payments and longer term outcomes to assess if the performance of hospitals differs when looking at a longer time frame. Our plan is to eventually compare 30-day payments with longer outcomes like 1year mortality to determine if high upfront payments have a longer term benefit. Comment: One commenter was concerned that the proposed payment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50234 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measure will be used in isolation and not understood by practitioners and the public. The commenter recommended that CMS instead create a composite measure with both cost and quality. Response: We will take into consideration the suggestion to create a single composite measure of cost and quality for future measure development. In order to ensure practitioners and the public appreciate out intent, which is to evaluate payment in the context of quality, we plan to report the payment measure alongside the outcomes measures on the Hospital Compare Web site. Comment: A commenter noted that it will be difficult to determine value with the existing heart failure measures since mortality and readmission are inversely related and the process measures are almost ‘‘topped-out.’’ Response: We appreciate this feedback. We intend this episode of care measure to be used in conjunction with the other outcome heart failure measures of readmission and mortality. We do not intend to use the outcome heart failure measures with the heart failure process measures as the outcome and process measure results would not provide useful and comparable information. Regarding the concern of not being able to determine the value of the heart failure episode of care measure since the heart failure mortality and readmission are inversely related, we believe that there is value in the episode of care measure because a hospital’s performance on mortality and readmissions measures represents different aspects of quality. We also note that there does not appear to be a meaningful correlation between hospital risk-standardized mortality rates and readmission rates. Finally, we believe that this measure can determine value as it was specifically developed to align with the heart failure mortality and readmissions measure. A recent MedPAC report indicates that there may be an inverse correlation between readmission and mortality rates, but we note that this inverse relationship has been found to be modest (available at https://www.medpac.gov/documents/ Jun13_EntireReport.pdf). We recognize the commenter’s concern and will monitor changes in the strength of these inverse correlations over time. Comment: Several commenters did not support adopting the heart failure payment measures for the Hospital IQR Program due to concerns regarding the measures’ utility and its attribution specifications, all episode-of-care payments to the admitting hospital. Response: We view the proposed measure of payments made for heart VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 failure as an important component of quality improvement when paired with existing quality measures. We believe it is important for hospitals to be held accountable for care decisions made during acute care episodes, particularly when those decisions include, for example, scheduling post-discharge follow-up care. We believe the measure appropriately attributes spending during the heart failure episode to the admitting hospital, and we will monitor close hospitals’ performance on the measure, as well as possible unintended consequences for patient care. We do not understand the commenter’s concern regarding ‘‘all episode-of-care payments to the admitting hospital,’’ but welcome the opportunity to address it upon clarification. Comment: A commenter recommended performing multi-level testing to determine the appropriate level for use of this measure. Response: The episode-of-care payment measures are hospital-level measures. They account for risk at the patient-level, but attribute payments to the hospital. We interpret ‘‘multi-level testing’’ to mean the influence of community-level variables, like patient income levels or rural or urban setting, on the payment outcomes. Although hospitals cannot fully control all payments during the episode of care, they are well positioned to influence the outcome or the total episode-of-care payment. We will take into consideration the recommendation to test multiple levels. Comment: A commenter did not support this measure due to concerns that the measure’s risk adjustment model does not properly account for differences in patient case mix and severity, which may lead to the misinterpretation of differences in episode cost performance. Response: We believe that the measure properly accounts for differences in patient case mix and severity. We developed the measure in accordance with national guidelines and in consultation with clinical and measurement experts, key stakeholders, and the public. The measure is consistent with the technical approach to outcomes measurement set forth in the NQF guidance for outcomes measures (https://www.qualityforum.org/ projects/Patient_Outcome_Measures_ Phases1-2.aspx), CMS’ Measure Management System (https:// www.cms.gov/Medicare/QualityInitiatives-PatientAssessment Instruments/MMS/?redirect=/ MMS/19_MeasuresManagementSystem Blueprint.asp), and the guidance articulated in two American Heart PO 00000 Frm 00382 Fmt 4701 Sfmt 4700 Association scientific statements.88 89 Furthermore, this measure was vetted by the NQF Standing Committee for Cost and Resource Use, Phase 2. Furthermore, this measure was recommended for endorsement by the NQF Standing Committee for Cost and Resource Use, Phase 2 and the Consensus Standards Approval Committee in the third quarter of 2014. It is anticipated to be reviewed by the NQF Board in August 2014. Comment: One commenter agreed with comments made by the NQF Cardiovascular TEP that accountability for heart failure payment outcomes should be attributed to primary care providers. The commenter believed that there is a wide range of heart failure severity, which determines the level of accountability and that patients with heart failure are often cared for by a range of providers who vary in level and skill. Response: Although many providers contribute to the cost of care, we attributed payments for a 30-day episode of care to the hospital because the episode is triggered by admission to an inpatient hospitalization. Inpatient hospitalizations represent a brief period of acute illness that require ongoing management post-discharge, and hospitals are often directly responsible for scheduling post-discharge follow-up. Therefore, decisions made at the admitting hospital affect not only the hospitalization payments, but payments for care in the immediate post-discharge period. Finally, the objective of this episode of care payment measure is to encourage efficiencies gained by wellcoordinated care across a patient’s experience of illness. Comment: One commenter felt that the measure is counter to CMS’ implementation of episode groupers since it would capture all costs associated with the patient instead of only the costs of medical and procedural services related to heart failure. The commenter recommended that CMS include episode groupers that 88 Krumholz HM, Brindis RG, Brush JE, et al. Standards for statistical models used for public reporting of health outcomes: an American Heart Association Scientific Statement from the Quality of Care and Outcomes Research Interdisciplinary Writing Group: cosponsored by the Council on Epidemiology and Prevention and the Stroke Council. Endorsed by the American College of Cardiology Foundation. Circulation. Jan 24 2006;113(3):456–462. 89 Krumholz HM, Keenan PS, Brush JE, Jr., et al. Standards for measures used for public reporting of efficiency in health care: a scientific statement from the American Heart Association Interdisciplinary Council on Quality of Care and Outcomes Research and the American College of Cardiology Foundation. Circulation. Oct 28 2008;118(18):1885– 1893. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations assign specific services to certain episodes in the heart failure payment measure. Response: Episode Groupers are designed to capture epsiodes of care in the Medicare Population. However, these groupers are used to evaluate physicians’ resource use while our measure is constructed to capture hospitals’ resource use. Comment: One commenter did not agree with a 30-day outcome timeframe because it does not align with heart failure disease progression and recommended more focus be placed on the ambulatory care environment with a longer time period focused on outpatient care. Response: Although heart failure is a chronic condition, patients often suffer acute decompensation requiring hospital admission. Acute decompensation is acute exacerbation that compromises the patient’s cardiorespiratory status and requires admission. This measure focuses on this acutely decompensated cohort of heart failure patients, not on ambulatory patients. Heart failure admissions are associated with a substantial 30-day mortality rate as well as variation in costs.90 In addition, heart failure admissions have high rates of readmission prompting heart failure to be targeted in current readmission reduction programs. For these reasons, we believe that heart failure is an appropriate focus for a hospital-based episode-of-care measure. Comment: Several commenters did not believe transfer patients should be attributed to the admitting hospital because the organization that initially admits a patient may not have as much control over the patient’s course of care. Furthermore, the commenters were concerned that hospitals would have a stronger incentive to hold onto patients longer to avoid being held accountable for the costs of another facility. Response: While we understand the commenters’ concerns, attributing the outcome to the first admitting hospital makes the most sense given the focus of this particular payment measure, which is hospital risk-standardized payment associated with a 30-day episode-of-care for heart failure]. We define a transfer as any admission that requires acute inpatient care at two or more hospitals for the same HF. We attribute total episode payments that involve a transfer for acute care of HF to the transferring hospital because: 90 Xiao, X, Li S–X, Normand SL, Kim N, Ott LS, Lagu T, Duan M, Kroch EA, Krumholz HM. ’’ ‘Phenotyping’ Hospital Value of Care for Patients with Heart Failure’’ Health Services Research Early View, Article first published online: 28 Jun 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • The episode of care begins at the time of the index admission, which thereby, provides a standard measure time frame for each hospital. • The transferring hospital is responsible for initial care decisions as well as the decision to transfer the patient, both of which can have a cascading effect on subsequent care decisions. • This method avoids incentivizing hospitals to transfer patients who are critically ill and at high risk of being very expensive to treat. As a result, we disagree with the commenter that hospitals would have a stronger incentive to hold onto patients longer to avoid being held accountable for the costs of another facility. • This method aligns with CMS’ publicly reported measure for HF riskstandardized mortality. • The objective of this episode-of-care payment measure is to encourage efficiencies gained by well-coordinated care across a patient’s experience of illness. Comment: Several commenters believed the HF payment measure should exclude transplant or LVAD patients who underwent the procedure in the previous 12 months. Response: We interpret this comment to mean that the measure should exclude patients with any type of transplant or a left ventricular assist device (LVAD) within 12 months of the index admission for heart failure. We agree that these patients will likely cost more than other HF patients. Accordingly, we plan to evaluate the data to see if either a heart transplant or LVAD placement occurred within 12 months prior to HF admission and exclude these patients from the measure beginning in FY 2016. We will then determine whether or not we should exclude patients from the measure with a history of LVAD or transplant. Comment: One commenter was concerned that the measure may not adequately adjust for older and more frail patients who are at a higher risk for readmission. Response: We note that the measure specifically adjusts for age and multiple indicators of patient frailty such as malnutrition and dementia. The measure is risk-adjusted in order to account for differences in case-mix, or patient complexity, between hospitals. For each patient, the claims for the 12months prior to the measured hospitalization are examined to identify additional clinical conditions that patients may have which could contribute to costs of care. These conditions are included in the risk model for the measure to ensure PO 00000 Frm 00383 Fmt 4701 Sfmt 4700 50235 providers are: 1)compared on their performance; 2) are not penalized for caring for sicker patients; and 3) to prevent putting providers at risk of being profiled as high cost facilities due to the clinical complexity of their patients. Comment: Several commenters believed that the measure does not adequately adjust for patient risk and cited NQF concerns regarding R-square values of 0.03–0.05 in the development and validation samples. Response: While we appreciate the concern that the measure does not adequately adjust for patient risk factors, we disagree for several reasons. First, the measure model was evaluated with a number of statistical methods in addition to the R-square. The results of these other diagnostic tests (over-fitting indices, distribution of Standardized Pearson residuals, and predictive ratios) all suggest that the model predicts payments well, after adjustment for patient risk factors. These results consider the measure from a different perspective than the R-square. Second, we feel the focus on the R-square value for this measure is not appropriate because the statistical methods we used do not produce a traditional R-square value. To provide conceptually similar number, we produced a quasi-R-square, the details of which can be found in our technical report (available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/ Measure-Methodology.html). Third, this quasi-R-square is consistent with other patient-level risk-adjustment models for health care payment. Lastly, the Rsquare results suggest that factors other than clinical severity may be predictive of resource utilization that can increase payments as discussed at length during the NQF proceedings.91 92 We note that despite the concerns raised about the Rsquare value during endorsement proceeding, in June 2014, the NQF Standing Committee for Cost and Resource Use Phase 2 recommended endorsement of the HF episode of care measure. After consideration of the public comments we received, we are finalizing the Hospital-Level, RiskStandardized Payment Associated with a 30-Day Episode of Care for Heart Failure measure as proposed. 91 Chen SI, Dharmarajan K, Kim N, et al. Procedure intensity and the cost of care. Circ Cardiovasc Qual Outcomes 2012;5:308–13. 92 Safavi KC, Dharmarajan K, Kim N, et al. Variation exists in rates of admission to intensive care units for heart failure patients across hospitals in the United States. Circulation 2013;127:923–9. E:\FR\FM\22AUR2.SGM 22AUR2 50236 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations e. Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (1) Background Sepsis, severe sepsis, and septic shock can arise from a simple infection, such as pneumonia or urinary tract infection. Although it can affect anyone at any age, it is more common in infants, the elderly, and patients with chronic health conditions such as diabetes and immunosuppressive disorders seen in transplant patients. Information for this measure comes from the NQF Measure Information-Composite for the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500).93 More information on this issue is available from the Surviving Sepsis Campaign: International Guidelines for Management of Severe Sepsis and Septic Shock: 2012.94 Sepsis is associated with mortality rates of over 16 to 49 percent, which is more than 8 times higher than the rate for inpatient stays for other hospital admissions. Findings from the National Hospital Discharge Survey indicate that the number of hospital stays for septicemia more than doubled between the years of 2000 and 2008, and patients with this condition were more severely ill than patients hospitalized for other conditions. Severe sepsis and septic shock are frequent causes of rehospitalizations, especially during the first year after the initial hospitalization. Based on national discharge data reported by the AHRQ, sepsis was the sixth most common principal reason for hospitalization in the United States in 2009, accounting for 836,000 hospital stays. There were an additional 829,500 stays with a secondary diagnosis of sepsis for a total of 1,665,400 inpatient stays and 258,000 deaths. From 1993 to 2009, sepsis-related hospital stays increased by 153 percent, with an average annual increase of 6 percent. Medicare was the predominant payer for sepsis-related hospital stays, covering 58.1 percent of patients. Sepsis cases and sepsis-related deaths are expected to continue to increase with the aging of the population. In a landmark study by Rivers et al.,95 it has been shown that an absolute and 93 National Quality Forum (NQF). Measure Information-Composite. #500 Severe Sepsis and Septic Shock: Management Bundle. Updated 2014 Jan 2. NQF: Washington, DC https:// www.qualityforum.org/Home.aspx. 94 Dellinger RP, Levy MM, Rhodes A, Annane D, et al. Surviving Sepsis Campaign: international guidelines for management of severe sepsis and septic shock: 2012. Crit Care Med. 2013 Feb; 41(2):580–637. 95 Rivers E, Nguyen B, Havstad S et al. Early goaldirected therapy in the treatment of severe sepsis VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 relative reduction in mortality from sepsis can be reduced 16 percent and 30 percent, respectively, when aggressive care is provided within 6 hours of hospital arrival. Furthermore, a recent study of the 2008 Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample 96 determined that patients admitted through the Emergency Department had a 17 percent lower likelihood of dying from sepsis than when directly admitted. The Severe Sepsis and Septic Shock: Management Bundle measure (NQF #0500) was supported by the MAP for the Hospital IQR Program, contingent on NQF endorsement in its Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, available at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. The MAP noted the measure addresses an NQS priority not adequately addressed in the program measure set and that early detection and treatment of sepsis in the emergency department and inpatient settings is important (page 125). This measure was initially endorsed by the NQF in 2008 for the hospital/acute care facility setting, underwent maintenance review and update in March 2013, June 2013, and May 2014. The MAP conditionally supported this measure as a Meaningful Use measure in its Pre-Rulemaking Report: 2014 Recommendations on Measures Under Consideration by HHS, available at: https://www.qualityforum.org/ Publications/2014/01/MAP_Pre-Rule making_Report_2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. The MAP stated, ‘‘Not ready for implementation; measure concept is promising but requires modification or further development.’’ In its Additional Findings the MAP stated that it, ‘‘noted the need for continued development of electronic specifications for NQF #0500 Severe Sepsis and Septic Shock: Management Bundle. While some workgroup members challenged the feasibility and evidence behind this measure, MAP deferred to the recent endorsement review of this measure and conditionally supported it for the Meaningful Use Program. Public comment from Edwards Lifesciences supports MAP’s conclusion [page 168].’’ (In the proposed rule (79 FR 28236), we and septic shock. N Engl J Med. 2001; 345: 1368– 77. 96 HCUP Nationwide Inpatient Sample (NIS). Healthcare Cost and Utilization Project (HCUP). 2007–2009. Agency for Healthcare Research and Quality, Rockville, MD. https://www.hcupus.ahrq.gov/nisoverview.jsp. PO 00000 Frm 00384 Fmt 4701 Sfmt 4700 attributed all of the MAP’s statements to its 2013 Pre-Rulemaking Report.) (2) Overview of Measure The purpose of the proposed Severe Sepsis and Septic Shock: Management Bundle measure is to support the efficient, effective, and timely delivery of high quality sepsis care in support of the Institute of Medicine’s (IOM) aims for quality improvement. This is consistent with the Department of Health and Human Service National Quality Strategy´s priorities directed at one of the leading causes of mortality. By providing timely, patient-centered care, and making sepsis care more affordable through early intervention, reduced resource use and complication rates can result. The severe sepsis and septic shock early management bundle provides a standard operating procedure for the early risk stratification and management of a patient with severe infection. Through applying this standard operating procedure, a clinically and statistically significant decrease in organ failure, mortality, and the utilization of health care resources has been demonstrated for over 10 years. Additional information about this measure is available on the NQF’s Web site at https://www.qualityforum.org/ QPS/0500. (3) Data Sources The proposed measure is chartabstracted data of patients presenting with septic shock who received treatment detailed in the Calculations section below. (4) Outcome The outcome criteria for this measure consists of: measure lactate; blood cultures; timely antibiotics; fluid resuscitation; lactate clearance; vasopressors, central venous pressure (CVP), central venous oxygen saturation (ScvO2); and overall bundle compliance. These are discussed in more detail below • Measure Lactate Measurement of lactate levels is specifically associated with improved outcomes in sepsis, and an elevated lactate value identifies patients at higher risk for poor outcomes. Up to 10 percent of in-hospital cardiac arrest in the United States per year is secondary to sepsis (pneumonia). These patients are often misdiagnosed and sent to the medical floors only to suffer acute hemodynamic deterioration. These outcomes could be potentially avoided with lactate measurement upon admission providing risk stratification triggering alternative dispositions. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Levy et al.97 conducted an international, multisite ‘‘Surviving Sepsis Campaign’’ (SSC) initiative to determine the rate of change at which the sites reached the SSC guideline targets. In the first quarter of this initiative, only 61.0 percent of patients had lactate values measured consistent with guidelines. In addition, prior studies have shown that care prompted by measurement of lactate levels in sepsis patients reduced resource utilization and cost. This leads to lower likelihood of hospital-acquired conditions. This performance measure has been previously used as a core component of multicenter and national quality improvement initiatives. Formalizing it as a national performance measure will provide direct targets for intervention that are closely linked with improvements in mortality and cost. • Blood Cultures In the first quarter of the Levy et al. SSC initiative, only 64.5 percent of patients had blood cultures collected prior to antibiotic administration. Collecting blood cultures prior to antibiotic administration is specifically associated with improved outcomes in sepsis, and pathogens identified by blood cultures allow for customized therapy. As a result, blood cultures continue as a recommendation of the current Surviving Sepsis Guidelines. By obtaining blood cultures, antibiotic regimens can be customized to treat the specific infecting organism. This will result in less unnecessary exposure to antibiotics, reducing complications associated with antibiotic use, including drug reactions, allergies and adverse events, the development of drugresistant organisms, and the occurrence of Clostridium difficile colitis. The performance measure for collecting blood cultures for suspected sepsis has been previously used and continues as a core component of the SSC guidelines. • Timely Antibiotics Kumar et al.98 found the median time to appropriate antibiotics was 6 hours after shock. In the first quarter of the Levy et al.99 SSC initiative, only 60.4 percent of patients received timely 97 Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign. The Surviving Sepsis Campaign: results of an international guideline based performance improvement program targeting severe sepsis. Crit Care Med. 2010 Feb;38(2):367–74. 98 Kumar A, Roberts D, Wood K, Light B, et al. Duration of Hypotension before Initiation of Effective Antimicrobial Therapy is the Critical Determinant of Survival in Human Septic Shock. Crit Care Med. 2006;34 (6):1589–96. 99 Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign. The Surviving Sepsis Campaign: results of an international guideline based performance improvement program targeting severe sepsis. Crit Care Med. 2010 Feb;38(2):367–74. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 antibiotics. Multiple studies, for example, have demonstrated that delays in administration of appropriate antibiotics in patients with sepsis and other severe infections are associated with longer lengths of stay, higher costs, and higher mortality. In septic shock, the Kumar et al. study demonstrated that every hour in delay of appropriate antibiotics was associated with a 7.6 percent higher mortality. The timely administration of broad-spectrum antibiotics was associated with significantly higher risk adjusted survival. Based on a preponderance of data, the current recommendations in the international guidelines for the management of severe sepsis and septic shock includes the administration of broad-spectrum antibiotic therapy within 1 hour of diagnosis of septic shock and severe sepsis. • Fluid Resuscitation A common finding in patients with septic shock, manifested by low blood pressure and/or other signs of organ hypoperfusion, such as elevated serum lactate levels, is intravascular volume depletion. The degree of the intravascular volume deficit in sepsis varies, yet nearly all patients require initial volume resuscitation and many patients require continuing fluid resuscitation over the first 24 hours. Early fluid resuscitation is associated with improved outcomes for patients with acute lung injury due to septic shock. International guidelines recommend that patients with suspected hypovolemia be initially treated with at least 30 mL/kg of crystalloid (for example, Ringer’s solution) to determine clinical response. In the first quarter of the Levy et al.100 SSC initiative, only 59.8 percent of patients received fluid resuscitation consistent with guidelines. Timely fluid resuscitation avoids an error of omission in which indicated therapy is delayed or omitted. By improving outcomes, length of stay is reduced. This leads to lower likelihood of hospital-acquired conditions. This performance measure has been previously used as a core component and continues as a core component of the SSC guidelines. Formalizing it as a national performance measure will provide direct targets for intervention that are closely linked with improvements in mortality and cost. • Lactate Clearance Elevated lactate levels prompt the consideration of specific care practices toward hemodynamic optimization guided by either central venous oxygen saturation or lactate clearance. International guidelines recommend 100 Ibid. PO 00000 Frm 00385 Fmt 4701 Sfmt 4700 50237 that patients with sepsis and continued elevated lactate values have additional therapies until lactate levels are normalized. However, normal lactate levels can be seen in septic shock, especially in children. • Vasopressors, Central Venous Pressure (CVP), and Central Venous Oxygen Saturation (ScvO2) Performance gaps in individual bundle elements can range from 79 percent (Confidence Interval (CI) (69–89 percent) for vasopressors, to 27 percent (CI 18–36 percent) for Central Venous Pressure (CVP) measurement, and as low as 15 percent (CI 7–23 percent) for Central Venous Oxygen Saturation (ScvO2) in some community emergency departments. These numbers increase (50–75 percent) in larger hospital settings. CVP has been shown to have a significant association with mortality 101 and multiple studies and meta-analysis have shown a significant association with reaching an ScvO2 of 70 percent and improved mortality. • Overall Bundle Compliance Multiple initiatives promoting bundles of care for severe sepsis and septic shock were associated with improved guideline compliance and lower hospital mortality. Even with compliance rates of less than 30 percent, absolute reductions in mortality of 4–6 percent have been noted. Coba et al.102 found that when all bundle elements were completed within 18 hours and compared with patients who did not have bundle completion, the mortality difference was 10.2 percent. Thus, there is a direct association between bundle compliance and improved mortality. In addition, a continuous quality improvement (CQI) initiative, can improve compliance rates. CQI is a quality management process that encourages continually assessing performance and whether improvements can be made.103 Multiple studies have shown that standardized order sets, enhanced bedside monitor display, telemedicine and comprehensive CQI feedback is feasible, modifies clinician behavior and is associated with decreased hospital mortality. 101 Varpula M, Tallgren M, Saukkonen K, VoipioPulkki LM, Pettila V. Hemodynamic variables related to outcome in septic shock. Intensive Care Med. Jun 23 2005;31:1066–1071. 102 Coba V, Whitmill M, Mooney R, et al. Resuscitation Bundle Compliance in Severe Sepsis and Septic Shock: Improves Survival, Is Better Late than Never. J Intensive Care Med. Jan 10 2011. 103 Edwards PJ, et al. Maximizing your investment in EHR: Utilizing EHRs to inform continuous quality improvement. JHIM 2008;22(1):32–7. E:\FR\FM\22AUR2.SGM 22AUR2 50238 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (5) Cohort This measure will focus on patients aged 18 years and older who present with symptoms of severe sepsis or septic shock. These patients will be eligible for the 3 hour (severe sepsis) and/or 6 hour (septic shock) early management measures. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (6) Inclusion and Exclusion Criteria Numerator Statement: the numerator is: Patients from the denominator who received all the following: Step 1, Step 2, and Step 3 within 3 hours of time of presentation, and if septic shock is present (as either defined as hypotension or lactate >=4 mmol/L), who also received Step 4, Step 5, Step 6, and Step 7 within 6 hours of time of presentation. The steps are described in detail below. Step 1: Measure lactate level Step 2: Obtain blood cultures prior to antibiotics Step 3: Administer broad spectrum antibiotics Step 4: Administer 30 ml/kg crystalloid for hypotension or lactate >= 4 mmol/ L Step 5: Apply vasopressors (for hypotension that does not respond to initial fluid resuscitation to maintain a mean arterial pressure >= 65) Step 6: In the event of persistent arterial hypotension despite volume resuscitation (septic shock) or initial lactate >= 4 mmol/L (36 mg/dl), measure central venous pressure and central venous oxygen saturation Step 7: Re-measure lactate if initial lactate is elevated Denominator: The denominator is the number of patients presenting with severe sepsis or septic shock. The following patients presenting with severe sepsis or septic shock will be excluded from the denominator: • Patients with advanced directives for comfort care; • Patients with clinical conditions that preclude total measure completion; • Patients for whom a central line is clinically contraindicated; • Patients for whom a central line was attempted but could not be successfully inserted; • A patient or a surrogate decision maker declines or is unwilling to consent to such therapies or central line placement; and • Patients who are transferred to an acute care facility from another acute care facility. (7) Calculations In calculating this measure, the denominator is the number of patients presenting with severe sepsis or septic VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 shock. The numerator in this measure is patients from the denominator who had their lactate levels measured, had blood cultures obtained prior to receiving antibiotics, and who received broad spectrum antibiotics within 3 hours of presentation. If septic shock is present, the patients also must receive 30 ml/kg crystalloid for hypotension or lactate >=4 mmol/L, apply vasopressors (for hypotension that does not respond to initial fluid resuscitation to maintain a mean arterial pressure >=65), in the event of persistent arterial hypotension despite volume resuscitation (septic shock) or initial lactate >=4 mmol/L (36 mg/dl) measure central venous pressure and central venous oxygen saturation, and the patient’s lactate level must be re-measured if the initial lactate level is elevated. We invited public comment on this proposal. Comment: Several commenters supported adopting this measure. Some commenters supported adopting this measure because it is NQF-endorsed. One commenter supported the addition of this measure and noted that it fills an important measure gap, and should positively impact patient care. Another commenter strongly supported incorporating the sepsis/ septic shock measure into the Hospital IQR Program beginning in the FY 2017 payment determination because of the association of sepsis with patient deaths, hospital admissions, and length of hospital stays. Further, the commenter stated that Medicare is the largest payer for sepsis-related hospital stays, accounting for close to 60 percent of all patients. Response: We proposed adopting this measure because we believe this measure improves patient health outcomes. Comment: Several commenters noted that there are two other trials that examine the risks/benefits of protocolized care of septic patients which are yet to be published. As this field is evolving, the commenter believed that it is not appropriate to set benchmarks which were not confirmed in the most recent, largest randomized controlled trial. Specifically, the commenters suggested that specific measure criteria should await the results of the Australian Resuscitation In Sepsis Evaluation Randomised Controlled Trial (ARISE) and The Protocolised Management in Sepsis Trial (ProMISe). Response: We thank the commenter for feedback. We acknowledge the importance of the results pending from the ARISE and the ProMISe trials and will take those results and their potential impact into consideration PO 00000 Frm 00386 Fmt 4701 Sfmt 4700 when available. However, we believe that care of patients with severe sepsis and septic shock is of paramount importance and there is a significant performance gap within the Hospital IQR Program. The presence of this gap warrants the adoption of this clinical quality metric prior to the finalization of the two pending trials referenced above. The severe sepsis/septic shock bundle measure is the only NQF-endorsed sepsis measure currently available to CMS. Comment: Many commenters opposed CMS adopting this measure citing the recent Protocolized Care for Early Septic Shock (ProCESS) trial published after publication of the proposed rule. The ProCESS trial found no additional benefit in including measurement of central venous pressure (CVP) and central venous oxygen saturation. Response: We thank the commenters for this feedback. We note from the measure steward that the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) measure ‘‘has undergone the rigorous NQF evaluation process for over 6–7 years based on over 13 years of confirmatory studies. These studies provided the framework which allowed the measure to navigate the validity and reliability metrics as a whole measure including the central venous catheter to measure central venous pressure and oxygen saturation (SCVO2).’’ 104 We note that these two clinical parameters guide the administration of intravenous fluids, vasopressors, inotropes, and blood transfusions. Further, both parameters provide critical information about cardiac dysfunction, which when treated appropriately improves outcome. The steward further notes ‘‘As a result CVC placement has been shown to be one of the most important bundle elements 34–37 and independently associated with a 9 percent reduction in mortality.’’ 38 39 Regarding the ProCESS trial, we note that this randomized trial focused on a different set of guidelines for septic shock patients and did not require patients to have a central venous catheter placed, unless peripheral access was insufficient.105 The protocolbased standard therapy was the result of the ProCESS Investigators reviewing the literature, surveying emergency physicians and intensivists worldwide with consensus feedback from investigators.2 The ProCESS trial 104 NQF. Patient Safety Measure. Henry Ford Comments. June 2014. Available at: https:// www.qualityforum.org/ ProjectMaterials.aspx?projectID=73701. 105 ProCESS Investigators. A Randomized trial of Protocol-Based Care for early septic shock. NEJM. 2014; 370:1683–1693. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations protocol-based standard therapy also included administration of fluids and vasoactive agents to reach goals for systolic blood pressure and shock index (the ratio of heart rate to systolic blood pressure).2 The results of this trial were published in March 2014 and NQF reviewed the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) measure and narrowly voted to remove the central venous catheter portion of the EGDT bundle in June 2014. We note that the ProCESS trial was performed in 31 U.S. hospital emergency departments known to have a high volume of patients and that over a 5-year period randomized 1351 patients with septic shock into the trial, or on average 8 patients per site per year. The measure steward noted that a meta-analysis of 49 studies found the ProCESS trial population to account for 3 percent of the 41,064 patients in the these studies and that the 31 centers in the trial are not reflective of community settings where the majority of patients are treated in the U.S.,2 nor are the 31 centers a majority of the 4500 hospitals in the U.S. Finally, during the NQF Patient Safety Measure Standing Committee meeting, the steward noted that the recommendation to remove the CVC portion of the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) measure had not been tested to assess if the measure would still be reliable and valid with this change to the measure, and that the recommendation was based on a single study’s protocol-based standard therapy which was noted not to be identical to the EGDT treatment used in the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) measure. In view of this background of information we believe the most logical next step is to gather more information from two other studies that will be completed in the near future, as well as to await further recommendations from the NQF Patient Safety Measures Project as the ProCESS investigators collaborate with the stewards of the Severe Sepsis and Septic Shock: Management Bundle (NQF #0500) measure to refine the measure. We believe that sepsis and its mortality rate are important medical conditions which have also shown wide variation in treatment and outcome. We believe severe sepsis and septic shock should be monitored for improvements in mortality rates. Comment: Commenters noted that the CVP and central venous oxygen saturation monitoring and other processes were adopted in the Surviving Sepsis Campaign (SSC) after the results of a single center trial published in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2001.106 Commenters also stated that the Surviving Sepsis Campaign (SSC) moderated some of its recommendations based on the results of the ProCESS trial citing the SSC’s response to the ProCESS trial.107 Response: We thank the commenter for feedback. We note that monitoring CVP and central venous oxygen saturation monitoring are important components of the sepsis bundle. The SSC recommendations note that mortality outcomes increase if CVP or oxygen saturation of 70 percent or 65 percent respectively, is not achieved with fluid resuscitation to the central venous pressure target. We acknowledge that the CVP and central venous oxygen saturation monitoring and other processes were adopted by the Surviving Sepsis Campaign (SSC) after the results of a single center trial published in 2001. However, we would like to point out the SSC recommendations have been updated since their initial publication and these updated recommendations are based on many different international studies. With regard to the comment that SSC has moderated some of its recommendations based on the ProCESS trial. We note that in their response to the ProCESS trial dated May 19, 2014, SSC recognizes that there are alternative ways to obtain these results and they will address ways to include this data in future versions of their quality improvement database. Comment: One commenter stated that support for this measure was not lessened by the ProCESS trial questioning the level of support for element ‘‘F’’ (measurement of central venous pressure and central venous oxygen saturation) of this measure. The commenter noted that, while the NQF Patient Safety Steering Committee voted in favor of removing element ‘‘F,’’ final ratification is pending by the NQF Board of Directors. The commenter noted that the NQF Patient Safety Steering Committee did not remove its endorsement of the full measure, and cited the Draft Report for Comment 108 on the ad hoc review that stated that ‘‘usual care for severe sepsis 106 Rivers E, Nguyen B, Havstad S et al. Early goal-directed therapy in the treatment of severe sepsis and septic shock. N Engl J Med.2001; 345: 1368–77. 107 Surviving Sepsis Campaign. Surviving Sepsis Campaign Responds to ProCESS Trial. May 19, 2014. Available at: https://www.survivingsepsis.org/ SiteCollectionDocuments/SSC-Responds-ProcessTrial.pdf. 108 National Quality Forum. NQF-Endorsed Measures for Patient Safety. Draft Report for Comment. May 28, 2014. Available at: https:// www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=76698. PO 00000 Frm 00387 Fmt 4701 Sfmt 4700 50239 and septic shock had changed dramatically in the past decade with dramatic improvements in sepsisrelated morbidity and mortality with several elements of the NQF #0500 measure being key to this improvement in outcomes’’ (p. 20). Response: We agree that support for this measure has not lessened as a result of the ProCESS trial. As part of its ongoing work, the NQF Patient Safety Standing Committee conducted an ad hoc review of the sepsis measure (NQF #0500) based on results from the ProCESS trial. While the NQF Patient Safety Steering Committee voted in favor of removing element ‘‘F,’’ it recommended retaining endorsement of the measure as a whole. At this time final ratification is pending by the NQF Board of Directors. We refer readers to the NQF Web site for complete information on this measure’s review at: https://www.qualityforum.org/News_ And_Resources/Press_Releases/2014/ Statement_from_NQF_on_Review_of_ Sepsis_Measure.aspx. We intend to closely monitor and incorporate new information as the evidence base improves. Comment: A commenter asked CMS to invest additional resources in developing a stronger sepsis outcome measure. Another commenter asked CMS to consider adding non-NQFendorsed measures that address early detection of sepsis. Response: We thank the commenters for these suggestions and will take them into consideration in the future. Comment: A commenter supported the severe sepsis/septic shock: management bundle measure provided the chart-abstracted measures that are proposed for removal in this rule are removed. The commenter noted that, if all existing chart-abstracted measures are left intact and the proposed mandatory electronic submission requirements for CY 2016 are added, it will be difficult for the commenter to find the resources to add the new measures. Response: We are working to lessen the burden by removing several chartabstracted measures. Comment: One commenter was concerned that the measure, as defined, may have a high rate of false positives. Response: We are unaware of any studies indicating the severe sepsis/ septic shock measure, as defined, has a high rate of false positives. We would be interested in seeing any evidence of a high rate of false positives. Comment: One commenter stated that the science of sepsis treatment is evolving and measurements of the incidence of sepsis and sepsis outcomes E:\FR\FM\22AUR2.SGM 22AUR2 50240 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV are likely inaccurate due to coding variances and payment incentives. Response: We acknowledge that the science of sepsis treatment is evolving. We note that this is common phenomenon in medicine, and this is why all measures undergo routine measure maintenance. We believe that the coding of sepsis is accurate because these codes are used for payment reimbursement. In addition, our payment reimbursement processes allow for review, correction, and appeals. The payment incentive in the Hospital IQR Program is for reporting, therefore there is no financial incentive associated with actual sepsis/septic shock outcomes. Comment: Many commenters suggested that this measure poses a possible risk to patients and would be a burden on hospitals to collect the data. Specifically, one commenter was concerned about whether emergency department staff would be required to complete elements of the bundle while they triage patients. Response: We believe this measure will benefit consumers seeking information regarding the quality of health care outcomes. Sepsis is associated with patient deaths, hospital readmissions, and increased length of hospital stays. The measure fills an important measure gap, and will positively impact patient care. We believe that these benefits will outweigh data collection burdens. We also do not believe this measure will be more burdensome than other measures for hospitals because the measure data may be collected concurrently, retrospectively, or a combination of both. Regarding the concern of the inability to complete the bundle elements in the emergency department during triage, we note that the measure allows for completion of elements A–C within 3 hours. Timeliness of accurate detection and treatment of sepsis has been associated with improved survival in numerous studies, for example. 109 110 Comment: A commenter suggested that CMS defer the sepsis reporting requirements until 2016, when the next version of the Surviving Sepsis Guidelines (SSG) is published. 109 Castellanos-Ortega A, Suberviola B, GarciaAstudilllo LA, Holanda MS, et al. Impact of the Surviving Sepsis Campaign protocols on hospital length of stay and mortality in septic shock patients: Results of a three-year follow-up quasiexperimental study. Crit Care Med. 2010, 8(4):1036– 1043. 110 Ferrer R, Artigas A, Suarez D, Palencia E, et al. Effectiveness of Treatments for Severe Sepsis. A Prospective, Multicenter, Observational Study. Am J Respir Crit Care Med. 2009, 180:861–866. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We believe the measure is important and addresses a critical gap in measurement and therefore, should be adopted at this time. However, we intend to closely monitor and incorporate new information as the evidence base improves. Comment: Several commenters requested that CMS consider alternative sepsis measures that are NQF-endorsed, reliable, accurate, feasible, evidencebased, streamlined, and can be collected consistently and reliably, with minimal burden. Response: At the time of this publication, we note that here are no other NQF-endorsed severe sepsis/ septic shock measures available. Comment: A commenter asked for clarification as to which patients would be excluded from this measure. This commenter also wanted clarification on whether we are developing a sampling methodology for the sepsis measure. The commenter suggested that we define a minimum case threshold for publicly reporting this measure. Response: The exclusions for this measure were outlined above, in the proposed rule (79 FR 28237), and at: https://www.qualityforum.org/QPS/0500. We intend to develop a sampling strategy for the sepsis measure. In addition, regarding a minimum case threshold for public reporting, we will follow our existing guidelines. We display a footnote on Hospital Compare when the number of cases/patients is too few to report, that is fewer than 11 cases.111 Comment: Many commenters also asked for changes to specific aspects of the measure. Components of the sepsis measure commenters would like to change include: • Allowing exclusions to the required fluid resuscitation amount of 30 ml/kg to take into account the elderly, frail, and cardiac compromised that are not able to handle this amount of fluid, and may have fluid overload. For example, one exclusion could be 25 ml/kg for cardiac compromise, which the commenter stated the literature also supports in sepsis fluid resuscitation. • Allowing administration of 30 ml/ kg crystalloid for hypotension or lactate >/=4 mmol/L should be administered within 3 hours of time of presentation and not 6 hours, according to current guidelines. • Excluding patients from the blood culture before antibiotic measure if blood cultures are attempted without success and patients that present to the emergency department with an atypical 111 https://www.medicare.gov/hospitalcompare/ Data/Footnotes.html. PO 00000 Frm 00388 Fmt 4701 Sfmt 4700 sepsis presentation (cardiac arrest prior to arrival). Many commenters opposed the inclusion of element F from the measure, specifically ‘‘In the event of persistent hypotension despite volume resuscitation (septic shock) or initial lactate >=4 mmol/L (36 mg/dl) measure central venous pressure and central venous oxygen saturation,’’ per the recommendation of the Patient Safety Measure Committee. A commenter cautioned that central lines have many complications and this trial showed early goal directed therapy without a central line was equivocal to placing a central line for monitoring. Commenters also noted that central venous catheters should be used sparingly, as they can lead to infections and other complications. A commenter stated that the measure specifications of care steps within six hours (required only for patients with septic shock) should not include steps five through seven because they are no longer considered the standard of care or high-quality sepsis resuscitation metrics and are outdated. Response: We thank the commenters for their feedback. We are adopting this measure as developed by the measure steward, Henry Ford Hospital, and endorsed by the NQF. We suggest the commenters recommend any changes to this measure to the measure developer/ steward so that those changes would go through the consensus development process. Comment: Several commenters sought clarification on aspects of the sepsis measure, such as: • Clarification of the denominator for identification of septic shock patients. The commenter asked that we clarify if the measure has specific ICD–9–CM diagnosis codes that would limit the review. If those are present, the commenter did not object to this measure. However, if they are not present, the commenter strongly objected to this measure based upon the significant burden of work that it imposes. • Clarification on whether the measure will be collected as aggregate data (Web-based) or if we will require the submission of patient-level data. • Clarification as to if the measure specifications will be provided in the standard manual format and when those specifications will be released. At this time, the commenter noted that there is no algorithm, data elements, initial patient population or sampling guidelines available to be able to begin programming this measure for collection. As this is a very complicated measure, the commenter noted that to E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations collect this measure as a chartabstracted measure will be a burden to the hospitals. • Clarification and rationale as to why we wanted to collect this as a chart-abstracted measure and not as an electronic clinical quality measure. A commenter suggested that the Severe Sepsis and Septic Shock measure be introduced as an electronic clinical quality measure rather than as a chartabstracted measure. The inclusion of this measure should be timed to occur when electronic measure specification is available to support its inclusion. Another commenter requested clarification and rationale as to why we want to collect this as a chart-abstracted measure and not as an electronic clinical quality measure. Response: The denominator is the number of patients presenting with severe sepsis or septic shock. These types of patients have specific ICD–9– CM codes and the codes will be provided with the measure specifications. The measure is a composite patient safety measure, which will require submission of patient-level data. The electronic specifications of the measure are not ready for implementation. We will consider adopting the electronic clinical quality measure version when it becomes fully electronically-specified. Comment: A commenter requested that, pending approval of the Sepsis and Septic Shock: Management Bundle Measure (NQF #0500), CMS provide the measure specifications six months in advance of the abstraction period to provide hospitals with ample time to review and evaluate any necessary process changes before the data collection period begins. Another commenter requested clarification as to if the measure specifications will be provided in the standard manual format and when those specifications will be released. At this time, the commenter notes that there is no algorithm, data elements, initial patient population or sampling guidelines available to be able to begin programming this measure for collection. As this is a very complicated measure, the commenter notes that to collect this measure as a chartabstracted measure will be a burden to the hospitals. Response: The measure specifications will be released in the standard format, in the Specifications Manual, which will contain the data elements and algorithm. Typically, our specifications manuals are posted on QualityNet in January for July–December discharges and July for January–June discharges. We also provide addendums each year VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 after the finalization of the IPPS/LTCH PPS final rule. The release date of this addendum is to be determined. Comment: One commenter stated that the quality improvement opportunities are when missed diagnosis occurs. The commenter asked if CMS will include possible diagnosis from an electronic health record problem list as a data source. Further, the commenter stated that the first three elements for severe sepsis have best-practice times of three hours from presentation. The commenter asked if that is three hours from arrival to the facility, upon transfer between units, from presentation of symptoms, or all of the above. The commenter advised that three hours could also be very difficult to meet depending on emergency department volumes at any given time. Response: We note that this is a chartabstracted measure and hospitals can collect data from all available sources of medical records including EHRs. Regarding the best-practice times for the measure, we refer the commenter to the Inclusion and Exclusion Criteria described above for a description of the steps to be completed within 3 hours of the patient’s presentation. According to the measure steward, Henry Ford Hospital, the measure’s intent is to use three hours following presentation/ onset from one endpoint to another, be it facility transfer/arrival or unit transfer/arrival. After consideration of the public comments we received, we are finalizing the Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500) as proposed. We will closely monitor this measure as new clinical evidence becomes available, and will update the public via future rulemaking and/or operational guidance as necessary. f. Electronic Health Record-Based Voluntary Measures (1) Overview of New Electronic Health Record-Based Voluntary Measures In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28238 through 28239) we proposed four new voluntary electronic health record-based measures to be submitted as electronically specified measures: (1) Hearing Screening Prior to Hospital Discharge (NQF #1354); (2) PC–05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (collectively referred to as NQF #0480); (3) Home Management Plan of Care (HMPC) Document Given to Patient/ Caregiver; (4) and Healthy Term PO 00000 Frm 00389 Fmt 4701 Sfmt 4700 50241 Newborn (NQF #0716). The four proposed electronic health record-based measures were included on a publicly available document entitled ‘‘List of Measures Under Consideration for December 1, 2012’’ in compliance with section 1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS. The final MAP report is available at: https:// www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&Item ID=72746. We considered the input and recommendations provided by the MAP in selecting measures to propose for the Hospital IQR Program. The specifications for the electronic clinical quality measures for eligible hospitals are found at: https://cms.gov/ Regulations-and-Guidance/Legislation/ EHRIncentivePrograms/eCQM_ Library.html. Many commenters raised similar concerns applicable across the proposed electronic clinical quality measures; we summarize and respond to these general comments first below before discussing the individual electronic clinical quality measures. Comment: Many commenters opposed one or more of these voluntary electronic clinical quality measures for the following reasons: • A significant portion of the measures’ populations are not covered by Medicare. • The proposed measures would not lead to improved hospital quality or offer insight on how to improve electronic clinical quality measures. • CMS did not propose to allow hospitals to submit chart-abstracted data on these measures in addition to the electronic clinical quality measures. Response: We are concerned with improving the quality of care provided to all patients, not just Medicare patients. All of our non-claims-based measures include all-payer patients, meaning they include non-Medicare patients as well as Medicare beneficiaries. We disagree that these measures would not lead to improved hospital quality of care. The measures address high-impact conditions not adequately addressed in the program measure set. We also disagree that these measures will not improve electronic clinical quality measures. Reporting clinical quality measures in their electronic form is a different mode of data collection that, as with any measure, will require refinement over time. We believe that implementing and using will drive quality improvement through measuring quality through EHR’s, and E:\FR\FM\22AUR2.SGM 22AUR2 50242 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV provide nationally representative information to inform future electronic clinical quality measure refinements. Finally, we believe these measures will give hospitals useful information that can be used to improve the quality of care for those patients in the measure population regardless of the mode of collection and submission. We are in the process of moving away from chartabstracted measures. Therefore, in part to minimize hospitals data collection burden and when electronic specifications are available, we intend to adopt those versions. We proposed to adopt these measures as voluntary electronic clinical quality measures to align with the Medicare EHR Incentive Program to provide hospitals’ flexibility in reporting. We note that the proposed measures are voluntary and a hospital may choose to not report one or more of the proposed measures. Comment: One commenter was concerned that the complexity of the data currently in chart abstraction for these measures will make it difficult to ensure that this information will accurately be translated when submitting these measures electronically. Response: These measures are already electronically-specified and as such, no translation is required. As previously stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50817 through 50818), we do not believe that the electronic clinical quality measures are substantively different from their chartabstracted form. Comment: Commenters recommended aligning CMS and TJC requirements for these measures in an effort to reduce the amount of resources that are spent when requirements are different or the timing of changes in requirements creates additional challenges. Response: We intend to continue working with TJC and other stakeholders to reduce hospitals’ quality reporting burden. (2) Voluntary Electronically Specified Measure: Hearing Screening Prior to Hospital Discharge (NQF #1354) The Hearing Screening Prior to Hospital Discharge (NQF #1354) measure assesses the proportion of all live births born at a hospital that have been screened for hearing loss before hospital discharge. The Joint Committee on Infant Hearing encourages early screening and intervention in infants with hearing loss to maximize linguistic competence and literacy development in children with hearing loss or who are hard of hearing. Early intervention improves developmental and social outcomes for children. The States and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 CDC have collected this measure as a population-based measure for more than 10 years. This measure is NQF-endorsed and was supported by the MAP in its PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, available at: https://www.qualityforum.org/Work Area/linkit.aspx?LinkIdentifier=id& ItemID=72738. The MAP noted that the measure addresses a high-impact condition not adequately addressed in the program measure set. The numerator is all live births during the measurement period born at a facility and screened for hearing loss prior to discharge, or screened but still not discharged, or not screened due to medical reasons or a medical exclusion. The denominator includes all live births during the measurement period born at a facility and discharged without being screened, or screened prior to discharge, or screened but still not discharged. The measure excludes any patient deceased prior to discharge and has not received hearing screening. Comment: One commenter supported the hearing screening prior to hospital discharge measure. Response: We thank the commenter for their support. Comment: One commenter opposed the Hearing Screening Prior to Hospital Discharge measure, and expressed concern that it will encourage physicians to obtain other preventative screenings during the hospitalization that are unnecessary or unrelated to the cause of the patient’s admission. Response: This measure relates to hearing screening for newborns prior to discharge, not all patients. Newborns, as defined by this measure, are not in the same category as other admitted patients as they are born to an admitted patient. Early screening allows for early intervention in infants with hearing loss. We do not believe newborn preventive hearing screenings will encourage physicians to perform unneeded preventive screenings. After consideration of the public comments we received, we are finalizing the adoption of the Hearing Screening Prior to Hospital Discharge measure for voluntary electronic reporting as proposed. (3) Voluntary Measure: PC–05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (collectively referred to as NQF #0480) Exclusive breast milk feeding for the first 6 months of neonatal life has long been the expressed goal of World Health PO 00000 Frm 00390 Fmt 4701 Sfmt 4700 Organization (WHO), HHS, American Academy of Pediatrics (AAP) and American College of Obstetricians and Gynecologists (ACOG). The PC–05 Exclusive Breast Milk Feeding measure and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (NQF #0480) is endorsed by the NQF and supported by the MAP in its PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS, available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. The MAP noted that the measure addresses a highimpact condition not adequately addressed in the program measure set. This measure assesses the number of newborns exclusively fed breast milk during the newborn’s entire hospitalization; and the subset measure only includes those newborns whose mothers chose to exclusively feed breast milk. The numerator is the same for both the measure and subset measure— newborns that were fed breast milk only since birth. However, the denominators differ. For PC–05, the denominator is defined as single term liveborn newborns discharged alive from the hospital with ICD–9–CM Principal Diagnosis Code for single liveborn newborn. The denominator for the subset measure, PC–05a, is defined as single term newborns discharged alive from the hospital excluding those whose mothers chose not to breast feed with ICD–9–CM Principal Diagnosis Code for single liveborn newborn. The ICD–9– CM Principal Diagnosis Codes for single liveborn newborns are found in Appendix A, Table 11.20.1: Single Live Newborn in the Specifications Manual for Joint Commission National Quality Measures available at: https:// manual.jointcommission.org/releases/ TJC2013A/AppendixATJC.html. Excluded populations: • Admitted to the Neonatal Intensive Care Unit (NICU) at this hospital during the hospitalization. • ICD–9–CM Other Diagnosis Codes for galactosemia as defined in Appendix A, Table 11.21 in the Specifications Manual for Joint Commission National Quality Measures found at: https:// manual.jointcommission.org/releases/ TJC2013A/AppendixATJC.html. • ICD–9–CM Principal Procedure Code or ICD–9–CM Other Procedure Codes for parenteral infusion as defined in Appendix A, Table 11.22 in the Specifications Manual for Joint Commission National Quality Measures found at: https:// E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations manual.jointcommission.org/releases/ TJC2013A/AppendixATJC.html. • Experienced death. • Length of Stay >120 days. • Enrolled in clinical trials. • Patients transferred to another hospital. • ICD–9–CM Other Diagnosis Codes for premature newborns as defined in Appendix A, Table 11.23 in the Specifications Manual for Joint Commission National Quality Measures found at: https:// manual.jointcommission.org/releases/ TJC2013A/AppendixATJC.html. • Documented Reason for Not Exclusively Feeding Breast Milk. The maternal reasons for not exclusively breastfeeding are limited to the following situations: • HIV infection; • Human t-lymphotrophic virus type I or II; • Substance abuse and/or alcohol abuse; • Active, untreated tuberculosis; • Taking certain medications, that is, prescribed cancer chemotherapy, radioactive isotopes, antimetabolites, antiretroviral medications and other medications where the risk of morbidity outweighs the benefits of breast milk feeding; • Undergoing radiation therapy; • Active, untreated varicella; • Active herpes simplex virus with breast lesions; and • Admission to Intensive Care Unit (ICU) post-partum. We invited public comments on this proposal. Comment: One commenter strongly supported the adoption of PC–05: Exclusive Breast Milk Feeding and the Subset Measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (Collectively Referred to as NQF #0480). Another commenter urged CMS to make the exclusive breast milk feeding measure a mandatory measure no later than FY 2017. The commenter believed that exclusive electronic reporting of these measures could ultimately reduce the burden of collection and increase the potential for timely feedback to all stakeholders on the ever important area of maternity care. The commenter indicated that the health benefits of breastfeeding for mothers and for babies are well established and that the measure has the virtue of being included in TJC’s core Perinatal Care measure set (PC–05), which hospitals with more than 1,100 births annually are now required to collect and report. The commenter indicated that the use of standardized measures helps avoid confusion among consumers and health professionals and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reduces duplication of related measure concepts and burden of collection. Response: We thank the commenters for their support. We will take into consideration their recommendations as we plan Hospital IQR Program policies in the future. Comment: One commenter stated that it is unclear whether noncompliance with the breast feeding measure would be created if the mother changed her mind at some point during the stay. Response: For PC–05a only, if the mother’s initial feeding plan was to exclusively feed breast milk and she diverges from that plan to feed formula later in the hospitalization, then the case will fail. A case is only excluded from the denominator if formula feeding is the initial stated feeding plan. Comment: One commenter believed there should be exclusions for newborns’ medical conditions that require supplemental feedings. This commenter did not support the measure because it is an electronic clinical quality measure only. The commenter would support the measure in its chartabstracted form because it is NQFendorsed and supported by the MAP. Response: We suggest that any recommendations for changes to the measure be shared with the measure developer/steward, TJC. As is, the measure is NQF-endorsed and includes the electronic specification. In 2012, The MAP declined to support the electronic clinical quality measure because of an issue regarding patient choice. However, the measure developer has addressed this issue following the 2012 MAP recommendation. Patients that choose not to exclusively breast feed are excluded from the denominator. In 2013, the MAP supported the measure for adoption by the Hospital IQR Program, noting the measure addresses an NQS priority not adequately addressed in the program measure set. Comment: Several commenters recommended the integration of technical assistance provided by TJC and the United States Breastfeeding Committee (USBC) to assist with implementation of the measure. The commenters pointed out that USBC has published an online toolkit 112 to help hospitals implement the measure and suggested that we should inform hospitals of the availability of the toolkit. Response: We thank the commenters for their suggestions and will consider them in the future. 112 https://www.usbreastfeeding.org/HealthCare/ HospitalMaternityCenterPractices/ ToolkitImplementingTJCCoreMeasure/tabid/184/ Default.aspx). PO 00000 Frm 00391 Fmt 4701 Sfmt 4700 50243 After consideration of the public comments we received, we are finalizing are finalizing the PC–05 Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother’s Choice (collectively referred to as NQF #0480) measure as a voluntary electronic clinical quality measure as proposed. (4) Voluntary Measure CAC–3: Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver Asthma is the most common chronic disease in children and a major cause of morbidity and health care costs nationally. For children, asthma is one of the most frequent reasons for admission to hospitals. There were approximately 157,000 admissions for childhood asthma in the United States in 2009. Under-treatment and/or inappropriate treatment of asthma are recognized as major contributors to asthma morbidity and mortality. Guidelines developed by the National Asthma Education and Prevention Program (NAEPP) of the National Heart, Lung and Blood Institute (NHLBI), as well as by the American Academy of Pediatrics (AAP) for the diagnosis and management of asthma in children, recommend establishing a plan for maintaining control of asthma and for establishing plans for managing exacerbations. The CAC–3: Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver measure is no longer endorsed by the NQF and was not supported by the MAP in its PreRulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier =id&ItemID=72738, because the measure no longer meets the NQF endorsement criteria. However, based on the prevalence of asthma among children, as well as the risks associated with under-treatment or over-treatment described above, we believe the measure is appropriate for voluntary collection. Because asthma is a serious, and potentially life-threatening disease, we believe that it is important to allow hospitals to voluntarily report this data, which may help inform our policy. This measure assesses the proportion of pediatric asthma patients (aged 2–17 years) discharged from an inpatient hospital stay with a HMPC document in place. The numerator is the number of pediatric asthma inpatients with documentation that they or their caregivers were given a written HMPC document that addresses: (1) E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50244 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Arrangements for follow-up care, (2) environmental control and control of other triggers, (3) method and timing of rescue actions, (4) use of controllers, and (5) use of relievers. The denominator is the number of pediatric asthma inpatients (age 2 years through 17 years) discharged with a principal diagnosis of asthma. The measure excludes: (1) Patients with an age less than 2 years or 18 years or greater; (2) patients who have a length of stay greater than 120 days; and (3) patients enrolled in clinical trials. We invited public comments on this proposal. Comment: A commenter supported the CAC–3 HPMC measure and noted that this plan of care supports patients’ successful transition from the hospital to home. Response: We thank the commenter for their support. Comment: Some commenters opposed the measure’s adoption as a voluntary electronic clinical quality measure because the NQF has removed its endorsement and the MAP has not recommended this measure. Another commenter requested that CMS provide additional information beyond what was stated in the proposed rule regarding our rationale for inclusion of the CAC–3 Home Management Plan of Care Document Given to Patient/ Caregiver. The commenter noted that this measure’s loss of NQF endorsement is cause for concern, but more importantly, the commenter did not feel this documentation measure appropriately contributes to evaluating the state of perinatal care in the U.S. Response: This is a pediatric measure addressing children aged 2–17, not a perinatal care measure. Since it is a pediatric measure, CAC–3 fills a gap in the Hospital IQR Program measure set. We are moving away from chartabstracted measures and when electronic specifications are available, we intend to adopt the electronic clinical quality measure version of a new measure. We acknowledge that the MAP did not support the adoption of this measure because the NQF withdrew their endorsement. According to the NQF report, the reason for this was because the measure did not pass the criteria for the category ‘‘Importance to Measure and Report.’’ 113 NQF stated that the evidence is not as strong for care plan as for use of ICS. The Committee noted the recent publication in JAMA by Morse in October 5, 2011 that found ‘‘Among children admitted to pediatric hospitals for asthma, there was 113 https://www.qualityforum.org/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=73041. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 high hospital-level compliance with CAC–1 and CAC–2 quality measures and moderate compliance with the CAC–3 measure but no association between CAC–3 compliance and subsequent ED visits and asthma-related readmissions’’ (https://jama.amaassn.org/content/306/13/1454.abstract). The NQF also cited concerns over the lack of standardization of a quality care plan, how language is constructed, and health literacy issues. Despite these findings, however, the NQF still agreed that ‘‘patient education is clearly an essential component in successful asthma management.’’ Our purpose for adopting this voluntary electronic clinical quality measure is to align with the Medicare EHR Incentive Program and to provide hospitals with flexibility in their quality reporting. We reiterate that the proposed measure is voluntary and a hospital may choose to not report this measure. Furthermore, we proposed to include this non-NQF endorsed measure under the Hospital IQR Program exception authority as discussed in section IX.A.7. of the preamble of this final rule. After consideration of the public comments we received, we are finalizing the Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver measure as a voluntary electronic clinical quality measure as proposed. (5) Voluntary Measure: Healthy Term Newborn (NQF #0716) This measure assesses the optimal outcome of pregnancy and childbirth, specifically a healthy term newborn. It evaluates the impact of any changes in the management or intervention on the positive outcome for the newborn. The measure is NQF-endorsed. The MAP recommended removal of this measure in its Pre-Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier =id&ItemID=72738, because the measure required modification or further development. However, the MAP strongly supported the measure concept for inclusion once technical issues were resolved. Given its endorsement by NQF, as well as the MAP’s strong support for the measure concept, we believe the measure is appropriate for voluntary reporting. The result of the measure calculation is the percentage of term singleton live births (excluding those with diagnoses originating in the fetal period) that do PO 00000 Frm 00392 Fmt 4701 Sfmt 4700 not have significant complications during birth or the nursery care.114 The numerator of this measure is the absence of conditions or procedures reflecting morbidity that happened during birth and nursery care to an otherwise normal infant. The denominator is composed of singleton, term (>=37 weeks), inborn, live births in their birth admission. The denominator further has eliminated fetal conditions likely to be present before labor. Maternal and obstetrical conditions (for example, hypertension, prior cesarean, malpresentation) are not excluded unless there is evidence of fetal effect prior to labor (for example, Intrauterine Growth Restriction (IUGR)/ Small for Gestational Age (SGA)). This measure excludes: (1) multiple gestations; (2) preterm, congenital anomalies; and, (3) fetuses affected by selected maternal conditions. We invited public comments on this proposal. Comment: Some commenters supported the adoption of this measure. One commenter noted the measure has recently been refined and renamed as ‘‘Unexpected Newborn Complications’’ and expressed the hope that CMS will adopt the updated version. Further, one commenter recommended that CMS make the measure mandatory no later than FY 2017. The commenter believed that the exclusive electronic reporting of this measure could ultimately reduce the burden of collection and increase the potential for timely feedback to all stakeholders on the ever important area of maternity care. Response: We will monitor the progress of the refined measure and consider adopting it after the measure completes the NQF-endorsement process. We will take into consideration the commenters’ recommendations as we plan Hospital IQR Program policies in the future. After consideration of the public comments we received, we are finalizing the Healthy Term Newborn (NQF #0716) measure as a voluntary electronic clinical quality measure as proposed. g. Readoption of Measures As Voluntarily Reported Electronic Clinical Quality Measures In order to align with the Medicare EHR Incentive Program for eligible hospitals (EHs) and critical access hospitals (CAHs), in the FY 2015 IPPS/ 114 National Quality Forum. National Voluntary Consensus Standards for Patient Outcomes 2009. Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id&Item ID=67546. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV LTCH PPS proposed rule (79 FR 28239 through 28242) we proposed to re-adopt two measures previously removed from the Hospital IQR Program; (a) AMI–2 Aspirin Prescribed at Discharge for AMI (acute myocardial infarction) (NQF #0142) (electronic clinical quality measure); and (b) AMI–10 Statin Prescribed at Discharge (NQF #0639) (electronic clinical quality measure). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28239) we proposed to add these measures to the list of voluntarily reported electronic clinical quality measures as described in section IX.A.7.f. of the preamble of this final rule. We believe we should continue aligning the Hospital IQR Program and the Medicare EHR Incentive Program in order to minimize reporting burden and continue the transition to reporting of electronic clinical quality measures, and we believe voluntary adoption of these measures will further that aim. Further, we believe that allowing hospitals the option to electronically report toppedout measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. (1) Readoption of AMI–2 Aspirin Prescribed at Discharge (NQF #0142) The AMI–2 Aspirin Prescribed at Discharge (NQF #0142) assesses the percentage of acute myocardial infarction (AMI) patients who are prescribed aspirin at hospital discharge. The measure is NQF endorsed, but has been placed in reserve status, as the performance on this measure is ‘‘topped-out.’’ The MAP recommended the measure should be suspended and phased out in its Pre-Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.quality forum.org/WorkArea/linkit.aspx?Link Identifier=id&ItemID=72738. However, as stated above, we intend to continue aligning the Hospital IQR Program and Medicare EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. Further, allowing hospitals the option to electronically report topped-out measures will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. The numerator includes AMI patients in the denominator who are prescribed aspirin at hospital discharge. The denominator includes patients with the following ICD–9–CM principal diagnosis codes of AMI: 410.00, 410.01, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81, 410.90, and 410.91. The following patients are excluded from this measure: • Patients less than18 years of age; • Patients who have a length of stay greater than 120 days; • Patients enrolled in clinical trials; • Patients who were discharged to another hospital; • Patients who expired; • Patients who left the hospital against medical advice; • Patients who were discharged to home for hospice care; • Patients who were discharged to a health care facility for hospice care; • Patients with comfort measures only documented; and • Patients with a documented reason for no aspirin at discharge. (2) Readoption of AMI–10 AMI-Statin Prescribed at Discharge (NQF #0639) AMI–10 AMI-Statin Prescribed at Discharge (NQF #0639) assesses the percent of acute myocardial infarction (AMI) patients who are prescribed a statin at hospital discharge. The measure is NQF endorsed. The MAP recommended phased removal in its Pre-Rulemaking Report: 2013 Recommendations on Measures under Consideration by HHS available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier =id&ItemID=72738 because the performance on this measure is likely ‘‘topped-out.’’ However, as stated above, we intend to continue aligning the Hospital IQR Program and Medicare EHR Incentive Program, and we believe collecting this measure on a voluntary basis enables us to continue collecting quality data on this topic while working to minimize reporting burden on participating hospitals. Further, allowing hospitals to electronically report topped-out measures on a voluntary basis will provide hospitals with an opportunity to test the accuracy of their electronic health record reporting systems. The numerator includes AMI patients in the denominator who are prescribed a statin medication at hospital discharge. The denominator includes patients with the following ICD–9–CM principal diagnosis codes of AMI: 410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81, 410.90, and 410.91. The following patients are excluded from this measure: • Patients less than 18 years of age; PO 00000 Frm 00393 Fmt 4701 Sfmt 4700 50245 • Patients who have a length of stay greater than 120 days; • Patients with comfort measures only documented; • Patients enrolled in clinical trials; • Patients who were discharged to another hospital; • Patients who left the hospital against medical advice; • Patients who expired; • Patients who were discharged to their home for hospice care; • Patients who were discharged to a health care facility for hospice care; • Patients with low-density lipoprotein less than 100 mg/dL within the first 24 hours after hospital arrival or 30 days prior to hospital arrival and not discharged on a statin; and • Patients with a reason for not prescribing statin medication at discharge. We invited public comments on our proposal to readopt these two measures as electronic clinical quality measures. Comment: Some commenters supported the inclusion of voluntary reporting for certain electronic clinical quality measures for the Hospital IQR Program, and noted that voluntary reporting allows hospitals to be better prepared for submitting new quality measures from EHRs and to correct any operational issues that arise. Several commenters supported adopting AMI–2 and AMI–10 as electronic clinical quality measures, because aligning the Hospital IQR Program with the Medicare EHR Incentive Program could reduce reporting burdens. The commenter hoped that CMS will continue to expand efforts to allow for electronic reporting to include registries, which are commonly used for data collection and reporting, in addition to EHRs. Response: We thank these commenters for their support. We would like to clarify that at this time we do not allow registry reporting for these measures. Comment: One commenter did not support CMS’ proposal to readopt two topped-out measures for purposes of electronic reporting, arguing that topped-out measures, by definition, are removed because they are no longer an accurate measure of hospital performance. The commenter was concerned that these measures would not advance hospital quality or improve electronic reporting. Other commenters opposed AMI–2 and AMI–10 as electronic clinical quality measures because they were topped-out and retired as chartabstracted measures and they believed retaining them would not advance hospitals’ understanding of how to E:\FR\FM\22AUR2.SGM 22AUR2 50246 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations submit electronic clinical quality measures or improve the quality of hospital care. Response: As we explained in section IX.A.2.g.(2) of the preamble of this final rule in response to a similar comment, even though these measures are toppedout, we would still like to retain the electronically specified versions for the following reasons: (1) to align the Hospital IQR Program and the Medicare EHR Incentive Program, (2) to allow us to monitor the effectiveness of measure reporting by EHR’s, and (3) to familiarize hospitals with reporting electronically specified measures. Topped-out status is also only one of many factors which we consider before determining whether a measure should be removed. While these measures may be toppedout, they are still an accurate measure of performance. Continuing to report on these measures is a way to monitor for continued high performance. Electronic measure data will help us evaluate variations in data capture modes (chartabstracted versus electronic clinical quality measures) in order to determine whether and what adjustments are necessary for the two different modes of collection. In addition, we believe that by allowing hospitals to voluntarily report these measures via electronic submission, we will provide hospitals needed flexibility in electronic clinical quality measure reporting, as requested by hospitals in their comments to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50814). As stated in the proposed rule (79 FR 208243), we intend to propose to require electronic clinical quality measure reporting in future rulemaking. We are providing this voluntary option to provide hospitals time to prepare for required electronic clinical quality measure reporting. After consideration of the public comments we received, we are finalizing the readoption of both AMI– 2: Aspirin Prescribed at Discharge (NQF #0142) and AMI–10: Statin Prescribed at Discharge (NQF #0639) as voluntary electronic clinical quality measures as proposed. In summary, for FY 2017 payment determination and subsequent years, we are finalizing: (1) the adoption of 11 total measures—9 new measures (4 of which are voluntary electronic clinical quality measures) and 2 previously removed measures re-adopted as voluntary electronic clinical quality measures, and (2) the removal of 19 measures (4 of which were previously suspended), ten of which are being retained as voluntary electronic clinical quality measures. We are not finalizing the removal of one of the required chartabstracted measures (SCIP–Inf–4). This gives a total of 63 measures (47 required and 16 voluntary electronic clinical quality measures) in the Hospital IQR Program measure set. Set out below is a table showing both the previously adopted and the newly finalized quality measures for the FY 2017 payment determination and subsequent years. Please note that this table does not include suspended measures. PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES AND MEASURES NEWLY FINALIZED IN THIS FINAL RULE FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS New for FY 2017 payment determination Short name Measure name NQF No. Submission methods for FY 2017 payment determination AMI–7a .................. NQF #0164 ........... NQF #0300 ........... Electronic clinical quality measure or chart-abstracted REQUIRED. Chart-abstracted only REQUIRED ...... NQF #0500 ........... Chart-abstracted only REQUIRED ...... NQF #1659 ........... NQF #0434 ........... Chart-abstracted only REQUIRED ...... Chart-abstracted only REQUIRED ...... NQF #0495 ........... Stroke-4 ................. Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. Cardiac Surgery Patients With Controlled 6 A.M. Postoperative Blood Glucose. Severe sepsis and septic shock: management bundle. Influenza Immunization ....................... Venous thromboembolism (VTE) prophylaxis. Median time from ED arrival to ED departure for admitted ED patients. Admit Decision Time to ED Departure Time for Admitted Patients. Thrombolytic therapy ........................... NQF #0437 ........... Stroke-6 ................. Discharged on statin medication ......... NQF #0439 ........... Stroke-8 ................. Stroke education ................................. N/A ........................ VTE–1 .................... Venous thromboembolism prophylaxis NQF #0371 ........... VTE–2 .................... Intensive care unit venous thromboembolism prophylaxis. VTE discharge instructions ................. NQF #0372 ........... Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. Electronic clinical quality measure chart-abstracted REQUIRED. SCIP–Inf–4 ............ Sepsis .................... Imm-2 ..................... Stroke-1 ................. ED–1 ...................... ED–2 ...................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VTE–5 .................... VTE–6 .................... PC–01 .................... CLABSI .................. VerDate Mar<15>2010 Incidence of potentially preventable VTE. Elective delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure). National Healthcare Safety Network (NHSN) Central line-associated Bloodstream Infection (CLABSI) Outcome Measure. 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00394 NQF #0497 ........... N/A ........................ N/A ........................ NQF #0469 ........... NQF #0139 ........... Fmt 4701 Sfmt 4700 or or or or or or or or or or NHSN REQUIRED .............................. E:\FR\FM\22AUR2.SGM 22AUR2 New for FY 2017. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50247 PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES AND MEASURES NEWLY FINALIZED IN THIS FINAL RULE FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued Short name Measure name NQF No. Submission methods for FY 2017 payment determination SSI ......................... American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. Colon procedures Hysterectomy procedures National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) Outcome Measure. National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure. Influenza vaccination coverage among healthcare personnel (HCP). Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following acute myocardial infarction (AMI) hospitalization for patients 18 and older. Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following heart failure (HF) hospitalization for patients 18 and older. Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following pneumonia hospitalization. Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. Stroke 30-day mortality rate ................ Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery. Hospital 30-day all-cause risk-standardized readmission rate (RSRR) following acute myocardial infarction (AMI) hospitalization. Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following heart failure hospitalization. Hospital 30-day, all-cause, risk-standardized readmission rate (RSRR) following pneumonia hospitalization. Hospital-level 30-day, all-cause riskstandardized readmission rate (RSRR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA). Hospital-Wide All-Cause Unplanned Readmission (HWR). Hospital 30-Day, All-Cause, RiskStandardized Readmission Rate (RSRR) following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. NQF #0753 ........... NHSN REQUIRED .............................. NQF #0138 ........... NHSN REQUIRED .............................. NQF #1716 ........... NHSN REQUIRED .............................. NQF #1717 ........... NHSN REQUIRED .............................. NQF #0431 ........... NHSN REQUIRED .............................. NQF #0230 ........... Claims REQUIRED ............................. NQF #0229 ........... Claims REQUIRED ............................. NQF #0468 ........... Claims REQUIRED ............................. NQF #1893 ........... Claims REQUIRED ............................. N/A ........................ N/A ........................ Claims REQUIRED ............................. Claims REQUIRED ............................. NQF #0505 ........... Claims REQUIRED ............................. NQF #0330 ........... Claims REQUIRED ............................. NQF #0506 ........... Claims REQUIRED ............................. NQF #1551 ........... Claims REQUIRED ............................. NQF #1789 ........... Claims REQUIRED ............................. NQF #1891 ........... Claims REQUIRED ............................. CAUTI .................... MRSA ..................... CDI ......................... HCP ....................... MORT–30–AMI ...... MORT–30–HF ........ MORT–30–PN ....... COPD Mortality ...... STK Mortality ......... CABG mortality ...... READM–30–AMI .... READM–30–HF ..... READM–30–PN ..... READM–30–TH/ TKA. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV New for FY 2017 payment determination READM–30–HWR COPD READMIT ... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00395 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 New for FY 2017. 50248 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES AND MEASURES NEWLY FINALIZED IN THIS FINAL RULE FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued New for FY 2017 payment determination Short name Measure name NQF No. Submission methods for FY 2017 payment determination STK READMIT ....... 30-day risk standardized readmission rate (RSMR) following Stroke hospitalization. Hospital 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery. Death among surgical inpatients with serious, treatable complications. Patient safety for selected indicators (composite). Payment-Standardized Medicare Spending Per Beneficiary (MSPB). AMI Payment per Episode of Care ..... Hospital-level, risk-standardized 30day episode-of-care payment measure for heart failure. Hospital-level, risk-standardized 30day episode-of-care payment measure for pneumonia. Hospital-level risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA). Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. Participation in a Systematic Clinical Database Registry for General Surgery. Safe Surgery Checklist Use ................ N/A ........................ Claims REQUIRED ............................. N/A ........................ Claims REQUIRED ............................. NQF #0351 ........... Claims REQUIRED ............................. NQF #0531 ........... Claims REQUIRED ............................. NQF #2158 ........... Claims REQUIRED ............................. N/A ........................ N/A ........................ Claims REQUIRED ............................. Claims REQUIRED ............................. New for FY 2017. N/A ........................ Claims REQUIRED ............................. New for FY 2017. NQF #1550 ........... Claims REQUIRED ............................. N/A ........................ Web-based REQUIRED ...................... N/A ........................ Web-based REQUIRED ...................... N/A ........................ Web-based REQUIRED ...................... NQF #0166 ........... NQF #0228 ........... NQF #0142 ........... Patient Survey REQUIRED ................. Electronic clinical quality measure ...... CABG READMIT ... PSI 4 (PSI/NSI) ...... PSI 90 .................... MSPB ..................... AMI payment .......... HF Payment ........... PN payment ........... Hip/knee complications. Registry Nursing Sensitive Care. Registry for General Surgery. Safe Surgery Checklist. HCAHPS ................ HCAHPS + CTM–3 ............................. AMI–2 .................... Aspirin Prescribed at Discharge for AMI. AMI–8a .................. Primary PCI Received Within 90 Minutes of Hospital Arrival. NQF #0163 ........... Electronic clinical quality measure ...... AMI–10 .................. Statin Prescribed at Discharge ........... NQF #0639 ........... Electronic clinical quality measure ...... SCIP–Inf–1a .......... Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. NQF #0527 ........... Electronic clinical quality measure ...... NQF #0528 ........... Electronic clinical quality measure ...... Urinary catheter removed on Postoperative Day 1 (POD 1) or Postoperative Day 2 (POD 2) with day of surgery being day zero. Discharged on antithrombotic therapy NQF #0453 ........... Electronic clinical quality measure ...... NQF #0435 ........... Electronic clinical quality measure ...... Stroke–3 ................ Anticoagulation therapy for atrial fibrillation/flutter. NQF #0436 ........... Electronic clinical quality measure ...... Stroke–5 ................ Antithrombotic therapy by the end of hospital day two. NQF #0438 ........... Electronic clinical quality measure ...... Stroke–10 .............. Assessed for rehabilitation .................. NQF #0441 ........... Electronic clinical quality measure ...... VTE–3 .................... Venous thromboembolism patients NQF #0373 ........... with anticoagulation overlap therapy. Electronic clinical quality measure ...... SCIP–Inf–2a .......... SCIP–Inf–9 ............ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Stroke-2 ................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00396 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 New for FY 2017. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50249 PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES AND MEASURES NEWLY FINALIZED IN THIS FINAL RULE FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued Short name Measure name NQF No. Submission methods for FY 2017 payment determination New for FY 2017 payment determination VTE–4 .................... Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother´s Choice. Hearing Screening Prior to Hospital Discharge. N/A ........................ Electronic clinical quality measure ...... NQF #0480 ........... Electronic clinical quality measure ...... Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. NQF #1354 ........... Electronic clinical quality measure ...... Home Management Plan of Care (HMPC). Document Given to Patient/Caregiver Healthy Term Newborn ....................... N/A ........................ Electronic clinical quality measure ...... NQF #0716 ........... Electronic clinical quality measure ...... PC–05 .................... EHDI–1a ................ CAC–3 ................... HTN ....................... h. Electronic Clinical Quality Measures (1) Data Submission Requirements for Quality Measures That May Be Voluntarily Electronically Reported for the FY 2017 Payment Determination We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS for the Hospital IQR Program. As we noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we recognize the need to align and harmonize measures across CMS quality reporting programs to minimize the reporting burden imposed on hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087), we finalized a total of 29 clinical quality measures from which hospitals must select at least 16 measures covering three National Quality Strategy (NQS) domains to report beginning in FY 2014. We anticipate that, as health information technology evolves and infrastructure is expanded, we will have the capacity to accept electronic reporting of many of the chart-abstracted measures that are currently part of the Hospital IQR Program. In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the exception of STK–1), VTE, ED, and PC measure sets, we allowed hospitals to either: (1) electronically report at least one quarter of CY 2014 (Q1, Q2, or Q3) quality measure data for each measure in one or more of those four measure sets; or (2) continue reporting all measures in those four measure sets using chart-abstracted data for all four quarters of CY 2014 (78 FR 50818). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28242 through 28243) for the FY 2017 payment determination, we proposed to expand this policy, such that providers may select to voluntarily report any 16 of the 28 Hospital IQR Program electronic clinical quality measures that align with the Medicare EHR Incentive Program as long as those 16 measures span three Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. different NQS domains. The 28 measures are listed in the table below. Only 28 of the 29 measures adopted in the Medicare EHR Incentive Program are applicable for the Hospital IQR Program, because the measure ED–3 Median time from ED arrival to ED departure for discharged ED patients (NQF #0496) is an outpatient quality measure. We expect eligible hospitals to select measures that best apply to their patient mix. For the FY 2017 payment determination, we also proposed to expand the reporting requirement of electronic clinical quality measures to require a full year’s data collection and submission instead of a minimum of one quarter. In addition, for the FY 2017 payment determination, we proposed to require data submission within approximately 60 days after the end of a calendar year quarter. We have listed the proposed submission deadlines in the table below. We also refer readers to section IX.D.2. of the preamble of this final rule for a description of the electronic clinical quality measures data reporting periods and proposed submission deadlines. CY 2015/FY 2017 ELECTRONIC CLINICAL QUALITY MEASURES DATA REPORTING PERIODS AND PROPOSED SUBMISSION DEADLINES tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV CY 2015 quarter 1 2 3 4 Reporting period (2015) ...................................................... ...................................................... ...................................................... ...................................................... January 1–March 31 .............................................................................. April 1–June 30 ...................................................................................... July 1–September 30 ............................................................................. October 1–December 31 ....................................................................... As an incentive for hospitals to voluntarily submit electronicallyspecified clinical quality measures, we VerDate Mar<15>2010 18:25 Aug 21, 2014 Proposed submission deadlines Jkt 232001 proposed that for the FY 2017 payment determination, hospitals successfully submitting electronic clinical quality PO 00000 Frm 00397 Fmt 4701 Sfmt 4700 May 30, 2015. Aug 30, 2015. Nov 30, 2015. Feb 28, 2016. measures according to our procedures will not have to validate those electronic clinical quality measures by E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50250 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations submitting chart-abstracted data to validate the accuracy of the measure data submitted electronically. By proposing these changes, we believe we would further align the Hospital IQR Program and the Medicare EHR Incentive Program and promote greater electronic clinical quality measure data reporting for hospitals. In addition, we believe that these changes would ease hospitals’ administrative burden, as they will be able to report the same clinical quality measures once to partially satisfy both the Hospital IQR and Medicare EHR Incentive Programs’ requirements. We welcomed public comments on these proposals. Commenters’ opinions on these proposals focused on timing, substantive and nonsubstantive quality measure updates, our collaboration with hospitals and EHR vendors, certification requirements, and general concerns about electronic clinical quality measure reporting. Comment: Some commenters were concerned that we were not allowing hospitals and EHR vendors enough time to transition to the new data submission deadlines. Some commenters supported the long-term goal of transitioning to EHR-enabled measurement and the general progression toward electronic clinical quality measures, noting that it will improve communication and documentation while reducing hospital resources now used for chart-abstracted measures. A commenter strongly supported CMS using electronic clinical quality measures and strongly objected to the implementation of chartabstracted measures. The commenter stated that the current methodology of manual chart abstraction is resource intensive and inefficient for hospitals. By focusing on electronic clinical quality measures, hospitals can focus on performance improvement and target resources to implementing EHRs and processes to improve patient care. Response: We thank commenters for their support. We plan to move away from chart-abstracted measures and move towards electronic clinical quality measures, as appropriate. This voluntary option also simplifies alignment with the Medicare EHR Incentive Program and allows hospitals to partially satisfy requirements in both programs using a common set of measures. Since hospitals have a choice whether to submit voluntary electronic clinical quality measure data or chartabstracted data, we recommend hospitals that are not yet prepared to submit electronically instead submit via chart-abstraction. We encourage VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospitals to submit test data when they are ready. We are actively working to reduce hospitals’ reporting burden by offering the option to submit electronic clinical quality measures. We received a number of comments regarding the timing of this proposal in relation to hospitals’ readiness to submit electronic clinical quality measures. Comment: Some commenters stated that healthcare providers and electronic health records systems are not yet ready to adopt electronic clinical quality measures, expressing concern about vendor problems related to meaningful use, including problems associated with submitting data to CMS, and about the accuracy and feasibility of electronically specified measures. Other commenters suggested that CMS not specify a date for mandatory electronic reporting until significant levels of CEHRT adoption are achieved, and a validation process for electronic clinical quality measures is operational and yields evidence of measure reliability. Response: We recently published a proposed rule (79 FR 29732 through 29738) proposing changes to the meaningful use stage timeline and changes to the requirements for the reporting of clinical quality measures for 2014. The comment period closed July 21, 2014. We hope the commenter was able to share their concerns regarding vendor problems related to meaningful use by responding to the proposed rule. We would like to clarify that this rule provides flexibility to hospitals and CAHs needing to update their EHR systems only for the most recent version of the CQMs, which is not a criteria for 2014 CEHRT. No changes to 2014 CEHRT criteria or timelines are being finalized in this rule. As we have previously mentioned, we are finalizing voluntary electronic clinical quality measure submission in order to give hospitals flexibility. Hospitals that are not yet ready to submit electronically can satisfy requirements for applicable measures as previously finalized and finalized in this rule at section IX.A.2.g.(2) of the preamble of this final rule, that is submit via chart-abstraction. We encourage hospitals to work with vendors and encourage vendors to work with the various EHR-related and electronic clinical quality measure HHS working groups to become more informed about policies and standards. As participants in these groups, the hospitals and vendors can share their concerns with CMS, ONC, and other measure stakeholders and help to improve processes. In addition, we PO 00000 Frm 00398 Fmt 4701 Sfmt 4700 suggest hospitals participate in our pilot electronic validation test to get free feedback on the accuracy of their data and have an opportunity to provide direct input regarding concerns. We refer readers to section IX.A.11.e. of the preamble of this final rule where this policy is discussed. Comment: A commenter opposed the creation of voluntary electronic reported clinical quality measures. Response: We respectfully disagree with the commenter that did not support voluntary electronic clinical quality measure reporting. This voluntary reporting provides hospitals the opportunity to test their submissions to prepare before electronic clinical quality measure reporting is required for this program. Comment: Commenters urged CMS to begin a more robust dialogue with hospitals, EHR vendors, and other stakeholders regarding submitting electronic clinical quality measures so that there is a shared understanding of the opportunities and challenges that lay ahead—both from the hospital operational perspective as well as from our perspective. Response: We have begun our education and outreach efforts with hospitals and vendors by holding educational webinars/sessions, uploading a number of resources to QualityNet,115 and creating a listserv for updates and announcements. Further, we have past recorded sessions discussing electronic clinical quality measures issues on our Web site at: https://www.qualitynet.org/dcs/ ContentServer?c=Page&page name=QnetPublic%2FPage%2FQnet Tier3&cid=1228773852046. We also note that hospitals may submit test files or practice submissions at any time and encourage hospitals and vendors to begin submitting test files as soon as feasible. Comment: One commenter recommended that CMS consider that certain measures currently improve quality of care for patients, but may not immediately lend themselves to especification. Response: We will take the comment into consideration for future measures, and note that we have expanded our measures under consideration process in order to find measures from a greater number of sources. Comment: Some commenters requested that CMS allow more time for implementing certification requirements and adopting measure specification 115 https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228773849716. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations updates. A commenter specifically suggested that CMS allow 18 months between the time of an updated specification adoption and the federal fiscal year to which the specification updates should apply. Another commenter recommended that CMS refrain from requiring certification of the revised measures and provide flexibility on the date by which the revisions must be fully implemented on provider sites. The commenter expressed concern that the current time frame of just prior to the October 1, 2014 start of the measure reporting year is inadequate to accommodate the development, testing, certification of the software by health IT vendors and subsequent delivery and implementation of software for every customer site. This time constraint could lead providers to continue to attest to their electronic clinical quality measures in FY 2015, rather than submit their electronic clinical quality measures as CMS would prefer. One commenter noted that there is insufficient time for vendors and certification test labs to obtain certification and subsequently deliver the certified product in time for hospitals to submit electronic clinical quality measures electronically in CY 2015. The commenter therefore anticipated that hospitals will continue to attest their clinical quality measure data in FY 2015. The commenter suggested that CMS allow hospitals who elect to attest their clinical quality measure for the Medicare EHR Incentive Program in CY 2015 to submit data electronically for the Hospital IQR Program during CY 2015. Response: We believe when discussing the ‘‘revised measures,’’ the commenter is referring to the annual April updates to the electronic clinical quality measures. For submission of CY 2015 data, we will only accept data consistent with the April 2014 measure specifications. Electronic clinical quality measure specifications are available in the CMS eCQM Library at: https://cms.gov/Regulations-andGuidance/Legislation/ EHRIncentivePrograms/eCQM_ Library.html. The October 1, 2014 date is the beginning of the reporting period for the Medicare EHR Incentive Program only. However, we proposed, that in order to align the two programs’ electronic clinical quality measure reporting and submission periods, both programs’ reporting periods and submission deadlines would begin with Q1 CY 2015 discharges (79 FR 28245 through 28246). However, after consideration of these comments regarding timing and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 hospitals’ readiness, we are modifying our proposal so that hospitals that wish to participate in the voluntary reporting need only submit one CY 2015 quarter (Q1, Q2, or Q3) of electronic clinical quality measure data with a submission deadline of November 30, 2015. We hope that this modification will encourage more hospitals to submit electronic clinical quality measures rather than attest. The commenter is reminded that attesting is a Medicare EHR Incentive Program option only and would not apply to Hospital IQR Program requirements. In addition, if a hospital chooses not to voluntarily submit one quarter of electronic clinical quality measure data for the Hospital IQR Program, it must submit all four quarters of chart-abstracted data in CY 2015. We believe that by modifying our proposal and reducing the data requirement to one quarter’s worth of data and by adopting the November 30th submission deadline, hospitals will have adequate time to update their EHR’s ability to capture and report data. In addition, measure certification falls under the ONC. ONC published a proposed rule February 26, 2014 describing voluntary 2015 Edition Electronic Health Record (EHR) Certification Criteria; Interoperability Updates and Regulatory Improvements (79 FR 10880 through 10946). The proposed rule offered a potential ‘‘gap certification’’ solution which may help the commenter with their concerns about the current timelines for development, testing, certification of the software by health IT vendors. The final rule is expected to be published in the summer of 2014. With respect to CEHRT requirements, though 2014 CEHRT is required, eligible hospitals are not required to ensure that their CEHRT products are recertified to the most recent version of the electronic specifications for the clinical quality measures. A hospital may submit electronic clinical quality measures for the Hospital IQR Program during CY 2015 even if they attest their aggregate measure numerators and denominators through the Medicare EHR Incentive Program. The hospital could submit as test data or production data. Test data submissions are submissions that do not count as submissions; they are practice submissions. Production data submissions are considered final submissions meant to fulfill Program submission requirements. With respect to CEHRT requirements, although 2014 CEHRT is required, eligible hospitals are not required to ensure that their CEHRT products are recertified to the most PO 00000 Frm 00399 Fmt 4701 Sfmt 4700 50251 recent version of the electronic specifications for the clinical quality measures. Comment: One commenter noted that the proposed subregulatory process for annual updates is to incorporate ‘‘nonsubstantive’’ changes to measure specifications. However, the commenter believed that the annual updates include substantive changes. The commenter looks forward to working with CMS to further refine the definition of nonsubstantive changes and recommended that the annual updates be limited to changes that do not have a significant impact on clinicians, software, or recertification. Response: We interpret the commenter’s use of the term ‘‘annual updates’’ to be in reference to our publication of the measure specifications in the electronic clinical quality measure Library at: https:// cms.gov/Regulations-and-Guidance/ Legislation/EHRIncentivePrograms/ eCQM_Library.html. We will work with stakeholders to help define substantive and nonsubstantive changes related specifically to electronic measure specifications, and will take suggestions regarding any recommended changes into consideration for future rulemaking. Comment: A commenter explained that there is confusion as to whether vendors need to certify to the updated measures and whether hospitals must start their measure reporting year with the annual updates and request clear and consistent guidance. The commenter also noted that the Cypress tool is not yet available for testing of the new measures, and no information has been provided as to when Cypress may be available. Response: Although 2014 CEHRT is required, eligible hospitals are not required to ensure that their CEHRT products are recertified to the most recent version of the electronic specifications for the clinical quality measures. Hospitals that choose to voluntarily submit electronic clinical quality measures in Q1, Q2, or Q3 of CY 2015 for FY 2017 payment determination must use the 2014 version of the measure specifications. Cypress version 2.5 is expected to be available with the eligible hospital and eligible provider measure packages in September 2014. Cypress version 2.51 is expected to align with the CMS Implementation Guide released for publication in July 2014. Comment: A commenter expressed concerns about electronic clinical quality measure specifications in regards to the ‘‘Medication, Order not done: Medical Reason’’ related to the E:\FR\FM\22AUR2.SGM 22AUR2 50252 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations STK, VTE, and future AMI, PN, and SCIP measures. The commenter pointed out that the Hospital IQR Program requires providers to document a medical reason for not prescribing a medication/device and the MU/ electronic clinical quality measure requires providers to document ‘‘what medication of choice would you have prescribed if not for a medical reason.’’ The commenter disagreed with the requirement to answer these questions and suggested that providers may view the questions as inefficient ‘‘administrative only questions’’ and may avoid them entirely. The commenter also suggested that the questions may force the institution to intentionally fail a measure due to lack of a contraindication and that it is improper to use data related to medication orders for public reporting of quality of care and financial incentives because not all medication orders that count for the Hospital IQR Program also count for electronic clinical quality measures since they are not all included in the qualifying RxNorm document. Response: We acknowledge that this is a known issue that is being addressed through HL7 and expected to be implemented in FY 2015. ONC has consolidated several JIRA comments into one issue. The commenter can follow the progress of the issue at https://jira.oncprojectracking.org/ browse/CQM–970. We note that to date there are no consequences for measure failure and encourage the commenter to review our zero denominator clarification in section IX.D.5. of the preamble of this final rule. Comment: A commenter expressed concern with the increasing number of measures for electronic clinical quality measure submission. The commenter advised that since electronic health records allow documentation to be placed in multiple places, chart review is required. The commenter stated that current medical record technology has not matured to restrict documentation input into only the field or fields designated for electronic data retrieval. Potential technological solutions contribute to alert fatigue. Further, the commenter believed that because there is not a common electronic medical record system for all staff to use regardless of the care setting, multiple inefficient documentation systems are created and customized to suit the needs of the individual hospital and facility. The commenter stated that resolving these problems will require a significant financial investment while reimbursement for services declines. Response: We recognize that many hospitals struggle with proper data capture in the EHR. We encourage these hospitals to work with their vendors to reduce burden and human intervention through chart abstraction. The electronically-specified clinical quality measures remain voluntary at this time to provide an opportunity for hospitals to improve upon accurate data capture. Comment: A commenter specifically disagrees with CMS’ statement that electronic clinical quality measures are more easily reported than chartabstracted measures. Response: We disagree that electronic clinical quality measures are not more easily reported than chart-abstracted measures; once capture is possible within EHR, the time and resources compared to manual abstraction should be significantly less. As data becomes more standardized, it is expected that reporting burden will decrease over time. For example, electronic clinical quality measure collection does not require hospital staff time to find and pull paper medical records, and manually review medical records to abstract data elements used in measure calculation. We acknowledge there are costs, but also benefits to moving to electronic data capture. EHR user training is a cost that will ultimately result in consistency coming from a common understanding and capture of common data definitions. Comment: A commenter recommended that CMS develop and share a five-year roadmap for the future regarding the transition of all clinical quality measurement programs to electronic reporting so hospitals can strategically plan for workflows that support electronic reporting. The commenter further recommended that this guidance, as well as all electronic quality reporting sub regulatory guidance and eMeasure specifications should be located on a central Web site. Response: We are working on a roadmap for both the Hospital IQR and Hospital VBP Programs, as well as a consolidated location for electronic clinical quality measure resources. After consideration of the public comments we received, we are modifying our proposal to finalize that hospitals that choose to voluntarily report electronic measures should submit one quarter of electronic clinical quality measure data from Q1, Q2, or Q3 of CY 2015 for FY 2017 payment determination. Hospitals that choose to voluntarily submit electronic clinical quality measures must use the 2014 version of the measure specifications and submit 16 measures covering three NQS domains from the 28 available electronically specified measures. However, hospitals may voluntarily submit more than one quarter of data. We will not accept Q4 2015 data for CY 2015 as this would likely delay EHR Incentive Program payments. Policies for CY 2016/FY 2018 payment determination electronic clinical quality measure reporting and submission will be made in future rulemaking. Because we are modifying our proposal to now only require 1 quarter’s worth of data from hospitals that wish to voluntarily submit electronically specified measures. We are subsequently also modifying the submission deadline to November 30, 2015 regardless of which quarter of data is submitted. We also refer readers to section X.2.h.1 for further discussion of submission of electronically specified measures. The chart below provides a summary of the finalized reporting periods and electronic submission deadlines for the FY 2017 Hospital IQR Program: tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV FY 2017 HOSPITAL IQR PROGRAM ELECTRONIC REPORTING PERIODS AND SUBMISSION DEADLINES FOR ELIGIBLE HOSPITALS CY 2015 Quarter Q1 Q2 Q3 Q4 Discharge reporting periods .................................................... .................................................... .................................................... .................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Submission deadlines January 1, 2015–March 31, 2015 ......................................................... April 1, 2015–June 30, 2015 ................................................................. July 1, 2015–September 30, 2015 ........................................................ October 1, 2015–December 31, 2015 ................................................... Jkt 232001 PO 00000 Frm 00400 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM November 30, 2015. November 30, 2015. November 30, 2015. Not Applicable. 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (2) Public Reporting of Electronic Clinical Quality Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50818), we adopted a policy under which we would only publicly report electronic clinical quality measure data under the Hospital IQR Program if we determined that the data are accurate enough to be reported. However, we noted that the majority of public commenters had opposed our proposal to withhold the electronically reported data from publication on Hospital Compare, and instead urged us to publicly display it (78 FR 50815). Therefore, for electronic clinical quality measure data submitted for the FY 2016 payment determination, we will publically report the data as previously finalized. However, for the FY 2017 payment determination, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28243) we proposed to provide hospitals that voluntarily report one year of electronic clinical quality measure data (as proposed above) an option to have their data reported on Hospital Compare with a preview period prior to public reporting. We also proposed to add a footnote next to that publically reported data indicating that it is a result of electronically-specified measures. We welcomed public comments on these proposals. Comment: Commenters suggested that when reporting electronic clinical quality measure data, hospitals should be provided a preview period for the FY 2016 payment determination. One commenter believed that public display of electronic measures for the FY 2016 payment determination should not occur because accuracy of data has not been validated, there would be inconsistencies in reporting time periods and that display of the data may not provide accurate or valuable data to the public for decision making. Commenters noted that display of the data may not provide accurate or valuable data to the public for decision making, and specifically stated that there are no validity and reliability studies demonstrating the capture of equivalent data between chartabstracted measures and electronically captured measures and urging us to develop a data validation strategy before publicly posting this information. Commenters stated that measures submitted as electronic clinical quality measures should not be publicly reported until validation of electronic clinical quality measures demonstrates that they are comparable to values reached through chart-abstraction. A commenter expressed concern that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 opportunity for a preview period before posting electronic clinical quality data on Hospital Compare will not offset the risks associated with reporting clinical quality measures electronically. One commenter asked that CMS wait until more research is conducted and there is an understanding of the limitations and opportunities of the electronic clinical quality measures. The commenter also asked that CMS wait until the preponderance of hospitals can do so and a data validation system for electronic measures is established. However, other commenters stated that not reporting electronic clinical quality measures on Hospital Compare fails to provide the public with reliable data and requested that CMS communicate the criteria it will use to determine if the electronic clinical quality measure data are accurate enough to be publicly displayed. Response: Regarding public reporting for electronically reported data submitted for the FY 2016 payment determination, we note that this policy is not subject to change in this rulemaking as it was previously finalized. However, consistent with our finalized policy, we will not post data that we determine are not deemed to be accurate. We intend to use the results of our validation pilot to assist in determining criteria for identifying electronic clinical quality measure data accuracy. These criteria will be proposed in future rulemaking. With respect to inconsistencies in reporting periods, historically we publicly reports data on Hospital Compare as it becomes available. Therefore, it is not unusual for there to be inconsistencies in reporting periods. The current data collection periods for each measure are posted on Hospital Compare. We appreciate the commenter’s concerns about validation. As finalized in section IX.A.11.e. of the preamble of this final rule, we intend to conduct a validation strategy pilot test in FY 2015. We also intend to develop mandatory requirements for validation in the FY 2016 IPPS/LTCH PPS proposed rule, which will make assessment of validity possible prior to posting of data collected for the FY 2018 payment determination. However, based on public comments received opposing public reporting for FY 2017, we are modifying our proposal to finalize that we will only publish the names of hospitals who successfully submit CY Q1, Q2, or Q3 electronic clinical quality measure data by November 30, 2015. We will not: (1) report actual data or performance rates for measures submitted as electronic PO 00000 Frm 00401 Fmt 4701 Sfmt 4700 50253 clinical quality measures on Hospital Compare, (2) include a preview period, or (3) provide hospitals an option to suppress their participation. Comment: One commenter encouraged CMS to use a strategy similar to the Star Ratings program with ‘‘topped-out’’ measures. The commenter suggested we allow voluntary submission of ‘‘topped-out’’ measures through all reporting mechanisms and publically report on Hospital Compare as ‘‘display measures.’’ This would allow for continued monitoring of performance and increase alignment with the Medicare Advantage and Part D plans. This concept of display measures could be used for introducing and testing new measures by first introducing the new measures on the display page. Response: We thank the commenter for the suggestion and will consider the idea in the future. After consideration of the public comments we received and as a logical outgrowth of our existing public reporting policy, we are finalizing our policy that we will only publicly report the names of those hospitals who successfully submit CY 1, CY 2, or CY 3 electronic clinical quality measure data by the November 30, 2015 submission deadline. Hospitals will not have a preview period nor will we allow hospitals to opt out of this public reporting. We will indicate these hospitals with a symbol on Hospital Compare to recognize their advanced ability to submit data electronically. We will not publicly report actual data or performance rates of electronic clinical quality measures at this time. 8. Possible New Quality Measures and Measure Topics for Future Years a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018 Payment Determination We anticipate that, as EHR technology changes and improves, hospitals will electronically report all clinical processof-care and HAI measures that are currently part of the Hospital IQR Program or that have been proposed for adoption into the Program. As stated above, we intend for the future direction of electronic quality measure reporting to reduce significantly administrative burden on hospitals under the Hospital IQR Program. We will continue to work with measure stewards and developers to develop new measure concepts, and conduct pilot, reliability, and validity testing. We believe that this voluntary reporting option will provide hospitals and us with the ability to test systems in CY 2015 for future quality program E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50254 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations proposals that, if finalized, will make electronic reporting a requirement instead of voluntary. We believe this will simplify measure collection and submission for the Hospital IQR Program, and will reduce the burden on hospitals to report chart-abstracted measures. We intend to propose to require reporting of electronic clinical quality measures for the Hospital IQR Program beginning for the CY 2016 reporting period or FY 2018 payment determination. We considered proposing to require hospitals to electronically report some Hospital IQR Program quality measures in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27695). After considering public comments, we made electronic reporting voluntary in CY 2014 in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50814). However, after two years, we believe that hospitals are more prepared and should be required to report Hospital IQR Program measures as electronic clinical quality measures beginning in CY 2016. We intend to propose this policy in future rulemaking, but requested comments on this intention here. Comment: A commenter asked for clarification on the proposal to electronically report all clinical process of care and HAI measures beginning in CY 2016, which are currently part of the Hospital IQR Program or which have been proposed for adoption for the FY 2018 payment determination and subsequent years. The commenter believed that CMS is moving away from the critical work of the Infection Preventionist and into a realm that is without professional judgment for identifying an HAI. Response: We clarify that we did not propose electronic reporting of all clinical process of care and HAI measures in CY 2016. We do not intend to take away the professional judgment of the Infection Preventionist professionals. Comment: One commenter was very concerned about the amount of resources that would be needed to analyze, validate, and ensure compliance with the electronically specified clinical quality measure specifications as well as the actual submission process. The commenter asked that CMS require the use of electronic submissions gradually instead of for all Hospital IQR Program measures in CY 2016. The commenter recommended a proposal that encourages voluntary submission of one or two measures that are not ‘‘toppedout’’ for CY 2016 with future gradual expansion of required electronic VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 measures over a period of several years. The commenter stated that this would allow hospitals to become proficient in reporting measures electronically while curtailing the administrative burden that hospitals experience when implementing new electronic measures. The commenter also urged CMS to allow hospitals to have flexibility in how measures are transmitted until all measure developers confirm that the measures can be e-specified within the timeframe. A commenter noted that any decisions to add electronic clinical quality measures should be dependent on the final decisions for Stage 2 and Stage 3 of meaningful use, given the current difficulties providers and vendors are experiencing with Stage 2 EHR implementation. In addition, the commenter recommended that CMS consider that certain measures currently improve quality of care for patients, but may not immediately lend themselves to e-specification. Response: We believe we are providing a gradual approach to electronic clinical quality measure adoption and submission. This will be the second year that the Hospital IQR Program has provided a voluntary electronic reporting option. With respect to the commenter’s request that we allow flexibility in how measures are submitted, we will strive to include a variety of measures in the Hospital IQR Program, such as claims-based, chartabstracted, electronically specified, and structural aggregate measures. We recognize that many hospitals struggle with proper data capture in the EHR and we encourage these hospitals to work with their vendors to reduce burden associated with human intervention through chart abstraction. The electronic clinical quality measures remain voluntary at this time to provide an opportunity to improve upon accurate data capture. We continue to work with the Medicare EHR Incentive Program team to ensure measure alignment moving forward. We agree that not all measures are appropriate for electronic specification. Comment: A commenter stated that while ONC and others are working to ensure common data standards, it is unwise to dismiss inclusion of a measure that is currently not electronically specified, but which may improve the quality of care for patients. Response: We will not remove a measure merely because it lacks an electronic specification. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we outlined seven criteria for removing measures from the Hospital IQR Program. In section IX.A.2.a. of the preamble of this final rule, we are also PO 00000 Frm 00402 Fmt 4701 Sfmt 4700 finalizing updated criteria for determining ‘‘topped-out’’ status. Conversely, we will consider adopting a measure that does not have electronic specifications if the measure meets a critical need and measurement gap. Comment: A commenter urged CMS to reconsider the proposal to begin requiring electronic clinical quality measures in CY 2016. The commenter stated that there is a lack of clear especifications and certification requirements, and that mandatory reporting should only begin when EHR systems are able to reliably generate this data. Response: We will consider these suggestions as we develop policies on electronic reporting. Please note that we did not propose to require electronic clinical quality measures in CY 2016, but rather, we signaled an intent. We thank the commenters for providing this feedback, and will take it into account in the future. b. Possible Future Electronic Clinical Quality Measures In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28244) we stated that we intend to continue to support the following measure domains in the Hospital IQR Program measure set: effective clinical care (for example, the AMI, PN, STK, and VTE measures), communication and care coordination (for example, the readmission measures), patient safety (for example, the HAI measures), person and caregiver-centered experience (for example, the HCAHPS measure), community/population health (for example, the global immunization measure), and efficiency and cost reduction (for example, the Medicare Spending per Beneficiary measure). This approach will enhance better patient care while aligning the Hospital IQR Program with our other established quality reporting and pay-forperformance programs, such as the Hospital VBP Program. Based on the above approach, we stated our intent to propose to adopt the following electronic clinical quality measures with data collection beginning with October 1, 2016 discharges (or, as described further above, January 1, 2017, if the proposal to align reporting under the Hospital IQR Program and Medicare EHR Incentive Program is finalized) to coincide with Medicare EHR Incentive Program Stage 3 collection: E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations • Hepatitis B Vaccine Coverage Among All Live Newborn Infants Prior to Hospital or Birthing Facility Discharge (NQF #0475) The Hepatitis B Vaccine Coverage Among All Live Newborn Infants Prior to Hospital or Birthing Facility Discharge (NQF #0475) measure is NQFendorsed, supported by the MAP, and conditionally supported by the MAP as an electronic clinical quality measure for the EHR Incentive Program by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Reportl2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. However, the MAP recommends a review of the electronic specifications of this measure through the NQF endorsement process. This measure requires each hospital/ birthing facility to measure its administration of a dose of hepatitis B vaccine to all infants born in their hospital/birthing facility prior to discharge for a specific time period (for example, one calendar year). Hospitals are required to assess infants whose parents refused vaccination for exclusion from the coverage estimate. • PC–02 Cesarean Section (NQF #0471) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV The PC–02 Cesarean Section (NQF #0471) is NQF-endorsed and supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_ Reportl2014_Recommendations_on_ Measures_for_More_than_20_Federal_ Programs.aspx. The MAP noted that there is an important public education piece to the reporting of PC–02 and recommended that we work with others to ensure consumers understand what the results mean and why the measure is important. This measure assesses the number of nulliparous women with a term, singleton baby in a vertex position delivered by cesarean section. • Adverse Drug Events—Hyperglycemia Adverse Drug Events—Hyperglycemia is conditionally supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Reportl2014_ Recommendations_on_Measures_for_ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 More_than_20_Federal_Programs.aspx. Use of this measure would address a very common condition. The MAP expressed concerns over the feasibility of using this measure in the Hospital IQR Program as it has been tested using electronic data and stated that the NQF endorsement process should resolve this issue. This measure assesses the average percentage of hyperglycemic hospital days for individuals with a diagnosis of diabetes mellitus, anti-diabetic drugs (except metformin) administered, or at least one elevated glucose level during the hospital stay. The measure’s numerator is the sum of the percentage of hospital days in hyperglycemia for all admissions in the denominator. The measure’s denominator is the total number of admissions with a diagnosis of diabetes mellitus, at least one administration of insulin or any oral anti-diabetic medication except metformin, or at least one elevated blood glucose value (≤200 mg/dL [11.1 mmol/L]) at any time during the entire hospital stay. Exclusions include: (1) Admissions with a diagnosis of diabetic ketoacidosis (DKA) or hyperglycemic hyperosmolar syndrome (HHS); (2) admissions without any hospital days included in the analysis; (3) admissions with lengths of stay greater than 120 days. • Adverse Drug Events—Hypoglycemia Adverse Drug Events—Hypoglycemia is conditionally supported by the MAP in its 2014 Recommendations on Measures for More Than 20 Federal Programs final report, which is available at: https://www.qualityforum.org/ Publications/2014/01/MAP_PreRulemaking_Reportl2014_ Recommendations_on_Measures_for_ More_than_20_Federal_Programs.aspx. Use of this measure would address a common condition that is very dangerous to patients. The MAP expressed concerns over the feasibility of using this measure in the Hospital IQR Program as it has been tested using electronic data and that the NQF endorsement process should resolve this issue. This measure assesses the rate of hypoglycemic events following the administration of an anti-diabetic agent. The measure’s numerator is the total number of hypoglycemic events (<40 mg/dL) that were preceded by administration of a short/rapid-acting insulin within 12 hours or an antidiabetic agent other than a short/rapidacting insulin within 24 hours, were not followed by another glucose value greater than 80 mg/dL within 5 minutes, and were at least 20 hours apart. The PO 00000 Frm 00403 Fmt 4701 Sfmt 4700 50255 measure’s denominator is total number of hospital days with at least one antidiabetic agent administered. Exclusions include admissions with length of stay greater than 120 days. We requested comments on these possible future measures. Comment: One commenter strongly supported the proposed measure Adverse Drug Events—Hypoglycemia. Response: We thank the commenter for their support. Comment: One commenter strongly supported adding Adverse Drug Events—Hyperglycemia. Another commenter advised that measurement of Adverse Drug Events—Hyperglycemia via chart abstraction requires searching for discrete, out-of-range blood glucose lab values, which is resource intensive. The commenter stated that collection of this measure as an electronic clinical quality measure is the most efficient data collection mechanism and supports Meaningful Use of an electronic health record. The commenter believed that glucose testing results can be captured at the point-of-care or from the laboratory system and stored in the EHR as discrete data fields. Response: We thank the commenters for their support and will address this measure in future policy making. Comment: A commenter noted that that electronically submitted data on Adverse Drug Events-Hyperglycemia would be highly unreliable. Further, that commenter stated that recommendations regarding levels of glucose control are variable among patient populations and there is limited information within CMS’ proposal regarding what patient populations would be included in the sample. Response: Adverse Drug Events— Hyperglycemia is conditionally supported by the MAP. The MAP expressed concerns over the feasibility of using this measure in the Hospital IQR Program as it has been tested using data from the EHR. Some hospitals and health systems are able to use the results of these electronic measures to address adverse events at the point of care and to track improvement over time. The data elements are still under development. Comment: Several commenters supported the adoption of the Hepatitis B Vaccine measure. A commenter recommended that further attention is given to high volume conditions and/or procedures, the goals of the three-part aim, and alignment between the Hospital IQR Program and other HHS programs. Response: We thank the commenters for their support. E:\FR\FM\22AUR2.SGM 22AUR2 50256 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: Several commenters supported the adoption of the Cesarean Section measure. One commenter believed that exclusive electronic reporting of this measure could ultimately reduce the burden of collection and increase the potential for timely feedback to all stakeholders on the ever important area of maternity care. Commenters also noted that the two leading obstetric professional societies, American College of Obstetricians and Gynecologists and Society for Maternal-Fetal Medicine, recently released a detailed set of consensus recommendations for safely reducing the rate of initial or primary cesarean sections, stating that this procedure is overused and that there are many safe ways to reduce the rate. Response: We thank the commenters for their support. We note that we received many public comments regarding other suggested future measures and policies addressing different operational aspects of the Hospital IQR Program such as public reporting and working with other stakeholders. We thank the commenters for their comments. Because we believe these comments are not within the scope of this current rulemaking, we are not addressing them in this final rule. However, we intend to consider all of these views for future rulemaking and Hospital IQR Program development. meet specific data collection, submission, and validation requirements. For each Hospital IQR Program year, we require that hospitals submit data on each measure in accordance with the measure’s specifications for a particular period of time. The data submission requirements, Specifications Manual, and submission deadlines are posted on the QualityNet Web site at: https:// www.QualityNet.org/. Hospitals submit quality data through the secure portion of the QualityNet Web site. There are safeguards in place in accordance with the HIPAA Security Rule to protect patient information submitted through this Web site. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also meet specific data collection, submission, and validation requirements. 9. Form, Manner, and Timing of Quality Data Submission c. Data Submission Requirements for Chart-Abstracted Measures We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) for details on the Hospital IQR Program data submission requirements for chartabstracted measures. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28245) we did not propose any changes to data submission requirements for chart-abstracted measures. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Background Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the applicable percentage increase for FY 2007 and each subsequent fiscal year shall be reduced by 2.0 percentage points (or beginning with FY 2015, by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act)) for any subsection (d) hospital that does not submit, to the Secretary in accordance with this clause and in a form and manner, and at a time, specified by the Secretary, data required to be submitted on measures selected under this clause with respect to such a fiscal year. We note that, in accordance with this section, the FY 2015 payment determination begins the first year that the Hospital IQR Program will reduce the applicable percentage increase by one-quarter of such applicable percentage increase. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 b. Procedural Requirements for the FY 2017 Payment Determination and Subsequent Years The Hospital IQR Program procedural requirements are codified in regulation at 42 CFR 412.140. We refer readers to the codified regulations for participation requirements, as further explained by the FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811). d. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures with Hospital IQR Program Reporting and Submission Timelines The Hospital IQR Program and the Medicare EHR Incentive Program have different reporting and submission periods for electronic clinical quality measures, with hospitals reporting data to the Hospital IQR Program based on calendar year deadlines while the Medicare EHR Incentive Program is based on fiscal year deadlines. In PO 00000 Frm 00404 Fmt 4701 Sfmt 4700 addition, the Hospital IQR Program generally requires quarterly reporting and submission of data for chartabstracted measures while the Medicare EHR Incentive Program requires annual submission of clinical process of care measure data. As a result of the different and incongruent Hospital IQR and Medicare EHR Incentive Programs’ schedules, hospitals reporting and submitting measure data to both programs would have to do so multiple times in a calendar year. This discrepancy may create confusion and additional burden for hospitals attempting to report data to both programs. To alleviate this possible confusion and reduce provider burden, beginning with the CY 2015 reporting period/FY 2017 payment determination, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28245 through 28246) we proposed to align incrementally the data reporting and submission periods for clinical quality measures for the Medicare EHR Incentive Program and the Hospital IQR Program on a calendar year basis. This proposed change also would also move us closer to meeting our commitment to align quality measurement and reporting among our programs, as we described in the Electronic Health Record Incentive Program—Stage 2 final rule (77 FR 54049 through 54051), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53502 and 53534), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50811 through 50819 and 78 FR 50903 through 50904). In order to ease the transition and prevent the delay of Medicare EHR Incentive Program payments, we proposed to shift incrementally the Medicare EHR Incentive Program reporting and submission periods for clinical quality measures to align with that of the Hospital IQR Program. We refer readers to section IX.D.2. of the preamble of this final rule for a detailed discussion of this proposal in the Medicare EHR Incentive Program. Specifically, for the CYs 2015 and 2016, we proposed in the Medicare EHR Incentive Program to require CY reporting, but only for the first three calendar quarters (that is, January through September). This proposal will allow us to align data reporting and submission periods without shifting the Medicare EHR incentive payments. We note that for the Hospital IQR Program, for the FY 2017 payment determination, we proposed to change the November 30th submission deadline to require data submission within approximately 60 days of the close of a quarter. We refer readers to section E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations IX.A.7.h.(1) of the preamble of this final rule where this proposal is discussed. We also proposed this change in the Medicare EHR Incentive Program in order to align the two programs. We refer readers to section IX.D.2. of the preamble of this final rule where this proposal is discussed. In summary, we proposed to align the reporting and submission periods of the Medicare 50257 EHR Incentive Program clinical quality measures with that of the Hospital IQR Program for CYs 2015 and 2016. PROPOSED REPORTING TIMELINE TO ALIGN THE MEDICARE EHR INCENTIVE PROGRAM WITH PROPOSED HOSPITAL IQR PROGRAM SUBMISSION PERIODS CY Submission period** Q1 ... January 1–March 31, 2015 January 1–March 31, 2015 April 1–June 30, 2015 ....... April 1–June 30, 2015 ....... Q3 ... Q4 ... July 1–September 30, 2015. N/A for Medicare EHR Incentive Program. July 1–September 30, 2015. October 1–December 31, 2015. Q1 ... January 1–March 31, 2016 January 1–March 31, 2016 Q2 ... April 1–June 30, 2016 ....... April 1–June 30, 2016 ....... Q3 ... 2016 Reporting Period ......................................... Hospital IQR program reporting requirements Q2 ... 2015 Reporting Period ......................................... Medicare EHR incentive program reporting requirements* July 1–September 30, 2016. N/A for Medicare EHR Incentive Program. July 1–September 30, 2016. October 1–December 31, 2016. Data must be submitted by May 30, 2015. Data must be submitted by August 30, 2015. Data must be submitted by November 30, 2015. For Hospital IQR Program, Data must be submitted by February 28, 2016. Data must be submitted by May 30, 2016. Data must be submitted by August 30, 2016. Data must be submitted by November 30, 2016. For Hospital IQR Program, Data must be submitted by February 28, 2017. Q4 ... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM data only. ** Proposed Medicare EHR Incentive Program and Hospital IQR submission period would allow data submission on an ongoing basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the quarter. We invited public comments on these proposals. Comment: Many commenters supported CMS’ proposal to align the Hospital IQR Program and the Medicare EHR Incentive Program. One commenter supported efforts aligning the Hospital IQR Program and the EHR Incentive Program and supported using the Hospital IQR Program as the foundation of the alignment. Response: We thank these commenters for their support. Comment: One commenter recommended that additional steps be taken to fully align the Hospital IQR and Medicare EHR Incentive Programs, and stated that it is currently not possible for a hospital to satisfy the meaningful use requirements with mandatory Hospital IQR Program measures only. This commenter observed that the Stage 2 list of electronic clinical measures includes some that have not been adopted for the Hospital IQR Program, and also some Hospital IQR Program measures that have been found to be ‘‘topped-out.’’ Two measures that previously were removed from the Hospital IQR Program remain as electronic clinical quality measures for demonstrating meaningful use of EHRs. The commenter recommended that CMS work to ensure hospitals could meet the meaningful use requirements by electronically reporting VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 some mandatory Hospital IQR Program measures, without having to report additional measures that have not been determined to have value for public reporting or quality improvement purposes under the Hospital IQR Program. Response: We are actively taking steps to align the list of available measures between the Hospital IQR and Medicare EHR Incentive Programs by proposing to adopt six new and retain 10 topped-out measures as electronic clinical quality measures (79 FR 28220 through 28242) so that 28 of the 29 Stage 2 measures are adopted by the Hospital IQR Program. As previously noted, ED–3—Median time from ED arrival to ED departure for discharged ED patients, is an outpatient quality measure. While 12 of the Stage 2 measures are required Hospital IQR Program measures, we believe that allowing hospitals the flexibility to select other measures that best fit their patient population is a benefit to the hospitals. This flexibility was requested by commenters in response to our restriction to 16 specific measures in CY 2014 (78 FR 50814–50815). As proposed and as finalized in this rule, hospitals can meet some meaningful use requirements by electronically reporting some mandatory Hospital IQR Program measures. We intend to continue working with hospitals to ensure that PO 00000 Frm 00405 Fmt 4701 Sfmt 4700 they are able to meet meaningful use requirements by reporting Hospital IQR Program measures electronically. We respectfully disagree with the commenter’s implication that only the mandatory Hospital IQR Program measures have value. We believe that allowing hospitals the flexibility to choose which additional measures to report is a benefit to the hospital and their patient population. We refer readers to our response in section IX.A.2.a. of the preamble of this final rule regarding why we are retaining ‘‘topped-out’’ measures. Comment: Some commenters opposed or expressed concerns with CMS’ alignment proposal. One commenter stated that it is premature to require quarterly reporting of electronic clinical quality measures because of the implementation delays with 2014 CEHRT for meaningful use and the anticipated changes in the attestation requirements for meaningful use in 2014. Response: We understand the commenters’ concerns. We are not finalizing quarterly reporting of electronic clinical quality measures at this time. We refer readers to section IX.A.2.h.(1) of the preamble of this final rule where this is discussed in more detail. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50258 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: One commenter appreciated CMS’ goal to align the Hospital IQR Program and the Medicare EHR Incentive Program, but noted several concerns. Specifically, the commenter is concerned about the validity of the electronic clinical quality measures, noting that hospitals that are performing well under the chartabstracted versions of measures are not the same hospitals that achieve high performance levels under the electronic clinical quality measure versions. Because of this concern, the commenter urged CMS to develop a methodology for validation and argues that chartabstracted versions of measures should never be compared to electronic clinical quality measure versions. Response: We are unaware of data showing that hospitals that are performing well under the chartabstracted versions of measures are not the same hospitals that achieve high performance levels under the electronic clinical quality measure versions. To date, we have only heard anecdotal comments about actual performance level differences between the two modes of collection. We do not have sufficient data to be able to confirm these comments. We are conducting a small validation pilot and have proposed to conduct a larger pilot in CY 2015. More discussion of the electronic clinical quality measure validation pilot can be found in section IX.A.11.e. of the preamble of this final rule. Comment: One commenter is concerned that CMS’ data systems may not be prepared to routinely accept EHR-based measures. Response: We would like to reassure the commenter that our data systems are prepared to accept EHR-based measures. The CMS database has been open to accept electronic clinical quality measure submissions since January 2, 2014. Comment: One commenter was concerned that different deadlines (that is, for chart-abstracted measures versus electronic clinical quality measures) may lead to confusion and requested that CMS undertake a strong educational initiative using current educational resources for both programs and ensure that technical assistance is available for hospitals opting to submit data for both programs electronically. Response: We routinely provide educational sessions and resources on the QualityNet Web site. After publication of the final rule, we will update the resources and offer additional educational sessions to assist reporting hospitals. We urge the commenter to sign up for our electronic mail distribution list available for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 pertinent updates and announcements of upcoming educational sessions. Further, we have recorded sessions available on electronic clinical quality measures on our Web site at: https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename=QnetPublic %2FPage%2FQnetTier3&cid=1228773 852046. We also refer readers to our response in section IX.A.2.h.(1) of the preamble of this final rule regarding education and outreach to hospitals and vendors. Comment: Another commenter expressed concern that the methods to encourage participation in the voluntary electronic reporting option and to align critical quality measure reporting in the Hospital IQR Program and the Medicare EHR Incentive Program undermine the goals of the Hospital IQR Program— namely, continuous hospital quality improvement. Rather than consider exceptions to Hospital IQR Program requirements, the commenters suggested that CMS leverage the data from the Medicare EHR Incentive Program for insight and development of a report on lessons learned to date from hospitals’ experience with certified electronic health record technology (CEHRT), and their use for electronic clinical quality measures. Response: We respectfully disagree with the commenter that our efforts to align reporting of electronic clinical quality measures between the Hospital IQR and Medicare EHR Incentive Programs undermine the goals of the Hospital IQR Program. We believe that clinical quality measure reporting, regardless of the mode of submission, will lead to continuous quality improvement. We interpret the commenter’s statement ‘‘consider exceptions to Hospital IQR Program requirements’’ and ‘‘CMS leverage the data from the Medicare EHR Incentive Program’’ to request that we not introduce an electronic voluntary reporting option for Hospital IQR. By allowing one submission to partially fulfill requirements for two programs, we believe we are alleviating the burden of reporting data to two programs. We disagree that leveraging data from the Medicare EHR Incentive Program would promote continuous quality improvement, since many hospitals have elected to attest results of their electronic clinical quality measures. Comment: One commenter cautioned that its EHR vendor prioritizes complying with federal government requirements over fixing critical errors in its system that could affect patient safety. PO 00000 Frm 00406 Fmt 4701 Sfmt 4700 Response: Patient safety is the top priority and we urge hospitals to work closely with their vendors to ensure patient safety as the highest priority. Comment: One commenter encouraged CMS to more clearly state that references to submission timelines in its proposal to align the Hospital IQR Program and the Medicare EHR Incentive Program do not impact chartabstracted measures. Another commenter asked CMS to clarify whether the submission deadline for the first quarter of CY 2015 is May 30 or May 31. Response: Our proposal to align the Hospital IQR Program and the Medicare EHR Incentive Program does not affect chart-abstracted measures’ submission deadlines. The alignment applies to electronic clinical quality measures only. In addition, as stated in section IX.A.2.h.(1) of the preamble of this final rule above, we are finalizing a modified version of our proposal. We will not require quarterly reporting at this time for the electronic clinical quality measures. As a result, we also modified the submission deadline for electronic clinical quality measures, which instead will be November 30, 2015. Policies for electronic clinical quality measure reporting in CY 2016/FY 2018 payment determination and subsequent years will be made in future rulemaking. Comment: One commenter recommended that CMS finalize the zero denominator and case threshold changes as proposed. Response: We refer readers to sections IX.D.5. and IX.D.6. of the preamble of this final rule for the discussion of zero dominators and the case threshold exemption in the EHR Incentive Program. We note that while this policy was clarified in the EHR Incentive Program, it also applies to electronic reporting for the Hospital IQR Program. After consideration of the public comments we received, we are finalizing our proposal to align the EHR Incentive Program with the Hospital IQR Program, with modifications. We proposed to align the reporting period and submission deadlines of the Medicare EHR Incentive Program clinical quality measures with that of the Hospital IQR Program for CY 2015. While we are finalizing our proposal to align the reporting period and submission deadline of the Medicare EHR Incentive Program with those of the Hospital IQR Program on the calendar year for clinical quality measures that are reported electronically, we are not finalizing our proposal to require quarterly submission E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations of clinical quality measure data in CY 2015. Since we are also modifying our proposal in the Hospital IQR Program to finalize that hospitals can voluntarily submit one calendar year (CY) quarter’s data for CY Q1 (January 1–March 31, 2015), CY 2 (April 1–June 30, 2015), or CY 3 (July 1–September 30) by November 30, 2015, we are also applying these modifications to the alignment with the Medicare EHR Incentive Program. As a result, we are not incrementally shifting the Medicare EHR Incentive Program reporting period and submission deadlines for clinical quality measures as proposed. We plan to continue to align reporting periods and submission deadlines in CY 2016 and subsequent years in future policy years. We refer readers to section IX.E.2. of the preamble of this final rule for a detailed discussion of the final policy in the Medicare EHR Incentive Program. ED–1, ED–2, Stroke-4, Stroke-6, Stroke-8, VTE–1, VTE–2, VTE–3, VTE– 5, VTE–6, AMI–7a, and PC–01 are measures required under the Hospital IQR Program and may be submitted as chart-abstracted or as electronic clinical quality measures. If a hospital chooses to submit one calendar quarter (CY 2015 Q1, Q2, or Q3) as an electronic clinical quality measure by November 30, 2015, a hospital does not need to also submit chart-abstracted data for that measure. The chart below provides a summary of the finalized reporting periods and electronic submission deadlines for the FY 2017 Hospital IQR Program: FY 2017 HOSPITAL IQR PROGRAM ELECTRONIC REPORTING PERIODS AND SUBMISSION DEADLINES FOR ELIGIBLE HOSPITALS Discharge reporting periods tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV January 1, 2015– March 31, 2015. April 1, 2015–June 30, 2015. July 1, 2015–September 30, 2015. October 1, 2015–December 31, 2015. Submission deadline November 30, 2015. November 30, 2015. November 30, 2015. Not Applicable. e. Sampling and Case Thresholds for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819) for details on our sampling and case thresholds for the FY 2016 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 payment determination and subsequent years. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not propose any changes to sampling or case thresholds. f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 53538), the FY 2014 IPPS/LTCH PPS final rule and (78 FR 50819 through 50820) for details on HCAHPS requirements. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not propose any changes to HCAHPS requirements. Hospitals and HCAHPS survey vendors should, however, regularly check the official HCAHPS Web site at https://www.hcahpsonline.org for new information and program updates regarding the HCAHPS Survey, its administration, oversight and data adjustments. g. Data Submission Requirements for Structural Measures for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51643 through 51644), and the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53538 through 53539) for details on the data submission requirements for structural measures. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not propose any changes to data submission requirements for structural measures. h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51631 through 51633; 51644 through 51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), and the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50820 through 50822) for details on the data submission and reporting requirements for healthcare-associated infection (HAI) measures reported via the CDC’s National Healthcare Support Network (NHSN) Web site. The data submission deadlines are posted on the QualityNet Web site at: https://www.QualityNet. org/. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not PO 00000 Frm 00407 Fmt 4701 Sfmt 4700 50259 propose any changes to data submission and reporting requirements for healthcare-associated infection measures reported via the NHSN. 10. Submission and Access of HAI Measures Data Through the CDC’s NHSN Web Site As finalized in the FY 2014 Hospital IPPS/LTCH PPS final rule (78 FR 50805 through 50807), the Hospital IQR Program requires hospitals to report data via the CDC’s NHSN Web site for the following HAI measures: (1) CLABSI (NQF #0139); (2) CAUTI (NQF #0138); (3) SSI following colon surgery; (4) SSI following abdominal hysterectomy; (5) laboratory-identified MRSA bacteremia infection (NQF #1716); (6) laboratoryidentified Clostridium difficile infection (NQF #1717); and, (7) healthcare personnel vaccination (NQF #0413). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644 through 51645), we adopted the data submission and reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of specific HAI measures to NHSN. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246 through 28247) for the FY 2016 payment determination and subsequent years, for the Hospital IQR Program, we clarified our data reporting and submission requirements for the above stated HAI measures. By adopting the data reporting and submission procedures set forth by the CDC, we intended that hospitals report, through the existing NHSN process, any and all data elements at the patient-level that are designated as ‘‘required’’ on NHSN forms (such as, the ‘‘primary bloodstream infection’’ or ‘‘annual facility survey’’ forms). Some examples of these ‘‘required’’ patient-level data elements include: patient identifier, date of birth, and gender; detailed event data, such as specific symptoms identified to meet case definitions and laboratory results; and risk factor data used to calculate the hospital-level measures. Hospitals may find a comprehensive list of required forms and data elements on the NHSN Web site (https://www.cdc.gov/nhsn/acutecare-hospital/). We further clarified that the NHSN required data collected by the CDC will be shared with CMS for Hospital IQR Program and Hospital VBP Program administration, monitoring and evaluation activities, including validation, appeals review, program impact evaluation, and development of quality measure specifications. We routinely use submitted quality measure E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50260 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations data for these types of program administration, monitoring and evaluation activities. In addition, we proposed that we will also receive access from the CDC to voluntarily submitted name and race identifying information with respect to Hospital IQR Program required measures. These data will also be used for Hospital IQR Program and Hospital VBP Program administration, monitoring and evaluation activities, including validation, appeals review, program impact evaluation, and development of quality measure specifications. More specifically, for Hospital IQR Program validation, we proposed to use these data to ensure accurate matching between patient charts submitted for HAI validation that cannot be matched to NHSN using Medicare beneficiary identification numbers. We also proposed to use these data as appropriate for program evaluation. We invited public comment on this proposal. Comment: Several commenters strongly supported the proposal for CMS to access NHSN patient-, system-, and aggregate-level data. Commenters stated that this access is necessary to evaluate the impact of the Hospital VBP and Hospital IQR Programs as required by the Affordable Care Act, as well as the HAC Reduction Program. Commenters stated that this information is also critical to inform quality improvement efforts and to ensure accurate data collection and will also increase the sampling power of the Hospital IQR Program validation process. A commenter also noted its trust that CMS will ensure data privacy and abide by all security and privacy requirements, as CMS has historically been an excellent steward to ensure data privacy and security in its quality programs. Response: We thank the commenters for the support. Comment: Many commenters opposed the proposed NHSN data access policy for validation purposes. Many of these commenters expressed the opinion that access to patient-level data was not needed for validation because CMS already has a validation process. Response: We would like to clarify why we need access to these NHSN data for validation. Although commenters correctly point out that we already have an HAI validation process, the current validation process is inefficient, does not provide timely information for the validation-related appeals process, and does not give hospitals all the information that would be useful to them. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 One example of how validation could improve in efficiency is by providing the CMS’ clinical data abstraction center (CDAC) contractor with access to data regarding which symptoms a patient experienced in order to meet the requirements for reporting a particular type of HAI event. In validating a single quarter of 2013 HAI data, CDAC encountered more than 30 episodes-ofcare in which the hospital reported an event to NHSN and for which CDAC did not find a reportable infection during its medical record review. In these situations, CDAC employs quality controls to ensure that its staff have not overlooked or misinterpreted important documentation. However, HAI records selected for validation are on average more than 1,000 pages in length, with maximum page length above 60,000 pages. Having information about which symptoms CDAC should be looking for and on what dates catheters were inserted would greatly assist the CDAC in ensuring that a properly documented and reported HAI was not overlooked, and that the hospital was credited appropriately. Without this data access, we rely on hospitals to request an educational review or appeal cases to identify any potential CDAC errors, thereby increasing inefficiencies and burden for hospitals. Another reason we need direct access to patient-level NHSN data for Hospital IQR Program administration is to support the processing of validationrelated appeals. A hospital may request from CMS at any time an educational review to better understand whether or not CDAC reached a correct conclusion during validation. However, a hospital which fails to meet Hospital IQR Program validation requirements has 30 days to appeal after this determination. Hospitals that fail to meet any Hospital IQR Program requirement, including validation, are ineligible for the Hospital VBP Program, and therefore, would not contribute to Hospital VBP Program performance standards. Because of the tight timeframe between the Hospital IQR Program payment determination and when Hospital VBP Program benchmarks must be posted, we must process Hospital IQR Program appeals very quickly, sometimes in 48 hours or less. Taking time at precisely this juncture to verify with CDC what was submitted to NHSN as the basis for the appeal is inefficient, and threatens timely payment determinations. Lastly, under our current validation process, we are unable to provide patient-level data element information of hospital reported HAI data for mismatched validation cases. We believe that our proposal is in part PO 00000 Frm 00408 Fmt 4701 Sfmt 4700 responsive to the commenters in previous rules; those comments indicated that we needed to provide hospitals with more detailed HAI validation educational feedback (78 FR 50826 through 50827). We believe that this patient-level information is necessary to provide specific and actionable feedback to hospitals to report more accurate HAI data for CMS programs. For example, if CDAC can explain to a hospital that a patient did have the infection symptoms that the hospital reported to NHSN, but that the symptoms (and therefore, the infection) first occurred too long after a catheter was removed, the hospital would have a clearer explanation of why an infection was reported incorrectly. Moreover, by accessing NHSN data at the patient-level for every required reporting element, CDAC can review the accuracy of data reporting to NHSN at the data-element level and provide all of this feedback to hospitals. When CDAC validates clinical process-of-care measures, CDAC reviews and provides feedback to hospitals for every data element submitted to the Hospital IQR Program. CDAC is unable to provide a comparable level of feedback to hospitals for HAI measures, because it does not have access to patient-level data at the element-level. Comment: Many commenters stated that the proposal to access patient name and race submitted on a voluntary basis as particularly objectionable. Some commenters questioned why patient name and race were needed for validation. A few commenters noted that this patient identifiable information would not be particularly useful because it is not available for every patient. A few commenters wanted to know why CMS needed data on nonMedicare beneficiaries. A few commenters stated that CMS should observe whether the new requirement to link data using Medicare Beneficiary ID for validation is helpful before instituting new policies. One commenter asked how frequently CMS failed to match validation cases on Medicare Beneficiary ID number. Response: Our past validation experience indicates that accessing patient race and name data for validation will allow CDAC to match validation cases that lack Medicare beneficiary numbers with a higher level of confidence. If we cannot access these data, a hospital might have to request an educational review or appeal to determine that we made an inappropriate mismatch. We believe that this approach is much less efficient and more burdensome to hospitals than using the patient name and race data E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations from NHSN where available to confirm the match. The policy requiring hospitals to report Medicare beneficiary identification numbers to NHSN is first effective for HAIs occurring in patients discharged in quarter 3, 2014 (78 FR 50822). We do not agree with commenters who indicated that we should wait until we implement this policy because of the number of patients with HAIs who are not receiving Medicare who will be impacted. We anticipate that there will be many cases that lack Medicare beneficiary identification numbers, because a large percentage of the 5 HAIs reportable to NHSN as part of the Hospital IQR Program occur among patients under 65 years of age. For infections reported in 2013, the percentage of events reported for patients under 65 years of age ranged from a low of 44 percent for laboratoryidentified Clostridium difficile (CDI) events to a high of 64 percent for surgical site infections (SSI). In these instances without Medicare beneficiary numbers, it would be helpful to have other data, such as name and race where available, in order to more effectively match validation cases. We agree that patient race and name data is not available for every patient. We believe that this information would be more useful if it were required and not voluntary. We will discuss this with CDC and take the suggestion under consideration for future rulemaking, considering both the burden of added requirements as well as the potential benefits. For the present, we believe that the available patient race and name data will greatly assist in identification of medical records required for CMS validation submission, and CMS’ matching of validation medical records to NHSN reported infection events. Regarding data for non-Medicare beneficiaries, we remind commenters that the Hospital IQR Program requires quality data that encompasses all-payer patients (both Medicare beneficiaries and those not participating in Medicare). Therefore, data from all patients must be validated. Comment: Some commenters asked CMS to clarify: (1) how it intends to use patient-level data for program evaluation, and (2) why aggregate-level data cannot be used for this purpose. Some commenters stated that CMS should only use aggregate-level data for program evaluation. Several commenters observed that patient name and race would have limited usefulness because these data are submitted voluntarily and are not available for all submitted cases. One commenter wanted to know what CMS meant by the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 phrase ‘‘as appropriate for program evaluation.’’ Response: We are collecting data from NHSN using our authority to collect these data for validation purposes. For purposes of Hospital IQR Program data program administration, including validation and appeals, like all data we collect for that purpose, we intend to use that data more broadly to meet goals of the Hospital IQR and VBP Programs including measure and program evaluation. Measure and program evaluation are two key components of administering a public reporting program. We intend to use patient-level data for program evaluation to assess the impact of quality measures used in the Hospital IQR and Hospital VBP Programs and determine whether either program may have unintended consequences as we already do with other non-NHSN measures data. Aggregate-level data have limited effectiveness for program evaluation, because they do not have a strong predictive power nor allow for multivariate statistical modeling. On the other hand, patient-level data provides us with much greater predictive power and the capability to perform multivariate statistical modeling through matching this data across all quality measures, including HAI measures. Such analyses provide additional information about the validity and impact of individual measures included in the Hospital IQR Program. For example, information from the same group of patients must be matched at the individual patient-level for the SCIP process-of-care antibiotic administration, PSI–90 component claims, and HAI measures to assess correlation among measure results. Such analyses provide additional information about the validity of individual measures included in the Hospital IQR Program, and also assist with assessing the relative impact of different types of measures on the distribution of Hospital VBP Program performance scores. These types of analyses provide actionable data to determine whether either program may have unintended consequences, including disproportionately penalizing hospitals serving the poor and vulnerable. Patient level data on race and Hispanic ethnicity are particularly important for evaluating any potential unintended consequences related to poor and vulnerable populations. Aggregate level analyses have limited predictive power and lack the level of detail needed to evaluate whether program initiatives have had unintended consequences in contributing to disparities both within PO 00000 Frm 00409 Fmt 4701 Sfmt 4700 50261 and across hospitals as well as disparities associated with specific populations. We intend to use patientlevel information, as well as race and Hispanic origin information where available, to improve the accuracy of categorizing safety net hospitals in our impact analysis. However, we agree with the concerns of some of the commenters that the patient race and ethnicity data may be of limited usefulness because it may be reported by too few hospitals. This is why we described the use of these voluntarily reported data ‘‘as appropriate’’. In the routine course of analysis, we intend to evaluate the level of completeness of the voluntarily submitted patient race and Hispanic ethnicity data, and its appropriateness for the specific analyses designed to evaluate the impact of the HVBP Program on safety net hospitals. Comment: Several commenters expressed concern about specific uses for patient-level access to NHSN data. A few indicated that CMS should not access patient-level NHSN data to produce standardized infection ratios (SIRs) to post on Hospital Compare. CDC currently performs this role and these commenters believe that CDC should continue to do so. One commenter expressed concern that CMS would misuse or misinterpret data to reduce hospital payment rates. Response: We agree with commenters that CDC effectively produces SIRs and should continue to provide these data to us to post on the Hospital Compare Web site, and that it would be duplicative for us to perform this work. We do not intend to perform these analyses and will not use the data in ways that reduce an individual hospital’s payment rates. Comment: Several commenters viewed CDC as housing the only ‘‘credible’’ experts on NHSN data collection and analysis, such that if CMS used these data to produce trends, evaluate and update NHSN measure specifications, or conduct data mining activities, the results might be incorrect, misleading, or not scientifically valid. Response: We recognize that CDC is the measure steward for NHSN data, and uniquely understands the intricacies of NHSN data collection. We do not intend to independently update NHSN measure specifications and would only make changes in response to CDC updates. Such changes would be subject to our substantive and nonsubstantive changes policy (see 77 FR 53504). We also would not conduct data mining activities. The measure steward, CDC, is responsible for updating measure specifications. We would invite CDC to provide feedback on any NHSN quality trend data we E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50262 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations produce for Hospital IQR or Hospital VBP Program evaluation purposes. Comment: Several commenters viewed any analyses that CMS might conduct as potentially duplicative with CDC efforts and therefore, wasteful of resources. One commenter asserted that CDC should conduct validation instead of CMS. Response: Our intention to access and use NHSN data does not constitute redundant or duplicative efforts with the CDC. CDC produces national and hospital level HAI SIRs for NHSN, and also provides CMS with hospitalspecific data for reporting on Hospital Compare. We intend to continue using CDC reported HAI SIRs. Further, the CDC does not validate these measures for purposes of the Hospital IQR Program. CMS has both the authority and the responsibility to conduct validation activities under section 1886(b)(3)(B)(viii)(XI) of the Act. We are statutorily responsible with auditing a number of hospitals to ensure the validity of the reporting program. Our validation process provides hospitals with a single standardized national process and provides hospitals in the validation sample with actionable and specific patient-level, confidential feedback on mismatched patient-level validation results in order to improve accuracy. We might consider contracting with CDC to conduct such validation in future years if we determine that CDC is interested in conducting validation for the Hospital IQR Program and could do so more efficiently than CMS. However, any validation process that CMS would undertake would have to be standardized nationally and employ quality assurance standards such as assessing inter-abstractor reliability. CDC’s current validation strategy, which involves providing technical assistance to states conducting validation, is not nationally standardized.116 It therefore does not meet CMS’ needs to ensure accuracy of HAI measure data using a standardized and nationwide process. Comment: Many commenters questioned whether CMS had rights to the data, and stated that CMS access would violate the confidentiality agreement between hospitals and NHSN, or indicated that the data being required and accessed exceeded those needed to measure performance as posted on Hospital Compare. Several commenters indicated that CMS should justify its need for specific data 116 National Healthcare Safety Network (NHSN) Validation Guidance and Toolkit 2012. Validation for Central Line-Associated Bloodstream Infection (CLABSI) in ICUS. https://www.cdc.gov/nhsn/ toolkit/validation-clabsi/, last accessed 7/29/2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 elements, arguing that CMS should require and access the minimum data needed to meet its goals. Response: We believe that our responsibility encompasses more than merely measuring quality performance. As described above in this section, we have both the authority and the responsibility to conduct validation of the data for the Hospital IQR Program. Furthermore, we wish to clarify that this policy does not constitute an expansion of reporting requirements, because we would access data that hospitals are already required to submit to meet Hospital IQR Program requirements. In addition, our policy to access data required by the Hospital IQR Program also does not violate the confidentiality agreement between facilities and the CDC. The confidentiality agreement signed by facilities specifically indicates that one purpose for the data submitted to NHSN is to ‘‘enable healthcare facilities to report HAI and prevention practice adherence data via NHSN to the U.S. Centers for Medicare and Medicaid Services (CMS) in fulfillment of CMS’s quality measurement reporting requirements for those data.’’ We would only be accessing data reported to fulfill Hospital IQR Program requirements, and therefore, would not violate the confidentiality agreement. We agree with commenters that data collection requirements should be kept to the minimum necessary to meet quality measurement goals, and that each data element collected should be justified. Using our authority and responsibility to access data needed to administer the Hospital IQR Program including by performing validation and appeals, we intend to access and store only the minimum data for any of the particular analysis of the types described above. However, given the varied analytical requirements for validation and appeals, and the frequency with which CDC makes small changes are made to NHSN specifications, we believe it would be impractical to provide a data element by data element rationale in a regulation. Comment: Many commenters expressed concerns about security for this highly sensitive and confidential data. Many commenters wanted to know whether CMS or its contractors would access the data, and how CMS would prevent inadvertent disclosures or privacy breaches. One commenter specifically wanted to know how the data would be transferred and how long it would be stored. Response: It is our intention that our staff as well as contractors would request access to data submitted via the NHSN for the purposes of administering PO 00000 Frm 00410 Fmt 4701 Sfmt 4700 the Hospital IQR Program. In accessing data submitted via the NHSN, we would uphold the same privacy and security standards we use for other quality measures data submitted directly to us. For example, we would comply with all applicable requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules to safeguard and limit the use and disclosure of the information we access and obtain through the NHSN, as well as require through HIPAA business associate agreements that our contractors do the same. We have several options for securely transferring data. For example, the Secure Transfer Protocol on QualityNet has secure transfer capabilities that ensure encryption of both the data and the transmission process. We will collaborate closely with CDC to ensure that we minimize the number of requests made for data. We will store data according to the CMS Center for Clinical Standards and Quality standard operating procedure for retention of records, which calls for retention of data for 10 years. Comment: A few of the commenters opposing CMS’ proposed data access policy urged CMS to work with CDC to support activities that increase accuracy through education, validation, and widespread adoption of electronic health records with ‘‘infection decision and support software.’’ Response: As described above and further below, we conduct data validation and would like to do more to educate hospitals about data accuracy. This would require better access to NHSN data as proposed in this policy. We will consider the recommendation regarding infection decision and support software for future policy development in concert with our other efforts and incentives to promote EHR adoption. After considering public comments we received, we are finalizing the policy to access NHSN data as proposed. 11. Modifications to the Existing Processes for Validation of Chartabstracted Hospital IQR Program Data In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 53553), we finalized the processes and procedures for validation of chart-abstracted measures in the Hospital IQR Program for the FY 2015 payment determination and subsequent years; this rule also contained a comprehensive summary of all procedures finalized in previous years and still in effect. Several modifications to these processes were finalized for the FY 2016 and FY 2017 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV payment determinations in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50835). In the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28219) for the FY 2017 payment determination and subsequent years, we proposed additional modifications to these processes. Proposed changes fall into the following categories: (a) Eligibility criteria for hospitals selected for validation; (b) number of charts to be submitted per hospital for validation; (c) combining scores for HAI and clinical process-of-care measures; (d) processes to submit medical records for chartabstracted measures; and (e) plans to validate electronic clinical quality measure data. a. Eligibility Criteria for Hospitals Selected for Validation In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50833 through 50834), for the FY 2016 payment determination and subsequent years, we finalized our process to draw a random sample of 400 hospitals and an additional sample of up to 200 hospitals meeting specific targeting criteria for purposes of validation. For the FY 2017 payment determination and subsequent years, we proposed one minor change to this process. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227), we defined hospitals eligible for validation as the subset of subsection (d) hospitals that successfully submitted ‘‘at least one case for the third calendar quarter of the year two years prior to the year to which validation applies.’’ For the FY 2017 payment determination and subsequent years, we proposed to change the definition of validation-eligible hospitals to be the subset of subsection (d) hospitals that successfully submitted at least one case to the Hospital IQR Clinical Data Warehouse during the quarter containing the most recently available data. The quarter containing the most recently available data will be defined based on when the random sample is drawn. For example, for the FY 2017 payment determination, we intend to draw this sample in November or December of 2014. The second quarter (Q2) of 2014 ends in June 2014, but hospitals participating in the Hospital IQR Program may submit quality data from this quarter until November 15, 2014 (see www.qualitynet.org for submission deadlines). If CMS draws its sample early in November 2014, before all the second quarter hospital data are submitted and processed by the Clinical Data Warehouse, the ‘‘quarter containing the most recently available data’’ will be first quarter (Q1) of 2014. On the other hand, if CMS draws its VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 sample late November or early December 2014 after the second quarter 2014 hospital data are processed, the second quarter of 2014 will contain the most recently available data. We proposed this change because, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50825), for the FY 2017 annual payment determination and subsequent years, we changed the timing of quarters for validation of HAI measures, as illustrated in the three graphs (78 FR 50824). To align with this change for HAI measures and to give hospitals more time to complete HAI validation template requirements once selected, we intend to draw the validation sample several months sooner than we have historically drawn it. Historically, we drew the sample early in each calendar year. This proposal provides us with greater flexibility for when we can sample hospital data and allows CMS to use the most recent data available to select hospitals. We invited public comment on this proposal. Comment: Several commenters supported CMS’ proposal to change the definition of validation-eligible hospitals because it allows more flexibility in the timing to draw the sample, allows alignment of the HAI and chart-abstracted validation timeframes, and provides hospitals with more time to submit HAI validation templates. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing this policy as proposed. b. Number of Charts To Be Submitted per Hospital for Validation (1) Background In the sections that follow, we discuss our proposals to: (1) Change the number of charts hospitals must submit for validation; (2) change the measurespecific sample sizes for HAI validation; and (3) change the topic areas and sample design for clinical process of care measures. We proposed these changes because section 1886(o) of the Act requires the Hospital VBP Program to use a subset of Hospital IQR Program measures and there is a declining number of measures and chartabstracted measure topic areas available to the Hospital VBP Program. Our proposals also will direct more resources to measures and topic areas that also overlap with the Hospital VBP Program. Finally, our proposals will ensure that all chart-abstracted measure topic areas containing required PO 00000 Frm 00411 Fmt 4701 Sfmt 4700 50263 measures within the Hospital IQR Program are included in validation. A more detailed rationale accompanies each proposal. As described in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53539 through 53553), the Hospital IQR Program validates chart-abstracted data submitted to two different systems: clinical process-of-care data submitted to the Hospital IQR Program Clinical Data Warehouse and HAI data submitted to the NHSN. Different validation approaches are used for the data submitted to each of the systems. The process for selecting and validating HAI data was first introduced in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51646 through 51648) and has evolved annually in each successive IPPS/LTCH PPS rule. In contrast, validation of the clinical process of care measures, which involves separate samples for each topic area, has not substantively changed since it was first finalized for the FY 2012 payment determination in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43884 through 43889). (2) Number of Charts To Be Submitted for Validation (A) Total Number of Charts Required for Validation Our current policy requires hospitals to submit 96 charts for validation (60 charts for clinical process-of-care measures and 36 charts for HAIs) (78 FR 50825 through 50834). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28248) for the FY 2017 payment determination and subsequent years, we proposed to require hospitals selected for Hospital IQR Program validation to submit 18 patient charts per quarter for a total of 72 charts per year. A sample size of 72 charts is statistically estimated to be the number of charts needed to determine whether an individual hospital clearly passed validation and to assess hospital performance across both types of measures (HAIs and clinical process-ofcare) combined. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53551), hospitals may fall into three validation categories: (1) Hospitals pass validation with a lower bound of the confidence interval greater than or equal to 75 percent; (2) hospitals fail validation with an upper bound for a hospital’s confidence interval lower than 75 percent; and (3) hospitals neither pass nor fail validation with a 90 percent confidence interval that includes values above and below 75 percent. Hospitals in the third category that neither pass nor fail validation receive their annual payment update, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50264 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations but may be randomly sampled for inclusion in the targeted validation in the following year. We estimate that a sample of 72 charts will be sufficient to estimate a reliability of 75 percent +/¥ 10 percent with 90 percent confidence, assuming a design effect no greater than 1.4. Historical data suggests that most hospitals in the Hospital IQR Program pass validation and validated data have a high level of accuracy. For example, for the FY 2013 payment determination, approximately 95 percent of hospitals validated had data reliability of 85 percent or higher. With a sample of 72 charts and an expected mean data reliability well above 85 percent, we should be able to identify most hospitals that pass validation. Of the remaining hospitals, we will use the same conservative approach to identify hospitals failing validation that we have used since the inception of the Hospital IQR Program. Comment: Many commenters supported the decrease in the number of charts required for validation. Response: We thank the commenters for their support. Comment: Several commenters opposed CMS’ proposed changes to the chart-abstracted data validation process. The commenters were concerned that hospitals were more likely to fail as a consequence of the policy. One commenter suggested a two-stage process, under which the initial sample size for clinical process of care charts would be small, but a hospital failing validation would be invited to submit additional charts. The validation score for the combined larger pool of charts then would be used for determining whether the hospital has failed validation. Since only a small number of hospitals fail validation, this would be an efficient strategy. Some commenters also said that hospitals needed more feedback on these chart-abstracted measures. Response: We disagree that the proposed policy to decrease sample size will increase the likelihood that one or more individual hospitals will fail validation. As explained in the proposal above, a hospital fails validation when the upper bound for its two-tailed 90 percent confidence interval is less than 75 percent. For any hospital that submits data at a given level of reliability, the only two factors that would affect how likely the upper bound of the confidence interval is to be less than that reliability standard are (1) the level of reliability selected for the standard, and (2) the confidence level. We did not propose to change either the standard level of reliability (currently 75 percent) or the confidence level of the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 upper bound (currently 90 percent) (77 FR 53551). Therefore, the likelihood that hospitals fail validation will not increase by decreasing sample size. Currently, a high percentage of hospitals pass, and we anticipate that the same percentages of hospitals would continue to pass, but acknowledge that the width of the confidence interval would increase due to decreased sample size. As stated in our proposal, we anticipate that additional hospitals would be eligible for targeted selection for validation in the following year. This targeting process is quite similar to the recommendation made by the commenter. We will take into consideration for future rulemaking the remainder of the commenter’s recommendations to combine scores across the first and second samples to produce a final passing or failing score. We also appreciate that the commenters would like more data on these chart-abstracted, clinical processof-care cases. However, our proposal reflects our best efforts to balance the cost and burden against the desire for more detailed feedback. Moreover, some of the measures that have been in the program for a long time are reported very accurately. For these measures, only minimal feedback is needed. We intend to summarize national validation results and provide educational training for hospitals to incorporate the lessons learned to address the most frequently occurring validation mismatches. We believe it would be wasteful to increase resources simply to verify the accuracy of the measures that are already being reported well. After consideration of the public comments we received, we are finalizing our proposal to require hospitals selected for Hospital IQR Program validation to submit 18 patient charts per quarter for a total of 72 charts per year as proposed. would be submitted to validate clinical process-of-care measures. This would equal 72 charts per year with a mix of 40 HAI and 32 clinical process-of-care measure charts. We proposed to require more HAI charts than clinical processof-care measure charts because HAI measures now, as proposed, have a greater impact on the Hospital VBP and the HAC Reduction Programs. Considering only the relative importance of HAIs and clinical process-of-care charts to the Hospital VBP Program, which is about 4 times as great, CMS might choose a ratio larger than 10 HAI charts for every 8 clinical process-of-care charts. However, we estimate that we spend about 4 times as much money per chart to validate HAIs as clinical process-of-care measures. Moreover, the clinical process-of-care measures are still a critical part of the Hospital IQR Program. Therefore, we proposed this mix of 40 HAI and 32 clinical process of care charts per year because we believe it to be optimal after considering both the relative importance of the two types of charts to the Hospital IQR Program and related payment incentive programs and the relative cost of validation for the two types of charts. We invited public comment on these proposals. Comment: Many commenters supported this proposal. Most commenters supported the proposed mix of HAI and clinical process of care cases. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal that of the 18 charts proposed to be submitted per quarter, 10 charts would be submitted to validate HAI measures and 8 charts would be submitted to validate clinical process-of-care measures as proposed. (B) Number of Charts Required for HAI and Clinical Process-of-Care Measures As finalized in the FY 2014 IPPS/ LTCH PPS final rule for the FY 2017 payment determination and future years, we require hospitals to submit 9 charts for HAI measures per quarter (78 FR 50831) and for the FY 2016 payment determination and future years, we require hospitals to submit 15 charts for clinical process-of-care measures per quarter for validation (78 FR 50830). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28248) for the FY 2017 payment determination and subsequent years, we proposed that of the 18 charts proposed to be submitted per quarter (above), 10 charts would be submitted to validate HAI measures and 8 charts (3) HAI Validation: Measures and Measure-Specific Sample Sizes In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50828 through 50832) for the FY 2016 payment determination and subsequent years, we finalized the HAI measures to be included in validation, the processes for completing validation, and the specific sample sizes for each. To validate HAI data, hospitals must use Validation Templates to provide supplemental data to CMS. These supplemental data provide CMS with a set of candidate infections for each HAI. As finalized previously, hospitals sampled for validation will be randomly assigned to provide two Validation Templates, either: (1) CLABSI and CAUTI, or (2) MRSA and CDI. PO 00000 Frm 00412 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50265 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Consequently, up to 300 hospitals will provide data on each of these 4 measures. We also previously finalized a decision to validate a smaller number of patient charts for SSI from twice as many hospitals because of the smaller number of candidate SSIs expected per hospital per quarter. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28248) we did not propose to change the process for validating individual measures. However, as described above in this section, we proposed to increase the total HAI sample size by 1 chart per quarter for a total of 4 more charts per year. As explained below in this section, HAI measures have greater relative scoring weights in the Hospital VBP and HAC Reduction Programs than clinical process-of-care measures. Therefore, in order to align the Hospital IQR Program with the Hospital VBP and HAC Reduction Programs, we proposed to increase measure-specific sample size targets to support this 1 chart per quarter increase in the Hospital IQR Program for the FY 2017 payment determination and subsequent years. Specifically, the total number of charts for CLABSI, CAUTI, MRSA, and CDI would increase by 1 from 15 to 16; and the total number of charts for SSI would increase by 2 from 6 to 8. The previously finalized and proposed specific sample-size charts are detailed in the tables below. PREVIOUSLY FINALIZED NUMBER OF CHARTS REQUIRED FOR HAI VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS HAI Number of hospitals Previously Finalized: Central line associated bloodstream infections (CLABSI) ........... Catheter-associated urinary tract infections (CAUTI) .................. MRSA ........................................................................................... CDI ............................................................................................... SSI ................................................................................................ Up Up Up Up Up to to to to to 300 300 300 300 600 Charts/ quarter/ hospital Number of quarters ................... ................... ................... ................... ................... 4 4 4 4 4 Number of charts per hospital 3.75* 3.75* 3.75* 3.75* 1.5* 15 15 15 15 6 *As previously finalized, within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI, CAUTI, and SSI, and 3, 3, and 1 respectively for MRSA, CDI, and SSI. As finalized, 2 additional charts per quarter per hospital were to be randomized to meet the fractional case targets on average. PROPOSED NUMBER OF CHARTS TO BE SUBMITTED FOR HAI VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS HAI Number of hospitals tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Proposed: Central line associated bloodstream infections (CLABSI) ........... Catheter-associated urinary tract infections (CAUTI) .................. MRSA ........................................................................................... CDI ............................................................................................... SSI ................................................................................................ We invited public comment on this proposal. Comment: Many commenters expressed general support for validation provisions. Response: We thank commenters for their support. Comment: One commenter asked CMS to provide a rationale as to why CDAC assesses over-reporting of CLABSI and CAUTI events to NHSN. The commenter further wanted to know whether the purpose of validation is ‘‘to determine if the hospital knows how to read and understand the measure specifications and report accordingly or to assist the hospitals in identifying processes and procedures needed to reduce the rates and improve quality of care.’’ Response: We have both the authority and the responsibility to conduct validation activities under section 1886(b)(3)(B)(viii)(XI) of the Act. We are VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Up Up Up Up Up to to to to to 300 300 300 300 600 ................... ................... ................... ................... ................... statutorily responsible with auditing a number of hospitals to ensure the accuracy of the reported data. This includes verifying the accuracy of data reported to NHSN. We look to confirm that all events that should have been reported were reported and all events that should not have been reported were not. An important factor for increasing accuracy is ensuring that hospitals know how to read and understand measure specifications and report them accordingly. Because hospitals have a financial disincentive to erroneously report more infections than actually occurred in their hospitals, education and feedback about these types of errors can benefit hospitals. After consideration of the public comments we received, we are finalizing our proposal to increase measure-specific sample size targets by 1 chart per quarter for the FY 2017 PO 00000 Frm 00413 Fmt 4701 Sfmt 4700 Charts/ quarter/ hospital Number of quarters 4 4 4 4 4 Number of charts per hospital 4 4 4 4 2 16 16 16 16 8 payment determination and subsequent years as proposed. (4) Clinical Process of Care Measures: Topic Areas and Sample Design As discussed above in this section, we proposed to sample 8 total patient charts for clinical process-of-care measures per quarter per hospital included in validation for the Hospital IQR Program for the FY 2017 payment determination and subsequent years. Those 8 charts are discussed in greater detail below. As shown in the table below, two other (than immunization) Hospital IQR Program clinical process-of-care topic areas overlap with measures proposed for inclusion in the FY 2017 Hospital VBP Program. Regardless, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28249 through 28250) we did not propose to target those topic areas for the following reasons. One of these E:\FR\FM\22AUR2.SGM 22AUR2 50266 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations measures, PC–01, Elective delivery prior to 39 completed weeks of gestation, is reported in aggregate. We cannot use the same mechanism to validate PC–01 as we use for measures reported at the patient level, but we hope to include it in our validation program in the future should reporting PC–01 as an electronic clinical quality measure becomes a requirement. The second measure is AMI–7a. AMI–7a describes a process of care only performed in small rural hospitals. Of the approximately 3,300 hospitals participating in the Hospital IQR Program for the FY 2015 payment determination, only 113 submitted cases for this measure in the first two quarters of CY 2013. Therefore, targeting hospitals that report the AMI–7a measure would unduly single out small rural hospitals that disproportionately report relatively high AMI–7a measure denominator counts for validation, and would be inequitable. NUMBER OF CHART-ABSTRACTED CLINICAL PROCESS-OF-CARE MEASURES PER TOPIC AREA PROPOSED TO BE REPORTED IN THE HOSPITAL IQR PROGRAM IN THE CY 2014 AND CY 2015 DISCHARGE PERIODS* Number of required measures reported in CY 2014 for FY 2016 hospital IQR program Topic area Number of required measures proposed for CY 2015 for FY 2017 hospital IQR program 2 1 1 7 6 8 2 1 0 1 1 0 0 0 5 4 2 1 1 1 Acute Myocardial Infarction (AMI) ......................................................................................... Heart Failure (HF) ................................................................................................................. Pneumonia (PN) .................................................................................................................... Surgical Care Improvement Project (SCIP) .......................................................................... Venous thromboembolism (VTE) .......................................................................................... Stroke (STK) .......................................................................................................................... Emergency department throughput (ED) .............................................................................. Prevention—global immunization (IMM) ............................................................................... Sepsis .................................................................................................................................... Perinatal Care (PC) ** ........................................................................................................... Proposed to include in the hospital VBP program for FY 2017 Yes No No No No No No Yes No Yes tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * Data validated for the FY 2017 payment determination are Quarter 3, CY 2014, Quarter 4, CY 2014 Quarter 1, CY 2015 and Quarter 2, CY 2015 (78 FR 50824). ** Not reported at the patient level and not proposed for inclusion in validation. For the FY 2017 payment determination and subsequent years, we proposed that the remaining 5 of the 8 clinical process-of-care charts be drawn from a systematic random sample of charts across all topic areas containing required measures other aside from those in the immunization and perinatal care topic areas. Across all hospitals included in validation, we believe this approach will ensure adequate numbers of patient charts are sampled for each topic area. Under this proposal, the pool of clinical process-of-care topic areas sampled for validation will include: STK, VTE, ED, and sepsis, as well as all other Hospital IQR Program-required topic areas such as AMI. We received many comments in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50807 through 50810; 78 FR 50825) regarding the importance of validating VTE, STK, and ED measures not included in validation for the FY 2016 payment determination. With this proposal, STK, VTE, ED, and sepsis measures would be included in the pool of clinical processof-care measures for validation. The systematic random sample of topic areas from this pool would ensure that charts are sampled proportionate to the number of charts submitted for each topic. Thus, a sample of 20 charts per year would not be limited to only one topic area by random occurrence. In addition, across all hospitals included in validation, we believe this approach VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 will ensure adequate numbers of patient charts are sampled for each topic area.117 This proposal simultaneously simplifies the sampling plan for clinical process-of-care measures and gives us the flexibility of introducing or removing new topic areas into validation each year without having to redesign and propose a new sampling strategy. Using a random sample ensures that new topic areas are not excluded from the validation sample and we can more easily adjust as the topic areas change over the years. If this proposal is finalized, every time a new required topic area is added to the Hospital IQR Program, it will automatically be added to validation, and every time a topic is removed from the Hospital IQR Program, it will automatically be excluded from validation. We invited public comment on these proposals. Because of the close relationship between this proposal and the one immediately below, we provide one consolidated set of comments and final policy for the two sections together at the end of the next proposal. 117 We used data submitted to the Clinical Data Warehouse for the Hospital IQR Program from quarters 1 and 2 of 2013 to estimate that at least 400 cases per topic area would be validated per year (across all hospitals). PO 00000 Frm 00414 Fmt 4701 Sfmt 4700 (5) Immunization Measure Validation In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250) we proposed for the Hospital IQR Program for the FY 2017 payment determination and subsequent years, that 3 of the 8 total patient charts each quarter be targeted from the Immunization topic area. Currently, this topic area only includes the Immunization for Influenza (NQF #1659) measure, which overlaps with the Hospital VBP Program. We want to ensure that every hospital included in validation is validated for this topic area because of the overlap. Comment: Many commenters supported the proposed policies to drop the measures that are topped-out from the validation process, and to divide the quarterly clinical process-of-care sample of 8 charts per hospital into a systematic random sample of 5 charts of all required topic areas other than immunization and perinatal care and a second sample of 3 immunization charts because of the importance of immunization to the Hospital VBP Program. Response: We thank these commenters for their support. Comment: A few commenters opposed the proposed policy to have 3 charts dedicated to immunization each quarter. These commenters observed that the IMM–2 measure only has meaning in the months of October through March, when hospitals are E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations expected to immunize patients. Therefore, in 2 of the 4 quarters, the only data element available to validate would be the patient’s discharge date. Because discharge date is not a measure of care quality, validating this element alone would not yield meaningful results. These commenters requested further clarification on the proposed methodology. For example, the commenters asked if ED Throughput (EDT) would be validated on those charts instead. A commenter asked if CMS will validate EDT on every IMM chart, since hospitals use the same population to sample cases for both measures. Response: We had not considered the seasonal nature of this measure when we proposed this policy, and that very limited data would be available for 2 of the 4 quarters included in validation for this measure. We agree that it would be wasteful to validate 6 cases per year (or 3 cases per quarter for 2 quarters) per hospital during a time period which we know will not contain any meaningful data. We will address this concern by finalizing a modified version of our proposal as follows. We will not sample any records for the IMM topic area in the quarters when the IMM–2 measure does not yield meaningful data and increase the number of IMM records sampled in the quarters during which this measure does yield meaningful data. In other words, for quarters 4 and 1 for each hospital included in validation, we will draw a quarterly random sample of 5 charts for validation for the IMM topic area and a quarterly systematic random sample of 3 charts in the ‘‘other’’ category. In quarters 2 and 3, when the IMM–2 measure does not apply, we will draw a systematic random sample of 8 charts from the ‘‘other’’ category. As established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50825), the quarters to be included in validation for the FY 2017 payment determination are quarters 3 and 4, 2014 and quarters 1 and 2, 2015. In quarters 3 and 4, 2014, the topic areas that will be in the ‘‘other’’ stratum are: AMI, ED, HF, PN, SCIP, STK, and VTE. In quarters 1 and 2, 2015, the topic areas that will be in the ‘‘other’’ category are: AMI, ED, SCIP, STK, VTE, and sepsis. We did not propose to validate the same cases for EDT and IMM, because EDT measures are not also finalized for the Hospital VBP Program. We disagree that making a one-for-one substitution of EDT for IMM cases would be an appropriate substitution, because unlike the IMM measure set, which contains a measure finalized in the Hospital VBP VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Program, the EDT topic area is not inherently more important than any other required topic area in the Hospital IQR Program. Comment: A few commenters expressed concern that CMS intended to drop some required measure sets from validation in its ‘‘other’’ systematic random sample, and/or suggested that CMS continue validating chartabstracted data for all measures sets that are part of the Hospital IQR and Hospital VBP Programs. In addition, several commenters noted that the ‘‘other’’ sample would include the ED, STK, VTE, and sepsis measures in validation. Response: We agree that all required measure sets should be included in validation to the extent that this is operationally feasible. In our weighting proposal below in this section, we identified the topic areas containing required measures other than Immunization and Perinatal Care only for quarters 1 and 2, in CY 2015 and inadvertently omitted HF, PN, and SCIP. However, we explicitly proposed to include a generic category so that we would not be required to revise our validation strategy every time a new topic area was added or deleted from the Hospital IQR Program measure set. Further, we included all CY 2014 Hospital IQR Program measures, including HF, PN, and SCIP, in our table above in this section, ‘‘Number of ChartAbstracted Clinical Process-of-Care Measures per Topic Area Proposed to Be Reported in the Hospital IQR Program in the CY 2014 and CY 2015 discharge periods.’’ We thank the commenter for the opportunity to clarify this ambiguity that we had no intention of dropping these measures from validation, and that in fact, as reflected in the Table above in quarters 3 and 4, 2014, these topic areas would meet the definition of the ‘‘other’’ category because they contain Hospital IQR Program required measures other than immunization and perinatal care. We appreciate the commenter’s concern and wish to reiterate that we proposed to draw a systematic random sample of records from ‘‘topic areas containing required measures aside from those in the immunization and perinatal care topic areas.’’ For example, the HF, PN, and SCIP topic areas include measures that are required for the Hospital IQR Program in quarters 3 and 4, 2014, which are part of validation for the FY 2017 payment determination. Therefore, the HF, PN, and SCIP measure sets would fall into the ‘‘other’’ category in these quarters. However, these topics are not included in the Hospital IQR Program in 2015 because PO 00000 Frm 00415 Fmt 4701 Sfmt 4700 50267 they met ‘‘topped-out’’ criteria and therefore, they would not fall into the ‘‘other’’ category in quarters 1 and 2, 2015. Comment: A few other commenters opposed validation of the VTE, STK, or sepsis measures. These commenters opposed validation of the VTE or STK measures because they believed that the measure specifications were of poor quality. These commenters wanted to know how CMS would ensure the clarity of TJC-developed specifications. Those commenters opposing validation of the sepsis measure observed that because it was new, hospitals were inexperienced with reporting it. Response: Although we appreciate that the measure specifications could be clearer for the VTE and STK measures and that the sepsis measure is new, all of these measures are NQF-endorsed and are finalized in the Hospital IQR Program. Any lack of clarity regarding the meaning of VTE and STK measure specifications and the inexperience of hospitals with the sepsis measures appear to be good reasons to provide hospitals with education and feedback on the data quality of these measures. We believe that the potential adverse impact to any individual hospital of validating measures in the VTE, STK, and Sepsis topic areas to be very small. In contrast, we believe that combining the validation data in these topic areas across all hospitals will provide the Hospital IQR Program and hospitals with rich information about the quality of data and needs for education and improved specifications. After consideration of public comments we received, we are modifying both our proposals that the remaining 5 of the 8 clinical process-ofcare charts be drawn from a systematic random sample of charts across all topic areas containing required measures aside from those in the immunization and perinatal care topic areas, and our proposal that 3 of the 8 total patient charts each quarter are to be targeted from the Immunization topic area. The modification takes into consideration the seasonal nature of the IMM measure set and is otherwise consistent with our proposals to sample 8 clinical process of care charts per quarter and to validate the IMM topic area separately from other topic areas because of its importance to the Hospital VBP Program. We are finalizing a modified policy as follows. In quarters 4 and 1, for each hospital included in validation, we will draw a quarterly random sample of 5 charts for validation of the IMM topic area and a quarterly systematic random sample of 3 charts in the ‘‘other’’ E:\FR\FM\22AUR2.SGM 22AUR2 50268 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations category. In quarters 2 and 3, for each hospital included in validation, we will draw a quarterly systematic random sample of 8 charts from all topic areas containing required measures other than immunization and perinatal care. c. Combining Scores for HAI and Clinical Process of Care Topic Areas We refer readers to the FY 2010 IPPS/ LTCH PPS final rule (74 FR 43885) for the process of scoring clinical processof-care measures, the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50832 through 50833) for the process of scoring HAI measures, and FY 2014 IPPS/LTCH PPS final rule (78 FR 50833) for the process to be used to compute the confidence interval. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250) we did not propose any changes to those established policies. However, for the FY 2017 payment determination and subsequent years, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250 through 28251) we proposed to modify our approach to weighting the scores for each of the HAI, IMM and ‘‘other topic areas’’ with two proposals. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53548 through 53553), we established a process to combine the HAI and clinical process-of-care measure scores by weighting them proportionate to the number of measures included in validation. For example, in section IX.A.11.b.(4) of the preamble of this final rule, our proposal to validate all clinical process-of-care measures required by the Hospital IQR Program for the FY 2017 payment determination would yield 14 clinical process-of-care measures in validation in CY 2015 and only 5 HAI measures in validation. Using the previously finalized weights, the clinical process of care measures score would contribute 14/19 and the HAI score would contribute only 5/19 to the combined score. This weighting does not reflect either the relative importance of HAIs to clinical process of care measures in the Hospital VBP Program nor the resources proposed to devote to their validation. In sections IV.I. and IV.J. of the preamble of this final rule (the Hospital VBP Program and the HAC Reduction Program, respectively), we discuss our proposals to weight the patient safety domain (of which the HAI measures are part) more heavily in the Hospital VBP Program (20 percent for the patient safety domain versus 5 percent for the clinical process of care measures) and to use the HAI measures for the HAC Reduction Program. In this section, we discuss our proposal to weight the HAI measures more heavily than the clinical process of care scores to align with these proposals in sections IV.I and IV.J. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250 through 28251) for the FY 2017 payment determination and subsequent years, we proposed to weight the HAI score 66.7 percent (or 2/3) of the total score and the clinical process-of-care measures to weight 33.3 percent (or 1/ 3) of the total score. Further justification is provided after the second proposal. In addition, we proposed to weight the IMM measures more heavily than other chart-abstracted clinical processof-care measures validated in the Hospital IQR Program to align with the Hospital VBP Program. We are changing the process currently established to calculate the clinical process-of-care score, which is based on application of the formulas for the variance of a stratified single-stage cluster sample with unequal cluster sizes and the variance of a proportion in a stratified random sample (see reference to Cochran’s ‘‘Sampling Techniques’’ at 75 FR 50226 and 78 FR 53550). We have previously applied this formula without consideration for the relative importance of different measures. When so applied, each topic area is weighted proportionate to the amount of data submitted to the warehouse for that topic area. However, we proposed to modify the formulas as previously applied to weight the IMM topic area more heavily because of the overlap with the Hospital VBP Program. For the FY 2017 payment determination and subsequent years, we proposed to weight the ‘‘IMM’’ clinical topic area as 66.7 percent (2/3) and all other topic areas combined 33.3 percent (1/3) of the clinical process-of-care score. The weights reflect our policy preference to place greater relative weight on Hospital VBP Program included measures to better ensure accurate scores and payment. Emphasizing chart-abstracted clinical process of care measures validated in the Hospital IQR Program to align with the Hospital VBP Program will address the need to validate Hospital IQR Program data not currently included in Hospital VBP Program for public reporting and validation feedback to hospitals. The table below shows the effect of the two proposals combined (the first to weight the HAI score more heavily than the clinical process-of-care score and the second to weight IMM data more heavily than other clinical process-ofcare topic areas). The HAI topic area will count 3 times as much as the IMM topic area and 6 times as much as all other topic areas combined. PROPOSED WEIGHTING TO COMBINE SCORES ACROSS CHART-ABSTRACTED TOPIC AREAS INCLUDED IN VALIDATION FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS Weight percent Topic Area 66.7 22.2 11.1 Total .......................................................................................................................................................................................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Healthcare-associated infection (HAI) ............................................................................................................................................. Immunization (IMM) ......................................................................................................................................................................... Other (all clinical process of care topic areas containing required measures other than IMM and Perinatal Care) ..................... 100 Previously, the clinical process-ofcare measures accounted for 20 percent of the Hospital VBP Program score, whereas the HAI measures, a subset of the outcome measures, weighted 30 percent (FR 53605 through 53606). The proposed relative weights for the HAI (66 percent) and IMM (22 percent) topic VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 areas better reflect the strong emphasis we have proposed for the HAI measures. These proposals will require adjustments to the formulas applied to compute the confidence intervals. As we have done in the past, we intend to post the specific formulas used to compute the confidence interval on the PO 00000 Frm 00416 Fmt 4701 Sfmt 4700 QualityNet Web site at least one year prior to final computation (https:// www.qualitynet.org/dcs/ ContentServer?c=Page &pagename=QnetPublic%2FPage%2F QnetTier2&cid=1138115987129). These formulas will continue to account appropriately for the manner in which E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV patient charts were sampled and data were abstracted. We invited public comment on these proposals. Comment: Many commenters supported the proposals to increase the weight of HAI measures, to decrease the weight of process of care measures, and to weight the immunization measure more heavily than other clinical process of care measures when computing a hospital’s validation score. Response: We thank the commenters for their support. Comment: A few commenters opposed the proposal to weight the IMM measure more heavily than other clinical process-of-care measures because of the seasonal nature of the measure. These commenters suggested that weighting the EDT measure more heavily might be appropriate. Response: We have addressed the commenters’ concern by finalizing a policy to validate IMM data only inseason (we refer readers to section IX.A.11.b.(5) of the preamble of this final rule, above). Having made this policy adjustment above in this section, we believe that weighting IMM more heavily than other clinical process of care measures because of its importance to the Hospital VBP Program is still appropriate. The EDT measure is not included in the Hospital VBP Program; so it should not count more than any other process-of-care measures. After consideration of the public comments we received, we are finalizing our policy to weight the ‘‘IMM’’ clinical topic area twice as heavily and all other topic areas combined of the clinical process-of-care score as proposed with final weights of 66.7% for HAI, 22.2% for IMM, and 11.1% for all topic areas containing required clinical process of care measures other than IMM and perinatal care. d. Processes To Submit Patient Medical Records for Chart-Abstracted Measures In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50834 through 50835), we finalized a process for the FY 2016 payment determination and subsequent years that allows hospitals to submit patient charts for validation via: (1) paper patient medical records; or (2) secure transmission of electronic versions of patient information. The process previously finalized restricts electronic submission of patient information to digital images of patient medical records submitted using encrypted CD–ROMs, DVDs, or flash drives. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28251) we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 proposed for the FY 2017 payment determination and subsequent years to expand the options for secure transmission of electronic versions of patient medical records. Specifically, we proposed to allow hospitals to submit digital images (PDFs) of patient charts using a Secure File Transfer Portal on the QualityNet Web site. This portal would allow hospitals to transfer files through either a Web-based portal or directly from a client application using a secure file transfer protocol. The system provides a mechanism for securely exchanging documents containing sensitive information such as Protected Health Information (PHI) or Personally Identifiable Information (PII). Detailed instructions on how to use this system are available in the Secure File Transfer 1.0 User Manual available on QualityNet at: https://www.quality net.org/dcs/ContentServer?c=Page&page name=QnetPublic%2FPage%2FQnet Basic&cid=1228773343598. After July 2014, hospitals can submit all Hospital IQR Program validation data using this portal. This proposal responds to many commenters from the FY 2014 IPPS/ LTCH PPS rulemaking that were concerned that encrypted CD–ROMs were cumbersome and requested viable alternatives. We believe that the burden associated with using this portal will be similar to or less than that involved with submitting patient medical records via portable electronic media (that is, encrypted CD–ROMS, DVDs, or flash drives). Therefore, we intend to reimburse hospitals according to the rate established for submitting patient medical records via portable electronic media (78 FR 50956). We invited public comment on this proposal. Comment: A few commenters strongly supported the proposal to expand the transmission options for patient medical records, specifically the option to submit pdfs via the QualityNet Web site. The commenters believed this action will streamline the validation process and reduce the burden on hospitals. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing our policy to allow hospitals to submit digital images (PDFs) of patient charts using a Secure File Transfer Portal on the QualityNet Web site as proposed. e. Plans To Validate Electronic Clinical Quality Measure Data In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through 50810), we finalized a voluntary process allowing hospitals to partially meet Hospital IQR PO 00000 Frm 00417 Fmt 4701 Sfmt 4700 50269 Program requirements for the FY 2014 payment determination by submitting electronic clinical quality measure data via certified electronic health record technology. Many commenters expressed concern that we did not have an adequate methodology to validate these data. To respond to these concerns as well as to ensure that Hospital IQR Program data are accurate and reliable, we conducted an environmental scan, including review of prior public comments to CMS proposed rules and requests for information, review of the technical and academic literatures, numerous listening sessions, and interviews with nine hospitals. From these activities, we identified three key categories of threats to data accuracy: (1) the design of the EHR product, including both the manufacturerprovided EHR product and the hospital’s customizations of that EHR product to support the hospital’s specific workflows and processes, (2) hospital and provider documentation practice, and (3) EHR and electronic clinical quality measure standards and specifications. We understand the potential threats to validity in each of these categories. To respond to these concerns, we are currently conducting a small scale test of a remote real-time validation strategy for electronic clinical quality measures in approximately 9 hospitals. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28251 through 28253) we did not propose any requirements for validation of electronic clinical quality measures for the FY 2017 payment determination. However, we stated that we intend to conduct a larger scale pilot test of validation activities in FY 2015. The pilot test will engage up to 100 volunteer hospitals in a highly interactive test abstraction of their EHR systems using a secure remote access, real-time abstraction technology. Hospitals that volunteer to participate must meet the Medicare EHR Incentive Program Stage 2 criteria (77 FR 53968 through 54162) and be able to produce QRDA Category 1 Revision 2 extracted data (individual patient data) for at least 6 of the 16 measures in the STK, VTE, ED, and PC topic areas. The Office of the National Coordinator for Health Information Technology (ONC) adopted QRDA as the standard to support both QRDA Category I (individual patient) and QRDA Category III (aggregate) data submission approaches for meaningful use Stage 2 in the Health Information Technology: Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology, 2014 Edition; Revisions to E:\FR\FM\22AUR2.SGM 22AUR2 50270 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the Permanent Certification Program for Health Information Technology rule (77 FR 54163 through 54292). Interested hospitals will be invited to attend a 30minute pre-briefing session where they will be provided with detailed instructions about the process and a demonstration explaining how to install needed software and have any concerns about security or systems requirements addressed. The software to be installed, Bomgar, is approved by CMS and meets our security requirements allowing CDAC to remotely view isolated records in real-time under hospital supervision, comparing all abstracted data with QRDA Category 1 file data and summarizing the results after the realtime session. We implemented Bomgar software, a commercial product, in a CMS data center to allow for the review of medical records securely over the Internet. The product will allow the CDAC staff and Hospital medical record staff to easily set up remote support sessions for reviewing Hospital IQR Program-related EHR records under hospital supervision. The software was tested and passed our strict security standards. The electronic sessions do not require changes to a hospital’s firewall or network because both the CDAC computer and the hospital computer connect to the product through secure outbound connections. The product will log and record every session and all session data will be safe-guarded by federal government approved encryption. While CDAC has limited, remote viewing access, hospitals will be asked to: • Generate separate lists of patients eligible for measures in each of the four topic areas (STK, VTE, ED, and PC); • Generate QRDA Category 1 files extracted automatically from an EHR for all applicable measures for up to 3 records within each of the 4 topic areas (for a total of 12 records) as selected by CDAC; and • Show selected records, such as laboratory records, and patient medical history, navigating through the EHR system as directed by CDAC. During this remote real-time session, CDAC will: • Follow the specifications for the electronic measure to abstract relevant information related to each data element from up to 10 different sources, for example, medication administration records, laboratory reports, and patient history, (including structured and unstructured fields) within each patient medical record. After concluding the real-time session with a hospital, CDAC will: • Compare all abstracted data with QRDA Category 1 file data; and • Summarize results identifying patterns of concern. Based on these results, we will, with our contractors: • Work with measure stewards to refine measure specifications based on conflicting findings; • Share conflicting findings with individual hospitals to support improvement; • Publicize de-identified patterns of conflicting findings that allow vendors to develop automated checks; • Determine reliability (agreement) between QRDA Category 1 extracted and abstracted data; and • Produce descriptive statistics to estimate sample size requirements for future validation. To address the burden associated with this test, we intend to reimburse hospitals for the burden associated with their participation. Details about reimbursement are included in section XIII.B.6. of the preamble of this final rule. We posted on QualityNet a detailed draft of the operational procedures that volunteer hospitals will be expected to follow during the public comment period at https:// www.qualitynet.org under ‘‘Data Validation Resources.’’ We developed this process to attempt to meet all of our goals for validity, as further explained in the table below. ELECTRONIC CLINICAL QUALITY MEASURE VALIDATION STRATEGY SUMMARY FOR THE HOSPITAL IQR PROGRAM Desired Attributes of Validation Strategy • Assesses accuracy including reliability and population representativeness. • Employs a standardized process conducted by an objective third party. • Minimizes burden to hospitals. • Minimizes costs to CMS by being performed at a central location. • Leverages the dynamic qualities of an EHR, including query functions. • May ultimately integrate with validation of other IQR measures. Goals of Test • • • • Assess the accuracy and completeness of electronic clinical quality measure data. Assess Hospital IQR Program readiness for electronic clinical quality measure reporting requirements. Identify the needs for and implement updates to measure specifications and standards. Plan future validation requirements, including detailed operational instructions and sample size. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Planned Process Overview Hospitals will: • Allow CMS’ Clinical Data Abstraction Contractor (CDAC) to remotely view records in real-time. • Generate separate lists of patients eligible for measures to be validated. • Generate QRDA Category 1 extract files for all applicable measures for up to 12 records selected by CDAC. • Show selected records, navigating through the EHR system as directed by CDAC. CDAC will: • Abstract data following the specifications for the electronic measure and relevant information related to each data element from up to 10 different sources (including structured and unstructured fields) within each medical record. • Compare all abstracted data with QRDA Category 1 file data. • Assess and refine operational processes. CMS and its contractors will: • Determine reliability (agreement) between extracted and abstracted measures. • Work with measure stewards to refine measure specifications based on conflicting findings. • Share conflicting findings with individual hospitals to support improvement. • Publicize de-identified common patterns of conflicting findings that allow vendors to develop automated checks. • Produce descriptive statistics to estimate sample size requirements for future validation. • Reimburse hospitals for burden associated with participation in test. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00418 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We invited public comment on this voluntary pilot test for validation. Because of the close relationship of comments for this policy and the request for information that follows, we respond to comments for both after the next paragraph. We also considered other validation approaches including one that supplements the current procedures and compares quality data manually abstracted by the hospitals with QRDA Category 1 extracts from their EHRs. Although we are making no specific proposals related to these alternatives at this time, we invited comments on whether we should develop or identify existing computerized applications to assist hospitals in self-validation and on the specific functionalities that may be useful for self-validation. For example, as part of the validation process, should we develop or identify an existing application that would use natural language processing, to identify potential threats to validity that human abstractors might then review more closely. An example of such an application might be one that searches the unstructured fields for contraindications to VTE prophylaxis, even if such contraindications were not noted in a structured field within an EHR. We also invited comments any other types of applications that would be useful for self-validation. Comment: Many commenters expressed concern that there is no proposed validation process for the electronic clinical quality measures, or that the validation strategy that CMS proposed is still in its initial stages. These commenters opposed CMS’ use of electronic clinical quality measure data that has not been validated and proven to be reliable for public reporting or pay-for-performance. Some commenters are pleased that CMS has taken steps to validate electronic clinical quality measures data, but believed that all measures used in public reporting and pay-for-performance programs should be subject to data validation, and noted that failure to do so will eliminate any benefit of electronic clinical quality measures. Response: We understand commenters’ concerns regarding use of electronic clinical quality measure data that is not validated and proven reliable for public reporting or pay-forperformance. We note that although we have signaled target dates for requiring hospitals to report electronic clinical quality measure validation requirements in the Hospital IQR Program, we have not proposed, nor are we finalizing any formal requirements to report electronically specified measures at this VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 time. We recognize that validation is a major concern for many stakeholders interested in electronic clinical quality measure reporting and will take these comments into consideration for future rulemaking. Comment: Many commenters expressed general support for CMS’ efforts towards a voluntary pilot test for EHR validation. Some commenters encouraged CMS to complete this process quickly. Several of these commenters encouraged CMS to publicly report the results of the pilot to allow hospitals and vendors to implement processes to support electronic clinical quality measure validation. Response: We intend to complete pilot activities in CY 2015. We also intend to publicly report aggregated results from the pilot, while protecting the confidentiality of individual providers and patients. Comment: Many commenters advocated for greater collaboration in the electronic clinical quality measure validation process. Several commenters suggested that CMS work with other federal agencies and private sector experts to develop the protocols and testing environments needed to begin validation of electronic clinical quality measures. Other commenters emphasized the important role of the vendor in the validation pilot. A few commenters specifically observed that the validation plan does not ‘‘reflect the significant role of EHR vendors in this effort,’’ and/or that vendors need to be engaged so that hospitals are prepared to participate in the pilot, including being prepared to produce QRDA–1 files on demand in real-time. One commenter specifically recommended that the pilot should only include functional requirements that are required in Stage 2, 2014 Edition certification. Response: We recognize the importance of engaging vendors, federal partners, and other private sector experts in the validation process, and we intend to do so going forward. We intend to reach out to vendors prior to implementation of the pilot to compare current product capabilities relative to pilot requirements. As described in our proposed policy, the only requirements for participation are that hospitals must meet the Medicare EHR Incentive Program Stage 2 criteria (77 FR 53968 through 54162) and be able to produce QRDA Category 1 Release 2 extracted data (individual patient data) for at least 6 of the 16 measures in the STK, VTE, ED, and PC topic areas. We realize that this may limit participation of hospitals who qualify for meaningful use based on reporting of other measures. Our PO 00000 Frm 00419 Fmt 4701 Sfmt 4700 50271 proposed policy does not require that hospitals are able to produce QRDA–1 files in real time, only that hospitals are able to produce these files. We have instructed the CDAC contractor to be very flexible so that if a hospital cannot produce QRDA–1 files or the measures of interest in real-time, but can provide them later, our contractor will accept them later during the pilot project data collection period. Similarly, we have directed CDAC to work out a flexible process if some hospitals are not able to generate patient lists for the ED, STK, VTE, or PC measure sets in real time. We intend to revise our pilot data collection materials to reflect that flexibility. We are not aware of any other specific functional requirements in the pilot materials proposed that are not part of stage 2, 2014 edition certification. We believe that we can complete outreach and collaborative activities before and after the validation pilot within the framework of the policy we have proposed. During the pilot itself, we will allow CDAC to engage with the vendor with the hospital’s permission, and can do so within the confines of the policy as proposed. However, we will not reimburse vendors. As we describe in the burden section XIII.B.6. of the preamble of this final rule, we will limit reimbursement to hospitals for the costs associated with one staff person participating for up to 16 hours and costs associated with providing medical records. We believe this is reasonable as it is in the business interests of vendors to support hospitals that need QRDA Category-1 files. Comment: Most commenters believe that the validation pilot should accommodate a comparison of chartabstracted and electronic clinical quality measure outcomes for the same measures, and/or that CMS should clarify whether it will evaluate whether the intent of the chart-abstracted and electronic clinical quality measures are the same. In contrast, several commenters specifically noted that one should not expect the same result from a manual process (which allows for differences in documentation practices, judgment, and error and accommodates data from multiple sources) as from an electronic process which extracts data from a ‘‘defined specific data element location,’’ or that the processes for electronic clinical quality measure validation should be ‘‘independent’’ from validation of chart-abstracted measures. One of these commenters also advised that CMS acknowledge the role of customization in creating variability E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50272 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations in records and that data can be unstructured in the EHR and that provider documentation can vary and still support the intent of the measure. Response: We understand that although the purpose of validation for chart-abstracted and electronic clinical quality measures are the same, the outcomes of validation may be different for many reasons, including what was described by the commenter above. We agree with commenters that our validation process should also include a comparison of chart-abstracted and electronic clinical quality measure outcomes for the same measures and will add this to our electronic clinical quality measures validation pilot as finalized below. We also are aware that hospitals may customize software in ways that create reporting errors and that individual providers may create errors by using the software in a manner other than that intended by the manufacturer. We understand, from a scoring perspective, that we can only hold vendors and hospitals accountable for achieving an outcome that should be generated based on existing standards and specifications. In addition to problems that may arise because of misalignment or errors in standards or specifications, we also are aware that hospitals may customize software in ways that create errors and that individual providers may create errors by using the software in a manner other than intended. We did not include a proposal for scoring individual hospitals, because we are aware that vendors have no choice but to code to existing specifications and standards. We intend to partner with stakeholders to assist in interpreting results and help develop a validation strategy that addresses these issues. We also understand that provider documentation may vary, be located in unstructured fields, and still support the measure. We intend that our validation pilot will be able to distinguish among these many different threats to accuracy as well as identify times when variability in documentation does not threaten accuracy. We further believe that the pilot will be a rich source of information about all of these scenarios. Comment: A few commenters raised issues related to the questions included in the detailed participation pilot materials posted on QualityNet describing the EHR walkthrough process. One commenter recommended that CMS include vendors as a source of information for many of the questions in the interview document that CMS posted on the QualityNet Web site to document the methodology we proposed to use for the validation pilot VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 as noted in CMS’ proposal. This commenter also requested additional guidance on the purpose of these questions and their relation to the outcome of the pilot and encouraged us to develop a final process that minimized burden to providers and the health system. One commenter recommended that the electronic clinical quality measure data validation pilot exclude assessment of EHR features, focusing instead on the health data of the EHR. Response: We assume that when the first commenter was requesting guidance on the Electronically Specified Clinical Quality Measures Program Walk-through and Interview Document, the commenter was referring to questions related to ‘‘acceptability of remote technology for validation’’ as the other questions have a very clear relationship to the range of technical issues that this commenter raised in relation to electronic clinical quality measure validation generally. This section on ‘‘acceptability of remote technology for validation’’ includes the questions assessing EHR features that one commenter suggested we remove. We agree that vendors may be a better source of information for these questions, and therefore, intend to remove questions 9–12 based on the comments received. The purpose of the remaining questions in this section is to gauge the general level of acceptability of the approach that we are piloting, and to judge how many hours of staff time hospitals would be willing and capable of dedicating to validation activities to support to ensure reliable electronic clinical quality measure data. We intend to retain questions 6–8 and 13–15, because we would value hospitals’ opinions about these ideas. Comment: Several commenters urged CMS to implement the recommendations of a March 2014 GAO report to ‘‘develop a comprehensive strategy for ensuring that data collected and reported using certified EHR technology are reliable, including testing for and mitigation of reliability issues arising from variance in certified EHR systems tested to different CQM specifications.’’ 118 Response: We agree that reliability of data collected and reported using certified EHR technology is critical. As proposed, our validation pilot is intended to develop a methodology that 118 Electronic Health Record Programs: Participation Has Increased, but Action Needed to Achieve Goals, Including Improved Quality of Care: Report to Congressional Committees. (GAO Publication No. GAO–14–207). Retrieved from U.S. Government Accountability Office: https:// www.gao.gov/assets/670/661399.pdf. PO 00000 Frm 00420 Fmt 4701 Sfmt 4700 achieves that goal. We intend to address problems arising from the fact that certified EHR systems may have been tested to specifications issued in different years, by only including in the pilot only those data certified to 2014 specifications. We will take the recommendations of the GAO report as a whole into consideration in future policy-making. Comment: One commenter specifically wanted to know how the validation pilot would align with Meaningful Use specifications when the QRDA does not take into account any information from scanned documents, text, and documentation added at a later time. Response: We understand that Meaningful Use specifications require that QRDA files extract data only from structured fields and therefore, the QRDA does not take into account data from scanned documents, text, and documentation added at a later time. Our proposed validation strategy was developed to acknowledge that because the QRDA does not take into account data from scanned documents, text, and documentation added at a later time, even the perfect EHR system could produce clinically meaningless validation results in contrast to chartabstracted validation. In addition, as described above in this section, many commenters have observed errors in standards and specifications. By employing CDAC to look at the entire content of the record during our validation process, as we have described in our proposal, we hope to be able to identify those situations in which the calculated measure does not produce results consistent with the intent of the measure. We recognize that our validation pilot test may uncover problems that are not the fault of the provider, hospital, or developer, which is one of the goals of this pilot. We note that we have not proposed a process for scoring hospitals based on validation findings. Comment: One commenter requested further details regarding what controls will be put into place to allow CDAC to remotely view records in real-time. Response: The process that we intend to use to access medical records remotely contains several important controls to prevent unauthorized access to hospital systems. We clarify that access would be pursuant to a request by CDAC for the minimum necessary access to such records that includes an assertion of CDAC’s legal authority (including the applicable basis(-es) under HIPAA) for such access. The Bomgar software that we intend to use is installed on a secure CMS-owned E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations system that has safeguards in place in accordance with the HIPAA Security Rule to protect sensitive patient data. The Bomgar software is configured to transmit all information exchanged during the medical record review through CMS-owned hardware at a secure facility. All information needed to access hospital systems remotely is guarded by strong HTTPS secure socket layer (SSL) encryption, which protects the information as it is transmitted from the hospital to the CDAC. This hardware and software, which CDAC will use to access medical records remotely, will not store any information about the medical records themselves. Only a limited number of CDAC personnel, authorized by CMS, will have access to the Bomgar device. For more information, see: video https:// www.bomgar.com/products/security. In addition, CDAC contractors employ security controls to protect medical record information as follows: (1) all screen captures saved and QRDA files received by CDAC contractors are controlled and monitored according to security standards established by the National Institute of Standards and Technology (NIST); 119 (2) all Protected Health Information (PHI) is encrypted on all CDAC servers; and (3) firewalls and servers are monitored by CMS security contractors. Only a limited number of CDAC personnel have been granted access to view any PHI. These CDAC personnel undergo background checks and undergo privacy and security training prior to being issued passwords to view records containing PHI. All of these security controls are audited in compliance with CMS Security Standards.120 Comment: One commenter who supported CMS’ validation plan for electronic clinical quality measures also agreed ‘‘that the development or identification of existing computerized applications that can assist hospitals in self-validation and functionalities will be useful in self-validation of eCQMs.’’ The commenter believed this process could take the place of the current internal inter-rater reliability (IRR) efforts (on abstracted data) and ensure accurate data capture practices. Response: We will consider this suggestion to develop tools to replace more labor-intensive quality control efforts such as inter-rater reliability efforts (that is, comparing chartabstracted results from two different abstractors) in development of future policies. We thank the commenters for their comments. We will consider them as we develop plans to validate electronic clinical quality measure data. After consideration of public comments on our proposal to conduct a validation pilot test for electronically specified measures in FY 2015, we are finalizing the policy as proposed with a few minor modifications. We will compare results generated from QRDA–1 files with data from up to 10 sources identified through chartabstraction as proposed. In addition, we will compare measure outcomes abstracted from electronic clinical quality measure specifications to those abstracted according to chart-abstracted specifications. Also, we plan to remove the questions related to ‘‘acceptability of remote technology for validation’’ and to EHR functionality from the ‘‘Electronically Specified Clinical Quality Measures Program Walkthrough and Interview’’ document and reflect our intended flexible approach to accommodate hospitals that cannot produce patient lists or QRDA–1 files in real time as long as submissions can occur during the data collection period for the pilot project. We also intend to reach out to stakeholders to collaborate in preparing for the pilot and interpreting results after the pilot. f. Data Submission Requirements for Quality Measures That May Be Voluntarily Electronically Reported for the FY 2017 Payment Determination We believe that collection and reporting of data through health information technology will greatly simplify and streamline reporting for many CMS quality reporting programs. Through electronic reporting, hospitals will be able to leverage EHRs to capture, calculate, and electronically submit quality data that is currently manually chart-abstracted and submitted to CMS tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Short name Measure name ED–1 ............. Median time from ED arrival to ED departure for admitted ED patients. Admit Decision Time to ED Departure Time for Admitted Patients. ED–2 ............. 119 https://csrc.nist.gov/, VerDate Mar<15>2010 last accessed 7/17/2014. 18:25 Aug 21, 2014 Jkt 232001 NQF number NQF #0495 NQF #0497 120 https://www.cms.gov/Research-Statistics-Dataand-Systems/CMS-Information-Technology/ PO 00000 Frm 00421 Fmt 4701 for the Hospital IQR Program. As we noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we recognize the need to align and harmonize measures across CMS quality reporting programs to minimize the reporting burden imposed on hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087), we finalized a total of 29 clinical quality measures from which hospitals must select at least 16 measures covering three National Quality Strategy (NQS) domains to report beginning in FY 2014. We anticipate that, as health information technology evolves and infrastructure is expanded, we will have the capacity to accept electronic reporting of many of the chart-abstracted measures that are currently part of the Hospital IQR Program. In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the exception of STK–1), VTE, ED, and PC measure sets, we allowed hospitals to either: (1) electronically report at least one quarter of CY 2014 (Q1, Q2, or Q3) quality measure data for each measure in one or more of those four measure sets; or (2) continue reporting all measures in those four measure sets using chart-abstracted data for all four quarters of CY 2014 (78 FR 50818). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28242 through 28243) for the FY 2017 payment determination, we proposed to expand this policy, such that providers may select to voluntarily report any 16 of the 28 Hospital IQR Program electronic clinical quality measures that align with the Medicare EHR Incentive Program as long as those 16 measures span three different NQS domains. The 28 measures are listed in the table below. Only 28 of the 29 measures adopted in the Medicare EHR Incentive Program are applicable for the Hospital IQR Program, because the measure ED–3 Median time from ED arrival to ED departure for discharged ED patients (NQF #0496) is an outpatient setting measure. We expect eligible hospitals to select measures that best apply to their patient mix. NQS domain 121 Patient and Family Engagement. Patient and Family Engagement. Sfmt 4700 50273 Available data submission modes Electronic clinical quality measure or chart-abstracted. Electronic clinical quality measure or chart-abstracted. InformationSecurity/?redirect=/ informationsecurity, last accessed 7/17/2014. E:\FR\FM\22AUR2.SGM 22AUR2 50274 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Short name Measure name PC–01 ........... Elective delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure). Discharged on antithrombotic therapy ...... Stroke-2 ........ NQF number NQS domain 121 NQF #0469 Clinical Process/Effectiveness. NQF #0435 Available data submission modes Stroke-6 ........ Antithrombotic therapy by the end of hospital day two. Discharged on statin medication ............... NQF #0439 Stroke-8 ........ Stroke education ....................................... N/A Stroke-10 ...... Assessed for rehabilitation ........................ NQF #0441 Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Patient and Family Engagement. Care Coordination ..... VTE–1 ........... Venous thromboembolism prophylaxis ..... NQF #0371 Patient Safety ............ VTE–2 ........... NQF #0372 Patient Safety ............ NQF #0373 VTE–5 ........... Intensive care unit venous thromboembolism prophylaxis. Venous thromboembolism patients with anticoagulation overlap therapy. Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. VTE discharge instructions ....................... VTE–6 ........... Incidence of potentially preventable VTE Clinical Process/Effectiveness. Clinical Process/Effectiveness. Patient and Family Engagement. Patient Safety ............ AMI–2 ........... Aspirin Prescribed at Discharge for AMI .. NQF #0142 AMI–7a ......... Fibrinolytic Therapy Received Within 30 minutes of Hospital Arrival. Primary PCI Received Within 90 Minutes of Hospital Arrival. Statin Prescribed at Discharge ................. NQF #0164 Stroke-3 ........ Stroke-4 ........ Stroke-5 ........ VTE–3 ........... VTE–4 ........... AMI–8a ......... AMI–10 ......... PN–6 ............. SCIP–Inf–1a SCIP–Inf–2a SCIP-Inf-9 ..... PC–05 ........... EHDI–1a ....... CAC–3 .......... HTN .............. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 121 Medicare Anticoagulation therapy for atrial fibrillation/flutter. Thrombolytic therapy ................................. NQF #0437 NQF #0438 N/A N/A N/A NQF #0163 NQF #0639 Initial Antibiotic Selection for communityacquired pneumonia (CAP) in Immunocompetent Patients. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. Prophylactic Antibiotic Selection for Surgical Patients. NQF #0147 Urinary catheter removed on Postoperative Day 1 (POD 1) or Postoperative Day 2 (POD 2) with day of surgery being day zero. Exclusive Breast Milk Feeding and the subset measure PC–05a Exclusive Breast Milk Feeding Considering Mother´s Choice. Hearing Screening Prior to Hospital Discharge. Home Management Plan of Care (HMPC) Document Given to Patient/Caregiver. Healthy Term Newborn ............................. NQF #0453 NQF #0527 NQF #0528 Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Clinical Process/Effectiveness. Efficient Use of Healthcare Resources. Patient Safety ............ Efficient Use of Healthcare Resources. Patient Safety ............ Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. NQF #0480 Clinical Process/Effectiveness. Voluntary electronic clinical quality measure. NQF #1354 Clinical Process/Effectiveness. Patient and Family Engagement. Patient Safety ............ Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. N/A NQF #0716 EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087). Comment: A commenter requested clarification regarding whether hospitals are required to report on the ED–1 and ED–2 measures for FY 2015. If hospitals are required to report on these measures, the commenter would like clarification regarding whether the data must be submitted electronically as opposed to chart-abstracted. VerDate Mar<15>2010 NQF #0436 Electronic clinical quality measure or chart-abstracted aggregated with Webbased submission. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Electronic clinical quality measure or chart-abstracted. Voluntary electronic clinical quality measure. Electronic clinical quality measure or chart-abstracted. Electronic clinical quality measure or chart-abstracted. Voluntary electronic clinical quality measure. Electronic clinical quality measure or chart-abstracted. Electronic clinical quality measure or chart-abstracted. Electronic clinical quality measure or chart-abstracted. Voluntary electronic clinical quality measure. Electronic clinical quality measure or chart-abstracted. Electronic clinical quality measure or chart-abstracted. Voluntary electronic clinical quality measure. Electronic clinical quality measure or chart-abstracted. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. Voluntary electronic clinical quality measure. 18:25 Aug 21, 2014 Jkt 232001 Response: ED–1 and ED–2 are shown as voluntary electronic clinical quality measures in the table on 79 FR 28242, but are not identified as voluntary measures in the table on 79 FR 28241. We would like to clarify that both ED– 1 and ED–2 are required measures that can be submitted either as chartabstracted measures or as electronic PO 00000 Frm 00422 Fmt 4701 Sfmt 4700 clinical quality measures under the voluntary reporting option. For the FY 2017 payment determination, we also proposed to expand the reporting requirement of electronic clinical quality measures to require a full year’s data collection and submission instead of a minimum of one quarter. In addition, for the FY 2017 payment determination, we proposed to E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations require data submission within approximately 60 days after the end of a calendar year quarter. We have listed the proposed submission deadlines in the table below. We also refer readers to section IX.D.2. of the preamble of this final rule for a description of the electronic clinical quality measures data 50275 reporting periods and proposed submission deadlines. CY 2015/FY 2017 ELECTRONIC CLINICAL QUALITY MEASURES DATA REPORTING PERIODS AND PROPOSED SUBMISSION DEADLINES CY 2015 quarter tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1 2 3 4 ......................................... ......................................... ......................................... ......................................... Reporting period (2015) January 1–March 31 ........................................................................................... April 1–June 30 ................................................................................................... July 1–September 30 .......................................................................................... October 1–December 31 ..................................................................................... As an incentive for hospitals to voluntarily submit electronic clinical quality measures, we proposed that for the FY 2017 payment determination, hospitals successfully submitting electronic clinical quality measures according to our procedures will not have to validate those measures by submitting chart-abstracted data. By proposing these changes, we would further align the Hospital IQR Program and the Medicare EHR Incentive Program and promote greater electronic clinical quality measure data reporting for hospitals. In addition, we believe that these changes would ease hospitals’ administrative burden, as they will be able to report the same clinical quality measures once to partially satisfy both the Hospital IQR and Medicare EHR Incentive Programs’ requirements. We invited public comment on this proposal. Comment: One commenter requested that CMS allow hospitals to electronically report data for one calendar quarter instead of an entire CY. Response: We refer readers to section IX.A.2.h.(1) of the preamble of this final rule where we are finalizing a modification of our proposal, which will only require one CY quarter of electronic clinical quality measure data for those hospitals that elect to participate in the voluntary electronic clinical quality measures reporting option. Comment: A commenter supported the inclusion of voluntary reporting for certain electronic clinical quality measures for the Hospital IQR Program, and noted that voluntary reporting allows hospitals to be better prepared for submitting new quality measures from EHRs and to correct any operational issues that arise. Another commenter supported the long-term goal of using EHRs to streamline and reduce the burden of quality reporting while increasing access to real-time information to improve care and patient outcomes. One commenter supported VerDate Mar<15>2010 Proposed submission deadline 18:25 Aug 21, 2014 Jkt 232001 the proposal that hospitals electronically report a full year of data on the 12 Hospital IQR Program measures that overlap with the 2014 Medicare EHR Incentive Program measures. Response: We thank the commenters for their support and, as noted in the response above, we have modified in our finalized policy the number of quarters of data to be reported by those hospitals that elect to participate in the voluntary electronic clinical quality measures reporting option. Comment: One commenter requested clarification on whether the deadlines for submitting chart-abstracted measures remain the same given the proposal for requiring data submission within 60 days after the calendar year quarter ends for electronic clinical quality measures. Commenters also stated that the shortened time frame for reporting measure data poses a burden on facilities and increases the possibility of errors, which could affect measure scores and, therefore, payment. Response: We would like to clarify that we did not propose any changes to the submission requirements for chartabstracted measures (79 FR 28245). We retained the 41⁄2 months quarterly submission deadline (78 FR 50811). In addition, we are not finalizing the 60 day quarterly submission deadline for electronic clinical quality measures. We refer readers to section IX.A.2.h.(1) of the preamble of this final rule where this is discussed in more detail. Comment: Some commenters supported the alignment of measures and reporting requirements and timelines across quality reporting and incentive programs, specifically noting that this alignment would reduce hospital’s administrative burden and confusion, uses the later Hospital IQR Program deadlines, reduce the number of quarters required until the transition is complete, and does not delay incentive payments. Some commenters argued that CMS’ timeline for alignment is aggressive and requested CMS give PO 00000 Frm 00423 Fmt 4701 Sfmt 4700 May 30, 2015. Aug 30, 2015. Nov 30, 2015. Feb 28, 2016. hospitals time to comply with this requirement. Commenters noted that EHRs are not ready for year two of Stage 1 meaningful use criteria or Stage 2 meaningful use criteria. Other commenters opposed CMS’ proposal to require Q4 2014 and Q1 2015 data submission by May 15, 2015, stating that it does not provide enough time for data submission, particularly for hospitals that conduct manual chart abstraction. Response: We thank the commenters for supporting our proposal to align reporting between the Hospital IQR Program and the Medicare EHR Incentive Program. We proposed to begin aligning the reporting periods between the two programs beginning with the CY 2015 reporting period. We believe some commenters may have confused the proposed electronic clinical quality measure requirements of the Medicare EHR Incentive Program with the proposed electronic clinical quality measure submission requirements for the Hospital IQR Program. We proposed for the Hospital IQR Program, that hospitals choosing to submit electronic clinical quality measures would need to submit all four quarters of CY 2015, whereas the Medicare EHR Incentive Program proposed to require only the first three quarters of CY 2015 (79 FR 28245 through 28246). However, we are not finalizing our proposal for hospitals to submit electronic clinical quality measures for all four quarters for the Hospital IQR Program and are instead finalizing a modified policy. We refer readers to section IX.A.2.h.(1) of the preamble of this final rule where this is discussed in more detail. We recognize that many hospitals have faced challenges moving to the latest CQM versions, which is why electronic clinical quality measure reporting remains voluntary at this time. Comment: One commenter noted that they appreciated the opportunity to gain experience with voluntary electronic E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50276 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations reporting for the Hospital IQR Program before such reporting is made mandatory. The commenter also asked that CMS provide further explanation on the set of voluntary electronic clinical quality measures within the Hospital IQR Program. Response: We refer the commenter to the table above listing the 28 possible electronic clinical quality measures. If a hospital chooses to submit electronic clinical quality measures, the hospital must submit 16 of the 28 possible measures covering three NQS domains. Please note that 12 of the 28 measures are measures required in the Hospital IQR Program. These 12 measures do cover three NQS domains. We would like to clarify that if a hospital chooses to submit electronic clinical quality measures, chart-abstraction of those submitted measures is not necessary. Comment: One commenter urged CMS to be mindful of safety net hospitals’ limited resources when proposing new requirements for reporting measure data electronically. The commenter advised that electronic reporting of quality data requires significant work to obtain, validate, and report and that it also requires information technology and quality management resources. The commenter stated that many hospitals are struggling to meet the current electronic data reporting requirements and that additional requirements will increase hospital expenses for labor, data analysis, and validation. Response: We note that reporting electronic clinical quality measure data remains voluntary for CY 2015 reporting/FY 2017 payment determination. We believe that our electronic clinical quality measure reporting voluntary reporting option is not unduly burdensome to hospitals, and will allow hospital an opportunity to prepare for electronic reporting of quality measure data. As data becomes more standardized, it is expected that provider burden will decrease over time. In addition, we have modified our proposal for CY 2015 so that for those hospitals choosing to submit electronic clinical quality measures, only one quarter of data submission is necessary to meet the Hospital IQR Program requirement. We want to clarify that we have not made proposals for CY 2016 electronic clinical quality measure reporting/FY 2018 payment determination. These will be addressed in future rulemaking. Comment: One commenter raised concern that participation in the voluntary electronic clinical quality measure program under the Hospital IQR Program would be low and would VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 therefore, not provide the data to inform future policy direction. In order to make the voluntary electronic clinical quality measure program more attractive to hospitals, the commenter recommended that CMS work with payers and quality assurance organizations to further align measure sets, provide electronic clinical quality measure specifications at least nine months before each relevant reporting period, allow providers to post or omit electronically-generated electronic clinical quality measure data to Hospital Compare, and either require only one-quarter of electronic clinical quality measure data in order to fulfill EHR MU and Hospital IQR Program requirements, or incorporate a robust logic model to monitor and evaluate the burdens and benefits associated with more frequent reporting. Response: We are actively working with measure developers/stewards to align measure sets and revise measure specifications, as needed. Issues identified by measure stakeholders should be reported to ONC’s JIRA tool at: https://jira.oncprojectracking.org/ browse/CQM where all stakeholders can comment and follow the progress of the issue. Electronic clinical quality measure specifications are published/ updated annually at: https://cms.gov/ Regulations-and-Guidance/Legislation/ EHRIncentivePrograms/eCQM_ Library.html. Also, we are modifying our proposal so that for those hospitals choosing to submit electronic clinical quality measures, only one quarter of data submission is necessary to meet the Hospital IQR Program requirements. We refer readers to section IX.A.2.h.(1) of the preamble of this final rule where this is discussed in more detail. After consideration of the public comments we received, we are finalizing our proposals with some modifications. We are finalizing our policy for hospitals that chose to participate in the voluntary electronic reporting option in CY 2015 must report any 16 of the 28 measures across 3 NQS domains as proposed. We are also finalizing that we will only accept the April 2014 version of the measure specifications for CY 2015 reporting/FY 2017 payment determination. Policies for electronic clinical quality measure reporting in CY 2016 and subsequent years will be made in future rulemaking. We are finalizing a modified version of our proposal to expand the reporting requirement of electronic clinical quality measures to require a full year’s data collection to only requiring one quarter’s worth of data. In addition, we are finalizing a modified version of our proposal to require data submission within approximately 60 days after the PO 00000 Frm 00424 Fmt 4701 Sfmt 4700 end of a calendar year quarter to require submission of CY Q1, Q2, or Q3 data by November 30, 2015. We refer readers to section IX.A.2.h.(1) of the preamble of this final rule for a more detailed discussion. We note that hospitals choosing to report at least one quarter of quality measure data electronically are not required, but are encouraged, to also submit the same data via chartabstraction. We understand that many hospitals may be submitting chartabstracted quality measure data to TJC so the reporting burden would not be increased. Hospitals will gain experience in understanding the differences in the submission methods. Hospitals voluntarily submitting electronically specified clinical quality measures will utilize their existing QualityNet account to submit electronic quality measure data. 12. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53554) for information for details on DACA requirements for the FY 2017 payment determination and subsequent years. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not propose any changes to DACA form requirements. We did not invite public comment regarding DACA requirements, but received one comment that we are addressing below. Comment: One commenter expressed concerns that the Data Accuracy and Completeness Acknowledgement statement for hospitals does not provide a means for hospitals to indicate to CMS any errors they have discovered in their quality reporting throughout the year. The commenter observed that a hospital may discover in the fourth quarter an error in the data that was submitted in the first quarter of the year, but the DACA only permits a ‘Yes’ or ‘No’ response regarding whether all of the data was complete and accurate to the best of their knowledge at the time of submission, which does not provide a means for fixing any errors. The commenter observed that there also should be a process for fixing such errors from prior years. Response: We currently provide a review and correction process for Hospital IQR Program process of care, HAI, and HCAHPS data during the submission period. Hospitals can review their measure rate before the submission deadline, and can review patient-level data to correct any identified errors on E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations previously submitted data. We strongly encourage hospitals to closely review their Hospital IQR Program measure and patient feedback reports to detect these errors before the submission deadline. We do not allow patient-level data correction after the submission deadline or for previous years. We must set a deadline to ensure timely computation of measure rates, Hospital VBP performance scores and payment adjustment factors. 13. Public Display Requirements for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2008 IPPS final rule (72 FR 47360), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for details on public display requirements for the FY 2017 payment determination and subsequent years. The Hospital IQR Program quality measures are typically reported on the Hospital Compare Web site at: https:// www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites such as https:// www.cms.gov and/or https:// data.medicare.gov. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not propose any changes to public display requirements. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 14. Reconsideration and Appeal Procedures for the FY 2017 Payment Determination and Subsequent Years We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), and at 42 CFR 412.140(e) for details on reconsideration and appeal procedures for the FY 2017 payment determination and subsequent years. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not propose any changes to the reconsideration and appeals procedures. 15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions We refer readers to the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital IQR Program extraordinary circumstances extensions or waivers. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not propose any substantive changes to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 these policies or the processes. However, in the future, we will refer to the process as the Extraordinary Circumstances Extensions or Exemptions process. We are currently in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form, previously approved under OMB control number 0938–1171. In addition, we proposed to make a conforming change from the phrase ‘‘extension or waiver’’ to the phrase ‘‘extension or exemption’’ in 42 CFR 412.140(c)(2). Section 412.140(c)(2) currently states that upon request by a hospital, CMS may grant an extension or waiver of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or waiver are available on QualityNet.org. We proposed to revise this language to state that upon request by a hospital, CMS may grant an extension or exemption of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or exemption are available on QualityNet.org. We did not receive any public comments on this proposal and we are finalizing this policy as proposed. B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 1. Statutory Authority Section 3005 of the Affordable Care Act added new sections 1866(a)(1)(W) and (k) to the Act. Section 1866(k) of the Act establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act (referred to as ‘‘PPS-Exempt Cancer Hospitals’’ or ‘‘PCHs’’). Section 1866(k)(1) of the Act states that, for FY 2014 and each subsequent fiscal year, a PCH must submit data to the Secretary in accordance with section 1866(k)(2) of the Act with respect to such a fiscal year. Section 1866(k)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, each hospital described in section 1886(d)(1)(B)(v) of the Act must submit data to the Secretary on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time, specified by the Secretary. Section 1866(k)(3)(A) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act, unless an exception under section 1866(k)(3)(B) of PO 00000 Frm 00425 Fmt 4701 Sfmt 4700 50277 the Act applies. The National Quality Forum (NQF) currently holds this contract. The NQF is a voluntary, consensus-based, standard-setting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care stakeholder organizations. The NQF was established to standardize health care quality measurement and reporting through its consensus development processes. We have generally adopted NQF-endorsed measures in our reporting programs. However, section 1866(k)(3)(B) of the Act provides an exception. Specifically, it provides that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Under section 1866(k)(3)(C) of the Act, the Secretary was required to publish the measures select for PCHs no later than October 1, 2012, with respect to FY 2014. Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making public the data submitted by PCHs under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program. Such procedures must ensure that a PCH has had the opportunity to review the data that are to be made public with respect to the PCH prior to such data being made public. The Secretary must report measures of processes, structural measures, measures of outcomes, patients’ perspective on care, efficiency, and costs of care that relate to services furnished by PCHs on the CMS Web site. 2. Covered Entities Section 1886(d)(1)(B)(v) of the Act excludes particular cancer hospitals from payment under the IPPS. This final rule covers only those PPS-excluded cancer hospitals meeting eligibility criteria specified in 42 CFR 412.23(f). 3. Previously Finalized PCHQR Program Quality Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561), we finalized five quality measures for the FY 2014 program and subsequent years. Specifically, we finalized two of the CDC NHSN-based HAI quality measures (outcome measures): (1) CLABSI; and (2) CAUTI. We also finalized three cancer- E:\FR\FM\22AUR2.SGM 22AUR2 50278 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV specific process of care measures: (1) Adjuvant chemotherapy is considered or administered within 4 months (120 days) of diagnosis to patients under the age of 80 with the American Joint Committee on Cancer (AJCC) III (lymph node positive) colon cancer; (2) Combination chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer; and (3) Adjuvant hormonal therapy. We also discussed the collection requirements and submission timeframes for these measures in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53566). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through 50840), we finalized one new quality measure for the FY 2015 program and subsequent years. Specifically, we finalized the CDC’s NHSN HAI measure of Surgical Site Infection (SSI). We did not remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2015 program and subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50840 through 50846), we finalized 12 new quality measures for the FY 2016 program and subsequent years. Specifically, we finalized six new SCIP measures, five new clinical process/oncology care measures, and the HCAHPS Survey for reporting beginning with the FY 2016 program and subsequent years. We did not remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2016 program and subsequent years. We also discussed the collection requirements and submission timeframes for these measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850 through 50853). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254), we did not propose to remove or replace any of the previously finalized measures from the PCHQR Program for the FY 2017 program and subsequent years. 4. Update to the Clinical Process/ Oncology Care Measures Beginning With the FY 2016 Program In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254), beginning with the FY 2016 program, we proposed to update the specifications for each of the five clinical process/oncology care measures so that, for each measure, PCHs must report all-patient data. We believe that the delivery of high quality care in the PCH setting is critically important and that collecting data on all patients will enable us to ensure that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 high quality care is delivered to Medicare beneficiaries in this setting. In addition, all-patient data increase transparency in the health care system and align with State and Federal initiatives.122 Our proposal to require PCHs to collect all-patient data provides us with the data necessary to inform the public accurately about the quality of care and patient outcomes in the PCH setting. In addition, this proposal will align the specifications of the clinical process/oncology care measures with those of the SCIP PCHQR measures, for which all-patient data are required for submission. We welcomed public comments on this proposal for the clinical process/ oncology care measures for the FY 2016 program and subsequent years. Comment: One commenter supported the proposal to require PCHs to report all-patient data for the five clinical process/oncology care measures, noting that it is consistent with reporting requirements in other CMS quality reporting programs. Response: We thank the commenter for its support. After consideration of the public comments we received, we are finalizing our proposal requiring PCHs to submit all-patient data for the five clinical process/oncology care measures beginning with the FY 2016 program. 5. New Quality Measure Beginning With the FY 2017 Program a. Considerations in the Selection of Quality Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556) and in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50838), we indicated that we have taken a number of principles into consideration when developing and selecting measures for the PCHQR Program, and that many of these principles are modeled on those we use for measure development and selection under the Hospital IQR Program: • Public reporting should rely on a mix of standards, outcomes, process of care measures, and patient experience of care measures, including measures of care transitions and changes in patient functional status. • The measure set should evolve so that it includes a focused core set of measures appropriate to cancer hospitals that reflects the level of care and the most important areas of service furnished by those hospitals. The measures should address gaps in the quality of cancer care. 122 All-Payer Claims Database (APCD) Fact Sheet; available at: https://www.apcdcouncil.org/issuebriefs-and-fact-sheets. PO 00000 Frm 00426 Fmt 4701 Sfmt 4700 • We also consider input solicited from the public through rulemaking and public listening sessions. • We consider suggestions and input from a PCH Technical Expert Panel (TEP), convened by a CMS measure development contractor, which rated potential PCH quality measures for importance, scientific soundness, usability, and feasibility. The TEP membership includes health care providers specializing in the treatment of cancer, cancer researchers, consumer and patient advocates, disparities experts, and representatives from payer organizations. Like the Hospital IQR Program, the PCHQR Program supports the National Quality Strategy (NQS), national priorities, HHS Strategic Plans and Initiatives, the CMS Quality Strategy, and strives to reduce the burden on participating PCHs whenever possible. The PCHQR Program also takes into consideration the recommendations of the Measure Applications Partnership (MAP). The MAP is a multi-stakeholder body convened by the NQF for the purpose of providing input to HHS on the selection of measures. b. New Quality Measure Beginning With the FY 2017 Program In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254 through 28456), we proposed to adopt one new clinical effectiveness measure for the FY 2017 program and subsequent years: External Beam Radiotherapy for Bone Metastases (NQF #1822). The proposed clinical effectiveness measure was included on a publicly available document entitled ‘‘List of Measures under Consideration for December 1, 2013,’’ a list of quality and efficiency measures being considered for use in various Medicare programs. The proposed measure was submitted to the MAP Hospital Workgroup for review. The MAP supported the inclusion of this measure in the PCHQR Program. The MAP’s conclusions may be found in the ‘‘MAP Pre-Rulemaking Report: 2014 Recommendations on Measures Under Consideration by HHS,’’ which is available at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_Report_ _2014_Recommendations_on_ Measures_for_More_than_20_Federal_ Programs.aspx. We considered the MAP’s input and recommendations for this proposed measure for the PCHQR Program, and specifically, we note that the proposed measure addresses the MAP priority of palliative care for cancer patients. In addition, the proposed measure addresses the NQS domain of effective clinical care. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV We believe that this NQF-endorsed measure, developed by the American Society for Radiation Oncology (ASTRO), meets the requirement under section 1866(k)(3)(A) of the Act that measures specified for the PCHQR generally be endorsed by the entity with a contract under section 1890(a) of the Act (currently the NQF). This measure assesses the percentage of patients (both Medicare and non-Medicare) with painful bone metastases and no history of previous radiation who receive EBRT with an acceptable dosing schedule. The measure numerator includes all patients with painful bone metastases and no previous radiation to the same site who receive EBRT with any of the following recommended fractionation schemes: 30Gy/10fxns; 24Gy/6fxns; 20Gy/5fxns; or 8Gy/1fxn. The measure denominator includes all patients with painful bone metastases and no previous radiation to the same site who receive EBRT. The following patients are excluded from the denominator: patients who have had previous radiation to the same site; patients with femoral axis cortical involvement greater than 3 cm in length; patients who have undergone a surgical stabilization procedure; and patients with spinal cord compression, cauda equina compression, or radicular pain. For the reasons explained more fully below, we believe that this measure will reduce the rate of EBRT services overuse, support our commitment to promoting patient safety, and support the NQS domains. Bone metastases are a common manifestation of malignancy. Some cancer types have a bone metastasis prevalence as high as 70 to 95 percent.123 EBRT can provide significant pain relief in 50 to 80 percent of patients with painful bone metastases.124 In October 2009, ASTRO organized a Task Force to perform an assessment of existing recommendations in order to address a lack of palliative radiotherapy guidelines. Based on a review of the literature, the Task Force recommended the following EBRT dosing schedules for patients with previously unirradiated painful bone metastases: 30 Gy over the course of 10 fractions; 24 Gy over the course of 6 fractions; 20 Gy 123 Coleman RE. Metastatic bone disease: clinical features, pathophysiology and treatment strategies. Cancer Treat Rev. 2001;27:165–176. 124 Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for bone metastases: An ASTRO evidence-based guideline. Int J Radiat Oncol Biol Phys. 2011;79(4):965–976. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 over the course of 5 fractions; and a single 8 Gy fraction.125 Despite the recommendations, the actual doses applied for EBRT continue to include dosing schedules as high as 25 fractions.126 Other studies support the conclusion that shorter EBRT schedules produce similar pain relief outcomes when compared to longer EBRT schedules, and that patients prefer shorter EBRT schedules because of their convenience, increased tolerability, and reduced side effects.127 In addition, the ASTRO Task Force found that the frequency and severity of side effects associated with a single fraction were the same or less than those associated with multiple fraction regimens, indicating that shorter treatment schedules may be preferable.128 The proposed External Beam Radiotherapy for Bone Metastases measure seeks to address the performance gap in treatment variation, ensure appropriate use of EBRT, and prevent the overuse of radiation therapy. We believe that this measure is necessary to support patient preferences for shorter EBRT schedules as well as to ensure patient safety, given that shorter treatment courses show similar or fewer side effects while producing similar clinical outcomes. We believe the proposed measure is applicable to the PCH setting because it addresses cancer care associated with radiation therapy. The adoption of measures that apply to multiple health care settings is one of our objectives in promoting quality care consistently across all health care settings. Detailed specifications for this proposed measure may be found at: https:// www.Fqualityforum.Forg/WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID= 70374. In summary, in addition to the 18 measures that we have previously finalized for the PCHQR Program, we proposed one new measure for reporting beginning with the FY 2017 program. The proposed policies regarding the form, manner, and timing of data collection for this measure are discussed in later sections. We welcomed public comment on this proposal. 125 Ibid. 126 Available at: https://www.qualityforum.org/ WorkArea/linkit.aspx?LinkIdentifier=id&ItemID= 70374. 127 Ibid. 128 Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for bone metastases: An ASTRO evidence-based guideline. Int J Radiat Oncol Biol Phys. 2011;79(4):965–976. PO 00000 Frm 00427 Fmt 4701 Sfmt 4700 50279 Comment: Several commenters supported the proposed EBRT for bone metastases measure, noting that it aims to address the variation in practice patterns for using radiation therapy for palliative care and promotes improved quality of inpatient care provided to Medicare beneficiaries. However, the commenters encouraged CMS to conduct a performance gap analysis of radiation therapy practice that is specific to the PCH setting. Response: We thank the commenters for their support. Radiation therapy is a common treatment modality for some cancers, and the ASTRO Task Force (2009) found that the literature demonstrates widespread variation in palliative radiation dose fractionation schedules. Because of this variation, we believe it is important to protect patient safety in the PCH setting by addressing potentially unnecessary and harmful radiation doses. We understand that PCHs, specifically, provide EBRT services, and we believe that the ASTRO Task Force findings demonstrate that the EBRT for bone metastases measure is relevant and appropriate for the PCH setting. We agree with the commenters’ suggestions that we conduct a ‘‘performance gap analysis’’ to assess the appropriateness of the EBRT measure in the PCH setting. We intend to conduct that analysis when we have collected data beginning with the FY 2017 PCHQR Program. Comment: One commenter supported the adoption of the EBRT for bone metastases measure but recommended that CMS revise the measure to include a broader population of patients receiving radiation therapy. Response: We appreciate the commenter’s feedback. The measure is NQF-endorsed for the population described in the specifications. We will continue to work closely with ASTRO to assess the current clinical evidence base for the broader PCH population. We will consider incorporating any future measure updates supported by clinical evidence. After consideration of the public comments we received, we are finalizing the EBRT for bone metastases measure for the FY 2017 program and subsequent years. The table below lists all previously adopted measures as well as the finalized measure for the PCHQR Program for the FY 2017 program and subsequent years. E:\FR\FM\22AUR2.SGM 22AUR2 50280 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PCHQR PROGRAM MEASURES FOR THE FY 2017 PROGRAM AND SUBSEQUENT YEARS [Including measure finalized in this final rule] Topic Safety and Healthcare-Associated Infection—HAI: • (NQF #0139) NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure * • (NQF #0138) NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure * • (NQF #0753) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure * (currently includes SSIs following Colon Surgery and Abdominal Hysterectomy Surgery) Clinical Process/Cancer-Specific Treatments: • (NQF #0223) Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer * • (NQF #0559) Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer * • (NQF #0220) Adjuvant Hormonal Therapy * SCIP: • (NQF #0218) Surgery Patients who Received Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24 Hrs After Surgery End Time * • (NQF #0453) Urinary Catheter Removed on Post-Operative Day 1 or Post-Operative Day 2 with Day of Surgery Being Day Zero * • (NQF #0527) Prophylactic Antibiotic Received Within 1 Hr Prior to Surgical Incision * • (NQF #0528) Prophylactic Antibiotic Selection for Surgical Patients * • (NQF #0529) Prophylactic Antibiotic Discontinued Within 24 Hrs After Surgery End Time * • (NQF #0284) Surgery Patients on Beta Blocker Therapy Prior to Admission who Received a Beta Blocker During the Perioperative Period * Clinical Process/Oncology Care Measures: • (NQF #0382) Oncology-Radiation Dose Limits to Normal Tissues * • (NQF #0383) Oncology: Plan of Care for Pain * • (NQF #0384) Oncology: Pain Intensity Quantified * • (NQF #0390) Prostate Cancer-Adjuvant Hormonal Therapy for High-Risk Patients * • (NQF #0389) Prostate Cancer-Avoidance of Overuse Measure-Bone Scan for Staging Low-Risk Patients * Patient Engagement/Experience of Care: • (NQF #0166) HCAHPS * Clinical Effectiveness Measure: • (NQF #1822) External Beam Radiotherapy for Bone Metastases ** tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * Previously finalized measures. ** Finalized for the FY 2017 program and subsequent years in this final rule. 6. Possible New Quality Measure Topics for Future Years We seek to develop a comprehensive set of quality measures for widespread use for informed decision-making and quality improvement in the PCH setting. Therefore, in future rulemaking, we intend to propose to adopt new or updated measures, such as measures that assess the safety and efficiency of the diagnosis and treatment of cancer, measures that take into account novel diagnostic and treatment modalities, measures that assess symptoms and functional status, and measures of appropriate disease management. Additional measure topics we intend to consider include patient-centered care planning and care coordination, shared decision-making, measures of quality of life outcomes, and measures of admissions for complications of cancer and treatment for cancer. We believe that such measures will help us further our goal of achieving better health care and improved health for Medicare beneficiaries who obtain cancer services through the widespread dissemination and use of quality of care information. We welcomed public comments and specific suggestions for measure topics for the following measure domains: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 outcomes; quality of life; clinical quality of care; care coordination; patient safety; patient and caregiver experience of care; population/community health; and efficiency. These domains align with those of the NQS, and we believe that selecting measures to address these domains will promote better cancer care while aligning the PCHQR Program with other established quality reporting and pay-for-performance programs such as the Hospital IQR Program, the Hospital OQR Program, and the Hospital VBP Program. Comment: Several commenters supported the types of measures that CMS stated its intent to adopt for the PCHQR Program, specifically measures that take into account the use of novel treatments and diagnostic tests, noting that CMS’ approach will ensure that cancer patients have appropriate access to new treatments. Response: We thank the commenters for their support and will consider this feedback for future rulemaking. Comment: Several commenters suggested measure topics that CMS should consider for future years. They recommended that CMS: (1) develop and adopt measures on topics including benign and malignant hematology; (2) PO 00000 Frm 00428 Fmt 4701 Sfmt 4700 consider measures that address nonsmall cell lung cancer (NSCLC) treatment; (3) develop measures of riskadjusted, stage-specific survival rates for various types of cancer; (4) adopt validated outcomes measures over process-based measures; (5) emphasize the importance of the HCAHPS survey; and (6) consider palliative care measures. Response: We appreciate the commenters’ suggestions and will consider this feedback for future rulemaking. We note that, in the FY 2014 IPPS/LTCH PPS final rule, we adopted the HCAHPS survey for use in the PCHQR Program measure set beginning with the FY 2016 program (78 FR 50844 through 50845). Comment: One commenter supported the measure topics proposed for consideration for the PCHQR Program in future years. Several commenters also described the importance of ensuring that measures adopted for the PCHQR Program be supported by the MAP, tested for their applicability, and assessed for potential unintended consequences that may result from their use in specific patient populations. Another commenter recommended that CMS continue to align measures E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations adopted for the PCHQR Program with those in other IPPS quality reporting programs. Response: We thank the commenters for their support and comments. We will consider this feedback in future rulemaking. Comment: One commenter commended CMS for focusing attention on addressing high priority measure gaps such as outcomes, quality of life measures, safety, and overuse of care to be considered for future use in the PCHQR Program. The commenter encouraged CMS to coordinate with partners in addressing the following challenges: measures that require multiple data sources; research that demonstrates gaps in care; and the need to develop a ‘‘core’’ set of measures for a population with varied diagnoses. Response: We thank the commenter for its support and will strive continually to collaborate with external stakeholders. Generally, we retain measures from the previous years’ PCHQR Program measure sets for subsequent years. However, in future years, we will consider developing criteria to determine whether or not to remove or replace measures from the PCHQR Program measure set. In developing removal criteria, we will consider those criteria used by other CMS quality reporting programs in order to align the PCHQR Program with those programs. We also welcomed public comments on the criteria for removal or replacement of measures from the PCHQR Program. Comment: Several commenters noted that, in the FY 2015 IPPS/LTCH PPS proposed rule, CMS proposed to remove nearly all of the SCIP measures from the Hospital IQR Program and recommended that CMS consider removing the six SCIP measures from the PCHQR Program. Commenters also recommended that CMS adopt criteria for determining ‘‘topped out’’ measures and measure removal in future years. Response: At this time, we do not have sufficient data to determine whether these SCIP measures are ‘‘topped-out’’ in the PCH setting. We recognize that the PCHQR patient population is exclusively comprised of cancer patients, unlike the patient population at acute care hospitals that are included in the Hospital IQR Program. As a result, we will retain the PCH SCIP measures until we have adopted ‘‘topped out’’ policy and until we have sufficient data to conduct ‘‘topped-out’’ analyses in future years and we will continue to monitor and evaluate the PCHQR SCIP measures. As noted above, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 50281 we will consider adopting ‘‘topped out’’ and other measure removal criteria similar to those adopted by other quality reporting programs, including the Hospital IQR Program, in future rulemaking. In an effort to reduce the reporting burden for PCHs, in future years, we will consider proposing to require PCHs to report electronically-specified clinical quality measures for the PCHQR Program. We believe that the collection and reporting of data through health information technology would greatly simplify and streamline reporting for many CMS quality reporting programs, including the PCHQR Program. Through electronic reporting, PCHs would be able to leverage EHRs to capture, calculate, and electronically submit quality data that are currently manually chart-abstracted and submitted to CMS for the PCHQR Program. In developing future proposals for electronic clinical quality measures adoption, we will consider the need to align and harmonize measures across various quality reporting programs to minimize the reporting burden imposed on PCHs. We welcomed public comments on the development of electronic clinical quality measure reporting criteria for future years. Comment: Several commenters supported CMS’ proposal to develop electronic clinical quality measure reporting criteria for future years and recommended that CMS consider the content validity and clinical appropriateness of any measures adopted for the PCHQR Program. Response: We thank the commenters for their support and will consider this feedback in future rulemaking. changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure. We believe that nonsubstantive changes may include updates to measures based upon changes to guidelines on which the measures are based. We will continue to use rulemaking to adopt substantive updates to the measures we have adopted for the PCHQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example, changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. We also note that, to the extent a PCHQR measure is endorsed by the NQF, the NQF measure maintenance process incorporates an opportunity for public comment and engagement. We believe the endorsement processes, as well as our treatment of substantive versus nonsubstantive measure changes, adequately balances our need to incorporate updates to PCHQR Program measures in the most expeditious manner possible while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the same measure that we originally adopted. 7. Maintenance of Technical Specifications for Quality Measures We maintain technical specifications for the PCHQR Program measures, and we periodically update those specifications. The specifications may be found on the QualityNet Web site at: https://qualitynet.org/dcs/Content Server?cid=1228772356060& pagename=QnetPublic%2FPage% 2FQnetTier2&c=Page. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505), we finalized a policy under which we use a subregulatory process to make nonsubstantive updates to measures used for the Hospital IQR Program. We also adopted this process for all measures adopted for the PCHQR Program. With respect to what constitutes substantive versus nonsubstantive changes, we expect to make this determination on a case-bycase basis. Examples of nonsubstantive 8. Public Display Requirements Beginning with the FY 2014 Program Section 1866(k)(4) of the Act requires the Secretary to establish procedures for making the data submitted under the PCHQR Program available to the public. Such procedures must ensure that a PCH has the opportunity to review the data that are to be made public with respect to the PCH prior to such data being made public. Section 1866(k)(4) of the Act also provides that the Secretary must report quality measures of process, structure, outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished in such hospital on the CMS Web site. In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53562 through 53563), we finalized our policy to display publicly PCHQR Program data on the Hospital Compare Web site (https://www. hospitalcompare.hhs.gov/) and PO 00000 Frm 00429 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50282 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations established a preview period of 30 days prior to making such data public. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through 50848), we finalized our proposal to display publicly in 2014 and subsequent years the data for the measures listed below: • Adjuvant Chemotherapy is considered or administered within 4 months (120 days) of diagnosis to patients under the age of 80 with AJCC III (lymph node positive) colon cancer (NQF #0223); and • Combination Chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or III hormone receptor negative breast cancer (NQF #0559). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28257), we proposed to display publicly in 2015 and subsequent years the data for the Adjuvant Hormonal Therapy measure (NQF #0220). We also proposed to display publicly no later than 2017 and for subsequent years the data for the measures listed below: • NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138); and • NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). At present, all PCHs are reporting CLABSI and CAUTI data to the NHSN under the PCHQR Program. However, due to the low volume of data produced and reported by the small number of facilities (in fewer than 2 years), the CDC is unable to calculate reasonable and reliable baseline estimates, or expected rates, which are needed for the purpose of calculating these measure rates. Therefore, we estimate that the first public posting of the CLABSI and CAUTI PCHQR Program data reported to the NHSN from the PCHs will occur no later than 2017. We invited public comment on these proposals. Comment: Commenters recommended that CMS revise the CLABSI, CAUTI, and SSI measures to account for cancerspecific risks and consider the variation in the cancer patient population casemix, especially regarding the percentage of patients discharged to palliative or hospice care, when assessing performance on these measures for public display, and recommended that CMS display publicly ICU versus nonICU rates for the CLABSI and CAUTI data. Response: We appreciate the commenters’ feedback and will consider it for future years. We note that the CDC is the measure steward and is VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 responsible for maintaining the measure specifications for the CLABSI, CAUTI, and SSI measures. CDC works closely with external partners and subjectmatter experts to develop and maintain NHSN definitions and criteria that are both standardized and clinically relevant. A concerted effort is made to take into account the heterogeneous patient populations that are monitored and tracked using NHSN, cancer patients being one of many such populations. However, CDC recognizes that the HAI definitions may not account for all heterogeneity and variation among the patient populations and will continue to work with subjectmatter experts to gain input and insight on additional criteria that are needed to better represent specific populations where possible. In addition, now that we have received data specifically from PCHs, those data can be reviewed, along with all other NHSN data, when the SIRs are to be recalculated to determine baselines based on the FY 2014 program year. If strong variations are found, we will consider revising the calculation for PCHs. Comment: One commenter supported CMS’ proposal to delay the display of both NHSN CAUTI and CLABSI until no later than 2017 in order to ensure that reliable expected rates can be calculated, and recommended that CMS evaluate the NHSN SSI data under the same standard. Response: We thank the commenter for its support. The main purposes of the PCHQR Program are to report publicly quality of care information that consumers can use to make decisions about their health care and to encourage PCHs to improve their quality of care. Accordingly, we will delay public reporting of CLABSI and CAUTI data until no later than 2017 so that reliable baseline estimates and expected rates can be determined. We believe this delay is necessary in order to provide meaningful and reliable data available for consumers to make informed health care decisions. After considering the comment, we agree that this same standard should apply to the SSI measure. After consideration of the public comments we received, we are finalizing the proposal to display publicly beginning in 2015 the data for the Adjuvant Hormonal Therapy measure (NQF #0220), and to display publicly the CLABSI and CAUTI data no later than 2017. PO 00000 Frm 00430 Fmt 4701 Sfmt 4700 9. Form, Manner, and Timing of Data Submission Beginning With the FY 2017 Program a. Background Section 1866(k)(2) of the Act requires that, beginning with the FY 2014 PCHQR Program, each PCH must submit to the Secretary data on quality measures specified under section 1866(k)(3) of the Act in a form and manner, and at a time, as specified by the Secretary. Data submission requirements and deadlines for the PCHQR Program are generally posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/ ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier3& cid=1228772864228. b. Reporting Requirements for the New Measure: External Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning With the FY 2017 Program In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28257 through 28258), we proposed that PCHs report the External Beam Radiotherapy for Bone Metastases (NQF #1822) measure beginning with January 1, 2015 discharges and for subsequent years. We proposed that PCHs would report this measure to us via a CMS Web-based Measures Tool on an annual basis (July 1 through August 15 of each respective year). This approach is consistent with the data submission deadlines finalized for the clinical process/oncology care measures (78 FR 50850 through 50851) and PCHs are already preparing to begin submitting PCHQR data using this timeline. We also believe that annual data submission of once per year (as opposed to quarterly data submission of four times per year) will reduce PCHs’ costs and burden. We believe that these proposed dates will provide enough advance notice for PCHs to prepare to report the measure. We proposed to collect the EBRT for Bone Metastases measure rates for the FY 2017 program and subsequent years using all-patient (both Medicare and non-Medicare) data from the four quarters (Q1, Q2, Q3, and Q4) of CY 2015, and that PCHs must submit aggregate data for the measure for each of these quarters during a data submission window that would be open from July 1 through August 15, 2016. For the FY 2017 program and subsequent years, we refer readers to the reporting periods and data submission window outlined in the table below in this section. For data collection, we proposed that PCHs submit aggregate-level data through the CMS Web-based Measures E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Tool or submit an aggregate data file through a vendor (via QualityNet infrastructure). We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850 through 50851) for more information on the CMS Web-based Measures tool. We welcomed public comment on the proposed reporting periods, data submission timeframes, and data collection methods/modes for the proposed measure for the FY 2017 program and subsequent years. Comment: One commenter requested that CMS provide clarification on whether a sampling methodology (including population and sampling guidelines) will be permitted for the EBRT for bone metastases measure because this approach will lessen the burden on PCHs. Response: We agree that an all-patient EBRT sampling methodology would provide the public with quality measure data that represents the entire patient population of PCHs. We believe that this approach would facilitate PCH education through a consistent sampling methodology across PCHQR measures. Accordingly, we are finalizing a sampling methodology for the EBRT measure in this final rule that is consistent with the sampling methodology standards finalized for the clinical process/oncology care and SCIP measures. We will incorporate this EBRT sampling methodology in the next feasible regularly scheduled PCHQR specifications manual semiannual update. Comment: One commenter recommended that CMS adopt the same reporting requirements proposed for the clinical process/oncology care, clinical process/cancer specific treatment, and SCIP measures for the new EBRT for bone metastases measure. Response: The EBRT for bone metastases reporting proposals (79 FR 28257) are consistent with the clinical process/oncology care proposals (79 FR 28258). These proposals allow two data 50283 submission options to submit aggregate data: via a CMS Web-based Measures Tool or an aggregate data file. After consideration of the public comments we received, we are finalizing the sampling methodology by allowing PCHs to use the same sampling approach that we are finalizing for the clinical process/oncology care measures (we refer readers to the sampling table found in section IX.B.9.d. of the preamble of this final rule (New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning with the FY 2016 Program)) for the EBRT measure sampling purposes. In addition, we are finalizing our proposed reporting requirements for the EBRT measure, beginning with the FY 2017 PCHQR Program. The table below outlines the finalized reporting periods and submission timeframes for FY 2017, FY 2018, and subsequent years for the EBRT for bone metastases measure. FINALIZED EXTERNAL BEAM RADIOTHERAPY FOR BONE METASTASES (NQF #1822) MEASURE-REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2017 PROGRAM AND SUBSEQUENT YEARS Program year (FY) Reporting periods (CY) 2017 ................................... Q1 2015 discharges ............................................................................................ (January 1, 2015–March 31, 2015) .................................................................... Q2 2015 discharges ............................................................................................ (April 1, 2015–June 30, 2015). Q3 2015 discharges ............................................................................................ (July 1, 2015–September 30, 2015). Q4 2015 discharges ............................................................................................ (October 1, 2015–December 31, 2015). Q1 2016 discharges ............................................................................................ (January 1, 2016–March 31, 2016) .................................................................... Q2 2016 discharges ............................................................................................ (April 1, 2016–June 30, 2016). Q3 2016 discharges ............................................................................................ (July 1, 2016–September 30, 2016). Q4 2016 discharges ............................................................................................ (October 1, 2016–December 31, 2016). Q1 discharges ..................................................................................................... (January 1–March 31 of each year 2 years before the program year) .............. Q2 discharges ..................................................................................................... (April 1–June 30 of each year 2 years before the program year). Q3 discharges ..................................................................................................... (July 1–September 30 of each year 2 years before the program year). Q4 discharges ..................................................................................................... (October 1–December 31 of each year 2 years before the program year). 2018 ................................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Subsequent Years ............. c. Reporting Options for the Clinical Process/Cancer Specific Treatment Measures Beginning With the FY 2015 Program and the SCIP and Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28258 through 28259), we proposed to modify the data submission requirements for the three clinical process/cancer specific VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Data submission deadlines treatment measures that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53564), and the six SCIP measures and five clinical process/ oncology care measures that we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50846). Under those requirements, PCHs submit aggregatelevel clinical process/cancer specific treatment measure data to a CMS contractor, aggregate-level clinical process/oncology care measure data PO 00000 Frm 00431 Fmt 4701 Sfmt 4700 July 1, 2016–August 15, 2016. July 1, 2017–August 15, 2017. July 1–August 15 of each year before the program year. through the CMS Web-based Measures Tool, and patient-level SCIP measure data through the QualityNet infrastructure. We proposed to allow PCHs to report the clinical process/ cancer specific treatment, SCIP, and clinical process/oncology care data to CMS using one of two mechanisms. Under the first option, which was newly proposed for the SCIP and clinical process/oncology care measure sets, PCHs or their authorized vendors may E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50284 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations enter aggregate numerator and denominator data into a CMS Web page located on the secure part of the CMS QualityNet infrastructure. Under the second option, which was newly proposed for the clinical process/cancer specific treatment, SCIP, and clinical process/oncology care measures, PCHs or their authorized vendors may submit an aggregate data file through a CMS secure QualityNet file exchange process. We proposed these options in order to decrease the reporting burden for PCHs. We believe that the newly proposed submission option, which is described further below for the SCIP measures, will result in a considerable burden reduction for PCHs, as it includes once annually, rather than once quarterly, submission deadlines and submission of aggregate data as opposed to patientlevel data for the SCIP measures. In addition, we proposed a second option, allowing PCHs to submit an annual aggregate data file stratified by four quarters for each of the SCIP measures. We stated that we believed this additional option would provide the public with sufficiently reliable quality measure information while reducing PCH burden through providing two data collection options. We also stated that we would provide detailed technical file format specifications on the public QualityNet Web site (www.qualitynet.org) following publication of this final rule. We outlined the new submission deadlines for the SCIP measures in the table below. We stated that these requirements would replace, for the purposes of the PCHQR Program, the update to the SCIP timeline and IT infrastructure that we finalized for the PCHQR Program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50851 through 50852). We invited public comment on the proposed new reporting mechanism that would apply to the three clinical process/cancer specific treatment measures, five clinical process/oncology care treatment measures, and six SCIP measures. Comment: One commenter supported the proposal to allow two reporting options for the clinical process/cancer specific treatment, clinical process/ oncology care, and SCIP measures. One commenter supported the proposal to update the reporting periods and submission timelines for the six SCIP measures, noting that the proposal simplifies the PCHQR Program’s data reporting process. Response: We appreciate the commenters’ support of this proposal. Our intent is to reduce burden and effort and align CMS infrastructure where VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 appropriate by offering alternative options for PCHs to submit measure data. We are finalizing the two reporting options for the clinical process/cancer specific treatment and clinical process/ oncology care measures as proposed. However, the six PCHQR SCIP measures, we are only finalizing the second proposed option, under which PCHs or their vendors may submit an annual aggregate data file stratified by four quarters data via the CMS QualityNet portal. We are not finalizing the first proposed option that would have allowed PCHs to submit aggregate numerator and denominator data into a CMS Web-Based Measures Tool for the SCIP measures because we were recently informed by our IT developers that the proposed CMS Web page would not be modified to collect aggregate SCIP data by the previously finalized January 2015 initial discharge date. As a result, we are retaining as a second option for these measures the data submission that is currently in place, under which PCHs may submit patientlevel data to CMS through the QualityNet infrastructure. Comment: One commenter expressed concern that the proposed submission options for the clinical process/cancer specific treatment measures, which allow for a data submission other than through the CMS contractor (77 FR 53564) which uses the Commission on Cancer Rapid Quality Reporting System (RQRS), could result in declining patient outcomes and less PCH accountability. Response: We appreciate the commenter’s feedback. We strongly believe that the vendor submission approach, allowing for vendors to submit aggregate data files is consistent across all PCHQR measures and other CMS quality reporting programs to submit data on behalf of the respective hospital facilities. In addition, we believe this approach will greatly reduce reporting burden, minimize duplication of effort, and increase efficiency because vendors commonly submit more than one measure set at the same time (for example, annually or quarterly) on behalf of the facilities. Comment: One commenter recommended that CMS update NQF #0383 (Oncology: Plan of Care for Pain) to include a minimum threshold for pain in the denominator and to provide a more specific definition for ‘‘visit’’ that includes oncology visits (for example, for palliative care). The commenter also recommended all changes to the measure specifications of the clinical process/oncology care PO 00000 Frm 00432 Fmt 4701 Sfmt 4700 measures be communicated to NQF and PCHs. Response: We appreciate the commenter’s feedback and will consider it in future rulemaking. Comment: Several commenters asked CMS to consider whether the SCIP measures have been adequately tested in the PCH patient population, noting that the measures may inadvertently encourage care that is not applicable to the PCH setting. For example, one commenter noted that SCIP-Inf-3 requires that prophylactic antibiotics be discontinued within 24 hours after surgery end time, but that this approach may not be well-suited for oncologic patient populations. Response: We note that we have considered the appropriateness of these measures for the PCH settings, as the inclusion and exclusion criteria for the SCIP measures adopted for the PCHQR Program exclude patients from the measure denominator when the care does not apply. For example, the SCIPInf-3 measure specifications include an exclusion criterion for patients with a Reason to Extend Antibiotics. We believe it is important to note that the SCIP measures include all cancer surgeries (and not limited to orthopedic surgeries) performed by both PCHs and many acute care hospitals. We will continue to collaborate with PCHs that have questions about the SCIP measures, and to incorporate nonsubstantive updates into the PCHQR specifications manual. After consideration of the public comments we received, we are finalizing the proposed reporting requirements for the clinical process/ cancer specific treatment and clinical process/oncology care measures beginning with the FY 2015 and FY 2016 program years respectively with one modification. We are not finalizing the CMS Web-Based Measures Tool (aggregate-level data) for the SCIP measures because we are able to leverage the existing patient-level CMS SCIP IT collection infrastructure. PCHs may submit the SCIP measures using two options: (1) Authorized vendor submission of an aggregate data file into the secure CMS QualityNet portal to CMS; or (2) submission of data via the secure CMS QualityNet portal. This finalized policy aligns our existing reporting infrastructure across the PCHQR Program and other CMS quality improvement programs and provides an additional vendor option to report SCIP data to CMS. The reporting periods and submission timeframes for the clinical process/ cancer specific treatment and clinical process/oncology care measures are E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations outlined in the FY 2013 and FY 2014 IPPS/LTCH PPS final rules (77 FR 53564 and 78 FR 50851, respectively). The table below outlines the finalized aggregate data file reporting periods and submission timeframes for FY 2016, FY 2017, and subsequent years for the SCIP measures. Patient-level SCIP reporting period and data submission timeframes are available on the QualityNet Web site 50285 (https://www.qualitynet.org/dcs/Content Server?c=Page&pagename= QnetPublic%2FPage%2FQnetTier3& cid=1228773716091). FINALIZED SIX SCIP MEASURES-AGGREGATE DATA FILE REPORTING PERIODS AND SUBMISSION TIMEFRAMES FOR THE FY 2016 PROGRAM AND SUBSEQUENT YEARS Program year (FY) Reporting periods (CY) 2016 ................................... Q1 2015 discharges ............................................................................................ (January 1, 2015–March 31, 2015) .................................................................... Q2 2015 discharges ............................................................................................ (April 1, 2015–June 30, 2015) ............................................................................ Q3 2015 discharges ............................................................................................ (July 1, 2015–September 30, 2015). Q4 2015 discharges ............................................................................................ (October 1, 2015–December 31, 2015). Q1 discharges ..................................................................................................... (January 1–March 31 of each year 2 years before the program year) .............. Q2 discharges ..................................................................................................... (April 1–June 30 of each year 2 years before the program year). Q3 discharges ..................................................................................................... (July 1–September 30 of each year 2 years before the program year). Q4 discharges ..................................................................................................... (October 1–December 31 of each year 2 years before the program year). 2017 ................................... Subsequent Years ............. Data submission deadlines The proposed methodology will allow for different numbers of cases to be reported based on each PCH’s cancer patient population size. This is necessary for the PCHQR Program because bed size varies among PCHs from 20 to >250 beds.129 The sampling methodology for the clinical process/ oncology care measures is shown below, and we believe it will decrease the reporting burden on PCHs while producing reliable measure rates. d. New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259), we did not propose any changes to the previously finalized procedural requirements, Notice of Participation (NOP) requirements, or Data Accuracy and Completeness Acknowledgement (DACA) requirements. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through 53567) for more information on these requirements. Average quarterly initial population size ‘‘N’’ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50842), we adopted a policy under which PCHs could report the five clinical process/oncology care measures finalized for the FY 2016 program and subsequent years using the same sampling methodology that we allow for the reporting of those measures under the PQRS. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259), we proposed to replace the previously adopted sampling methodology with a sampling methodology similar to the one we have allowed hospitals to use to report the SCIP measures under the Hospital IQR Program. The sampling methodology specified in the PQRS Specifications Manual is specific to the physician office setting. We believe that the methodology we proposed is more applicable to PCHs because it was developed for hospital-level reporting. >125 ......... 51–125 ..... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 10–50 ....... <10 ........... Minimum required sample size ‘‘N’’ 25. 20 percent of the initial patient population. 10. No sampling; 100 percent of the initial patient population. We also proposed that PCHs report population and sample size counts (by measure) for Medicare and nonMedicare discharges by quarter for the five clinical process/oncology care measures for the FY 2016 program and subsequent years. We proposed these requirements in order to support our effort to align with existing reporting requirements used in other CMS quality reporting programs, such as the Hospital IQR Program, which requires participating hospitals to 129 American Hospital Directory: https:// www.ahd.com/freesearch.php. PO 00000 Frm 00433 Fmt 4701 Sfmt 4700 July 1, 2015–August 15, 2015. July 1, 2016–August 15, 2016. July 1–August 15 of each year before the program year. submit population and sample size counts for certain measures in addition to the all-payer data needed to calculate measure rates. We view it as vital for PCHs to determine accurately their aggregate population and appropriate sample size data in order for us to assess PCHs’ data reporting accuracy and completeness for their total population of cases, including both Medicare and non-Medicare patients. We welcomed public comments on the proposed sampling guidelines and proposed population and sample size reporting requirements for the clinical process/oncology care measures for the FY 2016 program and subsequent years. Comment: Several commenters supported the proposal to replace the PQRS physician-level sampling methodology with the proposed new sampling methodology. However, one commenter requested clarification on whether the proposal to collect allpatient data for the clinical process/ oncology care measures conflicts with the proposed sampling methodology and also on whether the sampling methodology is based on the number of patients applicable for each measure, or on bed size (that is, hospital-level sample size determination). Response: We thank the commenters for their support. The term ‘‘all-patient data’’ refers to data regarding both Medicare and non-Medicare patients. Consistent with the sampling methodology standards that we adopted for these measures under the Hospital IQR Program, when PCHs identify the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50286 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations initial patient population, they will use ‘‘all-patient data’’ to determine the population of patients meeting the measure criteria prior to individual measure denominator exclusions. Thus, the sample will include both patients included and excluded from the measure denominator. We believe that this sampling methodology reduces potential bias in measure rates from sampling all patients included in the measure’s initial patient population. This initial patient population is usually defined by groups of ICD–9–CM principal procedure or diagnosis codes, which may be readily identified by PCHs by using computer billing records common to Medicare and non-Medicare health insurance payers. The PCHs will subsequently identify the sample size based on the patient population (‘‘allpatient data’’). This sampling process is applicable for each clinical process/ oncology care measure. Comment: One commenter requested that CMS provide the specifications for the clinical process/oncology care measures and their new sampling method. Response: We appreciate the commenter’s feedback. We have partnered closely with all 11 PCHs and will provide training and education materials on all measures, including the clinical process/oncology care measures and the applicable proposed sampling methodology. These materials will be available on our QualityNet Web site (https://www.qualitynet.org). Comment: One commenter recommended that CMS revise the proposed reporting requirements for the clinical process/oncology care measures in order to require that reporting of population and sample size counts be based on electronically available data only. Response: We appreciate the commenter’s feedback. We interpret the comment to recommend that data be submitted via the CMS Web-based Measures Tool only. However, we believe it is most appropriate and feasible at this time to provide PCHs with data submission options. We also understand from past discussions with PCHs that the 11 PCHs vary in their implementation of EHRs. We will consider future available data collection options for PCHs, including electronic Clinical Quality Measures (eCQMs). We also believe that requiring population and sample size count reporting based on electronic data might adversely burden PCHs that do not yet have the means to collect electronic data. Comment: One commenter recommended that benchmarks for the clinical process/oncology care measures VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 be based on statistically significant aggregate calculations only. Response: We thank the commenter for its feedback. Currently, we do not have a policy to develop benchmarks. In our effort to monitor and evaluate program growth and sustainability, we will be observing the clinical process/ oncology care measures baselines and expected rates. 10. Exceptions From Program Requirements In our experience with other quality reporting and performance programs, we have noted occasions when providers have been unable to submit required quality data due to extraordinary circumstances that are not within their control (for example, natural disasters). We do not wish to unduly increase their burden during these times. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our policy that, for the FY 2014 program and subsequent years, PCHs may request and we may grant exceptions (formerly referred to as waivers) with respect to the reporting of required quality data when extraordinary circumstances beyond the control of the PCH warrant. When exceptions are granted, we will notify the respective PCH. We are in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form (CMS–10432), approved under OMB control number 0938–1171. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259), we did not propose any substantive changes to this PCHQR exception process. C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program 1. Background In accordance with section 1886(m)(5) of the Act, as added by section 3004(a) of the Affordable Care Act, the Secretary established the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under section 1886(m)(5)(A)(i) of the Act, for the rate year 2014 and each subsequent rate year, in the case of an LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a rate year, any annual update (which we also refer to as a ‘‘payment determination’’) to a standard Federal rate for discharges for the hospital during the rate year, and after application of section 1886(m)(3) of the Act, shall be reduced by two percentage points. As we discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51744), for the purposes of the PO 00000 Frm 00434 Fmt 4701 Sfmt 4700 LTCH PPS, the term ‘‘rate year’’ and the term ‘‘fiscal year’’ both refer to the time period beginning October 1 and ending September 30. In order to avoid any possible confusion, we will use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ in our discussion of the LTCHQR Program. Under section 1886(m)(5)(D)(i) of the Act, the quality measures for the LTCHQR Program are measures selected by the Secretary that have been endorsed by an entity that holds a contract with the Secretary under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of the Act applies. This contract is currently held by the National Quality Forum (NQF). Additional information regarding the NQF and its measure review processes is available at: https:// www.qualityforum.org/Measuring_ Performance/Measuring_ Performance.aspx. While as a general matter the Secretary must select endorsed measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act provides that an exception may be made in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity that holds a contract with the Secretary under section 1890(a) of the Act. In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the Secretary to specify a measure that is not so endorsed, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. The LTCHQR Program was implemented in the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51743 through 51756). 2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program We seek to promote higher quality and more efficient health care for the beneficiaries we serve. Quality reporting programs, including public reporting of quality information, advance such quality improvement efforts. Quality measurement remains the key tool to the success of these programs. Therefore, the selection of only the highest caliber of measures is a priority for CMS. We seek to adopt measures for the LTCHQR Program that promote better, safer, and more efficient care. Our measure development and selection activities for the LTCHQR Program take into account national priorities, such as those established by the National Priorities Partnership (https:// www.qualityforum.org/Setting_ E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Priorities/NPP/National_Priorities_ Partnership.aspx), the HHS Strategic Plan (https://www.hhs.gov/secretary/ about/priorities/priorities.html), the National Quality Strategy (NQS) https://www.ahrq.gov/workingforquality/ nqs/nqs2011annlrpt.htm), and the CMS Quality Strategy (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/ QualityInitiativesGenInfo/CMS-QualityStrategy.html). We also must consider input from the NQF Measures Application Partnership (MAP) when selecting measures under the LTCHQR Program. The MAP is composed of multi-stakeholder groups convened by the NQF, our current contractor under section 1890 of the Act. The NQF must convene these stakeholders and provide us with the stakeholders’ input on the selection of certain categories of quality and efficiency measures as part of a prerulemaking process described in section 1890A of the Act. We, in turn, must take this input into consideration in selecting those categories of measures. The NQF MAP met in December 2013 and January 2014 and provided input to CMS as required under section 1890A(a)(3) of the Act. This input appears in the MAP’s January 2014 PreRulemaking Report available for download at: https:// www.qualityforum.org/Publications/ 2014/01/MAP_Pre-Rulemaking_Report_ _2014_Recommendations_on_ Measures_for_More_than_20_Federal_ Programs.aspx. Measures proposed for the LTCHQR Program in this final rule are measures CMS included under the List of Measures under Consideration (MUC List) for December 1, 2013,130 a list that the Secretary must make available to the public by December 1 of each year, as part of the pre-rulemaking process, as described in section 1890A(a)(2) of the Act. The measures we proposed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28263 through 28268) for the LTCHQR Program are discussed in the MAP PreRulemaking Report (pp. 192–193). The MAP reviewed each measure proposed in this rule. We refer readers to the following sections of the preamble of this final rule for more information on the MAP’s recommendations: IX.C.7.a.(1), Functional Status Quality Measure: Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; IX.C.7.a.(2), Functional Status 130 Available at: https://www.qualityforum.org/ WorkArea/ linkit.aspx?LinkIdentifier=id&ItemID=74245. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Quality Measure: Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and IX.C.7.b., Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. After due consideration to any measures that may have been endorsed or adopted by a consensus organization, including the NQF, for the LTCH setting, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259 through 28278) we proposed measures that are either supported by the MAP for the LTCHQR Program, or that we believe most closely align with the national priorities discussed in this section of the proposed rule. In the absence of the MAP’s support, in some cases we proposed measures for which the MAP expressed conditional support and that meet the exception criteria in section 1886(m)(5)(D)(ii) of the Act. Further discussion of why each measure is a high priority in the LTCH setting is included below. 3. Policy for Retention of LTCHQR Program Measures Adopted for Previous Payment Determinations In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 53615), for the LTCHQR Program, we adopted a policy that once a quality measure is adopted, it will be retained for use in subsequent years, unless otherwise stated. For the purpose of streamlining the rulemaking process, when we initially adopt a measure for the LTCHQR Program for a payment determination, this measure will be automatically adopted for all subsequent years or until we propose to remove, suspend, or replace the measure. For further information on how measures are considered for removal, suspension, or replacement, we refer readers to the FY 2013 IPPS/ LTCH PPS final rule. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28260), we did not propose any changes to this policy for retaining LTCHQR Program measures adopted for previous payment determinations. 4. Policy for Adopting Changes to LTCHQR Program Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616), we adopted our policy that if the NQF updates an endorsed measure that we have adopted for the LTCHQR Program in a manner that we consider to not substantively change the nature of the measure, we will use a subregulatory process to incorporate those updates to PO 00000 Frm 00435 Fmt 4701 Sfmt 4700 50287 the measure specifications that apply to the LTCHQR Program. With respect to what constitutes a substantive versus a nonsubstantive change, we expect to make this determination on a measureby-measure basis. Examples of such nonsubstantive changes might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and changes to exclusions for a measure. The subregulatory process for nonsubstantive changes will include revision of the LTCHQR Program Manual and posting of updates on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. Examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent, such as changes in acceptable timing of medication, procedure/ process, test administration, or expansion of the measure to a new setting. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28260 through 28261), we did not propose any changes to this policy for adopting changes to LTCHQR Program measures. 5. Previously Adopted Quality Measures a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53636), we retained the application of Percent of Residents with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) to the LTCH setting (initially adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51745 through 51750)) for the FY 2015 payment determination and subsequent years, and adopted updated versions of National Health Safety Network (NHSN) CatheterAssociated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) and NHSN Central Line-Associated Blood Stream Infection (CLABSI) Outcome Measure (NQF #0139), for the FY 2014 payment determination and subsequent years. We also adopted two new quality measures for the LTCHQR Program for the FY 2016 payment determination and subsequent years, in addition to the three previously adopted measures (the CAUTI measure, CLABSI measure, and Pressure Ulcer measure): (1) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short- E:\FR\FM\22AUR2.SGM 22AUR2 50288 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Stay) (NQF #0680); and (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) (77 FR 53624 through 53636). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863), we adopted the NQF-endorsed version of the Pressure Ulcer measure, Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), for the LTCHQR Program for the FY 2015 payment determination and subsequent years. Set out below are the quality measures, both previously adopted measures retained in the LTCHQR Program and measures adopted in FY 2013 and FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016 payment determinations and subsequent years. LTCHQR PROGRAM QUALITY MEASURES ADOPTED FOR THE FY 2015 AND FY 2016 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS NQF Measure ID Measure title Payment determination NQF #0138 ................ National Health Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure. National Health Safety Network (NHSN) Central Line-Associated Blood Stream Infection (CLABSI) Outcome Measure. Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay). Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay). Influenza Vaccination Coverage among Healthcare Personnel ...................................... FY 2015 and Subsequent FYs. NQF #0139 ................ NQF #0678 ................ NQF #0680 ................ NQF #0431 ................ While we did not propose any changes in the FY 2015 IPPS/LTCH PPS proposed rule to measure specifications for NQF #0678, Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay), we received input from several commenters on this measure. Comment: A few commenters suggested CMS consider adding a ‘‘present on admission’’ (POA) indicator in the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set. These commenters noted that a POA indicator is critical to aid in the determination of whether a pressure ulcer was developed as a result of care provided by an LTCH. Response: We recognize the importance of determining pressure ulcers that are ‘‘present on admission’’ and taking this into account when assessing new or worsened pressure ulcers in the LTCH setting. The quality measure Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), is designed to identify pressure ulcers that are present on admission. Items M0800A, M0800B, and M0800C on the LTCH CARE Data Set discharge assessment capture patient-specific data to identify Stage 2, Stage 3, and Stage 4 pressure ulcers that are ‘‘new’’ or ‘‘worsened’’ since the time of admission assessment, thus identifying only those Stage 2, Stage 3 and Stage 4 pressure ulcers that were not present on the admission assessment and/or only those Stage 2, Stage 3 and Stage 4 pressure ulcers that were present at a lower stage on the admission assessment. We refer readers to the measure specifications for the Pressure Ulcer measure, which are available for download at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ and at www.qualityforum.org/QPS/0678. Comment: A commenter recommended that ‘‘behavioral patients’’ be excluded from the Pressure Ulcer measure. The commenter noted that the inclusion of all inpatients regardless of age and any other criteria has a significant impact on the reporting burden for LTCHs and that the exclusion of behavioral patients would lessen burden on LTCHs because these patients do not significantly contributing to the Pressure Ulcer measure. Response: We appreciate the commenter’s input on this previously FY 2015 and Subsequent FYs. FY 2015 and Subsequent FYs. FY 2016 and Subsequent FYs. FY 2016 and Subsequent FYs. finalized measure. Pressure ulcers are serious medical conditions that can lead to serious life threatening infections, can substantially increase the cost of care, and are an important measure of quality. As a result, we believe that all patients, regardless of their cognitive or behavioral health status, should be assessed for pressure ulcer risk, and appropriate pressure ulcer monitoring, prevention, and management should be implemented for all patients in an LTCH. We refer the commenter to the current measure specifications for NQF #0678, including patient exclusions and inclusions, available at www.qualityforum.org/QPS/0678. b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule, we adopted three additional measures for the FY 2017 payment determination and subsequent years (78 FR 50863 through 50874) and one additional measure for the FY 2018 payment determination and subsequent years (78 FR 50874 through 50877). These measures are set out in the table below. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV LTCHQR PROGRAM QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS NQF Measure ID Measure title NQF #1716 ........................................................ National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00436 Fmt 4701 Sfmt 4700 Payment determination FY 2017 and Subsequent Years E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50289 LTCHQR PROGRAM QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS—Continued NQF Measure ID Measure title NQF #1717 ........................................................ National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals. Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay). NQF #2512 (Under Review at NQF*) ............... Application of NQF #0674 ................................. Payment determination FY 2017 and Subsequent Years FY 2017 and Subsequent Years FY 2018 and Subsequent Years tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * Not NQF endorsed, currently under review at NQF, please see: https://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_ Measures.aspx While we did not propose any changes in the FY 2015 IPPS/LTCH PPS proposed rule to measures previously adopted for the FY 2017 payment determination and subsequent years, we received input from a few commenters regarding three previously finalized measures: NHSN Facility-Wide Inpatient Hospital-Onset MethicillinResistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716), NHSN Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717), and All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals (NQF #2512, under review at NQF). While we greatly appreciate the commenters’ views on these previously finalized measures, we did not make any proposals relating to them in the FY 2015 IPPS/LTCH PPS proposed rule. Therefore, we will not summarize and address all of these comments in detail in this final rule. However, we will consider all of these comments in future rulemaking and program development. Comment: A commenter supported the inclusion of the MRSA and CDI measures in the LTCHQR Program noting that the LTCH patients arrive after receiving several weeks of therapy for infections that are difficult to treat and therefore have high levels of exposure to antibiotics. Another commenter also supported these two measures and indicated support for the readmission measure. This commenter urged CMS to adopt outcome measures more quickly and suggested that the three aforementioned measures finalized for FY 2017 be implemented for FY 2016. Response: We appreciate the commenter’s recommendation to adopt the measures more quickly than the previously finalized timeline. However, in order to ensure adequate time to support successful measure VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 implementation across the LTCHs, we believe the previously finalized data collection period and submission deadlines are appropriate. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50880 through 50882) for more information. Comment: A commenter urged CMS to share, on a monthly basis, claims data with LTCHs for any patients readmitted within 30 days of the LTCH discharge. The commenter noted that providing these data would (1) notify LTCHs of readmissions that will affect their quality reporting data, and (2) enable LTCHs to identify potential systemic problems and implement corrective action plans focused on improving quality of care and reducing preventable readmissions. Response: We appreciate the commenter’s support for this previously finalized quality measure. This commenter recommended a quality improvement process that is separate from the purpose of the readmissions measure. The readmissions measure is intended to report statistically robust estimates of standardized readmission rates over a particular time, while the commenter recommends an intensive quality control process with real time data on specific patients. We will consider these quality improvement process recommendations as we move forward with the LTCHQR Program and future measure development and reporting efforts. To facilitate reduction in readmissions, we encourage all LTCHs to conduct appropriate discharge planning and follow up with their patients to monitor and ensure highquality care and improved outcomes. 6. Revisions to Data Collection Period and Submission Deadlines for Previously Adopted Quality Measures In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28262 through 28263) we proposed, for the FY 2016 payment determination and subsequent PO 00000 Frm 00437 Fmt 4701 Sfmt 4700 years, to revise data collection period and submission deadlines for a measure that we previously adopted for the LTCHQR Program: Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). We also proposed, for the FY 2018 payment determination only, revised data collection period and submission deadlines for the application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (application of NQF #0674) measure. For the FY 2019 payment determination and subsequent years, data collection for this measure would begin on January 1 and continue through December 31. a. Revisions to Data Collection Period and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through 50861), we revised the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure for the FY 2016 payment determination and subsequent years. Specifically, we finalized that for the FY 2016 payment determination, LTCHs must collect data for any patient admitted or discharged during the influenza vaccination season, from October 1, 2014, through April 30, 2015, and submit data for these patients by May 15, 2015. We sought to better align the data collection period and submission deadlines of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure with the data collection period and submission deadlines of the Percent of Residents or Patients with E:\FR\FM\22AUR2.SGM 22AUR2 50290 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) measure because both measures are reported using the same data collection instrument, the LTCH CARE Data Set. Therefore, for the FY 2016 payment determination and subsequent years, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28262), we proposed to revise the data collection period and submission deadlines for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure. Specifically, we proposed that the first data collection period would take place during the fourth quarter of the CY preceding the applicable FY (for example, October 2014 through December 2014 for the FY 2016 payment determination), with data submission by February 15, 2015, and the second data collection period would take place during the first quarter of the subsequent CY (for example, January 2015 through March 2015 for the FY 2016 payment determination), with data submission by May 15, 2015. The changes are illustrated below for the FY 2016 and FY 2017 payment determinations only, but similar collection period and submission deadlines would also apply to subsequent years. By taking into account the influenza vaccination season, these changes would align data collection and submission for this measure (NQF #0680) with the rest of the LTCH CARE Data Set. DATA COLLECTION PERIOD AND SUBMISSION DEADLINES FOR LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 AND FY 2017 PAYMENT DETERMINATIONS: PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Data collection period October January October January 1, 1, 1, 1, Submission deadlines 2014—December 31, 2014 ................................................................ 2015—March 31, 2015 ...................................................................... 2015—December 31, 2015 ................................................................ 2016—March 31, 2016 ...................................................................... We noted that these changes would only apply to the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) for the LTCHQR Program, and would not be applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. We invited public comments on our proposal to revise the data collection period and submission deadlines for this patient influenza vaccination measure (NQF #0680) for the FY 2016 payment determination and subsequent years. We refer readers to section IX.9.c. of the preamble of this final rule for our responses to comments on this proposal, as well as our final policy on this proposal. February 15, 2015 ................................ May 15, 2015. February 15, 2016 ................................ May 15, 2016. b. Revisions to Data Collection Period and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long-Stay) (NQF #0674) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 through 50877), we adopted the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) for the FY 2018 payment determination. We further finalized that LTCHs should begin to collect and submit data on this measure using the LTCH CARE Data Set starting January 1, 2016. To ensure the successful implementation of new and updated versions of LTCH CARE Data Set, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28262 through 28263), we noted that we will be following an implementation cycle beginning April 1, 2016, which will allow for a predictable future release schedule. We believe that adherence to a predictable future release schedule that takes into account both Payment determination FY 2016. FY 2017. the changes that must be made to the LTCH CARE Data Set, as well as requirements that are managed by LTCHs for such changes, will help ensure successful implementation. Therefore, we will be adhering to a date of April 1 of any given year when releasing future iterations of the LTCH CARE Data Set. This change will effectively delay the implementation of the January 1, 2016, release by three months, allowing LTCHs additional time to become familiar with and to participate in trainings related to the revised LTCH CARE Data Set, as well as time to incorporate given changes into their existing IT infrastructure. Therefore, we proposed that for the FY 2018 payment determination, data collection for this measure would begin on April 1, 2016. For all subsequent years, data collection for this measure would begin on January 1 and continue through December 31. The changes are illustrated below for the FY 2018 and FY 2019 payment determinations. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV DATA COLLECTION PERIOD AND SUBMISSION DEADLINES FOR LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 AND FY 2019 PAYMENT DETERMINATIONS: APPLICATION OF PERCENT OF RESIDENTS EXPERIENCING ONE OR MORE FALLS WITH MAJOR INJURY (LONG-STAY) (NQF #0674) Data collection period Submission deadlines April 1, 2016—June 30, 2016 .............................................................................. July 1, 2016—September 30, 2016 ..................................................................... October 1, 2016—December 31, 2016 ................................................................ January 1, 2017—March 31, 2017 ...................................................................... April 1, 2017—June 30, 2017 .............................................................................. July 1, 2017—September 30, 2017 ..................................................................... October 1, 2017—December 31, 2017 ................................................................ August 15, 2016 ................................... November 15, 2016. February 15, 2017. May 15, 2017 ........................................ August 15, 2017. November 15, 2017. February 15, 2018. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00438 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Payment determination FY 2018. FY 2019. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We noted that these proposed changes would be applicable only to the application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) measure, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless specifically proposed for such measures. We invited public comments on these proposals. We refer readers to section IX.9.f. of the preamble of this final rule for our responses to comments on these proposals, as well as our final policy on this proposal. 7. New LTCHQR Program Quality Measures for the FY 2018 Payment Determination and Subsequent Years In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28263 through 28268), we proposed three new quality measures for the FY 2018 payment determination and subsequent years. Two of these are related to functional status, and one measure is related to ventilator-associated events (VAE). One of the proposed functional status quality measures is Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. The second proposed functional status quality measure is Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. The quality measures are described in more detail below. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. New LTCHQR Program Functional Status Quality Measures for the FY 2018 Payment Determination and Subsequent Years Patients in LTCHs present with clinically complex conditions. In addition to having complex medical care needs for an extended period of time, LTCH patients often have functional limitations due to the nature of their conditions, as well as deconditioning due to prolonged bed rest and treatment requirements (for example, ventilator use). These patients are therefore at high risk for functional decline during the LTCH stay that is both condition-related and iatrogenic. The National Committee on Vital and Health Statistics, Subcommittee on Health,131 noted: ‘‘[i]nformation on functional status is becoming increasingly essential for fostering healthy people and a healthy population. Achieving optimal health and well-being for Americans requires 131 Subcommittee on Health National Committee on Vital and Health Statistics, ‘‘Classifying and Reporting Functional Status’’ (2001). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 an understanding across the life span of the effects of people’s health conditions on their ability to do basic activities and participate in life situations, in other words, their functional status.’’ The functional assessment items included in the two functional status quality measures were originally developed and tested as part of the PostAcute Care Payment Reform Demonstration version of the CARE Tool,132 which was designed to standardize assessment of patients’ status across acute and post-acute settings, including LTCHs, inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies (HHAs). The functional status items on the CARE Tool are daily activities that clinicians typically assess at the time of admission and/or discharge in order to determine patients’ needs, evaluate patient progress and prepare patients and families for a transition to home or to another setting. The development of the CARE Tool and a description and rationale for each item is described in a report entitled ‘‘The Development and Testing of the Continuity Assessment Record and Evaluation (CARE) Item Set: Final Report on the Development of the CARE Item Set: Volume 1 of 3.’’ 133 Reliability and validity testing were conducted as part of CMS’ Post-Acute Care Payment Reform Demonstration, and we concluded that the functional status items have acceptable reliability and validity. A description of the testing methodology and results are available in several reports, including the report entitled ‘‘The Development and Testing of the Continuity Assessment Record And Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 2 of 3’’ 134 and the report entitled ‘‘The Development and Testing of The Continuity Assessment Record And Evaluation (CARE) Item Set: Final Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 3.’’ 135 These reports are available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-Quality132 In the FY 2015 IPPS/LTCH PPS proposed rule, we used the terms ‘‘CARE Item Set’’ and ‘‘CARE Tool’’ interchangeably. For the purpose of consistency and standardization of terminology, we have revised the language to ‘‘CARE Tool’’ throughout this FY 2015 IPPS/LTCH PPS final rule. However, we have retained the term ‘‘CARE Item Set’’ when citing existing reports. 133 Barbara Gage et al., ‘‘The Development and Testing of the Continuity Assessment Record and Evaluation (CARE) Item Set: Final Report on the Development of the CARE Item Set ’’ (RTI International, 2012). 134 Ibid. 135 Ibid. PO 00000 Frm 00439 Fmt 4701 Sfmt 4700 50291 Initiatives/CARE-Item-Set-and-B– CARE.html. (1) Functional Status Quality Measure: Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function The first functional status quality measure we proposed for the FY 2018 payment determination and subsequent years is a process quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. This quality measure reports the percent of LTCH patients with both an admission and a discharge functional assessment and a care plan that addresses function. This process measure requires the collection of admission and discharge functional status data by trained clinicians using standardized clinical assessment items, or data elements, that assess specific functional activities (that is, self-care, mobility, cognition, communication, and bladder continence). The self-care and mobility function items are coded using a 6-level rating scale that indicates the patient’s level of independence with the activity; higher scores indicate more independence. The number of available response options for coding the cognition, communication, and bladder items ranges from 2 to 7. For this quality measure, inclusion of function in the patient’s care plan is determined based on whether a functional goal is recorded at admission for at least one of the standardized self-care or mobility function items using the 6-level rating scale. An increasing body of reported evidence has supported the safety and feasibility of early mobilization and rehabilitation of critically ill but stable patients, with minimal adverse events and risk to the patient.136 137 138 139 140 141 136 J. Adler and D. Malone, ‘‘Early mobilization in the intensive care unit: A systematic review,’’ Cardiopulm Phys Ther J 23, no. 1 (2012). 137 J. P. Kress, ‘‘Clinical trials of early mobilization of critically ill patients,’’ Crit Care Med 37, no. 10 Suppl (2009). 138 W. D. Schweickert and J. P. Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU,’’ Chest 140, no. 6 (2011). 139 W. D. Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: a randomised controlled trial,’’ Lancet 373, no. 9678 (2009). 140 J. M. Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project,’’ J Crit Care 25, no. 2 (2010). 141 A. Drolet et al., ‘‘Move to improve: the feasibility of using an early mobility protocol to E:\FR\FM\22AUR2.SGM Continued 22AUR2 50292 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Early mobility and rehabilitation in these settings have been associated with improved patient outcomes. Therefore, this quality measure addresses the importance of: (1) Conducting a functional assessment at the time of admission addressing self-care, mobility, cognition, communication, and bladder continence; (2) incorporating the functional assessment findings made at the time of admission into the patients’ care plan and setting at least one discharge self-care or mobility functional status goal; and (3) conducting a functional assessment at the time of discharge addressing selfcare, mobility, cognition, communication, and bladder continence. Functional limitations following critical illness are becoming increasingly prevalent as a result of improving critical care medicine and survival rates.142 Short-term and longterm adverse consequences among critically ill and chronically, critically ill patients in LTCH and Intensive Care Unit (ICU) settings include severe weakness,143 144 145 146 muscle atrophy,147 connective-tissue shortening,148 loss of bone mass,149 increased risk for blood clots,150 increased risk for pressure ulcers,151 deconditioning,152 153 deficits in selfcare and ambulation,154 and functional impairment,155 fatigue,156 as well as cognitive impairment, including increase ambulation in the intensive and intermediate care settings,’’ Phys Ther 93, no. 2 (2013). 142 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 143 Ibid. 144 S. L. Dang, ‘‘ABCDEs of ICU: Early mobility,’’ Crit Care Nurs Q 36, no. 2 (2013). 145 E. H. Skinner et al., ‘‘Development of a physical function outcome measure (PFIT) and a pilot exercise training protocol for use in intensive care,’’ Crit Care Resusc 11, no. 2 (2009). 146 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ National Institute for Health and Clinical Excellence (NICE), https://www.nice.org.uk/ nicemedia/live/12137/43564/43564.pdf. 147 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project.’’ 148 Ibid. 149 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 150 Ibid. 151 Ibid. 152 Schweickert and Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU.’’ 153 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: an observational pilot project.’’ 154 Adler and Malone, ‘‘Early mobilization in the intensive care unit: a systematic review.’’ 155 Skinner et al., ‘‘Development of a physical function outcome measure (PFIT) and a pilot exercise training protocol for use in intensive care.’’ 156 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 profound and persistent deficits in memory, attention/concentration, and executive function,157 158 159 and the inability to return to work one year after hospital discharge.160 161 Cognitive impairment in survivors of critical illness has been associated with anxiety and depression, inability to return to work, and inability of older persons to return home.162 To mitigate these adverse consequences, traditional practices of bed rest and immobility have been challenged in recent years, and early mobility and rehabilitation have been increasingly recognized as important to improve patients’ longterm functional outcomes,163 164 165 with recovery of function being described as both desirable and possible.166 The lack of early mobility initiation in ICU settings has also been described as a strong predictor of patient outcomes.167 The clinical practice guideline Rehabilitation after Critical Illness 168 from the National Institute for Health and Clinical Excellence (NICE) recommends performing clinical assessment to determine the patient’s risk of developing physical and nonphysical morbidity during the critical care stay as early as clinically possible, identifying current rehabilitation needs for patients at risk of morbidity, establishing short-term and medium-term rehabilitation goals based on the clinical assessment, starting an individualized structured rehabilitation program as early as possible, and performing clinical reassessment before discharge. 157 Ibid. 158 M. E. Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: risk factors, predictors, and rehabilitation interventions,’’ Crit Care Med 41, no. 9 Suppl 1 (2013). 159 N. E. Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: the activity and cognitive therapy in the intensive care unit (ACT– ICU) trial,’’ Phys Ther 92, no. 12 (2012). 160 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 161 H. J. Engel et al., ‘‘ICU early mobilization: from recommendation to implementation at three medical centers,’’ Crit Care Med 41, no. 9 Suppl 1 (2013). 162 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: Risk factors, predictors, and rehabilitation interventions.’’ 163 Drolet et al., ‘‘Move to improve: The feasibility of using an early mobility protocol to increase ambulation in the intensive and intermediate care settings.’’ 164 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 165 Z. Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review,’’ Arch Phys Med Rehabil 94, no. 3 (2013). 166 C. L. Rochester, ‘‘Rehabilitation in the intensive care unit,’’ Semin Respir Crit Care Med 30, no. 6 (2009). 167 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 168 Centre for Clinical Practice at NICE (UK), ‘‘Rehabilitation after critical illness [Internet].’’ PO 00000 Frm 00440 Fmt 4701 Sfmt 4700 The importance of standardized functional assessment in LTCH settings is also supported by the high prevalence of therapy services provided in this setting, as well as the need for care coordination for patients returning home and receiving follow-up care in the community and patients receiving additional institutional healthcare services after discharge from an LTCH. A study 169 of 1,419 ventilatordependent patients from 23 LTCHs reported that physical, occupational, and speech therapy were the most commonly provided services among a comprehensive list of 34 procedures, services, and treatments provided during the LTCH stay. The high frequency of physical (84.8 percent), occupational (81.5 percent), and speech (79.7 percent) therapy reflects use of the rehabilitative model of care adopted by many post-ICU ventilator weaning programs, which is important in restoration of function. 170 This high utilization of therapy services supports the need for standardized functional assessment at admission to document functional status, identify the need for therapy, set functional status goals and assist with discharge planning and care coordination. Whether an LTCH patient is discharged home or to another care setting for continuing health care, functional status is an important aspect of a person’s health status to document at the time of transition. The study 171 also reported that 28.8 percent of patients were discharged directly home or to assisted living, further supporting the importance of functional assessment and early rehabilitation to facilitate discharge planning and home discharge, when possible. Reported benefits of early mobility and rehabilitation include: (1) Improved strength 172 173 174 and functional status; 175 176 177 (2) earlier achievement 169 D. J. Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: a multicenter outcomes study,’’ Chest 131, no. 1 (2007). 170 Ibid. 171 Ibid. 172 Schweickert and Kress, ‘‘Implementing early mobilization interventions in mechanically ventilated patients in the ICU.’’ 173 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 174 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ 175 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 176 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: A randomised controlled trial.’’ 177 Li et al., ‘‘Active mobilization for mechanically ventilated patients: a systematic review.’’ E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV of mobilization milestones, such as outof-bed mobilization; 178 179 (3) improvement in mobility and self-care function scores from admission to discharge; 180 181 (4) greater incidence of return to functional baseline in mobility and self-care, greater unassisted walking and walking distances, and improved self-reported physical function scores at hospital discharge compared with persons not participating in early mobility and rehabilitation; 182 (5) enhanced recovery of functional exercise capacity; 183 (6) improved selfperceived functional status; 184 and (7) reduced physiological and cognitive complications 185 and improved cognitive function.186 Early mobility and rehabilitation have also been associated with reduced ICU and hospital length of stay; 187 188 189 190 191 192 reduced incidence of delirium and improved patient awareness; 193 194 increased ventilator-free days and improved weaning outcomes; 195 196 197 greater incidence of discharge home directly after hospitalization compared with patients not receiving early 178 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 179 P. E. Morris, ‘‘Moving our critically ill patients: Mobility barriers and benefits,’’ Crit Care Clin 23, no. 1 (2007). 180 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ 181 Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: A multicenter outcomes study.’’ 182 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 183 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 184 Ibid. 185 Ibid. 186 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ 187 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 188 Kress, ‘‘Clinical trials of early mobilization of critically ill patients.’’ 189 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: A randomised controlled trial.’’ 190 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 191 Engel et al., ‘‘ICU early mobilization: From recommendation to implementation at three medical centers.’’ 192 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ 193 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 194 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: A randomised controlled trial.’’ 195 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 196 Dang, ‘‘ABCDEs of ICU: Early mobility.’’ 197 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 mobilization; 198 199 and reduced hospital readmission or death in the year following hospitalization.200 201 Short-term and long-term cognitive impairment are very frequent complications of critical illness, and negatively influence survivors’ abilities to function independently.202 203 204 Delirium during hospitalization is highly prevalent in critically ill patients and has been associated with longer lengths of stay, increased duration of mechanical ventilation, and higher risk of death.205 A longer duration of delirium has been associated with worse short- and long-term cognition and executive function.206 207 Given these adverse consequences, the importance of early assessment of cognitive function, including possible delirium, and early initiation of cognitive rehabilitation in critical care settings, is being increasingly recognized.208 209 Also, given the positive effects of physical exercise on cognitive function in other populations, the potential positive influence of exercise on cognitive function in the critically ill population is being examined by researchers.210 A technical expert panel (TEP) convened by our measure development contractor provided input on the technical specifications of this quality measure, including the items included 198 Schweickert et al., ‘‘Early physical and occupational therapy in mechanically ventilated, critically ill patients: A randomised controlled trial.’’ 199 Engel et al., ‘‘ICU early mobilization: From recommendation to implementation at three medical centers.’’ 200 Adler and Malone, ‘‘Early mobilization in the intensive care unit: A systematic review.’’ 201 Li et al., ‘‘Active mobilization for mechanically ventilated patients: A systematic review.’’ 202 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: Risk factors, predictors, and rehabilitation interventions.’’ 203 Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: The activity and cognitive therapy in the intensive care unit (ACT–ICU) trial.’’ 204 P. P. Pandharipande, T. D. Girard, and E. W. Ely, ‘‘Long-term cognitive impairment after critical illness,’’ N Engl J Med 370, no. 2 (2014). 205 Wilcox et al., ‘‘Cognitive dysfunction in ICU patients: Risk factors, predictors, and rehabilitation interventions.’’ 206 Ibid. 207 Pandharipande, Girard, and Ely, ‘‘Long-term cognitive impairment after critical illness.’’ 208 Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: The activity and cognitive therapy in the intensive care unit (ACT–ICU) trial.’’ 209 R. S. Miller et al., ‘‘Outcomes of trauma patients who survive prolonged lengths of stay in the intensive care unit,’’ J Trauma 48, no. 2 (2000). 210 Brummel et al., ‘‘A combined early cognitive and physical rehabilitation program for people who are critically ill: The activity and cognitive therapy in the intensive care unit (ACT–ICU) trial.’’ PO 00000 Frm 00441 Fmt 4701 Sfmt 4700 50293 in the quality measure, inclusion and exclusion criteria. We also solicited public comment on the draft specifications of this quality measure on the CMS Quality Measures Public Comment Page (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/MMS/ CallforPublicComment.html) between February 21, 2014, and March 14, 2014, and received 22 responses from stakeholders with comments and suggestions. Additional information regarding these comments may be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. Based on the evidence discussed above, we proposed to adopt for the LTCHQR Program for the FY 2018 payment determination and subsequent years the quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. This quality measure was developed by CMS, and we plan to submit the quality measure to the NQF for review. The MAP met in December 2013 and January 2014, and provided input to CMS as required under section 1890A(a)(3) of the Act. In its January 2014 PreRulemaking Report, the MAP conditionally supported this measure and stated that the measure concept is promising, but requires modification or further development, and that functional status is a critical area of measurement. Since the time of the MAP meeting, we have continued further development of the measure with input from technical experts, including empirical data analysis. Subsequently, we released draft specifications for the functional status quality measures, and requested public comment between February 21, 2014 and March 14, 2014. We received 22 responses from stakeholders with comments and suggestions during the public comment period, and have updated the quality measures specifications based on these comments and suggestions. The updated specifications are available for review at the LTCHQR Program Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html?redirect=/LTCH-QualityReporting/. We refer readers to section IX.C.2. of the preamble of this final rule for more information on the MAP. In section 1886(m)(5)(D)(ii) of the Act, the exception authority provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50294 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures focused on assessment of function for patients in the LTCH setting. We are unaware of any other quality measures for functional assessment that have been endorsed or adopted by another consensus organization for the LTCH setting. Therefore, we proposed to adopt this functional assessment measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures. Additional information regarding the quality measure may be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. We proposed that data for the quality measure be collected through the LTCH CARE Data Set, with the submission through the Quality Improvement and Evaluation System (QIES) Assessment Submission and Processing (ASAP) system. For more information on LTCHQR Program reporting using the QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/ LTCHTechnicalInformation.html. We noted our intention to revise the LTCH CARE Data Set to include new items that assess functional status, should this measure be adopted. These items, which assess specific functional activities (that is, self-care, mobility, cognition, communication, and bladder continence), would be based on functional items included in the PostAcute Care Payment Reform Demonstration version of the CARE Tool. The items have been carefully developed and tested for reliability and validity. We invited public comments on our proposal to adopt the quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function for the LTCHQR Program, with data collection starting on April 1, 2016, for the FY 2018 payment determination and subsequent years. We refer readers VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to section IX.C.9.c. of the preamble of this final rule for more information on the data collection period and submission deadline for this quality measure. Our responses to public comments on these quality measures are discussed below in this section of the final rule. Comment: Several commenters expressed support for the quality measure entitled Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function because functional improvement is an important patientcentered outcome. A few commenters noted that such improvements reduce the likelihood of infection, morbidity, mortality, and cost and significantly improve quality of life in this vulnerable population. A commenter emphasized the importance of improved functional status and improved, earlier mobility for patients who are ventilated. Commenters agreed that functional status is an important measurement gap for LTCHs and support CMS for proposing measures that address this measurement gap area. A commenter noted support for the use of the CARE Tool to streamline reporting across acute and post-acute care settings. Response: We appreciate the support for functional status quality measures in the LTCH setting and the support for the use of cross-setting standardized assessment items. Comment: A commenter supported a measure of function in patient care, but suggested that an outcome measure examining progress toward a functional goal would be preferable to a process measure. The commenter also suggested that CMS consider having a process measure that would address having a plan in place that addresses functional deficits at discharge. Response: We thank the commenter for their support. We interpret the commenter’s comment to suggest that we should include an outcome measure pertaining to the attainment of functional goals. We believe that patient attainment of functional goals is important and appreciate the commenter’s suggested inclusion of such an outcome measure. We will consider this measurement concept as we further develop the LTCHQR Program. We further interpret the commenter’s comment to suggest that we consider adopting a process measure related to functional deficits at discharge so as to ensure care coordination. We agree that such a measure concept is important in that the domain of ‘‘care coordination’’ is a priority to CMS. Therefore, we will PO 00000 Frm 00442 Fmt 4701 Sfmt 4700 consider this concept in future measure development for the LTCHQR Program. Comment: Many commenters expressed concern that the measure is not NQF-endorsed. Commenters underscored the importance of the NQF review process, emphasizing that NQF endorsement provides assurance that the measure has been tested, can reliably and accurately collect data, is feasible to implement and is usable. For these reasons, commenters encouraged CMS to refrain from adopting measures into the LTCHQR Program until they have been endorsed by NQF for use in the LTCH setting. Response: We agree that the NQFendorsement process is an important part of measure development, and we have generally adopted NQF-endorsed measures whenever feasible. However, as discussed above, where such measures do not exist for the LTCH setting, we may adopt measures that are not NQF-endorsed under the Secretary’s exception authority set out in section 1886(m)(5)(D)(ii) of the Act. Comment: A commenter indicated that the quality measure uses the FIM® rating scale. Response: We interpret this commenter to assert that we are using the FIM® rating scale. We would like to clarify that we are not using the FIM® rating scale, rather we are using a 6level rating scale developed and tested as part of the Post-Acute Care Payment Reform Demonstration (PAC-PRD). We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures that focused on assessment of function for patients in the LTCH setting. We are unaware of any other quality measures for functional assessment that have been endorsed or adopted by another consensus organization for the LTCH setting. Therefore, we proposed to adopt this functional assessment measure for use in the LTCHQR Program under the Secretary’s authority to select non-NQFendorsed measures. Further, CMS and its measure development contractor are planning to submit this measure for NQF review in the fall of 2014. Comment: Several commenters agreed with the MAP’s recommendation to adopt functional status measures as part of the LTCHQR Program. While most commenters agreed this was an important measure area for the LTCH population and some commenters noted that it addresses a measure area gap identified by the MAP, many commenters expressed concern that the measure is not yet fully developed and received only conditional support from the MAP. The commenters noted the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations MAP’s conclusions that while the measure concept is promising, the measure is not ready for implementation and requires further modification and development. Commenters encouraged CMS to refrain from adopting any measures not fully supported by the MAP. Response: We note that this quality measure has been under development for more than 3 years. The steps we undertook as part of the measure development process have included an environmental scan, technical expert panel review, and posting of specifications to solicit public input. As part of the environmental scan, we reviewed the NQF’s consensus-endorsed measures and were unable to identify any NQF-endorsed quality measures that focused on assessment of function for patients in the LTCH setting. A TEP focused on functional status quality measures was convened by our measure development contractor and met in person and by phone in the fall of 2013. A report summarizing these TEP meetings titled ‘‘Summary of Feedback from TEP on the Development of CrossSetting Functional Status Quality Measures’’ is available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. Since the MAP meeting, we have continued further development of this measure, including posting of the TEP report. As discussed above, we also released draft specifications for the functional status quality measures and solicited public comment between February 21, 2014, and March 14, 2014. We received 22 responses from stakeholders with comments and suggestions during this public comment period and, based on these comments and suggestions, updated the quality measure specifications, which are available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/?redirect=/LTCHQuality-Reporting/. Comment: A commenter was concerned that CMS did not convene a TEP for any of the new proposed quality measures and noted that TEPs, ‘‘which evaluate . . . quality measures for importance, scientific soundness, usability, and feasibility,’’ are integral to developing health care settingappropriate quality measures. Response: Our measure contractor convened a cross-setting functional status quality measures TEP after a public call for TEP nominations. The TEP met in person on September 9, 2013, and then met via Webinar on October 21, 2013, October 28, 2013, and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 November 6. 2013. TEP members included experts from LTCHs, as well as IRFs and SNFs. A report summarizing recent TEP meetings focused on functional status quality measures titled ‘‘Summary of Feedback from TEP on the Development of Cross-Setting Functional Status Quality Measures’’ is available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. The functional status quality measure development built on work conducted as part of a project funded by the Assistant Secretary for Planning and Evaluation, and that project also included a cross-setting function quality measure TEP, which was held on August 15, 2012. A report summarizing that meeting is available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/Downloads/ASPE-ReportAnalysis-of-Crosscutting-MedicareFunctional-Status-Quality-MetricsUsing-the-Continuity-and-AssessmentRecord-and-Evaluation-CARE-Item-SetFinal-Report.pdf. Comment: Some commenters indicated that the measure was inappropriate for the LTCH patient population. These commenters noted that many or most LTCH patients are not mobile or functional on admission, a significant percent are not mobile for the duration of their stay, and the majority of the functional status assessment items such as walking, picking up items and car transfers, would not be applicable to these patients. The commenters also noted that for many LTCH patients, a transfer from the bed to a chair is not possible. Response: The development of this quality measure included a review of published literature, a review of the findings from the PAC-PRD, discussions with an LTCH expert panel and an opportunity for a public comment period. As evidenced in the literature review, the PAC-PRD findings, and through the technical expert panel input we obtained during the measure development process, we concluded that this measure is important and appropriate for the LTCH setting, and items selected during the measure’s development were considered applicable. With respect to comments about the items selected, during their use in the PAC–PRD, the LTCH staff stated that these items and their associated response scale are able to capture small changes in patient improvement, such as the progression from total dependence for task completion to completing a task with much assistance PO 00000 Frm 00443 Fmt 4701 Sfmt 4700 50295 (that is, more than half the task was completed by the helper). The ability to capture this level of change was found to be significant, particularly as it pertains to the most impaired populations. Further, we made refinements to the items selected based on input from the expert panels convened by our measure development contractor and the public comment process, including those activities, for example, walking, picking up items and car transfers, which the commenter suggested were not applicable to this setting. Comment: Several commenters conveyed their concern regarding the use of the CARE Tool as the data source for the functional status quality measures due to limited testing in LTCHs and reliability testing results. These commenters noted that several self-care and mobility items have Kappa statistics categorizing inter-rater reliability as ‘‘fair’’ or ‘‘moderate,’’ and were based on a small sample of 46 LTCH patients. These commenters stated that ‘‘fair’’ or ‘‘moderate’’ reliability, while acceptable for exploratory studies or internal quality improvement efforts, is insufficient for national use in the LTCHQR Program. Commenters recommended CMS explain the low Kappa statistics and/or re-test these items in significantly more LTCHs to address reliability issues. These commenters noted that measure testing should be oriented towards the intended setting of use of the measure and suggested additional testing in the LTCH setting be conducted. Response: The reliability results mentioned by these commenters were only one of several reliability analyses conducted to support the development of this measure as part of the PAC–PRD. In addition to the inter-rater reliability study mentioned by these commenters, we also examined: (1) Inter-rater reliability of the CARE items using videotaped case studies, which included 114 LTCH assessments from 3 LTCHs; (2) internal consistency of the function data, which included more than 7,700 assessments from 28 LTCHs; and (3) Rasch analyses of the function data, which included more than 7,700 assessments from 28 LTCHs. The report describing these additional analyses and an interpretation of the Kappa statistics results is available at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/Downloads/TheDevelopment-and-Testing-of-theContinuity-Assessment-Record-andEvaluation-CARE-Item-Set-Final-Reporton-Reliability-Testing-Volume-2-of- E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50296 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 3.pdf. Therefore, given the totality of the reliability analysis involved, we believe that the development of this measure included a sufficient level of analysis, and at a scientifically acceptable level, such that a quality measure could be derived from these items. We note that as part of the LTCHQR Program we intend to evaluate the national-level data for this quality measure submitted by LTCHs to CMS. These data will inform ongoing measure development and maintenance efforts, including further analysis of reliability and validity of the data elements and the quality measure. Comment: Several commenters expressed concern related to undue burden associated with data documentation for the functional status quality measure. Some commenters suggested that several of the functional status assessment items had low or nonresponse rates when used as part of PAC–PRD. These commenters requested that CMS provide additional information on how the measure has been updated to address these low response rates. Further, in the event no updates have been made, the commenters encouraged CMS to further investigate its use of items having low or high non-response rates and reconsider if all of these items remain necessary and appropriate for LTCHs. Response: We appreciate the concerns related to any undue burden, including documentation, and take such concerns under consideration when selecting measures for the LTCHQR Program. In the specifications for the measure, we have included several gateway questions that allow the clinician to skip questions that are not pertinent, which we believe helps to reduce undue burden. For example, one item asks if the patient is or is not walking. If the patient is not walking, then the items ‘‘Walk 10 feet,’’ ‘‘Walk 50 feet with two turns’’ and ‘‘Walk 150 feet’’ do not require responses and are therefore skipped. With respect to the comments that some items had low response rates, we interpreted these comments to refer to the coding responses for when a patient does not or cannot attempt a daily activity, hence the activity did not occur, and the assessor reports a code indicating the reason that the activity was not attempted (for example, ‘‘Medical Condition’’ or ‘‘Patient Refusal’’). We interpret the comments pertaining to non-response as referring to missing data. In the development of this measure, despite the low or high non-response rates, inclusion of these items was the result of public input and expert VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 opinion. However, we agree with the commenters that some of the self-care and mobility items may not be activities that many LTCH patients perform, particularly at the time of admission. An analysis of the PAC–PRD data showed that LTCHs had the highest percentage of codes for these items indicating the ‘‘Activity Did Not Occur’’ as compared to IRFs, SNFs and HHAs. We also agree that car transfers and picking up an object are challenging activities for LTCH patients. Due to prior public input we received via public posting and technical expert panels, we had included these particular items because these items were intended to aid in the further development of this measure utilizing national data. However, if these items are removed, the use of the measure can be retained without impacting the measure outcome in any significant manner. Because commenters expressed concern regarding burden and because commenters expressed concerns about ‘‘Activity Did Not Occur’’ for data elements that pertain to specific physical activities or functions that would be assessed and addressed by a care plan, we believe that we should consider removing assessment items where possible from this measure’s specifications, particularly when the items are duplicative to items already included, or would often be coded as ‘‘Activity Did Not Occur’’ (that is, when due to medical condition) and would not specifically be meaningful in a care plan. We have therefore reviewed our measure and the assessment items needed for addressing all the key domains of function we proposed (for example, self-care, mobility, cognition, communication and bladder function). We believe there are items that could be removed from the self-care and mobility domains because they potentially overlap with items that we would retain and also because these items had high ‘‘Activity Did Not Occur’’ rates. Further, these items can be removed from the quality measure without affecting the measure substantively. We followed specific rationale in our consideration for the removal of these items: (1) That these particular items had high ‘‘Activity Did Not Occur’’ or high non-response rates; and/or (2) that the data elements to be removed were duplicative of the remaining data elements in the quality measure for the LTCH population. We determined this, for each item, based on data analysis and public comment, our review of the item definitions, as well our review of the distribution of scores of LTCH patients from the PAC–PRD. Lastly, we evaluated our ability to finalize a PO 00000 Frm 00444 Fmt 4701 Sfmt 4700 modified measure, and we reviewed the modifications to the measure, through the removal of these items, to ensure that the modification was not substantive in nature. The data elements specifically analyzed for removal were: ‘‘Dressing upper body,’’ ‘‘Dressing lower body,’’ ‘‘Putting on/taking off footwear,’’ ‘‘Shower/bathe self,’’ ‘‘Car transfer,’’ ‘‘1 step,’’ ‘‘4 steps,’’ ‘‘12 steps,’’ ‘‘Walk 10 feet on uneven surfaces’’ and ‘‘Pick up object,’’ all of which we would remove from the measure specifications for Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. Following our analysis, the following items have been finalized for removal, with the associated rationale: • The item ‘‘Dressing Upper Body’’ had high ‘‘Activity Did Not Occur’’ response rates and overlaps with the item ‘‘Wash Upper Body,’’ which we are retaining, in that both items pertain to upper body movement and the data captured for ‘‘Wash Upper Body’’ would represent the activity. The item ‘‘Dressing Lower Body’’ had high ‘‘Activity Did Not Occur’’ response rates and overlaps with ‘‘Toileting Hygiene,’’ which we are retaining, in that both items include managing lower body clothing. • The item ‘‘Putting on/taking off footwear’’ had high ‘‘Activity Did Not Occur’’ response rates and also overlaps with ‘‘Toileting Hygiene,’’ an item which we are retaining, although we are aware that it had moderately high ‘‘Activity Did Not Occur’’ response rates. We note that, although we are aware that the item ‘‘Toileting Hygiene’’ is associated with moderate ‘‘Activity Did Not Occur’’ response rates, we have decided to retain the item ‘‘Toileting Hygiene’’ based on feedback from technical expert panels convened by the measure contractor, the public comments from stakeholders, and the relevance of the item for every patient. • The item ‘‘Shower/bathe self’’ had high ‘‘Activity Did Not Occur’’ response rates and overlaps with the tasks involved with the item ‘‘Wash Upper Body,’’ which we are retaining. • The mobility items we are removing, ‘‘Walking 10 Feet on Uneven Surfaces,’’ ‘‘Car transfer,’’ ‘‘1 step,’’ ‘‘4 steps,’’ ‘‘12 steps’’ and ‘‘Pick up object,’’ had high non-response rates and overlap with items ‘‘Walk 150 Feet’’ and ‘‘Walk 50 feet with 2 turns,’’ which we are retaining. As stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28263) and the December 1, 2013, MUC List (pp. 39–40, 194–95), this measure provides E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the percentage of all LTCH patients that receive a functional assessment on admission and discharge and a care plan that addresses function. We believe that this measure, as modified in response to public comment, is consistent with the description of the measure reviewed by the MAP, which did not specify the various functions assessed or addressed by a care plan. Moreover, we believe that modification of the quality measure through the removal of duplicative assessment items with low or high nonresponse rates does not substantively alter this measure’s application or its calculation. We have previously explained that substantive measure changes would include ‘‘those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example: Changes in acceptable timing of medication, procedure/process, or test administration)’’ or ‘‘where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to the LTCH setting.’’ (77 FR 53258, 53615 through 53616). We believe that in this case, the standard of performance assessed by this measure would become less, not more, stringent due to the modifications, and the measure is not being extended to a new patient setting. Moreover, we believe that the modifications to the measure are not ‘‘so significant that the measure [would no longer be] the same measure,’’ as the measure numerator, denominator, and exclusions are unchanged. Therefore, we believe that the modified version of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function would not be inconsistent with the descriptions of the measure reviewed by the MAP and that the modifications to the measure are not substantive in nature. Thus, in response to public comments, we are modifying the proposed quality measure, Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function, through removal of the data items noted above. Specifically, the data elements we are removing for the reasons discussed above are the following: ‘‘Dressing upper body,’’ ‘‘Dressing lower body,’’ ‘‘Putting on/ taking off footwear,’’ ‘‘Shower/bathe self,’’ ‘‘Car transfer,’’ ‘‘1 step,’’ ‘‘4 steps,’’ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 ‘‘12 steps,’’ ‘‘Walk 10 feet on uneven surfaces,’’ and ‘‘Pick up object.’’ Comment: Several commenters expressed concerns about the need for standardized training to ensure interrater reliability for the CARE Tool function items, and noted that this training would add additional burden to facilities. Several commenters also suggested CMS identify the types of LTCH personnel who would collect and report measure data. Response: We have addressed similar concerns in the past with public outreach including training sessions, training manuals, Webinars, open door forums, help desk support and a Web site that hosts training information https://www.youtube.com/user/ CMSHHSgov), and we conduct such activities for the new items. All training materials are available on the Web site free of charge. Procedures for data collection, including who may complete functional assessments, are to follow facility policies, and patient assessments are to be completed in compliance with facility and applicable State and Federal requirements. We do not provide guidance on which disciplines may complete patient assessments. Comment: Several commenters suggested that patients with program interruptions (that is, periods of time during which the patient is transferred from the LTCH to another care setting and subsequently returned to the same LTCH; see the LTCHQR Program Manual 2.0 for current definition— Chapter 3–A https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/) be excluded from the quality measure, because it would be burdensome to collect data when the patient was transferred and then returned to the LTCH. A commenter explained that an interrupted stay patient is ‘‘discharged’’ from the LTCH and then ‘‘readmitted’’ to the LTCH within a certain fixed period under the 3-day or less interrupted stay policy and the greater than 3-day interrupted stay policy. Thus, the commenter felt it would be unnecessary to assess the patient’s functional status at both points of admission and discharge since doing so may result in an inaccurate assessment of the patient’s condition. The commenter also suggested that if interrupted stay patients are not excluded, then only the initial admission and the last discharge should be assessed for measure data collection purposes. Response: For LTCH patients who experience one or more program interruptions (3 calendar days or less), PO 00000 Frm 00445 Fmt 4701 Sfmt 4700 50297 completion of the function items would not be required during the program interruption, that is, at the time of the transfer to the acute care setting and the return. Patients with program interruptions are included in the quality measure, but, as the commenter suggested, assessments would be only be required for the initial admission assessment and at the time of the discharge from the LTCH stay. Comment: A commenter expressed general concern about the difficulty of assessing cognitive function in the LTCH patient population, including circumstances such as when any mindaltering medication was given to the patient. The commenter stated that cognitive assessment items have no provisions for accounting for such circumstances, nor could they, since any such mandate would interfere with clinical practice. Due to such considerations, the commenter questioned whether it was possible to accurately capture cognitive status via observational assessment, within two days of admission. The commenter noted that timely completion of the cognitive assessment items necessitates a clinician who is familiar with the patient, which in turn affects whether these items get completed on the admission assessment. Another commenter stated that the cognitive function assessment tool does not adequately measure baseline cognition because of the variation in LTCH patients’ clinical conditions and mental status. LTCH patients are extremely fragile, and their cognition is affected by small changes, such as the time of day and the clinical condition of the patient. The commenter also expressed the opinion that the cognitive function assessment tool provides a snapshot of a patient at a given time on a given day, and is not a true reflection of the patient’s cognitive functioning. The commenter added that the expertise of a clinical psychologist would be required to complete this tool. Thus, these two commenters felt assessing the patient to collect data to complete each of the data elements for the measure would require LTCHs to expend significant time and resources reporting data whose value in measuring quality of care in the LTCH setting is questionable. Response: We acknowledge the complexity of the LTCH patient population, and potential challenges that can limit certain assessments, for example, the inability to perform a cognitive assessment with a ventilatordependent patient on sedation. We interpret the commenter to indicate that under such circumstances, it will not be E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50298 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations feasible to accurately assess a patient’s cognition at the beginning of the LTCH stay and that it would be an interruption in clinical care to perform such an assessment. We also interpret the commenter to indicate that in the assessment there would be no capacity to reflect recent administration of medications that impact cognitive status, although assessment of cognition is required for this measure. We agree that at the time of assessment there is information that cannot be obtained from certain patients, such as patients who are ventilator-dependent and on sedation, or in the event the patient is comatose. We agree that there are circumstances that an assessment cannot be performed, and it would be inappropriate to do so, and hence, the assessment should allow for LTCHs to indicate these circumstances when the data could not be collected. We will address these circumstances by providing instructions on when select items can be skipped due to patient conditions and gateway questions in the LTCH CARE Data Set Version 3.00. In the specifications for the measure, we have included several gateway questions that allow the clinician to skip questions that are not pertinent. For example, one item asks if the patient is or is not walking. If the patient is not walking, then the items ‘‘Walk 10 feet,’’ ‘‘Walk 50 feet with two turns’’ and ‘‘Walk 150 feet’’ do not require responses and are therefore skipped. We agree with the commenter that a clinician familiar with the patient would provide the most accurate assessment of the patients’ status. Consistent with the clinical standard of practice, timely admission assessments are conducted on all patient admissions by a clinician, typically by a registered nurse who obtains assessment information to inform care planning so that the care team can become familiar with the patient and develop and implement sound clinical care and interventions. Thus, from the time of admission to an LTCH, we believe that clinical staff should collect health assessment information about the patient to inform their care. Further, we believe that such assessment data would be captured by a clinician familiar with the LTCH patient. We interpret the second commenter to indicate that the variability in the LTCH patient cognitive status would make it difficult to obtain a baseline for use in this measure. We also interpret the commenter’s concern to be related to the importance of capturing causation in mental status change. Causative factors in cognitive change do not impact the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 calculation of the quality measure. The measure requires the collection of the Confusion Assessment Method (CAM®) in order to capture fluctuations of cognitive function. We selected the CAM® Instrument after TEP review, and following receipt of several comments from our initial public comment opportunity in March 2014. We disagree with the commenter’s statement that the expertise of a clinical psychologist would be needed to collect the cognitive status assessment, because the CAM® was collected during the PAC–PRD by varying levels of staff, with strong inter-rater reliability without it being performed by a clinical psychologist, and there was no evidence found during this demonstration to support this concern. Furthermore, the CAM® was tested for use by bedside staff for use in the Minimum Data Set Version 3.0 and was implemented on October 1, 2010. Both commenters suggest that capturing the assessment data would necessitate LTCHs to expend significant time and resources to collect this measure, which they further suggest may not be valuable for this setting. We disagree with these commenters in that the data collected for use in these measures is consistent with general clinical care and the CAM® itself is a specific assessment that is already utilized in the healthcare setting. Comment: Commenters suggested that CMS take into consideration the addition of a POA indicator in selected portions of the LTCH CARE Data Set. These commenters noted that a POA indicator would be important for performing any risk adjustment of functional status measures to allow for the distinction between complications associated with care at the LTCH and a patient’s preexisting conditions. Response: The admission functional assessment data collected for this quality measure would be based on the patient’s functional status at the time of admission, and we would consider the initial assessment to be ‘‘present on admission.’’ In addition to soliciting comments about our proposal to adopt the functional status measure for the LTCHQR Program, we also invited public comment on our proposal to use the LTCH CARE Data Set and QIES ASAP systems for data collection and submission of the functional status measure. We received no public comments on this proposal. After consideration of the public comments we received, we are finalizing the adoption of the measure entitled Percent of Long-Term Care Hospital Patients with an Admission PO 00000 Frm 00446 Fmt 4701 Sfmt 4700 and Discharge Functional Assessment and a Care Plan That Addresses Function for use in the LTCHQR Program, with the modifications noted in our responses to public comments above. (2) Functional Status Quality Measure: Functional Outcome Measure: Change in Mobility Among Long-Term Care Hospital Patients Requiring Ventilator Support Section 1206(c) of Division B of Public Law 113–67, the Pathway to SGR Reform Act of 2013, amended section 1886(m)(5)(D) of the Act to add a new clause (iv) requiring the Secretary to establish by no later than October 1, 2015, ‘‘a functional status quality measure for change in mobility among inpatients requiring ventilator support.’’ Accordingly, the second functional status quality measure that we proposed was an outcome quality measure entitled the Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. This measure estimates the risk-adjusted change in mobility score between the time of admission and the time of discharge among LTCH patients requiring ventilator support at the time of admission. As noted above, LTCH patients often have functional limitations and receive rehabilitation therapy services so that they can become more independent when performing functional activities. Functional improvement is particularly relevant for patients who require ventilator support because these patients have traditionally had limited mobility due to cardiovascular and pulmonary instability, delirium, sedation, lack of rehabilitation therapy staff, and lack of physician referral.211 Several studies have examined functional improvement among patients in the long-term care hospitals. In a sample of 101 patients in LTCHs (threequarters were ventilator-dependent), median functional status scores using the Functional Status Score (FSS)–ICU (rolling, supine-to-sit transfers, unsupported sitting, sit-to-stand transfers, and ambulation) improved significantly from admission to discharge, with significant change in all five functional items.212 A separate study of 103 patients with respiratory 211 Zanni et al., ‘‘Rehabilitation therapy and outcomes in acute respiratory failure: An observational pilot project.’’ 212 A. Thrush, M. Rozek, and J.L. Dekerlegand, ‘‘The clinical utility of the functional status score for the intensive care unit (FSS–ICU) at a long-term acute care hospital: A prospective cohort study,’’ Phys Ther 92, no. 12 (2012). E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations failure examined functional improvement and found that by the end of the respiratory ICU stay, 69.4 percent of survivors ambulated more than 100 feet, 8.2 percent ambulated less than 100 feet, 15.3 percent could sit in a chair, 4.7 percent could sit on the edge of the bed, and 2.4 percent did not accomplish any of these activities.213 The importance of monitoring improvement in mobility skills among LTCH patients who require ventilator support at the time of admission is also supported by the high prevalence of therapy service provision as part of the treatment plan and the percent of patients discharged home after an LTCH stay. In a study of 1,419 ventilatordependent patients from 23 LTCHs with weaning programs,214 physical therapy, occupational therapy, and speech therapy were the three most commonly provided services among 34 procedures, services, and treatments provided during the LTCH admission. The very high frequency of physical (84.8 percent), occupational (81.5 percent), and speech (79.7 percent) therapy reflects use of the rehabilitative model of care adopted by many post-ICU weaning programs, which is important in the restoration of function.215 Improvement in functional status, including mobility and self-care was noted from admission to discharge. Nearly 30 percent of all patients discharged alive returned directly home or to assisted living.216 A TEP convened by our measure development contractor provided input on the technical specifications of this quality measure. We also solicited public comment on the draft specifications of this quality measure, on the CMS Quality Measures Public Comment Page (https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/MMS/ CallforPublicComment.html) between February 21 and March 14, 2014, and received 22 responses from stakeholder with comments and suggestions. Additional information regard the quality measure may be found on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. We proposed that data for the proposed quality measure be collected through the LTCH CARE Data Set, with 213 P. Bailey et al., ‘‘Early activity is feasible and safe in respiratory failure patients,’’ Crit Care Med 35, no. 1 (2007). 214 Scheinhorn et al., ‘‘Post-ICU mechanical ventilation at 23 long-term care hospitals: A multicenter outcomes study.’’ 215 Ibid. 216 Ibid. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the submission through the QIES ASAP system. For more information on LTCHQR Program reporting using the QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/ LTCHTechnicalInformation.html. We intend to revise the LTCH CARE Data Set to include new items that assess the functional status and the risk adjustors, should this proposed measure be adopted. These items, which assess specific functional activities (that is, self-care, mobility, cognition, communication, and bladder continence), would be based on functional status items included in the Post-Acute Care Payment Reform demonstration version of the CARE Tool. The items have been carefully developed and tested for reliability and validity. Based on the evidence discussed above, we proposed to adopt for the LTCHQR Program for the FY 2018 payment determination and subsequent years the quality measure entitled Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. This quality measure is developed by CMS, and we plan to submit the quality measure to the NQF for review. The MAP met in December 2013 and January 2014, and the NQF provided the MAP’s input to CMS as required under section 1890A(a)(3) of the Act. In its January 2014 PreRulemaking Report, the MAP conditionally supported this proposed measure and stated that the measure concept is promising, but requires modification or further development, and that functional status is a critical area of measurement. Since the time of the MAP meeting, we have continued further development of the measure with input from technical experts, including empirical data analysis. Subsequently, we have released draft specifications for the function quality measures, and requested public comment between February 21 and March 14, 2014. We received 22 responses from stakeholders with comments and suggestions during the public comment period, and have updated the quality measures specifications based on these comments and suggestions. The updated specifications are available for review at the LTCHQR Program Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html?redirect=/LTCH-Quality- PO 00000 Frm 00447 Fmt 4701 Sfmt 4700 50299 Reporting/. We refer readers to section IX.C.2. of the preamble of this final rule for more information on the MAP. In section 1886(m)(5)(D)(ii) of the Act, the exception authority provides that ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures focused on improvement of function among patients in the LTCH setting. We are unaware of any other quality measures for functional improvement that have been endorsed or adopted by another consensus organization for the LTCH setting. Moreover, as discussed above, the Secretary is now required to establish such a measure by October 1, 2015. Therefore, we proposed to adopt this functional improvement measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures. We invited public comments on our proposal to adopt the quality measure entitled Functional Outcome Measure: Change in Mobility among Patients Requiring Ventilator Support for the LTCHQR Program, with data collection starting on April 1, 2016, for the FY 2018 payment determination and subsequent years. We refer readers to section IX.C.9.c. of the preamble of this final rule for more information on the proposed data collection and submission timeline for this proposed quality measure. Comment: Several commenters expressed support for the quality measure ‘‘Functional Outcome Measure: Change in Mobility Among Long-Term Care Hospital Patients Requiring Ventilator Support,’’ because functional improvement is an important patientcentered outcome. A few commenters noted that such improvements reduce the likelihood of infection, morbidity, mortality, and cost and significantly improve quality of life in this vulnerable population. A commenter emphasized the importance of improved functional status and improved, earlier mobility by those patients who are ventilated. Several commenters agreed with the MAP’s recommendation to adopt functional status measures as part of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50300 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations LTCHQR Program. Commenters agreed that functional status is an important measurement gap for LTCHs and supported CMS for proposing measures that address this measurement gap area. A commenter noted support for the use of common functional status items across acute and post-acute care settings. A commenter noted that this quality measure is required by public law. Response: We appreciate the support for the quality measure entitled Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support in the LTCH setting, and for the support of use of standardized functional status items across acute and post-acute care settings. Comment: Many commenters expressed concern that the measure is not yet fully developed and is not NQFendorsed. Several commenters noted a number of issues that CMS should consider in the development of these functional status quality measures. Response: We agree that the NQF endorsement process is an important part of measure development and we have generally adopted NQF-endorsed measures whenever feasible. However, where such measures do not exist for the LTCH setting, as stated in our proposal and noted above, we may adopt measures that are not NQFendorsed for the LTCHQR Program under the Secretary’s exception authority set out in section 1886(m)(5)(D)(ii) of the Act. We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed quality measures that focused on assessment of function for patients in the LTCH setting. We are unaware of any other quality measures for functional assessment that have been endorsed or adopted by another consensus organization for the LTCH setting. Therefore, we proposed to adopt this functional assessment measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures. We plan to submit an application for NQF endorsement in the fall of 2014. Comment: While most commenters agreed that functional improvement was an important measure area for the LTCH population and some commenters noted that it addresses a measure area gap identified by the MAP, many commenters expressed concern that the measure is not yet fully developed and had only conditional support from MAP. They noted the MAP’s conclusions that while the measure VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 concept is promising, the measure is not ready for implementation and requires further modification and development. Commenters encouraged CMS to refrain from adopting any measures not fully supported by the MAP. Response: We note that this function quality measure has been under development for more than 3 years. The steps we undertook as part of the measure development process have included an environmental scan, technical expert panel review, and public posting of specifications with public input. A report summarizing the TEP meetings titled ‘‘Summary of Feedback from TEP on the Development of Cross-Setting Functional Status Quality Measures’’ is available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. Since the time of the MAP meeting, we have continued further development of the measure, and we posted draft specifications for the functional status quality measures for public comment between February 21, 2014, and March 14, 2014. As discussed above, we received 22 responses from stakeholders with comments and suggestions during the public comment period and, based on these comments and suggestions, have updated the quality measures specifications, which are available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html?redirect=/LTCH-QualityReporting/. Comment: A commenter expressed concern that CMS did not convene a TEP for any of the new proposed quality measures, and noted that TEPs, ‘‘which evaluate . . . quality measures for importance, scientific soundness, usability, and feasibility,’’ are integral to developing healthcare setting appropriate quality measures. Response: Our measure contractor convened a cross-setting function quality measures TEP after a public call for TEP nominations. The TEP met in person on September 9, 2013, and then by Webinar on October 21, 2013, October 28, 2013, and November 6. 2013. TEP members included experts from LTCHs as well as IRFs and SNFs. A report summarizing recent TEP meetings focused on functional status quality measures titled ‘‘Summary of Feedback from TEP on the Development of Cross-Setting Functional Status Quality Measures’’ is available at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. The functional status quality measure development builds upon work PO 00000 Frm 00448 Fmt 4701 Sfmt 4700 conducted as part of a project funded by the Assistant Secretary for Planning and Evaluation, and that project also included a cross-setting function TEP, which was held on August 15, 2012. A report summarizing that meeting is available at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/Post-AcuteCare-Quality-Initiatives/Downloads/ ASPE-Report-Analysis-of-CrosscuttingMedicare-Functional-Status-QualityMetrics-Using-the-Continuity-andAssessment-Record-and-EvaluationCARE-Item-Set-Final-Report.pdf. Comment: Several commenters conveyed concerns related to undue burden associated with data documentation for the functional status quality measure. Response: In the measure specifications, we included several gateway questions that allow the clinician to skip questions that are not pertinent, which we believe helps to reduce undue burden. For example, one item asks if the patient is or is not walking. If the patient is not walking, then the items ‘‘Walk 10 feet,’’ ‘‘Walk 50 feet with two turns’’ and ‘‘Walk 150 feet’’ do not require responses and are therefore skipped. Comment: A commenter questioned the value of this measure in the LTCH setting, given that many ventilator patients have no mobility at the time of admission. Another commenter noted that for some patients, the proposed measure may not be meaningful. The commenter added that in such cases, it may be appropriate to apply certain exclusions. Another commenter suggested the use of a process measure due to limited improvement in mobility for ventilator patients. Response: Our analyses of the PAC– PRD data found that many patients admitted to LTCHs on a ventilator have very limited mobility skills on admission, but that many did show some improvement in mobility skills during the LTCH stay, including bed mobility skills. LTCH clinicians in the PAC–PRD appreciated that the items used in this measure could capture even small improvement. We also list exclusion criteria in the draft measure specifications document, including patients with tetraplegia complete and locked-in state as well as patients with incomplete LTCH stays. We appreciate the commenter’s suggestion on the use of a process measure, and we note that we are finalizing such as process measure that includes this population. Comment: A commenter stated that in the testing of the CARE Tool, no analysis was reported of differences in functional scores at admission and E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations discharge, thus calling into question whether there is adequate variability in change in function scores to result in a meaningful measure. This commenter stated that the Rasch analysis for assessing validity was not applied to the sensitivity of the measure for chronically and critically ill patients. The commenter concluded that if little difference in functional scores at admission and discharge is expected, then the meaningfulness of the measure is called into question. Response: The change in self-care and mobility function for LTCH patients was reported in the Post-Acute Care Payment Reform Demonstration Final Report—Volume 4 available at: https:// www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/Reports/Downloads/PAC-PRD_ FinalRpt_Vol4of4.pdf. Specifically, on page 57 of this Report, it is noted that the mean self-care change for all patients in the post-acute care setting was an improvement of 12.4 units of self-care function. Among patients with nervous system conditions, LTCH patients and SNF patients achieved very similar unadjusted change in self-care scores (10.4 and 10.1 units of self-care functional improvement, respectively). The mean mobility change for all postacute care patients was 14.6 units of functional improvement. LTCH patients improved 11.2 units from admission to discharge, which is slightly more than the change in mobility observed among home health patients, which was 10.4 units of change. These results demonstrate that functional improvement was observed among LTCH patients using the function items from the CARE Tool. Our measure development analyses also showed improvement in mobility skills for patients requiring ventilator support. Comment: In order to more fully evaluate the proposed functional outcome measure, a few commenters requested that CMS provide further details regarding the proposed methodology and expected utilization approach for the measure. Specifically, a commenter was interested in learning more about the risk adjustment procedures. A commenter expressed concern about the lack of a validated model to assess change in mobility among LTCH inpatients requiring ventilator support. Commenters suggested that any such tool would also need to include components for stratification based on comorbidities impacting a patient’s ability to demonstrate functional improvement. Response: The risk adjustment methodology is described in the draft quality measures specification VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 document titled ‘‘Draft Specifications for the Proposed Functional Status Quality Measures for Long-Term Care Hospitals’’ available at the LTCHQR Program Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting. The risk adjustment analyses are being conducted by the measure contractor and the regression coefficients (that is, weights) will be available as part of the NQF application. Risk adjustment for this measure includes variables that adjust for several comorbidities, including chronic kidney disease or dialysis; septicemia or other severe infections; metastatic lung, colorectal, bladder or other severe cancers; diabetes; paraplegia; and hemiplegia. We received several suggestions for risk adjustors as part of the March 2014 public comment process and have tested all suggested variables. After consideration of the public comments we received, we are finalizing the adoption of the quality measure entitled Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support for use in the LTCHQR Program, as proposed. b. Quality Measure: National Healthcare Safety Network (NHSN) VentilatorAssociated Event (VAE) Outcome Measure The third quality measure that we proposed was the CDC-developed National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome measure. The term ‘‘Ventilator-Associated Events’’ incorporates a range of ventilatorassociated events, including ventilatorassociated pneumonia (VAP), pulmonary edema, acute respiratory distress syndrome, sepsis, and atelectasis.217 The NHSN VAE Outcome measure provides increased measure sensitivity, more objective definitions for ventilator-associated conditions, and the potential for automated outcome detection.218 The NHSN VAE Outcome measure is designed for use across multiple inpatient care settings, including LTCHs. The measure specifications were created and tested in the acute care setting. During CY 2013, 217 Klompas, M., Y. Khan, et al. (2011). ‘‘Multicenter Evaluation of a Novel Surveillance Paradigm for Complications of Mechanical Ventilation.’’ PLoS ONE 6(3): e18062. 218 Magill, S. S., M. Klompas, et al. (2013). ‘‘Developing a new, national approach to surveillance for ventilator-associated events*.’’ Crit Care Med 41(11): 2467–2475. PO 00000 Frm 00449 Fmt 4701 Sfmt 4700 50301 105 LTCHs submitted VAE data to CDC’s NHSN.219 According to the CDC, ‘‘more than 300,000 patients receive mechanical ventilation in the United States each year.’’ 220 These patients are at increased risk for infections, such as pneumonia and sepsis, as well as other serious complications including pulmonary edema, pulmonary embolism, and death.221 222 223 These complications can lead to longer stays in the ICU and hospital, increased health care costs and increased risk of disability (or death).224 The estimated mortality rate in patients aged 85 years and older with acute lung injury on mechanical ventilation is 60 percent.225 Ventilator-Associated Events represent a high-priority complication in the LTCH setting, given the older, medically complex population in LTCHs and the high prevalence of mechanical ventilation in this setting. A MedPAC analysis of MedPAR data found that 16 percent of LTCH patients used at least one ventilator-related service in 2012.226 In FY 2012, MS– LTC–DRG 207, a diagnosis-related group that refers to respiratory diagnosis with ventilator support for 96 or more hours, represented the most frequently occurring diagnosis among LTCH patients, at 11.3 percent of all LTCH discharges,227 and MS–LTC–DRG–4, a diagnosis-related group that refers to tracheostomy with ventilator support for 96 or more hours or primary diagnosis except face, mouth, and neck without major OR procedure, represented an additional 1.3 percent of all LTCH discharges. Together, the two diagnosisrelated groups account for a total of nearly 18,000 discharges. Furthermore, 219 Data from CMS–CDC correspondence on February 10, 2014. 220 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/ 10-VAE_FINAL.pdf. 221 Esteban, A., A. Anzueto, et al. (2002). ‘‘Characteristics and outcomes in adult patients receiving mechanical ventilation: a 28-day international study.’’ JAMA 287(3): 345–355. 222 Klompas, M., Y. Khan, et al. (2011). ‘‘Multicenter Evaluation of a Novel Surveillance Paradigm for Complications of Mechanical Ventilation.’’ PLoS ONE 6(3): e18062. 223 Rubenfeld, G. D., E. Caldwell, et al. (2005). ‘‘Incidence and outcomes of acute lung injury.’’ N Engl J Med 353(16): 1685–1693. 224 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/ 10-VAE_FINAL.pdf,. 225 Rubenfeld GD, Caldwell E, Peabody E, et al. Incidence and outcomes of acute lung injury. N Engl J Med 2005: 353:1685–93. 226 MedPAC ‘‘Report to Congress: Medicare Payment Policy’’ Chapter 11 ‘‘Long-term care hospital services.’’ March 2014. https:// www.medpac.gov/chapters/Mar14_Ch11.pdf. 227 Ibid. E:\FR\FM\22AUR2.SGM 22AUR2 50302 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV the number of ventilated patients in LTCHs is increasing—the number of discharged patients with respiratory diagnosis with ventilator support for 96 or more hours increased 7.4 percent between 2008 and 2011.228 Although there are no nationwide or LTCH-specific estimates of the prevalence of ventilator-associated conditions (VACs) and infection-related ventilator-associated complications (IVACs), a recent study of mechanically ventilated patients in ICUs found that approximately 10 percent developed a VAC and 5 percent developed an IVAC.229 Adherence to clinical practice guidelines for the prevention of VAP has been associated with decreased VAC rates in ICUs.230 Because VAP, one type of VAC, is considered preventable, surveillance and measurement of infection rates is important to improving quality of care and patient safety. The importance of the NHSN VAE Outcome measure in LTCHs was underscored by the MAP, which stated in its January 2014 Pre-Rulemaking Report that the measure addresses a National Quality Strategy aim or priority that is currently not adequately addressed. The MAP supported the addition of this measure addressing VAEs in the LTCH setting and stated that ‘‘although this measure is not NQFendorsed, it provides useful information for healthcare facilities to help them monitor ventilator use and identify improvements for preventing complications.’’ 231 We reviewed the NQF’s consensus endorsed measures and were unable to identify any NQF-endorsed measures for VAEs in the LTCH setting (or a related setting). We are unaware of any other measures for VAEs that have been endorsed or adopted by another consensus organization for the LTCH setting (or a related setting). Therefore, we proposed to adopt the NHSN VAE Outcome measure for use in the LTCHQR Program for the FY 2018 payment determination and subsequent years under the Secretary’s authority to select non-NQF-endorsed measures under section 1886(m)(5)(D)(ii) of the Act. We proposed to use the CDC’s NHSN reporting and submission infrastructure 228 Ibid. 229 Muscedere, J., T. Sinuff, et al. (2013). ‘‘The clinical impact and preventability of ventilatorassociated conditions in critically ill patients who are mechanically ventilated.’’ Chest 144(5): 1453– 1460. 230 Ibid. 231 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: Public Comment Draft: January 2014. Available: https://www.qualityforum.org/map/. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 for reporting of the NHSN VAE Outcome measure. Details related to the procedures for using CDC’s NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the NHSN VAE Outcome measure can be found at: https://www.cdc.gov/nhsn/PDFs/ pscManual/10-VAE_FINAL.pdf. CDC’s NHSN is the data collection and submission framework currently used for reporting the CAUTI (NQF #0138) and CLABSI (NQF #0139) measures for the LTCHQR Program. Further, CDC’s NHSN is the data collection and submission framework adopted for data collection and reporting for the Influenza Vaccination Coverage among Healthcare Personnel measure (NQF #0431) starting on October 1, 2014, and for the NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) and NHSN Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) starting on January 1, 2015. By building on the CDC’s NHSN reporting and submission infrastructure, we intend to reduce the administrative burden related to data collection and submission for this measure under the LTCHQR Program. We refer readers to section IX.C.9.d. of the preamble of this final rule for more information on the data collection and submission timeline for this quality measure. We invited public comments on our proposal to adopt the NHSN VAE Outcome measure for the LTCHQR Program, with data collection beginning on January 1, 2016, for the FY 2018 payment determination and subsequent years. We also invited public comments on our proposal to use the CDC’s NHSN for data collection and submission for this measure. Comment: Many commenters agreed that the NHSN VAE Outcome measure is an appropriate quality measurement area for the general LTCH patient population. Several commenters agreed with the NQF MAP’s recommendation to adopt HAI measures as part of the LTCHQR Program. Commenters agreed that HAI measures represent an important measurement gap for LTCHs and supported CMS’ proposal of a measure that addresses this measurement gap area. A commenter noted that the NHSN VAE Outcome measure is well aligned with the newly identified chronically critically ill (CCI) category of patients. Response: We thank these commenters’ for their support of our PO 00000 Frm 00450 Fmt 4701 Sfmt 4700 effort to implement HAI measures that address important measurement gap areas identified by the NQF MAP and other stakeholder groups. Comment: Some commenters fully supported CMS’ proposal to implement the NHSN VAE Outcome measure for the FY 2018 payment year. These commenters agreed with CMS’ rationale that VAEs represent a high-priority complication in the LTCH setting and appreciated CMS’ consideration for the utility of this measure given that it can be used across multiple settings. Some commenters specifically noted that the measure offers a mechanism for LTCHs of long-term mechanical ventilation to objectively measure the impact of care improvement initiatives. Furthermore, these commenters stated that reporting the NHSN VAE Outcome measure would raise awareness to the medical detriment of extended time on mechanical ventilation and would encourage facilities to implement strategies to reduce time on mechanical ventilation. Further, these commenters noted that the foundational elements for VAE definition (positive-end expiratory pressure (PEEP), fraction of inspired oxygen (FiO2), temperature, and white blood cell count (WBC)) are readily available, objective, rational, and reportable. The commenters stated that measuring and reporting VAE along with tracking care improvement initiatives could help to quantify the extent to which VAEs are preventable. Response: We appreciate these commenters’ support of our proposal and rationale to implement the NHSN VAE Outcome measure. Comment: Many commenters expressed concern that the measure is not NQF-endorsed, though several commenters noted that the measure is supported by the MAP. Commenters underscored the importance of the NQF review processes, emphasizing that NQF-endorsement provides assurance that the measure has been tested, can reliably and accurately collect data, is feasible to implement, and is usable. For these reasons, commenters encouraged CMS to refrain from adopting measures into the LTCHQR Program until they have been endorsed by the NQF for use in the LTCH setting. Commenters also emphasized the importance of review by the NQF via the full consensus development process, stating that timelimited endorsement from the NQF is insufficient to consider a measure for adoption in the LTCHQR Program. In addition to securing NQF-endorsement, commenters encouraged CMS to refrain from adopting any measures not supported by the NQF MAP and a TEP. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Response: We agree that the NQFendorsement process is an important part of measure development and we have generally adopted NQF-endorsed measures whenever feasible. However, where such measures do not exist for the LTCH setting, as stated in our proposal, we may adopt measures that are not NQF-endorsed under the Secretary’s exception authority set out in section 1886(m)(5)(D)(ii) of the Act. As also stated in our proposal, we reviewed the NQF’s consensus endorsed measures for VAEs and were unable to identify an NQF-endorsed measure for the LTCH setting. We note that the CDC has conveyed to us that they received preliminary positive feedback from the NQF on the NHSN VAE Outcome measure and plans to submit the measure for NQF endorsement in 2015. In addition, the NQF MAP supported the use of this measure in the LTCHQR Program and concluded that ‘‘although this measure is not NQF-endorsed, it provides useful information for healthcare facilities to help them monitor ventilator use and identify improvements for preventing complications.’’ 232 Because the NHSN VAE Outcome measure was developed for use in multiple inpatient settings, including LTCHs, and because several stakeholder groups have agreed that the measure provides useful information that can prevent ventilator-associated events and impact patient outcomes, we believe the measure is appropriate for implementation in the LTCHQR Program. Comment: A commenter questioned the appropriateness of the NHSN VAE Outcome measure for the LTCH patient population since the primary focus of care for the LTCH patient may include aggressive ventilator weaning. This commenter expressed concern that the definitions for VAE surveillance used in the NHSN VAE Outcome measure are different from the patient outcomes and clinical indicators of VAEs, such as the VAP, used in LTCHs. Further, this commenter noted that the surveillance monitoring approach used by the NHSN VAE Outcome measure does not align with LTCH patient goals (which often include aggressive ventilator weaning). Since LTCHs typically use identification of a symptomatic patient and laboratory culture results to identify VAEs, the commenter stated that implementing surveillance monitoring (in particular, ongoing monitoring of positive-end expiratory pressure and fraction of 232 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: Final Report January 2014. Available: https:// www.qualityforum.org/map/ (page 31). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 inspired oxygen) to adhere to the NHSN algorithm would be difficult and taxing in the LTCH setting and would divert resources away from other, more valuable monitoring and prevention efforts in the LTCH setting. Response: Although we recognize that the implementation of this measure adds burden for LTCHs, the NHSN VAE measure was developed to be more sensitive to VAEs than other VAE identification measures and is also more objective than other measures.233 The VAE algorithm avoids the use of chest radiograph and the reliance on specific clinical signs and symptoms to identify VAP due to their subjectivity and the fact that they may be poorly or inconsistently documented in the medical record.234 The VAE surveillance definition algorithm used in the NHSN VAE Outcome measure was developed by a workgroup based on objective, streamlined, and potentially automatable criteria that will intentionally identify a broad range of conditions and complications occurring in mechanically-ventilated adult patients.235 The measure was designed for use across several different healthcare settings, including LTCHs, and in 2013, 105 LTCHs successfully submitted VAE data to CDC’s NHSN,236 indicating that LTCHs were able to implement and operationalize this measure in their facilities. The NHSN VAE Outcome measure was also developed to facilitate potential automated outcome detection, which will contribute to increased objectivity and decreased burden on LTCHs. Comment: A commenter expressed concern about the validity of certain aspects of NHSN VAE Outcome measure. The commenter noted the NHSN VAE Outcome measure is used as a way to capture ventilator-associated pneumonia; however, the VAP portion of this measure is no longer valid or effective. Response: The NHSN VAE algorithm was developed and carefully tested to be more sensitive to VAEs (including VAPs) than other VAE measures and to be more objective than other 233 Magill, S. S., M. Klompas, et al. (2013). ‘‘Developing a new, national approach to surveillance for ventilator-associated events*.’’ Crit Care Med 41(11): 2467–2475. 234 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/pdfs/pscManual/ 10-VAE_FINAL.pdf. 235 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/pdfs/pscManual/ 10-VAE_FINAL.pdf. 236 Data from CMS–CDC correspondence on February 10, 2014. PO 00000 Frm 00451 Fmt 4701 Sfmt 4700 50303 measures.237 The algorithm was developed based on objective, streamlined, and potentially automatable criteria 238 and was developed and tested for a range of healthcare settings, including LTCHs. Research indicates the VAE algorithm detects clinical conditions such as pneumonia, ARDS, atelectasis and pulmonary edema, clinical conditions that may be preventable. In terms of what is most appropriate for making comparisons, benchmarking, etc., the overall VAE rate, which represents all events that met at least the VAC definition, and the ‘‘IVAC-plus’’ rate, which represents all events that met at least the IVAC definition, would be suitable for these purposes, and all facilities should be able to detect VACs and IVACs. Rates of individual events (for example, ‘‘VAC only,’’ ‘‘IVAC only,’’ and ‘‘especially possible and probable VAP’’) could be used by LTCHs as ‘‘internal quality improvement’’ measures. ‘‘Possible and probable VAP’’ definitions were developed for internal quality improvement purposes rather than inter-facility comparisons because practices within and among facilities with regard to diagnostic testing of respiratory tract samples vary widely and so are not ideal for inclusion in surveillance definitions that could potentially be used to make such comparisons in the future. Using the third tier of VAE (‘‘possible or probable VAP’’) for public reporting and/or for benchmarking or comparison purposes would therefore not be recommended. Comment: Several commenters expressed concerns regarding recent changes in the NHSN VAE Outcome measure algorithm and definitions, which were updated in January 2013 and July 2013, with additional modifications made in January 2014. A commenter noted that the updated algorithm has been in place for a relatively short period of time (implemented in the NHSN in 2013); thus, the commenter questioned whether data submitted under the new algorithm has been analyzed and validated, particularly in the LTCH setting. The commenter encouraged CMS to exercise caution in adopting the NHSN VAE Outcome measure as part of the LTCHQR Program since the measure was created and tested in the acute care 237 Magill, S. S., M. Klompas, et al. (2013). ‘‘Developing a new, national approach to surveillance for ventilator-associated events*.’’ Critical Care Medicine 41(11): 2467–2475. 238 Centers for Disease Control and Prevention (CDC). Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/pdfs/pscManual/ 10-VAE_FINAL.pdf. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50304 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital setting and the updated algorithm is still fairly new. Another commenter expressed similar concerns, noting that the NHSN continues to modify the data collection algorithm based on assessment and user feedback. This commenter mentioned that the NHSN has not yet provided comparative data to enable facilities to set adequate benchmarks for targets. Another commenter noted that further experience is necessary with VAE surveillance in the LTCH setting before moving forward with the adoption of this as a quality measure. This commenter provided an example requiring clarification is whether the epidemiology of VAE differs in a LTCH setting where tracheostomies are largely predominant. Another commenter stated the recent change in the NHSN algorithm no longer uses the Ventilator–Associated Pneumonia bundle. The commenter also stated that the previously used VAP bundle, referenced in the proposed rule, was applicable to Intensive Care Units, is outdated, and is not an appropriate measure for LTCHs. Response: We agree that comprehensive measure testing is an important part of measure development. The CDC algorithm was developed for several healthcare settings and initial testing was conducted in acute care facilities prior to implementation. As one commenter pointed out, the CDC continues to test the algorithm and to modify it based on assessment and enduser feedback. CDC has implemented an ongoing process to continually improve this measure and ensure it is up to date and reflects the most recently available testing and user feedback results. Although more testing and validation is helpful to inform the use of a measure, based on evidence cited, measure testing conducted to date, and the fact that 105 LTCHs collected and reported data to the CDC’s NHSN in CY 2013,239 we believe the impact this measure could have on the quality of care and patient outcomes supports our proposal to implement this measure starting January 1, 2016. We will continue to work closely with CDC to review measure testing results and feedback on an ongoing basis and continue to assess the validity of this measure and its impact on the quality of care in LTCHs. Further, CMS and CDC will develop and provide guidance to LTCHs to support the implementation of this measure, including clarification on measure specifications. This guidance will be informed by the current and 239 Data from CMS–CDC correspondence on February 10, 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 ongoing CDC NHSN experience with VAE surveillance in the LTCH setting. Finally, we agree with the commenter who states that the former VAP bundle is out of date; hence, we have not adopted this bundle for implementation in the LTCHQR Program. Comment: Commenters requested clarification regarding how CMS intends to define VAEs in the LTCH setting. These commenters encouraged CMS to report only the two standardized infection ratios (SIRs) listed in the NHSN specifications for the measure: VACs and IVACs. The commenters referred to the proposed rule, which states that VAE ‘‘incorporates a range of ventilator-associated events, including ventilator-associated pneumonia (VAP), pulmonary edema, acute respiratory distress syndrome, sepsis, and atelectasis’’ (79 FR 28267). The commenters clarified that according to the current specifications, VAE is defined not by the five aforementioned clinical conditions, but instead by quantitative changes in specific pathophysiologic parameters, including a decline in a patient’s oxygenation level after a period of stability or improvement on the ventilator, evidence of infection or inflammation (for example, elevated body temperature), and laboratory evidence of respiratory infection. Commenters noted that the pathophysiologic changes which define VACs and IVACs could be due to a variety of clinical conditions including, but not limited to, those mentioned in the proposed rule. These commenters underscored that, as suggested by the current specifications, the use of quantitative parameters is appropriate at this time because available definitions of specific conditions leading to VAEs are fairly subjective, which could lead to unreliable or invalid data collection and reporting. Commenters noted that, as specified by the NHSN, the NHSN VAE Outcome measure reports two SIRs, VAC and IVAC, which are not intended to be a ‘‘roll-up’’ of the five clinical conditions listed in the proposed rule. The commenters encouraged CMS to report the measure in a manner consistent with those specifications. Response: Our intent for the NHSN VAE Outcome measure as part of the LTCHQR Program is to collect and report data in alignment with NHSN measure specifications. Specifically, we will collect and report data on the two SIRs (VAC and IVAC) in alignment with the NHSN specifications. The measure would not be reported via a ‘‘roll-up,’’ or combined prevalence or incidence count of the five clinical conditions mentioned in the comment (ventilator- PO 00000 Frm 00452 Fmt 4701 Sfmt 4700 associated pneumonia (VAP), pulmonary edema, acute respiratory distress syndrome (ARDS), sepsis, and atelectasis). In the event that the measure specifications are revised through ongoing measure development by the CDC, the measure steward, we will align the data collection and reporting for the measure with revised measure specifications. Comment: A commenter expressed concerns about the NHSN VAE Outcome measure based on recent publications (Klouwenberg et al., 2014 240 and Lilly et al., 2014 241) and noted that these studies demonstrate that the new definition of VAE has poor sensitivity for detecting clinically verified VAP. The commenter expressed concern about the appropriateness of developing a quality measure based upon a clinical definition that research has shown to have poor sensitivity. The commenter encouraged CMS to work with stakeholders to improve the VAE definition before implementing the NHSN VAE Outcome measure. Response: We appreciate the commenter’s concern regarding the sensitivity of the measure for detecting clinically verified VAP. Ultimately, it is a clinical diagnosis that is made by taking into account several pieces of information at the bedside. There is not a universally accepted standard approach that all LTCHs can agree on. With this in mind, the intent of VAE surveillance is not to provide a new surveillance VAP definition but instead to provide an objective measure—based on information that should be available for any patient on mechanical ventilation in any facility—that captures a broad range of conditions and complications in patients on mechanical ventilation understanding that infections are not the only potentially preventable complications of mechanical ventilation. Research indicates the VAE algorithm detects clinical conditions that may be preventable, including, but not limited to, pneumonia, ARDS, atelectasis, and pulmonary edema. Comment: Several commenters recommended that CMS delay the January 1, 2016, implementation start 240 Klein Klouwenberg PM, van Mourik MS, Ong DS, Horn J, Schultz MJ, Cremer OL, Bonten MJ; MARS Consortium. Electronic Implementation of a Novel Surveillance Paradigm for Ventilatorassociated Events. Feasibility and Validation. Am J Respir Crit Care Med. 2014 Apr 15;189(8):947–55 241 Lilly CM, Landry KE, Sood RN, Dunnington CH, Ellison RT 3rd, Bagley PH, Baker SP, Cody S, Irwin RS; for the UMass Memorial Critical Care Operations Group. Prevalence and Test Characteristics of National Health Safety Network Ventilator-Associated Events. Crit Care Med. 2014 May 7. [Epub ahead of print]. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations date for this measure. A commenter recommended CMS delay implementation until data submitted under the new VAE algorithm is reviewed for reliability and in order to allow time to support adequate training and resources for VAE data collection. Several commenters expressed a need for the NHSN VAE Outcome measure to be further tested and refined for the LTCH setting before it is adopted for use in the LTCHQR Program. A few commenters expressed a concern that the NHSN VAE Outcome measure was developed and tested in the acute care setting and recommended that CMS exercise caution in implementing the measure in the LTCH setting. A commenter stated there is need for better data on VAEs and responsiveness to quality improvement programs before the measure is considered suitable for inter-facility comparisons or pay-for-performance programs. This commenter asked that the implementation of NHSN VAE Outcome measure be delayed until the measure can be validated in the LTCH setting, more is known about what portion of VAE is preventable, and until risk adjustment strategies for the measure have been developed. Another commenter expressed similar concerns about lack of LTCH-specific data currently available under the new VAE algorithm and stated that implementation of the measure in the LTCHQR Program would be premature until further data is available and standards of care are developed for preventing VAEs. Response: The CDC algorithm was developed for several health care settings, including LTCHs. While initial testing was conducted in acute care setting, the CDC continues to test the algorithm and to modify it based on assessment and end-user feedback. Further, LTCHs are acute care facilities and hence, while setting-specific testing is important, based on extensive evidence cited in our proposal, we believe that the impact this measure could have on the quality of care and patient outcomes in the LTCH setting justifies the need to implement this measure beginning January 1, 2016. CMS will continue to work closely with the CDC to review measure testing results and feedback on an ongoing basis and continue to assess the validity and reliability of this measure and its impact on the quality of care in LTCHs. Comment: A few commenters expressed concern about the resourceintensive nature for data collection for this measure. A commenter expressed concern about the limitations of existing resources in LTCHs and noted that implementation of the measure will divert resources to NHSN VAE Outcome measure data collection and reporting activities and away from other valuable prevention activities. A commenter noted that some LTCHs do not have EHRs to facilitate data collection for this measure. Another commenter noted the complexity of the measure algorithm and the variety of patient scenarios that could be implicated and stated that these represent additional burden in collecting data for the NHSN VAE Outcome measure. Response: Based on evidence cited in our proposal, we believe the impact this measure could have on quality of care and patient outcomes justifies additional resources needed for measure data collection. We recognize that the implementation of this measure adds data collection and reporting burdens for facilities; however, we believe the initial burden to implement the measure and train staff is necessary to improve the quality of care for patients in the LTCHs. In addition, in 2013, approximately 25 percent (n=105) of all currently Medicare-certified LTCHs reported data on this measure to CDC’s NHSN; this is evidence in support the feasibility of implementation of this measure in the LTCH setting.242 In addition, this measure was developed to facilitate potential automated outcome detection, which could eventually lead to decreased burden for LTCH. 50305 Further, CMS and CDC will undertake training and stakeholder communication and outreach efforts in CY 2015 and CY 2016 to support the implementation of this measure in the LTCHQR Program, similar to our ongoing efforts since 2012 to support the implementation of previously adopted measures, including the CLABSI, CAUTI, and Healthcare Professional Influenza Vaccination measures. In addition to soliciting comments on our proposal to adopt the NHSN VAE Outcome measure for the LTCHQR Program, we also invited comments on our proposal to use the CDC’s NHSN system for data collection and submission for this measure. We received no comments on the use of the NHSN system for data collection and submission of the VAE Outcome measure. Therefore we are finalizing the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure, as proposed, for FY 2018 payment update determination and subsequent years. 8. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28268 through 28269), we stated that we are considering whether to propose one or more of the quality measures and quality measure topics listed in the table below for future years in the LTCHQR Program. We invited public comments on these measures and measure topics. We specifically invited public comments regarding the clinical importance of these measures and measure topics in the LTCH setting, feasibility of data collection and implementation, current use of these measures and measure topics in the LTCH setting, and the usability of data for these measures and measure topics to inform future quality improvements in the LTCH setting. FUTURE MEASURES AND MEASURE TOPICS UNDER CONSIDERATION FOR PROPOSAL FOR THE LTCH QUALITY REPORTING PROGRAM tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV National Quality Strategy Priority: Patient Safety. • Measures addressing Ventilator Bundle. • Measures addressing avoidable injuries secondary to polypharmacy. • Application of Hospital-Based Inpatient Psychiatric Services (HBIPS)2 Hours of Physical Restraint Use (NQF #0640). • Application of Percent of Residents Who Were Physically Restrained (Long Stay) (NQF #0687). National Quality Strategy Priority: Effective Clinical Processes. • Severe Sepsis and Septic Shock: Management Bundle. 242 Data from CMS–CDC correspondence on February 10, 2014. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00453 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50306 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations FUTURE MEASURES AND MEASURE TOPICS UNDER CONSIDERATION FOR PROPOSAL FOR THE LTCH QUALITY REPORTING PROGRAM—Continued • Venous Thromboembolism Prophylaxis (NQF #0371). • Ventilator Weaning Rate. • Pain Management. National Quality Strategy Priority: Patient- and Caregiver-Centered Care. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV National Quality Strategy Priority: Communication and Coordination of Care. Comment: Commenters supported the addition of patient experience of care measures for use in the LTCHQR Program. Specifically, a commenter supported an application of the HCAHPS survey for use in the LTCHQR Program. The commenter supported the collection of patient and caregiver experience through surveys that provide feedback that only a patient or their caregiver can provide. The commenter urged CMS to undertake the necessary testing to modify the HCAHPS survey to be appropriate for use within the LTCHQR Program. The commenter suggested some modifications to the HCAHPS that would be necessary prior to implementation. These include testing the HCAHPS questions in LTCHs and the addition of new questions about key topics relevant to the LTCH patient population. The commenter added that for many patients proxy respondents would be necessary to achieve a reliable response rate. Response: We appreciate the commenters’ support of the HCAHPS survey in the LTCHQR Program, and we will take their recommendations into consideration in our measure development and testing efforts, as well as in our ongoing efforts to identify and propose appropriate measures for the LTCHQR Program in the future. Comment: Commenters noted the ‘‘Severe Sepsis and Septic Shock: Management Bundle’’ was not ready for use in the LTCHQR Program. A commenter noted that the bundle was endorsed for the acute care hospital setting and would need refinement and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 • Depression Assessment and Management. • Application of Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) (NQF #0166). • Measures addressing patients’ experience of care. • Measures addressing pain control—patients’ preference. • Application of Medication Reconciliation (NQF #0097). • Application of Medication Reconciliation Post-Discharge (NQF #0554). • Reconciled Medication List Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0646). • Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0647). • Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648). • Measures addressing care transitions. testing for use in the LTCH setting. Another commenter recommended additional review of ‘‘Severe Sepsis and Septic Shock: Management Bundle’’ before proposing the bundle as a formal measure. The commenter noted that although sepsis is one of the leading causes of hospitalization and readmissions and results in significant morbidity, mortality, and increased cost in health care, the current bundle definition, including central line placement and central hemodynamic monitoring, may have other unintended consequences. The commenter underscored the NQF Patient Safety Standing Committee’s recent recommendation that the item requiring measurement of central venous pressure be removed from this bundle. The commenter added that this recommendation is based on recent literature published on sepsis protocols, which found no significant benefit of the mandated use of central venous catheterization and central hemodynamic monitoring in all patients. Response: We appreciate the commenters’ acknowledgement of the significant burden sepsis can cause on health care outcomes and costs. We will take their comments regarding this measure into consideration in our measure development efforts, as well as in our ongoing efforts to identify and propose appropriate measures for the LTCHQR Program in the future. Comment: A commenter did not support the inclusion of the ‘‘Institute for Healthcare Improvement Ventilator PO 00000 Frm 00454 Fmt 4701 Sfmt 4700 Bundle,’’ as several components of the bundle (daily sedation reduction and daily weaning of ventilator settings) may not be applicable to patients who are on a long-term ventilator and may never be weaned. Another commenter supported the development of palliative care measures for the LTCHQR Program. Another commenter recommended CMS consider development and pilot testing of measure(s) related to antimicrobial stewardship, citing this measurement area as an important one given the fact that LTCHs are often at the epicenter of clusters and outbreaks of multidrugresistant organisms. Another commenter recommended CMS consider including The Joint Commission tobacco performance measure set in the LTCHQR Program since identifying and treating tobacco use is a cost-effective and medically effective clinical intervention demonstrated to improve health and reduce costs. Another commenter supported the addition of care coordination measures in the LTCHQR Program and noted that since patients in the LTCH setting often receive services from multiple providers, a care coordination measure would represent an important opportunity to ensure holistic, highquality care for the LTCH population. Finally, a commenter indicated support and a recommendation to include new quality measures, after the measures have been fully developed, tested, and endorsed by a multi-stakeholder consensus organization. The commenter supported quality of life, functional E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations status, and other patient-reported outcomes performance measures. Response: We appreciate the commenters’ recommendations, and we will take the commenters’ suggestions into consideration in our measure development efforts, as well as in our ongoing efforts to identify and propose appropriate measures for the LTCHQR Program in the future. 9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determination and Subsequent Years a. Background Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 payment determination and subsequent years, each LTCH submit to the Secretary data on quality measures specified by the Secretary and that such data shall be submitted in a form and manner, and at a time, specified by the Secretary. As required by section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to a given rate year, any annual update to the standard Federal rate for discharges for the hospital during the rate year must be reduced by two percentage points. b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 and FY 2017 Payment Determinations (Except NQF #0680 and NQF #0431) In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861 and 50878 through 50881), we finalized the data submission timelines and submission deadlines for measures for the FY 2016 and FY 2017 payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for a more detailed discussion of these timelines and deadlines. Specifically, we refer readers to the table at 78 FR 50878 of the FY 2014 IPPS/LTCH PPS final rule for the data collection period and submission deadlines for the FY 2016 payment determination and the tables at 78 FR 50881 of that final rule for the data collection timelines and submission deadlines for the FY 2017 payment determination. c. Revision to the Previously Adopted Data Collection Period and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through 50861), we revised the Percent of Residents or 50307 Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure for the FY 2016 payment determination and subsequent years. In that rule (78 FR 50861, 50880 through 50882), we also revised the data collection period and submission deadlines for the FY 2016 through FY 2018 payment determinations for this measure. For the reasons discussed in section IX.C.6.a. of the preamble of the proposed rule (79 FR 28262), we proposed to change to the data collection timeframes and submission deadlines for the FY 2016 payment determination and subsequent years. Specifically, as discussed in section IX.C.6.a. of the preamble of the proposed rule, for the FY 2016 payment determination, we proposed submission deadlines of February 15, 2015, and May 15, 2015, for this measure for data collection periods October 1-December 31, 2014, and January 1-March 31, 2015, respectively, instead of the previously finalized submission deadline of May 15, 2015, for the data collection period of October 1, 2014-April 30, 2015. The changes applicable to this measure (NQF #0680) are illustrated below for the FY 2016 payment determination. Please refer to section IX.C.6 of the preamble of this final rule for further information regarding this revision. DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2016 PAYMENT DETERMINATION FOR PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR program FY 2016 payment determination Data collection period (CY): Q4 (October 1—December 31, 2014) ...................................................... Q1 (January 1—March 31, 2015) ............................................................ Further, as discussed in section IX.C.6.a. of the preamble of the proposed rule (79 FR 28262), we February 15, 2015. May 15, 2015. proposed similar deadlines for the FY 2017 payment determination and subsequent years for the LTCHQR Program. The changes applicable to this measure (NQF #0680) are illustrated below. DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS FOR PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Data collection period (CY): Final submission deadlines for the LTCHQR program payment determination (FY) Q4 of the CY two years before the payment determination year (for example, October 1—December 31, 2015 for the FY 2017 payment determination). Q1 of the CY one year before the payment determination year (for example, January 1—March 31, 2016 for the FY 2017 payment determination). February 15 of the FY preceding the payment determination year (for example, February 15, 2016 for the FY 2017 payment determination). May 15 of the FY preceding the payment determination year (for example, May 15, 2016 for the FY 2017 payment determination). We invited public comment on our proposal to revise the data collection VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 timeline for Percent of Residents or Patients Who Were Assessed and PO 00000 Frm 00455 Fmt 4701 Sfmt 4700 Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50308 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations #0680) for the FY 2016 payment determination and subsequent years. Comment: A few commenters supported CMS’ proposal to revise the data collection period and submission deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 payment determination and subsequent years. A commenter also noted this alignment reflects the influenza season and will reduce data entry time for LTCH staff. Response: We greatly appreciate commenters’ support of our proposal to revise the data collection period and submission deadlines for NQF #0680 to better align with the influenza vaccination season. Comment: A commenter recommended that the NQF #0680 measure not apply to patients transferred from acute care hospitals since this would represent a duplicative compliance requirement between the two care settings. Response: We did not propose any changes to measure specifications for NQF #0680. As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50860), the specifications for NQF #0680 are written to ensure that ‘‘LTCHs follow current clinical guidelines to assess whether a patient should receive an influenza vaccine and to ensure that, when clinically indicated, each patient only receives one influenza vaccine.’’ For patients who did not receive the influenza vaccine in the LTCH, item O0250 on the LTCH CARE Data Set allows the LTCH to indicate why the vaccine was not received in the facility, including selecting an option indicating that the patient received the vaccine outside of the facility. In addition, because this measure reports on patients who received the influenza vaccine either inside or outside the facility/hospital, for a patient who received the vaccine at another facility prior to arriving at the LTCH, there is no incentive for the LTCH to over-vaccinate or provide duplicative vaccination. Facilities will need to adhere to the principles of proper care coordination and documentation to avoid overimmunization as well as underimmunization. However, the measure specifications are designed to encourage facilities to vaccinate only when the patient has not already received the vaccination in another setting and only when clinically indicated. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50860) for more information on this topic. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 After consideration of the public comments we received, we are finalizing the revision to the data collection period and submission timeline for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) for the FY 2016 payment determination and subsequent years. d. Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for New LTCHQR Program Quality Measures and for Revisions to Previously Adopted Quality Measures For the two functional status measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28270), we proposed that all LTCHs would be required to collect data using the LTCH CARE Data Set.243 We will release the technical data submission specifications and update LTCHQR Program Manual for the LTCH CARE Data Set (Version 3.00) to include items related to the functional status measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674) measure in CY 2015. The QIES ASAP system would remain the data submission mechanism for the LTCH CARE Data Set. Further information on data submission of the LTCH CARE Data Set for the LTCHQR Program Reporting using the QIES ASAP system is available at: https:// www.qtso.com/ www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. For the NHSN VAE Outcome measure, we proposed that LTCHs would be required to use the CDC’s NHSN reporting and submission infrastructure. Details related to the procedures for using CDC’s NHSN for data submission and information on definitions, numerator data, denominator data, data analyses, and measure specifications for the NHSN 243 The LTCH CARE Data Set (Version 2.01) was approved on June 10, 2013, by OMB in accordance with the PRA. The OMB Control Number is 0938– 1163. Expiration Date June 30, 2016. Available on the CMS Web site at: https://www.cms.gov/ Regulations-and-Guidance/Legislation/ PaperworkReductionActof1995/PRA-Listing-Items/ CMS1252160.html. CMS will revise the LTCH CARE Data Set and submit for OMB review for PRA approval to support data collection for the two functional status measures and the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). PO 00000 Frm 00456 Fmt 4701 Sfmt 4700 VAE Outcome Measure can be found at: https://www.cdc.gov/nhsn/PDFs/ pscManual/10–VAE_FINAL.pdf. We invited public comments on these proposals. Comment: A commenter supported the use of the LTCH CARE Data Set for the two functional status measures. The commenter appreciated CMS’ use of the LTCH CARE Data Set to streamline reporting across acute and post-acute settings. Response: We appreciate the commenter’s feedback and support of the use of the LTCH CARE Data Set for collection of the functional status measures. We received no comments on our proposed data submission mechanisms for the NHSN VAE Outcome measure. After consideration of the public comments we received, we are finalizing that all LTCHs would use the LTCH CARE Data Set (Version 3.00) to collect data for the application of Percent of Residents Experiencing One or More Falls with Major Injury (LongStay) (NQF #0674) and the two functional status measures. We are also finalizing that the QIES ASAP system will remain the data submission mechanism for the LTCH CARE Data Set. Further, we are finalizing that for the NHSN VAE Outcome measure, LTCHs would use the CDC’s NHSN reporting and submission infrastructure for the LTCHQR Program. e. Data Collection Period and Submission Deadlines Under the LTCHQR Program for the FY 2018 Payment Determination In sections IX.C.9.c. and f. of the preamble of this final rule, we discuss our proposal, for the FY 2016 payment determination and subsequent years, to revise the data collection period and submission deadlines for the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) measure and, for the FY 2018 payment determination and subsequent years, to revise the data collection period and submission deadlines for the application of the Percent of Residents Experiencing One or More Falls with Major Injury (LongStay) (NQF #0674) measure. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50882), we adopted the data collection period and submission deadlines for the remaining quality measures applicable to the FY 2018 payment determination as listed in the following tables. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations TIMEFRAMES FOR DATA COLLECTION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION 50309 January 1, 2016–December 31, 2016. January 1, 2016–December 31, 2016. January 1, 2016–December 31, 2016. October 1, 2016 (or when vaccine becomes available)–March 31, 2017. January 1, 2016–December 31, 2016. January 1, 2016–December 31, 2016. Data collection period: CY 2016 Final submission deadlines for the LTCHQR program FY 2018 payment determination Final submission deadlines for the LTCHQR program FY 2018 payment determination May 15, 2016. August 15, 2016. Data collection period NQF #0138 .... TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) AND PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680)—Continued Q1 (January–March 2016) .... Q2 (April–June 2016) ............ NQF measure ID TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) AND PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) NQF #0139 .... NQF #0678 .... NQF #0431 .... NQF #1716 .... NQF #1717 .... Data collection period: CY 2016 Q3 (July–September 2016) ... Q4 (October–December 2016). November 15, 2016. February 15, 2017. TIMELINE FOR SUBMISSION OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) Final submission deadlines for the LTCHQR Program FY 2018 payment determination Data collection period October 1, 2016 (or when vaccine becomes available)–March 31, 2017 For the new measures that we proposed to adopt for the FY 2018 May 15, 2017. payment determination and subsequent years, we proposed the following data collection period and submission deadlines. DATA COLLECTION PERIOD FOR NEW LTCHQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION NQF measure ID or measure name (when NQF measure ID not available) National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. Data collection period January 1, 2016–December 31, 2016. April 1, 2016–December 31, 2016. April 1, 2016–December 31, 2016. SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: NATIONAL HEALTHCARE SAFETY NETWORK (NHSN) VENTILATOR-ASSOCIATED EVENT (VAE) OUTCOME MEASURE Final submission deadlines for the LTCHQR program FY 2018 payment determination tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Data collection period Q1 Q2 Q3 Q4 (January–March 2016) ....................................................................... (April–June 2016) ............................................................................... (July–September 2016) ...................................................................... (October–December 2016) ................................................................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00457 Fmt 4701 May 15, 2016. August 15, 2016. November 15, 2016. February 15, 2017. Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 50310 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2018 PAYMENT DETERMINATION: FUNCTIONAL OUTCOME MEASURE: CHANGE IN MOBILITY AMONG LONGTERM CARE HOSPITAL PATIENTS REQUIRING VENTILATOR SUPPORT AND PERCENT OF LONG-TERM CARE HOSPITAL PATIENTS WITH AN ADMISSION AND DISCHARGE FUNCTIONAL ASSESSMENT AND A CARE PLAN THAT ADDRESSES FUNCTION Data collection period Q2 (April–June 2016) * .......... Q3 (July–September 2016) ... Q4 (October–December 2016). Final submission deadlines for the LTCHQR program FY 2018 payment determination August 15, 2016. November 15, 2016. February 15, 2017. * Note that data collection implementation begins Q2. We invited public comments on these data collection timelines and submission deadlines for the three new quality measures for FY 2018 payment determination. We received no comments on these proposals. Therefore, we are finalizing the data collection period and submission deadlines for the three measures (the two functional measures and the NHSN VAE Outcome measure), as proposed. f. Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for the FY 2018 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule, we revised the application of the Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure for the FY 2018 payment determination and subsequent years (78 FR 50874 through 50877). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28272), we proposed, for the FY 2018 payment determination only, to move the start date for data collection of this measure to April 1, 2016, instead of the previously finalized start date of January 1, 2016. Data collection and submission of this measure will continue through December 31, 2016, as previously finalized for the FY 2018 payment determination. This change in the data collection start date will only affect CY 2016 data collection and submission for the LTCHQR Program for the FY 2018 payment determination. For all subsequent years, data collection for this measure will begin on January 1 and continue through December 31. We note that these proposed changes will be applicable only to the application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) measure, and not applicable to any other LTCHQR Program measures, proposed or adopted, unless explicitly stated. We refer readers to section IX.C.6. of the preamble of this final rule for further information and rationale. We invited public comment on the proposed data collection timeline and quarterly submission deadlines for the application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674) for the FY 2018 payment determination. Comment: Commenters supported CMS’ proposal to delay the start of data collection for the NQF #0674 measure until April 1, 2016, for the FY 2018 payment determination. Response: We appreciate commenters’ support of our proposal to revise the data collection period and quarterly submission deadlines for the application of NQF #0674 and are finalizing the proposed revision to the data collection period and quarterly submission deadlines for this measure for the FY 2018 payment determination. We reiterate that this change in data collection of this measure would only apply to the FY 2018 payment determination year only; for all subsequent years, data collection for this measure would begin on January 1 and continue through December 31. After consideration of the public DATA COLLECTION TIMELINES AND comments we received, we are SUBMISSION DEADLINES OF finalizing the data collection period and LTCHQR PROGRAM QUALITY DATA quarterly submission deadlines for the FOR THE FY 2018 PAYMENT DETER- application of Percent of Residents MINATION FOR THE APPLICATION OF Experiencing One or More Falls with PERCENT OF RESIDENTS EXPERI- Major Injury (Long Stay) (NQF #0674) ENCING ONE OR MORE FALLS WITH for the FY 2018 payment determination, MAJOR INJURY (LONG STAY) (NQF as proposed. For all subsequent years, data collection for this measure would #0674) begin on January 1 and continue Final submis- through December 31. Data collection period: CY 2016 Q2 (April–June 2016) * .......... Q3 (July–September 2016) ... Q4 (October–December 2016). sion deadlines for the LTCHQR program FY 2018 payment determination August 15, 2016. November 15, 2016. February 15, 2017. * Note that data collection implementation begins Q2. g. Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2019 Payment Determination and Subsequent Years For the quality measures applicable to the FY 2019 payment determination and subsequent years, including those that we proposed in section IX.C.7. of the preamble of the proposed rule, we proposed the following data collection timelines and submission deadlines. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION NQF neasure ID or measure name (when NQF measure ID not available) Data collection period National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138). National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139). Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00458 Fmt 4701 January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50311 DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION—Continued NQF neasure ID or measure name (when NQF measure ID not available) Data collection period Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680). Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431). National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-resistant Staphylococcus areus (MRSA) Bacteremia Outcome Measure (NQF #1716). National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long-Stay) (NQF #0674). National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Functional Outcome Measure: Change in Mobility among Patients Requiring Ventilator Support. Percent of LTCH Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. October 1, 2017–March 31, 2018. October 1, 2017–March 31, 2018. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. January 1, 2017–December 31, 2017. DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION FOR ALL MEASURES EXCEPT INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) AND PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR program FY 2019 payment determination Data collection period: CY 2017 Q1 Q2 Q3 Q4 (January–March 2017) ....................................................................... (April–June 2017) ............................................................................... (July–September 2017) ...................................................................... (October–December 2017) ................................................................. May 15, 2017. August 15, 2017. November 15, 2017. February 15, 2018. DATA COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION: PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE (SHORT-STAY) (NQF #0680) Final submission deadlines for the LTCHQR Program FY 2019 payment determination Data collection period October 1, 2017–December 31, 2017 ...................................................... January 1, 2018–March 31, 2018 ............................................................ February 15, 2018. May 15, 2018. COLLECTION PERIOD AND SUBMISSION DEADLINES OF LTCHQR PROGRAM QUALITY DATA FOR THE FY 2019 PAYMENT DETERMINATION: INFLUENZA VACCINATION COVERAGE AMONG HEALTHCARE PERSONNEL (NQF #0431) Final submission deadlines for the LTCHQR Program FY 2019 payment determination Data collection period tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV October 1, 2017–March 31, 2018 ............................................................ We invited public comment on these proposals. We received no comments on these proposals. Therefore, we are finalizing the data collection period and submission deadlines for the FY 2019 payment determination and subsequent years, as proposed. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 May 15, 2018. 10. LTCHQR Program Data Completion Thresholds for the FY 2016 Payment Determination and Subsequent Years a. Overview Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 payment determination and subsequent years, each LTCH submit to the Secretary data on quality measures specified by the Secretary in a form and manner, and at a time, specified by the Secretary. As PO 00000 Frm 00459 Fmt 4701 Sfmt 4700 required by section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to a given fiscal year, any annual update to the standard Federal rate for discharges for the hospital during the rate fiscal year must be reduced by two percentage points. To date, we have not established a standard for compliance other than that LTCHs submit all applicable E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50312 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations required data for all finalized measures, by the previously finalized quarterly deadlines. In response to input from our stakeholders seeking additional specificity related to the LTCHQR Program compliance affecting FY payment update determinations and, due to the importance of ensuring the integrity of quality data submitted to CMS, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28273 through 28275), we proposed to set specific LTCHQR Program thresholds for completeness of LTCH quality data beginning with data affecting the FY 2016 payment determination and subsequent years. The LTCHQR Program, through the FY 2012, FY 2013, and FY 2014 IPPS/ LTCH PPS final rules, requires LTCHs to submit quality data using two separate data collection/submission mechanisms: Measures collected using the LTCH CARE Data Set (LCDS) are submitted through the CMS Quality Improvement Evaluation System (QIES); and measures stewarded by the CDC (such as Healthcare-Acquired Infection (HAI) and vaccination measures), are submitted using the CDC’s National Healthcare Safety Network (NHSN). We have also previously finalized a claimsbased measure (All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Long Term Care Hospitals); however, claims-based measures do not require LTCHs to actually submit quality data to CMS, as they are calculated using claims data submitted to CMS for payment purposes. Thus, for claims-based measures, there is no submitted quality data to which we could apply data completion thresholds. To ensure that LTCHs are meeting an acceptable standard for completeness of submitted data, we proposed that for the FY 2016 payment determination and subsequent years, LTCHs meet or exceed two separate program thresholds: One threshold for completion of quality measures data collected using the LCDS and submitted through QIES; and a second threshold for quality measures data collected and submitted using the CDC’s NHSN. We proposed that LTCHs must meet or exceed both thresholds discussed below, in order to avoid receiving a 2 percentage point reduction to their annual payment update for a given FY, beginning with FY 2016. We proposed to hold LTCHs accountable for different data completion thresholds for each of the two data submission mechanisms; an 80 percent data completion threshold for data collected using the LCDS and submitted through the QIES mechanism; VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 and a 100 percent data completion threshold for data submitted through the CDC’s NHSN. We proposed to hold LTCHs to the higher data completion threshold for the CDC’s NHSN initially, because many LTCHs have been mandated by States to report infection data using the CDC’s NHSN system for surveillance purposes, prior to the start of the LTCHQR Program on October 1, 2012, and, therefore, we believe LTCHs are more familiar with the NHSN collection and submission process. In contrast, LTCHs had never submitted quality data using a standardized data collection instrument before October 1, 2012, such as the LCDS submitted through the QIES mechanism. In addition, we require the submission of LCDS admission and discharge data through QIES, in order for LTCHs to meet the proposed data accuracy compliance standard, which with regard to discharge data, may be more difficult to collect on patients that are discharged emergently or against medical advice, in effect making it more difficult to meet a higher level of compliance initially. Lastly, through the FY 2014 IPPS/LTCH PPS final rule, we finalized accelerated quarterly deadlines for submission of quality data, beginning January 2014, of 45 days beyond the end of each CY quarter, as opposed to the 135 day post-quarterly deadline LTCHs were previously required to meet. We feel that this is an additional challenge that LTCHs may face. We invited comment on other obstacles LTCHs may face in meeting a higher level of compliance with regard to submission of quality data using the LCDS. Comment: A few commenters noted that individual LTCHs may have a higher than average percentage of incomplete data due to emergent discharges, as well as patients with fecal management systems. Commenters stated that emergent discharges do not allow for the collection of complete data, and that CMS guides LTCHs to enter a dash (-) for item H0400 (Bowel Continence) for those patients that have fecal management systems in place, rendering any associated admission assessment incomplete. These commenters suggested that 10 percent to 15 percent of any LTCH’s patients may fall under one of the two above categories, making it difficult to comply with proposed data completion thresholds. Finally, the commenters suggested that completeness in the LTCH CARE Data Set Planned Discharge assessments may be a better metric of a facility’s compliance with quality reporting completion thresholds. PO 00000 Frm 00460 Fmt 4701 Sfmt 4700 Response: The proposed data completion threshold for data submitted using the LTCH CARE Data set is 80 percent. We have considered emergent discharges as one reason that LTCHs may not meet data completion thresholds approaching 100 percent. While we understand that LTCHs may not have the opportunity to complete data item H0400 (Bowel Continence) for those patients with fecal management systems in place, we believe that LTCHs should be able to meet our currently proposed threshold of 80 percent and can confirm that the majority of LTCHs are meeting this threshold presently. With respect to the future expansion of our data completion threshold policy, we will monitor LTCH performance on each required item and take steps to account for any such low response rate. If we find that the majority of LTCHs are failing to consistently respond to any one of our required items, we will either take action to modify that item on the LTCH CARE Data Set, or we will address the problem as it relates to data completion threshold compliance in future rulemaking. With regard to the commenters’ suggestion that we base completion thresholds on only planned discharge assessment, we respectfully disagree. We believe that the LTCH CARE Data Set admission assessment is an important factor in collecting data with regard to risk adjustment items. However, we will consider the effect of the inclusion of unplanned discharge data elements in our compliance determinations based on data completion thresholds, as we monitor this program. b. LTCHQR Program Data Completion Threshold for the Required LTCH CARE Data Set (LCDS) Data Items The LCDS is composed of data collection items designed to inform quality measure calculations, including risk-adjustment calculations, as well as internal consistency checks for logical inaccuracies. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28274), we proposed that beginning with quality data affecting the FY 2016 payment determination and subsequent years, LTCHs must meet or exceed a proposed LCDS data completion threshold of 80 percent. We proposed to assess the completeness of submitted data by verifying that for all LCDS assessments submitted by any given LTCH, at least 80 percent of those LCDS Assessments must have 100 percent of the required quality data items completed, where, for the purposes of this rule, ‘‘completed’’ is defined as having provided actual patient data, as opposed to a non- E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations informative response, such as a dash (-), that indicates the LTCH was unable to provide patient data. The proposed threshold of 80 percent is based on the need for substantially complete records, which allows appropriate analysis of quality measure data for the purposes of updating quality measure specifications as they undergo yearly and triennial measure maintenance reviews with the NQF. In addition, complete data is needed to understand the validity and reliability of quality data items, including risk-adjustment models. Finally, we want to ensure complete quality data from LTCHs, which will ultimately be reported to the public, allowing our beneficiaries to gain an understanding of LTCH performance related to these quality metrics, and helping them to make informed health care choices. Our data suggest that the majority of current LTCHs are in compliance with, or exceeding, this proposed threshold already. Our decision to set this proposed data completion threshold at a lower level initially, with the intent to raise the proposed 80 percent threshold in subsequent program years, is based on our understanding that LTCHs are still new to quality reporting, and that their experience and understanding, with respect to reporting quality data using a standardized data collection instrument, and thus their compliance, will increase over time. However, we invited public comment on circumstances that might prevent LTCHs from meeting this level of compliance. All items that we proposed to require under the LTCHQR Program are identified in Appendix D of the LTCHQR Program Manual version 2.01, which is available for download on the CMS Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/ LTCHTechnicalInformation.html. We also proposed that any LTCH that does not meet the proposed requirement that 80 percent of all LCDS assessments submitted contain 100 percent of all required quality data items, will be subject to a reduction of 2 percentage points to the applicable FY annual payment update beginning with FY 2016. In order to establish this program threshold, we analyzed all LCDS submissions from January 2013 through September 2013, and we believe that the majority of LTCHs will be able to meet the proposed 80 percent data completion threshold. It is our intent to raise this threshold over the next 2 years, through the formal notice-andcomment rulemaking process. As stated above, we feel that as LTCHs continue VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to submit data using a standardized data collection instrument, such as the LCDS, and as they continue to take advantage of the resources we provide to guide LTCHs in their submission of this data (national trainings, CMS Special Open Door Forums, LTCHQR Program Manual, and technical trainings available on our Web site), we feel LTCH performance with respect to data completion will improve over time. We proposed that this threshold will have to be met by LTCHs, in addition to the CDC NHSN threshold discussed below, in order to avoid receiving a 2 percentage point reduction to the applicable FY annual payment update. c. LTCHQR Program Data Completion Threshold For Measures Submitted Using the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) The LTCHQR Program through the FY 2012, FY 2013, and FY 2014 IPPS/LTCH PPS final rules, requires that LTCHs submit CDC-stewarded quality measure data using the CDC’s NHSN, including data for the previously finalized CAUTI, CLABSI, and Influenza Vaccination Coverage among Healthcare Personnel (HCP) quality measures. More specifically, we require LTCHs follow CDC quality measure protocols, which require the LTCHs to complete all data fields required for both numerator and denominator data within NHSN, including the ‘‘no events’’ field for any month during which no infection events were identified. LTCHs are required to submit this data on a monthly basis (except for the HCP measure, which is only required to be reported once per year). However, LTCHs have until the associated quarterly deadline (45 calendar days beyond the end of each CY quarter) by which to report infection data to the CDC for each of the three months within any given quarter. For more information on the LTCHQR Program quarterly deadlines, we refer readers to section IX.C.9.b. of the preamble of this final rule. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28275), we proposed that beginning with FY 2016 payment determination and subsequent years, this previously finalized requirement for monthly reporting must be met in addition to the proposed LCDS data completion threshold discussed above in order to avoid a 2 percentage point reduction to the applicable FY annual payment update. That is, we proposed that LTCHs must meet a threshold of 100 percent for measures submitted via the NHSN, achieved by submitting relevant infection, vaccination, or other required PO 00000 Frm 00461 Fmt 4701 Sfmt 4700 50313 quality measure data for each month of any given CY, in addition to meeting the above-proposed data item completion threshold for required quality data items on the LCDS. As the LTCHQR Program expands, and LTCHs begin reporting measures that were previously finalized, but not yet implemented, or newly proposed and finalized measures, we proposed to apply this same threshold. d. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Completion Thresholds As we discussed above, we have proposed that LTCHs must meet two separate data completion thresholds in order to avoid a 2 percentage point reduction to their applicable FY annual payment update; a data completion threshold of 80 percent for those required data elements collected using the LCDS and submitted through QIES; and a second data completion threshold of 100 percent for quality measure data submitted through the CDC’s NHSN. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28275), we proposed that these data completion thresholds must be met in addition to the data validation threshold of 75 percent we discuss below, in order to avoid a 2 percentage point reduction to their applicable FY annual payment update. While we proposed that LTCHs must meet both the proposed data completion and data validation thresholds, LTCHs cannot have their applicable annual payment update reduced twice. That is, should an LTCH fail to meet either one or both of the proposed thresholds, it will only receive one reduction of 2 percentage points to its applicable fiscal year annual payment update. We invited public comment on these proposals. Comment: A few commenters supported CMS’ proposal to establish data completion thresholds, noting that it is a fundamental step to ensure the accuracy of the LTCH quality reporting data. A few commenters stated that CMS’ proposed policy will facilitate more accurate public reporting in the future and agreed with our proposed numeric standards. Response: We thank the commenters for their support. Comment: Commenters recommended that CMS apply the data completion standards no earlier than the FY 2017 payment determination, instead of FY 2016. These commenters further stated that a significant amount of data for FY 2016 has already been collected and submitted and that it would be inappropriate and unfair to apply the data completion standards to data submitted before the standards were E:\FR\FM\22AUR2.SGM 22AUR2 50314 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations even proposed and therefore known to LTCHs. Response: Currently, the compliance standard applicable to each LTCH is to timely submit all required quality data, and LTCHs should already be ensuring that the data that they submit is complete and accurate. Thus, applying the data completion standards to CY 2014 data merely ensures that LTCHs are complying with applicable standards and that payments made to LTCHs are based on complete and accurate quality data. Comment: A commenter suggests that LTCHs should not be penalized by a 2 percentage point reduction to the annual payment update based on completion thresholds, citing that emergency discharges make it difficult to complete assessments. Response: We believe that the number of unplanned discharges in LTCHs is not so substantial that it will prevent LTCHs from meeting or exceeding the proposed data completion threshold of 80 percent for data submitting using the LTCH CARE Data Set. We will continue to monitor submission patterns and completion thresholds for all data items and appropriately investigate and address any submission patterns that lead us to believe that a systematic issue is preventing LTCHs from complying with our data completion thresholds. After consideration of the public comments we received, we are finalizing the LTCHQR Program data completion threshold for the FY 2016 payment determination and subsequent years, as proposed. 11. Data Validation Process for the FY 2016 Payment Determination and Subsequent Years tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Data Validation Process Historically, we have built consistency and internal validation checks into our data submission specifications to ensure that the basic elements of the LCDS assessments conform to requirements such as proper format and facility information. These internal consistency checks are automated and occur during the LTCH submission process, and help ensure the integrity of the data submitted by LTCHs by rejecting submissions or issuing warnings when LTCH data contain logical inconsistencies. These internal consistency checks are referred to as ‘‘system edits’’ and are further outlined in the LTCH Data Submission Specifications version 1.01, which are available for download on the LTCH Quality Reporting Technical Information Web page at: https:// www.cms.gov/Medicare/Quality- VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCHTechnicalInformation.html. Validation is intended to provide added assurance of the accuracy of the data that will be reported to the public as required by section 1886(m)(5)(E) of the Act. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28275 through 28276) we proposed, for the FY 2016 payment determination and subsequent years, to validate the data elements submitted to CMS for quality purposes. Initially, for the FY 2016 payment determination, this data accuracy validation will apply only to the LCDS items that inform the measures Percent of Patients or Residents with Pressure Ulcers That are New or Worsened (Short-Stay) (NQF #0678). We intend to expand this validation process for quality measures affecting the FY 2017 payment determination and subsequent years through future notice-andcomment rulemaking. We proposed to validate the data elements submitted to CMS for Percent of Residents or Patients with Pressure Ulcers That are New or Have Worsened (Short-Stay) (NQF #0678) under the LTCHQR Program by requesting the minimum chart data necessary to confirm a statistically valid random sample of 260 LTCHs. From the random sample of 260 LTCHs, 5 LCDS assessments submitted through the National Assessment Collection Database would be randomly selected by the CMS validation contractor. In accordance with § 164.512 (d)(1)(iii) of the HIPAA Privacy Rule, we would request from these LTCHs the specified portions of the 5 Medicare patient charts that correspond to the randomly selected assessments, which would need to be copied and submitted via traceable mail to a CMS contractor for validation. We proposed that the specific portions of the 5 beneficiary charts would be identified in the written request, but may include: Admission and discharge assessments, relevant nursing notes following the admission, relevant nursing notes preceding the discharge, physician admission summary and discharge summary, and any Assessment of Pressure Ulcer Form the facility may utilize. We proposed that the CMS contractor would utilize the portions of the patient charts to compare that information with the quality data submitted to CMS. Differences that would affect measure outcomes or measure rates would be identified and reported to CMS. These differences could include but are not limited to unreported worsened pressure ulcers. PO 00000 Frm 00462 Fmt 4701 Sfmt 4700 We proposed that all data that has been submitted to the National Assessment Collection Database under the LTCHQR Program would be subject to the data validation process. Specifically, we proposed that the contractor would request copies of the randomly selected medical charts from each LTCH via certified mail (or other traceable methods that require an LTCH representative to sign for CMS correspondence), and the LTCH would have 45 days from the date of the request (as documented on the request letter) to submit the requested records to the contractor. If the LTCH does not comply within 30 days, the contractor would send a second certified letter to them, reminding the LTCH that it must return copies of the requested medical records within 45 calendar days following the date of the initial contractor medical record request. If the LTCH still does not comply, then the contractor would assign a ‘‘zero’’ score to each measure in each missing record. If, however, the LTCH does comply, the contractor would review the data submitted by the LTCH on the LCDS assessments for the required data elements associated with the Pressure Ulcer measure, until such time that LTCHs begin to submit additional quality measures that are collected using the LCDS. Initially, this review would consist solely of those required data elements that inform the Pressure Ulcer measure calculation and checks for logical inconsistencies. As LTCHs begin to report additional finalized measures, we intend to expand this validation process to quality measures affecting the FY 2017 payment determination and subsequent years, through future notice-and-comment rulemaking. The contractor would then calculate the percentage of matching data elements, which would constitute a validation score. Because we would not be validating all records, we would need to calculate a confidence interval that incorporates a potential sampling error. To receive the full FY 2016 annual payment update, we proposed that LTCHs in the random sample must attain at least a 75 percent validation score, based upon our validation process, which would use charts requested from patient assessments submitted for CY 2013. We would calculate a 95 percent confidence interval associated with the observed validation score. If the upper bound of this confidence interval is below the 75 percent cutoff point, we would not consider a hospital’s data to be ‘‘validated’’ for payment purposes. We E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations proposed that LTCHs failing the validation requirements would be subject to the 2 percent annual payment update reduction, beginning with their fiscal year annual payment update. In addition, all LTCHs validated would receive educational feedback, including specific case details. Comment: Several commenters believed that the proposed validation is a fundamental step to ensure the accuracy of the LTCH quality reporting data. Response: We thank the commenters for their support for this proposal. Comment: Several commenters suggested that CMS begin the validation standards no earlier than FY 2017. Although the commenters believed that validation is an important step to ensuring that hospitals are collecting measure data appropriately, they believed it would be inappropriate to validate data submitted for FY 2016 payment determination, as much of those data will be submitted prior to the effective date of CMS’ finalized data accuracy validation policy on October 1, 2014. Response: We agree that validation is important not only to ensure hospitals are collecting data appropriately, but also in providing feedback to LTCHs regarding possible differences in the findings of our validation effort. We believe the feedback a facility will receive, even if they are well above the validation minimum, could be valuable to both the LTCHs and to CMS. We are confident that most LTCHs have been submitting data accurately. Although much of the data for FY 2016 has been submitted, the FY 2013 IPPS/LTCH PPS final rule (77 FR 53620) states that LTCHs are required to submit the subset of data elements necessary to enable CMS to validate that the pressure ulcer measure data elements were accurately reported. We believe that we are operating within our authority to validate quality data. Currently, the compliance standard applicable to each LTCH is to timely submit all required quality data, and LTCHs should already be ensuring that the data that they submit is complete and accurate. Thus, validating CY 2014 data ensures that LTCHs are complying with applicable standards and that payments made to LTCHs are based on complete and accurate quality data. Comment: Several commenters recommended that the CMS make the validation process as transparent as possible, particularly since it is new to the LTCHQR Program. Response: We will use the requested charts to validate the following data elements: Functional mobility: ‘‘Lying VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to Sitting on Side of Bed;’’ ‘‘Bowel continence;’’ ‘‘Active Diagnosis;’’ ‘‘PVD;’’ ‘‘Active Diagnosis;’’ ‘‘Diabetes Mellitus;’’ ‘‘Height;’’ ‘‘Weight;’’ ‘‘Worsening stage 2 Pressure Ulcer;’’ ‘‘Worsening stage 3 Pressure Ulcer;’’ and, ‘‘Worsening stage 4 Pressure Ulcer.’’ We intend to share our data accuracy validation findings with the randomly selected LTCHs, so that they may gain an understanding of any discrepancies between the medical record and the LTCH CARE Data Assessment to which the medical record is being compared. We will also incorporate examples of our findings into LTCH training, special open door forums, and LTCH manuals, ensuring that the greater LTCH community benefits from this validation effort as well. b. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Accuracy Threshold In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28276) we proposed that LTCHs must meet a data accuracy threshold of 75 percent in order to avoid receiving a 2 percentage point reduction to their applicable fiscal year annual payment update. We proposed that this proposed data accuracy threshold of 75 percent must be met in addition to the proposed data completion thresholds (80 percent for data collected using the LTCH CARE Data Set and submitted using QIES, and 100 percent for data submitted using the CDC’s NHSN), in order to avoid receiving a 2 percentage point reduction to their applicable FY annual payment update. While we proposed that LTCHs must meet both the proposed data accuracy and data completion thresholds, LTCHs cannot have their applicable annual payment update reduced twice. That is, should an LTCH fail to meet either one or both of the proposed thresholds (data completion and/or data accuracy), it will only receive one reduction of 2 percentage points to its applicable FY annual payment update. We invited public comment on these proposals and suggestions to improve the utility of the approach or to reduce the burden on LTCHs. Comment: A commenter noted that 260 LTCHs would represent approximately 60 percent of the entire industry, which they believed was excessive. Response: We thank the commenter for voicing this concern and will take the proportion into consideration in future rulemaking. Comment: A commenter asked whether ‘‘IPPS comparable’’ cases will PO 00000 Frm 00463 Fmt 4701 Sfmt 4700 50315 be required to meet LTCHQR Program requirements or those that fall under ACH reporting requirements. Response: We presume that the commenter is referring to current short stay outlier policy, but they could be referencing future regulation under the SGR Reform Act, where the IPPS comparable amount is one of the payment options for a ‘‘site neutral’’ case. Regardless, the facility/unit would be subject to the LTCHQR Program, as it is still an LTCH when it is paid an IPPS comparable amount, and the payment is a form of LTCH PPS payment. Comment: A commenter recommended that CMS annually announce which LTCHs will be subject to validation and disseminate information about when these LTCHs should expect to begin receiving requests for medical records. Response: We recognize the need to communicate with LTCHs whether or not they will be selected for validation. We will use the LTCHQR Program Web site, as well as direct communication with LTCHs selected for validation, to communicate time frames and deadlines regarding the data accuracy validation effort. In addition, we will use the LTCHQR Program Web site to announce, and offer access to, a new listserv specifically for the LTCHQR Program, which we will use to communicate with the provider community in the near future. Comment: Commenters expressed concern that the threshold compliance of 75 percent agreement was too high for this first attempt to validate the Pressure Ulcer data. Commenters suggested that there would be a great deal of variability in the reporting of the Pressure Ulcer measure and that this should be an opportunity for CMS to educate LTCHs on appropriate documentation and reporting to improve the process. Commenters suggested that a 60 percent compliance threshold would be more appropriate validation. Response: We note that the 75 percent agreement is the single point estimate of the proportion in agreement; we proposed that the upper bound of a 95 percent confidence interval be the value that must exceed the 75 percent compliance threshold. We believe this takes into account the inherent variability to be found in the pressure ulcer data. In addition, the 75 percent proportion agreement is consistent with the other data quality programs currently underway, for example, the Hospital IQR Program, 42 CFR 412.140(d)(2), and the Hospital OQR Program, 42 CFR 419.46(e)(2). We feel it is important to promulgate consistent E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50316 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations standards when we deal with the various quality data we are collecting. Comment: A commenter requested CMS promulgate regulations for the validation process and provide the credentials, inter-rater reliability and detail the training provided to the contractor performing the validation. Response: We will make any future data accuracy validation regulations known to the LTCH community through future notice-and-comment rulemaking. All chart reviews will be performed by a licensed registered nurse trained in medical record review and comparison, utilizing the quality measure data specifications in the LTCH Quality Reporting Program Manual. Specified training will be provided before the actual reviews, which will include ensuring that there is inter-rater reliability among the reviewers prior to implementation of the data validation process. Comment: A few commenters suggested that CMS adopt a two-level data validation process similar to the process used by the MACs for the IRF Compliance Percentage Threshold. An initial small sample of charts would be requested from the facilities randomly selected for validation. If the facility did not meet the initial threshold for compliance, a larger, second sample of charts would be requested. The commenters believed that 5 charts is too small of a sample size and that if two of the five charts selected for review are perceived to contain errors the facility would not meet the 75 percent validation score. Lastly, the commenters suggested that CMS select the LTCHs for validation from all LTCHs participating in the Medicare program. Response: We will consider this approach for future years. We understand the concern regarding a relatively low sample of charts, but wish to explain that the overall validation score will be determined based on the aggregate percentage of reported elements (out of all reportable elements) in all of the sampled charts, not on the percentage of reported elements in each individual chart. Each chart will be evaluated on the 9 required data elements. Finally, we would like to confirm that the sample of randomly selected LTCHs will be drawn from the universe of all Medicare-certified LTCHs, as suggested by the commenter. After consideration of the public comments we received, we have decided to further explore suggestions from commenters before finalizing the LTCH data validation process that we proposed. Therefore, we are not finalizing our LTCH data validation proposal at this time. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 12. Public Display of Quality Measure Data for the LTCHQR Program Under section 1886(m)(5)(E) of the Act, the Secretary is required to establish procedures for making data submitted under section 1886(m)(5)(C) of the Act available to the public. Section 1886(m)(5)(E) of the Act requires that such procedures shall ensure that an LTCH has the opportunity to review the data that is to be made public with respect to the LTCH prior to such data being made public. The statute also requires that the Secretary report quality measures that relate to services furnished in inpatient settings in LTCHs on our Web site. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we received and responded to public comments regarding the public reporting of quality data under the LTCHQR Program. Currently, we are developing plans regarding the implementation of these provisions. We appreciate the need for transparency into the processes and procedures that will be implemented to allow for public reporting of the LTCHQR Program data and to afford LTCHs the opportunity to review that data before it is made public. At this time, we have not established procedures or timelines for public reporting of data, but we intend to include related proposals in future rulemaking. We welcomed public comment on what we should consider when developing future proposals related to public reporting of quality measures for the LTCHQR Program. Comment: Several commenters encouraged CMS to work with LTCHs to ensure an opportunity to review potential displays of quality data and to provide feedback prior to public reporting. Response: We thank the commenters for taking the time to express these views and suggestions regarding public reporting and will take it into consideration for future public reporting development. Comment: A commenter noted CMS should develop reports in the CASPER Reporting Application to indicate patients included in the Pressure Ulcer measure. Response: We plan to begin designing and making CASPER reports accessible for LTCHs in the near future. We thank the commenters for the responses, and we will consider them as we develop future proposals related to public reporting of quality measures for the LTCHQR Program. PO 00000 Frm 00464 Fmt 4701 Sfmt 4700 13. LTCHQR Program Submission Exception and Extension Requirements for the FY 2017 Payment Determination and Subsequent Years In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50883 through 50885), we referred to these requirements as submission ‘‘waiver’’ requirements. We proposed to instead use the phrase ‘‘exception and extension’’ requirements for purposes of clarity. For the FY 2017 payment determination and subsequent years, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28276 through 28277), we proposed to continue using the LTCHQR Program’s requirements that we adopted in the FY 2014 IPPS/ LTCH PPS final rule for the FY 2015 payment determination and subsequent years, although the term ‘‘waiver’’ is replaced by ‘‘exception and extension.’’ In the FY 2014 IPPS/LTCH PPS final rule, we finalized a process for LTCHs to request and for us to grant waivers with respect to the quality data reporting requirements of the LTCHQR Program for one or more quarters, beginning with the FY 2015 payment determination, when there are certain extraordinary circumstances beyond the control of the LTCH. We proposed to continue to use this previously finalized process. In the event that an LTCH seeks to request a submission exception or extension for quality reporting purposes, the LTCH must request an exception or extension within 30 days of the date that the extraordinary circumstances occurred by submitting a written request to CMS via email to the LTCH mailbox at LTCHQRPReconsiderations@ cms.hhs.gov. Exception or extension requests sent to CMS through any other channel will not be considered as a valid request for an exception or extension from the LTCHQR Program’s reporting requirements for any payment determination. The written request must contain all of the finalized requirements in the FY 2014 IPPS/LTCH PPS final rule, and on our Web site at: https:// www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. When an exception or extension is granted, an LTCH will not incur payment reduction penalties for failure to comply with the requirements of the LTCHQR Program, for the timeframe specified by CMS. If an LTCH is granted an exception, we will not require that the LTCH submit any quality data for a given period of time. If we grant an E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations extension to an LTCH, the LTCH will still remain responsible for submitting quality data collected during the time frame in question, although we will specify a revised deadline by which the LTCH must submit this quality data. In addition, in the FY 2014 IPPS/ LTCH PPS final rule, we finalized a policy that allowed CMS to grant exceptions or extensions to LTCHs that have not requested them if it is determined that extraordinary circumstances affects an entire region or locale. We stated that if this determination was made, we will communicate this decision through routine communication channels to LTCHs and vendors, including, but not limited to, issuing memos, emails, and notices at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. More information on the LTCHQR Program exception and extension requirements and processes, and all related announcements may be found at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ index.html. For the FY 2017 payment determination and subsequent years, we proposed that we may grant an exception or extension to LTCHs if we determine that a systemic problem with one of our data collection systems directly affected the ability of the LTCH to submit data. Because we do not anticipate that these types of systemic problems will happen often, we do not anticipate granting a waiver or extension on this proposed basis frequently. We proposed that if we make the determination to grant an exception or extension, we would communicate this decision through routine communication channels to LTCHs and vendors, including, but not limited to, issuing memos, emails, and notices on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/. We invited public comment on these proposals. Comment: A few commenters supported the proposed Exception/ Exemption proposal. Response: We thank the commenters for their support. After consideration of the public comments we received, we are finalizing the LTCHQR Program submission exception and extension requirements for the FY 2017 payment determination and subsequent years, as proposed. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 14. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years a. Previously Finalized LTCHQR Program Reconsideration and Appeals Procedures for the FY 2014 and FY 2015 Payment Determinations In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50885 through 50887), we finalized a voluntary process that allowed LTCHs the opportunity to seek reconsideration of our initial noncompliance decision for the FY 2014 and FY 2015 payment determinations. We refer readers to that rule for a discussion of this process. b. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years For the FY 2016 payment determination and subsequent years, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28277 through 28278), we proposed to adopt an updated process, as described below, that will enable an LTCH to request a reconsideration of our initial noncompliance decision in the event that an LTCH believes that it was incorrectly identified as being subject to the 2-percentage point reduction to its annual payment due to noncompliance with the LTCHQR Program reporting requirements for a given reporting period. For the FY 2016 payment determination, and subsequent years, we proposed that an LTCH would receive a notification of noncompliance if we determine that the LTCH did not submit data in accordance with section 1886(m)(5)(C) of the Act with respect to the applicable fiscal year and that the LTCH is therefore subject to a 2percentage point reduction in the applicable payment determination as required by section 1886(m)(5)(A)(i) of the Act. We would only consider requests for reconsideration after an LTCH has been found to be noncompliant and not before. An LTCH would have 30 days from the date of the initial notification of noncompliance to review its payment determination and submit to us a request for reconsideration. This proposed time frame would allow us to balance our desire to ensure that LTCHs have the opportunity to request reconsideration with our need to complete the process and provide LTCHs with our reconsideration decision in a timely manner. Notifications of noncompliance and any subsequent notifications from CMS would be sent via a traceable delivery PO 00000 Frm 00465 Fmt 4701 Sfmt 4700 50317 method, such as certified U.S. mail or registered U.S. mail. We proposed that an LTCH may withdraw its request at any time and may file an updated request within the proposed 30-day deadline. We also proposed that, in very limited circumstances, we may grant a request by an LTCH to extend the proposed deadline for reconsideration requests. It would be the responsibility of an LTCH to request an extension and demonstrate that extenuating circumstances existed that prevented the filing of the reconsideration request by the proposed deadline. We also proposed that as part of the LTCH’s request for reconsideration, the LTCH would be required to submit all supporting documentation and evidence demonstrating: (1) Full compliance with all LTCHQR Program reporting requirements during the reporting period; or (2) extenuating circumstances that affected noncompliance if the LTCH was not able to comply with the requirements during the reporting period. We would not review any reconsideration request that fails to provide the necessary documentation and evidence along with the request. The documentation and evidence may include copies of any communications that demonstrate its compliance with the program’s requirements, as well as any other records that support the LTCH’s rationale for seeking reconsideration. A sample list of acceptable supporting documentation and evidence, as well as instructions for LTCHs to retrieve copies of the data submitted to CMS for the appropriate program year can be found on our Web site at: https://www.cms.gov/Medicare/ Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. We proposed that an LTCH wishing to request a reconsideration of our initial noncompliance determination would be required to do so by submitting an email to the following email address: LTCHQRPReconsiderations@ cms.hhs.gov. Any request for reconsideration submitted to us by an LTCH would be required to follow the guidelines outlined on our Web site at: https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/ LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. Following receipt of a request for reconsideration, we will provide— • An email acknowledgment, using the contact information provided in the reconsideration request, to the CEO or E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50318 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations CEO-designated representative that the request has been received; and • Once we have reached a decision regarding the reconsideration request, an email to the LTCH CEO or CEOdesignated representative, using the contact information provided in the reconsideration request, regarding our decision. We proposed to require an LTCH that believes it was incorrectly identified as being subject to the 2-percentage point reduction to its annual payment update to submit a timely request for reconsideration and receive a decision on that request before the LTCH can file an appeal with the Provider Reimbursement Review Board (PRRB). If the LTCH is dissatisfied with the decision rendered at the reconsideration level, the LTCH could appeal the decision with the PRRB under 42 CFR 405.1835. We believe this proposed process is more efficient and less costly for CMS and for LTCHs because it decreases the number of PRRB appeals by resolving issues earlier in the process. Additional information about the reconsideration process including requirements for submitting a reconsideration request is posted on our Web site at: https://www.cms.gov/ Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. We invited public comment on the proposed procedures for reconsideration and appeals. Comment: Several commenters supported the proposal to continue the reconsideration process for FY 2016. Response: We thank the commenters for their support. Comment: A commenter supported the reconsideration process, but believed that it should be expanded to include data validation. Response: We believe the current reconsideration process could be utilized for reconsideration of the validation findings, as long as all of the documentation used for the request for reconsideration was submitted at the time of validation. As noted above, we are finalizing our data completeness proposal, but we are not finalizing our data validation proposal at this time. Comment: A commenter stated that CMS should set the reconsideration process in regulation as has been done in other administrative appeals processes. In addition, the commenter did not believe that CMS has demonstrated the ability to manage this level of additional administrative complexity in a prompt manner. The commenter believed that CMS should VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 allow LTCHs to appeal to the PRRB without having to go through CMS first. Response: We plan to propose regulations for reconsideration in future rulemaking. We note that while some CMS programs have codified their reconsideration processes in regulations, not all CMS reconsideration processes have been codified. We disagree that we have not demonstrated the ability to manage this level of additional administrative complexity. The LTCHQR Program completed all reconsiderations and notified all LTCHs of those reviews within 60 days in FY 2013. We believe that requiring LTCHs to first submit to the CMS reconsideration process prior to requesting a hearing at the PRRB will allow us the opportunity to overturn an erroneous decision when we have a systematic process and resources in place to do so, and ultimately decrease any unnecessary burden on the PRRB process. After consideration of the public comments we received, we are finalizing the LTCHQR Program reconsideration and appeals procedures for the FY 2016 payment determination and subsequent years, as proposed. 15. Electronic Health Records (EHR) and Health Information Exchange (HIE) We are also interested in understanding the current state of electronic health record (EHR) adoption and use of Health Information Exchange (HIE) in the LTCH community. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28278) we solicited feedback and input from LTCHs and the public on EHR adoption and HIE usage. We noted that are especially interested in LTCH feedback and input on the following questions: • Have you adopted an EHR in your LTCH setting? • If your LTCH setting uses EHRs, what functional aspects of EHRs do you find most important (for example, the ability to send or receive transfer of care information; the ability to support medication orders/medication reconciliation)? • Does the EHR system used in your LTCH setting support interoperable document exchange with other healthcare providers (for example, acute care hospitals, physician practices, skilled nursing facilities, etc.)? In addition to seeking public feedback and input on the feasibility and desirability of EHR adoption and use of HIE in LTCHs, we stated that we are also interested in public comment on the need to develop electronic clinical quality measures, and the benefits and PO 00000 Frm 00466 Fmt 4701 Sfmt 4700 limitations of implementing these measures for LTCHs. Comment: Commenters expressed support of the adoption and use of EHRs, HIEs and electronic prescribing in the LTCH setting. The commenters suggested that it is a critical step to achieving efficiencies and improving the quality of care provided by LTCHs, and that it is important to allow LTCHs to exchange information with other types of providers to improve care coordination and to participate in Accountable Care Organizations and other reform efforts. Response: We thank the commenters for their support. Comment: Some commenters urged CMS to consider a funding incentive program for the adoption of EHR technology by LTCHs that includes the same opportunities afforded to eligible physicians, CAHs, and acute care hospitals under the HITECH provisions of Public Law 111–5, the American Recovery and Reinvestment Act of 2009. The commenters noted that the lack of funding is a significant challenge to EHR adoption in the LTCH setting and calls into question the feasibility of requiring EHR use. Another commenter suggested that it is premature to consider the further development of electronic clinical quality measures for the LTCH setting until compensation is offered for implementing EHRs. Response: We believe that these recommendations and concerns are important considerations related to EHR adoption and HIE usage in the LTCH setting and help to inform our understanding of these issues. Comment: Several commenters indicated that their LTCHs have adopted EHR technology and indicated challenges they have been facing. First, the amount of information generated by the EHRs can be overwhelming, and there is a significant challenge associated with utilizing the information in a timely and meaningful way. Second, the lack of interoperability between acute care hospitals’ and LTCH EHRs make information exchange difficult. Third, the information currently being collected by HIEs are rudimentary and does not necessarily meet the information needs to LTCHs. A commenter indicated that not all proposed and new LTCH quality measures utilize EHR information and, therefore, suggested that LTCHs face the burden of manually reviewing each patient’s entire medical record regardless of whether EHR technology has been adopted. Response: We thank the commenters for their observations. We believe that these concerns are important E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations considerations related to EHR adoption and HIE usage in the LTCH setting and help to inform our understanding of these issues. D. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1. Background The HITECH Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA) authorizes incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified electronic health record (EHR) technology (CEHRT). We refer to this program as the EHR Incentive Program. Eligible hospitals (EHs) and critical access hospitals (CAHs) may qualify for these incentive payments under Medicare (as authorized under sections 1886(n) and 1814(l) of the Act, respectively) if they successfully demonstrate meaningful use of CEHRT, which includes reporting on clinical quality measures (CQMs) using CEHRT. Sections 1886(b)(3)(B) and 1814(l) of the Act also establish downward payment adjustments under Medicare, beginning with fiscal year 2015, for eligible hospitals and CAHs that are not meaningful users of CEHRT for certain associated reporting periods. We refer to this part of the EHR Incentive Program as the Medicare EHR Incentive Program. Sections 1903(a)(3)(F) and 1903(t) of the Act provide the statutory basis for Medicaid incentive payments. The set of CQMs from which eligible hospitals and CAHs will report under the EHR Incentive Program beginning in FY 2014 is listed in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087). We continue to believe there are important synergies with respect to the Medicare EHR Incentive Program and the Hospital IQR Program. We believe the financial incentives under the Medicare EHR Incentive Program for the adoption and meaningful use of CEHRT by EHs and CAHs will encourage the adoption and use of CEHRT for the electronic reporting of CQMs under the Hospital IQR Program. We expect that the electronic submission of quality data from EHRs under the Medicare EHR Incentive Program will provide a foundation for establishing the capacity of hospitals to send, and for CMS to receive, CQMs via CEHRT for certain Hospital IQR Program measures. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines We believe it is important to continue our goal of aligning the Medicare EHR Incentive Program with the Hospital IQR Program because alignment of these programs will serve to reduce hospital reporting burden and encourage the adoption and meaningful use of CEHRT by eligible hospitals and CAHs. Section 1886(n)(3)(B)(iii) of the Act requires that, in selecting measures and establishing the form and manner for reporting measures under the Medicare EHR Incentive Program, the Secretary shall seek to avoid redundant or duplicative reporting with reporting otherwise required, including reporting under section 1886(b)(3)(B)(viii) of the Act (the Hospital IQR Program). The reporting and submission timelines for the Medicare EHR Incentive Program for eligible hospitals and CAHs currently operate on a Federal fiscal year basis, while the reporting and submission timelines for the Hospital IQR Program currently operate on a calendar year basis. This difference may create confusion and additional burden for hospitals attempting to report data to both programs. To alleviate this possible confusion, reduce provider burden, and strengthen our commitment to aligning programs, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28278 through 28279) we proposed to align the reporting and submission periods for clinical quality measures for the Medicare EHR Incentive Program with that of the Hospital IQR Program on a calendar year basis in 2015 and 2016. We realize that aligning the Medicare EHR Incentive Program to the calendar year would mean shifting the timeline for reporting and submission of CQMs such that the submission period would continue through February of the subsequent calendar year rather than ending in November as it is currently done, and therefore would delay the incentive eligibility assessment, and subsequently delay the Medicare EHR incentive payments under Medicare made to eligible hospitals and CAHs. In order to ease the transition of the reporting period to the calendar year, and to prevent the delay of Medicare EHR incentive payments, we proposed to incrementally shift the Medicare EHR Incentive Program reporting periods for CQMs. Specifically, for 2015 and 2016, we proposed for the Medicare EHR Incentive Program to require calendar PO 00000 Frm 00467 Fmt 4701 Sfmt 4700 50319 year reporting for CQM data that are submitted electronically, but require that the data be reported only for the first three calendar quarters (that is, January through March, April through June and July through September) allowing the reporting period, incentive eligibility assessment, and incentive payments to remain on their current schedule. We noted that this proposal would only apply for eligible hospitals and CAHs submitting CQMs electronically for 2015 and 2016, and that hospitals demonstrating meaningful use for the first time in 2015 or 2016 would still be required to report CQMs by attestation for a continuous 90-day period in FY 2015 or 2016, or report CQMs electronically, by July 1 of the given year to avoid the Medicare penalty in the subsequent year as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905). Medicaidonly providers would continue to report according to State requirements. The proposal would not change the reporting periods or requirements for the meaningful use objectives and associated measures under 42 CFR 495.6 or for CQMs that are reported by attestation via the Registration and Attestation System. This proposal would allow us to align the CQM reporting periods for the Medicare EHR Incentive Program with that of the Hospital IQR Program without delaying payment of the Medicare EHR incentive payments for 2015 and 2016. To further align CQM reporting for the two programs, we proposed to require quarterly reporting of electronically reported CQMs for the Medicare EHR Incentive Program to align with the currently established quarterly electronic CQM reporting periods for the Hospital IQR Program. Additionally, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28242 through 28243) the Hospital IQR Program proposed to change its submission period for electronic CQMs from annual to quarterly submission. We refer readers to the Hospital IQR Program discussion in section IX.A.7.h. of the preamble of that proposed rule for more information about this proposal. Therefore, for the CY 2015 and 2016 reporting periods, we also proposed to align the Medicare EHR Incentive Program submission period with that being proposed for the Hospital IQR Program. The table below illustrates the current reporting periods, and the following table further illustrates our proposals. E:\FR\FM\22AUR2.SGM 22AUR2 50320 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations CURRENT (2014) TIMELINES FOR EHR INCENTIVE PROGRAM AND HOSPITAL IQR PROGRAM REPORTING AND SUBMISSION EHR incentive program CQM reporting requirements 2014 Reporting Period ...... FY 2014 October 1, 2013– September 30, 2014. Hospital IQR program reporting requirements for FY 2016 payment determination Report one full year OR .... Q4 CY 2013 ...................... October 1, 2013–December 31, 2013. N/A for 2014 Hospital IQR Program reporting. Report one three-month quarter OR. Report any continuous 90day period. Q1 CY 2014 ...................... January 1–March 31, 2014. April 1–June 30, 2014. Q2 CY 2014 ...................... Q3 CY 2014 ...................... Submission Period ............ Jan 2, 2014–Nov 30, 2014 July 1–September 30, 2014. October 1, 2013–November 30, 2014. PROPOSED TIMELINES TO ALIGN THE MEDICARE EHR INCENTIVE PROGRAM WITH PROPOSED HOSPITAL IQR PROGRAM REPORTING AND SUBMISSION EHR incentive program reporting requirements * Hospital IQR program reporting requirements Submission period ** Q1 January 1–March 31, 2015 ....... January 1–March 31, 2015 ....... Q2 April 1–June 30, 2015 ............... April 1–June 30, 2015 ............... Q3 July 1–September 30, 2015 ...... July 1–September 30, 2015 ...... Q4 N/A for EHR Incentive Program October 1–December 31, 2015 Q1 January 1–March 31, 2016 ....... January 1–March 31, 2016 ....... Q2 April 1–June 30, 2016 ............... April 1–June 30, 2016 ............... Q3 July 1–September 30, 2016 ...... July 1–September 30, 2016 ...... Q4 N/A for EHR Incentive Program October 1–December 31, 2016 Data must be submitted by May 30, 2015. Data must be submitted by August 30, 2015. Data must be submitted by November 30, 2015. For Hospital IQR Program, data must be submitted by February 28, 2016. Data must be submitted by May 30, 2016. Data must be submitted by August 30, 2016. Data must be submitted by November 30, 2016. For Hospital IQR Program, data must be submitted by February 28, 2017. CY 2015 Reporting Period .. 2016 ............................... Reporting Period ........... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * Calendar year alignment and quarterly reporting for 2015 and 2016 would apply for electronically reported CQM data only. ** Proposed EHR Incentive Program and Hospital IQR Program submission period would allow data submission on an ongoing basis starting January 2 of the reporting year, and ending approximately 60 days after the end of the quarter. We invited public comment on these proposals. Comment: Many commenters supported CMS’ proposed alignment between the Medicare EHR Incentive Program and Hospital IQR Program. Commenters appreciated CMS’ efforts to align these programs and felt alignment would reduce overall quality reporting burden. Several commenters specifically expressed their support of the proposal to align the reporting and submission timelines of CQMs for the Medicare EHR Incentive Program with reporting and submission timelines for the Hospital IQR Program stating that this alignment would reduce confusion among the programs and reduce reporting burden. A few commenters noted that the proposal did not address the reporting and submission timeline for reporting CQMs via attestation, or the reporting and submission timelines of the meaningful use objectives. Some of these commenters requested that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 CMS clarify whether those timelines would also be affected by this proposal. Response: We appreciate the comments in support of our alignment efforts with the Hospital IQR Program, and agree that our proposal to align timelines for the programs would reduce confusion and reporting burden. For this reason, we are finalizing our proposal, with the modifications discussed below, to align the reporting and submission timelines for CQMs that are reported electronically for the Medicare EHR Incentive Program with the reporting and submission timelines of the Hospital IQR Program on the calendar year for 2015. Although it is still our general goal to continue this alignment on a calendar year basis for 2016, we are not finalizing the proposals for 2016 at this time and will address the policy for 2016 in future rulemaking. We will continue to evaluate our policies for 2016, and PO 00000 Frm 00468 Fmt 4701 Sfmt 4700 maintain our goal of alignment with the Hospital IQR Program. We note that we did not propose to change the reporting periods or requirements for the meaningful use objectives and associated measures under 42 CFR 495.6 or for CQMs that are reported by attestation via the Registration and Attestation System, and thus, the policy will remain the same. We also note that we will consider these comments and possible alignment of CQMs reported by attestation in future rule making. Comment: Many commenters expressed their views regarding CMS’ proposal to require quarterly submission of CQMs reported electronically for the Medicare EHR Incentive Program. In general, commenters felt it was premature to require quarterly submission of CQMs in 2015 for the Medicare EHR Incentive Program given the delays with certification of EHR technology in 2014 and anticipated E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations changes in attestation requirements. Commenters also expressed concerns over whether EHRs would be ready for quarterly reporting by the first quarter of 2015, and suggested that CMS consider a pilot program for quarterly reporting instead of requiring it for 2015. Response: We refer readers to the Hospital IQR Program discussion in section IX.A.9.d. of the preamble of this final rule for further discussion of the comments related to quarterly reporting. We appreciate and understand the commenters’ concerns regarding quarterly reporting, and understand the feedback we have received from stakeholders concerning delays in certification of EHR technology. We additionally acknowledge that our requirement to report the most recent version of the CQMs as finalized below poses a challenge to eligible hospitals and CAHs in implementing quarterly reporting as EHR vendors can be certified to 2014 CEHRT without updating to the most recent version of CQMs. We note that at this time, we do not plan to offer quarterly reporting on a pilot basis in 2015. Based on commenters’ concerns, and the additional challenges posed by requiring the most recent version of the CQMs for 2015 reporting, we have decided not to finalize our proposal to require quarterly submission of electronically reported CQMs for the Medicare EHR Incentive Program in 2015, and instead maintain in 2015 our policy of one annual submission period to align with the submission period for CQMs reported electronically under the Hospital IQR Program. This annual submission period begins on January 2 and ends on November 30 (for example, for the reporting periods in 2015, the submission period is January 2, 2015 through November 30, 2015). In addition, and to align with the Hospital IQR Program in 2015, we are not finalizing our proposal to require three quarters of CQM data for calendar year 2015. Instead, for CQM data submitted electronically, we will require one calendar quarter of data for 2015 from either Q1 (January 1, 2015– March 31, 2015), Q2 (April 1, 2015–June 30, 2015), or Q3 (July 1, 2015– September 30, 2015). As noted above, at this time, we are not finalizing any proposals related to our reporting and submission requirements for 2016. We refer readers to the Hospital IQR Program discussion in section IX.A.9.d. of the preamble of this final rule for further discussion of the comments related to quarterly reporting. We also note that this policy only applies for eligible hospitals and CAHs submitting CQMs electronically for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2015. Therefore, as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905), hospitals demonstrating meaningful use for the first time in 2015 are still required to report CQMs by attestation for a continuous 90-day period in FY 2015, or to report CQMs electronically, by July 1 of the given year to avoid the Medicare penalty in the subsequent year. Medicaid-only providers will continue to report according to State requirements. In addition, as stated above, this policy does not change the reporting periods or requirements for the meaningful use objectives and associated measures under 42 CFR 495.6 or for CQMs that are reported by attestation via the Registration and Attestation System. In summary, after consideration of the public comments we received, we are finalizing our proposal, with the modifications described above, to align the reporting and submission timelines of the Medicare EHR Incentive Program with those of the Hospital IQR Program on the calendar year for CQMs that are reported electronically in 2015. We are not finalizing our proposal to require quarterly submission of CQM data for 2015; instead, we will maintain one annual submission period. We are also not finalizing our proposal to require three calendar quarters of CQM data for 2015, but instead, for data submitted electronically, we will require one calendar quarter of data from Q1, Q2, or Q3 of 2015. We are not finalizing our proposals for 2016 in this final rule, and will address the policy for 2016 in future rule making. 3. Quality Reporting Data Architecture Category III (QRDA–III) Option in 2015 In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we finalized two options for eligible hospitals and CAHs to electronically submit CQMs beginning in FY 2014 under the Medicare EHR Incentive Program. Option 1 was to electronically submit aggregate-level CQM data using QRDA– III. Option 2 was to electronically submit data using a method similar to the 2012 and 2013 EHR Incentive Program electronic reporting pilot for EHs and CAHs, which used QRDA–I (patient-level data). We also stated in that final rule that, consistent with section 1886(n)(3)(B)(ii) of the Act, in the event the Secretary does not have the capacity to receive CQM data electronically, eligible hospitals and CAHs that are beyond their first year of meaningful use may continue to report aggregate CQM results through attestation. PO 00000 Frm 00469 Fmt 4701 Sfmt 4700 50321 We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50904 through 50905) that we had determined that the electronic submission of aggregate-level data using QRDA–III would not be feasible in 2014 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. Therefore, for the 2014 reporting period under the Medicare EHR Incentive Program, eligible hospitals and CAHs would have the option to continue to report aggregate CQM results through attestation. We stated that we would reassess this policy for the 2015 and future reporting periods. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28279 through 28280), we stated that we have determined that the electronic submission of aggregate-level data using QRDA–III will not be feasible in 2015 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. Therefore, for the 2015 reporting period under the Medicare EHR Incentive Program, eligible hospitals and CAHs would have the option to continue to report aggregate CQM results through attestation. We noted that submissions of aggregate CQM data via attestation would not satisfy the reporting requirements for the Hospital IQR Program, and consistent with our proposal above regarding alignment of these programs, attested CQM data would need to be submitted for one full fiscal year in 2015 via the Registration and Attestation System, and would not require quarterly submissions. Hospitals in their first year of demonstrating meaningful use in 2015 would still be required to report CQMs by attestation for a continuous 90-day period in FY 2015, or report CQMs electronically, by July 1, 2015 to avoid the Medicare penalty in FY 2016 as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905). We also noted that this policy does not apply to the Medicaid EHR Incentive Program. Therefore, States may still require the submission of QRDA–III files to fulfill the CQM reporting requirements for hospitals that participate in the Medicaid EHR Incentive Program. In order to remain aligned with the Hospital IQR Program, and because over 66 percent of hospitals that participate in the Hospital IQR Program are already meaningful users, we strongly recommended that hospitals that are eligible to participate in both programs electronically submit up to 16 electronic clinical quality measures of the 28 inpatient measures identified by the Hospital IQR Program. We believe that keeping the two programs aligned will ultimately reduce reporting burden for E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50322 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospitals. We note again that reporting via attestation would not count towards the reporting requirements for the Hospital IQR Program. Comment: Several commenters expressed views related to CMS’ proposal not to accept aggregate-level data using QRDA–III for reporting in 2015. Most commenters were disappointed to learn that it was not feasible for CMS’ systems to accept QRDA–III files in 2015 and urged CMS to continue to improve systems such that we would be able to accept QRDA– III data in the future. Some commenters requested further discussion of CMS’ plan to accept QRDA–III data in the future. Response: We understand the concerns raised by commenters, and we expect to continue to review and improve our systems for future years to be able to accept aggregate level QRDA– III files. We note that our plans regarding the acceptance of QRDA–III files will be addressed in future rule making. Comment: A few commenters suggested that CMS and ONC remove the requirement for EHR technology designed for the inpatient setting to be certified to produce QRDA–III formatted files if CMS would not be able to receive QRDA–III data in the future in order to prevent unnecessary work related to the development of these files. Response: We appreciate the commenters’ concerns and suggestion. As we continue to review and improve our systems, we will continue to evaluate whether QRDA–III is a feasible option for future years and whether changes to existing policies would be appropriate. Comment: A few commenters requested additional information about the storage and maintenance of QRDA– I files. Response: We note that the storage and maintenance of QRDA–I files is outside the scope of this final rule. After consideration of the public comments we received, and for the reasons set forth above, we are finalizing the policy as proposed. For the Medicare EHR Incentive Program, eligible hospitals and CAHs may report their CQMs electronically using QRDA– I (patient-level data) or via attestation (aggregate-level data). We note again that reporting via attestation would not count towards the reporting requirements for the Hospital IQR Program. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 4. Electronically Specified Clinical Quality Measures (CQMs) Reporting for 2015 In the EHR Incentive Program Stage 2 final rule, we finalized the CQMs that eligible hospitals and CAHs would be required to report for purposes of meeting the CQM component of meaningful use under the EHR Incentive Program starting in 2014 (77 FR 54083 through 54087 Table 10). These CQMs are updated routinely to account for changes, including but not limited to changes in billing and diagnosis codes and changes in medical practices. The requirements specified in the EHR Incentive Program Stage 2 final rule allow for the reporting of different versions of the CQMs. For 2015, it is not technically feasible for CMS to accept data that is electronically reported according to the specifications of the older versions of the CQMs, including versions that may be allowed for reporting under the EHR Incentive Program. We stated in the EHR Incentive Program Stage 2 final rule that, consistent with section 1886(n)(3)(B)(ii) of the Act, in the event that the Secretary does not have the capacity to receive CQM data electronically, eligible hospitals and CAHs may continue to report aggregate CQM results through attestation (77 FR 54088). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280) we proposed that eligible hospitals and CAHs that seek to report CQMs electronically under the Medicare EHR Incentive Program must use the most recent version of the electronic specifications for the CQMs and have CEHRT that is tested and certified to the most recent version of the electronic specifications for the CQMs. Eligible hospitals and CAHs that do not wish to report CQMs electronically using the most recent version of the electronic specifications (for example, if their CEHRT has not been certified for that particular version) would be allowed to report CQM data by attestation for the Medicare EHR Incentive Program. We invited public comment on these proposals. We have addressed several of the public comments received in this section of this final rule, and we also refer readers to the Hospital IQR Program discussion in section IX.A.9.d. of the preamble of this final rule for further discussion of the comments related to CQM versions. Comment: Commenters expressed concern and requested clarification regarding the timeframe between publication of the revised specifications and the quarter in which hospitals must PO 00000 Frm 00470 Fmt 4701 Sfmt 4700 being using the new version. Commenters stated that the timeline was too short for adequate development and implementation of the new specifications. Response: CQMs are updated routinely to account for changes including, but not limited to, changes in billing and diagnosis codes and changes in medical practices. In order for CQMs to remain current and clinically valid, the specifications must be updated on a regular basis. We note that specifications are posted at least 6 months prior to the reporting period, and as we align the reporting and submission timelines of the Medicare EHR Incentive Program with those of the Hospital IQR Program, we provide an even greater window of time between the posting of the specifications and the start of the reporting period. Comment: Commenters specifically requested clarification regarding the timing and reporting of the updated specifications with respect to CMS’ proposal to require quarterly reporting of electronically reported CQMs. Commenters stated that the two proposals would require hospitals to use an EHR that is certified to one set of specifications and then re-certified to a different set of specifications within a given reporting year in order to satisfy the quarterly reporting requirement. Response: As we discussed above, and in section IX.D.2. of the preamble of this final rule, we are not finalizing our proposal to require quarterly submission of electronically reported CQMs for 2015. For electronic reporting of CQM data for 2015, we will require one calendar quarter of data from Q1, Q2 or Q3 of 2015 submitted during the period January 2, 2015–November 30, 2015. We believe this revised policy will allow additional time for eligible hospitals and CAHs to implement the updates required to submit the most recent version of the CQMs in 2015. Comment: One commenter suggested that CMS accept multiple versions of CQMs during the reporting year to account for the period of transition between CQM versions. Response: We appreciate the commenter’s suggestion, but unfortunately, as noted above, for 2015, it is not technically feasible for us to accept data that is electronically reported according to the specifications of the older versions of the CQMs, including versions that may be allowed for reporting under the EHR Incentive Program. We note that eligible hospitals and CAHs that do not wish to report CQMs electronically using the most recent version of the electronic specifications would be allowed to E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV report CQM data by attestation for the Medicare EHR Incentive Program. Comment: One commenter supported the proposal to require that eligible hospitals and CAHs ensure that their CEHRT products are tested and certified to the most recent version of the electronic specifications for the CQMs, and many others opposed the recertification requirement siting the additional burden and cost recertification would impose. Response: We have received feedback from stakeholders regarding the difficulty and expense of having to test and recertify CEHRT products to the most recent version of the electronic specifications for the CQMs. While we still believe eligible hospitals and CAHs should test and certify their products to the most recent version of the electronic specifications for the CQMs when feasible, we understand the burdens associated with this requirement. Therefore, to avoid this added burden, we are not finalizing our proposal to require eligible hospitals and CAHs to ensure that their CEHRT products are recertified to the most recent version of the electronic specifications for the CQMs. Please note that, although we are not requiring recertification, eligible hospitals and CAHs must still report the most recent version of the electronic specifications for the CQMs. After consideration of the public comments we received, and for the reasons set forth above, we are finalizing the policy that eligible hospitals and CAHs that seek to report CQMs electronically under the Medicare EHR Incentive Program must use the most recent version of the electronic specifications for the CQMs, however, we will not require eligible hospitals and CAHs to ensure that their CEHRT products are recertified to the most recent version of the electronic specifications for the CQMs. 5. Clarification Regarding Reporting Zero Denominators As we stated in the EHR Incentive Program Stage 2 final rule (77 FR 54079) we expect eligible hospitals and CAHs to adopt EHR technology that includes CQMs relevant to each eligible hospital’s or CAH’s patient mix. We understand, however, that there are situations in which an eligible hospital or CAH does not have data to report on a particular CQM, and its EHR is not certified to additional CQMs that can be used to replace that CQM with another for which it has data. For example, a health system with multiple eligible hospitals or CAHs may have an EHR certified for 16 CQMs, which is the minimum number of required CQMs for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 reporting, but not all of the eligible hospitals or CAHs in the health system may have cases to report on those particular 16 CQMs. We have received questions on how eligible hospitals and CAHs should meet their reporting requirements in this situation; therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280) we clarified our policy as set forth below regarding the reporting of a zero denominator for the purposes of the Medicare EHR Incentive Program and the Hospital IQR Program. If the eligible hospital’s or CAH’s EHR is certified to a CQM, but the eligible hospital or CAH does not have patients that meet the denominator criteria of that CQM, the eligible hospital or CAH can submit a zero in the denominator for that CQM. Submission of a zero in the denominator for a CQM counts as a successful submission for that CQM for both the Medicare EHR Incentive Program and the Hospital IQR Program. For example, if the eligible hospital or CAH within the previously mentioned health system does not provide maternity services, but one of the 16 CQMs the health system’s EHR is certified to is a maternity measure, that eligible hospital’s or CAH’s EHR may render a zero in the denominator for that CQM. The eligible hospital or CAH would therefore report a zero denominator for that maternity care CQM, and this would count toward the 16 required CQMs for the Medicare EHR Incentive Program and the Hospital IQR Program. Eligible hospitals or CAHs within that health system for which that maternity CQM does apply would provide data on that measure. Comment: Commenters supported and appreciated the clarification regarding zero denominators. Some commenters requested clarification as to whether the above stated zero denominator policy would be effective in CY 2015 or upon publication of this final rule. Response: The clarification set forth in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280) and stated above represents our current policy. The additional information and examples provided in the proposed rule were intended for clarification only and do not represent a change to our existing policy. Comment: One commenter requested clarification as to whether this policy extends to issues resulting from the maintenance of value sets specifically related to medications codified in RxNorm required by the CQM specifications. The commenter stated that these issues often result in a zero denominator being produced by the PO 00000 Frm 00471 Fmt 4701 Sfmt 4700 50323 Medicare EHR, and went on to suggest that these issues may be resolved by modifying CQM specifications to be more in line with how medications are evaluated in the Hospital IQR Program chart-abstracted measures. Response: While we cannot explore all the possible explanations and reasons why an EHR would produce a zero denominator in this final rule, we hope that the above clarification regarding zero denominators will provide guidance in these instances. 6. Case Threshold Exemption Policy; Clarification for 2014 and Change for 2015 In the EHR Incentive Program—Stage 2 final rule (77 FR 54080), we finalized the policy that eligible hospitals and CAHs that have 5 or fewer discharges per quarter in the same quarter as their reporting period in FY 2014, or 20 or fewer discharges per full FY reporting period beginning in FY 2015, for which data are being electronically submitted (Medicare and non-Medicare combined) as defined by the clinical quality measure’s denominator population are exempted from reporting the CQM. To be eligible for the exemption, eligible hospitals and CAHs must submit their aggregate population and sample size counts for Medicare and non-Medicare discharges for the CQM for the reporting period. In the Health Information Technology: Revisions to the 2014 Edition Electronic Health Record Certification Criteria; and Medicare and Medicaid Programs; Revisions to the Electronic Health Record Incentive Program interim final rule, we revised the case threshold exemption policy to make it applicable for eligible hospitals and CAHs in all stages of meaningful use beginning with FY 2013, including those that are demonstrating meaningful use for the first time and submitting CQMs by attestation (77 FR 72988 through 72989). Eligible hospitals and CAHs with 5 or fewer discharges during the relevant EHR reporting period (if attesting to a 90-day EHR reporting period), or 20 or fewer discharges during the year (if attesting to a full year EHR reporting period) as defined by the CQM’s denominator population would be exempted from reporting on that CQM. We stated in the interim final rule (77 FR 72989) that beginning in FY 2014, the reporting requirement is to report 16 CQMs covering at least 3 domains from a list of 29 CQMs. We stated further that in order to be exempted from reporting fewer than 16 CQMs, the eligible hospital or CAH would need to qualify for the case threshold exemption for more than 13 of the 29 CQMs. If the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50324 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations eligible hospital or CAH does not meet the criteria for a case threshold exemption for 13 or more CQMs, the eligible hospital or CAH would be able to report at least 16 CQMs. Likewise, we stated that if the CQMs for which the eligible hospital or CAH can meet the case threshold of discharges do not cover at least 3 domains, the eligible hospital or CAH would be exempt from the requirement to cover the remaining domains. For example, if the eligible hospital or CAH does not meet the case threshold of discharges for 13 clinical quality measures, and thus could report 16 clinical quality measures, but the 16 clinical quality measures cover only 2 of the 3 domains, the eligible hospital or CAH would be exempt from covering the third domain. For the reporting periods in 2014, our policy requires that an eligible hospital or CAH that claims a case threshold exemption for one CQM must choose another CQM on which to submit data, or continue to invoke the case threshold exemption until it exceeds 13 case threshold exemptions and may therefore report fewer than the 16 required CQMs. This policy assumes that the eligible hospital or CAH has an EHR that is certified to more than the minimum of 16 CQMs, and the eligible hospital or CAH has other CQMs in its EHR to choose from for reporting. We realize, however, that there could be many EHRs that are certified to only the minimum of 16 CQMs required by ONC’s regulations at 45 CFR 170.102 (the definition of ‘‘Base EHR’’), and for eligible hospitals and CAHs using those EHRs, this policy may result in the eligible hospital or CAH needing to submit data on a CQM for which the EHR is not certified. It was not our intent to have eligible hospitals or CAHs report on measures for which their EHRs are not certified. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280 through 28281), beginning with the reporting periods in 2015, we proposed to change the case threshold exemption policy so that if an eligible hospital or CAH qualifies for an exemption from reporting on a particular CQM, the exemption would count toward the 16 required CQMs. For example, if the eligible hospital’s or CAH’s EHR is certified to report 16 CQMs, and for one of those CQMs the eligible hospital or CAH has 5 or fewer discharges during the relevant EHR reporting period (if attesting to a 90-day EHR reporting period), or 20 or fewer discharges during the year (if attesting to a full year EHR reporting period) as defined by the CQM’s denominator population, the eligible hospital or CAH would report VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 data for the 15 CQMs for which the case threshold exemption does not apply, and invoke a case threshold exemption for the one CQM for which the exemption does apply for a total of 16 CQMs. We expect eligible hospitals and CAHs to adopt EHR technology that includes CQMs relevant to the eligible hospital’s or CAH’s case mix, though we understand that in some cases, the eligible hospital or CAH may not meet the case threshold of discharges for a particular CQM. We believe this proposed policy better reflects our intent for eligible hospitals and CAHs to report on only those measures for which their EHRs are certified while meeting the reporting requirements for the Medicare EHR Incentive Program and Hospital IQR Program. We invited public comment on this proposal. Comment: Several comments supported the proposed change to CMS’ case threshold exemption policy. Commenters felt that this change in policy acknowledged that an eligible hospital or CAH should receive credit for meeting the CQM even though the eligible hospital or CAH may not meet the case threshold of discharges for that particular CQM. Response: We appreciate the comments in support of our proposal. After consideration of the public comments we received, we are finalizing the policy as proposed. We note that for CQM data reported by attestation, this policy applies to eligible hospitals or CAHs that have 5 or fewer discharges during the relevant EHR reporting period (if attesting to a 90-day EHR reporting period), or 20 or fewer discharges during the year (if attesting to a full year EHR reporting period), as defined by the CQM’s denominator population. For CQM data submitted electronically in 2015, this policy applies to eligible hospitals or CAHs that have 5 or fewer discharges during their chosen reporting period of one calendar quarter, as defined by the CQM’s denominator population. We note that because there is no option for a full year reporting period for data submitted electronically in 2015, the exemption based on 20 or fewer discharges for a full year EHR reporting period would not apply. X. Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data A. Background Section 1853 of the Act requires the Secretary to make payments to Medicare Advantage (MA) organizations offering PO 00000 Frm 00472 Fmt 4701 Sfmt 4700 local and regional MA plans with respect to coverage of individuals enrolled under Medicare Part C. Section 1853(a)(1)(C) of the Act requires the Secretary to adjust such payments for such risk factors as age, disability status, gender, institutional status, and such other factors as the Secretary determines appropriate, including health status. To support these risk adjustments, section 1853(a)(3)(B) of the Act requires submission of data by MA organizations regarding the services provided to enrollees and other information the Secretary deems necessary but does not limit the Secretary’s use of such data or information. Section 1106 of the Act authorizes the Secretary to adopt regulations governing release of information gathered in the course of administering programs under the Act. Implementing regulations at 42 CFR 422.310 set forth the requirements for the submission of risk adjustment data that CMS uses to risk-adjust payments. MA organizations must submit data, in accordance with CMS instructions, to characterize the context and purposes of items and services provided to their enrollees by a provider, supplier, physician, or other practitioner. Section 422.310(d)(1) provides that MA organizations submit risk adjustment data to CMS as specified by CMS. Risk adjustment data refers to data submitted in two formats: comprehensive data equivalent to Medicare fee-for-service claims data (often referred to as encounter data); and data in abbreviated formats (often referred to as RAPS data). Section 422.310(f) currently specifies CMS’ uses of the risk adjustment data. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we proposed to revise the existing regulation at § 422.310(f) to broaden the specified uses and disclosures of risk adjustment data in order to strengthen program management and increase transparency in the MA program, and to specify the conditions for release of risk adjustment data to entities outside of CMS. We received approximately 28 pieces of correspondence from MA organizations and trade associations, beneficiary advocacy organizations, hospital systems and trade associations, a government agency, a research firm, and individuals. Summaries of and our responses to the public comments on the uses and bases for disclosure of risk adjustment data (§ 422.310(f)(1)) are presented in section X.B.1 of the preamble of this final rule. Summaries of and responses to the public comments on the conditions for release of risk adjustment data outside of CMS E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (§ 422.310(f)(2)) are presented in section X.B.2. of the preamble of this final rule. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV B. Proposed and Finalized Regulatory Changes 1. Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data In the FY 2015 IPPS/LTCHG PPS proposed rule, we first proposed to revise a reference in existing § 422.310(f) from ‘‘data obtained under this section’’ to ‘‘data described in paragraphs (a) through (d) of this section’’ in both paragraphs (f)(1) and (f)(2); this new text would indicate that the data used or released under proposed paragraph (f) would not include the medical records and other data collected separately under paragraph (e) for the purpose of risk adjustment data validation (RADV) audits. We stated that we did not intend for the proposed § 422.310(f) to authorize any additional use or release of the data described in paragraph (e). We proposed that the data described in paragraphs (a) through (d) would include those elements that constitute an encounter data record, including contract, plan, and provider identifiers, with the exception of disaggregated payment data as discussed below. In addition, we noted that paragraph (d)(1) also authorizes the collection of abbreviated data and that the proposed regulation would apply to both the abbreviated data as well as more detailed (encounter-level) data collected from MA organizations pursuant to § 422.310(a) through (d). Comment: A few commenters stated that, without a specific exclusion, the data that CMS proposed to release would seem to include audit data and additional data collected as part of these audits, which could include price and charge information. These commenters urged CMS to restrict the inclusion of additional data collected as part of audits from the data eligible for release. Response: We did propose a specific exclusion: That medical records and other data that MA organizations submit to CMS as part of a Risk Adjustment Data Validation (RADV) audit at § 422.311 are excluded from the data release provisions of this rulemaking, through the references at § 422.310(f) to the data described in § 422.310(a) through (d) as the data that would be available under this rule. This text excludes data collected pursuant to § 422.310(e) for RADV. We did not receive any public comments challenging our proposed exclusion of audit data under paragraph (e) of § 422.310, nor did we receive any public comments on the application of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 this rule to abbreviated data under paragraph (d)(1) of § 422.310. Comments about additional or fewer protections for encounter data under the final rule are addressed below. Therefore, we are finalizing the use of this language limiting the scope of paragraph (f) to data described in paragraphs (a) through (d) as proposed. The existing regulation at § 422.310(f) specifies five purposes for which CMS may use risk adjustment data obtained from MA organizations. In the proposed rule, we clarified that CMS’ uses of these data may include disclosure to CMS contractors or other agents that perform activities or analyses on CMS’ behalf in connection with authorized use of the data. The existing specified purposes are: (1) To determine the risk adjustment factors used to adjust payments, as required under §§ 422.304(a) and (c); (2) to update risk adjustment models; (3) to calculate Medicare DSH percentages; (4) to conduct quality review and improvement activities; and (5) for Medicare coverage purposes. We proposed to restructure paragraph (f) to identify the purposes for which CMS may use and release risk adjustment data and to impose certain conditions on any release of that data. We proposed to revise paragraph (f) to add four purposes, as paragraphs (f)(1)(vi) through (ix), for which CMS may use risk adjustment data submitted by MA organizations: (1) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related research; (2) for activities to support the administration of the Medicare program; (3) for activities conducted to support program integrity; and (4) for purposes permitted by other laws. We stated our expectation that, in general, comprehensive risk adjustment data submitted by MA organizations, which MA organizations began submitting to CMS effective CY 2012, will enable CMS to generate improved data analyses that could support Medicare program evaluations, demonstration designs, and CMS’ effective and efficient operational management of the Medicare program. Risk adjustment data also could be useful to support public health initiatives by governmental entities and to advance health care-related research by universities and other research organizations. We stated that we also believe that risk adjustment data can support CMS’ program integrity activities in the Medicare program and other Federal health care and related programs. This general term PO 00000 Frm 00473 Fmt 4701 Sfmt 4700 50325 encompasses audits, investigations, efforts to combat waste, fraud, and abuse, and any other actions designed to ensure that the program operates within its authority including audits, evaluations, and investigations by the Office of the Inspector General (OIG) as well as CMS’ own efforts. In addition, we stated that risk adjustment data may be useful in supporting Medicare administrative activities, such as the review of the validity of bid and medical loss ratio data submitted by MA organizations. Finally, we proposed to acknowledge that other laws may permit other uses of risk adjustment data and that this regulation is not intended to supersede such other laws. Regarding the use of risk adjustment data outside of CMS, we proposed at § 422.310(f)(2) that other HHS agencies, other Federal executive branch agencies, States, and external entities would only be able to obtain from CMS and use risk adjustment data for one or more of the purposes listed in proposed paragraph (f)(1). An external entity may be an individual, group, or organization. In the proposed rule, we acknowledged our expectation that other HHS agencies and other Federal executive branch agencies may request these data for the same purposes CMS proposed to use the data and that we believe such use is appropriate. Under our proposal, other agencies that evaluate and analyze the Medicare program, perform health carerelated research, support public health initiatives, perform activities in the administration of the Medicare program, or conduct activities to support program integrity in the Medicare program and other Federal health care and related programs would be able to access and use risk adjustment data for these purposes. States, while conducting program integrity activities for Medicaid programs or in the administration of Medicare-Medicaid demonstrations (for example, refer to the Web site at: https://www.cms.gov/MedicareMedicaid-Coordination/Medicare-andMedicaid-Coordination/MedicareMedicaid-Coordination-Office/Financial AlignmentInitiative/FinancialModelsto SupportStatesEffortsinCare Coordination.html), may access and use risk adjustment data under the proposal. We stated that we anticipate that nongovernmental external entities would generally only gain access to risk adjustment data under this proposal in connection with public health initiatives and health care-related research, as such external entities appear to have limited, if any, roles in the other purposes identified in our proposal. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50326 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Regarding the use of risk adjustment data for purposes permitted by other laws, we noted that, to the extent that a requestor has separate statutory authority for requiring CMS disclosure of data, our proposed provisions would not limit or supersede such authority. For example, some Congressional support agencies may compel release of data under separate statutory authority, such as 31 U.S.C. 716, 2 U.S.C. 166(d)(1) and 601(d), and section 1805 of the Act (42 U.S.C. 1395b–6), for the purposes of conducting Congressional oversight, monitoring, making recommendations and analysis of the Medicare program. In addition, the OIG has separate statutory authority under section 1128J of the Act (42 U.S.C. 1320a–7k), coupled with section 6(a) of the Inspector General Act of 1978 (5 U.S.C. App. 3) authorizing the OIG to access data as necessary to perform its responsibilities. This regulation will not limit that authority. Finally, in the proposed rule, we stated that we are seeking to balance protection of confidential beneficiary information and the proprietary interests of MA organizations with the need to effectively administer Federal health care programs and to encourage research into better ways to provide health care. We also noted a goal of the proposal to increase transparency in the administration of the Medicare program. We sought public comments on the proposed uses and release of data and how else to achieve the necessary balance. In particular, we solicited public comment on the extent to which a commercial purpose underlying a request for risk adjustment data should be a factor in evaluating whether the request is for one of the purposes that permit a disclosure under this regulation or if one of the purposes in paragraph (f)(1) of § 422.310, for which CMS would disclose data under this section, should address commercial uses of the data. The topic of commercial purposes is discussed later in section X.B.2. of the preamble of this final rule as a condition of data release. Comment: Several commenters supported CMS’ proposal for expanding the use and distribution of MA risk adjustment data to support and strengthen the Medicare program, as well as supporting public health initiatives and health care-related research. Commenters stated that risk adjustment data are valuable to researchers for analyzing health care trends, public health research initiatives, and improving management of the Medicare program. These commenters expressed support of CMS’ efforts to move toward greater VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 transparency through the release of risk adjustment data. One commenter believed that greater data transparency would not only further public health research but also might serve to further educate consumer organizations, patient advocates, and ultimately beneficiaries about the Medicare program. Generally, commenters supporting the proposals in the proposed rule simultaneously recognized the importance of balancing these goals with the importance of protecting the confidentiality of beneficiary information, and one commenter agreed with CMS’ proposal to aggregate data on negotiated rates paid to providers. Response: We appreciate the commenters’ support. Comment: A number of commenters generally addressed the proposed uses of risk adjustment data, characterizing the listed purposes as too broad and asking CMS to more specifically and narrowly define them. One commenter stated that the purposes, as stated in the proposed rule, are so broad as to justify release of these sensitive data for almost any research activity. Several commenters were concerned that having permitted uses of risk adjustment data for such broad-based purposes leaves a large gap in the protection of potentially proprietary information, especially given the concern about usage of these data by agencies with limited knowledge or understanding of the data and how to make accurate interpretations. Response: Section 1853 of the Act does not limit the uses of risk adjustment data, and section 1106 of the Act authorizes the adoption of regulations governing how CMS will disclose data obtained in the course of CMS’ duties. We have reviewed the proposed uses of risk adjustment data (which are for analytical purposes), and we do not believe that they are too broad. We reiterate that the list of permissible bases under this regulation for use and disclosure is exhaustive and that uses of the risk adjustment data that are outside of the scope of these nine categories will not be authorized. Accordingly, we see no compelling reason to further limit uses of this data by eliminating or narrowing any of the proposed purposes. Comment: Several commenters expressed concern about CMS’ use of risk adjustment data, under the purpose stated under § 422.310(f)(1)(vii), ‘‘for activities to support the administration of the Medicare program.’’ In particular, commenters requested clarification and specificity regarding how these data would be used in the example provided in the preamble, which was to validate PO 00000 Frm 00474 Fmt 4701 Sfmt 4700 the MA organizations’ bid and Medical Loss Ratio (MLR) data. They argued that the risk adjustment data could not be used to inform bid review or MLR analyses: The data MA organizations submit to CMS cannot provide a complete picture of MA organizations’ costs because many organizations have payment arrangements with providers that are not fee-for-service based, for example, capitation arrangements, bundled pricing, incentive payments, and multi-year contracting. Response: In the preamble of the proposed rule, we identified two examples of using risk adjustment data in support of Medicare administrative activities: Review of the validity of bid and MLR data submitted by MA organizations. We anticipate that there will be other uses in support of Medicare administrative activities, such as the development of quality measures. Regarding the two examples we provided in the proposed rule, while we recognize that many MA organizations have alternative arrangements other than fee-for-service payments, we believe that encounter data will be useful for understanding patterns of beneficiary utilization and aspects of MA organizations’ expenditures, as reported in bid and MLR submissions. Comment: One commenter asked how CMS could use risk adjustment data, under § 422.310(f)(1)(viii), ‘‘for activities conducted to support program integrity,’’ particularly when the data are incomplete due to payment arrangements with providers that are not fee-for-service based. Response: We believe that risk adjustment data are valuable for program integrity purposes. For example, encounter data could be used to compare MA and FFS billing to identify aberrant patterns, which may inform efforts to combat fraud, waste, and abuse. Comment: Several commenters expressed concern about CMS’ use of risk adjustment data, under § 422.310(f)(1)(ix), ‘‘for purposes permitted by other laws.’’ Commenters requested CMS to further clarify this purpose in regulation, for example, to distinguish Federal laws from State laws and to specify that this provision only applies to health care laws. Another commenter asked how CMS intends to evaluate the other laws that permit use or release of these data; for example, would CMS allow risk adjustment data to be used to evaluate risk adjustments for insurance exchanges created under the Affordable Care Act, and, if so, the commenter expressed concern that the data would not provide a valid or E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations accurate comparison, given the unique patient population. Response: As we noted in the preamble of the proposed rule, we believe it is important to acknowledge that this regulation is not intended to supersede other laws that permit other uses of risk adjustment data. For example, this regulation cannot override separate statutory authorities that require CMS disclosure of data to other Federal agencies. We refer readers, for example, to 31 U.S.C. 716; 2 U.S.C. 166(d)(1) and 601(d); and section 1805 of the Act (42 U.S.C. 1395b–6). Regarding the commenters’ request that we further specify in regulation text the types of laws to which paragraph (f)(1)(ix) applies (such as Federal laws versus State laws), we do not believe that detailed specification of laws is necessary because we believe it is clear that only laws that apply to CMS or to data held by CMS are within the scope of the provision. However, in response to these comments, we are finalizing the regulation text at § 422.310(f)(1)(ix) to state ‘‘for purposes authorized by other applicable laws’’ to emphasize that the provisions in other laws must be applicable to CMS and to MA risk adjustment data. Finally, we are not sure what the commenter means by evaluating other laws other than as a request for clarification that this provision encompasses laws that are applicable to CMS or to data held by CMS. If the question is about how we would determine the appropriateness of a research topic and study design that involves both Medicare and another program enacted under other laws, we do not believe we can comment on the appropriateness of specific designs in this preamble. The approval of any research study requesting use of MA risk adjustment data would be handled through the existing process CMS uses for data sharing, as described elsewhere in this preamble in the discussion of paragraph (f)(2)(ii) of § 422.310. Comment: One commenter stated that it is not appropriate for external entities to receive the data for uses that are exclusively within CMS’ authority— specifically, that CMS should not release data to entities outside of CMS for the determination of risk adjustment factors, updating risk adjustment models, the calculation of Medicare DHS percentages, or Medicare coverage purposes (§ 422.310(f)(1)(i) and (f)(1)(ii) or (f)(1)(v)). Another commenter asked CMS to expressly limit, in regulatory text, the bases upon which nongovernmental external entities receive the data to one purpose: Support of public health initiatives and other VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 health care-related research. Furthermore, one commenter stated that neither States nor external entities should receive the data to conduct quality review and improvement activities, for activities to support the administration of the Medicare program, or for activities conducted to support program integrity (§ 422.310(f)(1)(iv), (f)(1)(vii), or (f)(1)(viii)) because these are purposes exclusive to the Federal Medicare program. Another commenter stated that is it is unclear what uses States would have for these data, given the Federal administration of the MA program and the difference in populations enrolled in MA plans and commercial health insurance coverage, for which States may be administering risk adjustment or other programs, or Medicaid coverage, for which a State Medicaid agency would administer benefits, concluding that States should not receive the MA risk adjustment data. Response: We have reviewed our proposed purposes and believe that there may be cases in which researchers, whether external entities or other governmental agencies, might have well-designed research projects that meet CMS’ stringent requirements, under our longstanding data sharing procedures, thus warranting use of the data for an approved project. For example, other Federal governmental agencies may want to use the data to conduct research on new developments in risk adjustment models or an external entity may want to propose research on the design of quality measures that could apply to beneficiaries in both the MA and FFS programs. Both of these examples illustrate the point that greater data transparency could improve administration of the Medicare program and improve public health. As noted in the preamble of the proposed rule, we also believe that risk adjustment data can support program integrity activities in the Medicare program and in other Federal health care and related programs funded in whole or in part by Federal funds. Furthermore, we believe that our approach to determining whether to disclose risk adjustment data, which incorporates the Medicare Part A/B and Part D minimum necessary data policy, with additional restrictions to protect beneficiary privacy and commercially sensitive information of MA organizations, strikes an appropriate balance between the significant benefits of furthering knowledge through health care research and concerns regarding the release of risk adjustment data. Finally, we believe this process has sufficient protections to ensure compliance with the applicable laws PO 00000 Frm 00475 Fmt 4701 Sfmt 4700 50327 and guard against the potential misuse of data. External entities requesting access to risk adjustment data will have to enter into a Data Use Agreement with us that includes provisions protecting the data from improper release. Comment: One commenter asked CMS to further define what CMS means by external entities in paragraphs (f)(1) and (f)(2) of § 422.310. Response: An external entity may be an individual, group, or organization that is not a Federal executive -branch agency or a State. After consideration of the public comments we received, we are finalizing, as proposed, the four additional permitted uses of risk adjustment data at § 422.310(f)(1)(vi) through (f)(1)(ix), with the exception that we are changing the language for the purpose under paragraph (f)(1)(ix) to read: ‘‘For purposes authorized by other applicable laws.’’ 2. Conditions for CMS Release of Data The existing regulations at § 422.310 do not specify conditions for release by CMS of risk adjustment data that are submitted by MA organizations to CMS. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to add a paragraph (2) to § 422.310(f) to address CMS’ release of such data to non-CMS entities. First, as discussed above in connection with proposed paragraph (f)(1), our proposal was limited to the risk adjustment data described in § 422.310(a) through (d) and did not include the medical records and other data collected separately under paragraph (e) for the purpose of risk adjustment data validation (RADV) audits. We stated that we did not intend for the proposed revision to § 422.310(f) to authorize any additional use or release of the data described in paragraph (e). Second, we proposed that CMS would release only the minimum data that CMS determines is necessary to fulfill the analytical or operational goal for a particular project. In other words, our proposal provided that CMS could determine that the appropriate data release for an approved research project is a subset of encounter data records requested to conduct the proposed inquiry (instead of all encounter data in CMS’ systems for all years and provider types) or is a subset of the abbreviated data requested. Third, we proposed that CMS may release data under this authority to other HHS agencies, other Federal executive branch agencies, States, and external entities, only for purposes identified in paragraph (f)(1) (discussed above) and subject to a number of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50328 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations additional limitations: (i) Applicable Federal laws; (ii) CMS data sharing procedures; (iii) protection of beneficiary identifier elements and beneficiary confidentiality, including: (A) a prohibition against public disclosure of beneficiary identifying information; (B) release of beneficiary identifying information to other HHS agencies, other Federal executive branch agencies, Congressional support agencies, and States only when such information is needed to accomplish the purpose(s) of the disclosure; and (C) release of beneficiary identifying information to external entities only to the extent needed to link datasets; and (iv) the aggregation of payment data to protect commercially sensitive data. These limitations were included at proposed paragraphs (f)(2)(i) through (f)(2)(iv), respectively, of § 422.310. We solicited public comment on other conditions or limitations on the release of this data that will help maintain a balance between protecting confidential and proprietary information with the need to effectively administer Federal health care programs and to encourage research into better ways to provide health care. We also solicited public comments on the extent to which a commercial purpose underlying a request for risk adjustment data should be a factor in evaluating whether the request is for one of the purposes that permit a disclosure under this regulation or if one of the purposes in paragraph (f)(1) of § 422.310, for which CMS would disclose data under this section, should address commercial uses of the data. Under the provisions at proposed § 422.310(f)(2)(iv), we would aggregate payment data to protect commercially sensitive information. We stated our belief that release of payment data at the level of the encounter record might reveal proprietary negotiated payment rates between MA plans and providers. Given the commercially sensitive nature of this information, we did not propose to release payment data at the level of the encounter record without taking steps to protect the commercially sensitive information. In the interest of providing as much transparency as possible, while at the same time protecting proprietary information related to the payments made by MA organizations to health care providers, we proposed to authorize release of aggregate payment information. For example, we could aggregate the payment data by service category, by plan, by contract, or across contracts. We sought public comments on these or other approaches to aggregating payment data for release and whether VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the specified options are sufficiently aggregated to protect commercially sensitive information. In addition, we sought public comment on our conclusion that releasing payment rates at the level of the encounter data record would reveal proprietary negotiated payment rates. Specifically, we requested public comment on what strategies might be used under which payment data could be released while protecting commercially sensitive information. Comment: A number of commenters argued that no risk adjustment data should be released to protect the proprietary nature of encounter data, including data on payments, diagnoses, National Provider Identifiers (NPIs), among other data fields. A few commenters used ‘‘payment data’’ when referring to terms such as ‘‘service categories’’ and ‘‘diagnoses.’’ Response: In reviewing the comments, we observed that several commenters distinguished payment data from other elements of encounter data, while other commenters did not make this distinction and instead used the term ‘‘risk adjustment data’’ or ‘‘encounter data’’ when arguing that all data should be aggregated. Therefore, our response here is intended make clearer the distinction between payment data and other data elements. In the proposed rule, we stated at § 422.310(f)(2)(iii) that beneficiary identifier elements would not be disclosed to protect beneficiary confidentiality, and we stated at § 422.310(f)(2)(iv) that payment data would be aggregated as necessary to protect commercially sensitive data. Our proposed rule thus implied that data outside of these two protected categories would be released without redaction or aggregation. In light of some comments we received, we are concerned that the regulation text should be more detailed in describing the risk adjustment data that does not fall into the two protected categories at § 422.310 (f)(2)(iii) and (f)(2)(iv). Therefore, we are finalizing this rule with two changes to the regulation text. First, to clarify that the term ‘‘payment data’’ means the dollar amounts reported on an associated encounter data record, we are finalizing § 422.310(f)(2)(iv) to use the more specific phrase ‘‘dollar amounts reported for the associated encounter’’ instead of ‘‘payment data.’’ Therefore, in this final rule, we have revised § 422.310(f)(2)(iv) to specify risk adjustment data subject to the aggregation of dollar amounts reported for the associated encounter to protect commercially sensitive data. (We note that dollar amounts are only reported in PO 00000 Frm 00476 Fmt 4701 Sfmt 4700 encounter data records and not in the other type of risk adjustment data referred to as abbreviated (RAPS) data.) This rule does not address the release of data that relates to how much CMS pays MA organizations. In the final rule, CMS–4144–F, published in the Federal Register on April 15, 2011 (76 FR 21432), we adopted regulations on that topic. Second, we are clarifying that risk adjustment data elements that do not fall into either of the two protected categories (beneficiary identifiers and dollar amounts) are subject to release without redaction or aggregation, respectively. Specifically, we are adding paragraph (f)(2)(v) to clarify that risk adjustment data other than data described in paragraphs (f)(2)(iii) and (f)(2)(iv) of the section will be released without the redaction or aggregation described in paragraphs (f)(2)(iii) and (f)(2)(iv), respectively. (We note that we use the term ‘‘redaction’’ to include deletion, encryption, and obscuring or changing the form of something for legal or security purposes.) We discuss in more detail below our analysis of this new language. Comment: A number of commenters responded to the request for public comments on the release of payment data and possible ways they could be aggregated in order to protect commercially sensitive information. Many commenters thanked CMS for the opportunity to comment on this issue and expressed gratitude for CMS’ concern to protect proprietary information on prices negotiated between MA organizations and health care providers. Response: We appreciate the commenters’ support. Comment: A number of commenters addressed the aggregation of risk adjustment payment data for release under this rule. Several commenters asked that CMS only release payment data that have been aggregated to the national or regional level. Some commenters were concerned that the release of such data, even in an aggregated form, has the potential to provide detailed insight about aspects of MA plan experience under the MA program (for example, utilization and cost experience) that are fundamental to bidding and benefit design decisions and, as a result, release of these data would undermine the integrity of the bidding process and the competitive structure of the MA marketplace, both in terms of plan competition for enrollees and competitive negotiations with providers regarding payments rates. One commenter stated that public transparency of negotiated rates could E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations actually inflate prices by discouraging private negotiations that can result in lower prices for some buyers. One commenter who requested regional aggregation expressed concern that if CMS discloses payment data at a lower level of aggregation, it may be easy for competitors to identify sensitive business information on smaller plans and on plans serving targeted populations or providing specific services, such as SNP plans, which would undermine their market position. Another commenter requested that CMS not release payment data at all (at the encounter level or aggregated). Several other commenters asked that aggregated payment data only be released to government agencies and not to external entities. One commenter made the general request that CMS aggregate the data in a manner and at a level that protect the confidentiality of information and that take into account that an organization in some instances may be the principal MA plan in a particular geographic region. Some commenters argued that using encounter data fields such as contract, plan, and provider identifiers as categories by which to aggregate payment data could still lead to exposure of sensitive business strategies (including details about exclusive contracts, pricing, incentive programs, and other information that would disadvantage identifiable plans). A number of commenters provided suggestions for approaches to aggregation of payment data. One commenter suggested releasing national per member per month averages, which would protect negotiated rates while still allowing comparison with other areas of Medicare spending. Another commenter suggested aggregating risk adjustment payment data at a county level in areas where there are three or more MA plans, but in areas with two or less MA plans aggregation should be done across counties. In addition, this commenter suggested that CMS identify when area-specific aggregation approaches are needed, such as where a single MA plan dominates a market and could be identifiable even where there are multiple plans within one or across several counties. Several commenters suggested releasing only aggregated data at either service level categories in the MA bid or at the level of HCCs in the Part C risk adjustment model. Finally, one commenter suggested that CMS make available average pricing per relative value unit (RVU) for given geographies or patient demographic categories, which could provide helpful information regarding payment levels VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 without exposing commercially sensitive negotiated rates. Response: We appreciate all the responses to our request for comment on ways to aggregate risk adjustment payment data, and we will take these ideas and concerns into consideration when determining the appropriate level of aggregation of the dollar amounts associated with each encounter. We understand the commenters’ concerns about the proprietary nature of the payment data and believe that this rule, as finalized, provides the flexibility to protect commercially sensitive data as necessary. It is important to note that, in some instances, the payment data may not require aggregation to protect commercial sensitivity; for example, a request could be made for data that are over 15 years old that is not relevant to current payment amounts. In this case, we would need to assess the unique circumstance of the request and determine if the data were or were not commercially sensitive, and we may decide after consideration to release the data at the encounter level because the need to protect commercially sensitive data is not implicated. We note that we do not agree that only payment data aggregated at the national level should ever be disclosed for any approved research project because such a narrow approach would eliminate too many research questions appropriate to the permitted uses of the data under § 422.310(f)(1) and would not account for situations where less than a national level of aggregation is sufficient to protect the commercial interests of the applicable MA organization(s). In addition, we are not convinced that the release of aggregated payment data would have the negative impact on competition and the integrity of the MA bidding process that is described by a number of commenters. CMS expects to aggregate the dollar amounts on encounter data records as necessary to prevent researchers from determining payment amounts to individual providers, and in this way we would protect competition. As we noted in the April 15, 2011 final rule, CMS–4144–F (76 FR 21516), the MA program is not competitive in the way that term is normally understood. Although MA organizations do compete for members, primarily through the plan benefits offered and the cost (member cost sharing and premium) of those benefits, they do not directly compete for the payments that CMS makes. Rather, we approve all sustainable bids that are otherwise qualified without preference for the lowest bidder. The fact that MA-eligible Medicare beneficiaries can, generally, select from PO 00000 Frm 00477 Fmt 4701 Sfmt 4700 50329 a number of plans offered in their county of residence is evidence that competition is robust. Comment: Several commenters were concerned with the release and use of the payment data included in risk adjustment data, especially to external entities, even if the data are aggregated for release. These commenters argued that the MA encounter data are incomplete due to the nature of MA organizations’ financial arrangements with providers and it is inappropriate to use this data to draw conclusions that may inform policy or program management. Specifically, these commenters noted that encounter data cannot provide a complete picture of MA organizations’ costs because many MA organizations have payment arrangements with providers that are not fee-for-service based and are instead based on capitation arrangements (for which $0 is reported on an encounter record), bundled pricing, incentive payments, and multi-year contracting. One commenter noted that, for some MA plans, most outpatient services are capitated, except for some referrals and emergency services, and nonbenefit costs are not reflected in encounter data, rendering financial analysis and comparisons for these plans inappropriate and impractical. Another commenter also recommended that information about the limitations of the data should accompany any release of risk adjustment data, to reduce misinterpretations of the data by the end users and to prevent policy development based on inaccurate analyses of risk adjustment data. Response: We understand the commenters’ concerns that risk adjustment data may not provide a complete picture of the costs associated with care of MA plan enrollees due to the alternative payment arrangements. However, we believe that broader release of risk adjustment data to external entities can increase the positive contributions researchers make to the evaluation and function of the MA program and improve the efficiency of the program and the clinical care of its beneficiaries, which is in the interest of public health. Specifically, it is in the interest of the public health to share this information with entities outside of CMS, as the work of these entities will assist CMS in evaluating the MA program and assessing related policies to improve the clinical care of beneficiaries. In addition, broader release of the data also has the potential to assist in addressing public health issues of the population in general beyond just Medicare beneficiaries. Regarding the suggestion to provide E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50330 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations approved requestors with information on the limitations of encounter data, we believe this is a good suggestion and will consider what disclaimers are appropriate to accomplish this. Comment: A number of commenters also expressed concern about the proprietary nature of other data elements in the encounter record in addition to payment data, stating that releasing plan-specific and providerspecific data such as diagnoses, service categories, Current Procedural Terminology codes (CPTs), and NPIs has the potential to provide detailed insight about aspects of MA plan experience under the MA program that are fundamental to bidding and benefit design decisions and could undermine the competitive structure of the health care market in many areas. In contrast, one commenter agreed that proprietary payment data should be aggregated to protect proprietary information on negotiated prices, but further emphasized that all other encounter claims data should be widely available to commercial entities—including providers, medical societies, ERISA plans and insurers—for the purposes of improving the value of health care to the consumer (subject to privacy protections under HIPAA and other statutes). Response: In the proposed rule, we only raised the issue of commercial sensitivity with regard to payment data. As noted in an earlier response, we are clarifying that the term ‘‘payment data’’ means the dollar amounts reported on an associated encounter data record, and that risk adjustment data elements that do not fall into either of the two protected categories of beneficiary identifiers and dollar amounts are subject to release without redaction or aggregation, respectively. We are not persuaded by the argument that data elements aside from beneficiary identifiers and dollar amounts require protection because they are relevant to competition that MA organizations face. We are mirroring the effort within CMS to increase transparency through broadened release of Parts A and B data. We routinely make Medicare FFS claim data available to interested parties for research, and these data include information on procedure codes and diagnosis codes. Furthermore, on April 9, 2014, CMS released detailed service use data on nearly 1 million physicians and health care providers. Thus, as clarified in § 422.310(f)(2)(v), CMS will release risk adjustment data—other than beneficiary identifier data described in § 422.310(f)(2)(iii) and dollar amounts reported for associated encounter described in § 422.310(f)(2)(iv)—without the redaction or aggregation described VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in paragraphs (f)(2)(iii) and (f)(2)(iv), respectively. Comment: One commenter was concerned that encounter data from Medicare-Medicaid Plan (MMP) demonstrations would be used for analyses, such as OIG studies and validation of bids and medical loss ratios, and believed this would be a mistake because these are new plans and there remain many operational questions about submission of this encounter data, including coordinating with States and processing and submitting claims in a manner seamless to both the member and provider. Response: Our policy on the use and release of risk adjustment data in this final rule will apply the same way to the Medicare risk adjustment data of MMP demonstrations as it does to the risk adjustment data of MA organizations. We appreciate the comment on the important distinctions in the encounter data collection process for MMP data compared to MA data, and we will consider the unique aspects of MMP data in their ultimate application. Comment: Several commenters asked CMS to provide a definition of commercially sensitive. Response: There is extensive case law under the Trade Secrets Act (18 U.S.C. 1905) and FOIA Exemption 4 (5 U.S.C. 552(b)(4)) that addresses the concept of commercially sensitive, and we do not believe this is an appropriate venue for summarizing the case law. We also discuss the relationship of this regulation to the Trade Secrets Act and FOIA below. We add that two commenters appeared to blur the concepts of commercially sensitive and commercial purpose; therefore, we are clarifying here that these are unrelated concepts for the purpose of this rulemaking. Issues around releasing data for a commercial purpose pertain to CMS’ data sharing procedures and are discussed in a separate comment and response below. Comment: Several commenters asserted that even risk adjustment data aggregated up to the level of contract or parent organization (for example, service category and diagnosis data) could be considered to meet the elements required for application of the exemption under FOIA Exemption 4 (5 U.S.C. 552(b)(4)). The commenters stated that risk adjustment data submitted by an MA organization are protected by 45 CFR 5.65(b)(1) because: (1) It is supplied by someone outside the government having a financial interest in the information, namely the MA organization providing the data; (2) it is ‘‘confidential commercial or financial PO 00000 Frm 00478 Fmt 4701 Sfmt 4700 information’’ and proprietary and confidential; and (3) disclosure of each MA organization’s service category and/ or diagnosis data could result in competitive harm for the MA organization. Response: In response to comments arguing that the Trade Secrets Act (18 U.S.C. 1905) or FOIA exemptions prohibit release of this information on the basis that the information is the confidential commercial information of the MA organization, we do not believe that the release of the risk adjustment data under our final rule will violate either the Trade Secrets Act or FOIA. With respect to the risk adjustment data described in paragraph § 422.310(f)(2)(iv), the regulation explicitly provides for aggregation at the level necessary to protect commercially sensitive data. Under this regulation, when CMS aggregates, as necessary, the dollar amounts associated with the risk adjustment data—whether at a regional, contract or other level—any detailed (encounter-level) data protected by the Trade Secret Act or FOIA Exemption 4 will be withheld from disclosure. With respect to the risk adjustment data described at § 422.310(f)(2)(v), we are not persuaded that data elements aside from beneficiary identifiers and dollar amounts require protection and, therefore, are adopting a regulation that directs disclosure of such information (assuming all other conditions in this rule are met to obtain such a release) without redaction or aggregation. Section 1106(a) of the Act (42 U.S.C. 1306(a)) provides authority to enact regulations that would enable the agency to release information filed with this agency. (See Parkridge Hospital, Inc. v. Califano, 625 F.2d 719, 724–25 (6th Cir. 1980).) We have engaged in notice-and-comment rulemaking to promulgate regulations to enable the disclosure of the data described at § 422.310(f)(2)(v). The Trade Secrets Act permits government officials to release otherwise confidential information when authorized by law. A substantive regulation issued following notice-andcomment rulemaking, such as this one, provides the authorization of law required by the Trade Secrets Act. Because the Trade Secrets Act would allow disclosure, Exemption 4 (5 U.S.C. 552(b)(4)), which is as coextensive with the Trade Secrets Act, would also not preclude disclosure with respect to the information that would be released under this final rule. We recognize that this conclusion would not apply to the dollar amounts data described in paragraph § 422.310(f)(2)(iv). Comment: Several commenters stated that releasing payment data may trigger E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations antitrust concerns within both the health plan and provider communities, and cited the August 1996 ‘‘Statements of Antitrust Enforcement Policy’’ (https://www.ftc.gov/sites/default/files/ documents/reports/revised-federaltrade-commission-justice-departmentpolicy-statements-health-care-antritrust/ hlth3s.pdf), where the Federal Trade Commission and the Department of Justice laid out several conditions for an antitrust safety zone (pages 44 and 45) related to the collective release of negotiated provider payment rates, noting that there would be instances where negotiated rates possibly could be discerned, such as areas with a dominant private payer. Response: We are not clear what the ‘‘collective release of negotiated provider payment rates’’ has to do with this rulemaking. We understand the term ‘‘collective’’ in this context to mean more than one actor releasing its own specific rates. When CMS approves a release of aggregated payment data under this rule, that release is performed by one actor and not a collective of some sort. Further, our proposed policy of aggregating payment data as necessary will protect the proprietary nature of the payment data. In cases where there is a dominant private payer in a certain geographic area, we will take this into account when determining the appropriate level of aggregation. We understand the Federal Trade Commission and the Department of Justice guidance to address when health care providers act in concert to share or release their payment terms and what circumstances those enforcement agencies believe would ameliorate any collusive intent in such actions. However, this rulemaking pertains to a single actor (CMS), not to a collective action; specifically, CMS may release risk adjustment data for approved research projects, and these are data that were submitted to CMS by MA organizations on the basis of requirements in statute and regulation regarding risk adjustment data collection in the MA program. The underlying negotiation of the payment terms, such as whether the health care providers collectively negotiated them and the respective negotiating position of the MA organizations and the parties, are not part of the information submitted to CMS or disclosed by CMS under § 422.310. Comment: A few commenters stated that payment data should not be collected by CMS as part of encounter data and should not be used by CMS or released outside of CMS because such data are not relevant to risk adjustment. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We believe that payment data are useful for all of the purposes set forth in this regulation, including, but not limited to, the purpose of riskadjusting payments to MA organizations. Therefore, we are finalizing in this rule the release of aggregated payment data as necessary to protect commercially sensitive data, subject to all the conditions established in this rule. Comment: A number of commenters raised issues about the timing for release of risk adjustment data under the rule. Some commenters supported release of risk adjustment data to improve transparency; one commenter stated that there is an urgent need for more reliable consumer comparison shopping tools due to extreme provider price variations in local healthcare markets, and Medicare data could be valuable for this purpose. A few commenters requested that CMS delay release of encounter data to any governmental agency outside of CMS and/or delay release to external entities. A number of other commenters presented requests for two different types of delay in release of encounter data: (1) A routine delay for all data releases; and (2) a delay applicable only to the first few years of encounter data collected by CMS. First, commenters requested that CMS implement a routine lag in release of encounter data. Some commenters argued that, before release of the data for any given year, CMS should ensure that the data are complete and accurate, for example by validating and identifying any limitations in the data. Other commenters suggested timeframes of between 4 and 6 years for such routine lags, arguing that CMS should allow an established number of years pass before release because utilization, pricing, and similar data elements remain sensitive for a number of years (and could be used for trending competitor’s patterns), and many MA organizations have multi-year contracts with their providers (5 or more years), making data even a few years old still commercially sensitive in a marketplace. Second, a few commenters requested that CMS never release encounter data that was submitted in the initial years of required submission (in particular, that data for 2012 dates of service—the first year of submission—never be released). Alternatively, other commenters suggested that CMS lag release of data from the initial years of submission because: (1) Implementation of encounter data collection via CMS’ encounter Data System (EDS) has required frequent and ongoing systems development and modifications on the PO 00000 Frm 00479 Fmt 4701 Sfmt 4700 50331 part of the agency and MA organizations since the initiative began in January 2012, which has resulted in challenges in submission and acceptance of encounter data; and (2) the ICD–10 code set transition likely will result in some instances in which encounter data are incomplete or inaccurate for the 2015 data year, as providers adjust to the coding differences. Response: Regarding commenters’ requests that CMS implement both routine multi-year lags in release of encounter data and targeted delays in the release of encounter data from the initial years of submission, we believe that such delays in release to any agencies and entities described in this rule would defeat the goals of improving transparency in the Medicare program and allowing researchers to use data in a timely manner to improve the administration of and advance policy research on the Medicare program. Also, we refer readers to our response elsewhere in this preamble regarding the impact of such releases on MA bidding. However, CMS recognizes that there are circumstances unique to the process for collecting risk adjustment data that should be addressed in the timing of releases of such data. CMS allows 13 months after the end of a risk adjustment data collection year for MA organizations to update the risk adjustment data submitted under § 422.310; this period provides MA organizations an opportunity to identify and correct errors in data they have submitted for that data collection year, and ensures that the risk adjustment data is complete and accurate. We do not plan to regularly release risk adjustment data for a data collection year prior to the completion of this period because of the possibility that the data may contain errors or be incomplete for the applicable year. Therefore, to clarify our processes for the purposes of this rule, we have added paragraph (f)(3) to § 422.310, which states that risk adjustment data will not be available for release under paragraph (f) unless: • The risk adjustment reconciliation for the applicable payment year has been completed; • CMS determines that the data release is necessary under paragraph (f)(1)(vi) for emergency preparedness purposes before reconciliation; or • CMS determines that extraordinary circumstances exist to release the data before reconciliation. An example of an extraordinary circumstance would be a request by the Department of Justice for data for a qui tam case under the False Claims Act. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50332 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We believe these restrictions on the timing of data releases will address some of the commenters’ concerns. Comment: A few commenters suggested that CMS not release encounter data until CMS uses it for risk-adjusted payment purposes in place of RAPS data. One commenter stated that no data should be released until MA organizations are provided with the MAO–004 encounter data reports because these reports will allow the MA organizations to validate that encounter data are complete for risk adjustment purposes. Response: First, we do not agree with the commenters that CMS’ transition from the use of RAPS data to encounter data for risk-adjusted payment should be a prerequisite for releasing encounter data for the purposes under this final rule. The data are valuable for other purposes besides calibration of the risk adjustment model, as listed in paragraph (f)(1) of § 422.310, and the release of the data is important for transparency. Second, the MAO–004 report, also known as a filtering report, will contain detailed information on which diagnoses are eligible for risk adjustment purposes and will be part of the process that CMS will undertake for risk score calculation. The intent of this report is to assist MA organizations and other encounter data submitters to understand risk score calculation; it is not intended to support validation by MA organizations of the encounters that they have submitted to CMS. Therefore, we do not believe that these filtering reports should be a prerequisite to releasing encounter data associated with any payment year. Comment: A number of commenters responded to our request for public comment on releasing risk adjustment data for commercial purposes. Many commenters asked CMS not to release data to external entities for commercial purposes. Commenters also noted that CMS does not currently release Part A, Part B, or Part D data for commercial purposes, and argued that CMS should have a consistent policy for release of data for commercial purposes across all Medicare programs, including the Part C Medicare Advantage program; these commenters cited CMS’ discussion about such a consistent policy in a final rule, CMS–4159–F, published on May 23, 2014 (79 FR 29844). In contrast, one commenter supported the use of risk adjustment data by commercial entities to conduct research when the research is focused on legislative, regulatory, or policy development aimed at improving the Medicare program, including projects focused on patterns of care of MA VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 enrollees. This commenter suggested that if CMS moves to define commercial purpose, it should do so narrowly so that, for example, firms requesting data releases under the rule for research on regulatory or policy issues for their clients would not have this type of work construed as commercial. Another commenter stated that encounter data should be widely available to commercial entities, including providers, medical societies, ERISA plans, and insurers, for purposes of improving the value of health care to the consumer. This commenter encouraged CMS to put providers and insurers on an equal footing with each other, with respect to sharing of public data on safety, quality, volume, and intensity of care. Finally, a number of commenters requested that CMS define the term ‘‘commercial purposes.’’ Response: We appreciate all of the responses to our request for public comments on releasing risk adjustment data for commercial purposes. We recognize that some commenters would like risk adjustment data to be available for commercial purposes, while others are concerned about external entities having risk adjustment data releases approved for projects that have commercial purposes and/or for researchers employed by commercial entities. We consider the issue of whether or not a request for data has a commercial purpose to be an issue that would be addressed under CMS’ data sharing policies, which are referenced in § 422.310(f)(2)(ii) of this rule. Regarding commercial purpose, we refer commenters to page 30674 of the preamble of the final rule, CMS–4119– F, published on May 28, 2008 (73 FR 30664), where, for example, there is discussion of research whose primary purpose is to contribute to general knowledge in the public domain. We agree with commenters that it is appropriate to have consistent policies for the release of data across the original Medicare (Parts A and B) program, the Part D prescription drug program, and the Part C Medicare Advantage program. Although we are not changing CMS’ existing policy against releasing data for commercial purposes at this time, we note that, in the event the policy regarding the release of Parts A, B, and D data for commercial purposes were to change, we also would revise our Part C risk adjustment data sharing policies to be consistent with that change. Therefore, if a request for the data under the current policy is for one of the purposes outlined in paragraph (f)(1)(i) through (ix) and also for a commercial purpose, we would consider the commercial purpose as a barrier to the PO 00000 Frm 00480 Fmt 4701 Sfmt 4700 release in the same way here as in the other Medicare programs. Comment: A few commenters expressed concern about how CMS will evaluate requests for risk adjustment data release. One commenter asked CMS to keep in mind that broad disclosures of data could lead to creation of nonFederal databases, which could negatively affect the privacy and security of beneficiary-specific data. Another commenter cautioned that, in determining what is a minimum dataset necessary for a particular data request, CMS must not approve release of a subset of data or variables that omits critical data, resulting in an analysis with false assumptions about MA encounters. In addition, other commenters were particularly concerned about requests by external entities. One commenter stated that, in evaluating requests from commercial entities, CMS should consider relationships between the corporate and research arms of the commercial entity, and CMS should not assume that data released for research purposes will not be made available to related commercial entities unless specific prohibitions are put in place, or that published research findings will not be used for commercial purposes. Another commenter also expressed concern that external entities may use data released to them for a CMS-approved research project for purposes that go beyond the initial intent of the request. Response: We will release only the minimum data necessary for a particular study design that CMS has determined meets a use (analytical purpose) finalized in this final rule and if the research project also complies with all other conditions established in this final rule. We believe that CMS’ longstanding data sharing procedures (a condition for data release referenced at § 422.310(f)(2)(ii)) will allow CMS to determine the appropriateness of a requested data set and will limit inappropriate use of encounter data. CMS considers all data requests to ensure that the use of the data will not exploit or negatively impact Medicare beneficiaries. In order for a researcher to gain access to CMS data, the researcher must complete an application process, including submission of a research protocol. The researcher must receive approval of the protocol from CMS. In addition, all requestors are required to sign a Data Use Agreement with the agency that limits the use of the data to only the approved purposes. The Data Use Agreements that CMS uses have and will continue to have enforcement mechanisms. For example, one of CMS’ E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Data Use Agreement forms states: ‘‘The User acknowledges that penalties under § 1106(a) of the Social Security Act [42 U.S.C. 1306(a)], including possible imprisonment, may apply with respect to any disclosure of information in the files(s) that is inconsistent with the terms of the Agreement. The User further acknowledges that criminal penalties under the Privacy Act [5 U.S.C. 552a(i)(3)] apply if it is determined that the User, or any individual employed or affiliated therewith, knowingly and willfully obtained the file(s) under false pretenses. The User also acknowledges that criminal penalties may be imposed under 18 U.S.C. 641.’’ We believe these restrictions are necessary in order to ensure that data are only requested in compliance with the requirements of the regulations and CMS data sharing procedures, and that data shared by CMS are appropriately protected and are not reused or redisclosed without the necessary approval. Under our data sharing policies, we generally require the requester not to disclose the data to third parties without specific written authorization from us. CMS expects that researchers who receive a CMSapproved release of risk adjustment data will abide by the law, policies, and procedures surrounding use of that data, particularly where the regulation conditions release of the data on CMS data procedures being followed. Comment: A few commenters requested that, when CMS is making a determination about whether to release risk adjustment data to a requestor, CMS reach out to MA organizations to consult on whether to approve the request. One commenter stated that plans would appreciate the opportunity to advise the agency of any specific concerns they have with respect to release of data for certain purposes and to certain entities, while another commenter asked CMS to allow plans to deny certain requests for data. Finally, a few commenters stated that whenever a stakeholder’s data is part of an approved release, that stakeholder should have access to the entire data release for purposes of verification, equity, and accuracy. Response: Under this rulemaking, we will use CMS existing data sharing procedures (in accordance with § 422.310(f)(2)(ii)) for responding to requests for risk adjustment data. It is not part of CMS’ data sharing procedures to contact a submitter of data (for example, a FFS provider, supplier, a Part D sponsor, or an MA organization) whenever a researcher requests or receives approval for access VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to a data set for a study that includes some of that particular submitter’s data (unless the request is made under FOIA). Nor, is it part of the CMS’ data sharing procedures to allow an MA organization or another entity to have approval rights in regards to the release of data. In addition, this rule itself sets the standards under which data will be released. Therefore, CMS will not be notifying MA organizations or their contracted providers when data requests that may include their risk adjustment data are received or approved. Finally, CMS could not simply release a risk adjustment data set to a stakeholder that had not received approval through CMS data sharing procedures simply on the grounds that the stakeholder’s risk adjustment data submissions to CMS comprise one part of a data file released to a researcher for an approved study. One of the best ways MA organizations can address their concerns about the accuracy of risk adjustment data available for release is to continue working with CMS to improve the quality of risk adjustment data they submit to CMS. Comment: One commenter opposed the release of beneficiary identifying information to external entities, including other HHS agencies, other Federal Executive Branch agencies, Congressional support agencies, and States. Another commenter encouraged CMS to establish and impose appropriate penalties for any breach of privacy related to beneficiary identifiable information by external entities. Response: We understand the need to protect beneficiary identifying information. As finalized in § 422.310(f)(2)(iii) of the regulation, CMS release of risk adjustment data is subject to the protection of beneficiary identifier elements and beneficiary confidentiality, including— • A prohibition against public disclosure of beneficiary identifying information; • Release of beneficiary identifying information to other HHS agencies, other Federal executive branch agencies, and States only when such information is needed; and • Release of beneficiary identifying information to external entities only to the extent needed to link datasets. Any release of beneficiary-identifiable data must follow the policies in CMS’ data sharing procedures. We intend to protect the beneficiary data through, for example, encryption, or removal of the confidential fields when risk adjustment data is released. As we discussed above and in the final rule, CMS–4159–F, PO 00000 Frm 00481 Fmt 4701 Sfmt 4700 50333 published on May 23, 2014 (79 FR 29844), all users accessing beneficiary identifiable data are required to sign CMS’ Data Use Agreement, which addresses privacy and security for the data CMS discloses. The Data Use Agreement also contains provisions regarding access to and storage of CMS data to ensure that beneficiary identifiable information is stored in a secure system and handled according to CMS’ security policies. CMS has an established process to evaluate requests for data to ensure that there are appropriate safeguards in place to protect beneficiary privacy. We believe this process contains the necessary checks to ensure that the risks of the disclosure are minimal. Comment: One commenter requested CMS to release risk adjustment data by creating an MA encounter data Standard Analytic File (SAF) in limited data set form (LDS) to extend research that can currently be done by users of LDS SAFs across sites using fee-for-service Medicare claims data. A few other commenters argued that these data should be routinely available through public use files, not just through the project-specific process set forth in this rule. Response: We appreciate the suggestions and will take them into consideration for future additional guidance. With regard to the issue of Public Use Files, we believe that the nature of data—see the discussion above—make it appropriate to include the protections imposed by this rule, including the limits on the purpose of the disclosure, release of only the minimum necessary data, the incorporation of CMS data sharing policies and procedures, and additional protections for certain data elements. After consideration of the public comments we received, we are finalizing, as proposed, the policies regarding CMS release of data in § 422.310(f)(2), with the exception of five changes to the regulation text. First, we clarify that the paragraph (f)(1)(ix) purpose permitted by other laws is for ‘‘purposes authorized by other applicable laws.’’ Second, we have deleted the term ‘‘congressional support agencies’’ from paragraph (f)(2)(B) in order to be consistent with the introductory language at paragraph (f)(2) of this regulation. Third, to clarify that data aggregation will be of the dollar amounts reported on an associated encounter data record, we are finalizing paragraph (f)(2)(iv) to state that subject to the aggregation of dollar amounts reported for the associated encounter to protect commercially sensitive data. Fourth, in order to explicitly address the E:\FR\FM\22AUR2.SGM 22AUR2 50334 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations risk adjustment data elements that do not fall into either of the two protected categories (beneficiary identifiers and dollar amounts) and to clarify that such data are subject to release without redaction or aggregation, we are finalizing an additional paragraph (f)(2)(v) to state that risk adjustment data other than data described in paragraphs (f)(2)(iii) and (f)(2)(iv) of the section will be released without the redaction or aggregation described in paragraphs (f)(2)(iii) and (f)(2)(iv) of the section, respectively. Finally, we are adding paragraph (f)(3) to § 422.310 to clarify when risk adjustment data will be available for release, to state that risk adjustment data will not be available for release under paragraph (f) unless— • The risk adjustment reconciliation for the applicable payment year has been completed; • CMS determines that the data release is necessary under paragraph (f)(1)(vi) of the section for emergency preparedness purposes before reconciliation; or • CMS determines that extraordinary circumstances exist to release the data before reconciliation. 3. Technical Change In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we proposed to amend § 422.300, which identifies the basis and scope of the regulations for payments to MA organizations, to add a reference to section 1106 of the Social Security Act, which governs the release of information gathered in the course of administering our programs under the Act. We did not receive any public comments on this technical change, and we are finalizing without modification our proposed amendment to § 422.300, to add a reference to section 1106 of the Social Security Act, which governs the release of information gathered in the course of administering our programs under the Act. XI. Changes to Enforcement Provisions for Organ Transplant Centers tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV A. Background In February 2004, the Office of the Inspector General (OIG) published a report entitled ‘‘Medicare-Approved Heart Transplant Centers’’ (OEI–01–02– 00520), in which the OIG outlined three recommendations for CMS’ oversight of heart transplant centers: (1) that CMS expedite the development of continuing criteria for volume and survival-rate performance and for periodic recertification; (2) that CMS develop guidelines and procedures for taking VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 actions against centers that do not meet Medicare criteria for volume and survival-rate performance requirements; and (3) that CMS take immediate steps to improve its ability to maintain accurate and timely data regarding the performance of transplant centers. As part of CMS’ efforts to strengthen oversight of organ transplant centers, we published the final rule ‘‘Medicare Program: Hospital Conditions of Participation, Requirements for Approval and Re-approval of Transplant Centers to Perform Organ Transplants’’ on March 30, 2007 in the Federal Register (72 FR 15198) that established conditions of participation (CoPs) for organ transplant centers and applied the survey and certification enforcement process (that is used for all other providers and suppliers of Medicare services) to Medicare-approved transplant centers. In the preamble of that final rule, we discussed our efforts to improve organ donation and transplantation services and our goals to: (1) Protect patients who are awaiting organs for transplantation; (2) establish key quality and procedural standards; and (3) improve outcomes for patients (such as patient survival) and reduce Medicare expenses by decreasing the likelihood that a transplant would fail. In the March 30, 2007 final rule, we codified the CoPs for transplant centers at 42 CFR Part 482, Subpart E (§§ 482.68 through 482.104) and the special procedures for approval and re-approval of organ transplant centers at 42 CFR 488.61. The CoPs set forth explicit expectations for outcomes, patient safety, informed choice, and quality of transplantation services. In particular, §§ 482.80 and 482.82 specify that a transplant center’s outcomes are not acceptable if, among other factors, the number of observed patient deaths or graft failures 1 year after receipt of a transplant exceeds the risk-adjusted expected number by 1.5 times, based on the most recent program-specific report from the Scientific Registry of Transplant Recipients (SRTR). Failure to meet the transplant center requirements will lead CMS to deny approval or re-approval of a center’s Medicare participation under § 488.61. However, §§ 488.61(a)(4) and (c)(4) authorize CMS to consider mitigating factors when determining approval and re-approval, respectively, for a transplant center that has not met the data submission, clinical experience, or outcome requirements, or other CoPs, if the center submits a formal, written request for such a review. The existing regulations do not limit the factors that CMS may consider, but enumerate, at a minimum, the following factors to be PO 00000 Frm 00482 Fmt 4701 Sfmt 4700 considered: (1) The extent to which outcome measures are met or exceeded; (2) the availability of Medicareapproved transplant centers in the area; and (3) extenuating circumstances that may have a temporary effect on a transplant center meeting the requirements under the CoPs, such as a natural disaster. CMS approval or reapproval based on mitigating factors permits a transplant center to operate as a Medicare-approved transplant center under certain circumstances despite a finding of noncompliance. Under existing regulations at §§ 488.61(b)(4)(iv) and (c)(4)(iv), CMS will not approve a center with condition-level deficiencies but may reapprove a center with standard-level deficiencies. B. Basis for Proposed and Final Policies In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27977), we proposed to strengthen, clarify, and provide additional transparency for the survey, certification, and enforcement procedures under § 488.61 for transplant centers that are requesting initial approval or re-approval for participation in the Medicare program when the centers have not met one or more of the CoPs but wish to have certain mitigating factors taken into consideration. 1. Expansion of Mitigating Factors Based on CMS’ Experience The existing organ transplant enforcement regulation at § 488.61 does not provide detailed information on the factors generally needed for approval or re-approval of a request based on mitigating factors that a transplant center may make in order to participate, or continue to participate, in Medicare. However, since the adoption of the organ transplant CoPs and corresponding enforcement regulations, we have expanded our knowledge regarding: (a) The factors and processes that promote improvement in transplant center outcomes; and (b) other mitigating factors that merit explicit recognition under CMS regulations. Most of the requests that we have approved based on mitigating factors have been for transplant centers that were out of compliance with CMS outcomes requirements, but were then able to (a) effect substantial program improvements and (b) based on meaningful post-transplant survival data, demonstrate recent and much improved patient and graft survival subsequent to those program reforms. These performance improvements occurred after the program was cited for substandard performance by CMS and was at risk of losing Medicare E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations participation, usually while the program was operating during the mitigating factors review process or under a binding Systems Improvement Agreement (SIA) with CMS. Under an SIA, CMS agrees to extend the effective date of a prospectively scheduled termination from Medicare participation (that is, denial of re-approval) and holds in temporary abeyance a final review of the transplant center’s mitigating factors request, if the transplant center agrees to engage in a structured regimen of quality improvement to improve performance during a specified period of time. At the end of the SIA period (typically 12 months), we review the transplant center’s performance and make a final decision as to whether: (a) The transplant center’s patient and graft survival is within the acceptable limits set forth in the regulations; or (b) the transplant center qualifies for approval or re-approval based on mitigating factors. As of August 2013, CMS had rendered a final determination for 129 requests for approval to operate as a Medicareapproved transplant center based on mitigating factors. Of those determinations, 48 of the requests (37.8 percent) were approved based on information provided by the transplant center on its mitigating factors alone (that is, without entering into an SIA) because the transplant program had implemented substantial program improvements during the extended CMS review period, and CMS concluded that the most recent patient and graft survival data (taking into consideration the lag time in data inherent in the SRTR reports) demonstrated current compliance with outcome requirements. Another 33 requests (25.6 percent) were eventually approved on the basis of each transplant program’s successful SIA completion and much improved outcome data for the affected program. A total of 24 requests (18.6 percent) involved transplant programs that were approved (and the transplant centers were permitted to continue Medicare participation) because CMS determined that the transplant centers met the outcome requirements during the time period it took for CMS to review the mitigating factors request, based on a new SRTR report that because available during the 210-day mitigating factors review period. Requests from another 2 programs (1.6 percent) were approved in which the programs had not enter into an SIA but had made extensive use of innovative practices involving key factors that were not included in the SRTR risk-adjustment methodology. An additional 2 requests (1.6 percent) were VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 approved because natural disasters temporarily impacted the transplant centers. Finally, 20 requests (15.5 percent) were denied approval based on mitigating factors because the programs failed to meet the outcome or clinical experience requirements and were not able to demonstrate improvements and recent outcomes or experience that would warrant approval based on mitigating factors. These 20 programs voluntarily withdrew their participation from the Medicare program. Comment: Commenters supported CMS’ efforts to add clarity and increase transparency, and most commenters conveyed specific suggestions for further clarity or revision. Response: We appreciate the thoughtful nature of all comments we received and the specificity of the suggestions that were made. We address those specific suggestions below in the context of each relevant section of our proposed language. 2. Coordination With Efforts of the Organ Procurement and Transplantation Network (OPTN) and Health Resources and Services Administration When we adopted the outcome standards for transplant programs in 2007, we sought to harmonize CMS’ outcome standards with standards of the Organ Procurement and Transplantation Network (OPTN) so that transplant centers would have a single, consistent set of outcome expectations on which to focus. We also sought to organize CMS activities in a manner that would reinforce and continue the OPTN as the first line of external review and quality improvement for transplant centers. The OPTN is the unified transplant network established under the National Organ Transplant Act (NOTA) of 1984. The NOTA called for the network to be operated by a private, nonprofit organization under Federal contract. The OPTN is a public-private partnership that links all of the professionals involved in the donation and transplantation system. The primary goals of the OPTN are to: (a) Increase the effectiveness and efficiency of organ-sharing and equity in the national system of organ allocation; and (b) increase the supply of donated organs available for transplantation. For more details about the OPTN, we refer readers to the Web site at: https:// optn.transplant.hrsa.gov/optn/ profile.asp. The OPTN and the Health Resources and Services Administration (HRSA) have been considering adoption of an alternative methodology for calculating expected transplant outcomes, known as the ‘‘Bayesian’’ methodology, and for PO 00000 Frm 00483 Fmt 4701 Sfmt 4700 50335 setting a threshold that would ‘‘flag’’ a transplant center for OPTN review of performance. At its June 2014 meeting, the OPTN determined to adopt the new methodology and begin using the new methodology in CY 2015. HRSA and the SRTR will continue to provide the information needed by CMS, and we will work together to track how transplant programs are rated under the ‘‘Bayesian’’ methodology and the CMS outcomes standards. At the present time, CMS has insufficient experience with the new ‘‘Bayesian’’ methodology, and insufficient data, to determine an appropriate threshold for a Medicare outcomes deficiency under a ‘‘Bayesian’’ methodology. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose any changes in our CoPs regarding this new methodology. However, we wish to continue to coordinate with the OPTN’s efforts. Therefore, we proposed that if a program has been cited for an outcomes deficiency by CMS, but has not been flagged for review by the OPTN, CMS would take these facts into consideration if the transplant program has requested approval based on mitigating factors. For a perspective on the ‘‘Bayesian’’ methodology, we refer readers to the Web site at: https:// www.srtr.org/faqs/16.aspx. Comment: One commenter stated that an important lesson learned over the past several years is the need to further coordinate and reconcile differences between the requirements and processes used by CMS and the OPTN in regulating the quality of services provided by transplant centers throughout the country. Response: We concur with the value of coordinating requirements and processes to the extent permitted by the different roles played by the OPTN and CMS. Our desire to coordinate with HRSA and OPTN gave rise to many of the proposals discussed here. Further, staff from the United Network for Organ Sharing (UNOS, that is under contract with HRSA) and CMS developed a cross-walk of the OPTN and CMS requirements, updated the cross-walk in July 2014, and published it online at: https://www.optn.transplant.hrsa.gov/ content/policiesAndBylaws/evaluation_ plan.asp. While CMS and OPTN have many mutually-reinforcing requirements, the two organizations largely cover different aspects of the transplant universe. The OPTN, for example, excels at the data reporting and management that CMS does not address, but CMS reinforces OPTN through a CMS requirement that transplant centers timely and adequately report data in accordance E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50336 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations with OPTN requirements. Similarly, there are other areas not covered by OPTN that CMS addresses (such as the CMS requirement that every transplant program have an effectively functioning, internal quality assessment and performance improvement (QAPI) system). CMS, HRSA, and the OPTN observed both CMS’ and OPTN’s onsite surveys in the past year, with the intent to identify areas to reduce the burden on transplant programs, as well as improve the efficiency of the survey process. Although the surveys are conducted very differently based on the distinct roles of the two agencies, the OPTN has now combined the living donor survey with its regular survey to eliminate the need for an additional survey. HRSA and CMS also maintain monthly meetings and, as the need arises, more frequent meetings of workgroups. Another recent development was the CMS final rule (‘‘Medicare and Medicaid Programs; Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction; Part II; Final Rule’’) published in the Federal Register on May 12, 2014 (79 FR 27106) designed to reduce regulatory burden and increase efficiency. Among other features, the rule permits CMS to vary the frequency of onsite transplant center surveys compared to the earlier and standard CMS 3-year cycle that applied to all transplant programs. CMS maintains continuous review of transplant outcomes, responds to complaints at any time, and is notified by transplant centers when there is a major change in a center. With these continuous activities, and the added flexibility of the May 12, 2014 final rule, we expect to extend the average onsite survey frequency to a range of approximately 3 to 5 years. We expect some centers will be surveyed more frequently than the average and other centers less frequently, depending on CMS’ assessment of the need for a survey of a particular program. We expect that this change will help reduce the extent to which any particular transplant program will have two different surveys (OPTN and CMS) that occur within a proximate time of each other. We look forward to continuing to work with HRSA, UNOS, OPTN, and the transplant community on these and other coordination issues. C. Provisions of the Proposed and Final Regulations In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we proposed to revise the regulations at § 488.61 to include specific additional provisions describing and expanding VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the mitigating factors that CMS may consider when evaluating requests and explain the conditions under which each factor would apply. Comment: One commenter recommended that CMS modify § 482.82 of the regulations to state that a transplant center that does not meet the data submission, clinical experience, or outcomes requirements would be considered to be out of compliance at the Condition level only if CMS determines that a mitigating factors request would not be approved. In other words, a mitigating factors request would be processed before citing a center for a deficiency at a Condition level. Response: We are not adopting this recommendation for a number of important reasons. First, the mitigating factors provision is intended to enable CMS to recognize special situations so that we may calibrate enforcement actions appropriately. The provision is not intended to remove the possibility of enforcement or the likelihood of enforcement if appropriate corrections are not made. Second, we believe the mitigating factors and SIA processes have been quite successful in promoting improved patient outcomes as a direct result of the full hospital alignment in support of each involved transplant center. Based on the past 7 years of experience with programs that have had substandard outcomes, we believe that strong wholeinstitution support has been generated directly in response to the deficiency citation and accompanied by clear potential for enforcement action against a program that has had substandard performance. We note that most transplant programs maintain excellent outcomes continuously and are not cited for noncompliance with CMS outcome expectations. Another group of transplant programs temporarily exceed the outcomes thresholds based on a single SRTR report, but soon manifest outcomes within the acceptable tolerance limits in the next report. Such programs may be cited by CMS at a Standard level, rather than the Condition level, because the results are evident in only a single SRTR report. A Standard level citation requires corrective action but does not require mitigating factors approval because a Standard level citation by itself does not put the program on a schedule for termination of Medicare participation. A smaller third group of transplant programs experience long-term problems and may be cited by CMS at the Condition level, but engage with the OPTN and soon recover. These PO 00000 Frm 00484 Fmt 4701 Sfmt 4700 programs may apply for approval based on mitigating factors, but are more likely than other applicants to be approved without greater involvement with CMS. An even smaller group of programs are cited by CMS at the Condition level and are eventually approved based on mitigating factors, but only after an extended period of time and a more involved regimen of quality improvement through an SIA. CMS’ policy has been to cite at the Condition level only if the tolerance limits are exceeded in the most recent SRTR report and in at least one other SRTR report within the past five SRTR reports. Although the number and percentages vary depending on the particular SRTR reports involved, we generally find that approximately 9 to 11 percent of the programs do not meet the CMS outcome thresholds in any one particular SRTR report. However, only approximately 3 to 4 percent of the programs tend to fail to meet the outcomes requirement in the most recent SRTR report and in at least one other report of the most recent 5 reports. This number is further reduced during the 210-day period that we permit for consideration of a mitigating factors request by CMS. The 210-day period allows sufficient time for a sixth SRTR report to appear and perhaps show evidence of outcomes that would remove the deficiency and remove the need for mitigating factors approval. As a result of the way we implemented the citation and mitigating factors processes, those programs cited by CMS at the Condition level tend to be programs that generally have more extensive issues for which full hospital alignment and support are most needed, or programs that, for a variety of reasons, have been immune to prior efforts to improve outcomes. We believe we have structured CMS enforcement actions in a manner that permits considerable time for a transplant program to take action on its own, and allows many programs to engage successfully with the OPTN for timely resolution. However, for the residual, smaller number of programs that have not been so successful, our experience indicates that it is questionable whether the hospital alignment and other actions needed to achieve substantial and sustainable improvement would have occurred without the clear prospect that Medicare participation might soon end. The fact that many of the transplant programs cited at the Condition level had already been engaged with the OPTN in a peer review process without timely improvement in outcomes, lends credence to the belief that the clear, and potentially imminent, ending of E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Medicare participation has been the stimulant that eventually brought the various departments of the hospital together to finally achieve the results that had eluded the many dedicated individuals who had previously labored to achieve better outcomes. Third, only two situations involved mitigating factors where approval was based on natural disasters, two situations involved extensive use of innovative practices, and a small number of situations involved clinical experience. The remainder, constituting the vast preponderance of mitigating factors requests we have received, involved transplant programs whose patient or graft survival outcomes exceeded the tolerance limits in the CMS regulation for programmatic reasons. When such cases have been approved, the approval has been based on recovery and improvement in outcomes during the extended time period (210 days) that CMS permits for mitigating factors consideration or the even longer time period that CMS permits under an SIA. We believe that eventual approval of a mitigating factors request should not be construed to imply that the substandard outcomes never occurred, or to obscure the history or facts that led to the recovery efforts. We regard such history as important matters of public record. Transplant programs that may be approved based on mitigating factors due to confirmed innovative practice may be an area for which the commenter’s suggestion has merit, and we will give further consideration to this area for potential future action. Unlike mitigating factors approval that is made pursuant to recovery from a period of substandard outcomes or even natural disaster, approval of mitigating factors due to innovative practice may indicate the absence of a deficiency in the first place. We will be pleased to continue a dialogue with the transplant community regarding these issues and to consider other approaches to ensure that a strenuous improvement effort, such as that which is required in an SIA, is not misinterpreted. 1. Expansion of Mitigating Factors List, Content, and Timeframe In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that the regulations at §§ 488.61(a)(4) and (c)(4) provide three specific mitigating factors for review by CMS when determining whether a transplant center can be approved or re-approved, respectively, based on mitigating factors. These mitigating factors are: (1) The extent to which outcome measures are met or VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 exceeded; (2) the availability of Medicare-approved transplant centers in the area; and (3) extenuating circumstances that may have a temporary effect on meeting the CoPs. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to move the listing of mitigating factors from paragraphs (a)(4)(i) through (a)(4)(iii) and (c)(4)(i) through (c)(4)(iii) to new proposed paragraphs (f), (g), and (h) under § 488.61, and to include additional factors under these three new proposed paragraphs that may be reviewed in addition to the existing three factors. We proposed to move existing paragraphs (a)(4)(iv) and (c)(4)(iv) to the proposed new paragraph (g)(2). We also proposed to provide clarification of the existing three mitigating factors and the conditions under which they would apply. Finally, we proposed to revise the preexisting paragraphs (a)(4) and (c)(4) of § 488.61 to include crossreferences to the new proposed paragraphs (f), (g), and (h). We note that an administrative rule we published as a final rule in the Federal Register on May 12, 2014 (79 FR 27106) within days of publication of the FY 2015 IPPS/LTCH PPS proposed rule renumbered the elements of § 488.61(c) and added § 488.61(c)(3)(v) and made other amendments to this section. Specifically, the May 12, 2014 administrative rule removed § 488.61(a)(7), revised the introductory text of paragraphs (c) and (c)(1), and revised paragraph (c)(1)(ii). In addition, the final administrative rule removed paragraph (c)(2) and redesignated paragraphs (c)(3), (c)(4), and (c)(5) as paragraphs (c)(2), (c)(3), and (c)(4), respectively. Finally, the final administrative rule revised the text of newly designated paragraphs (c)(2), (c)(3)(i), and (c)(3)(ii), added a new paragraph (c)(3)(v), and revised paragraph (e). As a result of these changes, in this final rule, we are replacing the renumbered paragraphs of § 488.61(c)(3)(i) through (c)(3)(iii) of the administrative final rule as § 488.61(f)(1)(i), (f)(1)(ii), and (f)(1)(iii), respectively. The renumbered paragraph § 488.61(c)(3)(iv) is moved to the new § 488.61(g)(2). We also are incorporating the new paragraph that was added in the final administrative rule (§ 488.61(c)(3)(v)) as the new paragraph § 488.61(f)(1)(iv). We note that in all subsequent references involving § 488.61(c), we use the regulatory citations as revised by the May 12, 2014 final rule (79 FR 217060) and described above. Under proposed new paragraph § 488.61(f)(1), we proposed to move and relist the three mitigating factors currently under both PO 00000 Frm 00485 Fmt 4701 Sfmt 4700 50337 paragraphs (a)(4)(i) through (a)(4)(iii) and paragraphs (c)(3)(i) through (c)(3)(iii). We further proposed to expand the mitigating factors that CMS may consider by adding more description to those factors, as well as by adding new factors that may be reviewed. We also proposed to specify the procedures and timeframes for transplant centers to request consideration for approval based on mitigating factors. Specifically, in proposed new paragraph (f)(1), we proposed to specify the mitigating factors, except for situations of immediate jeopardy, as described below. • The extent to which outcome measures are not met or exceeded (existing paragraphs (a)(4)(i) and (c)(3)(i); proposed paragraph (f)(1)(i)). • Availability of Medicare-approved transplant centers in the area (existing paragraphs (a)(4)(ii) and (c)(3)(ii); proposed paragraph (f)(1)(ii)). • Extenuating circumstances (for example, natural disaster) that may have a temporary effect on meeting the CoPs (existing paragraphs (a)(4)(iii) and (c)(3)(iii); proposed paragraph (f)(1)(iii)). • Program improvements that substantially address root causes of graft failures or patient deaths and that have been implemented and institutionalized on a sustainable basis (proposed new paragraph (f)(1)(iv)). • Recent patient and graft survival data to determine if there is sufficient clinical experience and survival for CMS to conclude that the program is in compliance with CMS requirements, except for the data lag inherent in the reports from the SRTR (proposed new paragraph (f)(1)(v)). • Extensive use of innovative transplantation practices relative to other transplant programs, such as a high rate of transplantation of individuals who are highly sensitized or children who have undergone the Fontan procedure, where CMS finds that the innovative practices are supported by evidence-based, published research or nationally recognized standards or Institutional Review Board (IRB) approvals, and the SRTR riskadjustment methodology does not take the relevant key factors into consideration (proposed new paragraph (f)(1)(vi)). • The program’s performance, based on the OPTN method of calculating patient and graft survival, is within the OPTN’s thresholds for acceptable performance and does not flag OPTN performance review under the applicable OPTN policy (proposed new paragraph (f)(1)(vii)). E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50338 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Under proposed new paragraph (f)(2), we proposed to include details for the content of the request for consideration of mitigating factors, based on examples that have proven to be most useful in considering successful mitigating factors requests. Specifically, we proposed that a request for consideration of mitigating factors include sufficient information to permit an adequate review and understanding of the transplant program, the factors that have contributed to outcomes, program improvements or innovations that have been implemented or planned, and, in the case of natural disasters, the recovery actions planned. Examples of information to be submitted with each request could include, but are not limited to, the following: (i) The name and contact information for the transplant hospital and the names and roles of key personnel of the transplant program; (ii) The type of organ transplant program(s) for which approval is requested; (iii) The CoPs that the program failed to meet, and with respect to which the transplant center is requesting CMS’ review of mitigating factors; (iv) The rationale and relevant supporting evidence for CMS’ review must include, but not be limited to— Æ Root Cause Analysis of patient deaths and graft failures, including factors the program has identified as likely causal or contributing factors for patient deaths and graft failures; Æ Program improvements or innovations (where applicable) that have been implemented and improvements that are planned; Æ Patient and donor/organ selection criteria and evaluation protocols, including methods for pre-transplant patient evaluation by cardiologists, hematologists, nephrologists, and psychiatrists or psychologists, to the extent applicable; Æ Organizational chart with full-time equivalent levels, roles, and structure for reporting to hospital leadership; Æ Waitlist management protocols and practices relevant to outcomes; Æ Pre-operative management protocols and practices; Æ Immunosuppression/infection prophylaxis protocols; Æ Post-transplant monitoring and management protocols and practices; Æ Quality Assessment and Performance Improvement (QAPI) Program meeting minutes from the most recent four meetings and attendance rosters from the most recent 12 months; Æ Quality dashboard and other performance indicators; VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Æ Recent outcomes data for both patient survival and graft survival; and Æ Documentation of whether the program has engaged with the OPTN to review program outcomes, the status of any such review, and any steps taken to address program outcomes in accordance with the OPTN review. Under proposed new paragraph (f)(3), we proposed to specify a timeline for the transplant program to submit a request for mitigating factors and to make clear that, for requests related to clinical experience or outcomes, the program has additional time within which to submit supporting information. Specifically, we proposed that within 10 days after CMS has issued formal written notice of a Condition-level deficiency to the program, CMS must receive notice of the program’s request to seek consideration of mitigating factors. CMS would require that all information necessary for consideration be received within 30 days of CMS’ initial notification for any deficiency, except a deficiency based on insufficient clinical experience or outcomes; and within 120 days of CMS’ written notification for a deficiency based on insufficient clinical experience or outcomes. Failure of a transplant program to meet these timeframes may be the basis for denial of requests for consideration based on mitigating factors. Comment: One commenter stated that mitigating factors consideration should not be available for either initial applications or for deficiencies that involve process requirements (as opposed to clinical experience or outcomes). Examples of process requirements include the requirement to match donor and recipient blood types, ensure informed consent, or engage in multi-disciplinary planning. The commenter suggested that if the mitigating factors provision applied to process CoPs, CMS should clarify the circumstances under which a program ought to apply for mitigating factors rather than submit a plan of correction. The commenter suggested that process CoPs be handled through plans of correction rather than through mitigating factors. Response: We agree that all process CoPs should be handled through the plan of correction process and that only a deficiency involving data submission, clinical experience, or outcomes should involve both the required plan of correction and an optional mitigating factors request. A transplant program cited for a process CoP deficiency (or any deficiency) would not risk termination of its Medicare participation without a prior PO 00000 Frm 00486 Fmt 4701 Sfmt 4700 opportunity to submit a plan of correction and demonstrate that the deficiency has been removed in a timely manner. Since the time the CMS transplant regulation became effective in 2007, every instance in which a program was cited for a process CoP has been successfully remedied by timely action on the part of the transplant program. As a result, no transplant program has had its Medicare participation terminated as a result of failure to comply with a process CoP. We agree that the use of mitigating factors in the case of process deficiencies is not only unnecessary, but is also confusing to transplant centers and may interfere with the prompt remediation of those process deficiencies. In the final regulation, at § 488.(61)(f)(1) and elsewhere, we therefore limit the mitigating factors provision to deficiencies cited for noncompliance with the data submission, clinical experience, or outcomes requirements specified at § 488.80 and § 488.82. We also agree with the commenter that, in the case of an initial application for Medicare certification, every transplant program should be in full compliance with all process CoPs without needing to rely on mitigating factors consideration. However, we are retaining the ability of an initial applicant to request mitigating factors consideration with respect to the data submission, clinical experience, or outcomes requirements. We retain such ability because there may be situations where a transplant program has gone inactive beyond the time period allowed by CMS and is seeking Medicare reinstatement, or has withdrawn or lost Medicare participation due to substandard outcomes or lack of sufficient clinical experience, and is seeking reinstatement. In such situations, the latest available SRTR report may still show the program to have substandard outcomes or insufficient clinical experience for the 2.5 year retrospective period covered in the report, despite the fact that subsequent program improvements may have enabled greater clinical experience, or much better patient and graft survival with more recent data that meets the criteria for CMS approval based on mitigating factors. With the refinements discussed previously (wherein the mitigating factors provision will not apply to process CoPs), we believe that the retention of the mitigating factors provision for initial applicants is warranted. Comment: With regard to the expanded list of factors at § 488.61(f)(1) that CMS may consider, one commenter E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations suggested that not every request should necessarily be required to cover all of the factors listed. Instead, the factors covered should be tailored to the particular circumstances in question. Response: We agree with the commenter. The intent of § 488.61(f)(1) was not to require every application to address every possible factor, but to recognize CMS’ obligation to consider all of the listed factors, as applicable. We acknowledge the potential for confusion on this matter, and therefore, at § 488.61(f)(1) in this final rule, we have clarified that CMS will consider such mitigating factors as may be appropriate in light of the nature of the deficiency and circumstances involved. We would not necessarily expect a program that requests consideration on the basis of innovative practice, for example, to detail all the improvements that have been implemented. We would instead expect such a program to explain its innovative practice, the extent of such practice, the evidentiary basis that established it as an innovative practice, the particular cases in the applicable SRTR report that involved innovative practices, and similar factors applicable to the use and outcomes of innovative approaches. Comment: One commenter noted that a final rule published in the Federal Register on May 12, 2014 (79 FR 21706) made changes to § 488.61(c)(4), renumbering it as § 488.61(c)(3) and adding a factor at § 488.61(c)(3)(v), and specifying that CMS would consider program improvements that address root causes of patient deaths or graft failures if the improvements are supported by recent outcomes data that permit CMS to conclude that the program is in compliance with CMS outcomes expectations. In other words, in the May 12, 2014 final rule, CMS sought to clarify that both program improvements and recent data showing acceptable outcomes, together, comprise a single critical factor in our determination as to whether mitigating factors approval should be granted. CMS also sought to make clear that CMS will examine data that are more recent than the data in the latest available SRTR report that covers a retrospective 2.5 year period. The commenter observed that the subsequent regulation proposed in the FY 2015 IPPS/LTCH PPS proposed rule would move this provision to the new § 488.61(f)(1)(iv) and (f)(1)(v) as two separate considerations, making it unclear whether both improved data and substantial improvements are needed. The commenter asked that CMS clarify whether a program must demonstrate both substantial improvements and recent improved VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 outcomes data, or whether program improvements without better outcomes data would suffice. The commenter expressed the opinion that it should be sufficient for a program to demonstrate that it had implemented substantial program improvements on a sustainable basis, without having to provide recent outcomes data that allow CMS to conclude that the improvements have resulted in recent observed deaths or graft failures that are less than 150 percent of the risk-adjusted expected number 1 year after transplant. Several other commenters simply stated that these parts of the proposed regulation were not entirely clear and should be clarified. Response: We believe that program improvements and data showing improved outcomes subsequent to the program improvements are both needed and should be considered as a single two-sided but integrated consideration. We do not agree that mitigating factors should be approved without recent data that demonstrate actual improvements in outcomes in the manner described above. In our considerable experience with more than 129 mitigating factor applications, we have encountered many situations where program improvements were implemented on a sustainable basis, but outcomes either did not improve or did not improve sufficiently to bring the program into compliance within a reasonable period of time. Often the problem was that the improvements were well-warranted, but insufficient. Often the improvements did not address root causes, and the root causes did not become apparent until a multidisciplinary peer review team (organized under an SIA) conducted an onsite review and, together with the transplant program staff, gained new insights into systemic factors that contributed to substandard outcomes. In other cases, the program implemented improvements that were within the transplant program’s purview, but the hospital did not alter other aspects of hospital operations that were instrumental in affecting patient or graft survival. The transplant programs often were aware of other hospital-wide factors that were important, but were unable to effect change in those hospital-wide factors until the hospital agreed to enter into an SIA with CMS. Examples of hospital-wide factors include, but are not limited to, the working relationships between the transplant center and the intensive care unit (ICU), availability of transplanttrained specialty physicians (such as in cardiology, hepatology, anesthesiology, or nephrology), adequacy of staffing PO 00000 Frm 00487 Fmt 4701 Sfmt 4700 50339 levels, and information technology support, among others. With regard to the requested clarification for the new section § 488.61(f)(1)(iv) of the regulations, we note that the SRTR data, upon which the CMS outcomes expectations rely, cover a retrospective 2.5 year period. The data are further dependent on a 1year post-transplant period during which patient and graft survival are tracked. We appreciate that a transplant program may implement improvements and it will take time for the results of the improvements to become manifest in the SRTR data. This new section is intended to make clear that CMS will examine data that are more recent than the data in the latest available SRTR report. We will make a judgment as to the usability of those data depending on the number of transplants and the amount of post-transplant survival time available to be analyzed after major program improvements have been implemented. For example, a kidney transplant center may conduct 80 transplants per year, but have only 35 transplants that both occurred after the major program improvements were implemented and also have a sufficient post-transplant survival period (1-year post-transplant survival period) to constitute data that are reasonable to use in evaluating outcomes. It is not likely that the 35 transplant cases would be included in the latest available SRTR report. Nonetheless, this number of cases with such a post-transplant tracking period may be sufficient and would be considered by CMS. We acknowledge that, by looking at a time period shorter than the 2.5 year period of the SRTR reports and looking only at the observed/expected ratio, we may approve programs that seem to have improved outcomes d by chance. However, if there is a combined demonstration of implemented program changes and an improved survival ratio based on adequate numbers, we believe the risk is warranted. We also do not mean to imply that 35 cases is a magic number, but is illustrative for purposes of clarifying CMS’ intention. Therefore, we are finalizing these provisions at § 488.61(f)(1)(iv) as a combined factor (program improvements plus improved outcomes data). The final paragraph is consistent with the final regulation published as § 488.61(c)(3)(v) on May 12, 2014 (79 FR 27106), but now is moved to the new § 488.61(f)(1)(iv). Paragraph (f)(1)(iv) of § 488.61 in this new final rule now combines the two factors that were proposed in the FY 2015 IPPS/LTCH PPS proposed rule as § 488.61(f)(1)(iv) and (f)(1)(v). E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50340 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: With regard to the content of mitigating factors requests described in proposed § 488.61(f)(2), one commenter suggested that instructions related to specific information that must be included as part of a mitigating factors request should not be included in regulations but, instead, in CMS instructions that can be more easily modified as transplant centers and CMS gain additional experience with the types of information that may be useful. The commenter also expressed concern that it appeared that all the information was required of every request even if certain items were not relevant. Response: We appreciate the commenter’s concern. On the basis of 7 years of experience and review of 129 mitigating factors requests, we are confident that there are certain items of information that are almost always important in a mitigating factors request. We agree that not every item is needed in every request. Therefore, in this final rule, we reorganized into various categories the informational items for a mitigating factors request that were originally proposed in the new § 488.61(f)(2). In this final rule, the first category is comprised of items required for all requests (new paragraphs (f)(2)(i) through (f)(2)(iv)). Additional information required for requests pertaining to data submission, clinical experience, or outcomes is then described in new paragraph (f)(2)(v), versus additional material required of requests pertaining to innovative practice (new paragraph (f)(2)(vi)), versus requests based on natural disasters or emergencies (new paragraph (f)(2)(vii)). We believe that this reorganization makes it clear that information not pertinent to the request is not needed, while continuing to provide additional transparency and continuing to communicate (in advance of a request) the type of information that a transplant center should be prepared to provide if it wishes to request consideration of mitigating factors. Comment: With regard to the proposed content at § 488.61(f)(2), one commenter stated that it did not believe CMS has the authority to require a root cause analysis of patient deaths or graft failures that is specified by the program as a patient safety work product (PWSP) and submitted to (or received from) a Patient Safety Organization (PSO). Further, the commenter stated that to require such disclosure may place a transplant center in a situation in which it must choose between foregoing a mitigating factors review, which could keep the center open, or face fines under the Patient Safety and Quality Improvement Act of 2005 (PSQIA). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: By way of background, the PSQIA amended Title IX of the Public Health Service Act (PHSA) (42 U.S.C 299 et seq.). Section 921(7)(A) of the PSQIA defines ‘‘patient safety work product’’ (PSWP) as including ‘‘any data, reports, records, memoranda, analyses (such as root cause analyses) . . . which are assembled or developed by a provider for reporting to a patient safety organization and are reported to a patient safety organization.’’ Section 921(7)(B) of the PSQIA clarifies that PSWP does not include certain information, such as a patient’s medical record (section 921(7)(B)(i) of the PSQIA) or ‘‘information that is collected, maintained, or developed separately, or exists separately, from a patient safety evaluation system . . .’’ (section 921(7)(B)(ii) of the PSQIA). Section 921(7)(B)(iii) of the PSQIA further specifies that ‘‘nothing in this part shall be construed to limit . . . the reporting of information to a Federal, State, or local governmental agency for public health surveillance, investigation, or other public health purposes or health oversight purposes.’’ In addition, section 922(c)(1)(C) of the PSQIA provides for an exception to the privilege and confidentiality restrictions for ‘‘disclosure of identifiable patient safety work product if authorized by each provider identified in such work product.’’ We appreciate the commenter’s concerns. However, after 7 years and 129 mitigating factors reviews, we have not experienced this problem in relation to organ transplant centers. This may be because adequate root cause analyses of peri- and post-transplant deaths or graft failures require such specialized expertise that the more generalized patient safety expertise of PSOs is less likely than in other areas to be the resource to which transplant centers turn. We also note that, in certain other types of providers where the PSQIA has arisen as an issue, the providers have often taken advantage of the exceptions in the PSQIA noted previously (such as the exceptions at section 921(7)(B)(ii) or section 921(7)(B)(iii)) of the PSQIA). CMS does not require submission of a PSWP, and hospitals have choices with regard to what to place in a patient safety evaluation system as a PSWP, to what extent the hospital will use any of the exceptions provided in the PSQIA as noted above, and to what extent the hospital will seek to demonstrate compliance with the CoPs through the provision of other information. With regard to root cause analyses, rather than being a cause of Medicare termination, we have found root cause PO 00000 Frm 00488 Fmt 4701 Sfmt 4700 analyses to have been among the most important considerations in CMS decisions to grant mitigating factors approval that allowed continued Medicare participation for most of the requests we have received. In many cases, the analyses demonstrated the program’s definite capability to identify root causes. In other cases, the analyses demonstrated the program’s clear inability to conduct adequate root cause analyses, but CMS review of the analyses (by clinical and quality improvement personnel, both in-house and contracted) allowed us to gain sufficient insights, particularly with respect to areas that might be further investigated, that we determined an SIA and more time would be warranted for the transplant program to make improvements. Rather than constituting an expectation that leads to closure of a transplant program, our experience of the root cause analyses has been that they prevented many programs from termination of Medicare participation and from experiencing risk that such termination might have led to closure. Finally, the regulations at § 482.21 and § 482.96 oblige each hospital and transplant program to maintain an effectively functioning quality assessment and performance improvement system. A key expectation is that every adverse event be identified and investigated and the results of the investigation used to prevent recurrence. In the case of patient deaths and graft survival, this means root cause analyses to identify systemic factors that may have caused or contributed to the adverse events. The ability of a transplant program to demonstrate that it has adequately conducted such analyses, used the results to prevent recurrence, and has the capability to continue to do so is fundamental to the program’s demonstration of compliance required by CMS regulations. Therefore, we are retaining in this final regulation the language we originally proposed. Comment: One commenter objected to the provision at proposed § 488.61(f)(2)(iv)(L) that each program must describe whether it has engaged with the OPTN to review program outcomes, the status of any such review, and any steps taken to address program outcomes pursuant to the OPTN review. The commenter believed that this provision would unnecessarily mandate disclosure of the institution’s involvement with the peer review function of the OPTN under 42 CFR 121.10(b). The commenter stated that assurances of confidentiality and protection from disclosure are the foundations of effective medical peer E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations review processes. The commenter suggested that the proposed paragraph be modified to specify only submission of the steps taken by the program to address program outcomes. Another commenter suggested that the proposed language at § 488.61(f)(1) be expanded to include consideration of whether the Membership and Professional Standards Committee (MPSC) of the OPTN has reviewed the program’s performance and found it acceptable. Response: We appreciate the tremendous value of the OPTN peer review process and its statutory responsibilities under the National Organ Transplant Act (Pub. L. 98–507). We believe that the MPSC process of the OPTN may often result in improved outcomes, thereby rendering a CMS Condition-level deficiency citation unnecessary, or at least setting the stage for approval of a mitigating factors request during the extended period of time CMS allows for consideration of such requests. While we had proposed the regulatory language in order to further strengthen CMS coordination with the OPTN, we also appreciate the nature of the peer review process itself, as described by the commenter. Therefore, in this final rule, we have removed reference to the OPTN peer review process that was originally proposed at § 488.61(f)(2)(iv)(L). We note that programs may still voluntarily disclose any engagement with the MPSC of the OPTN. If the program is entering into an SIA with CMS, the program may also wish to disclose whether the OPTN has already conducted a recent onsite peer review of the program so that CMS may consider if an adjustment to the SIA peer review is warranted, or it may choose to describe any recent onsite peer review without reference to whether the onsite review was conducted under OPTN auspices or not. Comment: With regard to the timelines for submitting information that we proposed at § 488.61(f)(3), several commenters suggested that more than the proposed 10 days be permitted for a program to notify CMS of an intent to apply for mitigating factors consideration, and 30 days to submit written documentation when the pertinent deficiencies do not involve citation for clinical experience or outcomes. These commenters suggested that 20 days and 45 days, respectively, should be permitted. Response: With respect to mitigating factors, the 10-day timeline only obliges programs to notify CMS of the program’s intent to request such consideration, and no information is required beyond a simple statement of intent. We regard the 10-day timeframe for submission of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 a simple notice of intent to be a reasonable expectation. With the modification in this final discussed above (in which the mitigating factors provision is limited to deficiencies of data submission, clinical experience, or outcomes), the 30-day time period is no longer necessary. We already proposed to permit a longer period of time (120 days) for submission of the application when the deficiency is for data submission, clinical experience, and outcomes. Therefore, we are finalizing the rule with the proposed 10-day and 120-day timelines. We have removed the reference to the 30-day time period. In response to comments that suggested more time might be needed in some cases, we also added a provision in this final rule that permits CMS to extend the timelines for good cause. An example of a good cause would be a natural disaster, such as the 2013 Hurricane Sandy event, that may intervene in the middle of the applicable period. After consideration of the public comments we received, we are retaining the 10-day timeframe to notify CMS of an intent to apply for mitigating factors, reorganizing § 488.61(f)(1) and making it clear that not all factors pertain to every application, retaining the proposed § 488.61(f)(1)(iv) as a combined factor (program improvements plus improved outcomes data, consistent with the May 12, 2014 final regulation (79 FR 27106)) but with the paragraph moved to the new and clarified § 488.61(f)(1)(iv), and retaining the reorganized content of § 488.61(f)(2) except for the removal of references to a transplant program’s engagement with the OPTN. 2. Results of Mitigating Factors Review Under proposed new § 488.61(g), we proposed to clarify and expand on the description of the mitigating factors review process and results. Under existing regulations, a transplant center seeking initial approval or re-approval of Medicare participation based on the presence of mitigating factors is required to submit a formal written request to the CMS Central Office, as described earlier. If there are no deficiencies that constitute immediate jeopardy to a patient’s health and safety, in limited circumstances, CMS may approve continued Medicare participation based on mitigating factors. However, where a transplant program demonstrates that it is making significant progress toward correction and program improvement, but does not yet qualify for approval based on mitigating factors, we believe there may be merit, in many cases, in temporarily extending the effective date of the PO 00000 Frm 00489 Fmt 4701 Sfmt 4700 50341 program’s Medicare participation termination in exchange for a hospital’s agreement to engage in a significant and directed regimen of further quality improvement under a Systems Improvement Agreement (SIA). As we noted above, programs that have entered into SIAs have demonstrated significant improvements. Therefore, we proposed to provide an explicit procedure in the regulations at proposed new § 488.61(g)(1)(iii) for CMS to offer an SIA and hold in abeyance a final decision on the mitigating factors request until the SIA period has ended. Proposed new paragraphs (g)(1)(i), (g)(1)(ii), and (g)(1)(iii) outline the three outcomes of CMS mitigating factors decisions: (i) Initial approval or reapproval of a program’s Medicare participation based upon consideration of mitigating factors; (ii) denial of the program’s request; or (iii) offer of a timelimited SIA when a transplant program has waived its appeal rights, has committed to substantial program improvements that address root causes and are institutionally supported by the hospital’s governing body on a sustainable basis, and has requested more time to design or implement additional improvements or demonstrate compliance with CMS outcome requirements. Under the proposed new paragraph (g)(1)(iii), we would clarify that, during the SIA, CMS holds the mitigating factors request in abeyance and makes a final decision to approve or deny Medicare participation when the SIA is ended, based on the results of the program’s performance of the SIA. Existing regulations state that CMS will not approve any program with a Condition-level deficiency. However, CMS could approve a program with a Standard-level deficiency upon receipt of an acceptable plan of correction. A Condition-level deficiency represents a serious classification and, unless the deficiency is remedied, precludes a provider from participating in Medicare. A Standard-level deficiency represents a less serious deficiency, such as one in which just a small part of a CoP is found to be out of compliance. We proposed to move this to the proposed new paragraph § 488.61(g)(2). We did not receive any public comments on this proposal and, therefore, are finalizing it as proposed. 3. System Improvement Agreements (SIAs) In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27977), we proposed to add proposed new paragraph (h) to § 488.61 to set forth the purpose, intent, and contents of an SIA E:\FR\FM\22AUR2.SGM 22AUR2 50342 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV and the timeframes for an approved SIA with CMS. a. Purpose and Intent of an SIA Based on information and documentation provided by the transplant program at the time of its request, CMS may determine that, despite a deficiency or deficiencies, the transplant center has made substantial progress, has full support of the hospital governing body, and is on a quality improvement path that promises to improve prospects for patient survival. In such cases, we exercise our limited discretion to offer the transplant program the opportunity to enter into an SIA. In the absence of a written request for consideration on the basis of mitigating factors, CMS would otherwise proceed with the proposed date of termination based on noncompliance with one or more of the CoPs. In the proposed regulation, we clarified and specified the terms for such SIAs. CMS may offer an SIA to a transplant program if the transplant center can show that it has identified, or is actively improving its identification of, the root causes of its noncompliance and if the transplant center has initiated actions to correct those root causes. However, if we conclude that a transplant center does not qualify for initial approval or re-approval based on mitigating factors, the proposed rule would explicitly provide CMS with the option of offering a time-limited SIA to those transplant centers that have demonstrated progress in making substantive program improvements to address root causes of deficient outcomes, agree to undertake a structured regimen of further quality improvement, and agree to waive their appeal rights. In some instances, a voluntary period of inactivity of the transplant center is warranted, or a period of inactivity may be required by CMS as a condition of an SIA approval, as a requirement of initiating an SIA for a specified period, or until certain milestones are achieved. During the SIA period, CMS’ oversight and enforcement authority continue and CMS may conduct routine unannounced surveys, complaint investigations, and/or terminate the transplant center’s participation in the Medicare program if there is not substantial compliance with Federal requirements under 42 CFR Part 482 or if the program fails to follow the terms of the SIA. In consideration for the opportunity to continue to participate in the Medicare program under an SIA during the time that structured improvements and corrections are made, despite having been found to be VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in noncompliance with the requirements, a transplant center would be required to waive any appeal rights that it may have, either administratively or judicially, if CMS ultimately terminates Medicare participation or denies initial approval of the transplant center. We proposed that such a waiver applies, regardless of whether revocation or termination of approval/ re-approval occurs due to a finding that the hospital failed to fulfill the terms of the SIA or due to the deficiency findings that the SIA was designed to address, pursuant to CMS’ enforcement authority under the regulations. A transplant center’s approval to operate as a Medicare-approved transplant center does not guarantee any subsequent re-approvals and may be time-limited. The transplant center must submit a separate request for consideration of mitigating factors, including updated supporting documentation each time a CMS review (generally on a 3 to 5 year cycle) or complaint investigation determines that the transplant center does not meet one or more of the data submission, clinical experience, and outcomes requirements, or other CoPs. At such time, we would review any prior mitigating factors approval to determine if the circumstances that originally warranted approval would still apply. However, in the case of past mitigating factors approval based on innovative practice, CMS may seek information in advance of a recertification survey to determine if the reasons for past approval still prevail and, in such a case, CMS may consider mitigating factors concomitantly with the recertification survey. We did not receive any public comments in this policy and, therefore, finalizing it as proposed. b. Description and Contents of an SIA The SIA is a binding agreement between CMS and the hospital within which a transplant center operates. A transplant center, in turn, may have one or more organ-specific programs, such as a heart, kidney, pancreas, liver, or lung transplant program. Each SIA is focused on a particular organ transplant program. The SIA is a plan for a series of actions, activities, and goals that provide opportunities for the hospital and transplant center to conduct internal improvement analysis and action, and engage external experts to ensure that the transplant center is in compliance with evidence-based standards and advances in the field that would optimize the care provided to patients. PO 00000 Frm 00490 Fmt 4701 Sfmt 4700 Through an SIA, CMS is able to offer transplant centers additional time to achieve compliance with the CoPs through a structured and monitored process. In particular, the use of the formal SIA process reflects CMS’ recognition that it may sometimes require more than the usual time to correct the 1-year post-transplant patient or graft survival and have the results of such improvement become manifest in the tracking data, or to develop and implement a plan to correct low-volume performance rates. We generally do not expect to use an SIA in cases of noncompliance with other CoPs, although we do not preclude such a possibility if highly unusual circumstances are present. The SIA process (discussed in more detail below) has demonstrated effectiveness in improving patient and graft survival. An important measure of outcome is the extent to which observed patient deaths 1 year after transplant compare with the risk-adjusted expected number of deaths or graft failure for a particular transplant program. The SRTR risk adjustment methodology (used to calculate the expected numbers) takes into consideration the organs transplanted and the characteristics of the donors and recipients (for example, factors that have a bearing on the risk to patient or graft survival, such as diabetes, hypertension, advanced age, or cold ischemic time of the organ to be transplanted, among others). For example, the national number of expected deaths 1 year after transplant for all transplant centers in the United States is 1.0. A transplant center that had twice the expected number of deaths would have a standardized mortality ratio (SMR) of 2.0. As of August 2013, adult kidney transplant programs cited by CMS for substandard outcomes and placed on a Medicare enforcement track, for which there was a 2-year post-CMS survey tracking period (N=15), improved their average SMR for 1-year post-transplant patient survival performance rate from 2.05 to 1.17 (close to the 1.0 national average). The transplant centers under an approved SIA improved their outcomes from an average SMR ranging from 2.41 before the SIA to 0.76 after the SIA (much better than the national average). Transplant centers not cited for substandard kidney transplant outcomes improved outcomes slightly from 0.89 to 0.84.244 244 Hamilton, Thomas E., Regulatory Oversight in Transplantation: Are Patients Really Better Off, Curr Opin Organ Transplant 2013, 18:203–209. Available at: at https://www.co-transplantation.com. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations In proposed new § 488.61(h), we proposed to explicitly incorporate and specify elements that have been important to the successful use of the SIA structure. We proposed to define an SIA as a binding agreement, entered into voluntarily by the hospital and CMS, through which CMS extends the effective date of a prospectively scheduled termination of the center’s Medicare participation (thereby permitting the program additional time to achieve compliance with the CoPs), contingent on the hospital’s agreement to participate in a structured regimen of quality improvement activities and subsequent demonstration of improved outcomes. In some cases, transplant programs have entered a period of inactivity—voluntarily, or imposed as a condition of the SIA. Under proposed new § 488.61(h)(1)(i) through (h)(1)(x), we proposed that in the SIA, in exchange for additional time to initiate or continue activities to achieve compliance with the CoPs, the transplant center must agree to a regimen of specified activities, including (but not limited to) all of the following: • Patient notification about the degree and type of noncompliance by the program, an explanation of what the program improvement efforts mean for patients, and financial assistance to defray the out-of-pocket costs of copayments and testing expenses for any wait-listed individual who wishes to be listed with another program (proposed paragraph (h)(1)(i)). • An external independent peer review team that conducts an onsite assessment of program policies, staffing, operations, relationship to hospital services, and factors that contribute to program outcomes; that suggests quality improvements the hospital should consider; that provides both verbal and written feedback to the hospital; and that provides a verbal debriefing to CMS. Neither the hospital nor the peer review team is required to provide a written report to CMS. The peer review team would include a transplant surgeon with expertise in the relevant organ type(s), a transplant administrator, an individual with expertise in transplant QAPI systems, a social worker or psychologist or psychiatrist, and a specialty physician with expertise in conditions particularly relevant to the applicable organ types(s) such as a cardiologist, nephrologist, or hepatologist. Except for the transplant surgeon, CMS may permit substitution of an individual with one type of expertise for another individual who has expertise particularly needed for the type of challenges experienced by the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 program, such as substitution of an infection control specialist in lieu of, or in addition to, a social worker (proposed paragraph (h)(1)(ii)). • An action plan that addresses systemic quality improvements and is updated after the onsite peer review (proposed paragraph (h)(1)(iii)). • An onsite consultant whose qualifications are approved by CMS, and who provides services for 8 days per month on average for the duration of the agreement, except that CMS may permit a portion of the time to be spent offsite and may agree to fewer consultant days each month after the first 3 months of the SIA (proposed paragraph (h)(1)(iv)). • A comparative effectiveness analysis that compares policies, procedures, and protocols of the transplant program with those of other programs in areas of endeavor that are relevant to the transplant center’s current quality improvement needs (proposed paragraph (h)(1)(v)). • Development of increased proficiency, or demonstration of current proficiency, with patient-level data from the SRTR and the use of registry data to analyze outcomes and inform quality improvement efforts (proposed paragraph (h)(1)(vi)). • A staffing analysis that examines the level, type, training, and skill of staff in order to inform transplant center efforts to ensure the engagement and appropriate training and credentialing of staff (proposed paragraph (h)(1)(vii)). • Activities to strengthen performance of the Quality Assessment and Performance Improvement (QAPI) Program to ensure full compliance with the requirements at § 482.96 (proposed paragraph (h)(1)(viii)). • Monthly (unless otherwise specified) reporting and conference calls with CMS regarding the status of programmatic improvements, the results of the actions, data, reports, or other deliverables specified in the SIA, and regarding the number of transplants, and the death and graft failures that occur within 1 year post-transplant (proposed paragraph (h)(1)(ix)). • Additional or alternative requirements specified by CMS, tailored to the transplant program type and circumstances (proposed paragraph (h)(1)(x)). Comment: One commenter suggested that less detail be provided with regard to the content of an SIA in favor of more flexibility for CMS and transplant centers. Another commenter observed that the SIA content was robust and could conceivably constitute a best practice for transplant centers. The commenter also noted that, despite the PO 00000 Frm 00491 Fmt 4701 Sfmt 4700 50343 high specificity of the required activities, proposed language at § 488.61(h)(1)(x) allowing CMS to specify alternate requirements, provides the flexibility needed if there are elements a transplant program cannot meet due to circumstances beyond its control. Response: We agree that the requirements are reasonably robust and specific. The SIA content was developed after early experiences in 2007–2010 with lesser requirements that failed to generate the results needed for a number of programs to generate and sustain improvement outcomes. We then entered into a number of SIAs that had additional requirements which we did not include here, either because they proved unnecessary in many cases or caused excessive risk avoidance on the part of some transplant centers. The remaining requirements we proposed have now been well-tested in 35 SIAs so far, with exceptional success. We agree with the commenter who observed that the language proposed at § 488.61 (h)(1)(x) allows CMS with advisable flexibility to tailor alternate requirements when necessary. In response to the concern of the first commenter, however, in this final rule, we expanded § 488.61(h)(1)(x) to allow CMS the ability to waive certain enumerated elements of the SIA (rather than requiring alternates) if the agency finds that the program has already adequately fulfilled the task. Comment: Several commenters stated that transplant programs should not be obliged to waive their appeal rights in order to engage in an SIA with CMS. Response: We do not agree. Prior to any SIA, each transplant program will already have had full opportunity to appeal a prospectively scheduled termination of Medicare participation. Further, while a prospective termination deriving from all other CoP deficiencies must be resolved within 90 days, in the case of clinical experience or outcomes, CMS sets the prospective Medicare termination at 210 days and allows for consideration of mitigating factors. We provide for an SIA for certain programs when a program is making substantial progress but is not able to demonstrate compliance or qualify for outright approval of its mitigating factors request within the 210-day period. Under an SIA, CMS agrees to extend the prospectively scheduled Medicare termination date for up to another 12 months. Given these considerations, we do not agree that a program should be able to reach the end of an SIA, fail to demonstrate the improved outcomes necessary, and then appeal. We believe such an arrangement would only serve E:\FR\FM\22AUR2.SGM 22AUR2 50344 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations MedPAC recommendations for the IPPS for FY 2015 are addressed in Appendix B to this final rule. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653–7226, or visit MedPAC’s Web site at: https:// www.medpac.gov. c. Effective Period for an SIA Under proposed new § 488.61(h)(2), we proposed to specify that an SIA will be established for a 12-month period, subject to CMS’ discretion to determine if a shorter time period would suffice. At the hospital’s request and at CMS’ discretion, CMS may extend an SIA for up to one additional 6-month period. Comment: A number of commenters supported these time periods. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing § 488.61(h)(2) as proposed. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV to prolong the termination date and reduce incentives to correct deficiencies and achieve compliance promptly. Further, in our experience to date, only one transplant program has chosen to appeal a Medicare termination for any reason. The affected hospital involved expended considerable legal effort, over the course of a year, and did not prevail. In the succeeding year, the program applied for reinstatement and was eventually recertified for Medicare participation after making further improvements and demonstrating compliance with the CMS clinical experience and outcomes requirements. In short, in the case of an SIA, we provide for an exceptional extension of time and believe it is preferable for the available resources of all parties to be invested in the process of improving patient care rather than in a legal contest. If a program wishes to appeal, we suggest the appeal be made within the 60-day post-notification period permitted by regulation rather than pursue an SIA (because the SIA would require waiver of appeal rights). After consideration of the public comments we received, we are making a minor change at § 488.61(h)(1)(x) to allow some added flexibility to the SIA content, and are otherwise finalizing § 488.61(h)(1)(i) through (h)(1)(ix) as proposed. 1. Statutory Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28289 through 28294), we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). We discuss and respond to any XII. MedPAC Recommendations Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC’s recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary’s recommendations regarding MedPAC’s recommendations. We have reviewed MedPAC’s March 2014 ‘‘Report to the Congress: Medicare Payment Policy’’ and have given the recommendations in the report consideration in conjunction with the policies set forth in this final rule. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 XIII. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are now available on compact disc (CD) format. However, many of the files are available on the Internet at: https:// www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/ AcuteInpatientPPS/. We listed the data files and the cost for each file, if applicable, in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28288 through 28289). Commenters interested in discussing any data used in constructing the proposed rule and this final rule should contact Nisha Bhat at (410) 786–5320. B. Collection of Information Requirements PO 00000 Frm 00492 Fmt 4701 Sfmt 4700 public comments we received in the relevant sections. 2. ICRs for Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of the proposed rule and of this final rule discuss add-on payments for new services and technologies. Specifically, this section states that applicants for add-on payments for new medical services or technologies for FY 2016 must submit a formal request. A formal request includes a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement. In addition, the request must contain a significant sample of the data to demonstrate that the medical service or technology meets the high-cost threshold. We believe the burden associated with this requirement is exempt from the PRA under 5 CFR 1320.3(c), which defines the agency collection of information subject to the requirements of the PRA as information collection imposed on 10 or more persons within any 12-month period. This information collection does not impact 10 or more entities in a 12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, FY 2014, and FY 2015, we received 1, 4, 5, 3, 3, 5, 5, and 7 applications, respectively. We did not receive any public comments regarding this information collection. 3. ICRs for the Occupational Mix Adjustment to the FY 2015 Index (Hospital Wage Index Occupational Mix Survey) Section III.F. of the preamble of the proposed rule (79 FR 28066 through 28067) and this final rule discusses the occupational mix adjustment to the proposed and final FY 2015 wage index, respectively. While the preamble of these rules does not contain any new ICRs, we note that there is an OMB approved information collection request associated with the hospital wage index. Section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data at least once every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program in order to construct an occupational mix adjustment to the wage index. We collect the data via the occupational mix survey. The burden associated with this information collection requirement is E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the time and effort required to collect and submit the data in the Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned burden is subject to the PRA; it is currently approved under OCN 0938–0907. We did not receive any public comments regarding this information collection. 4. Hospital Applications for Geographic Reclassifications by the MGCRB Section III.H.2. of the preambles of the proposed rule (79 FR 28070 through 28075) and of this final rule discuss proposed and final changes to the wage index based on hospital reclassifications. As stated in that section, under section 1886(d)(10) of the Act, the MGCRB has the authority to accept short-term IPPS hospital applications requesting geographic reclassification for wage index and to issue decisions on these requests by hospitals for geographic reclassification for purposes of payment under the IPPS. The burden associated with this application process is the time and effort necessary for an IPPS hospital to complete and submit an application for reclassification to the MGCRB. The burden associated with this requirement is subject to the PRA. It is currently approved under OCN 0938–0573. We did not receive any public comments regarding this information collection. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 5. ICRs for Application for GME Resident Slots The information collection requirements associated with the preservation of resident cap positions from closed hospitals, addressed under section IV.J.3. of the preamble of this final rule, are not subject to the Paperwork Reduction Act, as stated in section 5506 of the Affordable Care Act. 6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program The Hospital IQR Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment (RHQDAPU) Program) was originally established to implement section 501(b) of the MMA, Public Law 108–173. This program expanded our voluntary Hospital Quality Initiative. The Hospital IQR Program originally consisted of a ‘‘starter set’’ of 10 quality measures. The collection of information associated with the original starter set of quality measures was previously approved under OMB control number 0938–0918. All of the information collection requirements previously approved under OMB control number 0938–0918 have been combined with the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 information collection request previously approved under OMB control number 0938–1022. We no longer use OMB control number 0938– 0918. We added additional quality measures to the Hospital IQR Program and submitted the information collection request to OMB for approval. This expansion of the Hospital IQR measures was part of our implementation of section 5001(a) of the DRA. Section 1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the DRA, requires that the Secretary expand the ‘‘starter set’’ of 10 quality measures that were established by the Secretary as of November 1, 2003, to include measures ‘‘that the Secretary determines to be appropriate for the measurement of the quality of care furnished by hospitals in inpatient settings.’’ The burden associated with these reporting requirements was previously approved under OMB control number 0938–1022. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated that, for the FY 2016 payment determinations and subsequent years updates, we sought OMB approval for a revised information collection request using the same OMB control number (0938–1022). The FY 2014 IPPS/LTCH PPS final rule (78 FR 50955) does not change the method for information collection requests. In a revised request for the FY 2017 payment determination, we will add the four claims-based measures and one chart-abstracted measure that we are finalizing in this final rule as proposed. The claims-based measures are: (1) Hospital 30-day, all-cause, unplanned, risk-standardized readmission rate (RSRR) following coronary artery bypass graft (CABG) surgery; (2) Hospital 30-day, all-cause, risk-standardized mortality rate (RSMR) following coronary artery bypass graft (CABG) surgery; (3) Hospital-level, riskstandardized 30-day episode-of-care payment measure for pneumonia; and (4) Hospital-level, risk-standardized 30day episode-of-care payment measure for heart failure. The chart-abstracted measure we are finalizing in this final rule is: Severe sepsis and septic shock: management bundle (NQF #0500). Because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe no additional information collection will be required from the hospitals for the four finalized claims based measures. However, we believe that the chart-abstracted measure will cause some additional burden. In addition, we believe there will be a reduction in the burden as a result of PO 00000 Frm 00493 Fmt 4701 Sfmt 4700 50345 removing 19 total measures in this rule.245 We note that we are not removing SCIP-Inf-4 Cardiac Surgery Patients with Controlled 6 a.m. Postoperative Blood Glucose as proposed. The measures we are removing are: (1) AMI–1 Aspirin at Arrival; (2) AMI–3 ACEI/ARB for left ventricular systolic dysfunction; (3) AMI–5 Beta-blocker prescribed at discharge; (4) AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI); (5) HF–2 Evaluation of left ventricular systolic function; (6) SCIP-Inf-1 Prophylactic antibiotic received within 1 hour prior to surgical incision; (7) SCIP-Inf-2 Prophylactic antibiotic selection for surgical patients; (8) SCIP Inf-3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery); (9) SCIP Inf-6 Appropriate hair removal; (10) SCIP-Inf-9 Postoperative urinary catheter removal on postoperative day 1 or 2 with day of surgery being day zero; (11) SCIP–VTE–2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/post-surgery; (12) SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period; (13) PN–6 Appropriate initial antibiotic selection; (14) STK–2 Antithrombotic therapy for ischemic stroke; (15) STK–3 Anticoagulation therapy for Afib/flutter; (16) STK–5 Antithrombotic therapy by the end of hospital day 2; (17) STK–10 Assessed for rehab; and (18) VTE–4 Patients receiving un-fractionated Heparin with doses/labs monitored by protocol, and (19) one structural measure: Participation in a systematic database for cardiac surgery. The numbers included in our finalized policy more accurately reflect the burden associated with the Hospital IQR Program than the estimates provided in our proposal. In the FY 2014 IPPS/LTCH PPS final rule, we estimated that the burden for the FY 2016 payment determination was 1,775 hours annually per hospital and 5.86 million hours across approximately 3,300 hospitals participating in the Hospital IQR Program (78 FR 50956). These estimates (at 78 FR 50956 for chart-abstracted measures) were based on the projected numbers of records to be abstracted for VTE and stroke. Using actual data from the Hospital IQR Program’s clinical data warehouse, we 245 We note that some of these measures are being removed as chart-abstracted measures, but are being retained as electronic clinical quality measures. We refer readers to section IX.A.2.b. of the preamble of this final rule for further discussion. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50346 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations have since revised these estimates downward to 1,309 hours per hospital and 4.3 million hours across all hospitals. We believe that there will be a reduction in burden for hospitals due to 14 of the 19 chart-abstracted measures that we are removing: (1) AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI); (2) HF–2 Evaluation of left ventricular systolic function; (3) SCIPInf-1 Prophylactic antibiotic received within 1 hour prior to surgical incision; (4) SCIP-Inf-2 Prophylactic antibiotic selection for surgical patients; (5) SCIP Inf-3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery); (6) SCIP-Inf-9 Postoperative urinary catheter removal on postoperative day 1 or 2 with day of surgery being day zero; (7) SCIP–VTE– 2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/postsurgery; (8) SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period; (9) PN–6 Appropriate initial antibiotic selection; (10) STK–2 Antithrombotic therapy for ischemic stroke; (11) STK–3 Anticoagulation therapy for Afib/flutter; (12) STK–5 Antithrombotic therapy by the end of hospital day 2; (13) STK–10 Assessed for rehab; and (14) VTE–4 Patients receiving un-fractionated Heparin with doses/labs monitored by protocol. The remaining four chart-abstracted measures that we are removing have been previously suspended from the program; therefore, their removal will not impact the reporting burden. The structural measure we are removing, Participation in a Systematic Database for Cardiac Surgery (NQF #0113), has an estimated burden of nearly zero hours; therefore, its removal will not result in a significant burden reduction. Therefore, for the FY 2017 payment determination, we estimate a net reduction in burden accounting for both the addition of one chart-abstracted measure, severe sepsis and septic shock: Management bundle (NQF #0500), as well as our removal of 19 measures (both chart-abstracted and structural) to be 160 hours annually per hospital. We estimate the total reduction in burden for chart abstraction and structural measures for the approximately 3,300 Hospital IQR Program-participating hospitals to be 0.5 million hours (please note the stated number appears to be off by 0.1 due to rounding). In addition, we intend to enroll up to 100 hospitals in a voluntary large scale VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 test of validation for electronic clinical quality measures for the Hospital IQR Program. We estimate a total burden of 16 hours for each participating hospital. We intend to reimburse hospitals $26 per hour for up to 16 hours for their participation in this test. Details regarding this reimbursement rate are as follows: • The labor performed can be accomplished by medical records and health information technology staff, with a mean hourly wage in general medical and surgical hospitals of $19.24.246 • Applying OMB Circular A–76, we assumed full fringe benefits of 36.25 percent, for a fully burdened labor rate of $26.25 per hour, rounding to $26 per hour, that accounts for the full cost of labor. The circular is available at https://www.whitehouse.gov/sites/ default/files/omb/assets/omb/circulars/ a076/a76_incl_tech_correction.pdf. For the FY 2017 payment determination, we also are encouraging hospitals to voluntarily submit up to 16 measures electronically for the Hospital IQR Program in a manner that would permit eligible hospitals to partially align Hospital IQR Program requirements with some requirements under the Medicare EHR Incentive Program. We estimate that the total burden associated with the electronic clinical quality measure reporting option will be similar to the burden outlined for hospitals in the EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). As described above for participation in the test of validation for electronic clinical quality metrics in the Hospital IQR Program, we believe an individual with commensurate skills will submit electronic clinical quality measures on behalf of the hospital at a rate of approximately $26.00 per hour. Therefore, we believe it will cost a hospital approximately $277.33 ($26.00 x 10 hours and 40 minutes) to report 16 electronic clinical quality measures. Additional information about the chart abstraction burden is detailed in section II.K. of Appendix A to this final rule. Previously, we required hospitals to provide 96 patient charts for validation per hospital per year, including 36 charts for HAI validation (with an average page length of 1,500) and 60 246 In May 2012, the hourly wage was $18.68. Occupational employment and wages, May 2012, 29–2071 Medical records and health information technicians. Bureau of Labor Statistics, https:// www.bls.gov/oes/2012/may/oes292071.htm, last accessed 3/31/2014. We increased this wage by 3.0 percent to account for inflation in the past 24 months. U.S. Inflation Calculator. https:// www.usinflationcalculator.com/inflation/currentinflation-rates/, last accessed 3/31/2014. PO 00000 Frm 00494 Fmt 4701 Sfmt 4700 charts for clinical process of care measure validation (with an average page length of 300) for a total of 72,000 pages per hospital per year. For the FY 2017 payment determination and subsequent years, we are reducing this requirement to 72 charts per hospital per year, including 40 charts for HAI validation and 36 charts for clinical process of care validation, for a total of 70,800 pages per hospital per year—a decrease of 1,200 pages per hospital per year. We reimburse hospitals at 12 cents per photocopied page (68 FR 67956 and 70 FR 23667). Therefore, the reduced burden is $144 per hospital for up to 600 hospitals. To support validation of four HAI measures for the FY 2017 payment determination and subsequent years, we estimate an annual burden of 43,200 hours. This estimate is based on up to 600 hospitals completing HAI Templates averaging 18 hours per quarter over 4 quarters. This burden is 10,800 hours more than that for the FY 2016 payment determination as finalized in the FY 2014 IPPPS/LTCH PPS final rule (78 FR 50822 through 50825) of 32,400 hours, because the HAI measures are to be validated for 4 quarters instead of 3 quarters. However, this change for the FY 2017 payment determination was previously finalized (78 FR 50822 through 50825). Using the estimates above, we estimate an overall reduction in burden from the FY 2016 estimate. We anticipate the reduction in total burden for hospitals to be 160 hours per hospital or 0.5 million hours for the FY 2017 payment determination, as compared to FY 2016, for reporting chart-abstracted and structural measures, completing forms, reviewing reports, and submitting validation templates across all hospitals. This burden estimate includes new, readopted, and previously finalized measures. The estimate excludes the burden associated with the NHSN and HCAHPS measures, both of which are submitted under separate information collection requests and are approved under separate OMB control numbers. The table below describes the hospital burden associated with the previously finalized Hospital IQR Program requirements, and shows how they changed based upon the policies finalized for the FY 2017 payment determination. The numbers included in our finalized policy more accurately reflect the burden associated with the Hospital IQR Program over the estimates provided in our proposal. The burden estimates in this final rule are the estimates for which we are requesting OMB approval. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50347 BURDEN IMPACT OF HOSPITAL IQR PROGRAM REQUIREMENTS Hospital IQR program requirement Number of hospitals impacted Burden per hospital for previously finalized requirements Burden per hospital for all requirements finalized in this rule (continuing, removed, added) Chart-abstracted and structural measures, forms .... Review reports for claims-based measures ............. Reporting of voluntary electronic clinical quality measures in place of chart-abstracted measures. Validation templates .................................................. Electronic clinical quality measure validation test .... Validation charts photocopying ................................. 3,300 ......................... 3,300 ......................... Unknown * ................. 1,291 hours ............... 4 hours ...................... ¥385 hours ............... 1,131 hours ............... 4 hours ...................... ¥425 hours ............... ¥160 hours 0 ¥40 hours Up to 600 ** ............... Up to 100 ** ............... Up to 600 .................. 72 hours .................... 0 ................................ $8,640 ....................... 72 hours .................... 16 hours .................... $8,496 ....................... 0 16 hours ¥$144 Net change in burden per hospital * This number is unknown at the time this table was prepared because final submission deadlines have not passed. Because the burden associated with participation is negative, we conservatively assumed the number of participating hospitals to be 0 in summary calculations included in the narrative. ** Maximum numbers were used in summary calculations included in the narrative. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program As discussed in section IX.B. of the preamble of the proposed rule and this final rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPSexempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. In this final rule, we are finalizing our proposal to adopt one new clinical effectiveness measure (External Beam Radiotherapy for Bone Metastases) for the FY 2017 program and subsequent years, which will increase the total number of measures for the FY 2017 PCHQR measure set to 19 measures. We also are finalizing an update to the specifications for the five previously finalized clinical process/oncology care measures to require PCHs to report allpatient data for each of these measures, and adopting a new sampling methodology that PCHs can use to report these measures, as well as the External Beam Radiotherapy measure. We believe that requiring PCHs to report the new External Beam Radiotherapy for Bone Metastases measure, as well as to use the sampling methodology, will not be burdensome. At least seven PCHs are currently reporting quality measure data (including population and sampling data for HCAHPS measures) on a voluntary basis to CMS. PCHs may also have experience submitting quality and population/sample size data to other entities, such as State survey agencies and The Joint Commission. As a result, we believe that the new reporting requirements we are adopting will not significantly impact PCHs. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50957 through 50959), we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 included burden estimates for the FY 2015 and FY 2016 programs. We noted in that final rule that those estimates represented a worst case scenario of estimated burden. We are providing a revised burden estimate for FY 2016 and a burden estimate for FY 2017 that take into account our finalized sampling methodologies for all applicable measures. The anticipated revised burden on PCHs for the FY 2016 program and the anticipated new burden on PCHs for the FY 2017 program consist of the following: New measure training and measure maintenance, and the time required for collection, aggregation, and submission of data for all measures. We estimate that 11 PCHs will submit quality measure data on approximately 37,596 cancer cases annually beginning with FY 2016 and FY 2017.247 In addition, we estimate that PCHs will spend 0.5 hours on chart abstraction and data submission per case/event, 0.5 hours on training per each new measure, 0.25 hours on measure maintenance per each existing measure, and a maximum of 5 hours summarizing and reporting population and sample size counts for the six SCIP measures and five oncology care measures. We are reducing the burden estimates for the HCAHPS Survey, the six SCIP measures, and the five clinical process/ oncology care measures in this final rule to take into consideration the sampling that PCHs may use for these measures. As a result, we estimate that the reporting burden on each PCH for the FY 2016 program will be 18,758 hours. We estimate that the reporting burden on each PCH for FY 2017 would increase by 50 hours because PCHs will be required to report an additional quality measure (External Beam Radiotherapy for Bone Metastases). 247 FY 2011 CMS MedPAR file based on Medicare data alone. PO 00000 Frm 00495 Fmt 4701 Sfmt 4700 Therefore, we estimate the overall burden for all of the FY 2017 PCHQR Program requirements to be 18,808 hours per PCH. This FY 2017 estimate, which includes an additional finalized measure, represents a decrease of 33,122 hours 248 per PCH from the FY 2016 burden estimate of 51,930 hours that we published in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50957 through 50959), or an overall decrease of 64 percent in the number of hours for each PCH. Coupled with our estimated salary costs,249 this revised estimate results in a net reduction in estimated cost of $472,362 per PCH. We believe that this burden estimate more accurately captures the hour and cost impact on PCHs participating in the PCHQR Program and reflects our efforts to minimize the burden impact through the proposed adoption of a new sampling methodology that PCHs can use to report the clinical process/ oncology care measures. However, we note that these estimates are based on PCH reporting of Medicare data only. We intend to update the burden estimate to more accurately reflect the burden on PCHs for reporting all-patient data in future years. Comment: One commenter supported CMS’ efforts to reduce the reporting burden of the PCHQR Program but raised concern about the variation in estimated burden between the Hospital IQR Program and PCHQR Program, and the possibility that the large variation in PCH patient volume may leave some PCHs with a greater burden than is estimated on average. The commenter 248 This figure represents the difference between previous burden estimate (51,930 hours) in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50958) and current burden estimate (18,808 hours). 249 We are now estimating an hourly salary of $33 (https://swz.salary.com/salarywizard/Staff-NurseRN-Hourly-Salary-Details.aspxper). After accounting for employee benefits and overhead, this results in a total cost of $66 per labor hour. E:\FR\FM\22AUR2.SGM 22AUR2 50348 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations also noted that the burden estimates provided in the FY 2015 IPPS/LTCH PPPS proposed rule do not consider the need for PCHs to build a reporting infrastructure, report non-Medicare data, or make efforts to ensure consistent application of measure specifications across PCHs. Response: We thank the commenter for their support and will consider this feedback for future years. We incorporated a sampling approach for non-Medicare patients, abstraction, training, computer edits, and labor hours in our burden estimates. We also note that we will revise our estimates to account for the burden associated with reporting patient level data for the six SCIP measures in future years, once we have data on which submission option PCHs select for SCIP data submission. Finally, in response to the commenter’s concern that our burden estimates do not account for ensuring consistent application of measure specifications across PCHs, we note that it is our role to ensure that PCHs report each measure consistent with the measure specifications and, therefore, this task does not affect PCH burden. We will submit a revision of the information collection request currently approved under OMB 0938–1175 to account for the aforementioned changes to the PCHQR Program. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 8. ICRs for the Hospital Value-Based Purchasing (VBP) Program In section IV.I. of the preamble of the proposed rule and of this final rule, we discuss requirements for the Hospital VBP Program. Specifically, in this final rule, we are adopting three new measures for the FY 2017 Hospital VBP Program: (1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia; (2) Clostridium difficile; and (3) PC–01: Elective Delivery Prior to 39 Completed Weeks Gestation. The first two measures are measures of healthcare-associated infections reported via the CDC’s National Healthcare Safety Network, while the last measure is a chart-abstracted measure. We also are adopting Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) for the FY 2019 Hospital VBP Program. As provided for in section 1886(o)(2)(A) of the Act, all of these additional measures are required for the Hospital IQR Program. Therefore, their inclusion in the Hospital VBP Program does not result in any additional burden because the Hospital VBP Program uses VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 data that are required for the Hospital IQR Program. 9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program As discussed in sections IX.C.3. through IX.C.5. of the preamble of the proposed rule and of this final rule, for the LTCHQR Program, for the FY 2015 payment determination and subsequent years, we are retaining the following three quality measures: (1) National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138); (2) National Healthcare Safety Network (NHSN) Central Line Catheter-Associated Blood Stream Infection Event (CLABSI) Outcome Measure (NQF #0139); and (3) and Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). For the FY 2016 payment determination and subsequent years, we are retaining the following two measures in addition to the measures finalized for previous years: (1) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680); and (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431). For the FY 2017 payment determination and subsequent years, we are retaining the following three measures in addition to the measures finalized for previous years: (1) National Health Safety Network (NHSN) FacilityWide Inpatient Hospital-Onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); (2) National Health Safety Network (NHSN) FacilityWide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717); and (3) All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals. For the FY 2018 payment determination and subsequent years, we are retaining the following measure in addition to the measures finalized for previous years: Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). As discussed in section IX.C.7. of the preamble of the proposed rule and this final rule, we are finalizing three new quality measures for inclusion in the LTCHQR Program for the FY 2018 payment determination and subsequent years: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; (2) Functional Outcome Measure: Change in Mobility among PO 00000 Frm 00496 Fmt 4701 Sfmt 4700 Long-Term Care Hospital Patients Requiring Ventilator Support; and (3) National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Six of the previously adopted and newly finalized measures will be collected via the NHSN. The NHSN is a secure, Internet-based healthcareassociated infection (HAI) tracking system maintained and managed by the CDC. The NHSN enables health care facilities to collect and use data about HAIs, adherence to clinical practices known to prevent HAIs, and other adverse events within their organizations. NHSN data collection occurs via a Web-based tool hosted by the CDC and provided free of charge to facilities. We believe that any burden increase related to complying with the submission of the proposed NHSN VAE Outcome measure would be minimal because LTCHs have already completed the initial setup of the NHSN submission process and have become familiar with reporting data in the NHSN system due to the requirement to report CAUTI and CLABSI measures. While this requirement is subject to the PRA, we believe that the associated burden is approved under OMB control number 0920–0666, for those measures previously finalized, with an expiration date of November, 31, 2016. The All-Cause Unplanned Readmission Measure for 30 Days PostDischarge from Long-Term Care Hospitals is a Medicare claims-based measure. Because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe that this measure will not add any additional reporting burden for LTCHs. The remaining five previously adopted and newly finalized measures will be collected utilizing the LTCH CARE Data Set. The LTCH CARE Data Set, in its current form, has been approved under OMB control number 0938–1163. Additions will need to be made to the LTCH CARE Data Set in order to allow for collection of the two functional status measures we are finalizing in section IX.C.7.a. of the preamble of this final rule: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; and (2) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support. The revised data collection will be resubmitted to OMB for approval. While this requirement is subject to the PRA, we believe the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations associated burden is either approved under OMB control number 0938–1163, for those measures previously finalized, with an expiration date of June 30, 2016, or is contained in this updated information collection request section. Assuring data accuracy is vital to public reporting programs. However, as discussed in section IX.C.11. of the preamble of this final rule, we are not finalizing our proposal, for the FY 2016 payment determination and subsequent years, to validate data submitted to CMS on the LTCH CARE Data Set at this time. We discuss and respond to public comments we received on these information collection requirements in the section IX.C. of the preamble of this final rule. 10. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU) In section IX.D. of the preamble of the proposed rule and of this final rule, we discuss our proposal to align the Medicare EHR Incentive Program reporting and submission timelines for clinical quality measures for eligible hospitals and CAHs with the Hospital IQR Program’s reporting and submission timelines. In addition, we provide guidance and clarification of certain policies for reporting zero denominators on clinical quality measures and our policy on case threshold exemptions. Because these proposals for data collection would align with the reporting requirements in place for the Hospital IQR Program, we do not believe there is any additional burden for this collection of information. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 11. ICR Regarding Revision of Regulations Governing Use and Release of Medicare Advantage (MA) Risk Adjustment Data (§ 422.310(f)) Medicare Advantage (MA) organizations are required to submit risk adjustment data to CMS organizations under current authority at § 422.310(b) through (d). The changes we are finalizing regarding the use and release of MA risk adjustment data under section X. of the preamble of this final rule do not change the requirements on MA organizations for submission of information to CMS, which have been in place for several years. Therefore, these finalized changes do not impose new information collection requirements on MA organizations. Consequently, because there are no new information collection requirements in our proposal, the proposal does not require a review by OMB under the authority of the Paperwork Reduction Act of 1995. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 C. Waiver of 60-Day Delay in the Effective Date We ordinarily provide a 60-day delay in the effective date of the provisions of a rule in accordance with the Administrative Procedure Act (APA) (5 U.S.C. 553(d), which requires a 30-day delayed effective date, and the Congressional Review Act (5 U.S.C. 801(a)(3), which requires a 60-day delayed effective date for major rules. However, we can waive the delay in the effective date if the Secretary finds, for good cause, that the delay is impracticable, unnecessary, or contrary to the public interest, and incorporates a statement of the finding and the reasons in the rule issued. 5 U.S.C. 553(d)(3); 5 U.S.C. 808(2). The Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care Hospital Prospective Payment System are fiscal year payment systems, and we typically issue the final rule by August 1 of each year to both comply with the requirement to annually review and update these payment systems and ensure that the payment policies for these systems are effective, following the required 60-day delay in the effective date, on October 1, the first day of the fiscal year to which the policies are intended to apply. If the agency finds, for good cause, that a 60-day delay is impracticable, unnecessary, or contrary to the public interest, and the agency incorporates a statement of the findings and its reasons in the rule issued, the agency may specify an earlier effective date. The timeframes for developing annual rules are extremely compressed and processing issues complicated this year’s rule. We believe it would be contrary to the public interest to delay the effective date of the payment system portions of this rule. We therefore specify that those portions of the rule will be effective October 1. List of Subjects 42 CFR Part 405 Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping, rural areas, X-rays. 42 CFR Part 412 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 413 Health facilities, Kidney diseases, Medicare, Puerto Rico, Reporting and recordkeeping requirements. PO 00000 Frm 00497 Fmt 4701 Sfmt 4700 50349 42 CFR Part 415 Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 422 Administrative practice and procedure, Health facilities, Health maintenance, organizations (HMO), Medicare, Penalties, Privacy, Reporting and recordkeeping requirements. 42 CFR Part 424 Emergency medical services, Health facilities, Health professions, Medicare. 42 CFR Part 485 Grant programs—health, Health facilities, Medicaid, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 488 Administrative practice and procedure, Health facilities, Medicare, Reporting and recordkeeping requirements. For the reasons stated in the preamble of this final rule, the Centers for Medicare & Medicaid Services is confirming, as final, interim rules published on October 3, 2013 (78 FR 61191) and March 18, 2014 (79 FR 15022) and is further amending 42 CFR Chapter IV as set forth below: Title 42—Public Health PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED Subpart R—Provider Reimbursement Determinations and Appeals 1. The authority citation for Subpart R continues to read as follows: ■ Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 405, 1302, 1395f(b), 1395g(a), 1395l, 1395hh, 1395ii, 1395oo, and 1395ww). 2. Section 405.1811 is amended by— a. Revising paragraphs (a) introductory text and (a)(3). ■ b. Revising paragraph (b) introductory text. ■ c. Redesignating paragraph (c) as paragraph (e). ■ d. Adding new paragraphs (c) and (d). ■ e. Revising newly redesignated paragraph (e). The revisions and additions read as follows: ■ ■ § 405.1811 Right to contractor hearing; contents of, and adding issues to, hearing request. (a) Right to hearing on final contractor determination. A provider (but no other E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50350 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations individual, entity, or party) has a right to a contractor hearing, as a single provider appeal, for specific items claimed for a cost reporting period covered by a final contractor or Secretary determination if— * * * * * (3) Unless the provider qualifies for a good cause extension under § 405.1813, the date of receipt by the contractor of the provider’s hearing request is no later than 180 days after the date of receipt by the provider of the final contractor or Secretary determination. (b) Contents of request for a contractor hearing on final contractor determination. The provider’s request for a contractor hearing under paragraph (a) of this section must be submitted in writing to the contractor, and the request must include the elements described in paragraphs (b)(1) through (b)(3) of this section. If the provider submits a hearing request that does not meet the requirements of paragraph (b)(1), (b)(2), or (b)(3) of this section, the contractor hearing officer may dismiss with prejudice the appeal or take any other remedial action he or she considers appropriate. * * * * * (c) Right to hearing based on untimely contractor determination. Notwithstanding the provisions of paragraph (a) of this section, a provider (but no other individual, entity, or party) has a right to a contractor hearing, as a single provider appeal, for a cost reporting period if— (1) A final contractor determination for the provider’s cost reporting period is not issued (through no fault of the provider) within 12 months after the date of receipt by the contractor of the provider’s perfected cost report or amended cost report (as specified in § 413.24(f) of this chapter). The date of receipt by the contractor of the provider’s perfected cost report or amended cost report is presumed to be the date the contractor stamped ‘‘Received’’ on such cost report unless it is shown by a preponderance of the evidence that the contractor received the cost report on an earlier date. (2) Unless the provider qualifies for a good cause extension under § 405.1813, the date of receipt by the contractor of the provider’s hearing request is no later than 180 days after the expiration of the 12 month period for issuance of the final contractor determination (as determined in accordance with paragraph (c)(1) of this section); and (3) The amount in controversy (as determined in accordance with § 405.1839) is at least $1,000 but less than $10,000. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (d) Contents of request for a contractor hearing based on untimely contractor determination. The provider’s request for a contractor hearing under paragraph (c) of this section must be submitted in writing to the contractor, and the request must include the elements described in paragraphs (d)(1) through (d)(3) of this section. If the provider submits a hearing request that does not meet the requirements of paragraph (d)(1), (d)(2), or (d)(3) of this section, the contractor hearing officer may dismiss with prejudice the appeal or take any other remedial action he or she considers appropriate. (1) A demonstration that the provider satisfies the requirements for a contractor hearing as specified in paragraph (c) of this section. (2) An explanation (for each specific item at issue) of the following: (i) Why the provider believes Medicare payment is incorrect for each disputed item (or, where applicable, why the provider is unable to determine whether Medicare payment is correct because it does not have access to underlying information concerning the calculation of Medicare payment). (ii) How and why the provider believes Medicare payment must be determined differently for each disputed item. (iii) If the provider self-disallows a specific item, a description of the nature and amount of each self-disallowed item and the reimbursement or payment sought for the item. (3) A copy of any documentary evidence the provider considers necessary to satisfy the hearing request requirements of paragraphs (d)(1) and (d)(2) of this section. (e) Adding issues to the hearing request. After filing a hearing request in accordance with paragraphs (a) and (b), or paragraphs (c) and (d), of this section, a provider may add specific Medicare payment issues to the original hearing request by submitting a written request to the contractor hearing officer, only if— (1) The request to add issues complies with the requirements of paragraphs (a) and (b), or paragraphs (c) and (d), of this section as to each new issue. (2) The specific matters at issue raised in the initial hearing request and the matters identified in subsequent requests to add issues, when combined, satisfy the amount in controversy requirements of paragraph (a)(2) or paragraph (c)(3) of this section. (3) The contractor hearing officer receives the provider’s request to add issues no later than 60 days after the expiration of the applicable 180-day PO 00000 Frm 00498 Fmt 4701 Sfmt 4700 period prescribed in paragraph (a)(3) or paragraph (c)(2) of this section. ■ 3. Section 405.1835 is amended by— ■ a. Revising paragraphs (a) introductory text and (a)(3). ■ b. Revising paragraph (b) introductory text. ■ c. Redesignating paragraph (c) as paragraph (e). ■ d. Adding new paragraphs (c) and (d). ■ e. Revising newly redesignated paragraph (e). The revisions and additions read as follows: § 405.1835 Right to Board hearing; contents of, and adding issues to, hearing request. (a) Right to hearing on final contractor determination. A provider (but no other individual, entity, or party) has a right to a Board hearing, as a single provider appeal, for specific items claimed for a cost reporting period covered by a final contractor or Secretary determination if— * * * * * (3) Unless the provider qualifies for a good cause extension under § 405.1836, the date of receipt by the Board of the provider’s hearing request is no later than 180 days after the date of receipt by the provider of the final contractor or Secretary determination. (b) Contents of request for a Board hearing on final contractor determination. The provider’s request for a Board hearing under paragraph (a) of this section must be submitted in writing to the Board, and the request must include the elements described in paragraphs (b)(1) through (b)(4) of this section. If the provider submits a hearing request that does not meet the requirements of paragraph (b)(1), (b)(2), or (b)(3) of this section, the Board may dismiss with prejudice the appeal or take any other remedial action it considers appropriate. * * * * * (c) Right to hearing based on untimely contractor determination. Notwithstanding the provisions of paragraph (a) of this section, a provider (but no other individual, entity, or party) has a right to a Board hearing, as a single provider appeal, for specific items claimed for a cost reporting period if— (1) A final contractor determination for the provider’s cost reporting period is not issued (through no fault of the provider) within 12 months after the date of receipt by the contractor of the provider’s perfected cost report or amended cost report (as specified in § 413.24(f) of this chapter). The date of receipt by the contractor of the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations provider’s perfected cost report or amended cost report is presumed to be the date the contractor stamped ‘‘Received’’ on such cost report unless it is shown by a preponderance of the evidence that the contractor received the cost report on an earlier date. (2) Unless the provider qualifies for a good cause extension under § 405.1836, the date of receipt by the Board of the provider’s hearing request is no later than 180 days after the expiration of the 12 month period for issuance of the final contractor determination (as determined in accordance with paragraph (c)(1) of this section); and (3) The amount in controversy (as determined in accordance with § 405.1839) is $10,000 or more. (d) Contents of request for a Board hearing based on untimely contractor determination. The provider’s request for a Board hearing under paragraph (c) of this section must be submitted in writing to the Board, and the request must include the elements described in paragraphs (d)(1) through (d)(4) of this section. If the provider submits a hearing request that does not meet the requirements of paragraph (d)(1), (d)(2), or (d)(3) of this section, the Board may dismiss with prejudice the appeal or take any other remedial action it considers appropriate. (1) A demonstration that the provider satisfies the requirements for a Board hearing as specified in paragraph (c) of this section. (2) An explanation (for each specific item at issue) of the following: (i) Why the provider believes Medicare payment is incorrect for each disputed item (or, where applicable, why the provider is unable to determine whether Medicare payment is correct because it does not have access to underlying information concerning the calculation of Medicare payment). (ii) How and why the provider believes Medicare payment must be determined differently for each disputed item. (iii) If the provider self-disallows a specific item, a description of the nature and amount of each self-disallowed item and the reimbursement or payment sought for the item. (3) A copy of any documentary evidence the provider considers necessary to satisfy the hearing request requirements of paragraphs (d)(1) and (d)(2) of this section. (4) With respect to a provider under common ownership or control, the name and address of its parent corporation, and a statement that meets all of the requirements of paragraphs (b)(4)(i) and (b)(4)(ii) of this section. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (e) Adding issues to the hearing request. After filing a hearing request in accordance with paragraphs (a) and (b), or paragraphs (c) and (d), of this section, a provider may add specific Medicare payment issues to the original hearing request by submitting a written request to the Board only if— (1) The request to add issues complies with the requirements of paragraphs (a) and (b), or paragraphs (c) and (d), of this section as to each new issue. (2) The specific matters at issue raised in the initial hearing request and the matters identified in subsequent requests to add issues, when combined, satisfy the amount in controversy requirements of paragraph (a)(2) or paragraph (c)(3) of this section. (3) The Board receives the provider’s request to add issues no later than 60 days after the expiration of the applicable 180-day period prescribed in paragraph (a)(3) or paragraph (c)(2), of this section. Nomenclature Changes Subpart R [Amended] 4. Amend Subpart R by removing the term or phrase in the first column and replace it with the term or phrase in the second column: ■ Remove Add an intermediary intermediary intermediaries’ intermediary’s a contractor contractor contractors’ contractor’s Subpart X—Rural Health Clinic and Federally Qualified Health Center Services 5. The authority citation for Subpart X continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 6. Section 405.2468 is amended by revising paragraph (f)(1) to read as follows: ■ § 405.2468 Allowable costs. * * * * * (f) * * * (1) Effective for portions of cost reporting periods occurring on or after January 1, 1999, if an RHC or an FQHC incurs ‘‘all or substantially all’’ of the costs for the training program in the nonhospital setting as defined in § 413.75(b) of this chapter, the RHC or FQHC may receive direct graduate medical education payment for those residents. However, in connection with cost reporting periods for which ‘‘all or substantially all of the costs for the PO 00000 Frm 00499 Fmt 4701 Sfmt 4700 50351 training program in the nonhospital setting’’ is not defined in § 413.75(b) of this chapter, if an RHC or an FQHC incurs the salaries and fringe benefits (including travel and lodging where applicable) of residents training at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical education payments for those residents. * * * * * PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 7. The authority citation for Part 412 is revised to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106–113 (113 Stat. 1501A–332), sec. 1206 of Pub. L. 113– 67, and sec. 112 of Pub. L. 113–93. 8. Section 412.23 is amended by— a. Revising paragraphs (e)(6)(i), (e)(6)(ii) introductory text, and (e)(6)(ii)(B)(2). ■ b. Revising paragraphs (e)(7)(i) and (e)(7)(ii) introductory text. ■ c. Adding new paragraph (e)(7)(iii). The revisions and additions read as follows: ■ ■ § 412.23 Excluded hospitals: Classifications. * * * * * (e) * * * (6) * * * (i) General rule. Except as specified in paragraphs (e)(6)(ii) and (e)(6)(iii) of this section for the period beginning December 29, 2007 and ending December 28, 2012, and the period beginning April 1, 2014 and ending September 30, 2017, a moratorium applies to the establishment and classification of a long-term care hospital as described in paragraphs (e) and (e)(1) through (e)(5) of this section or a long-term care hospital satellite facility as described in § 412.22(h). (ii) Exception. The moratorium specified in paragraph (e)(6)(i) of this section is not applicable to the establishment and classification of a long-term care hospital that meets the requirements of paragraphs (e) and (e)(1) through (e)(5) of this section, or a longterm care hospital satellite facility that meets the requirements of § 412.22(h), if the long-term care hospital or long-term care satellite facility meets the following criteria on or before December 29, 2007, or prior to April 1, 2014, as applicable: * * * * * (B) * * * (2)(i) Has expended prior to December 29, 2007, at least 10 percent (or, if less, $2.5 million) of the estimated cost of the E:\FR\FM\22AUR2.SGM 22AUR2 50352 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations project specified in paragraph (e)(6)(ii)(B)(1) of his section; or (ii) Has expended, before April 1, 2014, at least 10 percent (or, if less, $2.5 million) of the estimated cost of the project specified in paragraph (e)(6)(ii)(B)(1) of this section. * * * * * (7) * * * (i) For purposes of this paragraph, an existing long-term care hospital or longterm care hospital satellite facility means a long-term care hospital that meets the requirements of paragraph(e) of this section or a long-term care hospital satellite facility that meets the requirements of § 412.22(h) that received payment under the provisions of subpart O of this part prior to the dates noted in the following moratorium clauses. (ii) December 29, 2007, through December 28, 2007— * * * * * (iii) April 1, 2014 through September 30, 2017—The number of Medicarecertified beds in an existing long-term care hospital or an existing long-term care hospital satellite facility must not be increased beyond the number of Medicare-certified beds prior to April 1, 2014. * * * * * ■ 9. Section 412.64 is amended by— ■ a. Removing paragraph (b)(1)(ii)(D). ■ b. Revising paragraph (b)(3)(i). ■ c. Revising paragraphs (d)(1), (d)(2)(i) introductory text, (d)(2)(ii), and (d)(3) introductory text. ■ d. In paragraphs (h)(4) introductory text and (h)(4)(vi), removing the date ‘‘October 1, 2014’’ and adding in its place the date ‘‘October 1, 2015’’. The revisions read as follows: § 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * * * * * (b) * * * (3)(i) For discharges occurring on or after October 1, 2004, a hospital that is located in a rural county adjacent to one or more urban areas is deemed to be located in an urban area and receives the Federal payment amount for the urban area to which the greater number of workers in the county commute if the rural county would otherwise be considered part of an urban area, under the standards for designating MSAs if the commuting rates used in determining outlying counties were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or central counties of all adjacent MSAs. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Qualifying counties are determined based upon OMB standards, using the most recent OMB standards for delineating statistical areas adopted by CMS. * * * * * (d) * * * (1) The applicable percentage change for updating the standardized amount for all hospitals in all areas is— (i) For fiscal year 2005 through fiscal year 2009, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section. (ii) For fiscal year 2010, for discharges— (A) On or after October 1, 2009 and before April 1, 2010, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section; and (B) On or after April 1, 2010 and before October 1, 2010, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less 0.25 percentage point. (iii) For fiscal year 2011, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this subchapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less 0.25 percentage point. (iv) For fiscal years 2012 and 2013, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.1 percentage point. (v) For fiscal year 2014, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraph (d)(2) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.3 percentage point. (vi) For fiscal year 2015, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraphs (d)(2) and (d)(3) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.2 percentage point. PO 00000 Frm 00500 Fmt 4701 Sfmt 4700 (2)(i) In the case of a ‘‘subsection (d) hospital,’’ as defined under section 1886(d)(1)(B) of the Act, that does not submit quality data on a quarterly basis to CMS, in the form and manner specified by CMS, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals is reduced— * * * * * (ii) Any reduction pursuant to this paragraph (d)(2) will apply only to the fiscal year involved and will not be taken into account in computing the applicable percentage change for a subsequent fiscal year. (3) Beginning fiscal year 2015, in the case of a ‘‘subsection (d) hospital,’’ as defined under section 1886(d)(1)(B) of the Act, that is not a meaningful electronic health record (EHR) user as defined in Part 495 of this chapter for the applicable EHR reporting period and does not receive an exception, threefourths of the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals is reduced— * * * * * ■ 10. Section 412.101 is amended by revising paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2) introductory text, and (d) to read as follows: § 412.101 Special treatment: Inpatient hospital payment adjustment for lowvolume hospitals. * * * * * (b) * * * (2) * * * (i) For FY 2005 through FY 2010 and the portion of FY 2015 beginning on April 1, 2015, and subsequent fiscal years, a hospital must have fewer than 200 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital’s most recently submitted cost report, and be located more than 25 road miles (as defined in paragraph (a) of this section) from the nearest ‘‘subsection (d)’’ (section 1886(d) of the Act) hospital. (ii) For FY 2011 through FY 2014, and the portion of FY 2015 before April 1, 2015, a hospital must have fewer than 1,600 Medicare discharges, as defined in paragraph (a) of this section, during the fiscal year, based on the hospital’s Medicare discharges from the most recently available MedPAR data as determined by CMS, and be located more than 15 road miles, as defined in paragraph (a) of this section, from the nearest ‘‘subsection (d)’’ (section 1886(d) of the Act) hospital. * * * * * E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (c) * * * (1) For FY 2005 through FY 2010 and the portion of FY 2015 beginning on April 1, 2015 and subsequent fiscal years, the adjustment is an additional 25 percent for each Medicare discharge. (2) For FY 2011 through FY 2014 and the portion of FY 2015 before April 1, 2015, the adjustment is as follows: * * * * * (d) Eligibility of new hospitals for the adjustment. For FYs 2005 through 2010 and the portion of FY 2015 beginning on April 1, 2015, and subsequent fiscal years, a new hospital will be eligible for a low-volume adjustment under this section once it has submitted a cost report for a cost reporting period that indicates that it meets discharge requirements during the applicable fiscal year and has provided its fiscal intermediary or Medicare administrative contractor with sufficient evidence that it meets the distance requirement, as specified under paragraph (b)(2) of this section. ■ 11. Section 412.102 is revised to read as follows: tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV § 412.102 Special treatment: Hospitals located in areas that are changing from urban to rural as a result of a geographic redesignation. An urban hospital that was part of an MSA, but was redesignated as rural as a result of the most recent OMB standards for delineating statistical areas adopted by CMS, may receive an adjustment to its rural Federal payment amount for operating costs for 2 successive fiscal years as provided in paragraphs (a) and (b) of this section. (a) First year adjustment. (1) Effective on or after October 1, 1983 and before October 1, 2014, the hospital’s rural average standardized amount and disproportionate share payments as described in § 412.106 are adjusted on the basis of an additional amount that equals two-thirds of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its geographic redesignation and the rural standardized amount and disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. (2) Effective on or after October 1, 2014, the hospital’s rural disproportionate share payments as described in § 412.106 are adjusted on the basis of an additional amount that equals two-thirds of the difference between the disproportionate share payments as an urban hospital applicable to the hospital before its geographic redesignation to a rural area VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 as a result of implementation of the most recent OMB standards for delineating statistical areas adopted by CMS and the rural disproportionate share payment otherwise applicable to the Federal fiscal year for which the adjustment is made. (b) Second year adjustment. (1) Effective on or after October 1, 1983 and before October 1, 2014, if a hospital’s status continues to be rural as a result of geographic redesignation, its rural average standardized amount and disproportionate share payments are adjusted on the basis of an additional amount that equals one-third of the difference between the urban standardized amount and disproportionate share payments applicable to the hospital before its redesignation and the rural standardized amounts and disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. (2) Effective on or after October 1, 2014, if a hospital’s status continues to be rural as a result of geographic redesignation, its disproportionate share payments are adjusted on the basis of an additional amount that equals one-third of the difference between the disproportionate share payments applicable to the hospital before its geographic redesignation to a rural area as a result of implementation of the most recent OMB standards for delineating statistical areas adopted by CMS and the rural disproportionate share payments otherwise applicable to the Federal fiscal year for which the adjustment is made. ■ 12. Section 412.103 is amended by adding a new paragraph (a)(6) to read as follows: § 412.103 Special treatment: Hospitals located in urban areas and that apply for reclassification as rural. (a) * * * (6) For any period on or after October 1, 2014, a CAH in a county that was not in an urban area as defined by the Office of Management and Budget (OMB), but was included in an urban area as a result of the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, may be reclassified as being located in a rural area for purposes of meeting the rural location requirement at § 485.610(b) of this chapter for a period of 2 years, beginning with the date of the implementation of the new labor market area delineations, if it meets any of the requirements under paragraph (a)(1), (a)(2), or (a)(3) of this section. * * * * * PO 00000 Frm 00501 Fmt 4701 Sfmt 4700 50353 13. Section 412.105 is amended by revising paragraphs (a)(1)(ii), (f)(1)(iv)(D), and (f)(1)(v), to read as follows: ■ § 412.105 Special treatment: Hospitals that incur indirect costs for graduate medical education programs. * * * * * (a) * * * (1) * * * (ii)(A) For new programs started prior to October 1, 2012, the exception for new programs described in paragraph (f)(1)(vii) of this section applies to each new program individually for which the full-time equivalent cap may be adjusted based on the period of years equal to the minimum accredited length of each new program. (B) For new programs started on or after October 1, 2012, the exception for new programs described in paragraph (f)(1)(vii) of this section applies to each new program individually during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started, for hospitals for which the fulltime equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the each individual new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter. * * * * * (f) * * * (1) * * * (iv) * * * (D) A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, may retain the increases to its full-time equivalent resident cap that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this section while it was located in a rural area. Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may retain any existing increases to its FTE resident cap that it had received prior to when the redesignation became effective. Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50354 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations may receive an increase to its FTE resident cap for a new program, in accordance with paragraph (e) of this section, if it received a letter of accreditation for the new program and/ or started training residents in the new program prior to the redesignation becoming effective. (v)(A) For a hospital’s cost reporting periods beginning on or after October 1, 1997, and before October 1, 1998, the total number of full-time equivalent residents for payment purposes is equal to the average of the actual full-time equivalent resident counts (subject to the requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost reporting period and the preceding cost reporting period. (B) For a hospital’s cost reporting periods beginning on or after October 1, 1998, the total number of full-time equivalent residents for payment purposes is equal to the average of the actual full-time equivalent resident count (subject to the requirements set forth in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost reporting period and the preceding two cost reporting periods. (C) For new programs started prior to October 1, 2012, if a hospital qualified for an adjustment to the limit established under paragraph (f)(1)(iv) of this section for new medical residency programs created under paragraph (f)(1)(vii) of this section, the count of residents participating in new medical residency training programs above the number included in the hospital’s fulltime equivalent count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in paragraph (f)(1)(v)(B) of this section for a period of years. Residents participating in new medical residency training programs are included in the hospital’s full-time equivalent count before applying the averaging rules after the period of years has expired. For purposes of this paragraph, for each new program started, the period of years equals the minimum accredited length for each new program. The period of years for each new program begins when the first resident begins training in each new program. (D) For new programs started on or after October 1, 2012, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e) of this chapter, full-time equivalent residents participating in new medical residency training programs are excluded from the hospital’s full-time equivalent count before applying the averaging rules during the cost reporting periods prior VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the each individual new program started, for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter. Beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(1) of this chapter, and beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of each individual new program started for hospitals for which the full-time equivalent cap may be adjusted in accordance with § 413.79(e)(3) of this chapter, full-time equivalent residents participating in new medical residency training programs are included in the hospital’s full-time equivalent count before applying the averaging rules in paragraph (f)(1)(v)(B) of this section. (E) Subject to the provisions of paragraph (f)(1)(ix) of this section, fulltime equivalent residents that are displaced by the closure of either another hospital or another hospital’s program are added to the full-time equivalent count after applying the averaging rules in paragraph (f)(1)(v)(B) of this section for the receiving hospital for the duration of time that the displaced residents are training at the receiving hospital. (F) Subject to the provisions of paragraph (f)(1)(x) of this section, effective for cost reporting periods beginning on or after April 1, 2000, fulltime equivalent residents at an urban hospital in a rural track program are included in the urban hospital’s rolling average calculation described in this paragraph (f)(1)(v)(B). * * * * * ■ 14. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to read as follows: § 412.106 Special treatment: Hospitals that serve a disproportionate share of lowincome patients. * * * (g) * * * PO 00000 Frm 00502 * Fmt 4701 * Sfmt 4700 (1) * * * (iii) * * * (C) For fiscal year 2014 and for fiscal year 2015, CMS will base its estimates of the amount of hospital uncompensated care on the most recent available data on utilization for Medicaid and Medicare SSI patients, as determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of this section. * * * * * § 412.108 [Amended] 15. In § 412.108, paragraph (a)(1) introductory text and paragraph (c)(2)(iii) introductory text, remove the date ‘‘April 1, 2014’’ and add in its place the date ‘‘April 1, 2015’’. ■ 16. Section 412.140 is amended by revising paragraph (c)(2) to read as follows: ■ § 412.140 Participation, data submission, and validation requirements under the Hospital Inpatient Quality Reporting (IQR) Program. * * * * * (c) * * * (2) Exception. Upon request by a hospital, CMS may grant an extension or exemption of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or exemption are available on QualityNet.org. * * * * * ■ 17. Section 412.152 is amended by revising the definition of ‘‘Applicable hospital’’ to read as follows: § 412.152 Definitions for the Hospital Readmissions Reduction Program. * * * * * Applicable hospital is a hospital described in section 1886(d)(1)(B) of the Act. * * * * * § 412.154 [Amended] 18. Section 412.154 is amended by removing and reserving paragraph (d). ■ 19. Section 412.160 is amended by revising the definitions of ‘‘Base operating DRG payment amount’’ and ‘‘Performance standards’’ to read as follows: ■ § 412.160 Definitions for the Hospital Value-Based Purchasing (VBP) Program. * * * * * Base operating DRG payment amount means the following: (1) With respect to a subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Act), the wageadjusted DRG operating payment plus E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations any applicable new technology add-on payments under subpart F of this part. This amount is determined without regard to any payment adjustments under the Hospital Readmissions Reduction Program, as specified under § 412.154. This amount does not include any additional payments for indirect medical education under § 412.105, the treatment of a disproportionate share of low-income patients under § 412.106, outliers under subpart F of this part, or a low volume of discharges under § 412.101. (2) With respect to a Medicaredependent, small rural hospital that receives payments under § 412.108(c) or a sole community hospital that receives payments under § 412.92(d), the wageadjusted DRG operating payment plus any applicable new technology add-on payments under subpart F of this part. This amount does not include any additional payments for indirect medical education under § 412.105, the treatment of a disproportionate share of low-income patients under § 412.106, outliers under subpart F of this part, or a low volume of discharges under § 412.101. With respect to a Medicaredependent, small rural hospital that receives payments under § 412.108(c) (for discharges occurring in FY 2013) or a sole community hospital that receives payments under § 412.92(d), this amount also does not include the difference between the hospital-specific payment rate and the Federal payment rate determined under subpart D of this part. * * * * * Performance standards are the levels of performance that hospitals must meet or exceed in order to earn points under the Hospital VBP Program, and are calculated with respect to a measure for a fiscal year no later than 60 days prior to the start of the performance period for that measure for that fiscal year. The performance standards for a measure may be updated as follows: (1) To make a single correction to correct a calculation error, data issue, or other problem that would significantly change the performance standards; or (2) To incorporate nonsubstantive technical updates made to the measure between the time that CMS first displays the performance standards for that measure for a fiscal year and the time that CMS calculates hospital performance on that measure at the conclusion of the performance period for that measure for a fiscal year. * * * * * ■ 20. Section 412.161 is revised to read as follows: VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 § 412.161 Applicability of the Hospital Value-Based Purchasing (VBP) Program The Hospital VBP Program applies to hospitals, as that term is defined in § 412.160. § 412.172 [Amended] 21. Section 412.172 is amended by removing and reserving paragraph (c). ■ 22. Section 412.232 is amended by revising paragraph (b)(2) to read as follows: ■ § 412.232 Criteria for all hospitals in a rural county seeking urban redesignation. * * * * * (b) * * * (2) For fiscal years beginning with FY 2005, the group of hospitals must demonstrate that the county in which the hospitals are located meets the standards for redesignation to an MSA as an outlying county using the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data. * * * * * ■ 23. Section 412.234 is amended by revising paragraph (a)(3)(iv) to read as follows: § 412.234 Criteria for all hospitals in an urban county seeking redesignation to another urban area. (a) * * * (3) * * * (iv) For Federal fiscal year 2008 and thereafter, hospitals located in counties that are in the same Combined Statistical Area (CSA) or Core-Based Statistical Area (CBSA) (under the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data) as the urban area to which they seek redesignation qualify as meeting the proximity requirement for reclassification to the urban area to which they seek redesignation. * * * * * ■ 24. Section 412.500 is amended by adding paragraphs (a)(4), (a)(5), and (a)(6) to read as follows: § 412.500 Basis and scope of subpart. (a) * * * (4) Section 4302(a) of Public Law 111–5, which amended sections 114(c) and (d) of Public Law 110–173 relating to several moratoria on the establishment of new long-term care hospitals and satellite facilities and on the increase in the number of beds in existing long-term care hospitals and satellite facilities under the long-term care hospital prospective payment system. (5) Sections 3106(a) and 10312(a) of Public Law 111–148, which extended PO 00000 Frm 00503 Fmt 4701 Sfmt 4700 50355 certain payment rules and moratoria under the long-term care hospital prospective payment system by further amending sections 114(c) and (d) of Public Law 110–173. (6) Section 1206 of Public Law 113– 67, which further extended certain payment rules and moratoria under the long-term care hospital prospective payment system by amending sections 114(c) and (d) of Public Law 110–173, and which: (i) Added a new section 1886(m)(6) to the Act to establish a site neutral payment amount for long-term care hospital discharges that fail to meet the applicable criteria in cost reporting periods beginning on or after October 1, 2015; and (ii) Requires the Secretary’s review of the payment rates and regulations governing long-term care hospitals established under section 1886(d)(1)(B)(iv)(II) of the Act and application of payment adjustments based on that review. * * * * * ■ 25. Section 412.521 is amended by revising paragraph (a)(2) to read as follows: § 412.521 Basis for payment. (a) * * * (2) Except as provided for in § 412.526, the amount of payment under the prospective payment system is based on the Federal payment rate established in accordance with § 412.523, including adjustments described in § 412.525, and, if applicable during a transition period, on a blend of the Federal payment rate and the cost-based reimbursement rate described in § 412.533. * * * * * ■ 26. Section 412.523 is amended by adding a new paragraph (c)(3)(xi) to read as follows: § 412.523 Methodology for calculating the Federal prospective payment rates. * * * * * (c) * * * (3) * * * (xi) For long-term care hospital prospective payment system fiscal year beginning October 1, 2014, and ending September 30, 2015. The standard Federal rate for the long-term care hospital prospective payment system beginning October 1, 2014, and ending September 30, 2015, is the standard Federal rate for the previous long-term care hospital prospective payment system fiscal year updated by 2.2 percent, and further adjusted, as appropriate, as described in paragraph (d) of this section. * * * * * E:\FR\FM\22AUR2.SGM 22AUR2 50356 § 412.525 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations [Amended] 27. Section 412.525 is amended by removing and reserving paragraph (d)(3). ■ 28. A new § 412.526 is added to read as follows: ■ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV § 412.526 Payment provisions for a ‘‘subclause (II)’’ long-term care hospital. (a) Definition. A ‘‘subclause (II)’’ longterm care hospital is a hospital that qualifies as an LTCH under section 1886(d)(1)(B)(iv)(II) of the Act. (b) Method of payment. (1) For cost reporting periods beginning on or after October 1, 2003 and before September 30, 2014, payment to a ‘‘subclause (II)’’ long-term care hospital is made under the prospective payment system specified in § 412.1(a)(4) and Subpart O of this part. (2) For cost reporting periods beginning on or after October 1, 2014, payment to a ‘‘subclause (II)’’ long-term care hospital is made under the prospective payment system specified in § 412.1(a)(4) and under Subpart O of this part, as adjusted. The adjusted payment amount is determined based on reasonable cost, as described at § 412.526(c). (c) Determining the adjusted payment for Medicare inpatient operating and capital-related costs under the reasonable cost-based reimbursement rules. Medicare inpatient operating costs are paid based on reasonable cost, subject to a ceiling. The ceiling is the aggregate upper limit on the amount of a hospital’s net Medicare inpatient operating costs that the program will recognize for payment purposes, as determined under paragraph (c)(1) of this section. (1) Ceiling. For each cost reporting period, the ceiling is determined by multiplying the updated target amount, as defined in paragraph (c)(2) of this section, for that period by the number of Medicare discharges paid under this subpart during that period. (2) Target amounts. (i) For cost reporting periods beginning during Federal fiscal year 2015, the target amount equals the hospital’s target amount determined under § 413.40(c)(4) for its cost reporting period beginning during Federal fiscal year 2000, updated by the applicable annual rate-of-increase percentages specified in § 413.40(c)(3) to the subject period. (ii) For subsequent cost reporting periods, the target amount equals the hospital’s target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (3) Payment for inpatient operating costs. For cost reporting periods subject to this section, the hospital’s Medicare allowable net inpatient operating costs for that period (as defined at § 413.40(a)(3)) are paid on a reasonable cost basis, subject to that hospital’s ceiling (as determined under paragraph (c)(1) of this section) for that period. (4) Payment for inpatient capitalrelated costs. Medicare allowable net inpatient capital costs are paid on a reasonable cost basis, in accordance with the regulations under Part 413 of this chapter. (5) Adjustments for extraordinary circumstances—(i) General rules. (A) CMS may adjust the ceiling determined under paragraph (c)(1) of this section for one or more cost reporting periods when unusual inpatient operating costs have resulted in the hospital exceeding its ceiling imposed under this section due to extraordinary circumstances beyond the hospital’s control. These circumstances include, but are not limited to, strikes, fire, earthquakes, floods, or similar unusual occurrences with substantial cost effects. (B) When the hospital requests an adjustment, CMS makes an adjustment only to the extent that the hospital’s operating costs are reasonable, attributable to the circumstances specified separately, identified by the hospital, and verified by the Medicare administrative contractor. (ii) Process for adjustment requests. The provisions of §§ 413.40(e)(1) through (e)(5) of this subchapter are applicable to extraordinary circumstances adjustment requests under this section. § 412.532 [Removed] 29. Section 412.532 is removed. 30. Section 412.534 is amended by— a. Revising paragraphs (c)(1) introductory text and (c)(1)(i). ■ b. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraph (c)(1) and (c)(2) paragraph heading. ■ c. Revising paragraph (c)(3). ■ d. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraphs (d)(1) paragraph heading, (d)(1)(i), and (d)(2) paragraph heading. ■ e. Revising paragraph (d)(3). ■ f. Removing the year ‘‘2013’’ and adding in its place the year ‘‘2016’’ in paragraphs (e)(1) paragraph heading, (e)(1)(i), and (e)(2) paragraph heading. ■ g. Revising paragraph (e)(3). ■ h. Revising paragraphs (h) introductory text, (h)(4), and (h)(5). ■ i. Removing paragraph (h)(6). The revisions read as follows: ■ ■ ■ PO 00000 Frm 00504 Fmt 4701 Sfmt 4700 § 412.534 Special payment provisions for long-term care hospitals within hospitals and satellites of long-term care hospitals. * * * * * (c) * * * (1) For cost reporting periods beginning on or after October 1, 2004 and before October 1, 2007 and for cost reporting periods beginning on or after October 1, 2016. (i) Except as provided in paragraphs (c)(3), (g), and (h) of this section, for any cost reporting period beginning on or after October 1, 2004 and before October 1, 2007, and for cost reporting periods beginning on or after October 1, 2016 in which the long-term care hospital or its satellite facility has a discharged Medicare inpatient population of whom no more than 25 percent were admitted to the hospital or its satellite facility from the co-located hospital, payments are made under the rules at §§ 412.500 through 412.541 with no adjustment under this section. * * * * * (3) For a long-term care hospital satellite facility described in § 412.22(h)(3)(i), for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payments will be determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 50 percent. (d) * * * (3) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payment for a longterm care hospital satellite facility described in § 412.22(h)(3)(i) will be determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 75 percent. (e) * * * (3) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, payments for a longterm care hospital satellite facility described in § 412.22(h)(3)(i) will be determined using the methodology specified in paragraph (c)(1) of this section, except that the applicable percentage threshold for Medicare discharges is 75 percent. * * * * * (h) Effective date of policies in this section for certain co-located long-term care hospitals and satellite facilities of long-term care hospitals. Except as specified in paragraph (h)(4) of this section, the policies set forth in this paragraph (h) apply to Medicare patient discharges that were admitted from a hospital located in the same building or on the same campus as a long-term care E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations hospital described in § 412.23(e)(2)(i) that meets the criteria in § 412.22(f) and a satellite facility of a long-term care hospital as described under § 412.22(h)(3)(i) for discharges occurring in cost reporting periods beginning on or after July 1, 2007. * * * * * (4) For a long-term care hospital described in § 412.23(e)(2)(i) that meets the criteria in § 412.22(f), the policies set forth in this paragraph (h) and in § 412.536 do not apply for discharges occurring in cost reporting periods beginning on or after July 1, 2007. (5) For a long-term care hospital or a satellite facility that, as of December 29, 2007, was co-located with an entity that is a provider-based, off-campus location of a subsection (d) hospital which did not provide services payable under section 1886(d) of the Act at the offcampus location, the policies set forth in this paragraph (h) and in § 412.536 do not apply for discharges occurring in cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016. ■ 31. Section 412.536 is amended by— ■ a. Removing and reserving paragraph (a)(1)(iii). ■ b. Revising paragraph (a)(2) introductory text. ■ c. Removing and reserving paragraph (a)(2)(ii). ■ d. Removing paragraph (a)(3). The revisions read as follows: § 412.536 Special payment provisions for long-term care hospitals and satellites of long-term care hospitals that discharged Medicare patients admitted from a hospital not located in the same building or on the same campus as the long-term care hospital or satellite of the long-term care hospital. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV (a) * * * (1) * * * (iii) [Reserved]. * * * * * (2) For cost reporting periods beginning on or after July 1, 2007 and before July 1, 2016, the policies set forth in this section are not applicable to discharges from: * * * * * (ii) [Reserved]. * * * * * PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 32. The authority for Part 413 continues to read as follows: ■ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh). Nomenclature Changes PART 413—[AMENDED] 33. Amend Part 413 by removing the term or phrase in the first column and replace it with the term or phrase in the second column: ■ Remove Add an intermediary’s ............... fiscal intermediary .............. fiscal intermediary’s ........... intermediary ....................... intermediaries .................... intermediary’s .................... a contractor’s contractor contractor’s contractor contractors contractor’s 34. Section 413.75(b)(5) is amended by revising the definition of ‘‘Rural track FTE limitation’’ to read as follows: ■ § 413.75 Direct GME payments: General requirements. * * * * * (b) * * * (5) * * * Rural track FTE limitation means the maximum number of residents (as specified in § 413.79(k)) training in a rural track residency program that an urban hospital may include in its FTE count and that is in addition to the number of FTE residents already included in the hospital’s FTE cap. * * * * * ■ 35. Section 413.78 is amended by revising paragraph (g)(6) to read as follows: § 413.78 Direct GME payment: Determination of the total number of FTE residents. * * * * * (g) * * * (6) The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section shall not be applied in a manner that requires reopening of any settled cost reports as to which there is not a jurisdictionally proper appeal pending as of March 23, 2010, on direct GME or IME payments. Cost reporting periods beginning before July 1, 2010 are not governed by paragraph (g) of this section. * * * * * ■ 36. Section 413.79 is amended by revising paragraphs (c)(6), (d)(5), and (k)(7), to read as follows: § 413.79 Direct GME payments: Determination of the weighted number of FTE residents. * * * * * (c) * * * (6) FTE resident caps for rural hospitals that are redesignated as PO 00000 Frm 00505 Fmt 4701 Sfmt 4700 50357 urban. A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new MSA definitions announced by OMB on June 6, 2003, may retain the increases to its FTE resident cap that it received under paragraphs (c)(2)(i), (e)(1)(iii), and (e)(3) of this section while it was located in a rural area. Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may retain any existing increases to its FTE resident cap that it had received prior to when the redesignation became effective. Effective October 1, 2014, if a rural hospital is redesignated as urban due to the most recent OMB standards for delineating statistical areas adopted by CMS, the redesignated urban hospital may receive an increase to its FTE resident cap for a new program, in accordance with paragraph (e) of this section, if it received a letter of accreditation for the new program and/ or started training residents in the new program prior to the redesignation becoming effective. (d) * * * (5) (i) For new programs started prior to October 1, 2012, if a hospital qualifies for an adjustment to the limit established under paragraph (c)(2) of this section for new medical residency programs created under paragraph (e) of this section, the count of the residents participating in new medical residency training programs above the number included in the hospital’s FTE count for the cost reporting period ending during calendar year 1996 is added after applying the averaging rules in this paragraph (d), for a period of years. Residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules after the period of years has expired. For purposes of this paragraph (d), for each new program started, the period of years equals the minimum accredited length for each new program. The period of years begins when the first resident begins training in each new program. (ii) For new programs started on or after October 1, 2012, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e), FTE residents participating in new medical residency training programs are excluded from the hospital’s FTE count before applying the averaging rules during the cost reporting periods prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50358 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations program started, for hospitals for which the FTE may be adjusted in accordance with § 413.79(e)(1), and prior to the beginning of the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the each individual new program started, for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3). Beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(1), and beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the each individual new program started for hospitals for which the FTE cap may be adjusted in accordance with § 413.79(e)(3), FTE residents participating in new medical residency training programs are included in the hospital’s FTE count before applying the averaging rules. * * * * * (k) * * * (7)(i) Effective prior to October 1, 2014, if an urban hospital had established a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) for the rural track programs established prior to the adoption of such new labor market area definitions. In order to receive an adjustment to its FTE resident cap for a new rural track residency program, the urban hospital must establish a rural track program with hospitals that are designated rural based on the most recent geographical location delineations adopted by CMS. (ii) Effective October 1, 2014, if an urban hospital started a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and, during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) and subject to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 paragraph (k)(7)(iii) of this section for the rural track programs started prior to the adoption of such new OMB standards for delineating statistical areas. (iii) Effective October 1, 2014, if an urban hospital started a rural track training program under the provisions of this paragraph (k) with a hospital located in a rural area and that rural area subsequently becomes an urban area due to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, regardless of whether the redesignation of the rural hospital occurs during the 3-year period that is used to calculate the urban hospital’s rural track FTE limit, or after the 3-year period used to calculate the urban hospital’s rural track FTE limit, the urban hospital may continue to adjust its FTE resident limit in accordance with this paragraph (k) based on the rural track programs started prior to the change in the hospital’s geographic designation. In order for the urban hospital to receive or use the adjustment to its FTE resident cap for training FTE residents in the rural track residency program that was started prior to the most recent OMB standards for delineating statistical areas adopted by CMS, one of the following two conditions must be met by the end of a period that begins when the most recent OMB standards for delineating statistical areas are adopted by CMS and continues through the end of the second residency training year following the date the most recent OMB delineations are adopted by CMS: the hospital that has been redesignated from rural to urban must reclassify as rural under § 412.103 of this chapter, for purposes of IME only; or the urban hospital must find a new site that is geographically rural consistent with the most recent geographical location delineations adopted by CMS. In order to receive an adjustment to its FTE resident cap for an additional new rural track residency program, the urban hospital must participate in a rural track program with sites that are geographically rural based on the most recent geographical location delineations adopted by CMS. * * * * * PART 415—SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS 37. The authority citation for Part 415 continues to read as follows: ■ PO 00000 Frm 00506 Fmt 4701 Sfmt 4700 Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Pub. L. 106–113 (113 Stat. 1501A–332). 38. Section 415.70 is amended by revising paragraph (b) to read as follows: ■ § 415.70 Limits on compensation for physician services in providers. * * * * * (b) Methodology for establishing limits. (1) For cost reporting periods beginning before January 1, 2015. CMS establishes a methodology for determining annual reasonable compensation equivalency limits and, to the extent possible, considers average physician incomes by specialty and type of location using the best available data. (2) For cost reporting periods beginning on or after January 1, 2015. CMS establishes a methodology for determining annual reasonable compensation equivalency limits and, to the extent possible, considers average physician incomes by specialty using the best available data. * * * * * PART 422—MEDICARE ADVANTAGE PROGRAM 39. The authority citation for Part 422 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 40. Section 422.300 is revised to read as follows: ■ § 422.300 Basis and scope. This subpart is based on sections 1106, 1128J(d), 1853, 1854, and 1858 of the Act. It sets forth the rules for making payments to Medicare Advantage (MA) organizations offering local and regional MA plans, including calculation of MA capitation rates and benchmarks, conditions under which payment is based on plan bids, adjustments to capitation rates (including risk adjustment), collection of risk adjustment data, conditions for use and disclosure of risk adjustment data, and other payment rules. See § 422.458 in subpart J for rules on risk sharing payments to MA regional organizations. ■ 41. Section 422.310 is amended by revising paragraph (f) to read as follows: § 422.310 Risk adjustment data. * * * * * (f) Use and release of data. (1) CMS use of data. CMS may use the data described in paragraphs (a) through (d) of this section for the following purposes: E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (i) To determine the risk adjustment factors used to adjust payments, as required under §§ 422.304(a) and (c); (ii) To update risk adjustment models; (iii) To calculate Medicare DSH percentages; (iv) To conduct quality review and improvement activities; (v) For Medicare coverage purposes; (vi) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related research; (vii) For activities to support the administration of the Medicare program; (viii) For activities conducted to support program integrity; and (ix) For purposes authorized by other applicable laws. (2) CMS release of data. Regarding data described in paragraphs (a) through (d) of this section, CMS may release the minimum data it determines is necessary for one or more of the purposes listed in paragraph (f)(1) of this section to other HHS agencies, other Federal executive branch agencies, States, and external entities in accordance with the following: (i) Applicable Federal laws; (ii) CMS data sharing procedures; (iii) Subject to the protection of beneficiary identifier elements and beneficiary confidentiality, including— (A) A prohibition against public disclosure of beneficiary identifying information; (B) Release of beneficiary identifying information to other HHS agencies, other Federal executive branch agencies, and States only when such information is needed; and (C) Release of beneficiary identifying information to external entities only to the extent needed to link datasets. (iv) Subject to the aggregation of dollar amounts reported for the associated encounter to protect commercially sensitive data. (v) Risk adjustment data other than data described in paragraphs (f)(2)(iii) and (f)(2)(iv) of this section will be released without the redaction or aggregation described in paragraphs (f)(2)(iii) and (f)(2)(iv) of this section, respectively. (3) Risk adjustment data will not become available for release under this paragraph (f) unless— (i) The risk adjustment reconciliation for the applicable payment year has been completed; (ii) CMS determines that data release is necessary under paragraph (f)(1)(vi) of this section for emergency preparedness purposes before reconciliation; or VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (iii) CMS determines that extraordinary circumstances exist to release the data before reconciliation. * * * * * PART 424—CONDITIONS FOR MEDICARE PAYMENT 42. The authority citation for Part 424 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 43. Section 424.11 is amended by revising paragraph (d)(5) to read as follows: ■ § 424.11 General procedures. * * * * * (d) * * * (5) For all inpatient hospital services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. * * * * * ■ 44. Section 424.15 is amended by revising paragraph (b) to read as follows: § 424.15 Requirements for inpatient CAH services. * * * * * (b) Certification begins with the order for inpatient admission. All certification requirements must be completed, signed, and documented in the medical record no later than 1 day before the date on which the claim for payment for the inpatient CAH service is submitted. * * * * * PART 485—CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS 45. The authority citation for Part 485 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 46. Section 485.610 is amended by revising paragraph (b) introductory text and adding a new paragraph (b)(5) to read as follows: ■ § 485.610 Conditions of participation: Status and location. * * * * * (b) Standard: Location in a rural area or treatment as rural. The CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this section or the requirements of paragraph (b)(3), (b)(4), or (b)(5) of this section. * * * * * (5) Effective on or after October 1, 2014, for a period of 2 years beginning with the effective date of the most recent Office of Management and PO 00000 Frm 00507 Fmt 4701 Sfmt 4700 50359 Budget (OMB) standards for delineating statistical areas adopted by CMS, the CAH no longer meets the location requirements in either paragraph (b)(1) or (b)(2) of this section and is located in a county that, prior to the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, was located in a rural area as defined by OMB, but under the most recent OMB standards for delineating statistical areas adopted by CMS and the most recent Census Bureau data, is located in an urban area. * * * * * PART 488—SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES 47. The authority citation for Part 488 continues to read as follows: ■ Authority: Secs. 1102, 1128I, and 1871 of the Social Security Act (42 U.S.C. 1302, 1320a–7j, and 1395(hh)); Pub. L. 110–149, 121 Stat. 1819. 48. Section 488.61 is amended by— a. Revising paragraphs (a)(4) and (c)(3). ■ b. Adding new paragraphs (f), (g), and (h). The revisions and additions read as follows: ■ ■ § 488.61 Special procedures for approval and re-approval of organ transplant centers. * * * * * (a) * * * (4) CMS will consider mitigating factors in accordance with paragraphs (f), (g), and (h) of this section. * * * * * (c) * * * (3) CMS will consider mitigating factors in accordance with paragraphs (f), (g), and (h) of this section. * * * * * (f) Consideration of mitigating factors in initial approval and re-approval survey, certification, and enforcement actions for transplant centers. (1) Factors. Except for situations of immediate jeopardy or deficiencies other than failure to meet requirements of § 488.80 or § 488.82, CMS will consider such mitigating factors as may be appropriate in light of the nature of the deficiency and circumstances, including (but not limited to) the following, in making a decision of initial and re-approval of a transplant center that does not meet the data submission, clinical experience, or outcome requirements: (i) The extent to which outcome measures are not met or exceeded; (ii) Availability of Medicare-approved transplant centers in the area; E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50360 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations (iii) Extenuating circumstances (for example, natural disaster) that have a temporary effect on meeting the conditions of participation; (iv) Program improvements that substantially address root causes of graft failures or patient deaths, that have been implemented and institutionalized on a sustainable basis, and that are supported by outcomes more recent than the latest available SRTR report, for which there is a sufficient post-transplant patient and graft survival period and a sufficient number of transplants such that CMS finds that the program demonstrates present-day compliance with the requirements at § 482.80(c)(2)(ii)(C) or § 482.82(c)(2)(ii)(C) of this chapter; (v) Whether the program has made extensive use of innovative transplantation practices relative to other transplant programs, such as a high rate of transplantation of individuals who are highly sensitized or children who have undergone a Fontan procedure compared to most other transplant programs, where CMS finds that the innovative practices are supported by evidence-based published research literature or nationally recognized standards or Institution Review Board (IRB) approvals, and the SRTR risk-adjustment methodology does not take the relevant key factors into consideration; and (vi) Whether the program’s performance, based on the OPTN method of calculating patient and graft survival, is within the OPTN’s thresholds for acceptable performance and does not flag OPTN performance review under the applicable OPTN policy. (2) Content. A request for consideration of mitigating factors must include sufficient information to permit an adequate review and understanding of the transplant program, the factors that have contributed to outcomes, program improvements or innovations that have been implemented or planned, and in the case of natural disasters, the recovery actions planned. Examples of information to be submitted with each request include (but are not limited to) the following: (i) The name and contact information for the transplant hospital and the names and roles of key personnel of the transplant program; (ii) The type of organ transplant program(s) for which approval is requested; (iii) The conditions of participation that the program does not meet for which the transplant center is requesting CMS’ review for mitigating factors; VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (iv) The program’s organizational chart with full-time equivalent levels, roles, and structure for reporting to hospital leadership; (v) For applications involving substandard patient or graft survival, the rationale and supporting evidence for CMS’ review includes, but is not limited to— (A) Root Cause Analysis for patient deaths and graft failures, including factors the program has identified as likely causal or contributing factors for patient deaths and graft failures; (B) Program improvements that have been implemented and improvements that are planned; (C) Patient and donor/organ selection criteria and evaluation protocols, including methods for pre-transplant patient evaluation by cardiologists, hematologists, nephrologists, and psychiatrists or psychologists to the extent applicable; (D) Waitlist management protocols and practices relevant to outcomes; (E) Pre-operative management protocols and practices; (F) Immunosuppression/infection prophylaxis protocols; (G) Post-transplant monitoring and management protocols and practices; (H) Quality Assessment and Performance Improvement (QAPI) Program meeting minutes from the most recent four meetings and attendance rosters from the most recent 12 months; (I) Quality dashboard and other performance indicators; and (J) The most recent data regarding transplants that have been made and for outcomes in terms of both patient survival and graft survival; (vi) For mitigating factors requests based on innovative practice: (A) A description of the innovations that have been implemented and identification of the specific cases for which the innovative practices are relevant so as to enable the patient and graft survival data for such cases to be compared with all other transplants for at least the period covered by the latest available SRTR report. (B) The literature, research, or other evidentiary basis that supports consideration of the practice(s) as innovative. (vii) For requests based on natural disasters or public health emergency: (A) A description of the disaster or emergency, the specific impact on the program, the time periods of the event(s) and of its immediate recovery aftermath; (B) Identification of the transplants that occurred during the period for which the request is being made; and (C) The approximate date when the program believes it substantially PO 00000 Frm 00508 Fmt 4701 Sfmt 4700 recovered from the event(s), or believes it will recover if substantial recovery has not been accomplished at the time of the request. (3) Timing. Within 10 days after CMS has issued formal written notice of a condition-level deficiency to the program, CMS must receive notification of the program’s intent to seek mitigating factors approval or reapproval, and receive all information for consideration of mitigating factors within 120 days of the CMS written notification for a deficiency due to data submission, clinical experience or outcomes at § 482.80 or § 482.82 of this chapter. Failure to meet these timeframes may be the basis for denial of mitigating factors. However, CMS may permit an extension of the timeline for good cause, such as a declared public health emergency. (g) Results of mitigating factors review. (1) Actions. Upon review of the request to consider mitigating factors, CMS may take the following actions: (i) Approve initial approval or reapproval of a program’s Medicare participation based upon approval of mitigating factors; (ii) Deny the program’s request for Medicare approval or re-approval based on mitigating factors. (iii) Offer a time-limited Systems Improvement Agreement, in accordance with paragraph (h) of this section, when a transplant program has waived its appeal rights, has implemented substantial program improvements that address root causes and are institutionally supported by the hospital’s governing body on a sustainable basis, and has requested more time to design or implement additional improvements or demonstrate compliance with CMS outcome requirements. Upon completion of the Systems Improvement Agreement or a CMS finding that the hospital has failed to meet the terms of the Agreement, CMS makes a final determination of whether to approve or deny a program’s request for Medicare approval or re-approval based on mitigating factors. A Systems Improvement Agreement follows the process specified in paragraph (h) of this section. (2) Limitation. CMS will not approve any program with a condition-level deficiency. However, CMS may approve a program with a standard-level deficiency upon receipt of an acceptable plan of correction. (h) Transplant Systems Improvement Agreement. A Systems Improvement Agreement is a binding agreement, entered into voluntarily by the hospital E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations and CMS, through which CMS extends a prospective Medicare termination date and offers the program additional time to achieve compliance with the conditions of participation, contingent on the hospital’s agreement to participate in a structured regimen of quality improvement activities, demonstrate improved outcomes, and waive the right to appeal termination based on the identified deficiency or deficiencies (that led to the Agreement) in consideration for more time to demonstrate compliance. In some cases, transplant programs may enter a period of inactivity—voluntarily, or imposed as a condition of the Systems Improvement Agreement. (1) Content. In exchange for the additional time to initiate or continue activities to achieve compliance with the conditions of participation, the hospital must agree to a regimen of specified activities, including (but not limited to) all of the following: (i) Patient notification about the degree and type of noncompliance by the program, an explanation of what the program improvement efforts mean for patients, and financial assistance to defray the out-of-pocket costs of copayments and testing expenses for any wait-listed individual who wishes to be listed with another program; (ii) An external independent peer review team that conducts an onsite assessment of the program. The peer review must include— (A) Review of policies, staffing, operations, relationship to hospital services, and factors that contribute to program outcomes; (B) Suggestions for quality improvements the hospital should consider; (C) Both verbal and written feedback provided directly to the hospital; (D) Verbal debriefing provided directly to CMS; neither the hospital nor the peer review team is required to provide a written report to CMS; and (E) Onsite review by a multidisciplinary team that includes a transplant surgeon with expertise in the relevant organ type(s), a transplant administrator, an individual with expertise in transplant QAPI systems, a social worker or psychologist or psychiatrist, and a specialty physician with expertise in conditions particularly relevant to the applicable organ types(s) such as a cardiologist, nephrologist, or hepatologist. Except for the transplant surgeon, CMS may permit substitution of one type of expertise for another individual who has expertise particularly needed for the type of challenges experienced by the program, such as substitution of an infection VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 control specialist in lieu of, or in addition to, a social worker; (iii) An action plan that addresses systemic quality improvements and is updated after the onsite peer review; (iv) An onsite consultant whose qualifications are approved by CMS, and who provides services for 8 days per month on average for the duration of the agreement, except that CMS may permit a portion of the time to be spent offsite and may agree to fewer consultant days each month after the first 3 months of the Systems Improvement Agreement; (v) A comparative effectiveness analysis that compares policies, procedures, and protocols of the transplant program with those of other programs in areas of endeavor that are relevant to the center’s current quality improvement needs; (vi) Development of increased proficiency, or demonstration of current proficiency, with patient-level data from the Scientific Registry of Transplant Recipients and the use of registry data to analyze outcomes and inform quality improvement efforts; (vii) A staffing analysis that examines the level, type, training, and skill of staff in order to inform transplant center efforts to ensure the engagement and appropriate training and credentialing of staff; (viii) Activities to strengthen performance of the Quality Assessment and Performance Improvement Program to ensure full compliance with the requirements of § 482.96 and § 482.21 of this chapter; (ix) Monthly (unless otherwise specified) reporting and conference calls with CMS regarding the status of programmatic improvements, results of the deliverables in the Systems Improvement Agreement, and the number of transplants, deaths, and graft failures that occur within 1 year posttransplant; and (x) Additional or alternative requirements specified by CMS, tailored to the transplant program type and circumstances. CMS may waive the content elements at paragraphs (h)(1)(v), (h)(1)(vi), (h)(1)(vii), or (h)(1)(viii) of this section if it finds that the program has already adequately conducted the activity, the program is already proficient in the function, or the activity is clearly inapplicable to the deficiencies that led to the Agreement. (2) Timeframe. A Systems Improvement Agreement will be established for up to a 12-month period, subject to CMS’ discretion to determine if a shorter timeframe may suffice. At the hospital’s request, CMS may extend PO 00000 Frm 00509 Fmt 4701 Sfmt 4700 50361 the agreement for up to an additional 6month period. Dated: July 24, 2014. Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services. Dated: July 29, 2014. Sylvia M. Burwell, Secretary, Department of Health and Human Services. Note: The following Addendum and Appendixes will not appear in the Code of Federal Regulations. Addendum—Schedule of Standardized Amounts, Update Factors, Rate-ofIncrease Percentages Effective with Cost Reporting Periods Beginning on or after October 1, 2014, and Payment Rates for LTCHs Effective for Discharges Occurring on or after October 1, 2014 I. Summary and Background In this Addendum, we are setting forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capitalrelated costs for FY 2015 for acute care hospitals. We also are setting forth the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS for FY 2015. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-ofincrease ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this final rule, we are establishing the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS that are effective for cost reporting periods beginning on or after October 1, 2014. In addition, we are setting forth a description of the methods and data we used to determine the standard Federal rate that will be applicable to Medicare LTCHs for FY 2015. In general, except for SCHs, MDHs and hospitals located in Puerto Rico, for FY 2015, each hospital’s payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate (including, as discussed in section IV.F. of the preamble of this final rule, E:\FR\FM\22AUR2.SGM 22AUR2 50362 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations uncompensated care payments under section 1886(r)(2) of the Act); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge. We note that, as discussed in section IV.G. of the preamble of this final rule, section 1106 of Public Law 113–67, enacted on December 26, 2013, extended the MDH program from the end of FY 2013 (that is, for discharges occurring after September 30, 2013) through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of Public Law 113–93, enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Prior to the enactment of Public Law 113–67, the MDH program was only to be in effect through the end of FY 2013. Under current law, the MDH program will expire for discharges on or after April 1, 2015. Under section 1886(d)(5)(G) of the Act, MDHs historically have been paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever was higher. Section 5003(c) of Public Law 109–171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate. Further, based on the provisions of section 5003(d) of Public Law 109–171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. For hospitals located in Puerto Rico, the payment per discharge is based on the sum of 25 percent of an updated Puerto Rico-specific rate based on average costs per case of Puerto Rico hospitals for the base year and 75 percent of the Federal national rate. (We refer readers to section II.D.2. of this Addendum for a complete description.) As discussed below in section II. of this Addendum, we are making changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2015. In section III. of this Addendum, we discuss our policy changes for determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2015. In section IV. of this Addendum, we are setting forth our changes for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2015. In section V. of this Addendum, we discuss policy changes for determining the standard Federal rate for LTCHs paid under the LTCH PPS for FY 2015. The tables to which we refer in the preamble of this final rule are listed in section VI. of this Addendum and are available via the Internet on the CMS Web site. II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2015 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and Hospital submitted quality data and is a meaningful EHR User FY 2015 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Market Basket Rate-of-Increase ................................................................ Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act .................................................................. Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act .................................................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .................... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ............. Applicable Percentage Increase Applied to Standardized Amount ........... • An update of 2.2 percent to the Puerto Rico-specific standardized amount (that is, the FY 2015 estimate of the market basket rate-of-increase of 2.9 percent less an adjustment of 0.5 percentage point for MFP and less 0.2 percentage point), in accordance with VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Hospital submitted quality data and is NOT a meaningful EHR User Frm 00510 Fmt 4701 Hospital did NOT submit quality data and is a meaningful EHR User Hospital did NOT submit quality data and is NOT a meaningful EHR User 2.9 2.9 2.9 2.9 0.0 0.0 ¥0.725 ¥0.725 ¥0.725 ¥0.5 ¥0.2 1.475 0.0 ¥0.5 ¥0.2 1.475 ¥0.725 ¥0.5 ¥0.2 0.75 0.0 ¥0.5 ¥0.2 2.2 section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of Public Law 108–173, which sets the update to the Puerto Rico-specific standardized amount equal to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act. PO 00000 subsequent fiscal years is set forth under § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth under §§ 412.211 and 412.212. Below we discuss the factors we are using for determining the prospective payment rates for FY 2015. In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the Internet) reflect— • Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act. • The labor-related share that is applied to the standardized amounts and Puerto Rico-specific standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the national standardized amount. We refer readers to section IV.B. of the preamble of this final rule for a complete discussion on the FY 2015 inpatient hospital update. Below is a table with these four options: Sfmt 4700 • An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act. • An adjustment to ensure the wage index changes are budget neutral, as E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations provided for under section 1886(d)(3)(E)(i) of the Act. We note that section 1886(d)(3)(E)(i) of the Act requires that when we compute such budget neutrality, we assume that the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62 percent laborrelated share in certain circumstances) had not been enacted. • An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for under section 1886(d)(8)(D) of the Act, by removing the FY 2014 budget neutrality factor and applying a revised factor. • As discussed below and in section III. of the preamble of this final rule, an adjustment to offset the cost of the transitional wage index provisions provided by CMS as a result of the adoption of the new OMB labor market area delineations. • An adjustment to ensure the effects of the rural community hospital demonstration program required under section 410A of Public Law 108–173, as amended by sections 3123 and 10313 of Public Law 111–148, which extended the demonstration program for an additional 5 years, are budget neutral as required under section 410A(c)(2) of Public Law 108–173. • An adjustment to remove the FY 2014 outlier offset and apply an offset for FY 2015, as provided for under section 1886(d)(3)(B) of the Act. • As discussed below and in section II.D. of the preamble of this final rule, a recoupment to meet the requirements of section 631 of ATRA to adjust the standardized amount to offset the estimated amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. Beginning in FY 2008, we applied the budget neutrality adjustment for the rural floor to the hospital wage indexes rather than the standardized amount. As we did for FY 2014, for FY 2015, consistent with current law, we are continuing to apply the rural floor budget neutrality adjustment to hospital wage indexes rather than the standardized amount. Also, consistent with section 3141 of the Affordable Care Act, instead of applying a State level rural floor budget neutrality adjustment to the wage index, we are applying a uniform, national budget neutrality adjustment to the FY 2015 wage index for the rural floor. We note that, in section III.G.2.b. of the preamble to this final rule, we are extending the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Therefore, for FY 2015, in this final rule, we are continuing to include the imputed floor (calculated under the original and alternative methodologies) in calculating the uniform, national rural floor budget neutrality adjustment, which will be reflected in the FY 2015 wage index. A. Calculation of the Adjusted Standardized Amount 1. Standardization of Base-Year Costs or Target Amounts In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. For Puerto Rico hospitals, the Puerto Rico-specific standardized amount is based on per discharge averages of adjusted target amounts from a base period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d)(9) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates. Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include casemix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of low-income patients. In accordance with section 1886(d)(3)(E) of the Act, the Secretary estimates, from time-to-time, the proportion of hospitals’ costs that are attributable to wages and wage-related costs. In general, the standardized amount is divided into labor-related and nonlabor-related amounts; only the proportion considered to be the laborrelated amount is adjusted by the wage index. Section 1886(d)(3)(E) of the Act requires that 62 percent of the standardized amount be adjusted by the wage index, unless doing so would result in lower payments to a hospital PO 00000 Frm 00511 Fmt 4701 Sfmt 4700 50363 than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this provision to the labor-related share for hospitals located in Puerto Rico.) For FY 2015, we are using the national and Puerto Rico-specific laborrelated and nonlabor-related shares established for FY 2014, using the FY 2010-based hospital market basket. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to time, the proportion of payments that are labor-related: ‘‘[T]he Secretary shall adjust the proportion, (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs, of the DRG prospective payment rates . . . .’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ For FY 2015, as discussed in section III. of the preamble of this final rule, we are continuing to use a labor-related share of 69.6 percent for the national standardized amounts, and 63.2 percent for the Puerto Ricospecific standardized amount, if the hospital has a wage index value that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are applying the wage index to a laborrelated share of 62 percent of the national standardized amount for all IPPS hospitals whose wage index values are less than or equal to 1.0000. For all IPPS hospitals whose wage indexes are greater than 1.0000, we are applying the wage index to a labor-related share of 69.6 percent of the national standardized amount. For FY 2015, all Puerto Rico hospitals have a wage index value that is less than 1.0000 because the average hourly rate of every hospital in Puerto Rico divided by the national average hourly rate (the sum of all salaries and hours for all hospitals in the 50 United States and Puerto Rico) results in a wage index that is below 1.0000. However, when we divide the average hourly rate of every hospital located in Puerto Rico by the Puerto Rico-specific national average hourly rate (the sum of all salaries and hours for all hospitals located only in Puerto Rico), we determine a Puerto Rico-specific wage index value for some hospitals that is either above, or below 1.0000, depending on the hospital’s location within Puerto Rico. Therefore, for hospitals located in Puerto Rico, we are applying a labor-related share of 63.2 percent if its Puerto Rico-specific wage index is greater than 1.0000. For hospitals located in Puerto Rico whose Puerto Rico-specific wage index values are less than or equal to 1.0000, we are applying a labor share of 62 percent. E:\FR\FM\22AUR2.SGM 22AUR2 50364 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations The standardized amounts for operating costs appear in Tables 1A, 1B, and 1C that are listed and published in section VI. of the Addendum to this final rule and are available via the Internet on the CMS Web site. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 2. Computing the National Average Standardized Amount and Puerto RicoSpecific Standardized Amount Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Section 1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific urban and rural area rates. Accordingly, we are calculating the FY 2015 national average standardized amount and Puerto Ricospecific standardized amount irrespective of whether a hospital is located in an urban or rural location. 3. Updating the National Average Standardized Amount and Puerto RicoSpecific Standardized Amount Section 1886(b)(3)(B) of the Act specifies the applicable percentage increase used to update the standardized amount for payment for inpatient hospital operating costs. We note that, in compliance with section 404 of the MMA, in this final rule, we are using the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2015 (which replaced the FY 2006-based IPPS operating and capital market baskets in FY 2014). As discussed in section IV.B. of the preamble of this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are reducing the FY 2015 applicable percentage increase (which is based on IHS Global Insight, Inc.’s (IGI’s) second quarter 2014 forecast of the FY 2010based IPPS market basket) by the MFP adjustment (the 10-year moving average of MFP for the period ending FY 2015) of 0.5 percentage point, which is calculated based on IGI’s second quarter 2014 forecast. In addition, in accordance with section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are further updating the standardized amount for FY 2015 by the estimated market basket percentage increase less 0.2 percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of the Act, as added and amended by sections 3401(a) and 10319(a) of the Affordable Care Act, further state that these adjustments may result in the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applicable percentage increase being less than zero. The percentage increase in the market basket reflects the average change in the price of goods and services comprising routine, ancillary, and special care unit hospital inpatient services. Based on IGI’s 2014 second quarter forecast of the hospital market basket increase (as discussed in Appendix B of this final rule), the most recent forecast of the hospital market basket increase for FY 2015 is 2.9 percent. As discussed above, for FY 2015, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, there are four possible applicable percentage increases that could be applied to the standardized amount. We refer readers to section IV. of the preamble of this final rule for a complete discussion on the FY 2015 inpatient hospital update to the standardized amount. We also refer readers to the table above for the four possible applicable percentage increases that would be applied to update the national standardized amount. The standardized amounts shown in Tables 1A through 1C that are published in section VI. of this Addendum and that are available via the Internet on the CMS Web site reflect these differential amounts. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth under section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are establishing an applicable percentage increase to the Puerto Rico-specific standardized amount of 2.2 percent for FY 2015. Although the update factors for FY 2015 are set by law, we are required by section 1886(e)(4) of the Act to PO 00000 Frm 00512 Fmt 4701 Sfmt 4700 recommend, taking into account MedPAC’s recommendations, appropriate update factors for FY 2015 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our proposed recommendations in the Federal Register for public comment. Our recommendation on the update factors is set forth in Appendix B of this final rule. 4. Other Adjustments to the Average Standardized Amount As in the past, we are adjusting the FY 2015 standardized amount to remove the effects of the FY 2014 geographic reclassifications and outlier payments before applying the FY 2015 updates. We then apply budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2015 payment policies. We do not remove the prior year’s budget neutrality adjustments for reclassification and recalibration of the DRG relative weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year’s adjustment, we would not satisfy these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS–DRG classifications, recalibration of the MS– DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. In order to appropriately estimate aggregate payments in our modeling, we make several inclusions and exclusions so that the appropriate universe of claims and charges are included. We discuss IME Medicare Advantage payment amounts, fee-for-service only claims, and charges for anti-hemophilic blood factor and organ acquisition below. Consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare Advantage payments are made to IPPS hospitals under section 1886(d) of the Act, we believe these payments must be part of these budget neutrality calculations. However, we note that it is E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations not necessary to include Medicare Advantage IME payments in the outlier threshold calculation or the outlier offset to the standardized amount because the statute requires that outlier payments be not less than 5 percent nor more than 6 percent of total ‘‘operating DRG payments,’’ which does not include IME and DSH payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments. In addition, consistent with the methodology in the FY 2012 IPPS/LTCH PPS final rule, in order to ensure that we capture only fee-for-service claims, we are only including claims with a ‘‘Claim Type’’ of 60 (which is a field on the MedPAR file that indicates a claim is a fee-for-service claim). Finally, consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the MedPAR file and removed pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of ‘‘3’’ for blood clotting with a revenue code of ‘‘0636’’ from the covered charge field for the budget neutrality adjustments. We also removed organ acquisition charges from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS. The Bundled Payments for Care Improvement (BPCI) initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. For additional information on the BPCI initiative, we refer readers to the CMS Center for Medicare and Medicaid Innovation’s Web site at: https:// innovation.cms.gov/initiatives/BundledPayments/. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343), for FY 2013 and subsequent fiscal years, we finalized a methodology to treat hospitals that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process (which includes VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 recalibration of the MS–DRG relative weights, ratesetting, calculation of the budget neutrality factors, and the impact analysis) without regard to a hospital’s participation within these bundled payment models (that is, as if they are not participating in those models under the BPCI initiative). Therefore, for FY 2015, as discussed in section II.H.4. of the preamble to this final rule, as we proposed, we are continuing to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer readers to the FY 2013 IPPS/ LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals in the BPCI initiative in our ratesetting process. The Affordable Care Act established the Hospital Readmissions Reduction Program and the Hospital VBP Program which adjust payments to certain IPPS hospitals beginning with discharges on or after October 1, 2012. Because the adjustments made under these programs affect the estimation of aggregate IPPS payments, in this final rule, consistent with our methodology established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that it is appropriate to include adjustments for these programs within our budget neutrality calculations. We discuss the treatment of these two programs in the context of budget neutrality adjustments below. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act are reduced to account for certain excess readmissions. Under the Hospital Readmissions Reduction Program, for discharges beginning on October 1, 2012 discharges from an ‘‘applicable hospital’’ are paid at an amount equal to the product of the ‘‘base operating DRG payment amount’’ and an ‘‘adjustment factor’’ that accounts for excess readmissions for the hospital for the fiscal year plus any applicable add-on payments. We refer readers to section IV.H. of the preamble of this final rule for full details of our implementation of and FY 2015 policy changes to the Hospital Readmissions Reduction Program. We also note that the Hospital Readmissions Reduction Program provided for under section 1886(q) of the Act is not budget neutral. Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which, for discharges beginning on October 1, 2012, value- PO 00000 Frm 00513 Fmt 4701 Sfmt 4700 50365 based incentive payments are made in a fiscal year to eligible subsection (d) hospitals that meet performance standards established for a performance period for that fiscal year. As specified under section 1886(o)(7)(B)(i) of the Act, these value-based incentive payments are funded by a reduction applied to each eligible hospital’s base-operating DRG payment amount, for each discharge occurring in the fiscal year. As required by section 1886(o)(7)(A) of the Act, the total amount of allocated funds available for value-based incentive payments with respect to a fiscal year is equal to the total amount of base-operating DRG payment reductions, as estimated by the Secretary. In a given fiscal year, hospitals may earn a value-based incentive payment amount for a fiscal year that is greater than, equal to, or less than the reduction amount, based on their performance on quality measures under the Hospital VBP Program. Thus, the Hospital VBP Program is estimated to have no net effect on overall payments. We refer readers to section IV.I. of the preamble of this final rule for full details regarding the Hospital VBP Program. Both the hospital readmissions payment adjustment (reduction) and the hospital VBP payment adjustment (redistribution) are applied on a claimby-claim basis by adjusting, as applicable, the base-operating DRG payment amount for individual subsection (d) hospitals, which affects the overall sum of aggregate payments on each side of the comparison within the budget neutrality calculations. For example, when we calculate the budget neutrality factor for MS–DRG reclassification and recalibration of the relative weights, we compare aggregate payments estimated using the prior year’s GROUPER and relative weights to estimated payments using the new GROUPER and relative weights. (We refer readers to section II.A.4.a. of this Addendum for full details.) Other factors, such as the DSH and IME payment adjustments, are the same on both sides of the comparison because we are only seeking to ensure that aggregate payments do not increase or decrease as a result of the changes of MS–DRG reclassification and recalibration. In order to properly determine aggregate payments on each side of the comparison, as we did for FY 2014, for FY 2015 and subsequent years, we are continuing to apply the hospital readmissions payment adjustment and the hospital VBP payment adjustment on each side of the comparison, consistent with the methodology that E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50366 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That is, we are applying the readmissions payment adjustment factor and the hospital VBP payment adjustment factor on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. For the purpose of calculating the FY 2015 readmissions payment adjustment factors, we are using excess readmission ratios and aggregate payments for excess readmissions based on admissions from the prior fiscal year’s applicable period because hospitals have had the opportunity to review and correct these data before the data were made public under the policy we adopted regarding the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act. For FY 2015, in this final rule, we are calculating the readmissions payment adjustment factors using excess readmission ratios and aggregate payments for excess readmissions based on admissions from the finalized applicable period for FY 2015 as hospitals have had the opportunity to review and correct these data under our policy regarding the reporting of hospital-specific readmission rates consistent with section 1886(q)(6) of the Act. We discuss our policy regarding the reporting of hospital-specific readmission rates for FY 2015 in section IV.H.3.f. of the preamble of this final rule. (For additional information on our general policy for the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53400).) In addition, for FY 2015, in this final rule, for the purpose of modeling aggregate payments when determining all budget neutrality factors, we are using proxy hospital VBP payment adjustment factors for FY 2015 that are based on data from a historical period because hospitals have not yet had an opportunity to review and submit corrections for their data from the FY 2015 performance period. (For additional information on our policy regarding the review and correction of hospital-specific measure rates under the Hospital VBP Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 through 53581), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74544 through 74547), and the Hospital Inpatient VBP final rule (76 FR 26534 through 26536).) VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 The Affordable Care Act also established section 1886(r) of the Act, which modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments will receive an empirically justified Medicare DSH payment equal to 25 percent of the amount that would previously have been received under the current statutory formula set forth under section 1886(d)(5)(F) of the Act governing the Medicare DSH payment adjustment. In accordance with section 1886(r)(2) of the Act, the remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, will be available to make additional payments to Medicare DSH hospitals based on their share of the total amount of uncompensated care reported by Medicare DSH hospitals for a given time period. In order to properly determine aggregate payments on each side of the comparison for budget neutrality, prior to FY 2014, we included estimated Medicare DSH payments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. To do this for FY 2015 and subsequent years (as we did for FY 2014), we are including estimated empirically justified Medicare DSH payments that will be paid in accordance with section 1886(r)(1) of the Act and estimates of the additional uncompensated care payments made to hospitals receiving Medicare DSH payment adjustments as described by section 1886(r)(2) of the Act. That is, we are considering estimated empirically justified Medicare DSH payments at 25 percent of what would otherwise have been paid, and also the estimated additional uncompensated care payments for hospitals receiving Medicare DSH payment adjustments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. We note that, when calculating total payments for budget neutrality, to determine total payments for SCHs we model total hospital-specific rate payments and total Federal rate payments and then include whichever one of the total payments is greater. As discussed in section IV.F. of the preamble to this final rule and below, we are continuing the FY 2014 finalized methodology under which we will take PO 00000 Frm 00514 Fmt 4701 Sfmt 4700 into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we are including estimated uncompensated care payments in this comparison. Similarly, for MDHs, as discussed in section IV. of the preamble to this final rule, when computing payments under the Federal national rate plus 75 percent of the difference between the payments under the Federal national rate and the payments under the updated hospitalspecific rate, we are continuing to take into consideration uncompensated care payments in the computation of payments under the Federal rate and the hospital-specific rate for MDHs. Also, for FY 2015, as of the time of development of this final rule, CMS has yet to finalize a list of hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. Therefore, we are not including this adjustment to the standardized amount (for those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for budget neutrality for FY 2015. CMS intends to release a final list of hospitals that are not meaningful EHR users in September 2014. Hospitals identified on this list will be paid based on the applicable standardized amount in Tables 1A and 1B for discharges occurring in FY 2015. We finally note that the wage index value is calculated and assigned to a hospital based on the hospital’s labor market area. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by the Office of Management and Budget (OMB). The current statistical areas used in FY 2014 are based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). For purposes of determining all of the FY 2014 budget neutrality factors, we determined aggregate payments on each side of the comparison for our budget neutrality calculations using wage indexes based on the current CBSAs. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. In order to implement these changes for the IPPS, it was necessary to identify the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations new OMB labor market area delineation for each county and hospital in the country. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index policy based on the new OMB delineations in the FY 2015 IPPS/ LTCH PPS proposed rule. As discussed in section III. of the preamble of this final rule, as we proposed, we are adopting the new OMB labor market area delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. Consistent with our policy to adopt the new OMB delineations, in order to properly determine aggregate payments on each side of the comparison for our budget neutrality calculations, we are using wage indexes based on the new OMB delineations in the determination of all of the budget neutrality factors discussed below (with the exception of the transitional budget neutrality factor and outlier threshold as explained below). We also note that, consistent with past practice as finalized in the FY 2005 IPPS final rule (69 FR 49034), we are not adopting the new OMB delineations themselves in a budget neutral manner. We continue to believe that the revision to the labor market areas in and of itself does not constitute an ‘‘adjustment or update’’ to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV a. Recalibration of MS–DRG Relative Weights and Updated Wage Index— Budget Neutrality Adjustment Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II.H. of the preamble of this final rule, we normalized the recalibrated MS– DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, equating the average case relative weight after recalibration to the average case relative weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Therefore, as we have done in past years, we are making a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. Section 1886(d)(3)(E)(i) of the Act requires that we implement the wage index adjustment in a budget neutral manner. However, section 1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent for hospitals with a wage index less than or equal to 1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, this section of the statute requires that we implement the updates to the wage index in a budget neutral manner, but that our budget neutrality adjustment should not take into account the requirement that we set the laborrelated share for hospitals with wage indexes less than or equal to 1.0000 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage index less than or equal to 1.0000 are paid using a laborrelated share of 62 percent. Consistent with current policy, for FY 2015, we are adjusting 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.F. of the preamble of this final rule. For FY 2015, to comply with the requirement that MS–DRG reclassification and recalibration of the relative weights be budget neutral for the Puerto Rico standardized amount and the hospital-specific rates, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the FY 2014 labor-related share percentages, the new OMB labor market area delineations for FY 2015, the FY 2014 relative weights, and the FY 2014 prereclassified wage data, and applied the FY 2015 hospital readmissions payment adjustments and estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using the FY 2014 labor-related share percentages, the new OMB labor market area delineations for FY 2015, the FY 2015 relative weights, and the FY 2014 prereclassified wage data, and applied the same hospital readmissions payment PO 00000 Frm 00515 Fmt 4701 Sfmt 4700 50367 adjustments and estimated hospital VBP payment adjustments applied above. Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.997543. As discussed in section IV. of this Addendum, we also are applying the MS–DRG reclassification and recalibration budget neutrality factor of 0.997543 to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2014. Comment: Several commenters stated that CMS miscalculated the MS–DRG reclassification and recalibration budget neutrality adjustment factor presented in the proposed rule. The commenters noted that the budget neutrality adjustment factor of 0.992938 presented in the proposed rule was much lower than historical levels. The commenters also noted that, for the last 5 years, the budget neutrality adjustment factor has been between 0.996731 (FY 2011) and 0.998431 (FY 2013). In addition, the commenters informed CMS that they attempted to replicate the calculation of this budget neutrality adjustment factor, but were unable to do so. The commenters added that in May of 2014, CMS posted a revised set of MS–DRG relative weights on the CMS Web site via the Internet because a number of postacute care transfer-adjusted cases for certain MS–DRGs presented in the FY 2015 IPPS/LTCH PPS proposed rule were inadvertently miscalculated. However, the commenters stated that they were still not able to verify the budget neutrality adjustment factor using the updated MS–DRG relative weights. The commenters stated that, by using the revised MS–DRGs, they calculated a revised budget neutrality adjustment factor of 1.000301. The commenters recommended that CMS examine the calculation of the budget neutrality adjustment factor and, if necessary, revise the budget neutrality adjustment factor for the FY 2015 IPPS/ LTCH PPS final rule. One commenter recommended that CMS perform an analysis to confirm whether the proposed MS–DRG reclassification and recalibration budget neutrality adjustment factor is accurate and correct. The commenter also recommended that CMS discuss the results of its analysis in the final rule and afford interested parties a further opportunity to review and comment on the final budget neutrality adjustment factor before it becomes effective on October 1, 2014. Response: We appreciate the commenters’ input. As the commenters requested, we examined the calculation of the budget neutrality adjustment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50368 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations factor presented in the proposed rule. We agree with the commenters that the MS–DRG reclassification and recalibration budget neutrality adjustment factor was calculated incorrectly during the development of the proposed rule due to the inadvertent miscalculation of a number of postacute care transfer-adjusted cases for certain MS–DRGs. Using the updated MS–DRG relative weights, we calculated a revised proposed budget neutrality adjustment factor similar to the factor calculated by the commenters. For FY 2015, in this final rule, using accurate postacute care transfer-adjusted cases for these MS– DRGs, we have calculated a MS–DRG reclassification and recalibration budget neutrality factor of 0.997543, which is consistent with historical levels. In response to the commenters’ concerns regarding verifying the accuracy of the budget neutrality adjustment factor, we announced through information posted via the Internet on the CMS Web site at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/FY2015–IPPSProposed-Rule-Home-Page-Items/ FY2015-IPPS-Proposed-Rule-DataFiles.html that there was an inadvertent miscalculation of a number of postacute care transfer-adjusted cases for certain MS–DRGs. Therefore, after the publication of the FY 2015 IPPS/LTCH PPS proposed rule, we also posted via the Internet on the CMS Web site a revised table of the proposed MS–DRG relative weights for FY 2015. It is our goal to strive for accuracy in regard to our adjustment factor calculations, and we appreciate the commenters’ recognition of the mistake and for pointing out the effects of the miscalculation during the comment period. However, we believe that the 60day comment period affords the public an appropriate opportunity to review and comment on all of the proposals presented throughout the entire FY 2015 IPPS/LTCH PPS proposed rule. We are not changing our proposed policy in calculating this budget neutrality adjustment, but rather are using corrected information. Therefore, we do not believe that an additional opportunity for comment necessary. Comment: The commenter also noted that CMS did not explicitly state which labor-related share percentages were used in the calculation of the MS–DRG reclassification and recalibration budget neutrality adjustment factor. In addition, the commenter did not believe that it was appropriate to use the new OMB delineations in the calculation of the MS–DRG reclassification and recalibration budget neutrality VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 adjustment factor. The commenter requested that CMS address why it is appropriate to apply the new OMB delineations in the MS–DRG reclassification and recalibration budget neutrality adjustment factor and how and whether the new OMB delineations impact the calculation of the final budget neutrality adjustment factor. The commenter also requested that CMS identify which labor-related share percentages were in each component of the payment simulation model used to calculate the final budget neutrality adjustment factor. Response: As discussed in section III.B.(2)(e)(6) of the preamble of this final rule and consistent with past practice (69 FR 49034), we are not adopting the new OMB delineations, in and of themselves, in a budget neutral manner. However, we are adopting the transitional policies we have effectuated in a budget neutral manner as we describe below. We do not believe that the revision to the labor market areas in and of itself constitutes an ‘‘adjustment or update’’ to the adjustment for area wage differences, as provided under section 1886(d)(3)(E) of the Act. Therefore, the new OMB delineations did not impact the calculation of the final budget neutrality adjustment factor. Also, as stated in the FY 2015 IPPS/LTCH PPS proposed rule and above, consistent with our policy to adopt the new OMB delineations, in order to properly determine aggregate payments on each side of the comparison for our budget neutrality adjustment factor calculations, we are using wage indexes based on the new OMB delineations in the determination of all of the budget neutrality adjustment factors discussed below (with the exception of the transitional budget neutrality factor and outlier fixed-loss threshold as explained below). We also did not include the laborrelated share percentages used in the calculation of the proposed MS–DRG reclassification and recalibration budget neutrality adjustment factor presented in the proposed rule. For FY 2015, in this final rule, as requested by the commenters, we present the laborrelated share percentages used in the calculation of the budget neutrality adjustment factor in response to public comments we received in the discussion above, which are the same labor-related share percentages used for the proposed rule. In order to meet the statutory requirements that we do not take into account the labor-related share of 62 percent when computing wage index budget neutrality adjustment factor, it PO 00000 Frm 00516 Fmt 4701 Sfmt 4700 was necessary to use a three-step process to comply with the requirements that MS–DRG reclassification and recalibration of the relative weights and the updated wage index and labor-related share have no effect on aggregate payments for IPPS hospitals. Under the first step, we determined an MS- DRG reclassification and recalibration budget neutrality adjustment factor of 0.997543 (by using the same methodology described above to determine the MS–DRG reclassification and recalibration budget neutrality factor for the Puerto Rico standardized amount and hospitalspecific rates). Under the second step, to compute a budget neutrality adjustment factor for wage index and labor-related share percentage changes we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the new OMB labor market area delineations for FY 2015, FY 2015 relative weights and the FY 2014 pre-reclassified wage indexes, applied the FY 2014 laborrelated share of 69.6 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0000), and applied the FY 2015 hospital readmissions payment adjustment and the FY 2015 estimated hospital VBP payment adjustment; and • Aggregate payments using the new OMB labor market area delineations for FY 2015, FY 2015 relative weights and the FY 2015 pre-reclassified wage indexes, applied the labor-related share for FY 2015 of 69.6 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0000), and applied the same FY 2015 hospital readmissions payment adjustments and estimated FY 2015 hospital VBP payment adjustments applied above. In addition, we applied the MS–DRG reclassification and recalibration budget neutrality adjustment factor (derived in the first step) to the payment rates that were used to simulate payments for this comparison of aggregate payments from FY 2014 to FY 2015. By applying this methodology, we determined a budget neutrality adjustment factor of 1.001443 for changes to the wage index. Finally, we multiplied the MS–DRG reclassification and recalibration budget neutrality adjustment factor of 0.997543 (derived in the first step) by the budget neutrality adjustment factor of 1.001443 for changes to the wage index (derived in the second step) to determine the MS–DRG reclassification and recalibration and updated wage index budget neutrality adjustment factor of 0.998982. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV b. Reclassified Hospitals—Budget Neutrality Adjustment Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided for under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account in ‘‘applying any budget neutrality adjustment with respect to such index’’ under section 1886(d)(8)(D) of the Act. To calculate the budget neutrality adjustment factor for FY 2015, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using the FY 2014 labor-related share percentages, the new OMB labor market area delineations for FY 2015, FY 2015 relative weights, and FY 2015 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied the FY 2015 hospital readmissions payment adjustments and the estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using the FY 2014 labor-related share percentages, the new OMB labor market area delineations for FY 2015, FY 2015 relative weights, and FY 2015 wage data after such reclassifications, and applied the same hospital readmissions payment adjustments and the estimated hospital VBP payment adjustments applied above. We note that the reclassifications applied under the second simulation and comparison are those listed in Tables 9A2 and 9C2, which are posted on the CMS Web site. These tables reflect reclassification crosswalks based on the new OMB labor market area delineations for FY 2015, and apply the policies explained in section III. of the preamble to this final rule. Based on these simulations, we calculated a budget neutrality adjustment factor of 0.990406 to ensure that the effects of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 these provisions are budget neutral, consistent with the statute. The FY 2015 budget neutrality adjustment factor was applied to the standardized amount after removing the effects of the FY 2014 budget neutrality adjustment factor. We note that the FY 2015 budget neutrality adjustment reflects FY 2015 wage index reclassifications approved by the MGCRB or the Administrator. c. Rural Floor Budget Neutrality Adjustment Under § 412.64(e)(4), we make an adjustment to the wage index to ensure that aggregate payments after implementation of the rural floor under section 4410 of the BBA (Pub. L. 105– 33) and the imputed floor under § 412.64(h)(4) are equal to the aggregate prospective payments that would have been made in the absence of such provisions. Consistent with section 3141 of the Affordable Care Act and as discussed in section III.G. of the preamble of this final rule and codified at § 412.64(e)(4)(ii), the budget neutrality adjustment for the rural and imputed floor is a national adjustment to the wage index. As noted above and as discussed in section III.G.2.b. of the preamble of this final rule, in the FY 2012 IPPS/LTCH PPS final rule, we extended the imputed floor calculated under the original methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH PPS final rule, we established an alternative methodology for calculating the imputed floor and established a policy that the minimum wage index value for an all-urban state would be the higher of the value determined under the original methodology or the value computed using the alternative methodology (77 FR 53368 through 53369). Consistent with the methodology for treating the imputed floor, similar to the methodology we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we included this alternative methodology for computing the imputed floor index in the calculation of the uniform, national rural floor budget neutrality adjustment for FY 2014. For FY 2015, as discussed in section III.G.2.b. of the preamble of this final rule, we are extending the imputed floor using the higher of the value determined under the original methodology or the alternative methodology for FY 2015. Therefore, in order to ensure that aggregate payments to hospitals are not affected, similar to prior years, we will follow our policy of including the imputed floor in the rural floor budget neutrality adjustment to the wage index. PO 00000 Frm 00517 Fmt 4701 Sfmt 4700 50369 As discussed above, for FY 2015, we are implementing the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective for the FY 2015 IPPS wage index. Therefore, the budget neutrality adjustment for the rural floor and imputed floor will be calculated using the new OMB delineations. Under the OMB delineations used for FY 2014, the imputed floor (both the original methodology and alternative methodology) was applied to New Jersey and Rhode Island because these were the only two all-urban States. Under OMB’s 2010 revised delineations based on Census 2010 data, in addition to New Jersey and Rhode Island, Delaware will become an all-urban state. Therefore, for FY 2015, the imputed floor will be applied to the wage index for hospitals located in New Jersey, Rhode Island, and Delaware. Similar to our calculation in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593 and 51788), the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53689), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50975 through 50976), for FY 2015, we are calculating a national rural Puerto Rico wage index (used to adjust the labor-related share of the national standardized amount for hospitals located in Puerto Rico which receive 75 percent of the national standardized amount) and a rural Puerto Rico-specific wage index (which is used to adjust the labor-related share of the Puerto Ricospecific standardized amount for hospitals located in Puerto Rico that receive 25 percent of the Puerto Ricospecific standardized amount). Because there are no rural Puerto Rico hospitals with established wage data, our calculation of the FY 2015 rural Puerto Rico wage index is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we will use the unweighted average of the wage indexes from all CBSAs (urban areas) that are contiguous (share a border with) to the rural counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under the new OMB labor market area delineations, except for Arecibo, Puerto Rico (CBSA 11640), all other Puerto Rico urban areas are contiguous to a rural area. Therefore, based on our existing policy, the FY 2015 rural Puerto Rico wage index is calculated based on the average of the FY 2015 wage indexes for the following urban areas: Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660), San German, PR (CBSA 41900) and San JuanCarolina-Caguas, PR (CBSA 41980). E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50370 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations To calculate the national rural floor and imputed floor budget neutrality adjustment factors and the Puerto Ricospecific rural floor budget neutrality adjustment factor, we used FY 2013 discharge data to simulate payments, the FY 2015 new OMB labor market area delineations, and post-reclassified national and Puerto Rico-specific wage indexes and compared the following: • The national and Puerto Ricospecific simulated payments without the national rural floor and imputed floor and Puerto Rico-specific rural floor applied; and • The national and Puerto Ricospecific simulated payments with the national rural floor and imputed floor and Puerto Rico-specific rural floor applied. Based on this comparison, we determined a national rural budget neutrality adjustment factor of 0.989507 and the Puerto Rico-specific budget neutrality adjustment factor of 0.991291. The national adjustment was applied to the national wage indexes to produce a national rural floor budget neutral wage index and the Puerto Rico-specific adjustment was applied to the Puerto Rico-specific wage indexes to produce a Puerto Rico-specific rural floor budget neutral wage index. Comment: Many commenters opposed the continued application of a nationwide rural floor budget neutrality adjustment. Some commenters noted that under the current rural floor policy, all hospitals located in Massachusetts are eligible for the rural floor wage index as a result of one rural hospital, which resulted in an approximate 4.9 percent increase in payments for hospitals located in Massachusetts and creates a disparity when considering the wage index of other hospitals around the country. The commenters also noted that under the rural floor policy, hospitals located in California will also receive an increase in payments of approximately $196 million as a result of the application of the rural floor policy. The commenters stated that the adverse consequences of applying a nationwide rural floor budget neutrality adjustment have been recognized by CMS, MedPAC, and many others over the past several years. The commenters believed that the Medicare wage index system cannot accomplish its objective of ensuring that payments for the wage component of labor accurately reflect actual wage costs until this policy is corrected. Other commenters recommended that CMS consider applying the rural floor budget neutrality adjustment through a Statespecific budget neutrality adjustment factor, as CMS has previously applied. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Response: We appreciate the commenters’ input and for informing us of their concerns. Section 3141 of Public Law 111–148 requires that a national budget neutrality adjustment be applied in implementing the rural floor policy. Therefore, absent a legislative change enacted by Congress, we are unable to change the rural floor budget neutrality adjustment from a national to a Statespecific adjustment. Comment: Some commenters recommended that CMS consider implementing a policy under the IPPS and the OPPS that would result in only hospitals located in rural areas being included in the statewide rural floor wage index used for urban hospitals located in areas with wage indexes that are lower than the statewide rural wage index. The commenters believed that such a policy would prevent urban hospitals from reclassifying to rural status simply to improve the rural wage index, which might be used as a floor for urban hospitals located in areas of a State that have lower wage index values. The commenters added that they believed that CMS has the regulatory authority to make such a policy change without the enactment of Congressional legislation. Another commenter recommended that, for FY 2015, CMS require States to have at least 5 percent of their PPS hospitals physically located in rural areas as a prerequisite for establishing a rural floor wage index for each State. The commenter believed that this would ensure the original intent of the rural floor policy, which is to serve as an equalizer, and would protect the policy from being used as a manipulation tool that allows a handful of hospitals in one isolated area of the State to dictate the wage index for a major Metropolitan area. In addition, the same commenter urged CMS to create a national hospital wage index floor of 0.91. The commenter explained that this would reduce current disparities between hospitals. The commenter also stated that the purpose of the hospital area wage index is to fairly account for labor costs incurred by providers, and not to reward ‘‘winners’’ or punish ‘‘losers’’ as a result of reclassifications and a proliferation of other modifications. The commenter further noted that it recognized that there is growing interest from MedPAC and others regarding revising the hospital area wage index system, but acknowledged that such revisions take time. Therefore, the commenter believed that a hospital rural floor wage index is appropriate until CMS creates a system that better reflects the realities of today’s healthcare system PO 00000 Frm 00518 Fmt 4701 Sfmt 4700 and levels the playing field for all Medicare providers. Response: We appreciate the commenters’ input. We did not make any proposals to change the rural floor wage index policy. Any changes to this policy would first need to be proposed through rulemaking. Consequently, we are not making any changes to address the commenters’ concerns at this time. With respect to the commenter who recommended that CMS establish a national hospital wage index floor of 0.91, we do not believe that there is any statistical basis to support this calculation. In addition, we are unclear how such a wage index floor policy could be implemented nor do we believe that this suggestion meets the requirement of the statute. With respect to the other commenters’ suggestions, we first need to determine if the revised policy that the commenters suggested would be inconsistent with any longstanding policy or statutory requirement. We will consider the commenters’ suggestions in future rulemaking. Comment: One commenter requested that CMS provide an updated, detailed, State-specific analysis of the effect of a nationwide rural floor budget neutrality adjustment. The commenter specifically noted the estimated ‘‘windfall’’ expected to be received by hospitals located in Massachusetts as a result of the rural floor policy, and requested that CMS provide data and additional analysis of the impacts of a national rural floor budget neutrality adjustment. In addition, commenters questioned whether the addition of one rural hospital located in Franklin County, Massachusetts reduced the impact of the Massachusetts rural floor wage index from FY 2014 to FY 2015. Response: We have provided an updated State-specific analysis of the effect of the rural floor budget neutrality adjustment in Appendix A of the Addendum to this final rule. We also discuss in Appendix A to this final rule the increase in payments the hospitals in Massachusetts are expected to receive as a result of the rural floor wage index policy. We discuss below the reduced impact of the rural floor wage index policy for hospitals located in Massachusetts from FY 2014 to FY 2015. In FY 2014, CMS calculated that 60 hospitals would benefit from the Massachusetts rural floor wage index, resulting in an estimated $167.6 million being received by hospitals located in Massachusetts as a result of the national rural floor budget neutrality adjustment. In FY 2015, fewer hospitals located in Massachusetts (51) have been identified as benefitting from E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the rural floor wage index, and the fiscal impact of rural floor budget neutrality adjustment has been reduced. Below we explain why nine providers (60 minus 51) received the Massachusetts rural floor wage index in FY 2014, but not in FY 2015. The commenters are correct that the addition of one rural hospital located in Franklin County, Massachusetts reduced the impact of the rural floor wage index in FY 2015, as compared to the impact of the rural floor wage index in FY 2014. To further clarify, in FY 2014, there was only one geographically located rural hospital in Massachusetts (located in Nantucket County). Therefore, the Massachusetts pre- and post- reclassified rural wage index in the calculation of the reclassification budget neutrality adjustment, and the application of the rural floor budget neutrality adjustment, was established based on wage data from that one hospital located in Nantucket County, Massachusetts. For FY 2015, another hospital, which is defined as ‘‘urban’’ under the current delineations, is now considered to be ‘‘rural’’ under the new OMB delineations. Specifically, this hospital is located in Franklin County, Massachusetts, which is no longer considered to be part of CBSA 44140 (Springfield, MA) under the new OMB delineations, and is now considered to be geographically located in a rural area. However, under the new OMB delineations, Franklin County meets the requirements under section 1886(d)(8)(B) of the Act for reclassification. Therefore, in FY 2015, any hospital located within Franklin County is deemed an ‘‘urban’’ labor market (that is, the hospitals are considered ‘‘Lugar’’ hospitals). The calculation of the FY 2015 Massachusetts pre-reclassified rural wage index, which is used in the calculation of reclassification budget neutrality adjustment, is calculated based on the two geographically located rural hospitals (one from Franklin County and one from Nantucket County). The average hourly wage of the Franklin County hospital is lower than the average hourly wage of the Nantucket County hospital, lowering the pre-reclassified rural wage index for FY 2015 relative to FY 2014. With respect to budget neutrality, as described earlier in this Addendum, we first calculate and apply the MS–DRG and wage index budget neutrality adjustment, then the reclassification budget neutrality adjustment, and then the rural floor budget neutrality adjustment. This analysis focuses on the reclassification and rural floor budget neutrality adjustments and applies the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 requirement of section 1886(d)(8)(C)(iii) of the Act, which specifies that an area’s post-reclassified wage index (without application of the rural floor budget neutrality adjustment) may not be reduced below the State’s postreclassified rural wage index value (without application of the rural floor budget neutrality adjustment), as a result of reclassification. As stated in the FY 1992 IPPS final rule (56 FR 43220 through 43221), if reclassification (either to or from an area) would lower an area’s post-reclassified wage index (without application of the rural floor budget neutrality adjustment) below the State’s post-reclassified rural wage index (without application of the rural floor budget neutrality adjustment), CMS assigns those areas the postreclassified rural wage index value for that State (without application of the rural floor budget neutrality adjustment). For this to occur, the area’s pre-reclassified wage index value must be greater than or equal to the State’s pre-reclassified rural wage index value prior to calculating the effects of the reclassification budget neutrality adjustment. As discussed above in section II.A.4.b. of this Addendum regarding the reclassification budget neutrality adjustment, to ensure that the effects of applying sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are budget neutral, we compare FY 2015 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act (that is, prereclassified wage data) to FY 2015 wage data after such reclassifications (that is, the post-reclassified wage data). Specifically, we compared the Massachusetts pre-reclassified rural wage index (Column C in the table below) to the pre-reclassified area wage index (Column B in the table below). (We note that the Massachusetts prereclassified rural wage index is comprised from the wage data of two rural hospitals, one located in Franklin County, Massachusetts and one located in Nantucket County, Massachusetts.) If a hospital’s pre-reclassified area wage index (Column B in the table below) is greater than or equal to the Massachusetts pre-reclassified rural wage index (Column C in the table below), then we compare the Massachusetts post-reclassified rural wage index (Column F in the table below, which is based only on the wage data from one rural hospital in Nantucket County, and does not include the hospital located in Franklin County because it has been reclassified as an urban Lugar hospital) to the post- PO 00000 Frm 00519 Fmt 4701 Sfmt 4700 50371 reclassified area wage index (Column E in the table below). For hospitals that receive reclassification in FY 2015, if the hospital’s post-reclassified area wage index (Column E in the table below) is less than the Massachusetts post-reclassified rural wage index (Column F in the table below, which is based on the wage data from one rural hospital located in Nantucket County), then we assign the hospital the Massachusetts post-reclassified rural wage index (Column F in the table below) prior to application of the rural floor budget neutrality adjustment. The nine hospitals were reclassified for FY 2015, and their post-reclassified area wage index (Column E in the table below) is less than the Massachusetts post-reclassified rural wage index (Column F in the table below). Therefore, although there are other hospitals located in Massachusetts that also have been reclassified, only the nine hospitals meet both conditions and are being assigned the Massachusetts post-reclassified rural wage index (without application of the rural floor budget neutrality adjustment). Specifically, when we compared the Massachusetts pre-reclassified wage index to Massachusetts post-reclassified wage index in the calculation of the reclassification budget neutrality adjustment, the area’s pre-reclassified wage index value for the nine hospitals is greater than or equal to the Massachusetts pre-reclassified rural wage index value of 1.1447 (which is calculated based on the wage data from the two rural hospitals). After application of the reclassifications, the area’s post-reclassified wage index value for these nine hospitals is lower than the Massachusetts post-reclassified rural wage index value of 1.3477 (which only includes wage data from one rural hospital located in Nantucket County, Massachusetts). Therefore, in accordance with our reclassification hold-harmless methodology, these nine hospitals are assigned the Massachusetts post-reclassified rural wage index value of 1.3477 within the calculation of the reclassification budget neutrality adjustment, prior to the calculation and application of the rural floor budget neutrality adjustment. The impact of this increase in payments (Column B compared to Column F for the nine hospitals) is factored into the reclassification budget neutrality adjustment factor, which is applied to standardized amount. The table below illustrates the various wage indexes in each step of the process described above and why these nine hospitals were assigned the Massachusetts post- E:\FR\FM\22AUR2.SGM 22AUR2 50372 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations reclassified rural wage index prior to the Provider 220001 220016 220019 220058 220062 220090 220095 220163 220176 (A) Pre-reclassified CBSA ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. application of the rural floor budget neutrality adjustment. (B) Area pre-reclassified wage index 49340 22 49340 49340 49340 49340 49340 49340 49340 (C) Massachusetts pre-reclassified rural wage index (D) Post-reclassified CBSA (E) Area post-reclassified wage index (F) Massachusetts post-reclassified rural wage index 1.1447 1.1447 1.1447 1.1447 1.1447 1.1447 1.1447 1.1447 1.1447 14454 44140 14454 14454 14454 14454 14454 14454 14454 1.2318 1.0379 1.2318 1.2318 1.2318 1.2318 1.2318 1.2318 1.2318 1.3477 1.3477 1.3477 1.3477 1.3477 1.3477 1.3477 1.3477 1.3477 1.1728 1.1447 1.1728 1.1728 1.1728 1.1728 1.1728 1.1728 1.1728 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Note: All wage indexes in this table do not include application of the rural floor budget neutrality adjustment. The next step in the sequence of our calculation of the budget neutrality adjustment factor is to calculate the rural floor budget neutrality adjustment, which is applied to the wage index. For the 51 hospitals located in Massachusetts, their post-reclassified area wage index is compared to the Massachusetts rural floor wage index (consisting of the one rural hospital located in Nantucket County). Because their post-reclassified area wage index value is lower than the Massachusetts rural floor wage index value, the hospitals are assigned the Massachusetts rural floor wage index value of 1.3477. Therefore, a rural floor budget neutrality adjustment factor is applied to the wage indexes of the 51 hospitals to account for the increase in payments as a result of the application of the rural floor wage index policy. However, with regard to the nine reclassified hospitals, they have already been assigned a postreclassified wage index value of 1.3477, which is equal to the Massachusetts rural wage index. Accordingly, there is no need to make any further adjustments to ensure budget neutrality. As a result, the nine hospitals are excluded from and have no effect on the rural floor budget neutrality adjustment for FY 2015, and the impact of the FY 2015 rural floor budget neutrality adjustment for Massachusetts is lower than that of the FY 2014 rural floor budget neutrality adjustment. While the overall impact of the rural floor budget neutrality adjustment has decreased for hospitals located in Massachusetts in FY 2015, this explains why the same number of hospitals (60) will still receive the Massachusetts rural wage index in FY 2015 (determined by using the wage data from one rural hospital located in Nantucket County, Massachusetts) based on two different policies. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 d. Wage Index Transition Budget Neutrality As discussed in section III. of the preamble of this final rule, in the past, we have provided for transition periods when adopting changes that have significant payment implications, particularly large negative impacts. Similar to FY 2005, for FY 2015, we have determined that the transition to using the new OMB delineations will have the largest impact on hospitals that are currently located in an urban county that became rural under the new OMB delineations. To alleviate the decreased payments associated with having a rural wage index, in calculating the area wage index, similar to the transition provided in the FY 2005 IPPS final rule, we are finalizing, as we proposed, a policy to generally assign these counties the urban wage index value of the CBSA to which they are physically located in for FY 2014 for FYs 2015, 2016, and 2017. In addition to the 3-year transition period for hospitals being transitioned from urban to rural status as discussed above, we are finalizing, as we proposed, a 1-year blended wage index transitional policy for all hospitals that will experience any decrease in their wage index value (that is, a hospital’s actual wage index value used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively as a result of the implementation of the new OMB delineations. Similar to the policy adopted in the FY 2005 IPPS final rule (69 FR 49033), a post-reclassified wage index with the rural and imputed floor applied is computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ ies), and another post-reclassified wage index with the rural and imputed floor applied will be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We compared these two wage indexes. If the PO 00000 Frm 00520 Fmt 4701 Sfmt 4700 FY 2015 wage index using the FY 2015 CBSAs is lower than the FY 2015 wage index using the FY 2014 CBSAs, we are computing a blended wage index consisting of 50 percent of each of the two wage indexes added together. This blended wage index is the hospital’s wage index for FY 2015. Hospitals that benefit from the adoption of the new OMB delineations are assigned their new wage index based on the new OMB delineations. We refer readers to section III. of the preamble of this final rule for a complete discussion on the transitional wage index policy. In the past, CMS has budget neutralized transitional wage indexes. Because we are establishing a policy that allows for the application of a transitional wage index only when it benefits the hospital, we believe that it would be appropriate to ensure that such a transitional policy does not increase aggregate Medicare payments beyond the payments that would be made had we simply adopted the new OMB delineations without any transitional provisions. Therefore, for FY 2015, we proposed to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to make an adjustment to the national and Puerto Rico-specific standardized amounts to ensure that total payments, including the effect of the transitional wage index provisions, will equal what payments would have been if we had fully adopted the new OMB delineations without any transitional provisions. We did not receive any public comments on this proposal and are finalizing our proposal to make this adjustment under section 1886(d)(5)(I)(i) of the Act. Also, because we did not receive any public comments on this proposal we are finalizing our proposal to use the same methodology presented in the proposed rule in this final rule to calculate the transitional wage index E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations budget neutrality adjustment factor. We discuss the calculation of this adjustment factor below. As stated above, the 50/50 blended wage indexes use post-reclassified wage index data with the rural and imputed floor applied computed based on FY 2014 CBSAs. Because the 50/50 blended methodology uses data based on FY 2014 CBSAs, in order to properly calculate the transitional budget neutrality factor, it was first necessary to calculate the following budget neutrality factors based on the FY 2014 CBSAs: An MS–DRG and wage index budget neutrality, a reclassification budget neutrality, and a rural floor budget neutrality. It was necessary to compute the first three budget neutrality factors of MS–DRG, wage index, and reclassification budget neutrality (which are applied to the standardized amount) to ensure that the calculation of the rural and imputed floor budget neutrality factor applied to the wage index based on FY 2014 CBSAs is accurate. We calculated these four budget neutrality factors using the same methodology stated above, but used the FY 2014 CBSAs instead of the FY 2015 CBSAs on both sides of the comparison. After calculating all of the budget neutrality factors using FY 2014 and FY 2015 CBSAs, to calculate the transitional wage index budget neutrality factor for FY 2015, we used FY 2013 discharge data to simulate payments and compared the following: • Aggregate payments using new OMB delineations for FY 2015, the FY 2015 relative weights, FY 2015 wage data after such reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act (using the new OMB delineations), applied the rural floor budget neutrality adjustment factor to the wage index (using the new OMB delineations), and applied the FY 2015 hospital readmissions payment adjustments and the estimated FY 2015 hospital VBP payment adjustments; and • Aggregate payments using FY 2015 relative weights, FY 2015 wage data after applying the transitional wage indexes, and applied the same hospital readmissions payment adjustments and the estimated hospital VBP payment adjustments applied above. We note that hospitals that did not receive the transitional 50/50 blended wage index were assigned the post-reclassified wage index values with the rural floor budget neutrality adjustment based on the FY 2015 new OMB delineations. Based on these simulations, we calculated a budget neutrality adjustment factor of 0.998859. Therefore, for FY 2015, we are applying a transitional wage index budget VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 neutrality adjustment factor of 0.998859 to the national average and Puerto Ricospecific standardized amounts to ensure that the effects of these transitional wage indexes are budget neutral. We note that the budget neutrality adjustment factor calculated above is based on the increase in payments in FY 2015 that would result from the transitional wage indexes. Therefore, we are applying this budget neutrality adjustment factor as a one-time adjustment to the FY 2015 national and Puerto Rico-specific standardized amounts in order to offset the increase in payments in FY 2015 as a result of these transitional wage indexes. For subsequent fiscal years, we will not take into consideration the adjustment factor applied to the national and Puerto Ricospecific standardized amounts in the previous fiscal year’s update when calculating the current fiscal year transitional wage index budget neutrality adjustment factor (that is, this adjustment will not be applied cumulatively). Because we are establishing a 3-year transitional wage index policy for urban hospitals that became rural as a result of the adoption of the new OMB delineations, we intend to establish transitional wage index budget neutrality adjustment factors to apply to the FY 2016 and FY 2017 national and Puerto Rico-specific standardized amounts during those respective rulemaking cycles. Similar to the policy for FY 2015, we intend to propose that the FYs 2016 and 2017 adjustments would be applied as ‘‘onetime’’ adjustments and not cumulative adjustments applied each fiscal year. e. Case-Mix Budget Neutrality Adjustment (1) Background Below we summarize the recoupment adjustment to the FY 2015 payment rates, as required by section 631 of ATRA, to account for the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110–90 until FY 2013. We refer readers to section II.D. of the preamble of this final rule for a complete discussion regarding our policies for FY 2015 in this final rule and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in casemix. PO 00000 Frm 00521 Fmt 4701 Sfmt 4700 50373 (2) Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) to the National Standardized Amount Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110–90 to require the Secretary to make a recoupment adjustment totaling $11 billion by FY 2017. Our actuaries estimated that if CMS were to fully account for the $11 billion recoupment required by section 631 of ATRA in FY 2014, a one-time ¥9.3 percent adjustment to the standardized amount would be necessary. It is often our practice to delay or phase-in payment rate adjustments over more than 1 year, in order to moderate the effect on payment rates in any 1 year. Therefore, consistent with the policies that we have adopted in many similar cases, for FY 2014, we applied a ¥0.8 percent adjustment to the standardized amount. In this final rule, as we proposed, we are applying an additional ¥0.8 percent adjustment to the standardized amount for FY 2015. We note that, as section 631 of the ATRA instructs the Secretary to make a recoupment adjustment only to the standardized amount, this adjustment would not apply to the Puerto Rico-specific standardized amount and hospital-specific payment rates. f. Rural Community Hospital Demonstration Program Adjustment As discussed in section IV.L. of the preamble of this final rule, section 410A of Public Law 108–173 originally required the Secretary to establish a demonstration program that modifies reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) of Public Law 108–173 requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ Sections 3123 and 10313 of the Affordable Care Act extended the demonstration program for an additional 5-year period, and allowed up to 30 hospitals to participate in 20 States with low population densities determined by the Secretary. (In determining which States to include in the expansion, the Secretary is required to use the same criteria and data that the Secretary used to determine the States for purposes of the initial 5-year period.) In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 53453), in E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50374 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations order to achieve budget neutrality, we adjusted the national IPPS payment rates by an amount sufficient to account for the added costs of this demonstration program as described in section IV.K. of that final rule. In other words, we applied budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration program, consistent with past practice. We stated that we believe the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration . . . was not implemented,’’ but does not identify the range across which aggregate payments must be held equal. As we did for FY 2014, for FY 2015, we are adjusting the national IPPS payment rates according to the same methodology that we used for FY 2013, as set forth in section IV.L. of the preamble of this final rule, to account for the estimated additional costs of the demonstration program for FY 2015. For FY 2015, in this final rule, the estimated amount of this budget neutrality adjustment factor applied to the national IPPS payment rates for FY 2015 is $54,177,144. In addition, similar to previous years, we are including in the budget neutrality offset amount the amount by which the actual demonstration costs corresponding to an earlier given year (which would be determined once we have finalized cost reports for that year) exceeded the budget neutrality offset amount finalized in the corresponding year’s IPPS final rule. For this FY 2015 IPPS/ LTCH PPS final rule, we have calculated the amount by which the actual costs of the demonstration in FY 2008 (that is, the costs of the demonstration for the 10 hospitals that participated in FY 2008, as shown in these hospitals’ finalized cost reports for the cost report period beginning in that calendar year), exceeded the amount that was finalized in the FY 2008 IPPS final rule. For FY 2015, in this final rule, we are establishing a budget neutrality offset amount of $10,389,771 for FY 2008. We also are currently working with the MACs that service the hospitals participating in the demonstration to obtain finalized cost reports for FYs 2009, 2010, 2011, and 2012). These data were unavailable for this final rule. However, depending on our progress in obtaining these cost reports, we may include in the FY 2016 IPPS final rule the difference between the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 demonstration costs for one or more of these years and the amounts that were finalized in the respective fiscal years’ final rules. Therefore, the final total budget neutrality offset amount that we are applying to the FY 2015 IPPS payment rates is $64,566,915. This amount is the sum of two separate components: (1) the difference between the total estimated FY 2014 reasonable cost amount to be paid under the demonstration to the 22 participating hospitals participating in the demonstration program for covered inpatient services, and the total estimated amount that would otherwise be paid to the participating hospitals in FY 2014 without the demonstration ($54,177,144); and (2) the amount by which the actual costs of the demonstration for FY 2008, which are calculated in accordance with the finalized cost reports for the hospitals that participated in the demonstration during FY 2008, exceed the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule ($10,389,771). Accordingly, using the most recent data available to account for the estimated costs of the demonstration program, for FY 2015, we computed a factor of 0.99931 for the rural community hospital demonstration program budget neutrality adjustment that will be applied to the IPPS standard Federal payment rate. g. Outlier Payments Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for ‘‘outlier’’ cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the ‘‘outlier threshold’’ or ‘‘fixedloss’’ amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the outlier threshold as the outlier ‘‘fixed-loss cost threshold.’’ To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital’s CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2015 is 80 percent, the same marginal cost factor PO 00000 Frm 00522 Fmt 4701 Sfmt 4700 we have used since FY 1995 (59 FR 45367). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments (which does not include IME and DSH payments) plus outlier payments. When setting the outlier threshold, we compute the 5.1 percent target by dividing the total operating outlier payments by the total operating DRG payments plus outlier payments. We do not include any other payments such as IME and DSH within the outlier target amount. Therefore, it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the average standardized amount applicable to hospitals located in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ outlier.htm. (1) FY 2015 Outlier Fixed-Loss Cost Threshold In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977–50983), in response to public comments on the FY 2013 IPPS/LTCH PPS proposed rule, we made changes to our methodology for projecting the outlier fixed-loss cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for detailed discussion of the changes. For FY 2015, we proposed to continue to use the same methodology that we used in FY 2014. As we have done in the past, to calculate the proposed FY 2015 outlier threshold, we simulated payments by applying proposed FY 2015 payment rates and policies using cases from the FY 2013 MedPAR file. Therefore, in order to determine the proposed FY 2015 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2013 to FY 2015. As discussed in the FY 2014 IPPS/ LTCH PPS final rule, we believe a methodology that is based on 1-year of charge data will provide a more stable measure to project the average charge per case because our prior methodology E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations used a 6-month measure, which inherently uses fewer claims than a 1year measure and makes it more susceptible to fluctuations in the average charge per case as a result of any significant charge increases or decreases by hospitals. Under this new methodology, to compute the 1-year average annualized rate-of-change in charges per case for FY 2015, we proposed to compare the second quarter of FY 2012 through the first quarter of FY 2013 (January 1, 2012, through December 31, 2012) to the second quarter of FY 2013 through the first quarter of FY 2014 (January 1, 2013, through December 31, 2013). This rateof-change is 5.6 percent (1.055736) or 11.5 percent (1.114579) over 2 years. Comment: Commenters were concerned that they were unable to replicate the calculation of the charge inflation factor that CMS used in the proposed rule. The commenters stated that the first quarter of the FY 2014 MedPAR claims were not released to the public. The commenters requested that CMS release the claims data used to calculate the charge inflation factor used in the proposed rule. One commenter, a provider, requested that CMS reevaluate the calculation of the inflation factor because it far exceeds the inflation factors used in labor markets that the provider operates within. Response: In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to adopt a new methodology to compare periods of 1-year of the most recent charge data in order to inflate charges. Commenters supported this proposal and it was adopted for FY 2014 and future years in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50978). We note that we did not provide additional data for the first quarter of FY 2013, which was used to inflate charges in the FY 2014 IPPS/LTCH PPS proposed rule, nor was it requested during the comment period for the FY 2014 IPPS/LTCH PPS proposed rule. We further note that our charge inflation policy from FY 2005 through FY 2013 also compared the most recent period of charge data using a 6-month comparison instead of a 1 year comparison. Similar to above, we did no provide additional data for the first quarter of the applicable fiscal year, nor was it requested during the comment period for those years. Consistent with this policy, for FY 2015, we proposed to compare the most recent charge data from the second quarter of FY 2012 through the first quarter of FY 2013 (January 1, 2012, through December 31, 2012) to the second quarter of FY 2013 through the first quarter of FY 2014 (January 1, 2013, through December 31, 2013). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 In response to the commenters who requested a restructuring of the limited data set files for the FY 2015 IPPS/LTCH PPS proposed and final rule to provide an additional quarter of MedPAR claims data, we did not have sufficient time to restructure the files as the commenters requested prior to the publication of the proposed and this final rule. Consistent with our longstanding policy since FY 2005, we continue to believe that it is optimal to use the most recent period of charge data available to measure charge inflation. We will consider how best to provide additional information on the charge inflation factor for future years. With respect to the commenter requesting that CMS reevaluate the calculation of the inflation factor, we believe that our measure of charge inflation accurately reflects the national charge inflation. Our charge inflation factor represents the average percentage increase in charge inflation for all hospitals. We recognize that charge inflation may vary geographically, and we do not believe that it is appropriate to base the charge inflation factor on selective labor markets because we apply this charge inflation factor to all claims for all hospitals. As we have done in the past, in the FY 2015 IPPS/LTCH PPS proposed rule we proposed to establish the FY 2015 outlier threshold using hospital CCRs from the December 2013 update to the Provider-Specific File (PSF)—the most recent available data at the time of the proposed rule. We also proposed that if more recent data became available would we use that data to calculate the final FY 2015 outlier threshold. For FY 2015, we also proposed to continue to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a new methodology to adjust the CCRs. Specifically, we finalized a policy to compare the national average caseweighted operating and capital CCR from the most recent update of the PSF to the national average case-weighted operating and capital CCR from the same period of the prior year. Therefore, as we did for FY 2014, for FY 2015, we proposed to adjust the CCRs from the December 2013 update of the PSF by comparing the percentage change in the national average caseweighted operating CCR and capital CCR from the December 2012 update of the PSF to the national average caseweighted operating CCR and capital CCR from the December 2013 update of the PSF. We note that in the proposed rule we used total transfer-adjusted cases from FY 2013 to determine the PO 00000 Frm 00523 Fmt 4701 Sfmt 4700 50375 national average case-weighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison because this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison. Using the proposed methodology above, for the proposed rule we calculated a December 2012 operating national average case-weighted CCR of 0.295101 and a December 2013 operating national average caseweighted CCR of 0.289587. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the December 2012 operating national average case-weighted CCR from the December 2013 operating national average case-weighted CCR and then dividing the result by the December 2012 national operating average caseweighted CCR. This resulted in a proposed national operating CCR adjustment factor of 0.981315. We used the same methodology proposed above to adjust the capital CCRs. Specifically, for the proposed rule we calculated a December 2012 capital national average case-weighted CCR of 0.025079 and a December 2013 capital national average case-weighted CCR of 0.024868. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the December 2012 capital national average case-weighted CCR from the December 2013 capital national average case-weighted CCR and then dividing the result by the December 2012 capital national average caseweighted CCR. This resulted in a proposed national capital CCR adjustment factor of 0.991587. Consistent with our methodology used in the past and as stated in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe that it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2015 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50376 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Comment: One commenter matched the CCRs used for the proposed rule impact file to the December 2013 PSF and found that 126 providers’ CCRs did not match. The commenter noted that although an extremely high percentage of providers’ CCRs matched the data in the December 2013 update, the average percent difference for those CCRs that did not match is much higher than any other comparison from prior years. The commenter stated that this difference could lead to differences in the calculated fixed-loss threshold. The commenter further stated that the data demonstrated that CMS used significantly outdated CCRs to make projections for the FY 2015 fixed-loss threshold. The commenter recommended that this error be rectified in the final rule, which would result in a substantially reduced threshold. In addition, the commenter recommended that CMS use the most recently updated PSF file for the final rule. Response: With regard to the commenter’s finding of 126 providers with CCRs from the proposed rule impact file that did not match the data in the December 2013 PSF, as stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we apply the following edits to providers’ CCRs in the PSF. We believe these edits are appropriate in order to accurately model the outlier threshold. We first search for Indian Health Service providers and those providers assigned the statewide average CCR from the current fiscal year. We then replace these CCRs with the statewide average CCR for the upcoming fiscal year. We also assign the statewide average CCR (for the upcoming fiscal year) to those providers that have no value in the CCR field in the PSF. We believe that the edits above are the reason why the commenter found that 126 providers had CCRs in the impact file that did not match the CCRs in the December 2013 PSF, and contributed to the average percentage difference for those CCRs that did not match. We also believe that we have accurately calculated and applied these statewide average CCRs and will continue to monitor any large variances in the future. With regard to using the most recently updated PSF file for the final rule, we responded to a similar comment below. As stated above, for FY 2015, we applied the proposed FY 2015 payment rates and policies using cases from the FY 2013 MedPAR files in calculating the outlier threshold. As discussed above, for FY 2015, we are applying transitional wage indexes because of the adoption of the new OMB labor market area delineations. Also, as VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.G.3. of the preamble of this final rule, in accordance with section 10324(a) of the Affordable Care Act, beginning in FY 2011, we created a wage index floor of 1.0000 for all hospitals located in States determined to be frontier States. We noted that the frontier State floor adjustments will be calculated and applied after rural and imputed floor budget neutrality adjustments are calculated for all labor market areas, in order to ensure that no hospital in a frontier State will receive a wage index less than 1.0000 due to the rural and imputed floor adjustment. In accordance with section 10324(a) of the Affordable Care Act, the frontier State adjustment will not be subject to budget neutrality, and will only be extended to hospitals geographically located within a frontier State. However, for purposes of estimating the proposed outlier threshold for FY 2015, it was necessary to apply the transitional wage indexes and adjust the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2015. If we did not take the above into account, our estimate of total FY 2015 payments would be too low, and, as a result, our proposed outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2015 outlier payments, we proposed not to make any adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. We stated that we continue to believe that, due to the policy implemented in the June 9, 2003 Outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also note that, in accordance with our reconciliation criteria, reconciliation occurs in instances where a hospital’s actual CCR for the cost reporting period fluctuates plus or minus 10 percentage points compared to the interim CCR used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at PO 00000 Frm 00524 Fmt 4701 Sfmt 4700 the time we set the outlier threshold. For these reasons, we proposed not to make any assumptions regarding the effects of reconciliation on the outlier threshold calculation. Comment: One commenter expressed concern that CMS did not consider outlier reconciliation in the development of the outlier threshold. The commenter stated that CMS did not provide any objective data concerning the number of hospitals that have been subject to outlier reconciliation and the amounts recovered. The commenter further stated that, in February 2003, the Secretary signed what the commenter described as an emergency interim final rule that would have corrected the outlier threshold and included outlier reconciliation payments (in the calculation of the outlier threshold), but that rule was not issued because of objections from the Office of Management and Budget. The commenter asserted that if it was possible to account for outlier reconciliation payments at the initial implementation of the outlier reconciliation policy in the calculation of the threshold, it should be possible to do so 10 years later. The commenter also searched cost reports from the HCRIS database for the years 2003 through 2010 (Form CMS–2552–96 and CMS–2552–10) and, based on these data, provided its estimate that the annual amounts recovered by CMS through reconciliation totaled $108,934,425. The commenter believed that these data can be used to provide a baseline and trend information to assess whether outlier reconciliation is a significant factor to be considered in the development of the outlier threshold. The commenter noted that it was unable to extract outlier reconciliation payment information from cost reports filed under Form CMS–2552–10. The commenter was unsure why this data was not being captured. Therefore, the commenter requested that CMS disclose in the final rule and future rulemaking the amount CMS has recovered through reconciliation by year. Another commenter cited a report issued by the Office of Inspector General (OIG) on June 28, 2012, entitled ‘‘The Centers for Medicare & Medicaid Services Did Not Reconcile Medicare Outlier Payments in Accordance With Federal Regulations and Guidance’’ (A– 07–10–02764), which reviewed the reconciliation process for outlier payments under the IPPS. The commenter stated that the 2012 OIG Report identified approximately $664 million in unreconciled outlier payments, which is a material amount E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations in relation to total outlier payments. Moreover, the commenter further stated that CMS now has approximately 10 full fiscal years of experience with reconciliation from which to project the impact of its reconciliation in the upcoming fiscal year. As such, the commenter asserted that CMS’ policy of refusing to account for the impact of reconciliation in setting the FY 2015 outlier fixed-loss cost threshold is neither reasonable nor consistent with the outlier provisions of the statute. The same commenter cited the OIG report issued on November 13, 2013, entitled ‘‘Medicare Hospital Outlier Payments Warrant Increased Scrutiny’’ (OEI–06–10–00520). The commenter stated that the proposed outlier fixedloss cost threshold appears improperly inflated and, therefore, overstated because CMS does not report, and has not taken any actions to report, any steps to account for ‘‘high-outlier’’ payments identified in the report. The commenter further stated that it is neither consistent with the outlier provisions of the statute nor reasonable for CMS, in modeling outlier payments for the upcoming fiscal year, to include outlier payments that were based on excessively high charges for particular MS–DRGs and not based on truly unusually high costs. The commenter concluded that such payments will presumably be recouped by CMS following audit and reconciliation. However, CMS has not disclosed or discussed what, if anything, it has done to address this issue in setting the outlier fixed-loss cost threshold for FY 2015. Response: A similar comment was received in response to the policies presented in last year’s rule. We appreciate the commenter’s input and for informing us of its concern regarding our policy of not including outlier reconciliation within the development of the outlier fixed-loss cost threshold. The commenter provided data from HCRIS that demonstrated total outlier reconciliation payments from 2003 through 2010 were $108,934,425, which equates to approximately $13,616,803 annually. Assuming that the totals provided by the commenter are correct, we do not believe that this relatively small annual amount would have an impact on the outlier threshold because total outlier payments are approximately $4.3 billion. Further, with regard to the draft final rule referenced by the commenter, that draft document was never finalized or published in the Federal Register (neither on a proposed or interim basis), or implemented in any way. We also disagree with the commenter’s VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 characterization of the draft interim final rule. That draft rule would not have adjusted the outlier threshold by accounting for payment changes as a result of outlier reconciliation, as the commenter suggested. Rather, the draft interim final rule merely would have calculated a new fixed-loss threshold to be applied for the remainder of Federal fiscal year 2003 using the same data that originally had been used for that purpose, but excluding data from 123 hospitals whose percentage of outlier payments relative to total DRG payments increased by at least 5 percentage points between FY 1999 and FY 2001, and whose case-mix (the average DRG relative weight value for all of a hospital’s Medicare cases) adjusted charges increased at a rate at or above the 95th percentile rate of charge increase for all hospitals (46.63 percent) over the same period. As previously stated, this draft rule was never finalized or published in the Federal Register. Therefore, that document has little, if any, relevance to the current discussion. With respect to the commenter citing the 2012 OIG Report which identified approximately $664 million in unreconciled outlier payments, we cannot substantiate this amount until all of the outlier reconciliations are performed. As the MACs continue to perform these outlier reconciliations, they record these amounts on the cost report, which are then publicly available through the HCRIS database. Also, CMS has requested that the MACs submit to CMS the reconciled outlier amounts. We will continue to track these outlier reconciliations as stated in our response to the OIG report. As stated in prior final rules, we continue to believe that, as a result of the policy implemented in the June 9, 2003 outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement as demonstrated by the total outlier payments provided by the commenter. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also note that, in accordance with our outlier reconciliation criteria, reconciliation occurs in instances where a hospital’s actual CCR for the cost reporting period fluctuates plus or minus 10 percentage points compared to the interim CCR used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information PO 00000 Frm 00525 Fmt 4701 Sfmt 4700 50377 available to us at the time we set the outlier threshold. For these reasons, as we proposed, we are finalizing our proposal not to make any assumptions regarding the effects of reconciliation on the outlier threshold calculation. Also, outlier reconciliation is a function of the cost report and MACs record the outlier reconciliation amount on each provider’s cost report (and are not required to report these data to CMS outside of the cost report settlement process). Therefore, the outlier reconciliation data that the commenter requested should be publicly available through the cost report. With regard to the commenter not being able to retrieve the data for outlier reconciliation payments from cost reports filed under Form CMS–2552–10, we received a similar comment in response to last year’s proposed rule, as summarized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50980). We will continue to follow up with our information systems team to ensure this information is readily available to the public. Since the effective date of Change Request 7192 on April 1, 2011, we have approved the reconciliation of outlier payments for some hospitals. Other hospitals that were flagged for outlier reconciliation are still under review for approval. In addition, some hospitals flagged for outlier reconciliation may experience a delay in reconciling their outlier payments due to circumstances that prevent the MACs from finalizing the hospital’s cost report (such as other payments that may need to be reconciled aside from outlier payments). We disagree with the commenter that stated that we should not include outlier payments that were based on excessively high charges for particular MS–DRGs and not based on truly unusually high costs because such payments will presumably be recouped by CMS following audit and reconciliation. The purpose of the CCR is to measure a hospital’s costs and charges. We believe that the CCRs will reflect these low costs and high charges that the commenter referred to, and when applied to the charges on the claim will result in less outlier payments for such cases because the costs of the case will be lower when compared to the total MS–DRG payments excluding outlier payments. Also, the commenter appears to assume that providers with high charges will be eligible for outlier reconciliation and CMS will recoup these funds at a later time. We disagree with the commenter. If a hospital’s interim CCR is consistent with its charges on the claim then no matter how high or low a hospital’s E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50378 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations charges, the hospital probably will not meet the outlier reconciliation criteria. As described in sections IV.H. and IV.I., respectively, of the preamble of this final rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe that it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the outlier threshold calculation or the outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments will continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we proposed to exclude the hospital VBP payment adjustments and the hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold. We noted that, to the extent section 1886(r) of the Act modifies the existing DSH payment methodology under section 1886(d)(5)(F), the new uncompensated care payment under section 1886(r)(2), like the empirically justified Medicare DSH payment under section 1886(r)(1), may be considered an amount payable under section 1886(d)(5)(F) of the Act such that it would be reasonable to include the payment in the outlier determination under section 1886(d)(5)(A). As we did for FY 2014, for FY 2015, we stated that we also are proposing to allocate an estimated per-discharge uncompensated care payment amount to all cases for the hospitals eligible to receive the uncompensated care payment amount in the calculation of the outlier fixedloss cost threshold methodology. We stated that we continue to believe that allocating an eligible hospital’s estimated uncompensated care payment to all cases equally in the calculation of the outlier fixed-loss cost threshold would best approximate the amount we would pay in uncompensated care payments during the year because, when we make claim payments to a hospital eligible for such payments, we would be making estimated perdischarge uncompensated care payments to all cases equally. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Furthermore, we stated that we continue to believe that using the estimated perclaim uncompensated care payment amount to determine outlier estimates provides predictability as to the amount of uncompensated care payments included in the calculation of outlier payments. Therefore, consistent with the methodology used in FY 2014 to calculate the outlier fixed-loss cost threshold, for FY 2015, we stated that we are proposing to include estimated FY 2015 uncompensated care payments in the computation of the proposed outlier fixed-loss cost threshold. Specifically, we stated we are proposing to use the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the outlier fixed-loss cost threshold methodology. Using this methodology, we proposed an outlier fixed-loss cost threshold for FY 2015 equal to the prospective payment rate for the MS–DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any add-on payments for new technology, plus $25,799. In the proposed rule we noted that the proposed FY 2015 fixed-loss cost threshold is higher than the FY 2014 final outlier fixed-loss cost threshold of $21,748. We stated that we believe that the increase in the charge inflation factor (compared to the FY 2014 charge inflation factor) contributed to a higher proposed outlier fixed-loss threshold for FY 2015. As charges increase, so do outlier payments. As a result, it was necessary for us to raise the proposed outlier fixed-loss cost threshold to decrease the amount of outlier payments expended in order to reach the 5.1 percent target. Comment: Some commenters were surprised by the magnitude of the increase of the outlier threshold in the proposed rule compared to the threshold of $21,748 for FY 2014. The commenters explained that, for FY 2013, CMS currently estimates that outliers are 4.81 percent of total MS– DRG payments. The commenters asserted that, given that the threshold for FY 2013 of $21,821 was similar to the outlier threshold for FY 2014, they find little justification for a dramatic increase in the threshold for FY 2015. The commenters also stated that it is important that CMS is aware of the magnitude of inaccuracies when estimating the actual outlier payout for prior years or calculating the current outlier threshold. The commenters noted that, in prior years, CMS has estimated outlier payments for a FY in PO 00000 Frm 00526 Fmt 4701 Sfmt 4700 one year and then the next year revises the estimate at a much lower number than the initial estimate. The commenters cited the FY 2013 outlier estimate as an example where CMS estimated total outlier payments for FY 2013 in the FY 2014 IPPS/LTCH PPS proposed rule as 5.17 percent and then revised this number in the FY 2015 IPPS/LTCH PPS proposed rule to 4.81 percent. The commenters also noted that with each rulemaking the final outlier threshold established by CMS is always lower than the threshold set forth in the proposed rule. One commenter speculated that this is most likely as result of the use of updated CCRs or other data in calculating the final outlier threshold. As a result, the commenter emphasized the need for CMS to use the most recent data available when calculating the outlier threshold. The commenter stated that, with regard to the current rulemaking, CMS used data from the December 2013 PSF in the proposed rule, when the March 2014 PSF was available at the time the proposed rule was issued. Using the March 2014 PSF, the commenter calculated an outlier threshold of $25,375 (compared to the threshold presented in the proposed rule of $25,799, which used the December 2013 PSF). Response: When we conduct our modeling to determine the outlier threshold, we factor in all payments and policies that would affect actual payments for the current year in order to estimate that outlier payments are 5.1 percent of total MS–DRG payments. While we recognize that outlier payments have been below the 5.1 percent target in prior fiscal years, we do not believe that these lower payouts are relevant to the current fiscal year because they do not lend greater accuracy to the estimate of payments that are 5.1 percent of total MS–DRG payments for FY 2015. We also note that in response to commenters’ concerns, last year we modified our outlier threshold calculation by changing the way we adjust the CCRs. We also changed the measure of inflation from using 6 months of claims data to 1 year of claims data. CMS shares the commenters’ belief that outlier payments in every fiscal year meet the 5.1 percent target, and we made these changes to improve our methodology for calculating the outlier threshold. As in prior years, CMS will continue to consider any suggestions made by the commenters to improve the accuracy of the calculation of the outlier threshold. CMS’ historical policy is to use the best available data when setting the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payment rates and factors in both the proposed and final rules. Sometimes there are variables that change between the proposed and final rule as result of the availability of more recent data, such as the charge inflation factor and the CCR adjustment factors that can cause fluctuations in the threshold amount. Other factors such as changes to the wage indexes and market basket increase can also cause the outlier fixedloss cost threshold to fluctuate between the proposed rule and the final rule each year. We use the latest data that is available at the time of the development of the proposed and final rules, such as the most recent update of MedPAR claims data and CCRs from the most recent update of the PSF. With regard to the commenter noting the availability of the March 2014 PSF at the time the proposed rule was issued, this file was not available when we calculated the proposed outlier fixed-loss cost threshold as part of the development of the proposed rule. Therefore, for the proposed rule, we used the latest update available, which was the December 2013 PSF. If we were to wait for the March 2014 PSF to become available, this would cause further delay of publication of the proposed rule, leading to a possible further delay of issuance of the final rule in a timely fashion. Comment: One commenter stated that as a result of the large increase in the proposed outlier threshold it suspected that CMS is duplicating its charge increases through the use of the charge inflation factor. The commenter believed that this duplication is compounded by the fact that the CCRs would also reflect high charges. The commenter believed that these two issues are artificially inflating the threshold while hospitals have lower costs. The commenter offered an alternative threshold of $24,340, by measuring the change in outlier percentage payments of 5.1 percent for FY 2015 compared to the FY 2014 outlier estimate of 5.79 percent (5.1 percent minus 5.79 percent = ¥0.69 percent divided by 5.79 percent = 11.92 percent). The commenter recommended using a forecast correction of 100 plus 11.92 percent based on their calculation above. Response: We disagree with the commenter. We believe that our measure and application of the charge inflation factor is accurate and appropriate as explained in the proposed rule. As discussed, we apply a 2-year charge inflation factor because we use claims from FY 2013 for FY 2015. Also, the CCRs we use come directly from the PSF, which comes VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 directly from hospitals’ cost reports. We believe that these CCRs are accurate. We also are unsure what ‘‘high charges’’ to which the commenter referred. Further, as noted above, section 1886(d)(5)(A)(iv) of the Act requires outlier payments to be not less than 5 percent nor more than 6 percent of total estimated or projected payments in that year. Therefore, we cannot adopt the commenter’s suggestion to use a forecast correction to compute the outlier threshold. When we calculate the threshold, we use the latest data that are available at the time of the proposed and final rules in order to estimate that outlier payments are 5.1 percent of total payments. Comment: One commenter noted that CMS did not indicate if it has made any additional changes to its methodology to exclude the charges for hemophilia clotting factors from the calculation of the fixed-loss outlier threshold. The commenter noted that CMS provides a methodology for excluding such charges from MedPAR data for the budget neutrality calculation. The commenter wanted to ensure that such efforts also resulted in the exclusion of such charges from MedPAR data used for the calculation of the fixed-loss threshold as well. Response: We appreciate the commenter’s input and for seeking clarification on the calculation of the fixed-loss outlier threshold. Similar to what is done in the budget neutrality calculation, CMS excludes the charges for hemophilia clotting factors from the calculation of the fixed-loss outlier threshold. Comment: One commenter stated that in its public comment submitted in response to the FY 2014 IPPS/LTCH PPS proposed rule regarding outliers, it explained why uncompensated care payments should be included as part of the fixed-loss threshold calculation. The commenter noted that it is clear why CMS considered this in the FY 2015 IPPS/LTCH PPS proposed rule. The commenter wanted to ensure that updates to the uncompensated care payment calculation are also considered in the final rule. Response: As discussed above, we included updates to the uncompensated care payment calculation as part of the fixed-loss outlier threshold calculation in this final rule. After consideration of the public comments we received, we are not making any changes to our methodology in this final rule for FY 2015. Therefore, we are using the same methodology we proposed to calculate the final outlier threshold. As we have done in the past, to calculate the final FY 2015 outlier PO 00000 Frm 00527 Fmt 4701 Sfmt 4700 50379 threshold, we simulated payments by applying FY 2015 payment rates and policies using cases from the FY 2013 MedPAR file. Therefore, in order to determine the final FY 2015 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2013 to FY 2015. As discussed in the FY 2014 IPPS/LTCH PPS final rule, we believe that a methodology that is based on 1-year of charge data will provide a more stable measure to project the average charge per case. To compute the 1-year average annualized rate-ofchange in charges per case for FY 2015, we compared the third quarter of FY 2012 through the second quarter of FY 2013 (April 1, 2012, through March 31, 2013) to the third quarter of FY 2013 through the second quarter of FY 2014 (April 1, 2013, through March 31, 2014). This rate-of-change is 5.1 percent (1.050917) or 10.4 percent (1.104427) over 2 years. As we have done in the past, we are establishing the FY 2015 outlier threshold using hospital CCRs from the March 2014 update to the ProviderSpecific File (PSF)—the most recent available data at the time of development of this final rule. For FY 2015, we also are continuing to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50979), we adopted a new methodology to adjust the CCRs. Specifically, we finalized a policy to compare the national average case-weighted operating and capital CCR from the most recent update of the PSF to the national average caseweighted operating and capital CCR from the same period of the prior year. Therefore, as we did for FY 2014, for FY 2015, we are adjusting the CCRs from the March 2014 update of the PSF by comparing the percentage change in the national average case-weighted operating CCR and capital CCR from the March 2013 update of the PSF to the national average case-weighted operating CCR and capital CCR from the March 2014 update of the PSF. We note that we used total transfer-adjusted cases from FY 2013 to determine the national average case-weighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison as this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison. E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50380 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Using the methodology above, we calculated a March 2013 operating national average case-weighted CCR of 0.292377 and a March 2014 operating national average case-weighted CCR of 0.28714. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the March 2013 operating national average case-weighted CCR from the March 2014 operating national average case-weighted CCR and then dividing the result by the March 2013 national operating average caseweighted CCR. This resulted in a national operating CCR adjustment factor of 0.982088. We also used the same methodology above to adjust the capital CCRs. Specifically, we calculated a March 2013 capital national average caseweighted CCR of 0.025143 and a March 2014 capital national average caseweighted CCR of 0.024849. We then calculated the percentage change between the two national capital caseweighted CCRs by subtracting the March 2013 capital national average caseweighted CCR from the March 2014 capital national average case-weighted CCR and then dividing the result by the March 2013 capital national average case-weighted CCR. This resulted in a national capital CCR adjustment factor of 0.988307. Consistent with our methodology in the past and as stated in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe that it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2015 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. As stated above, for FY 2015, we applied the FY 2015 payment rates and policies using cases from the FY 2013 MedPAR files in calculating the outlier threshold. As discussed above, for FY 2015, we are applying transitional wage indexes because of the adoption of the new OMB labor market area delineations. Also, as discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.G.3. of the preamble of this final rule, in accordance with section 10324(a) of the Affordable Care Act, beginning in FY 2011, we created VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 a wage index floor of 1.0000 for all hospitals located in States determined to be frontier States. We note that the frontier State floor adjustments are calculated and applied after rural and imputed floor budget neutrality adjustments are calculated for all labor market areas, in order to ensure that no hospital in a frontier State receives a wage index less than 1.0000 due to the rural and imputed floor adjustment. In accordance with section 10324(a) of the Affordable Care Act, the frontier State adjustment is not subject to budget neutrality, and is only extended to hospitals geographically located within a frontier State. However, for purposes of estimating the outlier threshold for FY 2015, it was necessary to apply the transitional wage indexes and adjust the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2015. If we did not take the above into account, our estimate of total FY 2015 payments would be too low, and, as a result, our outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), as we proposed and for the reasons discussed above, in our projection of FY 2015 outlier payments, we are not making any adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. As described in sections IV.H. and IV.I., respectively, of the preamble of this final rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe that it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the outlier threshold calculation or the outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments will continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we PO 00000 Frm 00528 Fmt 4701 Sfmt 4700 are excluding the hospital VBP payment adjustments and the hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold. We note that, to the extent section 1886(r) of the Act modifies the existing DSH payment methodology under section 1886(d)(5)(F), the new uncompensated care payment under section 1886(r)(2), like the empirically justified Medicare DSH payment under section 1886(r)(1), may be considered an amount payable under section 1886(d)(5)(F) of the Act such that it would be reasonable to include the payment in the outlier determination under section 1886(d)(5)(A). As we did for FY 2014, for FY 2015, for the reasons discussed above, we also are allocating an estimated per-discharge uncompensated care payment amount to all cases for the hospitals eligible to receive the uncompensated care payment amount in the calculation of the outlier fixed-loss cost threshold methodology. Specifically, we are using the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the outlier fixed-loss cost threshold methodology. Using this methodology, we calculated a final outlier fixed-loss cost threshold for FY 2015 equal to the prospective payment rate for the MS– DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any add-on payments for new technology, plus $24,758. We note that the final FY 2015 fixedloss cost threshold is higher than the FY 2014 final outlier fixed-loss cost threshold of $21,748. We believe that the increase in the charge inflation factor (compared to the FY 2014 charge inflation factor) contributed to a higher outlier fixed-loss threshold for FY 2015. As charges increase, so do outlier payments. As a result, it was necessary for us to raise the outlier fixed-loss cost threshold to decrease the amount of outlier payments expended in order to reach the 5.1 percent target. Also, the final FY 2015 fixed-loss cost threshold is lower than the FY 2015 proposed outlier fixed-loss cost threshold of $25,799. As discussed above, the proposed MS–DRG reclassification and recalibration budget neutrality factor was calculated incorrectly in the proposed rule as a result of the inadvertent miscalculation of a number of postacute care transferadjusted cases for certain MS–DRGs. We believe that the corrected factor, which offsets less money from the E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations calculate a CCR (as described under § 412.84(i)(3) of our regulations), statewide average CCRs are used to determine whether a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and (2) Other Changes Concerning Outliers available only via the Internet on the As stated in the FY 1994 IPPS final CMS Web site) contains the statewide rule (58 FR 46348), we establish an average operating CCRs for urban outlier threshold that is applicable to hospitals and for rural hospitals for both hospital inpatient operating costs which the fiscal intermediary or MAC is and hospital inpatient capital-related unable to compute a hospital-specific costs. When we modeled the combined CCR within the above range. Effective operating and capital outlier payments, for discharges occurring on or after we found that using a common October 1, 2014, these statewide average threshold resulted in a lower percentage ratios will replace the ratios posted on of outlier payments for capital-related our Web site at https://www.cms.gov/ costs than for operating costs. We Medicare/Medicare-Fee-for-Serviceproject that the thresholds for FY 2015 Payment/AcuteInpatientPPS/FY-2014will result in outlier payments that will IPPS-Final-Rule-Home-Page-Items/FYequal 5.1 percent of operating DRG 2014-IPPS-Final-Rule-CMS-1599-Fpayments and 6.27 percent of capital Tables.html. Table 8B listed in section payments based on the Federal rate. VI. of this Addendum (and available via In accordance with section the Internet on the CMS Web site) 1886(d)(3)(B) of the Act, we are contains the comparable statewide reducing the FY 2015 standardized average capital CCRs. As previously amount by the same percentage to stated, the CCRs in Tables 8A and 8B account for the projected proportion of will be used during FY 2015 when payments paid as outliers. hospital-specific CCRs based on the The outlier adjustment factors that latest settled cost report are either not will be applied to the standardized available, or are outside the range noted amount based on the FY 2015 outlier above. Table 8C listed in section VI. of threshold are as follows: this Addendum (and available via the Internet on the CMS Web site) contains Operating standardCapital fed- the statewide average total CCRs used under the LTCH PPS as discussed in ized eral rate amounts section V. of this Addendum. We finally note that we published a National ............. 0.948998 0.937327 Puerto Rico ....... 0.926575 0.915412 manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section We are applying the outlier 20.1.2 of the Medicare Claims adjustment factors to the FY 2015 payment rates after removing the effects Processing Manual. The manual update covered an array of topics, including of the FY 2014 outlier adjustment CCRs, reconciliation, and the time value factors on the standardized amount. To determine whether a case qualifies of money. We encourage hospitals that for outlier payments, we apply hospital- are assigned the statewide average operating and/or capital CCRs to work specific CCRs to the total covered charges for the case. Estimated operating with their fiscal intermediary or MAC on a possible alternative operating and/ and capital costs for the case are or capital CCR as explained in Change calculated separately by applying Request 3966. Use of an alternative CCR separate operating and capital CCRs. developed by the hospital in These costs are then combined and conjunction with the fiscal intermediary compared with the outlier fixed-loss or MAC can avoid possible cost threshold. Under our current policy at § 412.84, overpayments or underpayments at cost we calculate operating and capital CCR report settlement, thereby ensuring ceilings and assign a statewide average better accuracy when making outlier CCR for hospitals whose CCRs exceed payments and negating the need for 3.0 standard deviations from the mean outlier reconciliation. We also note that of the log distribution of CCRs for all a hospital may request an alternative hospitals. Based on this calculation, for operating or capital CCR ratio at any hospitals for which the fiscal time as long as the guidelines of Change intermediary or MAC computes Request 3966 are followed. In addition, operating CCRs greater than 1.23 or as mentioned above, we published an capital CCRs greater than 0.172, or additional manual update (Change hospitals for which the fiscal Request 7192) to our outlier policy on intermediary or MAC is unable to December 3, 2010, which also updated tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV standardized amount, results in less outlier payments. Therefore, it was necessary to lower the outlier threshold from the proposed rule in the final rule in order to reach the 5.1 percent target. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00529 Fmt 4701 Sfmt 4700 50381 Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/ manuals/downloads/clm104c03.pdf. (3) FY 2013 and FY 2014 Outlier Payments In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50983 through 50984), we stated that, based on available data, we estimated that actual FY 2013 outlier payments would be approximately 4.77 percent of actual total MS–DRG payments. This estimate was computed based on simulations using the FY 2012 MedPAR file (discharge data for FY 2012 claims). That is, the estimate of actual outlier payments did not reflect actual FY 2013 claims, but instead reflected the application of FY 2013 payment rates and policies to available FY 2012 claims. Our current estimate, using available FY 2013 claims data, is that actual outlier payments for FY 2013 were approximately 4.86 percent of actual total MS–DRG payments. Therefore, the data indicate that, for FY 2013, the percentage of actual outlier payments relative to actual total payments is lower than we projected for FY 2013. Consistent with the policy and statutory interpretation we have maintained since the inception of the IPPS, we do not make retroactive adjustments to outlier payments to ensure that total outlier payments for FY 2013 are equal to 5.1 percent of total MS–DRG payments. We currently estimate that, using the latest CCRs from the March 2014 update of the PSF, actual outlier payments for FY 2014 will be approximately 5.71 percent of actual total MS–DRG payments, approximately 0.61 percentage point higher than the 5.1 percent we projected when setting the outlier policies for FY 2014. This estimate of 5.71 percent is based on simulations using the FY 2013 MedPAR file (discharge data for FY 2013 claims). 5. FY 2015 Standardized Amount The adjusted standardized amount is divided into labor-related and nonlaborrelated portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the Internet) contain the national standardized amounts that we are applying to all hospitals, except hospitals located in Puerto Rico, for FY 2015. The Puerto Rico-specific amounts are shown in Table 1C listed and published in section VI. of this E:\FR\FM\22AUR2.SGM 22AUR2 50382 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Addendum (and available via the Internet on the CMS Web site). The amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is 69.6 percent, and the laborrelated share applied to the standardized amounts in Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we will apply a labor-related share of 62 percent for all hospitals whose wage indexes are less than or equal to 1.0000. In addition, Tables 1A and 1B include the standardized amounts reflecting the applicable percentage increases for FY 2015. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount (this amount is set forth in Table 1A). The labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2015 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the Internet on the CMS Web site). This table also includes the Puerto Rico-specific standardized amounts. The labor-related share applied to the Puerto Rico-specific standardized amount is the labor-related share of 63.2 percent, or 62 percent, depending on which provides higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Public Law 108– 173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) The following table illustrates the changes from the FY 2014 national standardized amount. The second through fifth columns display the changes from the FY 2014 standardized amounts for each applicable FY 2015 standardized amount. The first row of the table shows the updated (through FY 2014) average standardized amount after restoring the FY 2014 offsets for outlier payments, demonstration budget neutrality, the geographic reclassification budget neutrality, and the retrospective documentation and coding adjustment under section 7(b)(1)(B) of Public Law 110–90. The MS–DRG reclassification and recalibration and wage index budget neutrality adjustment factors are cumulative. Therefore, those FY 2014 adjustment factors are not removed from this table. COMPARISON OF FY 2014 STANDARDIZED AMOUNTS TO THE FY 2015 STANDARDIZED AMOUNTS tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Hospital submitted quality data and is a meaningful EHR user FY 2014 Base Rate after removing: 1. FY 2014 Geographic Reclassification Budget Neutrality (0.990718) 2. FY 2014 Rural Community Hospital Demonstration Program Budget Neutrality (0.999415) 3. Cumulative Factor: FY 2008, FY 2009, FY 2012, FY 2013, and FY 2014 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Pub. L. 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012 (0.9403). 4. FY 2014 Operating Outlier Offset (0.948995) FY 2015 Update Factor ................................. FY 2015 MS-DRG Recalibration and Wage Index Budget Neutrality Factor. FY 2015 Reclassification Budget Neutrality Factor. FY 2015 Rural Community Demonstration Program Budget Neutrality Factor. FY 2015 Operating Outlier Factor ................. Cumulative Factor: FY 2008, FY 2009, FY 2012, FY 2013, FY 2014 and FY 2015 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Pub. L. 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012. FY 2015 New Labor Market Delineation Wage Index Transition Budget Neutrality Factor. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality sata and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user If Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38. Nonlabor (30.4%): $1,847.75. If Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45. Nonlabor (38%): $2,309.70. If Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38. Nonlabor (30.4%): $1,847.75. If Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45. Nonlabor (38%): $2,309.70. If Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38. Nonlabor (30.4%): $1,847.75. If Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45. Nonlabor (38%): $2,309.70. If Wage Index is Greater Than 1.0000: Labor (69.6%): $4,230.38. Nonlabor (30.4%): $1,847.75. If Wage Index is less Than or Equal to 1.0000: Labor (62%): $3,768.45. Nonlabor (38%): $2,309.70. 1.022 .......................... 0.998982 .................... 1.01475 ...................... 0.998982 .................... 1.01475 ...................... 0.998982 .................... 1.0075. 0.998982. 0.990406 .................... 0.990406 .................... 0.990406 .................... 0.990406. 0.99931 ...................... 0.99931 ...................... 0.99931 ...................... 0.99931. 0.948998 .................... 0.9329 ........................ 0.948998 .................... 0.9329 ........................ 0.948998 .................... 0.9329 ........................ 0.948998. 0.9329. 0.998859 .................... 0.998859 .................... 0.998859 .................... 0.998859. PO 00000 Frm 00530 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50383 COMPARISON OF FY 2014 STANDARDIZED AMOUNTS TO THE FY 2015 STANDARDIZED AMOUNTS—Continued Hospital submitted quality data and is NOT a meaningful EHR user Hospital submitted quality data and is a meaningful EHR user National Standardized Amount for FY 2015 if Wage Index is Greater Than 1.0000; Labor/Non-Labor Share Percentage (69.6/ 30.4). National Standardized Amount for FY 2015 if Wage Index is less Than or Equal to 1.0000; Labor/Non-Labor Share Percentage (62/38). The following table illustrates the changes from the FY 2014 Puerto Ricospecific payment rate for hospitals located in Puerto Rico. The second column shows the changes from the FY 2014 Puerto Rico specific payment rate for hospitals with a Puerto Rico-specific wage index greater than 1.0000. The Hospital did NOT submit quality sata and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user Labor: $3,780.13. Labor: $3,753.31. Labor: $3,753.31. Labor: $3,726.50. Nonlabor: $1,651.09. Nonlabor: $1,639.38. Nonlabor: $1,639.38. Nonlabor: $1,627.66. Labor: $3,367.36. Labor: $3,343.47. Labor: $3,343.47. Labor: $3,319.58. Nonlabor: $2,063.86. Nonlabor: $2,049.22. Nonlabor: $2,049.22. Nonlabor: $2,034.58. third column shows the changes from the FY 2014 Puerto Rico specific payment rate for hospitals with a Puerto Rico-specific wage index less than or equal to 1.0000. The first row of the table shows the updated (through FY 2014) Puerto Rico-specific payment rate after restoring the FY 2014 offsets for Puerto Rico-specific outlier payments, rural community hospital demonstration program budget neutrality, and the geographic reclassification budget neutrality. The MS–DRG recalibration budget neutrality adjustment factor is cumulative and is not removed from this table. COMPARISON OF FY 2014 PUERTO RICO-SPECIFIC PAYMENT RATE TO THE FY 2015 PUERTO RICO–SPECIFIC PAYMENT RATE Update (2.2 percent); wage index is greater than 1.0000; labor/Non-labor share percentage (63.2/36.8) FY 2014 Puerto Rico Base Rate, after removing: .............................. 1. FY 2014 Geographic Reclassification Budget Neutrality (0.990718). 2. FY 2014 Rural Community Hospital Demonstration Program Budget Neutrality (0.999415). 3. FY 2014 Puerto Rico Operating Outlier Offset (0.943455) ............ FY 2015 Update Factor ...................................................................... FY 2015 MS-DRG Recalibration Budget Neutrality Factor ................ FY 2015 Reclassification Budget Neutrality Factor ............................ FY 2015 Rural Community Hospital Demonstration Program Budget Neutrality Factor. FY 2015 New Labor Market Delineation Wage Index Transition Budget Neutrality Factor. FY 2015 Puerto Rico Operating Outlier Factor .................................. Puerto Rico-Specific Payment Rate for FY 2015 ............................... tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV B. Adjustments for Area Wage Levels and Cost-of-Living 18:25 Aug 21, 2014 Jkt 232001 Labor: $1,722.31 ............................. Nonlabor: $1,002.86 ........................ 1.022 ................................................ 0.997543 .......................................... 0.990406 .......................................... 0.99931 ............................................ Labor: $1,689.61 Nonlabor: $1,035.56 1.022 0.997543 0.990406 0.99931 0.998859 .......................................... 0.998859 0.926575 .......................................... Labor: $1,608.39 ............................. Nonlabor: $936.54 ........................... 0.926575 Labor: $1,577.86 Nonlabor: $967.07 1. Adjustment for Area Wage Levels Tables 1A through 1C, as published in section VI. of this Addendum (and available via the Internet), contain the labor-related and nonlabor-related shares that we used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2015. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum. VerDate Mar<15>2010 Update (2.2 percent); wage index is less than or equal to 1.0000; labor/Non-labor share percentage (62/38) Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the laborrelated portion of the national and Puerto Rico prospective payment rates, respectively, to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of the preamble of this final rule, we discuss the data and methodology for the FY 2015 wage index. PO 00000 Frm 00531 Fmt 4701 Sfmt 4700 2. Adjustment for Cost-of-Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act provides discretionary authority to the Secretary to make ‘‘such adjustments . . . as the Secretary deems appropriate to take into account the unique circumstances of hospitals located in Alaska and Hawaii.’’ Higher laborrelated costs for these two States are taken into account in the adjustment for area wages described above. To account for higher nonlabor-related costs for these two States, we multiply the nonlabor-related portion of the standardized amount for hospitals E:\FR\FM\22AUR2.SGM 22AUR2 50384 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations located in Alaska and Hawaii by an adjustment factor. In the FY 2013 IPPS/LTCH PPS final rule, we established a methodology to update the COLA factors for Alaska and Hawaii that were published by the U.S. Office of Personnel Management (OPM) every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively). For FY 2014, in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50985 through 50987), we updated the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, we are using the same COLA factors established in FY 2014 for FY 2015 to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii. Below is a table listing the COLA factors for FY 2015. FINAL FY 2015 COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS Cost of living adjustment factor tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Area Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ....................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ....................................... City of Juneau and 80-kilometer (50-mile) radius by road ........ Rest of Alaska ........................... Hawaii: City and County of Honolulu ..... County of Hawaii ....................... County of Kauai ........................ County of Maui and County of Kalawao ................................. 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, the next update to the COLA factors for Alaska and Hawaii would occur in FY 2018. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 C. Calculation of the Prospective Payment Rates General Formula for Calculation of the Prospective Payment Rates for FY 2015 In general, the operating prospective payment rate for all hospitals paid under the IPPS located outside of Puerto Rico, except SCHs and MDHs, for FY 2015 equals the Federal rate (which includes uncompensated care payments). We note that, as discussed in section IV.G. of the preamble of this final rule, section 1106 of Public Law 113–67, enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of Public Law 113–93, enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). Prior to the enactment of Public Law 113–67, the MDH program was only to be in effect through the end of FY 2013. Under current law, the MDH program will expire for discharges beginning on April 1, 2015. SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (which, as discussed in section IV.F. of the preamble of this final rule, includes uncompensated care payments); the updated hospitalspecific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. The prospective payment rate for SCHs for FY 2015 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. The prospective payment rate for MDHs for FY 2015 discharges occurring before April 1, 2015 equals the higher of the Federal rate or the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate as described below. For MDHs, the updated hospital-specific rate is based on FY 1982, FY 1987 or FY 2002 costs per discharge, whichever yields the greatest aggregate payment. The prospective payment rate for hospitals located in Puerto Rico for FY 2015 equals 25 percent of the Puerto Rico-specific payment rate plus 75 percent of the applicable national rate. PO 00000 Frm 00532 Fmt 4701 Sfmt 4700 1. Federal Rate The Federal rate is determined as follows: Step 1—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data and is a meaningful EHR user, as described above. Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—For hospitals located in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the applicable cost-of-living adjustment factor. Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if applicable, under Step 3). Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the applicable MS– DRG (Table 5 listed in section VI. of this Addendum and available via the Internet). The Federal payment rate as determined in Step 5 may then be further adjusted if the hospital qualifies for either the IME or DSH adjustment. In addition, for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b), the payment in Step 5 would be increased by the formula described in section IV.D. of the preamble of this final rule. The baseoperating DRG payment amount may be further adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment as described under sections 1886(q) and 1886(o) of the Act, respectively. Finally, we add the uncompensated care payment to the total claim payment amount. We note that, as discussed above, we take uncompensated care payments into consideration when calculating outlier payments. 2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs) a. Calculation of Hospital-Specific Rate Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate (which, as discussed in section IV.F. of the preamble of this final rule, includes uncompensated care payments); the updated hospitalspecific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospitalspecific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. As discussed previously, currently MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the greater of the updated hospital-specific rates based on either FY 1982, FY 1987, or FY 2002 costs per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, we refer readers to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082). We also refer readers to section IV.F. of the preamble of this final rule for a complete discussion on empirically justified Medicare DSH and uncompensated care payments. FY 2015 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Market Basket Rate-of-Increase ................................................ Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act .................................................. Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ....................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act .......................................................................................... Applicable Percentage Increase Applied to Hospital-Specific Rate ........................................................................................ For a complete discussion of the applicable percentage increase applied to the hospital-specific rates for SCHs and MDHs, we refer readers to section IV.B. of the preamble of this final rule. In addition, because SCHs and MDHs use the same MS–DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospital-specific rate is adjusted by a budget neutrality factor to ensure that changes to the MS–DRG classifications and the recalibration of the MS–DRG relative weights are made in a manner so that aggregate IPPS payments are unaffected. Therefore, a SCH’s and MDH’s hospital-specific rate is adjusted by the MS–DRG reclassification and recalibration budget neutrality factor of 0.997543, as discussed in section III. of this Addendum. The resulting rate is used in determining the payment rate that an SCH will receive for its discharges beginning on or after October 1, 2014, and the payment rate that an MDH will receive for its discharges beginning on or after October 1, 2014, and before April 1, 2015. We note that, in this final rule, for FY 2015, we are not making a documentation and coding adjustment to the hospital-specific rate. We refer readers to section II.D. of the preamble VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs and MDHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the applicable percentage increases to the hospital-specific rates applicable to SCHs and MDHs are the following: b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific Rate for FY 2015 Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospitalHospital submitted quality data and is a meaningful EHR user Hospital submitted quality data and is not a meaningful EHR user Hospital did not submit quality data and is not a meaningful EHR user 2.9 2.9 2.9 0.0 0.0 ¥0.725 ¥0.725 0.0 ¥0.5 ¥0.725 ¥0.5 0.0 ¥0.5 ¥0.725 ¥0.5 ¥0.2 ¥0.2 ¥0.2 ¥0.2 2.2 1.475 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning on or After October 1, 2014, and Before October 1, 2015 Section 1886(d)(9)(E)(iv) of the Act provides that, effective for discharges occurring on or after October 1, 2004, hospitals located in Puerto Rico are paid based on a blend of 75 percent of the national prospective payment rate and 25 percent of the Puerto Rico-specific rate. a. Puerto Rico-Specific Rate The Puerto Rico-specific prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount considering the applicable wage index (obtained from Table 1C published in section VI. of this Addendum and available via the Internet). Step 2—Multiply the labor-related portion of the standardized amount by Frm 00533 Hospital did not submit quality data and is a meaningful EHR user 2.9 of this final rule for a complete discussion regarding our policies and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in casemix. PO 00000 50385 Fmt 4701 Sfmt 4700 1.475 0.75 the applicable Puerto Rico-specific wage index. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet). Step 5—Multiply the result in Step 4 by 25 percent. b. National Prospective Payment Rate The national prospective payment rate is determined as follows: Step 1—Select the applicable national average standardized amount. Step 2—Multiply the labor-related portion of the national average standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the national average standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (obtained from Table 5 listed in section VI. of this Addendum and available via the Internet on the CMS Web site). E:\FR\FM\22AUR2.SGM 22AUR2 50386 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Step 5—Multiply the result in Step 4 by 75 percent. The sum of the Puerto Rico-specific rate and the national prospective payment rate computed above equals the prospective payment rate for a given discharge for a hospital located in Puerto Rico. This payment rate is then further adjusted if the hospital qualifies for either the IME or DSH adjustment. Finally, we add the uncompensated care payment to the total claim payment amount. We note that, as discussed above, we take uncompensated care payments into consideration when calculating outlier payments. III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2015 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, over a 10-year transition period (which extended through FY 2001) the payment methodology for Medicare acute care hospital inpatient capital-related costs changed from a reasonable cost-based methodology to a prospective methodology (based fully on the Federal rate). The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we used to determine the capital Federal rate for FY 2015, which is effective for discharges occurring on or after October 1, 2014. The 10-year transition period ended with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002). Therefore, for cost reporting periods beginning in FY 2002, all hospitals (except ‘‘new’’ hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) also provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 proportion of payments for exceptions under § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no longer a need for an exceptions payment adjustment factor.) However, in limited circumstances, an additional payment exception for extraordinary circumstances is provided for under § 412.348(f) for qualifying hospitals. Therefore, in accordance with § 412.308(c)(3), an exceptions payment adjustment factor may need to be applied if such payments are made. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral. Section 412.374 provides for blended payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. In accordance with section 1886(d)(9)(A) of the Act, under the IPPS for acute care hospital operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Effective October 1, 2004, in accordance with section 504 of Public Law 108–173, the methodology for operating payments made to hospitals located in Puerto Rico under the IPPS was revised to make payments based on a blend of 25 percent of the applicable standardized amount specific to Puerto Rico hospitals and 75 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges occurring on or after October 1, 2004, we also revised the methodology for computing capital payments made to hospitals located in Puerto Rico to be based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the national capital Federal rate (69 FR 49185). A. Determination of the Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update In the discussion that follows, we explain the factors that we used to determine the capital Federal rate for FY 2015. In particular, we explain why the FY 2015 capital Federal rate increases approximately 1.2 percent, compared to the FY 2014 capital Federal rate. As discussed in the impact analysis in Appendix A to this final rule, we PO 00000 Frm 00534 Fmt 4701 Sfmt 4700 estimate that capital payments per discharge will increase approximately 1.5 percent during that same period. Because capital payments constitute about 10 percent of hospital payments, a percent change in the capital Federal rate yields only about a 0.1 percent change in actual payments to hospitals. 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we adjust the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The update factor for FY 2015 under that framework is 1.5 percent based on the best data available at this time. The update factor under that framework is based on a projected 1.5 percent increase in the FY 2010based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0 percentage point adjustment for casemix, a 0.0 percentage point adjustment for the FY 2013 DRG reclassification and recalibration, and a forecast error correction of 0.0 percentage point. As discussed below in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2015 CIPI projection in that same section of this Addendum. Below we describe the policy adjustments that we are applying in the update framework for FY 2015. The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: • The average resource use of Medicare patients changes (‘‘real’’ casemix change); • Changes in hospital documentation and coding of patient records result in higher-weighted DRG assignments (‘‘coding effects’’); and • The annual DRG reclassification and recalibration changes may not be budget neutral (‘‘reclassification effect’’). We define real case-mix change as actual changes in the mix (and resource E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations requirements) of Medicare patients as opposed to changes in documentation and coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts as discussed in section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 47707).) For FY 2015, we are projecting a 0.5 percent total increase in the case-mix index. We estimated that the real casemix increase will also equal 0.5 percent for FY 2015. The net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, as we proposed, the net adjustment for casemix change in FY 2015 is 0.0 percentage point. The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year’s changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix indexrelated changes other than those due to patient severity of illness. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we have data available to evaluate the effects of the FY 2013 DRG reclassification and recalibration as part of our update for FY 2015. We estimate that FY 2013 DRG reclassification and recalibration resulted in no change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for reclassification and recalibration in the update framework for FY 2015. The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage point or more. There is a 2-year lag between the forecast and the availability of data to develop a measurement of the forecast error. A forecast error of 0.0 percentage point was calculated for the FY 2015 update. Historically, when forecast error of the CIPI is greater than 0.25 percentage point in absolute terms, it is reflected in the update recommended under this framework. Current historical data indicate that the forecasted FY 2013 rate-of-increase of the FY 2006-based CIPI (1.2 percent) used in calculating the FY 2013 update factor slightly understated the actual realized FY 2013 price increases of the FY 2006-based CIPI (1.3 percent) by 0.1 percentage point because the prices associated with both the depreciation and other capitalrelated cost categories grew more quickly than anticipated. Because this forecast error does not exceed the 0.25 percentage point threshold, as we proposed, we are making a 0.0 percentage point adjustment for forecast error in the update for FY 2015. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we calculated this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflected how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncost-effective services. Our intensity measure is based on a 5-year average. We calculate case-mix constant intensity as the change in total cost per discharge, adjusted for price level changes (the CIPI for hospital and related services) and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and the combination of qualityenhancing new technologies and complexity within the DRG system, we assume that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG PO 00000 Frm 00535 Fmt 4701 Sfmt 4700 50387 severity and the adoption of qualityenhancing technology. In this final rule, we are continuing to use a Medicare-specific intensity measure that is based on a 5-year adjusted average of cost per discharge for FY 2015 (we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50436) for a full description of our Medicare-specific intensity measure). Specifically, for FY 2015, we are using an intensity measure that is based on an average of cost per discharge data from the 5-year period beginning with FY 2007 and extending through FY 2012. Based on these data, we estimated that case-mix constant intensity declined during FYs 2007 through 2012. In the past, when we found intensity to be declining, we believed a zero (rather than a negative) intensity adjustment was appropriate. Consistent with this approach, because we estimate that intensity declined during that 5-year period, we believe it is appropriate to continue to apply a zero intensity adjustment for FY 2015. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for intensity in the update for FY 2015. Above, we described the basis of the components used to develop the 1.5 percent capital update factor under the capital update framework for FY 2015 as shown in the table below. CMS FY 2015 UPDATE FACTOR TO THE CAPITAL FEDERAL RATE Capital Input Price Index* Intensity: Case-Mix Adjustment Factors: Real Across DRG Change .................. Projected Case-Mix Change .................. 1.5 0.0 ¥0.5 0.5 Subtotal .............. Effect of FY 2013 Reclassification and Recalibration ................................ Forecast Error Correction 1.5 0.0 0.0 Total Update ....... 1.5 *The capital input price index is based on the FY 2010-based CIPI. b. Comparison of CMS and MedPAC Update Recommendation In its March 2014 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments for FY 2015. (We refer readers to MedPAC’s Report to the Congress: Medicare Payment Policy, March 2014, Chapter 3.) E:\FR\FM\22AUR2.SGM 22AUR2 50388 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments. For FY 2014, we estimated that outlier payments for capital will equal 6.07 percent of inpatient capital-related payments based on the capital Federal rate in FY 2014. Based on the thresholds as set forth in section II.A. of this Addendum, we estimate that outlier payments for capital-related costs will equal 6.27 percent for inpatient capitalrelated payments based on the capital Federal rate in FY 2015. Therefore, we are applying an outlier adjustment factor of 0.9373 in determining the capital Federal rate for FY 2015. Thus, we estimate that the percentage of capital outlier payments to total capital Federal rate payments for FY 2015 will be slightly higher than the percentage for FY 2014. The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The FY 2015 outlier adjustment of 0.9373 is a ¥0.21 percent change from the FY 2014 outlier adjustment of 0.9393. Therefore, the net change in the outlier adjustment to the capital Federal rate for FY 2015 is 0.9979 (0.9373/0.9393). Thus, the outlier adjustment will decrease the FY 2015 capital Federal rate by 0.21 percent compared to the FY 2014 outlier adjustment. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. Because we VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 implemented a separate GAF for Puerto Rico, we apply separate budget neutrality adjustments for the national GAF and the Puerto Rico GAF. We apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was implemented in FY 1998. To determine the factors for FY 2015, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG classifications and relative weights and the FY 2014 GAF to estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG classifications and relative weights and the FY 2015 GAFs. To achieve budget neutrality for the changes in the national GAFs, based on calculations using updated data, we are applying an incremental budget neutrality adjustment factor of 0.9999 for FY 2015 to the previous cumulative FY 2014 adjustment factor of 0.9891, yielding an adjustment factor of 0.9890 through FY 2015. For the Puerto Rico GAFs, we are applying an incremental budget neutrality adjustment factor of 1.0012 for FY 2015 to the previous cumulative FY 2014 adjustment factor of 1.0076, yielding a cumulative adjustment factor of 1.0088 through FY 2015. We then compared estimated aggregate capital Federal rate payments based on the FY 2014 MS–DRG relative weights and the FY 2015 GAFs to estimated aggregate capital Federal rate payments based on the cumulative effects of the FY 2015 MS–DRG classifications and relative weights and the FY 2015 GAFs. The incremental adjustment factor for DRG classifications and changes in relative weights is 0.9987 both nationally and for Puerto Rico. The cumulative adjustment factors for MS–DRG classifications and changes in relative weights and for changes in the GAFs through FY 2015 are 0.9877 nationally and 1.0075 for Puerto Rico. (We note that all the values are calculated with unrounded numbers.) The GAF/DRG budget neutrality adjustment factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement under § 412.308(c)(4)(ii) that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs. PO 00000 Frm 00536 Fmt 4701 Sfmt 4700 The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the MS–DRG relative weights. Under the capital IPPS, there is a single GAF/DRG budget neutrality adjustment factor (the national capital rate and the Puerto Rico capital rate are determined separately) for changes in the GAF (including geographic reclassification) and the MS–DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for DSH or IME. The cumulative adjustment factor accounts for the MS–DRG reclassifications and recalibration and for changes in the GAFs. It also incorporates the effects on the GAFs of FY 2015 geographic reclassification decisions made by the MGCRB compared to FY 2014 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors. 4. Capital Federal Rate for FY 2015 For FY 2014, we established a capital Federal rate of $429.31 (78 FR 50990). We are establishing an update of 1.5 percent in determining the FY 2015 capital Federal rate for all hospitals. As a result of this update and the budget neutrality factors discussed above, we are establishing a national capital Federal rate of $434.26 for FY 2015. The national capital Federal rate for FY 2015 was calculated as follows: • The FY 2015 update factor is 1.015, that is, the update is 1.5 percent. • The FY 2015 budget neutrality adjustment factor that is applied to the capital Federal rate for changes in the MS–DRG classifications and relative weights and changes in the GAFs is 0.9986. • The FY 2015 outlier adjustment factor is 0.9373. (We note that, as discussed in section VI.C. of the preamble of this final rule, we are not making an additional MS– DRG documentation and coding adjustment to the capital IPPS Federal rates for FY 2015.) Because the FY 2015 capital Federal rate has already been adjusted for differences in case-mix, wages, cost-ofliving, indirect medical education costs, and payments to hospitals serving a E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations disproportionate share of low-income patients, we are not making additional adjustments in the capital Federal rate for these factors, other than the budget neutrality factor for changes in the MS– DRG classifications and relative weights and for changes in the GAFs. We are providing the following chart that shows how each of the factors and adjustments for FY 2015 affects the computation of the FY 2015 national capital Federal rate in comparison to the FY 2014 national capital Federal rate. The FY 2015 update factor has the effect of increasing the capital Federal rate by 1.5 percent compared to the FY 2014 capital Federal rate. The GAF/DRG budget neutrality adjustment factor has the effect of decreasing the capital 50389 Federal rate by 0.14 percent. The FY 2015 outlier adjustment factor has the effect of decreasing the capital Federal rate by 0.21 percent compared to the FY 2014 capital Federal rate. The combined effect of all the changes will increase the national capital Federal rate by 1.15 percent compared to the FY 2014 national capital Federal rate. COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2014 CAPITAL FEDERAL RATE AND FY 2015 CAPITAL FEDERAL RATE FY 2014 Update Factor 1 ................................................................................ GAF/DRG Adjustment Factor 1 ........................................................ Outlier Adjustment Factor 2 .............................................................. Capital Federal Rate ........................................................................ FY 2015 1.0090 0.9987 0.9393 429.31 Change 1.0150 0.9986 0.9373 434.26 1.0150 0.9986 0.9979 1.0115 Percent change 1.50 ¥0.14 ¥0.21 1.15 1 The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal rates. Thus, for example, the incremental change from FY 2014 to FY 2015 resulting from the application of the 0.9986 GAF/DRG budget neutrality adjustment factor for FY 2015 is a net change of 0.9986 (or –0.14 percent). 2 The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting from the application of the FY 2015 outlier adjustment factor is 0.9373/ 0.9393, or 0.9979 (or ¥0.21 percent). In this final rule, we also are providing the following chart that shows how the final FY 2015 capital Federal rate differs from the proposed FY 2015 capital Federal rate as presented in the FY 2015 IPPS/LTCH PPS proposed rule. COMPARISON OF FACTORS AND ADJUSTMENTS: PROPOSED FY 2015 CAPITAL FEDERAL RATE AND FINAL FY 2015 CAPITAL FEDERAL RATE Proposed Update Factor .................................................................................. GAF/DRG Adjustment Factor .......................................................... Outlier Adjustment Factor ................................................................ Capital Federal Rate ........................................................................ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 5. Special Capital Rate for Puerto Rico Hospitals Section 412.374 provides for the use of a blended payment system for payments made to hospitals located in Puerto Rico under the PPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. Under the broad authority of section 1886(g) of the Act, beginning with discharges occurring on or after October 1, 2004, capital payments made to hospitals located in Puerto Rico are based on a blend of 25 percent of the Puerto Rico capital rate and 75 percent of the capital Federal rate. The Puerto Rico capital rate is derived from the costs of Puerto Rico hospitals only, while the capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS (including Puerto Rico). To adjust hospitals’ capital payments for geographic variations in capital VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Final 1.0150 0.9957 0.9374 433.01 costs, we apply a GAF to both portions of the blended capital rate. The GAF is calculated using the operating IPPS wage index, and varies depending on the labor market area or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended capital rate. Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality adjustment factor for MS–DRG reclassifications and recalibration nationally and for Puerto Rico. The budget neutrality adjustment factors for the national GAF and for the Puerto Rico GAF and the budget neutrality factor for MS–DRG reclassifications and recalibration (which is the same nationally and for Puerto Rico) are PO 00000 Frm 00537 Fmt 4701 Sfmt 4700 Change 1.0150 0.9986 0.9373 434.26 1.0000 1.0030 0.9999 1.0029 Percent change 0.00 0.30 ¥0.01 1.29 discussed in section III.A.3. of this Addendum. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). For FY 2014, the special capital rate for hospitals located in Puerto Rico was $209.82 (78 FR 50991). With the changes we are making to the factors used to determine the capital Federal rate, the FY 2015 special capital rate for hospitals in Puerto Rico is $209.10. Comment: One commenter noted that the proposed capital standard Federal rate for Puerto Rico is approximately less than half of the proposed national capital standard Federal rate. The commenter asserted that this E:\FR\FM\22AUR2.SGM 22AUR2 50390 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV ‘‘disparity’’ is ‘‘not consistent with the basic reality of Puerto Rico’’ because average capital costs in Puerto Rico are not that dissimilar from those in the United States. Response: We appreciate the commenter’s attention to the proposed capital Federal rates for Puerto Rico hospitals. While it is not clear what the commenter was specifically requesting, we believe the commenter may have been suggesting that CMS increase the Puerto Rico specific capital Federal rate to reduce the difference between it and the national capital Federal rate. The commenter is correct that the proposed Puerto Rico capital standard Federal rate is approximately half of the proposed national capital standard Federal rate, which has consistently been the difference since those rates were established. The Puerto Rico capital rate is derived from the costs of Puerto Rico hospitals only, while the national capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS, including Puerto Rico. The commenter did not provide any empirical data to demonstrate that the capital-related costs in Puerto Rico are similar to those in the United States, nor that the blended payment methodology for capital-related costs to hospitals located in Puerto Rico at § 412.374 (that is, 25 percent of the Puerto Rico capital rate and 75 percent of the national capital Federal rate) does not result in appropriate capital IPPS payments for Puerto Rico hospitals. Consequently, we are unable to assess and directly respond to the statements included in the comment. Therefore, in this final rule, we have determined that the Puerto Rico capital Federal rate for FY 2015 is consistent with our current policy. B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2015 For purposes of calculating payments for each discharge during FY 2015, the capital Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted capital Federal rate. Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The outlier thresholds for FY VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 2015 are in section II.A. of this Addendum. For FY 2015, a case would qualify as a cost outlier if the cost for the case plus the (operating) IME and DSH payments (including both the empirically justified Medicare DSH payment and the estimated uncompensated care payment, as discussed in section II.A.4.g.(1) of this Addendum) is greater than the prospective payment rate for the MS– DRG plus the fixed-loss amount of $24,758. Currently, as provided under § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect— the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weightedaverage of past capital purchase prices up to and including the current year. We periodically update the base year for the operating and capital input price indexes to reflect the changing composition of inputs for operating and capital expenses. In the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50603 through 50607), we rebased and revised the CIPI to a FY 2010 base year to reflect the more current structure of capital costs in hospitals. For a complete discussion of this rebasing, we refer readers to the FY 2014 IPPS/LTCH PPS final rule. 2. Forecast of the CIPI for FY 2015 Based on the latest forecast by IHS Global Insight, Inc. (second quarter of 2014), we are forecasting the FY 2010based CIPI to increase 1.5 percent in FY PO 00000 Frm 00538 Fmt 4701 Sfmt 4700 2015. This reflects a projected 2.0 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), and a projected 2.7 percent increase in other capital expense prices in FY 2015, partially offset by a projected 1.1 percent decline in vintage-weighted interest expenses in FY 2015. The weighted average of these three factors produces the forecasted 1.5 percent increase for the FY 2010-based CIPI as a whole in FY 2015. IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2015 Payments for services furnished in children’s hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) that are excluded from the IPPS are made on the basis of reasonable costs based on the hospital’s own historical cost experience, subject to a rate-ofincrease ceiling. A per discharge limit (the target amount as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital’s own cost experience in its base year, and updated annually by a rate-ofincrease percentage. (We note that, in accordance with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed that the FY 2015 rate-of-increase percentage for updating the target amounts for the 11 cancer hospitals, children’s hospitals, and the short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, as well as RNHCIs would be the estimated percentage increase in the FY 2015 IPPS operating market basket, in accordance with applicable regulations at § 413.40. As we did in FY 2014, we proposed to use the percentage increase in the FY 2010-based IPPS operating market basket to update these target amounts. Based on IHS Global Insight, Inc.’s 2014 first quarter forecast, we estimated that the FY 2010-based IPPS operating market basket update for FY 2015 was 2.7 percent (that is, the estimate of the market basket rate-of-increase). However, we proposed that if more recent data become available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2015. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations We did not receive any public comments on our proposals. Based on updated data from IHS Global Insight, Inc.’s 2014 second quarter forecast, we estimate that the final FY 2010-based IPPS operating market basket update for FY 2015 is 2.9 percent (that is, the estimate of the market basket rate-of-increase). The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section VII. of the preamble of this final rule and section V. of the Addendum to this final rule for the update changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2015. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. V. Updates to the Payment Rates for the LTCH PPS for FY 2015 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV A. LTCH PPS Standard Federal Rate for FY 2015 1. Background In section VII. of the preamble of this final rule, we discuss our updates to the payment rates, factors, and specific policies under the LTCH PPS for FY 2015. Under § 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate years beginning RY 2004 through RY 2006, we updated the standard Federal rate annually by a factor to adjust for the most recent estimate of the increases in prices of an appropriate market basket of goods and services for LTCHs. We established this policy of annually updating the standard Federal rate because, at that time, we believed that was the most appropriate method for updating the LTCH PPS standard Federal rate for years after the initial implementation of the LTCH PPS in FY 2003. Therefore, under § 412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to the LTCH PPS standard Federal rate was equal to the previous rate year’s Federal rate updated by the most recent estimate of increases in the appropriate market basket of goods and services included in covered inpatient LTCH services. In determining the annual update to the standard Federal rate for RY 2007, based on our ongoing monitoring activity, we believed that, rather than solely using the most recent estimate of the LTCH PPS market basket update as the basis of the annual update factor, it was appropriate to adjust the standard Federal rate to account for the effect of documentation and coding in a prior period that was unrelated to patients’ severity of illness (71 FR 27818). Accordingly, we established under VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 § 412.523(c)(3)(iii) that the annual update to the standard Federal rate for RY 2007 was zero percent based on the most recent estimate of the LTCH PPS market basket at that time, offset by an adjustment to account for changes in case-mix in prior periods due to the effect of documentation and coding that were unrelated to patients’ severity of illness. For RY 2008 through FY 2011, we also made an adjustment for the effect of documentation and coding that was unrelated to patients’ severity of illness in establishing the annual update to the standard Federal rate as set forth in the regulations at §§ 412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012, 2013, and 2014, we updated the standard Federal rate by the most recent estimate of the LTCH PPS market basket at that time, including additional statutory adjustments required by section 1886(m)(3)(A) of the Act as set forth in the regulations at §§ 412.523(c)(3)(viii) through (c)(3)(ix). Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the other adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) as discussed in section VII.C.2. of the preamble of this final rule. Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. (As noted in section VII.C.2.a. of the preamble of this final rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use the term ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) For FY 2014, consistent with our historical practice, we established an update to the LTCH PPS standard Federal rate based on the full estimated LTCH PPS market basket increase of 2.5 percent and the 0.8 percentage point PO 00000 Frm 00539 Fmt 4701 Sfmt 4700 50391 reductions required by sections 1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(x) of the regulations, we established an annual update of 1.7 percent to the standard Federal rate for FY 2014 (78 FR 50761 through 50763). For FY 2015, as discussed in greater detail in section VII.C.2. of the preamble of this final rule, consistent with our proposal, we are establishing an annual update to the LTCH PPS standard Federal rate based on the full estimated increase in the LTCH PPS market basket, less the MFP adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In addition, as discussed in greater detail in section VII.C.2. of the preamble of this final rule, beginning in FY 2014, the annual update will be further reduced by 2.0 percentage points for LTCHs that fail to submit quality reporting data in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act. Specifically, in this final rule, based on the best available data, we are establishing an annual update to the standard Federal rate of 2.2 percent, which is based on the full estimated increase in the LTCH PPS market basket of 2.9 percent, less the MFP adjustment of 0.5 percentage point consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. As discussed in greater detail in section VII.C.2.c. of the preamble of this final rule, for LTCHs that fail to submit the required quality reporting data for FY 2015 in accordance with the LTCHQR Program, the annual update is further reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. Accordingly, we are establishing an annual update to the LTCH PPS standard Federal rate of 0.2 percent for LTCHs that fail to submit the required quality reporting data for FY 2015. This 0.2 percent update is calculated based on the full estimated increase in the LTCH PPS market basket of 2.9 percent, less a MFP adjustment of 0.5 percentage point, less an additional adjustment of 0.2 percentage point required by the statute, and less 2.0 percentage points for failure to submit quality reporting data as required by section 1886(m)(5) of the Act. 2. Development of the FY 2015 LTCH PPS Standard Federal Rate We continue to believe that the annual update to the LTCH PPS standard Federal rate should be based E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50392 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations on the most recent estimate of the increase in the LTCH PPS market basket, including any statutory adjustments. Consistent with our historical practice and as we proposed, for FY 2015, we are applying the annual update to the LTCH PPS standard Federal rate from the previous year. Furthermore, in determining the standard Federal rate for FY 2015, consistent with our proposal, we also are making certain regulatory adjustments. Specifically, we are applying an adjustment factor for the final year of the 3-year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3), as discussed in greater detail in section VII.C.3. of the preamble of this final rule. In addition, in determining the FY 2015 standard Federal rate, we are applying a budget neutrality adjustment factor for the changes related to the area wage adjustment (that is, changes to the wage data, including the policy to adopt the new OMB delineations, and laborrelated share) in accordance with § 412.523(d)(4). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50993and 50993), we established an annual update to the LTCH PPS standard Federal rate of 1.7 percent for FY 2014 based on the full estimated LTCH PPS market basket increase of 2.5 percent, less the MFP adjustment of 0.5 percentage point consistent with section 1886(m)(3)(A)(i) of the Act and less the 0.3 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(C) of the Act. Accordingly, at § 412.523(c)(3)(x), we established an annual update to the standard Federal rate for FY 2014 of 1.7 percent. That is, we applied an update factor of 1.017 to the FY 2013 Federal rate of $40,607.31 to determine the FY 2014 standard Federal rate. We also adjusted the standard Federal rate for FY 2014 by the one-time prospective adjustment factor for FY 2014 of 0.98734 under § 412.523(d)(3)(ii). Furthermore, for FY 2014, we applied an area wage level budget neutrality factor of 1.0010531 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Consequently, we established a standard Federal rate for FY 2014 of $40,607.31 (calculated as $40,397.96 × 1.017 × 0.98734 × 1.0010531). In this final rule, we are establishing an annual update to the LTCH PPS standard Federal rate of 2.2 percent (that VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 is, an update factor of 1.022) for FY 2015, based on the full estimated increase in the LTCH PPS market basket of 2.9 percent, less the MFP adjustment of 0.5 percentage point, consistent with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. Therefore, consistent with our proposal, under § 412.523(c)(3)(xi), we are applying a factor of 1.022 to the FY 2014 standard Federal rate of $40,607.31 to determine the FY 2015 standard Federal rate. These factors are based on IGI’s second quarter 2014 forecast, which are the best available data at this time. For LTCHs that fail to submit quality reporting data for FY 2015 under the LTCHQR Program, consistent with our proposal, under § 412.523(c)(3)(xi) in conjunction with § 412.523(c)(4), we are reducing the annual update to the LTCH PPS standard Federal rate by an additional 2.0 percentage points consistent with section 1886(m)(5) of the Act. Therefore, we are establishing an annual update to the LTCH PPS standard Federal rate of 0.2 percent (that is, 2.2 percent minus 2.0 percentage points, or an update factor of 1.002) for FY 2015 for LTCHs that fail to submit the required quality reporting data for FY 2015 under the LTCHQR Program. We also are establishing that the standard Federal rate for FY 2015 will be further adjusted by an adjustment factor of 0.98734 for FY 2015 under the final year of the 3year phase-in of the one-time prospective adjustment at § 412.523(d)(3)(ii). In addition, for FY 2015, we are applying an area wage level budget neutrality factor of 1.0016703 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, we are establishing a standard Federal rate of $41,043.71 (calculated as $40,607.31 × 1.022 × 0.98734 × 1.0016703) for FY 2015. The standard Federal rate of $41,043.71 will apply in determining the payments for FY 2015 discharges from LTCHs that submit quality reporting data for FY 2015 in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act. For LTCHs that fail to submit quality reporting data for FY 2015 in accordance with the requirements of the LTCHQR Program under section 1886(m)(5) of the Act, we are establishing a standard Federal of $40,240.51 (calculated as $40,607.31 × PO 00000 Frm 00540 Fmt 4701 Sfmt 4700 1.002 × 0.98734 × 1.0016703) for FY 2015. B. Adjustment for Area Wage Levels under the LTCH PPS for FY 2015 1. Background Under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal rate to account for differences in LTCH area wage levels under § 412.525(c). The labor-related share of the LTCH PPS standard Federal rate is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. When we implemented the LTCH PPS, we established a 5-year transition to the full area wage level adjustment. The area wage level adjustment was completely phased-in for cost reporting periods beginning in FY 2007. Therefore, for cost reporting periods beginning on or after October 1, 2006, the applicable LTCH area wage index values are the full LTCH PPS area wage index values calculated based on acute care hospital inpatient wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. For additional information on the phase-in of the area wage level adjustment under the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and the RY 2008 LTCH PPS final rule (72 FR 26891). 2. Geographic Classifications (Labor Market Areas) Based on the New OMB Delineations In adjusting for the differences in area wage levels under the LTCH PPS, the labor-related portion of an LTCH’s Federal prospective payment is adjusted by using an appropriate area wage index based on the geographic classification (labor market area) in which the LTCH is located. Specifically, the application of the LTCH PPS area wage level adjustment under existing § 412.525(c) is made based on the location of the LTCH—either in an ‘‘urban area,’’ or a ‘‘rural area,’’ as defined in § 412.503. Under § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area (MSAs) (which includes a Metropolitan division, where applicable), as defined by the Executive E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations OMB and a ‘‘rural area’’ is defined as any area outside of an urban area. The CBSA-based geographic classification (labor market area) definitions currently used under the LTCH PPS, effective for discharges occurring on or after July 1, 2005, are based on the OMB’s CBSA definitions that were developed based on 2000 U.S. Census data. As discussed in greater detail in section VII.D. of the preamble of this final rule, OMB announced revisions to the statistical boundaries of its labor market areas for MSAs, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the uses of the delineations of these areas in OMB Bulletin No. 13–01, issued on February 28, 2013 (referred hereinafter as the ‘‘new OMB delineations’’). As previously stated, at that time, the FY 2014 IPPS/LTCH PPS proposed rule was in the advanced stages of development, and the proposed FY 2014 LTCH PPS area wage indexes had already been developed based on the previous OMB CBSA-based labor market area definitions that are currently used to define CBSA-based labor market areas (referred hereinafter as ‘‘CBSA designations’’) under the LTCH PPS. Therefore, we did not implement changes to the CBSA designations under the LTCH PPS for FY 2014 based on the new OMB labor market areas delineations that were developed based on 2010 Decennial Census data. Rather, to allow for sufficient time to assess the new changes and their ramifications, we stated that we intended to propose to adopt the new OMB delineations, and the corresponding changes to the area wage index values based on those delineations, under the LTCH PPS for FY 2015 through notice and comment rulemaking. This approach was consistent with the approach used under the IPPS. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994 through 50995).) As discussed in section VII.D. of the preamble of this final rule, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are adopting the new OMB delineations beginning in FY 2015. We believe that these new OMB delineations are based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas. We also believe that the new OMB delineations will ensure that the LTCH PPS area wage VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We note that this policy is consistent with the IPPS policy discussed in section III.B. of the preamble of this final rule. For additional details on our policy to adopt the new OMB delineations, we refer readers to section VII.D. of the preamble of this final rule. 3. LTCH PPS Labor-Related Share Under the payment adjustment for the differences in area wage levels under § 412.525(c), the labor-related share of an LTCH’s PPS Federal prospective payment is adjusted by the applicable wage index for the labor market area in which the LTCH is located. The LTCH PPS labor-related share currently represents the sum of the labor-related portion of operating costs (Wages and Salaries; Employee Benefits; Professional Fees Labor-Related, Administrative and Business Support Services; and All-Other: Labor-Related Services) and a labor-related portion of capital costs using the applicable LTCH PPS market basket. Additional background information on the historical development of the laborrelated share under the LTCH PPS and the development of the RPL market basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 and 51808). For FY 2013, we revised and rebased the market basket used under the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific market basket. In addition, we determined the labor-related share for FY 2013 as the sum of the FY 2013 relative importance of each labor-related cost category of the FY 2009-based LTCH-specific market basket. For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479). Consistent with our historical practice, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50995 through 50996), we determined the LTCH PPS laborrelated share for FY 2014 based on the FY 2014 relative importance of each labor-related cost category, which reflected the different rates of price change for these cost categories between the base year (FY 2009) and FY 2014. Specifically, based on IGI’s second quarter 2013 forecast of the FY 2009- PO 00000 Frm 00541 Fmt 4701 Sfmt 4700 50393 based LTCH-specific market basket, we established a labor-related share under the LTCH PPS for FY 2014 of 62.537 percent. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28335), we proposed to establish a labor-related share under the LTCH PPS for FY 2015 of 62.571 percent based on IGI’s first quarter 2014 forecast of the FY 2009based LTCH-specific market basket. Consistent with our historical practice, we also proposed that if more recent data became available, we would use that data to determine the final FY 2015 labor-related share under the LTCH PPS. We did not receive any public comments on this proposal. Therefore, we are adopting the policy as final without modification. For FY 2015, in this final rule, we are establishing a labor-related share under the LTCH PPS of 62.306 percent based on IGI’s second quarter 2014 forecast of the FY 2009-based LTCH-specific market basket. The table below shows the FY 2015 labor-related share relative importance using IGI’s second quarter 2014 forecast of the FY 2009-based LTCH-specific market basket. The sum of the relative importance for FY 2015 for operating costs (Wages and Salaries; Employee Benefits; Professional Fees Labor-Related, Administrative and Business Support Services; and All Other: Labor-Related Services) is 58.116 percent. We are establishing that the portion of capital-related costs that is influenced by the local labor market will continue to be estimated to be 46 percent. Because the relative importance for capital-related costs will be 9.109 percent of the FY 2009-based LTCHspecific market basket in FY 2015, we are taking 46 percent of 9.109 percent to determine the labor-related share of capital-related costs for FY 2015, which will result in 4.190 percent (0.46 x 9.109). We then added that 4.190 percent for the capital-related cost amount to the 58.116 percent for the operating cost amount to determine the total labor-related share for FY 2015. Therefore, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are establishing a labor-related share under the LTCH PPS for FY 2015 of 62.306 percent. This labor-related share is determined using the same methodology as used in calculating all previous fiscal years LTCH labor-related shares. E:\FR\FM\22AUR2.SGM 22AUR2 50394 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations FY 2015 LABOR-RELATED SHARE RELATIVE IMPORTANCE BASED ON THE FY 2009-BASED LTCH–SPECIFIC MARKET BASKET FY 2015 laborrelated share relative importance 44.865 8.072 2.198 0.500 2.481 Subtotal ..................................................................................................................................................................................... Proposed Labor-Related Portion of Capital Costs (46%) ............................................................................................................... 58.116 4.190 Total Labor-Related Share ................................................................................................................................................ tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Wages and Salaries ........................................................................................................................................................................ Employee Benefits ........................................................................................................................................................................... Professional Fees: Labor-Related ................................................................................................................................................... Administrative and Business Support Services ............................................................................................................................... All Other: Labor-Related Services ................................................................................................................................................... 62.306 4. LTCH PPS Wage Index for FY 2015 Historically, we have established LTCH PPS area wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment established under the LTCH PPS is based on an LTCH’s actual location without regard to the ‘‘urban’’ or ‘‘rural’’ designation of any related or affiliated provider. In the FY 2014 LTCH PPS final rule (78 FR 50996 through 50997), we calculated the FY 2014 LTCH PPS area wage index values using the same data used for the FY 2014 acute care hospital IPPS (that is, data from cost reporting periods beginning during FY 2010), without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent complete data available at that time. In that same final rule, we indicated that we computed the FY 2014 LTCH PPS area wage index values consistent with the urban and rural geographic classifications (labor market areas) that were in place at that time, and consistent with the pre-reclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS). As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus (or campuses) are located. We also continued to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. Consistent with our historical methodology, in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28336 through 28337), to determine the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 applicable area wage index values under the LTCH PPS for FY 2015, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we proposed to use wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2011, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. We proposed to use FY 2011 wage data because these data are the most recent complete data available. We also noted that these are the same data used to compute the proposed FY 2015 acute care hospital inpatient wage index, as discussed in section III. of the preamble of that proposed rule. We proposed to compute the FY 2015 LTCH PPS area wage index values consistent with the proposed ‘‘urban’’ and ‘‘rural’’ geographic classifications (that is, using the proposed new OMB labor market area delineations), and consistent with our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS. We also proposed to continue to apportion wage data for multicampus hospitals with campuses located in different labor market areas to each CBSA where the campus or campuses are located, consistent with the IPPS policy. Lastly, under our proposed methodology for determining the FY 2015 LTCH PPS area wage index values, we proposed to continue to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. (We refer readers to section V.B.4. of the Addendum to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28336 through 28337) for additional details regarding our proposals pertaining to the development PO 00000 Frm 00542 Fmt 4701 Sfmt 4700 of the LTCH PPS wage index values for FY 2015, which we are adopting as final without modification in this final rule, as discussed below.) Comment: One commenter provided information received from a procured contractor that attempted to replicate the proposed FY 2015 LTCH wage index values using the IPPS wage index data from the FY 2011 cost report data that CMS made available on its Web site. As part of that analysis, the contractor also explored the variance between the FY 2014 LTCH PPS wage index values and the proposed FY 2015 LTCH PPS wage index values for certain LTCHs that were projected to experience a relatively significant change in their wage index. In particular, the analysis prepared by the commenter’s contractor focused on specific CBSAs (particularly CBSA 23540 and CBSA 34740) that were projected to experience ‘‘a significant decline’’ in their wage index values for FY 2015 when compared to FY 2014, although there has been no change in the constituent of hospitals used to compute the wage index values for these areas. The commenter requested that CMS reexamine the wage data used to calculate the FY 2015 LTCH PPS wage index values for CBSAs that would experience a decrease in their wage index values for FY 2015 when compared to the FY 2014 LTCH PPS wage index values for these CBSAs, and to explain the cause for those decreases. Response: As requested by the commenter, we reexamined the IPPS wage data used to calculate the FY 2015 LTCH PPS wage index values for CBSAs that were projected to experience a decrease in their wage index values for FY 2015 when compared to the FY 2014 LTCH PPS wage index values for these CBSAs, focusing our attention on the CBSAs referenced by the commenter. We found no issues with the IPPS hospital wage data from the FY 2011 cost reports, or with the calculation of E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the FY 2015 LTCH PPS wage index values. In exploring the cause for the decrease in the wage index values for CBSAs projected to experience ‘‘a significant decline’’ in their FY 2015 wage index values when compared to the FY 2014 LTCH PPS wage index values for these CBSAs, we found that many of these CBSAs were comprised of three or less hospitals. A labor market area’s wage index value is calculated as the ratio of the labor market area’s average hourly wage to the national average hourly wage. Labor market areas (CBSAs) with fewer providers are generally subject to less stability in yearto-year wage index values because there is less of an averaging effect, wherein even relatively minor changes in one provider’s wage data can produce a relatively ‘‘significant’’ effect on the wage index value for that area. This is because such a change in one provider’s wage data has a relatively greater effect on the CBSA’s average hourly wage (based solely on the limited number of hospitals in that area) when compared to the effect that such a change has on the national average hourly wage (which is based on wage data from all hospitals). We note that there also are CBSAs that were projected to experience a ‘‘significant increase’’ in their wage index values for the same reason. We believe that these wage index changes are appropriate because these values are based on the most recent data available that reflect the relative hospital wage level in a geographic area (CBSA) in comparison to the national average hospital wage level. After consideration of the public comments we received, in this final rule, we are finalizing our proposals pertaining to the development of the LTCH PPS wage index values for FY 2015, without modification. Therefore, consistent with our historical methodology, to determine the applicable area wage index values under the LTCH PPS for FY 2015, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are using wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2011, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. We are using FY 2011 wage data because these data are the most recent complete data available. These are the same data used to compute the FY 2015 acute care hospital inpatient wage index VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 values, as discussed in section III. of the preamble of this final rule. (For our rationale for using IPPS hospital wage data as a proxy for determining the area wage index values used under the LTCH PPS, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44024 through 44025).) The FY 2015 LTCH PPS area wage index values were computed consistent with the ‘‘urban’’ and ‘‘rural’’ geographic classifications (that is, using the new OMB labor market area delineations), as discussed in section VII.D. of the preamble of this final rule, and consistent with the prereclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS). As with the IPPS wage index, we are continuing to apportion wage data for multicampus hospitals with campuses located in different labor market areas to each CBSA where the campus or campuses are located, as discussed in section III.G. of the preamble of this final rule. Furthermore, in determining the FY 2015 LTCH PPS area wage index values, we are continuing to use our existing policy for determining area wage index values for areas where there are no IPPS wage data using the methodology we established in the RY 2009 LTCH PPS final rule. For more information about this methodology, including an explanation of and rationale for our policy for determining LTCH PPS wage index values for areas that have no IPPS wage data, we refer readers to the RY 2009 LTCH PPS final rule (73 FR 26817 through 26818). There are currently no LTCHs located in labor market areas without IPPS hospital wage data (or IPPS hospitals). However, as discussed in the proposed rule, if an LTCH were to open in one of these labor market areas, LTCH PPS wage index values for such an area would be calculated using our established methodology. Under our existing methodology, the LTCH PPS wage index value for urban CBSAs with no IPPS wage data is determined by using an average of all of the urban areas within the State, and the LTCH PPS wage index value for rural areas with no IPPS wage data is determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State. Based on the FY 2011 IPPS wage data that we are using to determine the FY 2015 LTCH PPS area wage index values in this final rule, there are no IPPS wage data for the urban area Hinesville, GA PO 00000 Frm 00543 Fmt 4701 Sfmt 4700 50395 (CBSA 25980). Consistent with the methodology discussed above, we calculated the FY 2015 wage index value for CBSA 25980 as the average of the wage index values for all of the other urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown in Table 12A, which is listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site). We note that, as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future. Based on FY 2011 IPPS wage data that we are using to determine the FY 2015 LTCH PPS area wage index values in this final rule, there are no rural areas without IPPS hospital wage data. Therefore, as discussed in the proposed rule, it is not necessary to use our established methodology to calculate an LTCH PPS wage index value for proposed rural areas with no IPPS wage data for FY 2015. We note that, as IPPS wage data are dynamic, it is possible that rural areas without IPPS wage data will vary in the future. For FY 2015, we are adopting the new OMB delineations under the LTCH PPS, as discussed in greater detail in section VII.D. of the preamble of this final rule. Under this policy, there will be some changes to the current CBSA compositions as a result of the new OMB delineations, which will result in the creation of new CBSAs, ‘‘urban’’ counties that are now ‘‘rural,’’ ‘‘rural’’ counties that are now ‘‘urban,’’ and existing CBSAs that are divided into separate boundaries. Under existing § 412.503, an ‘‘urban area’’ is defined as a Metropolitan Statistical Area as defined by the Executive OMB, and a ‘‘rural area’’ is defined as any area outside of an urban area. We are not making any changes to the current definitions of ‘‘urban area’’ and ‘‘rural area’’ because our policy to use the new OMB delineations under the LTCH PPS is consistent with the definitions in existing § 412.503. As discussed in section VII.D.2.e. of the preamble of this final rule, overall we believe that using the new OMB delineations will result in LTCH PPS area wage index values being more representative of the actual costs of labor in a given area. However, we also recognize that, as a result of our policy to adopt the new OMB delineations, some LTCHs will experience decreases in area wage index values, while other LTCHs will experience increases in area wage index values. Therefore, to mitigate any short-term instability in E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50396 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations LTCH PPS payments that could result from our policy to adopt the new OMB delineations, in section VII.D.2.e. of the preamble of this final rule, we are finalizing our proposed transitional wage index policy. Under our transitional wage index policy, any LTCH that will experience a decrease in its area wage index solely as a result of the policy to adopt the new OMB delineations under the LTCH PPS will receive a blended area wage index for FY 2015. That is, for purposes of determining an LTCH’s area wage index for FY 2015, we are computing LTCH PPS area wage index values using the area wage data discussed above under both the current (FY 2014) CBSA designations and the new OMB delineations. If the area wage index value under the new OMB delineations is lower than the area wage index value under the FY 2014 CBSA designations, the LTCH will be paid based on a blended area wage index for FY 2015, which will be computed as the sum of 50 percent of each wage index value (referred to as the 50/50 blended wage index), as described below. Specifically, under the transitional wage index policy that we are establishing in this final rule, to determine the applicable area wage index value for each LTCH that will be effective for discharges occurring on or after October 1, 2014, through September 30, 2015, we computed the following two area wage index values: (1) the wage index values calculated using the new OMB delineations; and (2) the wage index values calculated using the current (FY 2014) CBSA designations. The FY 2015 LTCH area wage index values calculated using the new OMB delineations are presented in Table 12A (for urban areas) and Table 12B (for rural areas) associated with this final rule, which are available via the Internet on the CMS Web site. The FY 2015 LTCH area wage index values calculated using the current (FY 2014) CBSA designations are presented in Table 12C (for urban areas) and Table 12D (for rural areas) associated with this final rule, which are available via the Internet on the CMS Web site. Where applicable, the wage index values in Tables 12C and 12D will be used to calculate a LTCH’s 50/50 blended wage index value under the transitional wage index policy. Under our transitional wage index policy, an LTCH will only receive the 50/50 blended area wage index value for FY 2015 if the LTCH’s area wage index value under the new OMB delineations (shown in Table 12A or 12B) is lower than the area wage index value under the FY 2014 CBSA VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 designations (shown in Tables 12C or 12D). If an LTCH’s area wage index under the new OMB delineations (shown in Tables 12A or 12B) is higher than the wage index under the FY 2014 CBSA designations (shown in Tables 12C or 12D), we will pay the LTCH based on 100 percent of the area wage index under the new OMB delineations shown in Tables 12A or 12B (as such the LTCH will not receive the 50/50 blended area wage index). Furthermore, as discussed below and in section VII.D.2.e. of the preamble of this final rule, we are applying this transitional wage index policy in a budget neutral manner. Each LTCH’s labor market area under the new OMB delineations and the current (FY 2014) CBSA-based labor market area designation can be found in the LTCH PPS impact file for this final rule, which is available via the Internet on the CMS Web site. 5. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. Under § 412.525(c)(2), any changes to the area wage index values or labor-related share are to be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage-level adjustment budget neutrality factor that will be applied to the standard Federal rate to ensure that any changes to the area wage level adjustments are budget neutral such that any changes to the area wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, under § 412.523(d)(4), we apply an area wage level adjustment budget neutrality factor in determining the standard Federal rate, and we also established a methodology for calculating an area wage level adjustment budget neutrality factor. (For additional information on the establishment of our budget neutrality policy for changes to the area wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).) In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28337 through 28338), in accordance with § 412.523(d)(4), we proposed to apply an area wage level adjustment budget neutrality factor to adjust the standard PO 00000 Frm 00544 Fmt 4701 Sfmt 4700 Federal rate to account for the estimated effect of the adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments using our existing methodology. In determining the area wage level adjustment budget neutrality factor for FY 2015 under § 412.523(d)(4), we also proposed to include the proposed transitional wage index policy under the proposed adoption of the new OMB delineations (that is, the proposed 50/50 blended area wage index values for LTCHs that would experience a decrease in the their wage index solely as a result of the proposed adoption of the new OMB delineations under the LTCH PPS) to ensure that the proposed changes to the area wage level adjustments would be budget neutral. We did not receive any public comments on our proposals pertaining to the FY 2015 budget neutrality adjustment for changes to the area wage level adjustment. Therefore, in this final rule, we are adopting our proposal as final without modification. In this final rule, for FY 2015, in accordance with § 412.523(d)(4), we are applying an area wage level adjustment budget neutrality factor to adjust the standard Federal rate to account for the estimated effect of the adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments using a methodology that is consistent with the methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). In addition to the updates for FY 2015 to the area wage index data and labor-related share discussed above, as discussed above and in section VII.D.2.e. of the preamble of this final rule, we are establishing a transitional wage index policy to mitigate the impacts of adopting changes to the LTCH PPS labor market areas (CBSAs) based on the new OMB delineations. Because our transitional wage index policy for LTCHs that will experience a decrease in their area wage index solely as a result of the adoption of the new OMB delineations under the LTCH PPS will result in an increase in estimated aggregate LTCH PPS payments without such changes, we are including the 50/50 blended area wage index when determining the area wage level adjustment budget neutrality factor that we are applying to the standard Federal rate under § 412.523(d)(4) to ensure that any changes to the area wage-level adjustments are budget neutral. For this final rule, using the steps in the methodology described in section VII.D.2.e. of this preamble, we determined a FY 2015 area wage level E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations adjustment budget neutrality factor of 1.0016703. Accordingly, in section V.A.2. of the Addendum to this final rule, to determine the FY 2015 LTCH PPS standard Federal rate, we are applying an area wage level adjustment budget neutrality factor of 1.0016703, in accordance with § 412.523(d)(4). The FY 2015 LTCH PPS standard Federal rate shown in Table 1E of the Addendum to this final rule reflects this adjustment factor. C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii Under § 412.525(b), a cost-of-living adjustment (COLA) is provided for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are taken into account in the adjustment for area wage levels described above. Prior to FY 2014, we used the most recent updated COLA factors obtained from the U.S. Office of Personnel Management (OPM) Web site at https:// www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments for LTCHs located in Alaska and Hawaii. Statutory changes have transitioned the Alaska and Hawaii COLAs to locality pay (phased in over a 3-year period beginning in January 2010, with COLA rates being frozen as of October 28, 2009, and then proportionately reduced to reflect the phase-in of locality pay). For FY 2013, we believed that it was appropriate to use ‘‘frozen’’ COLA factors to adjust payments, while we explored alternatives for updating the COLA factors in the future, and we continued to use the same ‘‘frozen’’ COLA factors used in FY 2012 to adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under § 412.525(b). We also established a methodology to update the COLA factors for Alaska and Hawaii every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014 (77 FR 53712 through 53713). The methodology we established to update the COLA factors is based on a comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). It also incorporates a 25-percent cap on the CPI-updated COLA factors, which is consistent with a statutorily mandated 25-percent cap that was applied to OPM’s published COLA factors. We believe that determining updated COLA factors using this methodology would appropriately adjust the nonlaborrelated portion of the standard Federal rate for LTCHs located in Alaska and Hawaii. (For additional details on the methodology we established in the FY 2013 IPPS/LTCH PPS final rule to update the COLA factors for Alaska and Hawaii beginning in FY 2014, we refer readers to section VII.D.3. of the preamble of that final rule (77 FR 53481 through 53482).) For FY 2014, we updated the COLA factors published for Alaska and Hawaii by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule. Under our finalized methodology, we used COLA factors for FY 2014 for the three specified urban areas of Alaska (Anchorage, Fairbanks and Juneau) of 1.23; for the City and County of Honolulu, the County of Kauai, the County of Maui, the County of Kalawao, and ‘‘All other’’ areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For additional details on our policy, we refer readers to the FY 50397 2014 IPPS/LTCH PPS final rule (78 FR 50997 through 50998). Under our finalized policy, we update the COLA factors using the methodology described above every 4 years; the first year began in FY 2014 (77 FR 53482). Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28338), for FY 2015, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we proposed to continue to use the COLA factors based on the 2009 OPM COLA factors updated through 2012 by the comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city as established in the FY 2014 IPPS/LTCH PPS final rule. We did not receive any public comments on this proposal. Therefore, in this final rule, we are adopting the policy as final without modification. Accordingly, in this final rule, for FY 2015, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we are continuing to use the COLA factors established in the FY 2014 IPPS/LTCH PPS final rule, which were based on the 2009 OPM COLA factors updated through 2012 by the comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50998) for a discussion of the FY 2014 COLA factors.) Consistent with our historical practice, we are establishing that the COLA factors shown in the table below will be used to adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii under § 412.525(b). tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS UNDER THE LTCH PPS FOR FY 2015 Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ..................................................................................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ...................................................................................................... City of Juneau and 80-kilometer (50-mile) radius by road .......................................................................................................... All other areas of Alaska .............................................................................................................................................................. Hawaii: City and County of Honolulu ................................................................................................................................................. County of Hawaii ................................................................................................................................................................... County of Kauai ..................................................................................................................................................................... County of Maui and County of Kalawao ............................................................................................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00545 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 1.23 1.23 1.23 1.25 1.25 1.19 1.25 1.25 50398 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background Under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of the BIPA, in the regulations at § 412.525(a), we established an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. We refer to these cases as high cost outliers (HCOs). Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be incurred when treating patients who require more costly care and, therefore, reduce the incentives to underserve these patients. We set the outlier threshold before the beginning of the applicable rate year so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. Under § 412.525(a) in the regulations (in conjunction with § 412.503), we make outlier payments for any discharges if the estimated cost of a case exceeds the adjusted LTCH PPS payment for the MS–LTC–DRG plus a fixed-loss amount. Specifically, in accordance with § 412.525(a)(3) (in conjunction with § 412.503), we make an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the patient case and the outlier threshold, which is the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount. The fixed-loss amount is the amount used to limit the loss that a hospital will incur under the outlier policy for a case with unusually high costs. This results in Medicare and the LTCH sharing financial risk in the treatment of extraordinarily costly cases. Under the LTCH PPS HCO policy, the LTCH’s loss is limited to the fixed-loss amount and a fixed percentage of costs above the outlier threshold (adjusted MS–LTC–DRG payment plus the fixedloss amount). The fixed percentage of costs is called the marginal cost factor. We calculate the estimated cost of a case by multiplying the Medicare allowable covered charge by the hospital’s overall hospital cost-to-charge ratio (CCR). Under the LTCH PPS HCO policy at § 412.525(a), we determine a fixed-loss amount, that is, the maximum loss that an LTCH can incur under the LTCH PPS for a case with unusually high costs VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 before the LTCH will receive any additional payments. We calculate the fixed-loss amount by estimating aggregate payments with and without an outlier policy. The fixed-loss amount results in estimated total outlier payments being projected to be equal to 8 percent of projected total LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data from the most recent Provider-Specific File (PSF) (or from the applicable statewide average CCR if an LTCH’s CCR data are faulty or unavailable) are used to establish a fixed-loss threshold amount under the LTCH PPS. 2. Determining LTCH CCRs Under the LTCH PPS a. Background The following is a discussion of CCRs that are used in determining payments for HCO and SSO cases under the LTCH PPS, at § 412.525(a) and § 412.529, respectively. Although this section is specific to HCO cases, because CCRs and the policies and methodologies pertaining to them are used in determining payments for both HCO and SSO cases (to determine the estimated cost of the case at § 412.529(d)(2)), we are discussing the determination of CCRs under the LTCH PPS for both of these types of cases simultaneously. In determining both HCO payments (at § 412.525(a)) and SSO payments (at § 412.529), we calculate the estimated cost of the case by multiplying the LTCH’s overall CCR by the Medicare allowable charges for the case. In general, we use the LTCH’s overall CCR, which is computed based on either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period, in accordance with § 412.525(a)(4)(iv)(B) and § 412.529(f)(4)(ii) for HCOs and SSOs, respectively. (We note that, in some instances, we use an alternative CCR, such as the statewide average CCR in accordance with the regulations at § 412.525(a)(4)(iv)(C) and § 412.529(f)(4)(iii), or a CCR that is specified by CMS or that is requested by the hospital under the provisions of the regulations at § 412.525(a)(4)(iv)(A) and § 412.529(f)(4)(i).) Under the LTCH PPS, a single prospective payment per discharge is made for both inpatient operating and capital-related costs. Therefore, we compute a single ‘‘overall’’ or ‘‘total’’ LTCH-specific CCR based on the sum of LTCH operating and capital costs (as described in Section 150.24, Chapter 3, of the Medicare Claims Processing Manual PO 00000 Frm 00546 Fmt 4701 Sfmt 4700 (Pub. 100–4)) as compared to total charges. Specifically, an LTCH’s CCR is calculated by dividing an LTCH’s total Medicare costs (that is, the sum of its operating and capital inpatient routine and ancillary costs) by its total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges). b. LTCH Total CCR Ceiling Generally, an LTCH is assigned the applicable statewide average CCR if, among other things, an LTCH’s CCR is found to be in excess of the applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This is because CCRs above this threshold are most likely due to faulty data reporting or entry, and CCRs based on erroneous data should not be used to identify and make payments for outlier cases. Therefore, under our established policy, generally, if an LTCH’s calculated CCR is above the applicable ceiling, the applicable LTCH PPS statewide average CCR is assigned to the LTCH instead of the CCR computed from its most recent (settled or tentatively settled) cost report data. In this final rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the March 2014 update of the PSF, consistent with our proposal, we are establishing a total CCR ceiling of 1.346 under the LTCH PPS for FY 2015 in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs. c. LTCH Statewide Average CCRs Our general methodology established for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling (described above) because it is based on ‘‘total’’ IPPS CCR data. Under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(C) and the SSO policy at § 412.529(f)(4)(iii), the MAC may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for an LTCH in one of the following circumstances: (1) new LTCHs that have not yet submitted their first Medicare cost report (for this purpose, consistent with current policy, a new LTCH is defined as an entity that has not accepted assignment of an existing hospital’s provider agreement in accordance with § 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations missing or faulty data). (Other sources of data that the MAC may consider in determining an LTCH’s CCR include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as an LTCH (that is, the period of at least 6 months that it was paid as a shortterm, acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.) Consistent with our historical practice of using the best available data, in this final rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS ‘‘total CCR’’ data from the March 2014 update of the PSF, consistent with our proposal, we are establishing LTCH PPS statewide average total CCRs for urban and rural hospitals that would be effective for discharges occurring on or after October 1, 2014 through September 20, 2015, in Table 8C listed in section VI. of the Addendum to this final rule (and available via the Internet). Under the changes to the LTCH PPS labor market areas based on the new OMB delineations, all areas in Delaware, the District of Columbia, New Jersey, and Rhode Island would be classified as urban. Therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the same as the policy applied under the IPPS. In addition, although Connecticut and Massachusetts have areas that are designated as rural, there are no shortterm, acute care IPPS hospitals or LTCHs located in those areas as of March 2014. Therefore, consistent with our existing methodology, we are using the national average total CCR for rural IPPS hospitals for rural Connecticut and Massachusetts in Table 8C listed in section VI. of the Addendum to this final rule (and available via the Internet). In addition, consistent with our existing methodology, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, consistent with our proposal, we are continuing to use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We are using this proxy because we believe that the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 CCR data in the PSF for Maryland hospitals may not be entirely accurate (as discussed in greater detail in the FY 2007 IPPS final rule (71 FR 48120)). d. Reconciliation of LTCH HCO and SSO Payments We note that under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at § 412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively, are subject to reconciliation. Specifically, any reconciliation of outlier payments is based on the CCR that is calculated based on a ratio of cost-to-charge data computed from the relevant cost report determined at the time the cost report coinciding with the discharge is settled. For additional information, we refer readers to sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100–4) as added by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821). 3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2015 When we implemented the LTCH PPS, as discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad authority of section 123 of the BBRA as amended by section 307(b) of BIPA, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. To determine the fixed-loss amount, we estimate outlier payments and total LTCH PPS payments for each case using claims data from the MedPAR files. Specifically, to determine the outlier payment for each case, we estimate the cost of the case by multiplying the Medicare covered charges from the claim by the LTCH’s CCR. Under § 412.525(a)(3) (in conjunction with § 412.503), if the estimated cost of the case exceeds the outlier threshold, we make an outlier payment equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (that is, the sum of the adjusted Federal prospective payment for the MS–LTC– DRG and the fixed-loss amount). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 53715), we presented our policies regarding the methodology and data we used to establish the fixed-loss amount of $13,314 for FY 2014, which was calculated using our existing methodology to calculate the fixed-loss amount for FY 2014 (based on the data and the rates and policies presented in that final rule) in order to maintain PO 00000 Frm 00547 Fmt 4701 Sfmt 4700 50399 estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments. Consistent with our historical practice of using the best data available, in determining the fixedloss amount for FY 2014, we used the most recent available LTCH claims data and CCR data, that is, LTCH claims data from the March 2013 update of the FY 2012 MedPAR file and CCRs from the March 2013 update of the PSF, as these data were the most recent complete LTCH data available at that time. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321), we proposed to continue to use our existing methodology to calculate a fixed-loss amount for FY 2015 using the best available data that would maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments (based on the rates and policies presented in this proposed rule). Specifically, based on the most recent complete LTCH data available at that time (that is, LTCH claims data from the March 2014 update of the FY 2013 MedPAR file and CCRs from the March 2014 update of the PSF), we proposed to determine a fixed-loss amount for FY 2015 that would result in estimated outlier payments projected to be equal to 8 percent of total estimated payments in FY 2015. Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we proposed a fixed-loss amount of $15,730 for FY 2015, and also proposed to make an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS–LTC–DRG and the proposed fixed-loss amount of $15,730). Comment: One commenter expressed support for the proposed fixed-loss amount, and stated that the proposed increase for FY 2015 is justified. That same commenter also requested that CMS provide its most recent estimate of the percentage payout of high-cost outlier payments for the current fiscal year. Another commenter expressed concern that the proposed increase in the fixed-loss amount would result in significant financial losses for hospitals that treat a comparatively high volume of outlier cases, and recommended that the increase be transitioned in over 2 years to reduce the impact of this increase in the fixed-loss amount. Response: We appreciate the commenter’s support for the proposed fixed-loss amount, and agree that the increase is necessary to maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments (as explained in E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50400 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations the proposed rule). In section I.K. of the regulatory impact analysis in the Appendix to this final rule, we state that we currently estimate that HCO payments will be approximately 7.9 percent of the estimated total LTCH PPS payments in FY 2014 based on the most recent data available. While we understand the commenter’s concern regarding the financial impact an increase in the fixed-loss amount may have on the outlier payments to some LTCH’s, we do not believe that the increase should be phased-in over 2 years. The intent of the HCO policy is to provide an additional payment to LTCH cases that have unusually high costs while at the same time balancing an incentive for LTCHs to treat expensive patients and provide cost efficient care. (We refer readers to the FY 2003 LTCH PPS final rule (67 FR 56025) for further details regarding the intent of this policy.) Under our historical HCO policy, this balance is achieved by making outlier payments that are intended to approximate the marginal cost of providing care above the fixed-loss threshold. We believe that phasing-in the increase to the fixed-loss amount would be inconsistent with the intent of the LTCH PPS HCO policy because such a policy would reduce the incentive to provide cost efficient care by resulting in estimated outlier payments that are in excess of 8 percent of total estimated payments in FY 2015. (For additional detail on the rationale for setting the HCO payment ‘‘target’’ at 8 percent of total estimated LTCH PPS payments, we refer readers to the FY 2003 LTCH PPS final rule (67 FR 56022 through 56024).) Furthermore, any auxiliary adjustment to the fixed-loss amount, such as a transition, would result in making outlier payments that would not be directly related to the cost of providing care to unusually costly cases in FY 2015. When we determine the annual fixed-loss amount, we include all payments and policies that would affect actual payments for the current fiscal year in order to ensure the most accurate determination of a fixedloss amount that would result in estimated outlier payments equaling 8 percent of total estimated for the fiscal year. Including an auxiliary adjustment, such as a transition, that is not relative to the current fiscal year does not lend greater accuracy to the determination of a fixed-loss amount that would result in estimated outlier payments equaling 8 percent of total estimated payments in FY 2015. For these reasons, we continue to believe that our policies are consistent with the original intent of the HCO policy under the LTCH PPS and, VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 therefore, we are not adopting the commenter’s suggestion to phase-in the increase to the fixed-loss amount for FY 2015. In this final rule, after consideration of the public comments we received, we are adopting our proposals related to the calculation of the fixed-loss amount for FY 2015 as final without modification. For FY 2015, consistent with our proposal, we are continuing to use our existing methodology to calculate a fixed-loss amount for FY 2015 using the best available data that would maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments (based on the rates and policies presented in this final rule). Specifically, for this final rule, we used LTCH claims data from the March 2014 update of the FY 2013 MedPAR file and CCRs from the March 2014 update of the PSF to determine a fixedloss amount that will result in estimated outlier payments projected to be equal to 8 percent of total estimated payments in FY 2015 because these data are the most recent complete LTCH data available at this time. Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are establishing a fixed-loss amount of $14,972 for FY 2015. Therefore, we are making an additional payment for an HCO case that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS–LTC–DRG and the fixed-loss amount of $14,972). We note that the fixed-loss amount of $14,792 for FY 2015 is lower than the proposed FY 2015 fixed-loss amount of $15,730. This decrease is primarily a result of updated data used to calculate the fixed-loss amount in this final rule, such as the most recent available LTCH claims data in the MedPAR file, CCRs in the PSF, and the estimate of the LTCH PPS market basket update factors. We also note that the fixed-loss amount of $14,972 for FY 2015 is slightly higher than the FY 2014 fixed-loss amount of $13,314. Based on our payment simulations using the most recent available data at this time, the final increase in the fixed-loss amount for FY 2015 is necessary to maintain the existing requirement that estimated outlier payments equal 8 percent of estimated total LTCH PPS payments. Maintaining the fixed-loss amount at the current level would result in HCO payments that are more than the current regulatory 8-percent requirement because a lower fixed-loss amount would result in more cases qualifying as outlier cases, as well as higher outlier payments for qualifying HCO cases PO 00000 Frm 00548 Fmt 4701 Sfmt 4700 because the maximum loss that an LTCH must incur before receiving an HCO payment (that is, the fixed-loss amount) would be smaller. For these reasons, we believe that raising the fixed-loss amount is appropriate and necessary to maintain that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments as required under § 412.525(a). (As noted above, for further information on the existing 8 percent HCO ‘‘target’’ requirement, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56024).) 4. Application of the Outlier Policy to SSO Cases As we discussed in the August 30, 2002 final rule (67 FR 56026), under some rare circumstances, an LTCH discharge could qualify as an SSO case (as defined in the regulations at § 412.529 in conjunction with § 412.503) and also as an HCO case. In this scenario, a patient could be hospitalized for less than five-sixths of the geometric average length of stay for the specific MS–LTC–DRG, and yet incur extraordinarily high treatment costs. If the estimated costs exceeded the HCO threshold (that is, the SSO payment plus the fixed-loss amount), the discharge is eligible for payment as an HCO. Therefore, for an SSO case in FY 2015, the HCO payment would be 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the fixed-loss amount of $14,972 and the amount paid under the SSO policy as specified in § 412.529). E. Update to the IPPS Comparable/ Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology In the FY 2014 IPPS/LTCH PPS final rule, we established a policy for reflecting the changes to the Medicare IPPS DSH payment adjustment methodology provided for by section 3133 of the Affordable Care Act in the calculation of the ‘‘IPPS comparable amount’’ under the SSO policy at § 412.529 and the ‘‘IPPS equivalent amount’’ under the 25-percent threshold payment adjustment policy at § 412.534 and § 412.536. Historically, the determination of both the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ includes an amount for inpatient operating costs ‘‘for the costs of serving a disproportionate share of low-income patients.’’ Under the statutory changes to the Medicare DSH payment adjustment methodology that began in FY 2014, in general, eligible IPPS hospitals receive an empirically justified Medicare DSH payment equal E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations to 25 percent of the amount they otherwise would have received under the statutory formula for Medicare DSH payments prior to the amendments made by the Affordable Care Act. The remaining amount, equal to an estimate of 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under the age of 65 who are uninsured, is made available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The additional uncompensated care payments are based on the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all IPPS hospitals that receive Medicare DSH payments. To reflect the statutory changes to the Medicare DSH payment adjustment methodology in the calculation of the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ under the LTCH PPS, we stated that we will include a reduced Medicare DSH payment amount that reflects the projected percentage of the payment amount calculated based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act that will be paid to eligible IPPS hospitals as empirically justified Medicare DSH payments and uncompensated care payments in that year (that is, a percentage of the operating DSH payment amount that has historically been reflected in the LTCH PPS payments that is based on IPPS rates). We also stated that the projected percentage will be updated annually, consistent with the annual determination of the amount of uncompensated care payments that will be made to eligible IPPS hospitals. As explained in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50766 through 50767), we believe that this approach results in appropriate payments under the LTCH PPS and is consistent with our intention that the ‘‘IPPS comparable amount’’ and the ‘‘IPPS equivalent amount’’ under the LTCH PPS closely resemble what an IPPS payment would have been for the same episode of care, while recognizing that some features of the IPPS cannot be translated directly into the LTCH PPS. For FY 2014, aggregate Medicare IPPS operating DSH payments are projected to be reduced to 95.7 percent of the amount that would otherwise have been paid under the statutory Medicare DSH payment formula prior to the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 amendments made by the Affordable Care Act. Accordingly, for FY 2014, the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 includes an applicable operating Medicare DSH payment amount that is equal to 95.7 percent of the operating Medicare DSH payment amount based the current statutory Medicare DSH payment formula (that is, the operating Medicare DSH payment amount historically included in those calculations). (We refer readers the FY 2012 IPPS/LTCH PPS final rule (76 FR 50766).) In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28341 through 28342), we discussed that, for FY 2015, based on the latest data available, we project that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the proposed payments for uncompensated care under section 1886(r)(2) of the Act, would result in overall Medicare DSH payments equaling 85.26 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of amendments made by the Affordable Care Act. Therefore, we proposed that the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 for FY 2015 includes an applicable operating Medicare DSH payment amount that would be equal to 85.26 percent of the operating Medicare DSH payment amount based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act. We also proposed that, consistent with our historical practice of using the most recent data available, if more recent data became available for the final rule, we would use that data to determine the percentage of the operating Medicare DSH payment amount based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act used in the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 for FY 2015. As discussed in greater detail in section IV.F.3.d.(2) of the preamble of this final rule, based on the most recent data available, our estimate of 75 percent of the amount that would otherwise have been paid as Medicare DSH payments (under the methodology outlined in section 1886(r)(2) of the Act) will be adjusted to 76.19 percent of that amount to reflect the change in the percentage of individuals that are PO 00000 Frm 00549 Fmt 4701 Sfmt 4700 50401 uninsured. The resulting amount will then be used to determine the amount of uncompensated care payments that will be made to eligible IPPS hospitals in FY 2015. In other words, Medicare DSH payments prior to the amendments made by the Affordable Care Act are adjusted to 57.14 percent (the product of 75 percent and 76.19 percent) and the resulting amount will be used to calculate the uncompensated care payments to eligible hospitals. As a result, for FY 2015, we project that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the payments for uncompensated care under section 1886(r)(2) of the Act, will result in overall Medicare DSH payments of 82.14 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of amendments made by the Affordable Care Act (that is, 25 percent + 57.14 percent = 82.14 percent). We did not receive any public comments on this proposal and therefore we are adopting the policy as final without modification. In this final rule, for FY 2015, we are establishing that the calculation of the ‘‘IPPS comparable amount’’ under § 412.529 and the ‘‘IPPS equivalent amount’’ under § 412.534 and § 412.536 will include an applicable operating Medicare DSH payment amount that will be equal to 82.14 percent of the operating Medicare DSH payment amount based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act. F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2015 Section 412.525 sets forth the adjustments to the LTCH PPS standard Federal rate. Under § 412.525(c), the standard Federal rate is adjusted to account for differences in area wages by multiplying the labor-related share of the standard Federal rate by the applicable LTCH PPS wage index (FY 2015 values are shown in Tables 12A through 12D listed in section VI. of the Addendum of this final rule and are available via the Internet). The standard Federal rate is also adjusted to account for the higher costs of LTCHs located in Alaska and Hawaii by the applicable COLA factors (the FY 2015 factors are shown in the chart in section V.C. of this Addendum) in accordance with § 412.525(b). In this final rule, we are establishing a standard Federal rate for FY 2015 of $41,043.71 (applicable to discharges from LTCHs that submit the required quality reporting data for FY E:\FR\FM\22AUR2.SGM 22AUR2 50402 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2015 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act), as discussed above in section V.A.2. of the Addendum to this final rule. We illustrate the methodology to adjust the LTCH PPS Federal standard rate for FY 2015 in the following example: Example: During FY 2015, a Medicare patient is in an LTCH located in Chicago, Illinois (CBSA 16974). The FY 2015 LTCH PPS wage index value for CBSA 16974 is 1.0419 (obtained from Table 12A listed in section VI. of the Addendum of this final rule and available via the Internet on the CMS Web site). The Medicare patient is classified into MS–LTC–DRG 189 (Pulmonary Edema & Respiratory Failure), which has a relative weight for FY 2015 of 0.9098 (obtained from Table 11 listed in section VI. of the Addendum of this final rule and available via the Internet on the CMS Web site). The LTCH submitted quality reporting data for FY 2015 in accordance with the LTCHQR Program under section 1886(m)(5) of the Act. To calculate the LTCH’s total adjusted Federal prospective payment for this Medicare patient in FY 2015, we computed the wage-adjusted Federal prospective payment amount by multiplying the unadjusted FY 2015 standard Federal rate ($41,043.71) by the labor-related share (62.306 percent) and the wage index value (1.0419). This wage-adjusted amount was then added to the nonlabor-related portion of the unadjusted standard Federal rate (37.694 percent; adjusted for cost of living, if applicable) to determine the adjusted Federal rate, which is then multiplied by the MS–LTC–DRG relative weight (0.9098) to calculate the total adjusted Federal LTCH PPS prospective payment for FY 2015 ($38, 316.42). The table below illustrates the components of the calculations in this example. Standard Federal Prospective Payment Rate * ............................................................................................................................... Labor-Related Share ....................................................................................................................................................................... Labor-Related Portion of the Federal Rate ..................................................................................................................................... Wage Index (CBSA 16974) ............................................................................................................................................................. Wage-Adjusted Labor Share of Federal Rate ................................................................................................................................. Nonlabor-Related Portion of the Federal Rate ($41,043.71 × 0.37694) ......................................................................................... Adjusted Federal Rate Amount ....................................................................................................................................................... MS–LTC–DRG 189 Relative Weight ............................................................................................................................................... Total Adjusted Federal Prospective Payment ................................................................................................................................. $41,043.71 × 0.62306 = $ 25,572.69 × 1.0419 = $ 26,644.19 + $ 15,471.02 = $ 42,115.21 × 0.9098 = $ 38, 316.42 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * LTCH PPS standard Federal rate applicable to discharges from LTCHs that submit the required quality data in accordance with the LTCHQR Program under section 1886(m)(5) of the Act). VI. Tables Referenced in This Final Rule and Available Only Through the Internet on the CMS Web site This section lists the tables referred to throughout the preamble of this final rule and in this Addendum. In the past, a majority of these tables were published in the Federal Register as part of the annual proposed and final rules. However, similar to FYs 2012 through 2014, for the FY 2015 rulemaking cycle, the IPPS and LTCH tables will not be published in the Federal Register in the annual IPPS/ LTCH PPS proposed and final rules and will be available only through the Internet. Specifically, all IPPS Tables listed below with the exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E will be available only through the Internet. IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed at the end of this section and will continue to be published in the Federal Register as part of the annual proposed and final rules. As discussed in sections II.G.11. and 13. of the preamble of this final rule, Tables 6A through 6F will not be issued with this FY 2015 final rule because there are no new, revised, or deleted diagnosis or procedure codes for FY 2015. As discussed in section IV.D. of this final rule, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, extended, through the first half of FY 2015 (that is, for discharges VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 occurring before April 1, 2015), the temporary changes in the low-volume hospital definition and methodology for determining the payment adjustment originally made by the Affordable Care Act (and extended by subsequent legislation). We refer the reader to section IV.D. of the preamble of this final rule for complete details on the low-volume hospital payment adjustment. Therefore, Table 14 associated with this final rule lists the FY 2015 low-volume payment adjustments for potentially eligible hospitals that also meet the distance criterion for low-volume hospital status. As discussed in section IV.H.11. of the preamble of this final rule, we are providing proxy FY 2015 readmission payment adjustment factors in Table 15A issued with this final rule. After the completion of the review and corrections process, we will publish the final FY 2015 readmissions payment adjustment factors in Table 15B on the CMS IPPS Web site. In addition, under the HAC Reduction Program established by section 3008 of the Affordable Care Act, a hospital’s total payment may be reduced by 1 percent if it is in the lowest HAC performance quartile. However, as discussed in section IV.J. of the preamble of this final rule, we are not providing the hospital-level data (such as a proxy list of providers subject to the HAC Reduction Program in FY 2015 in Table 17) in conjunction with this final rule. Finally, a hospital’s PO 00000 Frm 00550 Fmt 4701 Sfmt 4700 Factor 3 is the proportion of the uncompensated care amount that a DSH will receive under section 3133 of the Affordable Care Act. Factor 3 is the hospital’s estimated number of Medicaid days and Medicare SSI days relative to the estimate of all DSHs’ Medicaid days and Medicare SSI days. Therefore, Table 18 contains the FY 2015 Medicare DSH uncompensated care payment Factor 3 for all hospitals and identifies whether or not a hospital is projected to receive DSH and, therefore, eligible to receive the additional payment for uncompensated care for FY 2015. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified below should contact Michael Treitel at (410) 786–4552. The following IPPS tables for this FY 2015 final rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ AcuteInpatientPPS/. Click on the link on the left side of the screen titled, ‘‘FY 2015 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. Table 2–1.—Hospital Average Hourly Wages for Federal Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage Data); and 3-Year Average of Hospital Average Hourly Wages; Based on CBSA Delineations used in FY 2014 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Table 2–2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2012; Hospital Wage Indexes for Federal Fiscal Year 2015; Hospital Average Hourly Wages for Federal Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage Data; Based on FY 2015 CBSA Delineations); and 3-Year Average of Hospital Average Hourly Wages Table 3A–1.—FY 2015 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY 2014 Table 3A–2.—FY 2015 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY 2015 Table 3B–1.—FY 2015 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY 2014 Table 3B–2.—FY 2015 and 3-Year* Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY 2015 Table 4A–1.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4A–2.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4B–1.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4B–2.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4C–1.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4C–2.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4D–1.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index; Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor or Imputed Floor VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Wage Index—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4D–2.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index; Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor or Imputed Floor Wage Index—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4E–1.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4E—2.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4F–1.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2015; Based on CBSA Delineations Used in FY 2014. Table 4F–2.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 4J.—Out-Migration Adjustment for Acute Care Hospitals—FY 2015 Table 5.—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay—FY 2015 Table 6I.—Major CC List—FY 2015 Table 6J.—Complete CC List—FY 2015 Table 6K.—Complete List of CC Exclusions—FY 2015 Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2013 MedPAR Update—March 2014 GROUPER V31.0 MS–DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2013 MedPAR Update—March 2014 GROUPER V32.0 MS–DRGs Table 8A.—FY 2015 Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural) Table 8B.—FY 2015 Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals Table 9A–1.—Hospital Reclassifications and Redesignations— FY 2015; Based on CBSA Delineations Used in FY 2014. Table 9A–2.—Hospital Reclassifications and Redesignations— FY 2015; Based on CBSA Delineations Used in FY 2015. Table 9C–1.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2015; Based on CBSA Delineations Used in FY 2014. PO 00000 Frm 00551 Fmt 4701 Sfmt 4700 50403 Table 9C–2.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2015; Based on CBSA Delineations Used in FY 2015. Table 10.—New Technology Add-On Payment Thresholds 1,2 for Applications for FY 2016 Table 14.—List of Hospitals with Fewer than 1,600 Medicare Discharges Based on the March 2014 Update of the FY 2013 MedPAR File and Potentially Eligible Hospitals’ FY 2015 LowVolume Payment Adjustment for Discharges Occurring Before April 1, 2015 (Eligibility for the low-volume payment adjustment is also dependent upon meeting the mileage criteria specified at § 412.101(b)(2)(ii) of the regulations.) Table 15A.—FY 2015 Proxy Readmissions Adjustment Factors Table 16.—Updated Proxy Hospital Inpatient Value-Based Purchasing (VBP) Program Adjustment Factors for FY 2015 Table 18.—FY 2015 Medicare DSH Uncompensated Care Payment Factor 3 The following LTCH PPS tables for this FY 2015 final rule are available only through the Internet on the CMS Web site at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/LongTermCareHospitalPPS/ index.html under the list item for Regulation Number CMS–1607–F. Table 8C.—FY 2015 Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs (Urban and Rural) Table 11.—MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, Short-Stay Outlier (SSO) Threshold, and ‘‘IPPS Comparable Threshold’’ for Discharges Occurring from October 1, 2014 through September 30, 2015 under the LTCH PPS Table 12A.—LTCH PPS Wage Index for Urban Areas under the New OMB CBSA Delineations for Discharges Occurring From October 1, 2014 through September 30, 2015 Table 12B.—LTCH PPS Wage Index for Rural Areas under the New OMB CBSA Delineations for Discharges Occurring from October 1, 2014 through September 30, 2015 Table 12C.—LTCH PPS Wage Index for Urban Areas under the Current CBSA Designations for Discharges Occurring from October 1, 2014 through September 30, 2015 Table 12D.—LTCH PPS Wage Index for Rural Areas under the Current CBSA Designations for Discharges Occurring from October 1, 2014 through September 30, 2015 Table 13A.—Composition of LowVolume Quintiles for MS–LTC–DRGs— FY 2015 E:\FR\FM\22AUR2.SGM 22AUR2 50404 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations Table 13B.—No-Volume MS–LTC– DRG Crosswalk for FY 2015 TABLE 1A—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (69.6 PERCENT LABOR SHARE/30.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2015 Hospital submitted quality data and is a meaningful EHR user (Update = 2.2 percent) Hospital did NOT submit quality data and is a meaningful EHR user (update = 1.475 percent) Hospital submitted quality data and is NOT a meaningful EHR user (update = 1.475 percent) Hospital did NOT submit quality data and is NOT a meaningful EHR user (update = 0.75 percent) Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor $3,780.13 $1,651.09 $3,753.31 $1,639.38 $3,753.31 $1,639.38 $3,726.50 $1,627.66 TABLE 1B—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/ 38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2015 Hospital submitted quality data and is a meaningful EHR user (Update = 2.2 percent) Hospital did NOT submit quality data and is a meaningful EHR user (Update = 1.475 percent) Hospital submitted quality data and is NOT a meaningful EHR user (Update = 1.475 percent) Hospital did NOT submit quality data and is NOT a meaningful EHR user (Update = 0.75 percent) Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor $3,367.36 $2,063.86 $3,343.47 $2,049.22 $3,343.47 $2,049.22 $3,319.58 $2,034.58 TABLE 1C—ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR EQUAL TO 1; PUERTO RICO: 63.2 PERCENT LABOR SHARE/36.8 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1 OR 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1—FY 2015 Rates if wage index is greater than 1 Standardized Amount Labor Nonlabor Rates if wage index is less than or equal to 1 Labor National 1 .......................................................................................................... Puerto Rico ...................................................................................................... 1 For Not Applicable $1,608.39 Not Applicable $936.54 $3,367.36 $1,577.86 $2,063.86 $967.07 FY 2015, there are no CBSAs in Puerto Rico with a national wage index greater than 1. TABLE 1D—CAPITAL STANDARD FEDERAL PAYMENT RATE—FY 2015 Rate National ................................................................................................................................................................................................ Puerto Rico .......................................................................................................................................................................................... $434.26 $209.10 TABLE 1E—LTCH STANDARD FEDERAL PROSPECTIVE PAYMENT RATE—FY 2015 Full Update (2.2 Percent) Standard Federal Rate ............................................................................................................................................ $41,043.71 Reduced Update* (0.2 Percent) $40,240.51 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV * For LTCHs that fail to submit quality reporting data for FY 2015 in accordance with the LTCH Quality Reporting (LTCHQR) Program, the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. Appendix A: Economic Analyses I. Regulatory Impact Analysis A. Introduction We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011), the Regulatory Flexibility VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory PO 00000 Frm 00552 Fmt 4701 Sfmt 4700 approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for major rules with economically E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV significant effects ($100 million or more in any 1 year). We have determined that this final rule is a major rule as defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2015 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million to acute care hospitals. The applicable percentage increase to the IPPS rates required by the statute, in conjunction with other payment changes in this final rule, will result in an estimated $654 million decrease in FY 2015 operating payments (or ¥0.6 percent change) and an estimated $132 million increase in FY 2015 capital payments (or 1.6 percent change). These changes are relative to payments made in FY 2014. The impact analysis of the capital payments can be found in section I.J. of this Appendix. In addition, as described in section I.K. of this Appendix, LTCHs are expected to experience an increase in payments by $62 million in FY 2015 relative to FY 2014. Our operating impact estimate includes the ¥0.8 percent documentation and coding adjustment applied to the IPPS standardized amount, which represents part of the recoupment required under section 631 of the ATRA. In addition, our operating payment impact estimate includes the 2.2 percent hospital update to the standardized amount (which includes the estimated 2.9 percent market basket update less 0.5 percentage point for the multifactor productivity adjustment and less 0.2 percentage point required under the Affordable Care Act). The estimates of IPPS operating payments to acute care hospitals do not reflect any changes in hospital admissions or real case-mix intensity, which will also affect overall payment changes. The analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this final rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. This final rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. Finally, in accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget has reviewed this final rule. B. Statement of Need This final rule is necessary in order to make payment and policy changes under the Medicare IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain hospitals and hospital units excluded from the IPPS. This final rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS payment system. C. Objectives of the IPPS The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund. We believe that the changes in this final rule will further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable while avoiding or minimizing unintended adverse consequences. D. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our policy changes, as well as statutory changes effective for FY 2015, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. E. Hospitals Included in and Excluded From the IPPS The prospective payment systems for hospital inpatient operating and capitalrelated costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 32 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short-term, acute care hospitals, hospitals in Maryland are paid in accordance with the Maryland All-Payer Model, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, 5 short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. As of March 2014, there were 3,396 IPPS acute care hospitals included in our analysis. This represents approximately 56 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There also are approximately 1,326 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS. IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs, children’s hospitals, 11 cancer hospitals, and 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, which are paid under separate payment systems. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts for these IPPS-excluded hospitals and units are not included in this final rule. The impact of the update and policy changes to the LTCH PPS for FY 2015 is discussed in section I.L. of this Appendix. PO 00000 Frm 00553 Fmt 4701 Sfmt 4700 50405 F. Effects on Hospitals and Hospital Units Excluded From the IPPS As of March 2014, there were 98 children’s hospitals, 11 cancer hospitals, 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa, and 18 RNHCIs being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. (In accordance with § 403.752(a) of the regulation, RNHCIs are paid under § 413.40.) Among the remaining providers, 245 rehabilitation hospitals and 897 rehabilitation units, and 431 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 490 psychiatric hospitals and 1,136 psychiatric units are paid the Federal per diem amount under the IPF PPS. As stated above, IRFs and IPFs are not affected by the rate updates discussed in this final rule. The impacts of the changes on LTCHs are discussed in section I.K. of this Appendix. For children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNHCIs, the update of the rateof-increase limit (or target amount) is the estimated FY 2015 percentage increase in the IPPS operating market basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and §§ 403.752(a) and 413.40 of the regulations. As discussed in section IV. of the preamble of the FY 2014 IPPS/LTCH PPS final rule, we rebased the IPPS operating market basket to a FY 2010 base year. Therefore, we are using the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for FY 2015 and subsequent fiscal years for children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNHCIs that are paid based on reasonable costs subject to the rate-ofincrease limits. Consistent with current law, based on IHS Global Insight, Inc.’s second quarter 2014 forecast of the FY 2010-based market basket increase, we are estimating that the FY 2015 update based on the IPPS operating market basket is 2.9 percent (that is, the current estimate of the market basket rate-of-increase). However, the Affordable Care Act requires an adjustment for multifactor productivity (currently estimated to be 0.5 percentage point for FY 2015) and a 0.2 percentage point reduction to the market basket update resulting in a 2.2 percent applicable percentage increase for IPPS hospitals that submit quality data and are meaningful EHR users, as discussed in section IV.B. of the preamble of this final rule. Children’s hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and RNCHIs that continue to be paid based on reasonable costs subject to rate-ofincrease limits under § 413.40 of the regulations are not subject to the reductions in the applicable percentage increase required under the Affordable Care Act. Therefore, for those hospitals paid under § 413.40 of the regulations, the update is the E:\FR\FM\22AUR2.SGM 22AUR2 50406 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV percentage increase in the FY 2015 IPPS operating market basket, estimated at 2.9 percent, without the reductions required under the Affordable Care Act. The impact of the update in the rate-ofincrease limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded hospitals that have maintained their cost increases at a level below the rate-of-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with cost increases above the cumulative update in their rate-ofincrease limits, the major effect is the amount of excess costs that will not be paid. We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system and whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus the lesser of: (1) 50 percent of its reasonable costs in excess of 110 percent of the limit, or (2) 10 percent of its limit. In addition, under the various provisions set forth in § 413.40, hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates In this final rule, we are announcing policy changes and payment rate updates for the IPPS for FY 2015 for operating costs of acute care hospitals. The FY 2015 updates to the capital payments to acute care hospitals are discussed in section I.J. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2015 operating payments will decrease by 0.6 percent compared to FY 2014. In addition to the applicable percentage increase, this amount reflects the FY 2015 recoupment adjustment for documentation and coding described in section II.D. of the preamble of this final rule of ¥0.8 percent to the IPPS national standardized amounts. The impacts do not reflect changes in the number of hospital admissions or real case-mix intensity, which will also affect overall payment changes. We have prepared separate impact analyses of the changes to each system. This section deals with the changes to the operating inpatient prospective payment system for acute care hospitals. Our payment simulation model relies on the most recent available data to enable us to estimate the impacts on payments per case of certain changes in this final rule. However, there are other changes for which we do not have data available that will allow us to estimate the payment impacts using this model. For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. The data used in developing the quantitative analyses of changes in payments per case presented below are taken from the FY 2013 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost reports were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change. Third, we use various data sources to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from the different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible. Using cases from the FY 2013 MedPAR file, we simulated payments under the operating IPPS given various combinations of payment parameters. As described above, Indian Health Service hospitals and hospitals in Maryland were excluded from the simulations. The impact of payments under the capital IPPS, or the impact of payments for costs other than inpatient operating costs, are not analyzed in this section. Estimated payment impacts of the capital IPPS for FY 2015 are discussed in section I.J. of this Appendix. We discuss the following changes below: • The effects of the application of the documentation and coding adjustment and the applicable percentage increase (including the market basket update, the multifactor productivity adjustment and the applicable percentage reduction in accordance with the Affordable Care Act) to the standardized amount and hospital-specific rates. • The effects of the changes to the relative weights and MS–DRG grouper. • The effects of the changes in hospitals’ wage index values reflecting updated wage data from hospitals’ cost reporting periods beginning during FY 2011, compared to the FY 2010 wage data, and the adoption of the new OMB delineations to calculate the FY 2015 wage index. • The combined effects of the recalibration of the MS–DRG relative weights as required by section 1886(d)(4)(C) of the Act and the wage index (including the updated wage data and the adoption of new OMB labor market area delineations), including the wage and recalibration budget neutrality factors. • The effects of the geographic reclassifications by the MGCRB (as of publication of this final rule) and the effects of the adoption of new OMB labor market area delineations on these reclassifications, that will be effective for FY 2015. • The effects of the rural floor and imputed floor with the application of the national budget neutrality factor applied to the wage index where the rural floor and imputed floor wage index are calculated based on the adoption of the new OMB labor market area delineations. • The effects of the adoption of the new labor market area delineations announced by OMB in February 2013 on hospital redesignations. • The effects of the 3-year transition for urban hospitals becoming rural under the PO 00000 Frm 00554 Fmt 4701 Sfmt 4700 new OMB delineations and the 1-year transitional blended wage index for hospitals whose FY 2015 wage indexes decrease solely as a result of adopting the new OMB delineations. • The effects of the frontier State wage index adjustment under the statutory provision that requires that hospitals located in States that qualify as frontier States to not have a wage index less than 1.0. This provision is not budget neutral. • The effects of the implementation of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in a hospital’s wage index if a threshold percentage of residents of the county where the hospital is located commute to work at hospitals in counties with higher wage indexes. • The effects of the policies for implementation of the Hospital Readmissions Reduction Program under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, that adjusts a hospital’s base operating DRG amount by an adjustment factor to account for a hospital’s excess readmissions. • The effects of the policies for continued implementation of section 3133 of the Affordable Care Act that reduces Medicare DSH payments to 25 percent of what hospitals had been previously paid under section 1886(d)(5)(F) of the Act and establishes an additional payment to be made to hospitals that receive DSH payments for their relative share of the total amount of uncompensated care. • The total estimated change in payments based on the FY 2015 policies relative to payments based on FY 2014 policies that include the applicable percentage increase of 2.2 percent (or 2.9 percent market basket update with a reduction of 0.5 percentage point for the multifactor productivity adjustment, and a 0.2 percentage point reduction, as required under the Affordable Care Act). The total estimated change in payments for FY 2015 reflects the extension of MDH payment status for the first 6 months of FY 2015, in accordance with the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93) enacted on April 1, 2014. We note that in the FY 2015 IPPS/LTCH PPS proposed rule we provided the effects of section 1886(o) of the Act, as added by section 3008 of the Affordable Care Act, which establishes payment reductions under the HAC Reduction Program. Hospitals ranked in the lowest 25 percent of performance on HACs are subject to a 1percent reduction in total IPPS payments. We are finalizing policies related to the HAC Reduction Program in this final rule, but as described earlier in this final rule, because the HAC scores are currently undergoing 30day review and correction by the hospitals, we are not providing hospital-level data or a hospital-level payment impact in conjunction with the FY 2015 IPPS Final Rule. We do provide an estimate of the overall payment impact in section I.H.8. of this Appendix A along with a discussion of the impact of these changes. To illustrate the impact of the FY 2015 changes, our analysis begins with a FY 2014 baseline simulation model using: the FY E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 2015 applicable percentage increase of 2.2 percent and the documentation and coding recoupment adjustment of 0.8 percent to the Federal standardized amount; the FY 2014 MS–DRG GROUPER (Version 31.0); the current FY 2014 CBSA designations for hospitals based on the OMB definitions; the FY 2014 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total operating MS–DRG and outlier payments for modeling purposes. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Public Law 109– 171, as amended by section 4102(b)(1)(A) of the ARRA (Pub. L. 111–5) and by section 3401(a)(2) of the Affordable Care Act (Pub. L. 111–148), provides that, for FY 2007 and each subsequent year through FY 2014, the update factor will include a reduction of 2.0 percentage points for any subsection (d) hospital that does not submit data on measures in a form and manner and at a time specified by the Secretary. Beginning in FY 2015, the reduction is one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or one-quarter of the market basket update. Therefore, for FY 2015, we are establishing that hospitals that do not submit quality information under rules established by the Secretary and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act will receive an applicable percentage increase of 1.475 percent. At the time that this impact was prepared, 56 hospitals did not receive the full market basket rate-of-increase for FY 2014 because they failed the quality data submission process or did not choose to participate. For purposes of the simulations shown below, we modeled the payment changes for FY 2015 using a reduced update for these 56 hospitals. However, we do not have enough information at this time to determine which hospitals will not receive the full update factor for FY 2015. Beginning in FY 2015, in accordance with section 1886(b)(3)(B)(ix) of the Act, a hospital that has been identified as not an meaningful EHR user will be subject to a reduction of one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or one-quarter of the market basket update. Therefore, for FY 2015, we are establishing that hospitals that are identified as not meaningful EHR users and do submit quality information under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of 1.475 percent. Hospitals that are identified as not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act and also do not submit quality data under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of 0.75 percent, which reflects a one-quarter reduction of the market basket update for failure to submit quality data and a onequarter reduction of the market basket update for being identified as not a meaningful EHR user. For FY 2015, we have yet to finalize a list of hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act. Therefore, we are not including this adjustment to the standardized amount (for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for FY 2015. We intend to release a final list of hospitals that are not meaningful EHR users in September 2014. Hospitals identified on this list will be paid based on the applicable standardized amount in Table 1A and Table 1B for discharges occurring in FY 2015. Each policy change, statutory or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2015 model incorporating all of the changes. This simulation allows us to isolate the effects of each change. Our final comparison illustrates the percent change in payments per case from FY 2014 to FY 2015. Three factors not discussed separately have significant impacts here. The first factor is the update to the standardized amount. In accordance with section 1886(b)(3)(B)(i) of the Act, we are updating the standardized amounts for FY 2015 using an applicable percentage increase of 2.2 percent. This includes our forecasted IPPS operating hospital market basket increase of 2.9 percent with a reduction of 0.5 percentage point for the multifactor productivity adjustment and a 0.2 percentage point reduction as required under the Affordable Care Act. (Hospitals that fail to comply with the quality data submission requirements and are meaningful EHR users would receive an update of 1.475 percent. This update includes a reduction of onequarter of the market basket update for failure to submit these data). We note that hospitals that do comply with the quality data submission requirements but are not meaningful EHR users would receive an update of 1.475 percent, which includes a reduction of one-quarter of the market basket update. Furthermore, hospitals that do not comply with the quality data submission requirements and also are not meaningful EHR users would receive an update of 0.75 percent. However, as discussed earlier, we do not have a list of hospitals that are not meaningful EHR users and have not included this adjustment to the standardized amount (for those hospitals that are not meaningful EHR users) in our modeling of aggregate payments for FY 2015. Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs and MDHs also are equal to the applicable percentage increase, or 2.2 percent if the hospital submits quality data and is a meaningful EHR user. In addition, we are updating the Puerto Rico-specific amount by an applicable percentage increase of 2.2 percent. A second significant factor that affects the changes in hospitals’ payments per case from FY 2014 to FY 2015 is the change in hospitals’ geographic reclassification status from one year to the next. That is, payments may be reduced for hospitals reclassified in FY 2014 that are no longer reclassified in FY 2015. Conversely, payments may increase for hospitals not reclassified in FY 2014 that are reclassified in FY 2015. A third significant factor is that we currently estimate that actual outlier payments during FY 2014 will be 5.71 percent of total MS–DRG payments. When PO 00000 Frm 00555 Fmt 4701 Sfmt 4700 50407 the FY 2014 IPPS/LTCH PPS final rule was published, we projected FY 2014 outlier payments would be 5.1 percent of total MS– DRG plus outlier payments; the average standardized amounts were offset correspondingly. The effects of the higher than expected outlier payments during FY 2014 (as discussed in the Addendum to this final rule) are reflected in the analyses below comparing our current estimates of FY 2014 payments per case to estimated FY 2015 payments per case (with outlier payments projected to equal 5.1 percent of total MS– DRG payments). 2. Analysis of Table I Table I displays the results of our analysis of the changes for FY 2015. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 3,396 acute care hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: all urban, which is further divided into large urban and other urban; and rural. There are 2,549 hospitals located in urban areas included in our analysis. Among these, there are 1,401 hospitals located in large urban areas (populations over 1 million), and 1,148 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 847 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals’ FY 2015 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,563; 1,413; 1,150; and 833, respectively. The next three groupings examine the impacts of the changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive Medicare DSH payments, or some combination of these two adjustments. There are 2,357 nonteaching hospitals in our analysis, 795 teaching hospitals with fewer than 100 residents, and 244 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next five rows examine the impacts of the changes on rural hospitals by special payment groups (SCHs, RRCs, and MDHs). There were 193 RRCs, 325 SCHs, and 162 E:\FR\FM\22AUR2.SGM 22AUR2 50408 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV MDHs (MDH status is extended through March 31, 2015 only under Pub. L. 113–93), 124 hospitals that are both SCHs and RRCs, and 15 hospitals that are MDHs and RRCs (MDH status is extended through March 31, 2015 only under Pub. L. 113–93). The next series of groupings are based on the type of ownership and the hospital’s VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Medicare utilization expressed as a percent of total patient days. These data were taken from the FY 2012 or FY 2011 Medicare cost reports. The next two groupings concern the geographic reclassification status of hospitals. The first grouping displays all urban hospitals that were reclassified by the PO 00000 Frm 00556 Fmt 4701 Sfmt 4700 MGCRB for FY 2015. The second grouping shows the MGCRB rural reclassifications. The final category shows the impact of the policy changes on the 15 cardiac hospitals. BILLING CODE 4120–01–P E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VerDate Mar<15>2010 Jkt 232001 PO 00000 3,396 1.5 Frm 00557 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) Fmt 4701 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutrality3 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (3) (4) Sfmt 4725 0 0 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality' (5) 0 FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) 0 0 Application of theCBSA Transition Wage Index with Budget Neutrality 9 (9) Application of the Frontier Wage Index and OutMigration Adjustment10 (10) Hospital Readmissions Reduction Proeram11 (11) 0 0 0.1 -0.2 Changes to Medicare DSH12 (12) -1.3 All F¥2015 Chanees13 (13) -0.6 I E:\FR\FM\22AUR2.SGM All Hospitals I By Geographic Location: I I 2,549 1.4 0 0 0.1 -0.1 0 0 0 0.1 -0.2 -1.4 -0.6 Urban hospitals 1,401 1.4 0.1 0.1 0.2 -0.3 0 0 0 0.1 -0.2 -1.4 -0.6 Large urban areas 1 I 1,148 1.5 0 -0.2 -0.2 0.1 0 0 0 0.2 -0.2 -1.3 -0.6 Other urban areas 1 I 847 1.8 -0.3 0.1 -0.2 1.5 -0.3 0 0 0.1 0 -0.9 -0.7 I 22AUR2 I Rural hospitals Bed Size (Urban): I 666 1.5 -0.2 0.1 -0.1 -0.4 0.1 0.1 0 0.4 -0.2 -0.7 -o.3 0-99 beds I I 787 I 00-199 beds i I 1.4 -0.1 -0.1 -0.2 0 0.3 0 0 0.2 -0.3 -1.4 -o.1 1 I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 TABLE I.-IMPACT ANALYSIS OF CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2015 50409 ER22AU14.009</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50410 VerDate Mar<15>2010 Jkt 232001 FY2015 MGCRB Reclassifications 6 Impact of the New OMB CBSA Designations 8 (6) (7) (8) 455 1.5 -0.1 0 0 0.1 0 0.1 0 0.1 429 1.4 0 0 0.1 -0.3 0.1 0.1 0 212 1.4 0.2 0 0.2 -0.2 -0.2 -0.1 328 1.8 -0.3 -0.1 -0.4 0.4 -0.3 305 1.9 -0.4 0 -0.4 0.9 125 1.8 -0.3 0.1 -0.2 50 1.7 -0.2 0.1 39 1.7 -0.1 0.1 PO 00000 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) Frm 00558 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (4) FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr (3) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustment10 (10) Hospital Readmissions Reduction Pro2ram11 Sfmt 4725 All F¥2015 Chan2es13 (13) -0.2 -1.1 -0.2 0.2 -0.1 -1.5 -0.7 0 0 -0.1 -1.4 -0.8 I 0 0.1 0.2 0 -0.7 -1.2 I -0.2 0 0 0.1 0 -0.9 -l.s I 1.8 -0.3 0 0 0.2 -0.1 -0.9 -0.2 -0.1 1.8 -0.3 0 0 0.2 -0.1 -1.2 -o.s -0.1 2.8 -0.4 0.1 -0.1 0 0.1 -0.7 o.3 (9) (11) 200-299 beds E:\FR\FM\22AUR2.SGM Changes to Medicare DSH12 (12) 500 or more beds i 300-499 beds Bed Size (Rural): I 0-49 beds i 50-99 beds I 22AUR2 100-149 beds I 150-199 beds 200 or more beds ER22AU14.010</GPH> I I I I I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 I tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VerDate Mar<15>2010 Jkt 232001 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (3) (4) FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustmentl 0 (10) 120 1.4 0.1 0.8 0.8 1.3 2.8 -0.5 0.2 0.1 324 1.4 0.1 0.1 0.2 0.1 -0.4 0 0.3 407 1.4 0 -0.3 -0.2 -0.3 -0.4 0.1 397 1.4 0 0 0 -0.2 -0.6 153 1.4 0 -0.5 -0.4 -0.4 162 1.5 0 0 0 387 1.4 0 -0.6 162 1.5 -0.1 0 PO 00000 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) Frm 00559 Hospital Readmissions Reduction Pro2ram11 Fmt 4701 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 Changes to Medicare DSH12 (12) All F¥2015 Chan2es13 -0.2 -1 0 0.2 -0.2 -1.2 -0.1 -0.1 0 -0.2 -1.3 -0.9 0.1 -0.1 0 -0.3 -1.2 -0.6 -0.4 0 -0.1 0 -0.2 -1.6 -1.3 -0.7 -0.5 0.1 -0.1 0.8 -0.1 -1 -0.4 -0.5 -0.5 -0.5 0.1 -0.1 0 -0.2 -2 -1.7 0 -0.1 0 0.1 -0.1 0.2 -0.2 -1.6 -o.9 (9) (11) (13) I Urban by Re2ion: I New England Middle Atlantic i South Atlantic East N ortb Central East South Central West North Central West South Central I Mountain 1 I 385 Pacific I 1.4 0 0.6 0.5 -0.2 1.4 0.1 -0.1 0 -0.1 -1.5 o.1 1 I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr 50411 ER22AU14.011</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50412 VerDate Mar<15>2010 Jkt 232001 1.6 PO 00000 52 Frm 00560 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (3) (4) 0.1 0.1 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) 0.2 FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) -0.8 0 Application of theCBSA Transition Wage Index with Budget Neutrality 9 (9) Application of the Frontier Wage Index and OutMigration Adjustmentl 0 (10) Hospital Readmissions Reduction Pro2ram11 (11) -0.1 0 0 0 Changes to Medicare DSH12 (12) All F¥2015 Chan2es13 -7.7 -7.4 (13) I ! Sfmt 4725 Puerto Rico I Rural by Re2ion: I ! 22 1.7 -0.1 0.6 0.4 2.2 -0.3 0 0 0 0 -0.5 -0.9 New England 1 E:\FR\FM\22AUR2.SGM i 57 1.9 -0.4 0.7 0.2 1.1 -0.2 -0.2 0.2 0.2 -0.1 -0.7 132 1.8 -0.3 -0.1 -0.4 2.2 -0.4 0 0 0.1 0.1 -1 -0.91 Middle Atlantic -o.9 South Atlantic 1 I -0.3 0 -0.2 1.1 -0.2 0.1 0 0 -0.1 -0.5 o.l I 165 1.6 -0.1 -0.3 -0.4 2.6 -0.5 0 -0.1 0.1 -0.1 -1.5 -1.4 I 102 2.1 -0.4 0 -0.4 0.4 -0.1 0.1 0 0.3 0 -0.3 0.1 168 1.7 -0.2 0.1 -0.1 1.7 -0.4 -0.1 0 0.1 -0.2 -1.6 -1.9 2 -0.4 -0.2 -0.5 0.1 0 0 0 0.6 0 -0.4 0.5 East South Central West North Central West South Central Mountain ER22AU14.012</GPH> 1.9 61 22AUR2 116 East North Central I ! I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VerDate Mar<15>2010 Jkt 232001 2.3 PO 00000 24 Frm 00561 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (3) (4) -0.7 0.8 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) -0.5 FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) 0.9 -0.2 Application of theCBSA Transition Wage Index with Budget Neutrality 9 (9) Application of the Frontier Wage Index and OutMigration Adjustmentl 0 (10) Hospital Readmissions Reduction Pro2ram11 (11) -0.1 0.1 0 0.2 Changes to Medicare DSH12 (12) -0.3 Pacific All F¥2015 Chan2es13 (13) 1.1 Sfmt 4725 By Payment Classification: I I I E:\FR\FM\22AUR2.SGM 2,563 1.4 0 0 0.1 -0.1 0 0 0 0.1 -0.2 -1.4 -0.6 1,413 1.4 0.1 0.1 0.2 -0.3 0 0 0 0.1 -0.2 -1.4 -0.6 1,150 1.5 0 -0.2 -0.2 0.1 0 0 0 0.2 -0.2 -1.3 -0.6 833 1.8 -0.3 0 -0.3 1.2 -0.3 0 0 0.3 0 -0.8 -o.6 Urban areas Large urban areas I I Other urban areas 1 I Rural areas 22AUR2 Teachin2 Status: 2,357 1.5 -0.1 -0.1 -0.2 0.2 0.2 0.1 0 0.1 -0.2 -1.1 -0.5 Nonteaching 1 I Fewer than 100 residents 795 100 or more residents 244 1.5 0 0 0 -0.1 -0.1 0.1 0 0.2 -0.2 -1.4 -o.6 1 i 1.4 0.2 0.1 0.4 -0.1 -0.2 -0.1 0.1 0 -0.1 -1.6 -o.8 1 I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr 50413 ER22AU14.013</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50414 VerDate Mar<15>2010 Jkt 232001 FY2015 MGCRB Reclassifications 6 Impact of the New OMB CBSA Designations 8 (6) (7) (8) 679 1.5 -0.1 -0.1 -0.1 0 0 0.2 0 0.2 -0.2 -0.3 1,588 1.4 0.1 0 0.1 -0.1 0 0 0 0.1 -0.2 -1.5 PO 00000 No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) Frm 00562 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (4) FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr (3) Application of theCBSA Transition Wage Index with Budget Neutrality 9 (9) Application of the Frontier Wage Index and OutMigration Adjustment10 (10) Hospital Readmissions Reduction Pro2ram11 (11) Changes to Medicare DSH12 (12) All F¥2015 Chan2es13 (13) Sfmt 4725 UrbanDSH: I 0.6 I Non-DSH I -0.8 E:\FR\FM\22AUR2.SGM 100 or more beds 1.5 -0.3 0.2 -0.1 0 0 0.1 0 0.3 -0.2 -1 -o.8 373 2.1 -0.4 0 -0.5 0.2 -0.1 0 0 0 0 -0.6 -0.6 212 1.8 -0.2 0 -0.2 1.8 -0.3 0 0 0.5 0 -0.9 -0.3 24 1.4 -0.2 -0.2 -0.4 2.4 -0.6 0.1 0 0.2 -0.2 -1.7 -1.3 137 22AUR2 383 1.4 -0.2 -0.1 -0.2 1 -0.6 -0.3 0.2 0.5 -0.2 -1.8 -1.3 RuraiDSH: SCH RRC 100 or more beds ER22AU14.014</GPH> i I I Less than 100 beds Less than 100 beds I 1 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 I tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VerDate Mar<15>2010 Jkt 232001 (3) (4) FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustmentl 0 (10) No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) Both teaching and DSH 842 1.4 0.1 0 0.2 -0.2 -0.1 0 0 0.1 Teaching and no DSH 133 1.4 0 0 0 0.3 0.1 0.1 0 No teaching and DSH 1,129 1.5 -0.1 -0.1 -0.1 0 0.3 0.1 459 1.4 -0.1 -0.1 -0.2 -0.2 0 193 1.4 -0.1 0 -0.1 2.5 325 2 -0.3 -0.1 -0.4 0 PO 00000 Frm 00563 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) Hospital Readmissions Reduction Pro2ram11 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 Changes to Medicare DSH12 (12) All F¥2015 Chan2es13 -0.1 -1.6 -0.9 0.2 -0.3 -0.3 0.9 0 0.1 -0.2 -1.4 -0.7 0.2 0 0.2 -0.2 -0.3 0.7 -0.5 0 0 0.6 -0.2 -1.2 -0.6 -0.1 0 0 0 0 -0.4 0.7 (9) (11) (13) I Urban teaching andDSH: No teaching and no DSH Special Hospital Types: RRC i SCH 162 2 -0.4 0 -0.4 0.3 -0.2 0 0 0.1 -0.1 -0.8 -5.3 124 2.1 -0.4 0 -0.3 0.3 0 0 0 0.1 0.1 -0.3 1 MDH SCHandRRC 1 I I I I I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr 50415 ER22AU14.015</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50416 VerDate Mar<15>2010 Jkt 232001 (3) (4) FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustment10 (10) No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) 15 2 -0.4 -0.1 -0.4 0.5 -0.1 -0.1 0 0 1,935 1.5 0 0.1 0.1 0 0 0 0 0.1 PO 00000 Frm 00564 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) (9) Hospital Readmissions Reduction Program11 Sfmt 4725 Changes to Medicare DSH12 (12) All F¥2015 Changes13 0 -0.3 -8.1 -0.2 -1.2 -o.4 (11) (13) MDHandRRC Type of Ownership: E:\FR\FM\22AUR2.SGM Voluntary 892 1.4 0 -0.2 -0.2 0.2 0.1 0.1 -0.1 0.1 -0.2 -1.5 542 1.5 0 -0.1 -0.1 -0.1 0 0 0 0 -0.1 -2 -0.9 I Proprietary I -1.4 22AUR2 Government Medicare Utilization as a Percent of Inpatient Days: i I 501 1.4 0 0.1 0.2 -0.3 0 0 0 0 -0.1 -3 -2.4 2,081 1.4 0 0 0 -0.1 0 0 0 0.1 -0.2 -1.2 -0.4 601 1.6 -0.1 -0.1 -0.2 0.8 0.1 0.2 0 0.1 -0.2 -0.6 -0.1 0-25 50-65 I I 25-50 ER22AU14.016</GPH> ! Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutrality' tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV VerDate Mar<15>2010 Jkt 232001 (3) (4) FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustment10 (10) No. of Hospitals 1 (1) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) 93 1.6 -0.2 -0.2 -0.3 0.2 0.5 -0.1 0 0.2 719 1.5 -0.1 0 0 2.4 0.1 0 -0.1 2,677 1.4 0 0 0 -0.7 0 0 450 1.4 0 0 0.1 2.4 0.2 2,054 1.4 0 0 0.1 -0.8 269 1.8 -0.3 0 -0.2 2.5 PO 00000 Frm 00565 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) Hospital Readmissions Reduction Proeram11 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 Changes to Medicare DSH 12 (12) All F¥2015 Chanees13 -0.2 -0.6 -0.7 0 -0.2 -1.1 -0.2 i 0 0.1 -0.2 -1.4 -0.7 I 0 -0.1 0 -0.2 -1.2 -0.1 0 0 0 0.1 -0.2 -1.4 -0.7 -0.3 0 0 0 -0.1 -0.9 -oA (9) (11) (13) ! Over65 FY 2015 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals Non-Reclassified Hospitals Urban Hospitals Reclassified Urban Nonreclassified Hospitals, FY 2015 All Rural Hospitals Reclassified FY 2015 Rural N onreclassified Hospitals FY 2015 i I I 514 1.9 -0.4 0 -0.3 -0.1 -0.2 -0.1 0 0.3 0.1 -0.9 -0.91 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutralitr 50417 ER22AU14.017</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50418 VerDate Mar<15>2010 Jkt 232001 FY2015 MGCRB Reclassifications 6 Rural Floor and Imputed Floor with Application of National Rural Floor Budget Neutrality7 Impact of the New OMB CBSA Designations 8 (6) (7) (8) Application of theCBSA Transition Wage Index with Budget Neutrality 9 Application of the Frontier Wage Index and OutMigration Adjustment10 (10) No. of Hospitals 1 (1) Frm 00566 Fmt 4701 F¥2015 Wage Data with Application of Wage Budget Neutrality4 (4) FY2015 DRG,Rel. Wts., Wage Index Changes with Wage and Recalibration Budget Neutrality5 (5) Hospital Rate Update and Documentation and Coding Adjustment 2 (2) 50 1.9 -0.3 -0.1 -0.4 -0.3 -0.1 -0.4 0.2 2 64 1.6 -0.3 0.3 0 3.1 -0.5 0.2 0.1 15 1.4 1.1 0.1 1.3 -0.9 -0.1 0.1 -0.1 PO 00000 Sfmt 4725 E:\FR\FM\22AUR2.SGM 22AUR2 ER22AU14.018</GPH> FY2015 Weights andDRG Changes with Application of Recalibration Budget Neutrality' All Section 401 Reclassified Hospitals Other Reclassified Hospitals (Section 1886(d)(8)(B)) (3) (9) Hospital Readmissions Reduction Program11 Changes to Medicare DSH12 (12) All F¥2015 Changes13 0 -0.6 -1.2 0.1 -0.1 -1.2 -2 0.7 0 -0.1 2.1 (11) (13) ! Specialty Hospitals Cardiac specialty Hospitals I I 1 Because data necessary to classifY some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY 2013, and hospital cost report data are from reporting periods beginning in FY 2012 and FY 2011. 2 This column displays the payment impact of the hospital rate update and the documentation and coding adjustment including the 2.2 percent adjustment to the national standardized amount and hospital-specific rate (the estimated 2.9 percent market basket update reduced by the 0.5 percentage point for the multifactor productivity adjustment and the 0.2 percentage point reduction under the Affordable Care Act) and the 0.8 percent documentation and coding adjustment to the national standardized amount. 3 This column displays the payment impact of the changes to the Version 32.0 GROUPER, the changes to the relative weights and the recalibration of the MS-DRG weights based on FY 2013 MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the recalibration budget neutrality factor of0.997543 in accordance with section 1886(d)(4)(C)(iii) of the Act. I Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 I tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Jkt 232001 PO 00000 Frm 00567 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 This column displays the payment impact of the update to wage index data using FY 2011 cost report data and the new OMB labor market area delineations. This column displays the payment impact of the application of the wage budget neutrality factor, which is calculated separately from the recalibration budget neutrality factor, and is calculated in accordance with section 1886(d)(3)(E)(i) ofthe Act. The wage budget neutrality factor is 1.001443. 5 This column displays the combined payment impact of the changes in Columns 3 through 4 and the cumulative budget neutrality factor for MS-DRG and wage changes in accordance with section 1886(d)(4)(C)(iii) of the Act and section 1886(d)(3)(E) of the Act. The cumulative wage and recalibration budget neutrality factor of0.998982 is the product of the wage budget neutrality factor and the recalibration budget neutrality factor. 6 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) along with the effects of the adoption of the new OMB labor market area delineations on these reclassifications. The effects demonstrate the FY 2015 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2015. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects the geographic budget neutrality factor of0.990406. 7 This column displays the effects of the rural floor and imputed floor based on the adoption of new OMB labor market area delineations. The Affordable Care Act requires the rural floor budget neutrality adjustment to be 100 percent national level adjustment. The rural floor budget neutrality factor (which includes the imputed floor) applied to the wage index is 0.989507. 8 This column displays the effects of the adoption of the new OMB labor market area delineations. It does not reflect the 3-year transition for hospitals that are currently located in urban counties that would become rural under the new OMB delineations and the one-year transition to the new OMB delineations where the wage indexes are blended such that hospitals receive 50 percent of their wage index based on the new OMB delineations, and 50 percent of their wage index based on their current labor market area. Rather, it shows the impact of the new OMB delineations fully implemented in FY 2015. 9This column shows the effects of both the 3-year transition for hospitals that are currently located in urban counties that become rural under the new OMB delineations, and the 50/50 blended wage index adjustments in a budget neutral manner. For FY 2015, we are applying both the 3-year transition and 50/50 blended wage index adjustments in a budget neutral manner, with a budget neutrality factor of0.998859 applied to the standardized amount. 10 This column shows the combined impact of the policy required under section 10324 of the Affordable Care Act that hospitals located in frontier States have a wage index no less than 1.0 and of section 1886(d)(13) of the Act, as added by section 505 of Pub. L. 108-173, which provides for an increase in a hospital's wage index if a threshold percentage of residents of the county where the hospital is located commute to work at hospitals in counties with higher wage indexes. These are nonbudget neutral policies. 11 This column displays the impact of the implementation of the Hospital Readmissions Reduction Program, section 3025 of the Affordable Care Act, a nonbudget neutral provision that adjusts a hospital's payment for excess readmissions. 12 This column displays the impact of the implementation of section 3133 of the Affordable Care Act that reduces Medicare DSH payments by 7 5 percent and establishes an additional uncompensated care payment. 13 This column shows the changes in payments from FY 2014 to FY 2015. It reflects the impact of the FY 2015 hospital update and the adjustment for documentation and coding. It also reflects changes in hospitals' reclassification status in FY 2015 compared to FY 2014, and the extension ofMDH payment status for the first half ofFY 2015, under Pub. L. 113-93 enacted on Apri11, 2014. It incorporates all of the changes displayed in Columns 2, 5, 6, 7, 8, 9, 10, 11, and 12 (the changes displayed in Columns 3 and 4 are included in Column 5). The sum of these impacts may be different from the percentage changes shown here due to rounding and interactive effects. Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 18:25 Aug 21, 2014 BILLING CODE 4120–01–C VerDate Mar<15>2010 4 50419 ER22AU14.019</GPH> tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50420 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations a. Effects of the Hospital Update and Documentation and Coding Adjustment (Column 2) As discussed in section II.D. of the preamble of this final rule, this column includes the hospital update, including the 2.9 percent market basket update, the reduction of 0.5 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction in accordance with the Affordable Care Act. In addition, this column includes the FY 2015 documentation and coding recoupment adjustment of ¥0.8 percent on the national standardized amount as part of the recoupment required by section 631 of the ATRA. As a result, we are making a 1.4 percent update to the national standardized amount. This column also includes the 2.2 percent update to the hospital-specific rates which also includes the 2.9 percent market basket update, the reduction of 0.5 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction in accordance with the Affordable Care Act. Overall, hospitals will experience a 1.5 percent increase in payments primarily due to the combined effects of the hospital update and documentation and coding adjustment on the national standardized amount and the hospital update to the hospital-specific rate. Hospitals that are paid under the hospitalspecific rate, namely SCHs, will experience a 2.2 percent increase in payments; therefore, hospital categories with SCHs paid under the hospital-specific rate will experience increases in payments of more than 1.4 percent. b. Effects of the Changes to the MS–DRG Reclassifications and Relative Cost-Based Weights With Recalibration Budget Neutrality (Column 3) Column 3 shows the effects of the changes to the MS–DRGs and relative weights with the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of the Act, we calculated a recalibration budget neutrality factor to account for the changes in MS–DRGs and relative weights to ensure that the overall payment impact is budget neutral. As discussed in section II.E. of the preamble of this final rule, the FY 2015 MS– DRG relative weights will be 100 percent cost-based and 100 percent MS–DRGs. For FY 2015, the MS–DRGs are calculated using the FY 2013 MedPAR data grouped to the Version 32.0 (FY 2015) MS–DRGs. The methodology to calculate the relative weights and the reclassification changes to the GROUPER are described in more detail in section II.H. of the preamble of this final rule. The ‘‘All Hospitals’’ line in Column 3 indicates that changes due to the MS–DRGs and relative weights will result in a 0.0 percent change in payments with the application of the recalibration budget neutrality factor of 0.997543 on to the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 standardized amount. Hospital categories that generally treat more surgical cases than medical cases will experience increases in their payments due to the changes to the relative weight methodology. Rural hospitals will experience a 0.3 percent decrease in payments because rural hospitals tend to treat fewer surgical cases than medical cases, while teaching hospitals with more than 100 residents will experience an increase in payments by 0.2 percent as those hospitals treat more surgical cases than medical cases. c. Effects of the Wage Index Changes (Column 4) Column 4 shows the impact of updated wage data using FY 2011 cost report data and the new OMB labor market area delineations, with the application of the wage budget neutrality factor. The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core Based Statistical Areas (CBSAs) established by OMB. The current statistical areas used in FY 2014 were based on OMB standards published on December 27, 2000 (65 FR 82228) and Census 2000 data and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10–02). As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13–01, which established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. In order to implement these changes for the IPPS, it is necessary to identify the new labor market area delineation for each county and hospital in the country. However, because the bulletin was not issued until February 28, 2013, with supporting data not available until later, and because the changes made by the bulletin and their ramifications needed to be extensively reviewed and verified, we were unable to undertake such a lengthy process before publication of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not implement changes to the wage index for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we stated that we intended to propose changes to the wage index based on the new OMB delineations in this FY 2015 proposed rule. As discussed below, in this final rule, we are implementing the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13–01, effective beginning with the FY 2015 IPPS wage index. Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the wage index for acute care hospitals for FY 2015 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2010 and before October 1, 2011. The estimated impact of the updated wage data using the FY 2011 cost report data and the new OMB labor PO 00000 Frm 00568 Fmt 4701 Sfmt 4700 market area delineations on hospital payments is isolated in Column 4 by holding the other payment parameters constant in this simulation. That is, Column 4 shows the percentage change in payments when going from a model using the FY 2014 wage index, based on FY 2010 wage data, the laborrelated share of 69.6 percent, under the new OMB delineations and having a 100-percent occupational mix adjustment applied, to a model using the FY 2015 pre-reclassification wage index based on FY 2011 wage data with the labor-related share of 69.6 percent, under the new OMB delineations, also having a 100-percent occupational mix adjustment applied, while holding other payment parameters such as use of the Version 32.0 MS–DRG GROUPER constant). The FY 2015 occupational mix adjustment is based on the CY 2010 occupational mix survey. In addition, the column shows the impact of the application of the wage budget neutrality to the national standardized amount. In FY 2010, we began calculating separate wage budget neutrality and recalibration budget neutrality factors, in accordance with section 1886(d)(3)(E) of the Act, which specifies that budget neutrality to account for wage index changes or updates made under that subparagraph must be made without regard to the 62 percent labor-related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2015, we calculated the wage budget neutrality factor to ensure that payments under updated wage data and the laborrelated share of 69.6 percent are budget neutral without regard to the lower laborrelated share of 62 percent applied to hospitals with a wage index less than or equal to 1.0. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the higher laborrelated share of the standardized amount. The wage budget neutrality factor is 1.001443, and the overall payment change is zero percent. Column 4 shows the impacts of updating the wage data using FY 2011 cost reports. Overall, the new wage data and the laborrelated share, combined with the wage budget neutrality adjustment, will lead to a 0.0 percent change for all hospitals as shown in Column 4. In looking at the wage data itself, the national average hourly wage increased 1.02 percent compared to FY 2014. Therefore, the only manner in which to maintain or exceed the previous year’s wage index was to match or exceed the national 1.02 percent increase in average hourly wage. Of the 3,387 hospitals with wage data for both FYs 2014 and 2015, 1,572 or 46.4 percent will experience an average hourly wage increase of 1.02 percent or more. The following chart compares the shifts in wage index values for hospitals due to changes in the average hourly wage data for FY 2015 relative to FY 2014. Among urban hospitals, 4 will experience a decrease of more than 10 percent, with 2 urban hospital experiencing an increase of more than 10 percent. Seventy-six urban hospitals will experience an increase or decrease of at least 5 percent or more but less than or equal to 10 percent. Among rural hospitals, none will E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations experience a decrease of more than 5 percent, but 5 rural hospitals will experience an increase of greater than 5 percent but less than or equal to 10 percent. However, 841 rural hospitals will experience increases or decreases of less than or equal to 5 percent, while 2,220 urban hospitals will experience increases or decreases of less than or equal to 5 percent. Two hundred thirty-nine urban and no rural hospitals will not experience a change in their wage index. These figures reflect changes in the ‘‘pre-reclassified, occupational mix-adjusted wage index,’’ that is, the wage index before the application of geographic reclassification, the rural and imputed floors, the out-migration adjustment, and other wage index exceptions and adjustments. We note that this analysis was performed by applying the new OMB labor market area delineations to the FY 2015 wage data and also by recomputing the FY 2014 final wage data to reflect the new OMB delineations. (We refer readers to sections III.G.2. through III.I. of the preamble of this final rule for a complete discussion of the exceptions and adjustments to the wage index.) We note that the ‘‘post-reclassified wage index’’ or ‘‘payment wage index,’’ the wage index that includes all such exceptions and adjustments (as reflected in Tables 2, 4A, 50421 4B, 4C, and 4F of the Addendum to this final rule, which are available via the Internet on the CMS Web site) is used to adjust the laborrelated share of a hospital’s standardized amount, either 69.6 percent or 62 percent, depending upon whether a hospital’s wage index is greater than 1.0 or less than or equal to 1.0. Therefore, the pre-reclassified wage index figures in the chart below may illustrate a somewhat larger or smaller change than will occur in a hospital’s payment wage index and total payment. The following chart shows the projected impact of changes in the area wage index values for urban and rural hospitals. Number of hospitals Percentage change in area wage index values Urban tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Increase more than 10 percent ............................................................................................................................... Increase more than 5 percent and less than or equal to 10 percent ..................................................................... Increase or decrease less than or equal to 5 percent ............................................................................................ Decrease more than 5 percent and less than or equal to 10 percent .................................................................... Decrease more than 10 percent .............................................................................................................................. Unchanged ............................................................................................................................................................... d. Combined Effects of the MS–DRG and Wage Index Changes (Column 5) Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS–DRG reclassifications and the relative weights cannot increase or decrease aggregate payments. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. We computed a wage budget neutrality factor of 1.001443 and a recalibration budget neutrality factor of 0.997543 (which is applied to the Puerto Rico-specific standardized amount and the hospital-specific rates). The product of the two budget neutrality factors is the cumulative wage and recalibration budget neutrality factor. The cumulative wage and recalibration budget neutrality adjustment is 0.998982, or approximately 0.10 percent, which is applied to the national standardized amounts. Because the wage budget neutrality and the recalibration budget neutrality are calculated under different methodologies according to the statute, when the two budget neutralities are combined and applied to the standardized amount, the overall payment impact is not necessarily budget neutral. However, in this final rule, we are estimating that the changes in the MS–DRG relative weights and updated wage data with wage and budget neutrality applied will result in a 0.0 percent change in payments. e. Effects of MGCRB Reclassifications (Column 6) Our impact analysis to this point has assumed acute care hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on other bases than where they are geographically located). The changes in Column 6 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2015 and the effects of the adoption of the new OMB labor market area VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 delineations on these reclassifications which affect hospitals’ wage index area assignments. By spring of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital’s reclassification request for the purpose of using another area’s wage index value. Hospitals may appeal denials of MGCRB decisions to the CMS Administrator. Further, hospitals had 45 days from publication of the IPPS proposed rule in the Federal Register to decide whether to withdraw or terminate an approved geographic reclassification for the following year. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, for purposes of this impact analysis, we are applying an adjustment of 0.990406 to ensure that the effects of the reclassifications under section 1886(d)(10) of the Act are budget neutral (section II.A. of the Addendum to this final rule). Geographic reclassification generally benefits hospitals in rural areas. We estimate that the geographic reclassification will increase payments to rural hospitals by an average of 1.5 percent. By region, all the rural hospital categories will experience increases in payments due to MGCRB reclassifications. Table 9A listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site reflects the reclassifications for FY 2015. f. Effects of the Rural and Imputed Floor, Including Application of National Budget Neutrality (Column 7) As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the FYs 2011, 2012, 2013 and 2014 IPPS/ LTCH PPS final rules, and this final rule, section 4410 of Public Law 105–33 established the rural floor by requiring that PO 00000 Frm 00569 Fmt 4701 Sfmt 4700 2 18 2,220 58 4 239 Rural 0 5 841 0 0 0 the wage index for a hospital in any urban area cannot be less than the wage index received by rural hospitals in the same State. We apply a uniform budget neutrality adjustment to the wage index. The imputed floor, which is also included in the calculation of the budget neutrality adjustment to the wage index, was extended in FY 2012 for 2 additional years. In the past, only urban hospitals in New Jersey received the imputed floor. As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53369), we established an alternative temporary methodology for the imputed floor, which resulted in an imputed floor for Rhode Island for FY 2013. For FY 2014, we extended the imputed rural floor, as calculated under the original methodology and the alternative methodology. For FY 2015, we are extending the imputed rural floor for one year, as calculated under the original methodology and the alternative methodology. As a result, New Jersey, Rhode Island, and Delaware are able to receive an imputed floor. In New Jersey, 15 out of 64 hospitals will receive the imputed floor, and 4 out of 11 hospitals in Rhode Island will receive the imputed floor for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (78 FR 28356), we stated that one out of six hospitals in Delaware would benefit from the imputed floor. However, in this final rule, no hospitals are benefitting from the imputed floor in Delaware because the CBSA wage index for each CBSA in Delaware under the new OMB delineations is equal to or higher than the imputed rural floor. The Affordable Care Act requires that we apply one rural floor budget neutrality factor to the wage index nationally, and the imputed floor is part of the rural floor budget neutrality factor applied to the wage index nationally. We have calculated an FY 2015 rural floor budget neutrality factor to be applied to the wage index of 0.989507, which reduces wage indexes by 1.0 percent. Column 7 shows the projected impact of the rural floor and imputed floor with the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50422 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations national rural floor budget neutrality factor applied to the wage index based on the new OMB labor market area delineations. The column compares the post-reclassification FY 2015 wage index of providers before the rural floor and imputed floor adjustment and the post-reclassification FY 2015 wage index of providers with the rural floor and imputed floor adjustment based on the new OMB labor market area delineations. Only urban hospitals can benefit from the rural and imputed floors. Because the provision is budget neutral, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) will experience a decrease in payments due to the budget neutrality adjustment that is applied nationally to their wage index. We estimate that 422 hospitals will benefit from the rural and imputed floors in FY 2015, while the remaining 2,974 IPPS hospitals in our model have their wage index reduced by the rural floor budget neutrality adjustment of 0.989507 (or 1.0 percent). We project that, in aggregate, rural hospitals will experience a 0.3 percent decrease in payments as a result of the application of the rural floor budget neutrality because the rural hospitals do not benefit from the rural floor, but have their wage indexes downwardly adjusted to ensure that the application of the rural floor is budget neutral overall. We project hospitals located in urban areas will experience no change in payments because increases in payments by hospitals benefitting from the rural floor offset decreases in payments by nonrural floor urban hospitals whose wage index is downwardly adjusted by the rural floor budget neutrality factor. Urban hospitals in the New England region can expect a 2.8 percent increase in payments primarily due to the application of the rural floor in Massachusetts. Fifty-one urban providers in Massachusetts are expected to receive the rural floor wage index value, including the rural floor budget neutrality of 1.3336, increasing payments overall to Massachusetts by an estimated $156 million. During most past years, there have been no IPPS hospitals located in rural areas in Massachusetts. There was one urban IPPS hospital that was reclassified to rural Massachusetts (under section 1886(d)(8)(E) of the Act) which established the Massachusetts rural floor, but the wage index resulting from that hospital’s data was not high enough for any urban hospital to benefit from the rural floor policy. However, for the FY 2012 wage index, the rural floor for Massachusetts was established by a hospital that converted from a CAH to an IPPS hospital that is geographically located in rural Massachusetts. The rural floor in Massachusetts continues to be set by the wage index of the hospital in rural Massachusetts that converted from CAH to IPPS status. We estimate that Massachusetts hospitals will receive approximately a 4.9 VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 percent increase in IPPS payments due to the application of the rural floor in FY 2015. We wish to make note of a situation that occurred in the rural floor impact calculation for Massachusetts. In FY 2014, CMS calculated that 60 hospitals would benefit from the Massachusetts rural floor, resulting in an estimated $167.6 million being received by Massachusetts hospitals via the national rural floor budget neutrality adjustment. In FY 2015, fewer Massachusetts hospitals, 51 hospitals, have been identified as benefitting from the rural floor, and the fiscal impact of national budget neutrality has been reduced. We have received inquiries from commenters regarding this reduction, speculating whether the addition of one rural hospital in Franklin County, MA reduced the impact of the Massachusetts rural floor. The commenters are correct that the addition of one rural hospital in Massachusetts reduced the impact of the rural floor in FY 2015 as compared to the impact of the rural floor in FY 2014. We refer readers to section II.A.4.(c) of the Addendum to this final rule for a complere discussion on this issue. Urban Puerto Rico hospitals are expected to experience a 0.0 percent change in payments as a result of the application of a Puerto Rico rural floor with the application of the Puerto Rico rural floor budget neutrality adjustment. We are applying a rural floor budget neutrality factor to the Puerto Rico-specific wage index of 0.991291 or ¥0.87 percent. The Puerto Rico-specific wage index adjusts the Puerto Rico-specific standardized amount, which represents 25 percent of payments to Puerto Rico hospitals. The increases in payments experienced by the urban Puerto Rico hospitals that benefit from a rural floor are offset by the decreases in payments by the urban Puerto Rico hospitals that do not benefit from the rural floor that have their wage indexes downwardly adjusted by the rural floor budget neutrality adjustment. As a result, overall, urban Puerto Rico hospitals will experience a 0.0 percent change in payments due to the application of the rural floor with rural floor budget neutrality. There are 15 hospitals out of the 64 hospitals in New Jersey that benefit from the extension of the imputed floor and will receive the imputed floor wage index value under the new OMB labor market area delineations, including the rural floor budget neutrality of 1.121 which we estimate will increase payments to those imputed floor hospitals by $24 million (overall, the State will see an increase in payments of approximately $2.7 million due to the other hospitals in the State experiencing decreases in payments due to the rural floor budget neutrality adjustment). Four Rhode Island hospitals will benefit from the imputed rural floor calculated under the alternative methodology and receive an additional $3.7 million (overall, the State will receive an additional $1.9 million). As mentioned PO 00000 Frm 00570 Fmt 4701 Sfmt 4700 earlier, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28356), we stated that one hospital in Delaware would benefit from the imputed floor. However, in this final rule, no hospitals are benefitting from the imputed floor in Delaware because the CBSA wage index for each CBSA in Delaware under the new OMB delineations is equal to or higher than the imputed rural floor. In response to a public comment addressed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593), we are providing the payment impact of the rural floor and imputed floor with budget neutrality at the State level. Column 1 of the table below displays the number of IPPS hospitals located in each State. Column 2 displays the number of hospitals in each State that will receive the rural floor or imputed floor wage index for FY 2015 based on the new OMB labor market area delineations. Column 3 displays the percentage of total payments each State will receive or contribute to fund the rural floor and imputed floor with national budget neutrality based on the new OMB labor market area delineations. The column compares the post-reclassification FY 2015 wage index of providers before the rural floor and imputed floor adjustment and the postreclassification FY 2015 wage index of providers with the rural floor and imputed floor adjustment with the wage indexes calculated based on the new OMB labor market area delineations. Column 4 displays the estimated payment amount that each State will gain or lose due to the application of the rural floor and imputed floor with national budget neutrality. Comment: Some commenters requested that CMS include in the FY 2015 IPPS/LTCH PPS final rule an updated detailed Statespecific analysis of the effects of nationwide rural floor budget neutrality. In addition, the commenters requested that CMS publish a table showing the cumulative State-specific and aggregate inpatient and outpatient payment impact of the nationwide rural floor with budget neutrality and project the estimated 10-year State-specific effects of continuing the current policy. Response: We appreciate the commenters’ request for additional analysis on the impact of the rural floor on inpatient and outpatient payments. Commenters may request to view the OPPS impacts of the rural floor policy through the public comment period for the CY 2015 OPPS/ASC proposed rule that closes on September 2, 2014. In addition, we are unable to provide a State-by-State impact with a 10-year projection of the rural floor because the rural floor is based on wage data that are updated annually. Therefore, we believe it would be difficult to accurately portray the rural floor in 10-year projections. We have updated our State-by-State rural floor budget neutrality impact analysis for this FY 2015 IPPS/LTCH PPS final rule. E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50423 FY 2015 IPPS ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY Number of hospitals Percent change in payments due to application of rural floor and imputed floor with budget neutrality Difference (in millions) (1) State Number of hospitals that will receive the rural floor or imputed floor (2) (3) (4) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Alabama ............................................................................................. Alaska ................................................................................................ Arizona ............................................................................................... Arkansas ............................................................................................ California ............................................................................................ Colorado ............................................................................................ Connecticut ........................................................................................ Delaware ............................................................................................ Washington, D.C. ............................................................................... Florida ................................................................................................ Georgia .............................................................................................. Hawaii ................................................................................................ Idaho .................................................................................................. Illinois ................................................................................................. Indiana ............................................................................................... Iowa ................................................................................................... Kansas ............................................................................................... Kentucky ............................................................................................ Louisiana ............................................................................................ Maine ................................................................................................. Massachusetts ................................................................................... Michigan ............................................................................................. Minnesota .......................................................................................... Mississippi .......................................................................................... Missouri .............................................................................................. Montana ............................................................................................. Nebraska ............................................................................................ Nevada ............................................................................................... New Hampshire ................................................................................. New Jersey ........................................................................................ New Mexico ....................................................................................... New York ........................................................................................... North Carolina .................................................................................... North Dakota ...................................................................................... Ohio ................................................................................................... Oklahoma ........................................................................................... Oregon ............................................................................................... Pennsylvania ...................................................................................... Puerto Rico ........................................................................................ Rhode Island ...................................................................................... South Carolina ................................................................................... South Dakota ..................................................................................... Tennessee ......................................................................................... Texas ................................................................................................. Utah ................................................................................................... Vermont ............................................................................................. Virginia ............................................................................................... Washington ........................................................................................ West Virginia ...................................................................................... Wisconsin ........................................................................................... Wyoming ............................................................................................ g. Impact of the New OMB Delineations (Column 8) Column 8 shows the effects of the adoption of the new OMB labor market area delineations. This column compares the payments under the rural and imputed floor wage index with rural floor budget neutrality calculated under the new OMB delineations and the payments under the rural and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 91 6 57 45 309 47 31 6 7 169 106 12 14 127 91 34 53 65 100 20 61 95 51 64 78 12 23 24 13 64 25 163 87 6 135 86 33 154 52 11 55 19 98 324 33 6 79 49 30 65 11 imputed floor wage index with budget neutrality calculated under the current OMB delineations. It does not reflect the 3-year transition for hospitals that are currently located in urban counties that become rural under the new OMB delineations and the 1year transition to the new OMB delineations where the wage indexes are blended such that hospitals receive 50 percent of their wage index based on the new OMB PO 00000 Frm 00571 Fmt 4701 Sfmt 4700 2 4 9 0 200 6 8 0 0 25 0 0 0 0 0 0 0 1 0 0 51 0 0 0 0 4 0 6 9 15 2 0 0 1 10 2 0 10 11 4 7 0 16 6 2 0 1 8 2 0 0 ¥0.5 1.5 ¥0.1 ¥0.5 1.9 0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.3 ¥0.5 ¥0.4 ¥0.4 ¥0.6 ¥0.6 ¥0.5 ¥0.4 ¥0.5 ¥0.5 ¥0.5 4.9 ¥0.5 ¥0.5 ¥0.5 ¥0.5 ¥0.3 ¥0.4 0.7 2.2 0.1 ¥0.2 ¥0.6 ¥0.5 ¥0.3 ¥0.4 ¥0.5 ¥0.5 ¥0.5 0 0.5 ¥0.3 ¥0.3 ¥0.2 ¥0.5 ¥0.4 ¥0.3 ¥0.5 ¥0.2 ¥0.4 ¥0.5 ¥0.2 ¥$8.4 2.2 ¥1.9 ¥5.3 188.8 2.3 ¥6.5 ¥2.4 ¥2.6 ¥18.6 ¥13.3 ¥1.3 ¥1.2 ¥28.1 ¥13.2 ¥4.5 ¥3.8 ¥7.9 ¥7.0 ¥2.5 155.6 ¥22.9 ¥10.0 ¥5.3 ¥11.2 ¥0.8 ¥2.6 4.6 10.5 2.7 ¥0.7 ¥47.4 ¥15.8 ¥0.9 ¥16.9 ¥5.7 ¥4.7 ¥23.3 ¥0.1 1.9 ¥5.0 ¥1.1 ¥5.6 ¥30.3 ¥2.2 ¥0.7 ¥12.0 ¥3.0 ¥3.1 ¥8.6 ¥0.3 delineations, and 50 percent of their wage index based on their current labor market area. Rather, it shows the impact of the new OMB delineations fully implemented for FY 2015. Approximately 609 hospitals have their wage index impacted due to the new OMB delineations. Urban New England and rural Middle Atlantic hospitals will experience the largest decreases in payments due to the new OMB delineations being fully implemented E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50424 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations for FY 2015, with payment decreases of 0.5 and 0.2 percent, respectively. Urban nonDSH hospitals, nonteaching and non-DSH hospitals, and Lugar hospitals will experience the largest increases in payments due to the new OMB delineations being fully implemented for FY 2015, each with payment increases of 0.2 percent. h. Application of the CBSA Transition Wage Index With Budget Neutrality (Column 9) As discussed earlier in this final rule, for FY 2015, we are using the most recent labor market area delineations issued by OMB but we established a transition period in certain circumstances. Specifically, we established a 3-year transition for hospitals that are currently located in an urban county that becomes rural under the new OMB labor market area delineations under which such hospitals will be assigned the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (that is, for FYs 2015, 2016, and 2017). We also are establishing a 1-year blended wage index for all hospitals that experience any decrease in their actual payment wage index (that is, a hospital’s actual wage index used for payment, which accounts for all applicable effects of reclassification and redesignation) exclusively due to the implementation of the new OMB labor market area delineations. We are providing that a post-reclassified wage index with the rural and imputed floor applied be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floor applied be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We compared these two wage indexes. If the FY 2015 wage index with FY 2015 CBSAs was lower than the FY 2015 wage index with FY 2014 CBSAs, we computed a blended wage index, consisting of 50 percent of each of the two wage indexes added together. This blended wage index is the hospital’s wage index for FY 2015. This adjustment only applies to hospitals that will experience a decrease in their actual payment wage index exclusively due to the implementation of the new OMB labor market area delineations. Hospitals that benefit from the new OMB labor market area delineations receive their new wage index based on the new OMB labor market area delineations. We refer readers to section III.B. of the preamble to this final rule for a complete discussion on the transition wage indexes. Lastly, we are applying both the 3-year transition and 50/50 blended wage index adjustments in a budget neutral manner. We are making an adjustment to the standardized amount to ensure that the total payments, including the effect of the transition provisions, equal what payments would have been if we had not provided for these transitional wage indexes. Column 9 shows the effects of the adoption of the new OMB labor market area delineations, including the 3-year hold harmless provision for hospitals that are currently located in an urban county that becomes rural under the new OMB delineations and the 1-year transition to the new OMB delineations where the wage VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 indexes are blended such that hospitals receive 50 percent of their wage index based on the new OMB delineations and 50 percent of their wage index based on their current labor market area. For FY 2015, we are applying both the 3-year transition and 50/ 50 blended wage index adjustments in a budget neutral manner, with a budget neutrality factor of 0.998859 (or ¥0.1 percent) applied to the standardized amount to ensure that the total payments, including the effect of the transition provisions, equal what payments would have been if we had not provided for these transitional wage indexes. This column shows the payment impact of the transitional wage index. For columns 1 through 8, the payment impacts and budget neutrality factors have been calculated under the new OMB delineations. Under the 1-year transition to the new OMB delineations, hospitals that would have experienced a decrease in payments due to the new OMB delineations being fully implemented this year now have those decreases alleviated due to the transition. Urban New England hospitals and Middle Atlantic hospitals will experience a 0.2 percent and 0.3 percent increase respectively in payments due to the application of the transitional wage index with budget neutrality, while urban South Atlantic, East North Central, East South Central, West North Central, West South Central, Mountain and Pacific hospitals will experience a ¥0.1 percent change in payments due to the transitional budget neutrality adjustment of ¥0.1 percent applied to the standard Federal rate. i. Effects of the Application of the Frontier State Wage Index and Out-Migration Adjustment (Column 10) This column shows the combined effects of the application of section 10324(a) of the Affordable Care Act, which requires that we establish a minimum post-reclassified wageindex of 1.00 for all hospitals located in ‘‘frontier States,’’ and the effects of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. These two wage index provisions are not budget neutral and increase payments overall by 0.1 percent compared to the provisions not being in effect. The term ‘‘frontier States’’ is defined in the statute as States in which at least 50 percent of counties have a population density less than 6 persons per square mile. Based on these criteria, four States (Montana, North Dakota, South Dakota, and Wyoming) are considered frontier States and 46 hospitals located in those States will receive a frontier wage index of 1.0000. Nevada is also, by definition, a frontier State and was assigned a frontier floor value of 1.0000 for FY 2012, but since then and including in this final rule, its rural floor value has been greater than 1.0000 so it has not been subject to the frontier wage index. Overall, this provision is not budget neutral and is estimated to increase IPPS operating payments by approximately $67 million or approximately PO 00000 Frm 00572 Fmt 4701 Sfmt 4700 0.1 percent. Rural hospitals located in the Mountain region and urban hospitals located in the West North Central region will experience an increase in payments by 0.6 and 0.8 percent, respectively, because many of the hospitals located in this region are frontier State hospitals. In addition, section 1886(d)(13) of the Act, as added by section 505 of Public Law 108– 173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. Hospitals located in counties that qualify for the payment adjustment are to receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, postreclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index. There are an estimated 273 providers that will receive the out-migration wage adjustment in FY 2015. Rural hospitals generally qualify for the adjustment, resulting in a 0.1 percent increase in payments. This provision appears to benefit Section 401 hospitals and RRCs in that they will experience a 2.0 percent and 0.6 percent increase in payments, respectively. This out-migration wage adjustment also is not budget neutral, and we estimate the impact of these providers receiving the out-migration increase to be approximately $53 million. j. Effects of the Reductions Under the Hospital Readmissions Reduction Program (Column 11) Column 11 shows our estimates of the effects of the policies for reductions in payments under the Hospital Readmissions Reduction Program, which was established under section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital’s base operating DRG payments to account for excess readmissions, which for FY 2015, is based on a hospital’s risk-adjusted readmission rate during a 3-year period for five applicable conditions: acute myocardial infarction, heart failure, pneumonia, total hip and total knee arthroplasty and chronic obstructive pulmonary disease. This provision is not budget neutral. A hospital’s readmission adjustment is the higher of a ratio of the hospital’s aggregate payments for excess readmissions to their aggregate payments for all discharges, or a floor, which has been defined in the statute as 0.97 (or a 3.0 percent reduction) for FY 2015. A hospital’s base operating DRG payment (that is, wage-adjusted DRG payment amount, as discussed in section IV.G. of the preamble of this final rule) is the portion of the IPPS payment subject to the readmissions payment adjustment (DSH, IME, outliers and lowvolume add-on payments are not subject to the readmissions adjustment). For FY 2015, we have revised the definition of base operating DRG payment for MDHs to include the hospital-specific add-on amount, as discussed earlier in this final rule such that the this hospital-specific add-on amount is also subject to the readmissions payment E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations adjustment. In this final rule, we estimate that 2,638 hospitals will have their base operating DRG payments reduced by their hospital-specific readmissions adjustment, an increase from FY 2014, due to the addition of new readmissions measures in the program. As a result, we estimate that the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease in payments relative to FY 2014. We estimate that the Hospital Readmissions Reduction Program will result in a 0.4 percent decrease in payments relative to no provision (or a decrease of $424 million). Teaching non-DSH hospitals experience a decrease in payments of 0.3 percent relative to last year, while teaching DSH hospitals experience a 0–1 percent decrease in payments relative to last year. Puerto Rico hospitals will show a 0.0 percent change in payments because they are exempt from the provision. k. Effects of the Changes to Medicare DSH Payments (Column 12) Column 12 shows the effects of the adjustments to Medicare DSH payments made under section 3133 of the Affordable Care Act. Under section 3133, hospitals that are eligible to receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the former statutory formula for Medicare DSH payments. The remainder, equal to an estimate of 75 percent of what otherwise formerly would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments, is available to make additional payments to each hospital that qualifies for Medicare DSH payments. Each Medicare DSH hospital will receive an additional payment based on its estimated share of the total amount of uncompensated care for all Medicare DSH hospitals. The reduction to Medicare DSH payments is not budget neutral. For FY 2015, we are establishing that the amount to be distributed on the basis of uncompensated care, which is 75 percent of our estimate of what otherwise would have been paid in Medicare DSH payments (that is, Factor 1), be adjusted to 76.19 percent of that amount to reflect changes in the percentage of individuals under age 65 who are uninsured and additional statutory adjustments (that is, Factor 1 multiplied by Factor 2). In the FY 2015 IPPS/LTCH PPS proposed rule the uncompensated care payment was 75 percent of what otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 80.36 percent and for FY 2014, the uncompensated care payment was 75 percent of what otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 94.3 percent. Assuming DSH payments are constant, the FY 2015 uncompensated care amount is approximately 14 percentage points less than the uncompensated care amount that we distributed for FY 2014. As a result, we project that, compared to the empirically justified DSH payments and the VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 uncompensated care payments made last year, payments for FY 2015 will be reduced overall by 1.3 percent as compared to Medicare DSH payments made last year under the first year of the implementation of section 3133 of the Affordable Care Act. The uncompensated care payment methodology has redistributive effects based on a Medicare DSH hospital’s low income insured patient days (sum of Medicaid patient days and Medicare SSI patient days) relative to the Medicaid patient days and Medicare SSI patient days for Medicare DSH hospitals, and the final payment amount is not tied to a hospital’s discharges. Rural West South Central and Rural Pacific will experience a 0.3 percent change in DSH and uncompensated care payments. Hospitals with low Medicare utilization (Medicare days are less than 25 percent of total inpatient days) will experience the largest decreases in payments of 3.0 percent. l. Effects of All FY 2015 Changes (Column 13) Column 13 shows our estimate of the changes in payments per discharge from FY 2014 and FY 2015, resulting from all changes reflected in this final rule for FY 2015. It includes combined effects of the previous columns in the table. The average decrease in payments under the IPPS for all hospitals is approximately 0.6 percent for FY 2015 relative to FY 2014. As discussed in section II.D. of the preamble of this final rule, this column includes the FY 2015 documentation and coding recoupment adjustment of -0.8 percent on the national standardized amount as part of the recoupment required under section 631 of the ATRA. In addition, this column includes the annual hospital update of 2.2 percent to the national standardized amount. This annual hospital update includes the 2.9 percent market basket update, the reduction of 0.5 percentage point for the multifactor productivity adjustment, and the 0.2 percentage point reduction under section 3401 of the Affordable Care Act. Hospitals paid under the hospital-specific rate will receive a 2.2 percent hospital update described above. As described in Column 2, the annual hospital update with the documentation and coding recoupment adjustment for hospitals paid under the national standardized amount combined with the annual hospital update for hospitals paid under the hospital-specific rate will result in a 1.5 percent increase in payments in FY 2015 relative to FY 2014. Column 11 shows the estimated 0.2 percent decrease in payments due to the reductions in payments under the Hospital Readmissions Reduction Program relative to FY 2014. Column 12 shows the estimated 1.3 percent decrease in Medicare DSH payments due to the changes made under section 3133 of the Affordable Care Act, which reduces Medicare DSH payments by 75 percent and redistributes the remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured and an additional statutory adjustment, to each PO 00000 Frm 00573 Fmt 4701 Sfmt 4700 50425 hospital that qualifies for Medicare DSH payments as an uncompensated care payment based on the hospital’s relative share of the total amount of uncompensated care. The impact of moving from our estimate of FY 2014 outlier payments, 5.71 percent, to the estimate of FY 2015 outlier payments, 5.1 percent, will result in a decrease of 0.6 percent in FY 2015 payments relative to FY 2014. Lastly, this column reflects the extension of MDH payment status for the first half of FY 2015, under Public Law 113–93, enacted on April 1, 2014. There also might be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in Column 13 may not equal the sum of the estimated percentage changes described above. (We note that in the FY 2015 IPPS/LTCH PPS proposed rule we provided the effects of section 1886(o) of the Act, as added by section 3008 of the Affordable Care Act, which establishes payment reductions under the HAC Reduction Program. Hospitals ranked in the lowest 25 percent of performance on HACs are subject to a 1-percent reduction in total IPPS payments. We are finalizing policies related to the HAC Reduction Program in this final rule, but as described earlier in this final rule, because the HAC scores are currently undergoing 30-day review and correction by the hospitals, we are not providing hospital-level data or a hospitallevel payment impact in conjunction with the FY 2015 IPPS Final Rule. We do provide an estimate of the overall payment impact in section I.H.8. of this Appendix A along with a discussion of the impact of these changes.) Overall payments to hospitals paid under the IPPS are estimated to decrease by 0.6 percent for FY 2015. Much of the payment changes among the hospital categories is attributed to the reduction in Medicare DSH payments and the redistribution of a portion of the Medicare DSH payments as an additional payment for hospitals’ relative uncompensated care amounts. Hospitals in urban areas will experience a 0.6 percent decrease in payments per discharge in FY 2015 compared to FY 2014. Hospital payments per discharge in rural areas are estimated to decrease by 0.7 percent in FY 2015. 3. Impact Analysis of Table II Table II presents the projected impact of the changes for FY 2015 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2014 with the estimated average payments per discharge for FY 2015, as calculated under our models. Therefore, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the changes presented in Table I. The estimated percentage changes shown in the last column of Table II equal the estimated percentage changes in average payments per discharge from Column 13 of Table I. E:\FR\FM\22AUR2.SGM 22AUR2 50426 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2015 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM [Payments per discharge] Estimated average FY 2014 payment per discharge Estimated average FY 2015 payment per discharge All FY 2015 changes (1) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Number of hospitals (2) (3) (4) All Hospitals ................................................................................... By Geographic Location: Urban hospitals ....................................................................... Large urban areas .................................................................. Other urban areas .................................................................. Rural hospitals ........................................................................ Bed Size (Urban): 0–99 beds ............................................................................... 100–199 beds ......................................................................... 200–299 beds ......................................................................... 300–499 beds ......................................................................... 500 or more beds ................................................................... Bed Size (Rural): 0–49 beds ............................................................................... 50–99 beds ............................................................................. 100–149 beds ......................................................................... 150–199 beds ......................................................................... 200 or more beds ................................................................... Urban by Region: New England .......................................................................... Middle Atlantic ........................................................................ South Atlantic ......................................................................... East North Central .................................................................. East South Central ................................................................. West North Central ................................................................. West South Central ................................................................ Mountain ................................................................................. Pacific ..................................................................................... Puerto Rico ............................................................................. Rural by Region: New England .......................................................................... Middle Atlantic ........................................................................ South Atlantic ......................................................................... East North Central .................................................................. East South Central ................................................................. West North Central ................................................................. West South Central ................................................................ Mountain ................................................................................. Pacific ..................................................................................... By Payment Classification: Urban hospitals ....................................................................... Large urban areas .................................................................. Other urban areas .................................................................. Rural areas ............................................................................. Teaching Status: Nonteaching ............................................................................ Fewer than 100 residents ....................................................... 100 or more residents ............................................................ Urban DSH: Non-DSH ................................................................................ 100 or more beds ................................................................... Less than 100 beds ................................................................ Rural DSH: SCH ........................................................................................ RRC ........................................................................................ 100 or more beds ................................................................... Less than 100 beds ................................................................ Urban teaching and DSH: Both teaching and DSH .......................................................... Teaching and no DSH ............................................................ No teaching and DSH ............................................................ No teaching and no DSH ....................................................... Special Hospital Types: RRC ........................................................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00574 Fmt 4701 3,396 11,197 11,129 ¥0.6 2,549 1,401 1,148 847 11,566 12,296 10,677 8,238 11,496 12,226 10,608 8,184 ¥0.6 ¥0.6 ¥0.6 ¥0.7 666 787 455 429 212 9,085 9,730 10,470 11,892 14,185 9,054 9,661 10,448 11,814 14,075 ¥0.3 ¥0.7 ¥0.2 ¥0.7 ¥0.8 328 305 125 50 39 6,778 7,803 8,112 8,856 9,979 6,695 7,686 8,099 8,808 10,008 ¥1.2 ¥1.5 ¥0.2 ¥0.5 0.3 120 324 407 397 153 162 387 162 385 52 12,688 12,762 10,423 10,795 10,044 11,316 10,674 11,895 14,626 8,149 12,684 12,752 10,327 10,733 9,911 11,275 10,492 11,793 14,638 7,543 0 ¥0.1 ¥0.9 ¥0.6 ¥1.3 ¥0.4 ¥1.7 ¥0.9 0.1 ¥7.4 22 57 132 116 165 102 168 61 24 11,180 8,289 7,834 8,474 7,513 8,914 7,108 9,454 11,083 11,080 8,216 7,764 8,484 7,404 8,925 6,974 9,503 11,207 ¥0.9 ¥0.9 ¥0.9 0.1 ¥1.4 0.1 ¥1.9 0.5 1.1 2,563 1,413 1,150 833 11,551 12,286 10,645 8,454 11,480 12,214 10,576 8,401 ¥0.6 ¥0.6 ¥0.6 ¥0.6 2,357 795 244 9,343 10,941 16,321 9,296 10,879 16,187 ¥0.5 ¥0.6 ¥0.8 679 1,588 383 9,801 11,990 8,431 9,863 11,893 8,366 0.6 ¥0.8 ¥0.8 373 212 24 137 7,907 9,190 7,390 6,328 7,858 9,162 7,297 6,247 ¥0.6 ¥0.3 ¥1.3 ¥1.3 842 133 1,129 459 13,175 11,027 9,781 9,223 13,063 11,125 9,709 9,288 ¥0.9 0.9 ¥0.7 0.7 193 9,372 9,316 ¥0.6 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50427 TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2015 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM—Continued [Payments per discharge] Number of hospitals Estimated average FY 2014 payment per discharge Estimated average FY 2015 payment per discharge All FY 2015 changes (1) (2) (3) (4) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV SCH ........................................................................................ MDH ........................................................................................ SCH and RRC ........................................................................ MDH and RRC ....................................................................... Type of Ownership: Voluntary ................................................................................. Proprietary .............................................................................. Government ............................................................................ Medicare Utilization as a Percent of Inpatient Days: 0–25 ........................................................................................ 25–50 ...................................................................................... 50–65 ...................................................................................... Over 65 ................................................................................... FY 2015 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals ....................................................... Non-Reclassified Hospitals ..................................................... Urban Hospitals Reclassified ................................................. Urban Nonreclassified Hospitals, FY 2015 ............................ All Rural Hospitals Reclassified FY 2015 ............................... Rural Nonreclassified Hospitals FY 2015 ............................... All Section 401 Reclassified Hospitals ................................... Other Reclassified Hospitals (Section 1886(d)(8)(B)) ............ Specialty Hospitals: Cardiac Specialty Hospitals .................................................... H. Effects of Other Policy Changes In addition to those policy changes discussed above that we are able to model using our IPPS payment simulation model, we are making various other changes in this final rule. Generally, we have limited or no specific data available with which to estimate the impacts of these changes. Our estimates of the likely impacts associated with these other changes are discussed below. 1. Effects of Policy on MS–DRGs for Preventable HACs, Including Infections In section II.F. of the preamble of this final rule, we discuss our implementation of section 1886(d)(4)(D) of the Act, which requires the Secretary to identify conditions that are: (1) high cost, high volume, or both; (2) result in the assignment of a case to an MS–DRG that has a higher payment when present as a secondary diagnosis; and (3) could reasonably have been prevented through application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission, unless, based on data and clinical judgment, it cannot be determined at the time of admission whether a condition is present. That is, the case will be paid as though the secondary diagnosis were not present. However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 325 162 124 15 9,570 7,073 10,289 9,195 9,636 6,700 10,394 8,450 0.7 ¥5.3 1 ¥8.1 1,935 892 542 11,319 9,986 12,214 11,274 9,900 12,038 ¥0.4 ¥0.9 ¥1.4 501 2,081 601 93 14,705 11,311 9,137 8,406 14,357 11,261 9,131 8,349 ¥2.4 ¥0.4 ¥0.1 ¥0.7 719 2,677 450 2,054 269 514 50 64 10,791 11,327 11,446 11,618 8,732 7,665 10,130 7,812 10,771 11,243 11,429 11,535 8,702 7,597 10,012 7,658 ¥0.2 ¥0.7 ¥0.1 ¥0.7 ¥0.4 ¥0.9 ¥1.2 ¥2 15 12,303 12,567 2.1 the budget neutrality calculations for MS– DRG reclassifications and recalibration. Therefore, we will perform our budget neutrality calculations as though the payment provision did not apply, but Medicare will make a lower payment to the hospital for the specific case that includes the secondary diagnosis. Thus, the provision results in cost savings to the Medicare program. We note that the provision will only apply when one or more of the selected conditions are the only secondary diagnosis or diagnoses present on the claim that will lead to higher payment. Medicare beneficiaries will generally have multiple secondary diagnoses during a hospital stay, such that beneficiaries having one MCC or CC will frequently have additional conditions that also will generate higher payment. Only a small percentage of the cases will have only one secondary diagnosis that would lead to a higher payment. Therefore, if at least one nonselected secondary diagnosis that leads to higher payment is on the claim, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. In addition, as discussed in section II.F.3. of the preamble of this final rule, it is possible to have two severity levels where the HAC does not affect the MS–DRG assignment or for an MS–DRG not to have severity levels. In either of these circumstances, the case will continue to be assigned to the higher paying MS–DRG and PO 00000 Frm 00575 Fmt 4701 Sfmt 4700 there will be no Medicare savings from that case. The HAC payment provision went into effect on October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: Year FY FY FY FY FY 2015 2016 2017 2018 2019 ................................ ................................ ................................ ................................ ................................ Savings (in millions) $27 29 31 34 36 In section IV.J. of the preamble of this final rule, we are making changes to the HAC Reduction Program for FY 2015. We refer readers to section I.H.6. of this Appendix A for a discussion of the impact of these changes. 2. Effects of Policy Relating to New Medical Service and Technology Add-On Payments In section II.I. of the preamble to this final rule, we discuss five applications (Dalbavancin, Heli-FXTM EndoAnchor System, CardioMEMSTM HF (Heart Failure) Monitoring System, MitraClip® System, and Responsive Neurostimulator (RNS®) System) for add-on payments for new medical services and technologies for FY 2015, as well as the status of the new technologies that were approved to receive new technology add-on payments in FY 2014. We E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50428 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations note that one of the applications (for the Watchman® System) discussed in the proposed rule withdrew its application prior to the publication of this final rule. As explained in the preamble to this final rule, add-on payments for new medical services and technologies under section 1886(d)(5)(K) of the Act are not required to be budget neutral. As discussed in section II.I.4. of the preamble of this final rule, we are approving three of the five applications (CardioMEMSTM HF Monitoring System, MitraClip® System, and RNS® System) for new technology add-on payments for FY 2015. As we proposed, in this final rule, we also are continuing to make new technology add-on payments in FY 2015 for KcentraTM, Argus® II Retinal Prosthesis System, the Zilver® PTX® Drug Eluting Peripheral Stent, Voraxaze®, and the Zenith® F. Graft (because all of these technologies are still within the 3-year anniversary of the product’s entry onto the market). We note that new technology add-on payments per case are limited to the lesser of: (1) 50 percent of the costs of the new technology; or (2) 50 percent of the amount by which the costs of the case exceed the standard MS–DRG payment for the case. Because it is difficult to predict the actual new technology add-on payment for each case, our estimates below are based on the increase in add-on payments for FY 2015 as if every claim that would qualify for a new technology add-on payment would receive the maximum add-on payment. Based on the applicant’s estimate from FY 2013, we currently estimate that new technology addon payments for Voraxaze® will increase overall FY 2015 payments by $6,300,000. Based on the applicant’s estimate from FY 2013, we currently estimate that new technology add-on payments for the Zenith® F. Graft will increase overall FY 2015 payments by $4,085,750. Based on the applicant’s estimate for FY 2014, we currently estimate that new technology addon payments for KcentraTM will increase overall FY 2015 payments by $5,449,888. Based on the applicant’s estimate for FY 2014, we currently estimate that new technology add-on payments for the Argus® II Retinal Prosthesis System will increase overall FY 2015 payments by $3,601,437. Based on the applicant’s estimate for FY 2014, we currently estimate that new technology add-on payments for the Zilver® PTX® Drug Eluting Peripheral Stent will increase overall FY 2015 payments by $20,463,000. Based on the applicant’s estimate for FY 2015, we currently estimate that new technology add-on payments for the CardioMEMSTM HF Monitoring System will increase overall FY 2015 payments by $11,315,625 (maximum add-on payment of $8,875 * 1,275 patients). Based on the applicant’s estimate for FY 2015, we currently estimate that new technology addon payments for the MitraClip® System will increase overall FY 2015 payments by $27,000,000 (maximum add-on payment of $15,000 * 1,800 patients). Based on the applicant’s estimate for FY 2015, we currently estimate that new technology addon payments for the RNS® System will increase overall FY 2015 payments by $12,932,500 (maximum add-on payment of $18,475 * 700 patients). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 3. Effects of Changes to List of MS–DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy In section IV.A. of the preamble of this final rule, we discuss changes to the list of MS–DRGs subject to the postacute care transfer and DRG special payment policies. As reflected in Table 5 listed in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site, using criteria set forth in regulation at § 412.4, we evaluated MS–DRG charge, discharge, and transfer data to determine which MS–DRGs qualify for the postacute care transfer and DRG special pay policies. We note that we are making no change to these payment policies in this FY 2015 final rule. We are changing the status of certain MS–DRGs as a result of revisions to the MS– DRGs for FY 2015. We are changing the status of five MS–DRGs to qualify for the postacute care transfer policy in FY 2015. One additional MS–DRG that qualified under the policy in FY 2014 does not qualify in FY 2015, and we are changing the status accordingly. Finally, five MS–DRGs now qualify for the MS–DRG special pay policy in FY 2015 after not qualifying in FY 2014, and we are adding them to the list of qualifying MS–DRGs. Column 4 of Table I in this Appendix A shows the effects of the changes to the MS–DRGs and relative payment weights with the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. The analysis and methods determining the changes due to the MS– DRGs and relative payment weights accounts for and includes changes in MS–DRG postacute care transfer and special pay policy statuses. We refer readers to section I.G. of this Appendix for a more detailed discussion of payment impacts due to MS–DRG reclassification policies. 4. Effects of the Payment Adjustment for Low-Volume Hospitals for FY 2015 In section V.D. of the preamble of this final rule, we discuss the provisions of the Protecting Access to Medicare Act of 2014 (Pub. L.113–93) that extend for an additional year, through March 31, 2015, the temporary changes to the low-volume hospital definition and the methodology for determining the payment adjustment made by the Affordable Care Act for FYs 2011 and 2012, and extended through FY 2013 by the ATRA, and the first half of FY 2014 by the Pathway for SGR Reform Act (Pub. L. 113– 67). Therefore, to qualify for the low-volume hospital payment adjustment for FY 2015 discharges occurring before April 1, 2015, under section 1886(d)(12) of the Act, a hospital must have less than 1,600 Medicare discharges and be located more than 15 miles from other IPPS hospitals The payment adjustment for eligible low-volume hospital FY 2015 discharges occurring before April 1, 2015, is a continuous, linear sliding scale adjustment ranging from an additional 25 percent payment adjustment to qualifying PO 00000 Frm 00576 Fmt 4701 Sfmt 4700 hospitals with 200 or fewer Medicare discharges to no additional payment to hospitals with 1,600 or more Medicare discharges. Beginning with FY 2015 discharges occurring on or after April 1, 2015, in accordance with section 1886(d)(12) of the Act, the low-volume hospital definition and payment adjustment methodology revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act as amended by subsequent legislation. Therefore, effective for FY 2015 discharges occurring on or after April 1, 2015 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. Based on the latest available data, we estimate that approximately 593 hospitals will qualify as a low-volume hospital in FY 2014 and in FY 2015 for discharges occurring before April 1, 2015. With the statutory changes to the low-volume hospital payment adjustment, we estimate only approximately five hospitals will continue to qualify as a low-volume hospital for FY 2015 discharges occurring on or after April 1, 2015. We project that the expiration of the temporary changes to the low-volume hospital definition and the payment adjustment methodology originally made by the Affordable Care Act and extended by subsequent legislation will result in a decrease in payments of approximately $152 million in FY 2015 as compared to the lowvolume hospital payments in FY 2014. This estimate accounts for our projection of the five IPPS low-volume hospitals in FY 2014 that are expected to continue to receive a low-volume hospital payment adjustment of an additional 25 percent for FY 2015 discharges occurring on or after April 1, 2015. 5. Effects of Policies Related to IME Medicare Part C Add-On Payments to SCHs Paid According to Their Hospital-Specific Rates In section IV.E.2. of the preamble of this final rule, we discuss our finalized policy related to IME add-on payments for Medicare Part C patients to SCHs that are paid according to their hospital-specific rates. Payments based on the Federal rate are based on the IPPS standardized amount and include all applicable IPPS add-on payments, such as outliers, DSH, and IME, while payments based on the hospital-specific rate include no add-on payments. The hospitalspecific rate generally reflects the additional costs incurred by a teaching hospital for its Medicare Part A patients. However, the hospital-specific rate does not reflect the costs associated with Medicare Part C patients and there is currently no payment mechanism for SCHs paid based on their hospital-specific rate to receive the IME addon payment for Medicare Part C patients. Accordingly, we are providing all SCHs that are subsection (d) teaching hospitals, IME add-on payments for applicable discharges of Medicare Part C patients in accordance with section 1886(d)(11) of the Act, regardless of E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations whether the SCH is paid based on the Federal rate or its hospital-specific rate. In addition, we also are establishing that for purposes of the comparison of payments based on the Federal rate and payments based on the hospital-specific rate, IME payments under section 1886(d)(11) of the Act for Medicare Part C patients will no longer be included as part of the Federal rate payment. Because the IPPS Federal rate used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology, this change to the comparison of payments based on the Federal rate and payments based on the hospital-specific rate also applies to the Federal rate payment amount used to determine payment to MDHs that are teaching hospitals (that is, in the determination of the payment amount in addition to the Federal rate payment that is equal to 75 percent of the amount by which the hospital-specific rate payment exceeds the Federal rate payment), as discussed in section IV.E.2. of the preamble of this final rule. We estimate that the policy at section IV.E.2. of the preamble of this final rule will result in an increase in payments to approximately 45 hospitals that are both SCHs or MDHs and teaching hospitals of approximately $5.3 million in FY 2015. 6. Effects of the Extension of the MDH Program for the First Half of FY 2015 In section V.G. of the preamble of this final rule, we briefly discuss the statutory extension of the MDH program through March 31, 2015, that is, through the first half of FY 2015, by section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113– 93). Hospitals that qualify as MDHs receive the higher of operating IPPS payments made under the Federal standardized amount or the payments made under the Federal standardized amount plus 75 percent of the amount by which the hospital-specific rate (a hospital-specific cost-based rate) exceeds the Federal standardized amount. Based on the latest available data we have for 177 MDHs, we project that 166 MDHs will receive the blended payment (that is, the Federal standardized amount plus 75 percent of the amount by which the hospital-specific rate exceeds the Federal standardized amount) for the first half of FY 2015 (that is, for discharges occurring through March 31, 2015). We estimate that those hospitals will experience an overall increase in payments of approximately $70.7 million as compared to our previous estimates of payments to these hospitals for FY 2015 prior to the extension of the MDH program through March 31, 2015, by section 106 of Public Law 113–93. 7. Effects of Changes Under the FY 2015 Hospital Value-Based Purchasing (VBP) Program Section 1886(o)(1)(B) of the Act directs the Secretary to make value-based incentive payments under the Hospital VBP Program to hospitals that meet performance standards during the performance period for discharges occurring on or after October 1, 2012. These incentive payments will be funded for FY 2015 through a reduction to the FY 2015 base operating DRG payment for each discharge of 1.50 percent, as required by section 1886(o)(7)(B) of the Act. The applicable percentage for FY 2016 is 1.75 percent and for FY 2017 and subsequent years, it is 2 percent. We are required to ensure that the total amount available for value-based incentive payments is equal to the total amount of reduced payments for all hospitals for the fiscal year, as estimated by the Secretary. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 53614), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50677 through 50707), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75120 through 75121) for further explanation of the details of the Hospital VBP Program. We specifically refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53582 through 53592) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50678 through 50679), for discussions of the measures and other policies that we adopted for the FY 2015 and FY 2016 Hospital VBP Programs. In section IV.I. of the preamble of this final rule, we estimate the available pool of funds for value-based incentive payments in the FY 2015 Hospital VBP Program, which, in accordance with section 1886(o)(7)(C)(iii) of the Act, will be 1.50 percent of base 50429 operating DRG payments, or a total of approximately $1.4 billion. This estimated available pool for FY 2015 is based on the historical pool of hospitals that were eligible to participate in the FY 2014 Hospital VBP Program and the payment information from the March 2014 update to the FY 2013 MedPAR file. The estimated impacts of the FY 2015 Hospital VBP Program by hospital characteristic, found in the table below, are based on historical TPSs. We used the FY 2014 Hospital VBP Program TPSs to calculate the proxy adjustment factors used for this impact analysis. These are the most recently available scores that hospitals were given an opportunity to review and correct. The proxy adjustment factors use estimated annual base operating DRG payment amounts derived from the March 2014 update to the FY 2013 MedPAR file. The proxy adjustment factors can be found in Table 16 associated with this final rule (available via the Internet on the CMS Web site). The impact analysis shows that, for the FY 2015 Hospital VBP Program, the number of hospitals that will receive an increase in base operating DRG payment amount is slightly lower than the number of hospitals that will receive a decrease. Among urban hospitals, those in the New England, South Atlantic, East North Central, West North Central, and West South Central regions will have an increase, on average, in base operating DRG payment amount, and among rural hospitals, those in the New England and East North Central regions will have an increase, on average, in base operating DRG payment amounts. Both urban and rural hospitals in the Middle Atlantic, East South Central, Mountain, and Pacific regions and rural hospitals in the South Atlantic, West North Central, and West South Central regions will receive an average decrease in base operating DRG payment amount. As the percent of DSH payments increases, we see a decrease in base operating DRG payment amount, while as the Medicare utilization (MCR) percent increases, we see an increase in base operating DRG payment amount. Nonteaching and teaching hospitals will have an average decrease in base operating DRG payment amount. IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT CHANGES RESULTING FROM THE FY 2015 HOSPITAL VBP PROGRAM tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Number of hospitals By Geographic Location: All Hospitals ...................................................................................................................................................... Large Urban .............................................................................................................................................. Other Urban ............................................................................................................................................... Rural Area ................................................................................................................................................. Urban hospitals ................................................................................................................................................. 0–99 beds .................................................................................................................................................. 100–199 beds ............................................................................................................................................ 200–299 beds ............................................................................................................................................ 300–499 beds ............................................................................................................................................ 500 or more beds ...................................................................................................................................... Rural hospitals .................................................................................................................................................. 0–49 beds .................................................................................................................................................. 50–99 beds ................................................................................................................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00577 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 2,728 1,113 910 705 2,023 307 677 431 401 207 705 161 296 Average (percent) ¥0.038 ¥0.021 ¥0.030 ¥0.074 ¥0.025 0.025 ¥0.043 ¥0.032 ¥0.033 ¥0.010 ¥0.074 ¥0.042 ¥0.088 50430 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT CHANGES RESULTING FROM THE FY 2015 HOSPITAL VBP PROGRAM—Continued Number of hospitals By By By By 100–149 beds ............................................................................................................................................ 150–199 beds ............................................................................................................................................ 200 or more beds ...................................................................................................................................... Region: Urban By Region .............................................................................................................................................. New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ Rural By Region ............................................................................................................................................... New England ............................................................................................................................................. Middle Atlantic ........................................................................................................................................... South Atlantic ............................................................................................................................................ East North Central ..................................................................................................................................... East South Central .................................................................................................................................... West North Central .................................................................................................................................... West South Central ................................................................................................................................... Mountain .................................................................................................................................................... Pacific ........................................................................................................................................................ MCR Percent: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. DSH Percent: 0–25 .................................................................................................................................................................. 25–50 ................................................................................................................................................................ 50–65 ................................................................................................................................................................ Over 65 ............................................................................................................................................................. Teaching Status: Teaching ........................................................................................................................................................... Non-Teaching ................................................................................................................................................... Actual FY 2015 Hospital VBP Program TPSs will not be reviewed and corrected by hospitals until after this FY 2015 IPPS/LTCH PPS final rule has been published. Therefore, the same historical universe of eligible hospitals and corresponding TPSs from the FY 2014 Hospital VBP Program are used for this updated impact analysis. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 8. Effects of Changes to the HAC Reduction Program for FY 2015 In section IV.J. of the preamble of this final rule, we are establishing measures, scoring, and a risk adjustment methodology to implement the FY 2015 payment reduction under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges occurring on October 1, 2014 and for subsequent program years. We note that hospitals will have a payment impact for the first time in FY 2015. For FY 2015, we are presenting the overall impact of the HAC Reduction Program provision along with other IPPS payment provision impacts VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 in section I.G. of this Appendix A. The table and analyses that we are presenting below show the distributional effect of the measures and scoring system for the HAC Reduction Program included in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729). For FY 2015, we note that we finalized a Total HAC Score methodology in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729) that assigns weights for Domain 1 and Domain 2 at 35 percent and 65 percent, respectively. Based on this methodology, the table below presents data on the proportion of hospitals, by structural characteristic, in the worst performing quartile based on the 35/65 weighting scheme. The data for this simulation are derived from the AHRQ PSI results based on Medicare FFS discharges from July 2011 through June 2013, using version 4.5a of the AHRQ software, and CDC measure results were used based on Standard Infection Ratios (SIRs) calculated with data reported to the National Healthcare Safety Network for infections occurring between January 2012 and December 2013. To analyze the results by hospital characteristic, the FY 2015 proposed rule impact file were used. Of the 3,352 hospitals included in this analysis, PO 00000 Frm 00578 Fmt 4701 Sfmt 4700 Average (percent) 148 55 45 ¥0.074 ¥0.106 ¥0.067 2,023 112 279 346 350 121 134 248 130 303 705 21 64 136 114 114 82 101 45 28 ¥0.025 0.058 ¥0.076 0.002 0.052 ¥0.043 0.054 0.003 ¥0.086 ¥0.155 ¥0.074 0.044 ¥0.150 ¥0.024 0.036 ¥0.019 ¥0.052 ¥0.178 ¥0.299 ¥0.247 260 1,788 605 46 ¥0.119 ¥0.034 ¥0.016 0.003 1,253 1,220 141 114 0.013 ¥0.064 ¥0.121 ¥0.222 933 1,795 ¥0.041 ¥0.036 3,310 hospitals were included for geographic location, bed size, region, DSH percent, and teaching status; 3,270 for ownership; and 3,196 for MCR percent. These differences in denominator are due to the source of the hospital characteristic data. This analysis does not include Maryland hospitals as Maryland hospitals are exempt by waiver from the HAC Reduction Program in FY 2015. The percentage of hospitals for each characteristic (column 3) indicates the percent of hospitals in each level of characteristic. For example, with regard to geographic region, 40.4 percent of hospitals (or 1,338 hospitals) are characterized as large urban; 33.8 percent of hospitals (or 1,119 hospitals) are characterized as other urban; and 25.8 percent of hospitals (or 853 hospitals) are characterized as rural. The percentage of hospitals in the worst performing quartile (column 5) indicates the proportion of hospitals for each characteristic that would be penalized. For example, in regards to geographic location, 26.6 percent of hospitals (or 356 hospitals) characterized as large urban will be subject to a payment adjustment; 23.0 percent of hospitals (or 257 hospitals) characterized as other urban will be subject to a payment adjustment; and 13.2 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations percent of hospitals (or 113 hospitals) characterized as rural will be subject to a payment adjustment. With regard to geographic location of urban hospitals by bed size, 15.7 percent of hospitals (or 98 hospitals) characterized as urban hospitals with bed size of 0–99 beds will be subject to a payment adjustment; 20.7 percent of hospitals (or 155 hospitals) characterized as urban hospitals with bed size of 100–199 beds will be subject to a payment adjustment; 29.7 percent of hospitals (or 136 hospitals) characterized as urban hospitals with bed size of 200–299 beds will be subject to a payment adjustment; 27.7 percent of hospitals (or 72 hospitals) characterized as urban hospitals with bed size of 300–399 beds will be subject to a payment adjustment; 41.2 percent of hospitals (or 63 hospitals) characterized as urban hospitals with bed size of 400–499 beds will be subject to a payment adjustment; and 42.0 percent of hospitals (or 89 hospitals) characterized as urban hospitals with bed size of 500 or more beds will be subject to a payment adjustment. With regard to geographical location of rural hospitals by bed size, 11.7 percent of hospitals (or 39 hospitals) characterized as rural hospitals with bed size of 0–49 beds will be subject to a payment adjustment; 12.5 percent of hospitals (or 37 hospitals) characterized as rural hospitals with bed size of 50–99 beds will be subject to a payment adjustment; 12.6 percent of hospitals (or 17 hospitals) characterized as rural hospitals with bed size of 100–149 beds will be subject to a payment adjustment; 18.0 percent of hospitals (or 9 hospitals) characterized as rural hospitals with bed size of 150–199 beds will be subject to a payment adjustment; and 29.7 percent of hospitals (or 11 hospitals) characterized as rural hospitals with bed size of 200 or more beds will be subject to a payment adjustment. With regard to region of urban hospitals, 30.3 percent of hospitals (or 36 hospitals) characterized as urban in the New England region will be subject to a payment adjustment; 30.2 percent of hospitals (or 96 hospitals) characterized as urban in the MidAtlantic region will be subject to a payment adjustment; 24.3 percent of hospitals (or 98 hospitals) characterized as urban in the South Atlantic region will be subject to a payment adjustment; 22.5 percent of hospitals (or 88 hospitals) characterized as urban in the East North Central region will be subject to a payment adjustment; 22.1 percent of hospitals (or 33 hospitals) characterized as urban in the West South Central region will be subject to a payment adjustment; 26.1 percent of hospitals (or 42 hospitals) characterized as urban in the East North Central region will be subject to a payment adjustment; 15.9 percent of hospitals (or 60 hospitals) characterized as urban in the West South Central region will be subject to a payment adjustment; 33.3 percent of hospitals (or 54 hospitals) characterized as urban in the Mountain region will be subject to a payment adjustment; and 28.2 percent of hospitals (or 106 hospitals) characterized as urban in the Pacific region will be subject to a payment adjustment. With regard to region of rural hospitals, 18.2 percent of hospitals (or 4 hospitals) characterized as rural in the New England region will be subject to a payment adjustment; 12.5 percent of hospitals (or 7 hospitals) characterized as rural in the MidAtlantic region will be subject to a payment adjustment; 16.9 percent of hospitals (or 22 hospitals) characterized as rural in the South Atlantic region will be subject to a payment adjustment; 12.2 percent of hospitals (or 14 hospitals) characterized as rural in the East North Central region will be subject to a payment adjustment; 8.8 percent of hospitals (or 14 hospitals) characterized as rural in the West South Central region will be subject to a payment adjustment; 15.0 percent of hospitals (or 16 hospitals) in the East North Central region will be subject to a payment adjustment; 9.6 percent of hospitals (or 16 hospitals) in the West South Central region will be subject to a payment adjustment; 26.8 percent of hospitals (or 19 hospitals) in the Mountain region will be subject to a payment adjustment; and 3.8 percent of hospitals (or 1 hospitals) in the Pacific region will be subject to a payment adjustment. With regard to the DSH percent characteristic, 19.4 percent of hospitals (or 309 hospitals) characterized in the 0–24 DSH percent will be subject to a payment adjustment; 22.0 percent of hospitals (or 304 hospitals) characterized in the 25–49 DSH percent will be subject to a payment adjustment; 38.1 percent of hospitals (or 67 hospitals) characterized in the 50–64 DSH 50431 percent will be subject to a payment adjustment; and 28.9 percent of hospitals (or 46 hospitals) characterized in the 65 and over DSH percent will be subject to a payment adjustment. With regard to the teaching status characteristic, 17.0 percent of hospitals (or 391 hospitals) characterized as nonteaching will be subject to a payment adjustment; 25.7 percent of hospitals (or 198 hospitals) characterized as fewer than 100 residents will be subject to a payment adjustment; and 56.4 percent of hospitals (or 137 hospitals) characterized as 100 or more residents will be subject to a payment adjustment. With regard to the urban teaching and DSH characteristic, 35.6 percent of hospitals (or 294 hospitals) characterized as teaching and DSH will be subject to a payment adjustment; 25.0 percent of hospitals (or 32 hospitals) characterized as teaching and no DSH will be subject to a payment adjustment; 19.5 percent of hospitals (or 207 hospitals) characterized as no teaching and DSH will be subject to a payment adjustment; 18.2 percent of hospitals (or 80 hospitals) characterized as no teaching and no DSH will be subject to a payment adjustment; and 13.2 percent of hospitals (or 113 hospitals) characterized as nonurban will be subject to a payment adjustment. With regard to the type of ownership characteristic, 22.7 percent of hospitals (or 429 hospitals) characterized as voluntary will be subject to a payment adjustment; 18.7 percent of hospitals (or 160 hospitals) characterized as proprietary will be subject to a payment adjustment; and 25.0 percent of hospitals (or 131 hospitals) characterized as government will be subject to a payment adjustment. With regard to the MCR percent characteristic, 37.4 percent of hospitals (or 145 hospitals) characterized in the 0–24 MCR percent will be subject to a payment adjustment; 22.6 percent of hospitals (or 447 hospitals) characterized in the 25–49 MCR percent will be subject to a payment adjustment; 14.4 percent of hospitals (or 101 hospitals) characterized in the 50–64 MCR percent will be subject to a payment adjustment; and 9.4 percent of hospitals (or 12 hospitals) characterized in the 65 and over MCR percent will be subject to a payment adjustment. PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC FOR THE FY 2015 HAC REDUCTION PROGRAM Hospital characteristics Hospitals in the worst performing quartile Number of hospitals a tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Characteristic Total d ............................................................................................................... By geographic location: All hospitals: Large urban e ..................................................................................... Other urban ....................................................................................... Rural .................................................................................................. Urban hospitals: 0–99 beds .......................................................................................... 100–199 beds .................................................................................... 200–299 beds .................................................................................... VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00579 Fmt 4701 Sfmt 4700 Percent b Number of hospitals Percent within characteristic c 3,352 100.0 726 21.7 1,338 1,119 853 40.4 33.8 25.8 356 257 113 26.6 23.0 13.2 626 748 458 25.5 30.4 18.6 98 155 136 15.7 20.7 29.7 E:\FR\FM\22AUR2.SGM 22AUR2 50432 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations PROPORTION OF HOSPITALS IN THE WORST PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC SCORE BY HOSPITAL CHARACTERISTIC FOR THE FY 2015 HAC REDUCTION PROGRAM—Continued Hospital characteristics Hospitals in the worst performing quartile Number of hospitals a Characteristic By By By By By tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV By 300–399 beds .................................................................................... 400–499 ............................................................................................. 500 or more beds .............................................................................. Rural hospitals: 0–49 beds .......................................................................................... 50–99 beds ........................................................................................ 100–149 beds .................................................................................... 150–199 beds .................................................................................... 200 or more beds .............................................................................. region: Urban by region: New England ..................................................................................... Mid-Atlantic ........................................................................................ South Atlantic .................................................................................... East North Central ............................................................................. West South Central ........................................................................... East North Central ............................................................................. West South Central ........................................................................... Mountain ............................................................................................ Pacific ................................................................................................ Rural by region: New England ..................................................................................... Mid-Atlantic ........................................................................................ South Atlantic .................................................................................... East North Central ............................................................................. West South Central ........................................................................... East North Central ............................................................................. West South Central ........................................................................... Mountain ............................................................................................ Pacific ................................................................................................ DSH percent: 0–24 .......................................................................................................... 25–49 ........................................................................................................ 50–64 ........................................................................................................ 65 and over .............................................................................................. teaching status: Non-teaching ............................................................................................ Fewer than 100 residents ......................................................................... 100 or more residents .............................................................................. urban teaching and DSH: f Teaching and DSH ................................................................................... Teaching and no DSH .............................................................................. No teaching and DSH .............................................................................. No teaching and no DSH ......................................................................... Non-urban ................................................................................................. type of ownership: Voluntary ................................................................................................... Proprietary ................................................................................................ Government .............................................................................................. MCR percent: 0–24 .......................................................................................................... 25–49 ........................................................................................................ 50–64 ........................................................................................................ 65 and over .............................................................................................. Percent b Number of hospitals Percent within characteristic c 260 153 212 10.6 6.2 8.6 72 63 89 27.7 41.2 42.0 334 297 135 50 37 39.2 34.8 15.8 5.9 4.3 39 37 17 9 11 11.7 12.5 12.6 18.0 29.7 119 318 404 391 149 161 377 162 376 4.8 12.9 16.4 15.9 6.1 6.6 15.3 6.6 15.3 36 96 98 88 33 42 60 54 106 30.3 30.2 24.3 22.5 22.1 26.1 15.9 33.3 28.2 22 56 130 115 159 107 167 71 26 2.6 6.6 15.2 13.5 18.6 12.5 19.6 8.3 3.0 4 7 22 14 14 16 16 19 1 18.2 12.5 16.9 12.2 8.8 15.0 9.6 26.8 3.8 1,592 1,383 176 159 48.1 41.8 5.3 4.8 309 304 67 46 19.4 22.0 38.1 28.9 2,297 770 243 69.4 23.3 7.3 391 198 137 17.0 25.7 56.4 827 128 1,062 440 853 25.0 3.9 32.1 13.3 25.8 294 32 207 80 113 35.6 25.0 19.5 18.2 13.2 1,890 857 523 57.8 26.2 16.0 429 160 131 22.7 18.7 25.0 388 1,977 703 128 12.1 61.9 22.0 4.0 145 447 101 12 37.4 22.6 14.4 9.4 Source: FY 2015 HAC Reduction Program Final Rule Results provided by R&A contract. Scores are based on AHRQ PSI 90 data from July 2011 through June 2013 and CLABSI and CAUTI results from January 2012 to December 2013. Hospital Characteristics are based on FY 2015 Proposed Rule Impact File released May 20, 2014. a The total number of hospitals with hospital characteristic data (3,310 for geographic location, bed size, region, DSH percent and teaching status; 3,270 for type of ownership; and 3,196 for MCR) do not add up to the total number of hospitals eligible for the HAC Reduction program (3,352) because 42 hospitals are not included in the FY 2015 impact file and not all hospitals have data for all characteristics. b This column is the percent of all hospitals with each characteristic that were eligible for the program and included in the FY 15 impact file. Percents may not sum to 100 due to rounding. c This column is the percent of hospitals within each characteristic that are in the worse performing quartile. d Total excludes the 46 Maryland hospitals. e Large Urban hospitals are hospitals located in large urban areas (populations over 1 million). f A hospital is considered a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP) greater than zero and is considered a DSH hospital if it has a DSH patient percentage greater than zero. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00580 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 9. Effects of Policy Changes Relating to Payments for Direct GME and IME Under section IV.K.2. of the preamble of this final rule, we discuss our revisions to simplify and streamline the timing of CMS’s policies related to when the FTE resident caps, the 3-year rolling average, and the IRB ratio cap would become effective for new teaching hospitals, by stating that the FTE resident caps, rolling average, and IRB ratio cap will be effective simultaneously, beginning with the applicable hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program started. We are specifying that this policy regarding the effective dates of the FTE residency caps, rolling average, and IRB ratio cap for FTE residents in new programs is consistent with the methodology for calculation of the FTE resident caps as described in the FY 2013 IPPS/LTCH PPS final rule, and implemented at 42 CFR 413.79(e)(1) and (3). That is, this policy is effective for urban hospitals that have not yet had FTE resident caps established under § 413.79(e)(1), and for rural hospitals, on or after October 1, 2012. This policy will increase the amount of time that the new programs will be exempt from the FTE resident caps by several months, depending on the cost reporting period of the new teaching hospital. The estimate of possible cost of this policy is less than $5 million a year and, therefore, is negligible. In section IV.K.3.a. of the preamble of this final rule, we discuss our policies related to the effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas. Under existing regulations a new teaching hospital has 5 years from when it first begins training residents in its first new program to grow its cap. If the teaching hospital is a rural teaching hospital, it can continue to receive permanent cap adjustments even after the initial 5-year cap-building period ends if it trains residents in a new program. As a result of the implementation of the new OMB delineations, some teaching hospitals may be redesignated from being located in a rural area to an urban area, thereby losing their ability to increase their caps again after their initial 5-year cap-building period. Effective October 1, 2014, if a rural hospital has received a letter of accreditation for a new program and/or started training residents in the new program prior to being redesignated as urban, it can continue growing that program for the remainder of the capbuilding period and receive a permanent cap adjustment for that new program. Once the cap-building period for the new program that was started while the hospital was still rural expires, the teaching hospital that has been redesignated as urban will no longer be able to receive any additional permanent cap adjustments. In section IV.K.3.b. of the preamble of this final rule, we discuss our policy change related to a redesignated hospital’s participation in a rural track program. Under existing regulations, if an urban hospital rotates residents to a separately accredited rural track program at a rural site(s) for more than one-half of the duration of the program, the urban hospital may receive an adjustment VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 to its cap for training those FTE residents, referred to as the rural track FTE limitation. We are providing that, effective October 1, 2014, if a rural hospital participating in a rural track is in an area redesignated by OMB as urban after residents started training in the rural track and during the period that is used to calculate the urban hospital’s rural track FTE limitation, the urban hospital may still receive a cap adjustment for that rural track. We also are providing that, effective October 1, 2014, if the rural hospital participating in the rural track is in an area redesignated as urban, the redesignated urban hospital can continue to be considered a rural hospital for purposes of the rural track for a transition period that would begin effective with the implementation date of the new OMB delineations and last through the end of the second residency training year following implementation of the new OMB delineations. However, during that transition period, either the rural hospital that has been redesignated as urban must reclassify as rural under § 412.103 for purposes of IME payment only, or the urban hospital must find a new geographically rural site to participate as the rural site for purposes of the rural track, in order for the urban hospital to receive payment under § 413.79(k)(1) or (k)(2) for the rural track program after the transition period ends. We estimate that these policies discussed under IV.K.3.a. and b. of the preamble of this final rule will have a very minimal, if any, impact on Medicare expenditures. These policies will only be applied to, at the most, very few hospitals (if any at all) and will only apply once every 10 years as a result of OMB changes in labor market area delineations due to a recent Census. In sections IV.K.5.a. and b. of the preamble of this final rule, we are making some changes to the current application process for and awarding of cap slots from closed hospitals under section 5506 of the Affordable Care Act that will be effective for hospital closures announced on or after October 1, 2014. We are providing an alternative interpretation of the statutory provision at section 5506(d) of the Affordable Care Act, which provides that the Secretary give consideration to the effect of the permanent awarding of slots under section 5506 of the Affordable Care Act to any temporary cap adjustments to a hospital received under § 413.79(h) of the regulations to ensure that there be no duplication of FTE cap slots. In this final rule, we are interpreting the statutory language at section 5506(d) in a manner that will permit us to apply the concept of ensuring no duplication of FTE resident slots on a hospital-byhospital basis, such that if a hospital is both receiving a temporary cap adjustment under § 413.79(h) and is applying under section 5506 for permanent cap slots, it will not be able to receive a permanent cap adjustment until an equivalent amount of displaced residents graduate. However, if a hospital is applying under section 5506 for permanent cap slots and did not receive a temporary cap adjustment under § 413.79(h), that hospital will not have to wait until displaced residents that are training at another hospital graduate to be awarded any permanent cap PO 00000 Frm 00581 Fmt 4701 Sfmt 4700 50433 slots under section 5506. We estimate that this revised policy could result in a slight increase in Medicare expenditures in a rare event a section 5506 cap adjustment may be provided to one hospital before a temporary cap adjustment expires at another hospital. However, we are unable to estimate whether this will occur with any future hospital closures where section 5506 is applied because we do not know how many, if any, residents will be displaced. Furthermore, we believe that any temporary duplicate payment will be a rare occurrence as most hospitals that are receiving a temporary cap adjustment under § 413.79(h) will also receive a permanent cap adjustment under section 5506. In this instance the hospital will only be able to receive the permanent cap adjustment once the temporary cap adjustment for an equivalent number of FTE residents expires, in which case there would be no duplication of FTE resident slots. In addition, under section IV.K.5.c. of the preamble of this final rule, we are revising the ranking criteria used to award slots under section 5506. First, we are no longer allowing hospitals to apply for cap relief, which is included under current Ranking Criterion Eight. This change means that hospitals will be awarded slots under section 5506 for taking over a closed hospital’s residency training program, having participated with a closed hospital in a Medicare GME affiliated group, taking over part of a closed hospital’s program, expanding or starting a new geriatrics program, expanding or starting a new primary care or general surgery program, and expanding or starting a new nonprimary care or nongeneral surgery program. Second, Ranking Criterion One currently applies to hospitals that are assuming (or have assumed) an entire program from the hospital that closed. We are revising this Ranking Criterion to provide priority to a hospital whose FTE resident caps were erroneously reduced by CMS under section 5503 of the Affordable Care Act, contrary to the specific statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and the CMS Central Office was made aware of the error prior to the posting of the FY 2015 proposed rule. We do not believe there is any cost associated with these policies. We will continue assigning all of the closed hospital’s slots; only the specific hospitals awarded the slots may change. 10. Effects of Implementation of Rural Community Hospital Demonstration Program In section IV.L. of the preamble of this final rule, we discuss our implementation of section 410A of Public Law 108–173, as amended, which requires the Secretary to conduct a demonstration that would modify reimbursement for inpatient services for up to 30 rural community hospitals. Section 410A(c)(2) requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ As discussed in section IV.L. of the preamble of this final rule, in the IPPS final rules for each of the previous 10 fiscal years, we have estimated the additional E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50434 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations payments made by the program for each of the participating hospitals as a result of the demonstration. In order to achieve budget neutrality, we are adjusting the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In other words, we are applying budget neutrality across the payment system as a whole rather than across the participants of this demonstration. The language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration . . . was not implemented’’ but does not identify the range across which aggregate payments must be held equal. We are adjusting the national IPPS rates according to the methodology set forth elsewhere in this final rule. The adjustment to the national IPPS rates to account for estimated demonstration cost for FY 2014 for the 7 ‘‘pre-expansion’’ participating hospitals that are currently participating in the demonstration and the 15 additional hospitals participating as a result of the expansion of the demonstration under the Affordable Care Act is $54,177,144. In addition, in this final rule, we are adding to the adjustment of the national IPPS rates the amount by which the actual costs of the demonstration for FY 2008 (as shown in the finalized cost reports for cost reporting periods beginning in FY 2008 for the hospitals that participated in the demonstration during FY 2008) exceed the budget neutrality offset amount that was finalized in the FY 2008 IPPS final rule ($10,389,771). Thus, the resulting total ($64,566,915) is the amount for which an adjustment to inpatient rates for FY 2015 is calculated. 11. Effects of Changes Related to Reclassification as Rural for CAHs In section VI.D.2. of the preamble of this final rule, we discuss our policies relating to reclassifications of CAHs as a result of the adoption of the new OMB labor market area delineations. A facility is eligible for designation as a CAH only if it is either physically located in a rural area or has been reclassified as rural under 42 CFR 412.103. CAHs can be affected by the recent OMB labor market area delineations because facilities that are currently participating as CAHs that were previously located in rural areas may now be located in urban areas as a result of the new delineations. Previously, in both in the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule, we revised the regulations to give currently participating CAHs 2 years, from the effective date of the earlier OMB designations, to reclassify as rural facilities. However, these regulation changes were specific to a particular timeframe. As we are implementing the latest OMB labor market area delineations in this final rule, we are providing that, effective October 1, 2014, currently participating CAHs that are located in an area that has been redesignated from rural to urban under the new delineations will again be treated as rural for 2 years from VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 the date the new OMB delineations are implemented. An affected CAH will have 2 years from the date the redesignation becomes effective to reclassify as rural and thereby retain its CAH status. If a CAH fails to reclassify within those 2 years, it can no longer participate in Medicare as a CAH. However, unlike in previous years when the regulation changes were specific to a particular timeframe, the change that we are making to the regulations is not specific to a particular timeframe but will also apply to future OMB labor market area delineations. We estimate that this policy will have little or no impact on Medicare expenditures because we expect that virtually all of the affected CAHs will be granted rural status by the State in which they are located and, therefore, will be able to apply for reclassification as rural under § 412.103 in order to retain their CAH status. 12. Effects of Revision of the Requirements for Physician Certification of CAH Inpatient Services In section VI.D.3. of the preamble of this final rule, we discuss the statutory requirement for physician certification of CAH inpatient services. For inpatient CAH services to be payable under Medicare Part A, section 1814(a)(8) of the Act requires that a physician certify that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH. These statutory requirements are addressed in the regulations at 42 CFR 424.15. In order to provide CAHs with additional flexibility in meeting certification requirements, we are amending the regulation text at § 424.11(d)(5) to remove the phrase ‘‘or critical access hospital inpatient’’. In addition, we are revising the regulations at § 424.15(b) to read as follows: ‘‘Certification begins with the order for inpatient admission. All certification requirements must be completed, signed, and documented in the medical record no later than 1 day before the date on which the claim for the inpatient CAH service is submitted.’’ We do not believe there is any significant impact on Medicare expenditures associated with these changes because we are simply providing CAHs with additional flexibility in meeting the statutory requirement for physician certification of CAH inpatient services. The underlying statutory requirement itself is unchanged. 13. Effects of Changes Relating to Technical Correction to Administrative Appeals by Providers and Judicial Review In section VIII. of the preamble to this final rule, we discuss the technical correction to the regulations to eliminate provider dissatisfaction as a requirement for PRRB jurisdiction over appeals based on untimely contractor determinations as well as the change in terminology in Part 405 and Part 413 from ‘‘intermediary’’ or ‘‘fiscal intermediary’’ to ‘‘contractor’’. There is no impact to the provider resulting from these provisions. PO 00000 Frm 00582 Fmt 4701 Sfmt 4700 I. Effects of Update to the Reasonable Compensation Equivalent (RCE) Limits for Compensation for Physician Services Provided in Providers In section VI.B. of the preamble of this final rule, we discuss our finalized policy to update and revise the methodology used to calculate the reasonable compensation equivalent (RCE) limits for compensation for physician services provided in providers, in accordance with our regulations at 42 CFR 415.70(f)(2). For CY 2015, we estimate that 59 cancer and children’s hospitals and 46 IPPS teaching hospitals will be subject to the RCE limits. We estimate the costs associated with the updated RCE limits for CY 2015 to be approximately $40 million. We do not expect this RCE limit update to impact a significant number of small, rural entities; therefore, a full impact analysis is not required. J. Effects of Changes in the Capital IPPS 1. General Considerations For the impact analysis presented below, we used data from the March 2014 update of the FY 2013 MedPAR file and the March 2014 update of the Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the changes to the capital prospective payment system do not incorporate cost data, we used the March 2014 update of the most recently available hospital cost report data (FYs 2011 and 2012) to categorize hospitals. Our analysis has several qualifications. We use the best data available and make assumptions about casemix and beneficiary enrollment as described below. Due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each change. In addition, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, it is possible that some individual hospitals are placed in the wrong category. Using cases from the March 2014 update of the FY 2013 MedPAR file, we simulated payments under the capital IPPS for FY 2014 and FY 2015 for a comparison of total payments per case. Any short-term, acute care hospitals not paid under the general IPPS (for example, Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. The methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating capital IPPS payments in FY 2015 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME adjustment factor, if applicable). In addition to the other adjustments, hospitals may also receive outlier payments for those cases that qualify under the threshold established for each fiscal year. We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital’s case-mix. We then E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations added estimated payments for indirect medical education, disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions: • We estimate that the Medicare case-mix index will increase by 0.5 percent in both FYs 2014 and 2015. • We estimate that Medicare discharges will be approximately 11.6 million in FY 2014 and 11.7 million in FY 2015. • The capital Federal rate was updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.1.a. of the Addendum to this final rule, the update is 1.5 percent for FY 2015. • In addition to the FY 2015 update factor, the FY 2015 capital Federal rate was calculated based on a GAF/DRG budget neutrality adjustment factor of 0.9986 and an outlier adjustment factor of 0.9373. As discussed in section VI.C. of the preamble of this final rule, we are not making an additional MS–DRG documentation and coding adjustment to the capital IPPS Federal rates for FY 2015. 2. Results We used the actuarial model described above to estimate the potential impact of our changes for FY 2015 on total capital payments per case, using a universe of 3,396 hospitals. As described above, the individual hospital payment parameters are taken from the best available data, including the March 2014 update of the FY 2013 MedPAR file, the March 2014 update to the PSF, and the most recent cost report data from the March 2014 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2014 and estimated total payments per case for FY 2015 based on the FY 2015 payment policies. Column 2 shows estimates of payments per case under our model for FY 2014. Column 3 shows estimates of payments per case under our model for FY 2015. Column 4 shows the total percentage change in payments from FY 2014 to FY 2015. The change represented in Column 4 includes the 1.5 percent update to the capital Federal rate and other changes in the adjustments to the capital Federal rate. The comparisons are provided by: (1) Geographic location; (2) region; and (3) payment classification. The simulation results show that, on average, capital payments per case in FY 2015 are expected to increase as compared to capital payments per case in FY 2014. This expected increase is due primarily to the approximately 1.2 percent increase in the capital Federal rate for FY 2015 as compared to the FY 2014 capital Federal rate. (For a discussion of the determination of the capital Federal rate, we refer readers to section III.A. of the Addendum to this final rule.) Overall, across all hospitals, the changes to the GAFs are expected to have no net effect on capital payments. However, regionally, the effects of the changes to the GAFs on capital payments are consistent with the projected changes in payments due to changes in the wage index (and policies affecting the wage index) as shown in Table I in section I.G. of this Appendix. Overall, there is an increase in capital payments per case due to the effects of changes to the MS–DRG reclassifications and recalibrations, with more of this increase expected for urban hospitals. However, this increase is offset by projected changes in outlier payments for both urban and rural hospitals. Rural areas are expected to experience an offset to the projected increase in capital payments per case due to the effects of changes to the GAFs. The net impact of these changes is an estimated 1.5 percent change in capital payments per case from FY 2014 to FY 2015 for all hospitals (as shown below in Table III). The geographic comparison shows that, on average, all hospitals are expected to experience an increase in capital IPPS payments per case in FY 2015 as compared to FY 2014. As we stated above, these expected increases are primarily due to the increase in the capital Federal rate. Capital IPPS payments per case for hospitals in ‘‘large urban areas’’ are expected to have an estimated increase of 1.7 percent, while hospitals in rural areas, on average, are expected to experience a 1.0 percent increase in capital payments per case from FY 2014 to FY 2015. Capital IPPS payments per case for ‘‘other urban hospitals’’ are estimated to increase 1.4 percent. The primary factor contributing to the difference in the projected increase in capital IPPS payments per case for urban hospitals as compared to rural hospitals is the increase in capital payments to urban hospitals due to changes to the MS– DRG relative weights and the effect of changes in the GAFs. The increase in capital payments due to changes to the MS–DRG relative weights is slightly lower for rural hospitals than it is for urban hospitals. In addition, rural hospitals are expected to experience a slight decrease in capital payments due to the effect of changes in the GAFs, while urban hospitals are expected to experience a slight increase in capital 50435 payments due to the effect of changes in the GAFs. The comparisons by region show that the estimated increases in capital payments per case from FY 2014 to FY 2015 in urban areas range from a 2.4 percent increase for the Pacific urban region to a 0.9 percent increase for the West South Central urban region. For rural regions, the Pacific rural region is expected to experience the largest increase in capital IPPS payments per case of 2.4 percent, while the Mountain rural region is projected to have the smallest increase in capital payments per case of 0.5 percent, compared to FY 2014 payments per case. Unlike most other urban and rural regions where changes in the GAFs either contribute to a projected decrease in capital payments or only a small increase in capital payments, the changes in the GAFs are a primary contributor to the expected increase in capital IPPS payments per case for the Pacific urban and rural regions. A larger than average decrease in capital payments per case for the Mountain rural area due to the change in outliers offsets the projected increases to that area’s capital payments per case in FY 2015 compared to FY 2014. Hospitals of all types of ownership (that is, voluntary hospitals, government hospitals, and proprietary hospitals) are estimated to experience an increase in capital payments per case from FY 2014 to FY 2015. The increase in capital payments for voluntary hospitals is estimated at 1.6 percent, and for proprietary and government hospitals the increase is estimated to be 1.4 percent. Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2015. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified as of the publication of this final rule for FY 2015, we show the average capital payments per case for reclassified hospitals for FY 2015. Urban reclassified hospitals are expected to experience an increase in capital payments of 2.1 percent, whereas for urban nonreclassified hospitals, the expected increase is 1.4 percent. The estimated percentage increase for rural reclassified hospitals is 1.0 percent, and for rural nonreclassified hospitals, the estimated percentage increase is 0.7 percent. Other reclassified hospitals (that is, hospitals reclassified under section 1886(d)(8)(B) of the Act) are expected to experience the largest increase (2.2 percent) in capital payments from FY 2014 to FY 2015. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE [FY 2014 payments compared to FY 2015 payments] Number of hospitals VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00583 856 944 869 960 1.5 1.7 1,148 Fmt 4701 Average FY 2015 payments/case 3,396 1,401 By Geographic Location: All hospitals ...................................................................... Large urban areas (populations over 1 million) ........ Other urban areas (populations of 1 million of fewer) ..................................................................... Average FY 2014 payments/case 824 835 1.4 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Change 50436 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2014 payments compared to FY 2015 payments] tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Number of hospitals Rural areas ................................................................ Urban hospitals ................................................................. 0–99 beds .................................................................. 100–199 beds ............................................................ 200–299 beds ............................................................ 300–499 beds ............................................................ 500 or more beds ...................................................... Rural hospitals .................................................................. 0–49 beds .................................................................. 50–99 beds ................................................................ 100–149 beds ............................................................ 150–199 beds ............................................................ 200 or more beds ...................................................... By Region: Urban by Region .............................................................. New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ Puerto Rico ................................................................ Rural by Region ................................................................ New England ............................................................. Middle Atlantic ........................................................... South Atlantic ............................................................ East North Central ..................................................... East South Central .................................................... West North Central .................................................... West South Central ................................................... Mountain .................................................................... Pacific ........................................................................ [There are no rural hospitals in Puerto Rico] By Payment Classification: All hospitals ...................................................................... Large urban areas (populations over 1 million) ............... Other urban areas (populations of 1 million of fewer) ..... Rural areas ....................................................................... Teaching Status: Non-teaching ............................................................. Fewer than 100 Residents ........................................ 100 or more Residents .............................................. Urban DSH: 100 or more beds ............................................... Less than 100 beds ........................................... Rural DSH: Sole Community (SCH/EACH) ........................... Referral Center (RRC/EACH) ............................ Other Rural: 100 or more beds ....................................... Less than 100 beds .................................... Urban teaching and DSH: Both teaching and DSH ............................................ Teaching and no DSH ............................................... No teaching and DSH ............................................... No teaching and no DSH .......................................... Rural Hospital Types: Non special status hospitals ..................................... RRC/EACH ................................................................ SCH/EACH ................................................................ SCH, RRC and EACH ............................................... Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY2015 Reclassifications: All Urban Reclassified ............................................... All Urban Non-Reclassified ....................................... All Rural Reclassified ................................................ VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00584 Average FY 2014 payments/case Average FY 2015 payments/case 847 2,549 666 787 455 429 212 847 328 305 125 50 39 583 890 733 772 812 908 1,066 583 474 542 582 636 709 588 903 739 783 826 922 1,082 588 479 546 588 643 717 1.0 1.6 0.9 1.4 1.7 1.6 1.6 1.0 1.1 0.7 1.0 1.0 1.1 2,549 120 324 407 397 153 162 387 162 385 52 847 22 57 132 116 165 102 168 61 24 .............................. 890 984 958 802 856 764 880 823 907 1,120 408 583 812 566 555 607 534 619 515 653 749 .............................. 903 1,001 978 812 868 772 892 830 918 1,148 412 588 823 575 559 613 538 624 518 657 767 .............................. 1.6 1.7 2.0 1.3 1.4 1.0 1.3 0.9 1.2 2.4 1.1 1.0 1.4 1.6 0.7 1.0 0.9 0.8 0.7 0.5 2.4 .............................. 3,396 1,413 1,150 833 856 943 823 594 869 959 835 599 1.5 1.7 1.4 0.8 2,357 795 244 728 837 1,210 738 850 1,231 1.4 1.5 1.7 1,588 383 911 649 925 656 1.6 1.0 373 212 530 656 535 661 1.0 0.8 24 137 552 465 552 469 0.0 0.8 842 133 1,129 459 990 891 762 788 1,005 907 774 799 1.6 1.8 1.6 1.4 2,575 193 325 124 890 717 652 711 904 730 659 720 1.5 1.8 1.1 1.3 450 2,054 269 886 893 621 904 906 628 2.1 1.4 1.0 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Change Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50437 TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2014 payments compared to FY 2015 payments] Number of hospitals tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV K. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS 1. Introduction and General Considerations In section VII. of the preamble of this final rule and section V. of the Addendum to this final rule, we set forth the annual update to the payment rates for the LTCH PPS for FY 2015. In the preamble of this final rule, we specify the statutory authority for the provisions that are presented, identify those policies, and present rationales for our decisions as well as alternatives that were considered. In this section of Appendix A to this final rule, we discuss the impact of the changes to the payment rate, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this final rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs. Currently, there are 422 LTCHs included in this impacts analysis, which includes data for 80 nonprofit (voluntary ownership control) LTCHs, 330 proprietary LTCHs, and 12 LTCHs that are government-owned and operated. (We note that, although there are currently approximately 430 LTCHs, for purposes of this impact analysis, we excluded the data of all inclusive rate providers and the LTCHs that are paid in accordance with demonstration projects, consistent with the development of the FY 2015 MS–LTC–DRG relative weights (discussed in section VII.B.3.c. of the preamble of this final rule)). In the impact analysis, we used the payment rate, factors, and policies presented in this final rule, including the 2.2 percent annual update for LTCHs that submit quality data in accordance with section 1886(m)(5)(C) of the Act, which is based on the full estimated increase of the LTCH PPS market basket and the reductions required by sections 1886(m)(3) and (m)(4) of the Act, the final year of the phase-in of a one-time prospective adjustment factor of 0.98734 (approximately –1.3 percent), the update to the MS–LTC– DRG classifications and relative weights, the update to the wage index values, including the implementation of the new OMB delineations, and labor-related share, and the best available claims and CCR data to estimate the change in payments for FY 2015. (As discussed in section VII.C. of the preamble of this final rule, in accordance with section 1886(m)(5)(C) of the Act, for VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Average FY 2015 payments/case 514 59 533 581 536 594 0.7 2.2 1,935 892 542 868 776 895 882 787 908 1.6 1.4 1.4 501 2,081 601 93 All Rural Non-Reclassified ........................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) Type of Ownership: Voluntary ................................................................... Proprietary ................................................................. Government ............................................................... Medicare Utilization as a Percent of Inpatient Days: 0–25 ........................................................................... 25–50 ......................................................................... 50–65 ......................................................................... Over 65 ...................................................................... Average FY 2014 payments/case 1,023 871 717 648 1,038 884 728 654 1.5 1.5 1.5 1.0 LTCHs that fail to submit quality data, the annual update to the LTCH PPS standard Federal rate is reduced by 2.0 percentage points in FY 2015.) The standard Federal rate for FY 2014 is $40,607.31 for LTCHs that submit quality data in accordance with the requirements of section 1886(m)(5)(C) of the Act. For FY 2015, we are establishing a standard Federal rate of $41,043.71 (for LTCHs that submit quality data in accordance with the requirements of section 1886(m)(5)(C) of the Act, which reflects the 2.2 percent annual update to the standard Federal rate, and the area wage budget neutrality factor of 1.0016703 to ensure that the changes in the wage index, including the implementation of the new OMB delineations, and labor-related share do not influence aggregate payments, and the final year of the phase-in of a onetime prospective adjustment factor of 0.98734. For LTCHs that fail to submit data for the LTCHQR Program, in accordance with section 1886(m)(5)(C) of the Act, we are establishing a standard Federal rate of $40,240.51. This reduced standard Federal rate reflects the updates described above as well as the required 2.0 percentage point reduction to the annual update for failure to submit data to the LTCHQR Program. We note that the factors described above to determine the FY 2015 standard Federal rate are applied to the FY 2014 Federal standard rate set forth under § 412.523(c)(3)(ix)(A) (that is, $40,607.31). Based on the best available data for the 422 LTCHs in our database, we estimate that the annual update to the standard Federal rate for FY 2015, the update to the MS–LTC–DRG classifications relative weights for FY 2015 (discussed in section VII.B. of the preamble to this final rule), and the changes to the area wage adjustment for FY 2015 (discussed in section V.B. of the Addendum to this final rule), in addition to an estimated increase in HCO payments will result in an increase in estimated payments from FY 2014 of approximately $62 million. Based on the 422 LTCHs in our database, we estimate that the FY 2015 LTCH PPS payments would be approximately $5.614 billion, as compared to estimated FY 2014 LTCH PPS payments of approximately $5.552 billion. Because the combined distributional effects and estimated changes to the Medicare program payments are over approximately $100 PO 00000 Frm 00585 Fmt 4701 Sfmt 4700 Change million, this final rule is considered a major economic rule, as defined in this section. We note that the approximate $62 million for the projected increase in estimated aggregate LTCH PPS payments from FY 2014 to FY 2015 does not reflect changes in LTCH admissions or case-mix intensity in estimated LTCH PPS payments, which also will affect overall payment changes. In addition, it does not reflect the estimated change in aggregate LTCH PPS payments due the projected impact of certain other LTCH PPS policy changes, which are discussed below in section I.K.3.b. of this Appendix. The projected 1.1 percent increase in estimated payments per discharge from FY 2014 to FY 2015 is attributable to several factors, including the 2.2 percent annual update to the standard Federal rate (or 0.2 percent annual update for LTCHs that failed to submit data under the requirements of the LTCHQR Program), a one-time prospective adjustment factor for FY 2015 of 0.98734 (approximately ¥1.3 percent), and projected increases in estimated HCO payments. Although the net effect of the 2.2 percent annual update and the approximate ¥1.3 percent one-time prospective adjustment factor is approximately 0.9 percent (that is, 2.2 percent¥1.3 percent = 0.9 percent), Table IV (column 6) shows the estimated change attributable solely to the annual update to the standard Federal rate (2.2 percent for LTCHs that submit quality data under the requirements of the LTCHQR Program and 0.2 percent for LTCHs that failed submit quality data under the requirements of the LTCHQR Program), including a one-time prospective adjustment factor for FY 2015 under the final year of the phase-in (approximately¥1.3 percent), is projected to result in an increase of 0.8 percent in payments per discharge from FY 2014 to FY 2015, on average, for all LTCHs. In addition to the 2.2 percent annual update for FY 2015, and a ¥1.3 percent one-time prospective adjustment factor for FY 2015, this estimated increase in aggregate LTCH PPS payments of 0.8 percent shown in column 6 of Table IV also includes estimated payments for SSO cases that are paid using special methodologies that are not affected by the annual update to the standard Federal rate. Therefore, for all hospital categories, the projected increase in payments based on the standard Federal rate is slightly less than the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50438 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations net effect of the 2.2 percent annual update and the approximate ¥1.3 percent one-time prospective adjustment factor (or 0.9 percent) for FY 2015. Because we are applying an area wage level budget neutrality factor to the standard Federal rate, the annual update to the wage data, including the implementation of the new OMB delineations, and laborrelated share does not impact the increase in aggregate payments. As discussed in section V.B. of the Addendum to this final rule, we are updating the wage index values for FY 2015 based on the most recent available data and the adoption of the new OMB labor market area delineations. Under our adoption of the new OMB delineations, we are establishing and applying a transitional blended wage index for FY 2015 for LTCHs that will have a lower wage index value under those delineations, as discussed in section VII.D.2. of the preamble of this final rule. Therefore, this column reflects the blended wage index that is calculated as a 50/50 blend of the wage index under the current CBSA designations and the wage index under the new OMB delineations under our transitional wage index policy. In addition, we are slightly lowering the labor-related share from 62.537 percent to 62.306 percent under the LTCH PPS for FY 2015, based on the most recent available data on the relative importance of the labor-related share of operating and capital costs based on the FY 2009-based LTCH-specific market basket. We also are applying an area wage level budget neutrality factor of 1.0016703, which increases the standard Federal rate by approximately 0.17 percent. Therefore, the changes to the wage data, including the adoption of the new OMB delineations, and labor-related share do not result in a change in estimated aggregate LTCH PPS payments. Table IV below shows the impact of the payment rate and the policy changes on LTCH PPS payments for FY 2015 presented in this final rule by comparing estimated FY 2014 payments to estimated FY 2015 payments. The projected increase in payments from FY 2014 to FY 2015 of 1.1 percent is attributable to the impacts of the change to the standard Federal rate (0.9 percent in Column 6) and the effect of the estimated slight increase in payments for HCO cases (0.1 percent) and an estimated increase in payments for SSO cases (0.2 percent). We currently estimate total HCO payments are projected to increase slightly from FY 2014 to FY 2015 in order to ensure that the estimated HCO payments will be 8 percent of the total estimated LTCH PPS payments in FY 2015. An analysis of the most recent available LTCH PPS claims data (that is, FY 2013 claims data from the March 2014 update of the MedPAR file) indicates that the FY 2014 HCO threshold of $13,314 (as established in the FY 2014 IPPS/LTCH PPS final rule) may-result in HCO payments in FY 2015 that are slightly below the estimated 8 percent. Specifically, we currently estimate that HCO payments will be approximately 7.9 percent of the estimated total LTCH PPS payments in FY 2014. We estimate that the impact of the slight increase in HCO payments will result in approximately a 0.1 percent increase in VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 estimated payments from FY 2014 to FY 2015, on average, for all LTCHs. Furthermore, in calculating the estimated HCO payments for FYs 2014 and 2015, we increased estimated costs by the applicable market basket percentage increase as projected by our actuaries. This increase in estimated costs also results in a projected increase in SSO payments of approximately 0.2 percent relative to last year. The net result of these projected changes in HCO and SSO payments in FY 2015 is an estimated change in aggregate payments of 0.3 percent. We note that estimated payments for all SSO cases comprise approximately 12 percent of the estimated total LTCH PPS payments, and estimated payments for HCO cases comprise approximately 8 percent of the estimated total FY 2015 LTCH PPS payments. Payments for HCO cases are based on 80 percent of the estimated cost of the case above the HCO threshold, while the majority of the payments for SSO cases (approximately 60 percent) are based on the estimated cost of the case. In addition to the projected increase in LTCH PPS payments per discharge of approximately $62 million (1.1 percent) from FY 2014 to FY 2015, as shown in Table IV below, we also estimate that the net effect of the projected impact of certain other LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25-percent policy’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the revocation of onsite discharges and readmissions policy; and the payment adjustment for ‘‘subclause (II)’’ LTCHs) will result in a $116 million increase in aggregate LTCH PPS payments in FY 2015. The individual impact of these policy changes are discussed in greater detail below in section I.K.3.b. of this Appendix. As we discuss in detail throughout this final rule, based on the most recent available data, we believe that the provisions of this final rule relating to the LTCH PPS will result in an increase in estimated aggregate LTCH PPS payments and that the resulting LTCH PPS payment amounts will result in appropriate Medicare payments. 2. Impact on Rural Hospitals For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. As shown in Table IV, we are projecting a 1.2 percent increase in estimated payments per discharge for FY 2015 as compared to FY 2014 for rural LTCHs that will result from the changes presented in this final rule, as well as the effect of estimated changes to HCO and SSO payments. This estimated impact is based on the data for the 22 rural LTCHs in our database (out of 422 LTCHs) for which complete data were available. The estimated increase in LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs (1.2 percent) is slightly greater than the national average increase (1.1 percent). The estimated increase in LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs is primarily due to the increase to the standard Federal rate. PO 00000 Frm 00586 Fmt 4701 Sfmt 4700 3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy Changes a. Budgetary Impact Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs ‘‘maintain budget neutrality.’’ We believe that the statute’s mandate for budget neutrality applies only to the first year of the implementation of the LTCH PPS (that is, FY 2003). Therefore, in calculating the FY 2003 standard Federal rate under § 412.523(d)(2), we set total estimated payments for FY 2003 under the LTCH PPS so that estimated aggregate payments under the LTCH PPS were estimated to equal the amount that would have been paid if the LTCH PPS had not been implemented. As discussed above in section I.K.1. of this Appendix, we project an increase in aggregate LTCH PPS payments per discharge in FY 2015 relative to FY 2014 of approximately $62 million based on the 422 LTCHs in our database. In addition, as discussed below in section I.K.3.b. of this Appendix, we also estimate that the net effect of the projected impact of certain other LTCH PPS policy changes will result in a $116 million increase in aggregate LTCH PPS payments in FY 2015. b. Impact of Certain LTCH PPS Policy Changes (1) Reinstatement of the Moratorium on the Full Implementation of the ‘‘25-Percent Policy’’ Payment Adjustment (§ 412.534 and § 412.536) and Reinstatement of the Moratorium on the Development of New LTCHs and LTCH Satellites and Additional LTCH beds (§ 412.23(e) and §§ 412.23(e)(6) and (7)) Section 1206(b) of Public Law 113–67 provides for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment (referred to as the ‘‘25-percent policy’’ payment adjustment) established under section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act. As discussed in section VII.E. of the preamble of this final rule, we are reinstating this payment adjustment retroactively for LTCH cost reporting periods beginning on or after July 1, 2013 or October 1, 2013, as applicable under the regulations at § 412.534 and § 412.536. Section 1206(b)(2) of Public Law 113–67, as amended by section 112(b) of the Protecting Access to Medicare Act of 2–14 (Pub. L. 113–93), provides for moratoria on the establishment of new LTCHs and LTCH satellite facilities and on bed increases in LTCHs effective for the period beginning April 1, 2014, and ending September 30, 2017. This statutory provision also provides specific exceptions to the moratorium on the establishment of new LTCHs and LTCH satellites. We are implementing this policy under the regulations at § 412.23(e) and §§ 412.23(e)(6) and (7), respectively. For additional details, refer to section VII.G. of the preamble of this final rule. Our Office of the Actuary projects that the reinstatement of ‘‘25-percent policy’’ adjustment policy will result in E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations approximately a $120 million increase in aggregate LTCH PPS payments in FY 2015. In addition, our Office of the Actuary projects that the portion of the moratoria on the establishment of new LTCHs and LTCH satellite facilities and additional LTCH beds that will occur during FY 2015 is estimated to result in approximately a $30 million reduction in aggregate LTCH PPS payments in FY 2015. Therefore, we project our implementation of both of these statutory provisions will result in approximately a $90 million increase in aggregate LTCH PPS payments in FY 2015. (2) Revocation of On-Site Discharges and Readmissions Policy (§ 412.532) As discussed in section VII.F. of the preamble of this final rule, we are removing the discharge and readmission requirement specified in the regulations under § 412.532 (referred to as the ‘‘5-percent payment threshold’’). Under the ‘‘5-percent payment threshold’’ policy, if an LTCH (or a LTCH satellite facility) directly readmits more than 5 percent of its total Medicare inpatients discharged from an ‘‘on-site facility’’ (for example, a co-located acute care hospital, an IRF, or a SNF, or in the case of a LTCH satellite facility, that is co-located with an LTCH), all such discharges to the co-located ‘‘on-site facility’’ and the readmissions to the LTCH are treated as one discharge for that cost reporting period, and, as such, one LTCH PPS payment is made on the basis of each patient’s initial principal diagnosis. We estimate that the discontinuation of the ‘‘5percent payment threshold’’ policy will result in an increase of approximately $20 million in aggregate LTCH PPS payments in FY 2015. (We note, as also discussed in section VII.F. of the preamble of this final rule, after consideration of public comments, we are not finalizing the proposed revision the fixed-day thresholds under the greater than 3-day interruption of stay policy under § 412.531.) (3) Payment Adjustment for ‘‘Subclause (II)’’ LTCHs (§ 412.526) Section 1206(d) of Public Law 113–67 requires the Secretary to evaluate payments and regulations governing ‘‘hospitals which are classified under subclause (II) of subsection (d)(1)(B)(iv)’’. In addition, based on the result of such evaluations, the statute authorizes the Secretary to adjust the payment rates for this type of hospital and to adjust regulations governing a subclause (II) LTCH that otherwise apply to subclause (I) LTCHs. As discussed in section VII.H. of the preamble of this final rule, under new § 412.526, we are applying a payment adjustment under the LTCH PPS to a subclause (II) LTCH beginning in FY 2015 that will result in payments to this type of LTCH resembling those under the reasonable cost TEFRA payment system model. Our Office of the Actuary projects that the payment adjustment for ‘‘subclause (II)’’ LTCHs will increase aggregate LTCH PPS payments in FY 2015 by approximately $6 million. c. Impact on Providers The basic methodology for determining a per discharge LTCH PPS payment is set forth VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 under § 412.515 through § 412.536. In addition to the basic MS–LTC–DRG payment (the standard Federal rate multiplied by the MS–LTC–DRG relative weight), we make adjustments for differences in area wage levels, a COLA for LTCHs located in Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO payments for those cases that qualify based on the threshold established each year. To understand the impact of the changes to the LTCH PPS payments presented in this final rule on different categories of LTCHs for FY 2015, it is necessary to estimate payments per discharge for FY 2014 using the rates, factors (including the FY 2014 GROUPER (Version 31.0), and relative weights and the policies established in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50753 through 50760 and 51002). It is also necessary to estimate the payments per discharge that will be made under the LTCH PPS rates and factors, and GROUPER (Version 32.0) for FY 2015 (as discussed in section VII. of the preamble of this final rule and section V. of the Addendum to this final rule). These estimates of FY 2014 and FY 2015 LTCH PPS payments are based on the best available LTCH claims data and other factors, such as the application of inflation factors to estimate costs for SSO and HCO cases in each year. We also evaluated the change in estimated FY 2014 payments to estimated FY 2015 payments (on a per discharge basis) for each category of LTCHs. We are establishing a standard Federal rate for FY 2015 of $41,043.71 (for LTCHs that submit quality data under the requirements of the LTCHQR Program), which includes the 2.2 percent annual update, the area wage budget neutrality factor of 1.0016703, and a one-time prospective adjustment to the standard Federal rate for FY 2015 of 0.98734 (approximately ¥1.3 percent). For LTCHs that fail to submit data to the LTCH Quality Reporting Program, we are establishing a standard Federal rate for FY 2015 of $40,240.51 that includes a 2.0 percentage point reduction applied to the annual update under the requirements of section 1886(m)(5)(C) of the Act in addition to the other adjustments noted above. Hospital groups were based on characteristics provided in the OSCAR data, FY 2010 through FY 2012 cost report data in HCRIS, and PSF data. Hospital groups included the following: • Location: large urban/other urban/rural. • Participation date. • Ownership control. • Census region. • Bed size. To estimate the impacts of the payment rates and policy changes among the various categories of existing providers, we used LTCH cases from the FY 2013 MedPAR file to estimate payments for FY 2014 and to estimate payments for FY 2015 for 422 LTCHs. We believe that the discharges based on the FY 2013 MedPAR data for the 422 LTCHs in our database, which includes 330 proprietary LTCHs, provide sufficient representation in the MS–LTC–DRGs containing discharges for patients who received LTCH care for the most commonly treated LTCH patients’ diagnoses. PO 00000 Frm 00587 Fmt 4701 Sfmt 4700 50439 d. Calculation of Prospective Payments For purposes of this impact analysis, to estimate per discharge payments under the LTCH PPS, we simulated payments on a case-by-case basis using LTCH claims from the FY 2013 MedPAR files. For modeling estimated LTCH PPS payments for FY 2014, we used the FY 2014 standard Federal rate (that is, $40,607.31 for LTCHs that submit quality data under the requirements of the LTCHQR Program and $39,808.74 for LTCHs that failed to submit quality data under the requirements of the LTCHQR Program) used to make payments for LTCH discharges occurring on or after October 1, 2013 through September 30, 2014). For modeling estimated LTCH PPS payments for FY 2015, we used the FY 2015 standard Federal rate of $41,043.71 (for LTCHs that submit quality data under the requirements of the LTCHQR Program), which includes a one-time prospective adjustment of 0.98734 for FY 2015 for the final year of the 3-year phase-in. For LTCHs that we project to have failed to submit the requisite quality data for FY 2015 under the LTCH Quality Reporting Program, we used the FY 2015 standard Federal rate of $40,240.51, which reflects the 2.0 percentage points reduction required by section 1886(m)(5)(C) of the Act. The FY 2015 standard Federal rates also include the application of an area wage level budget neutrality factor of 1.0016703 (as discussed in section V.B.5. of the Addendum to this final rule). Furthermore, in modeling estimated LTCH PPS payments for both FY 2014 and FY 2015 in this impact analysis, we applied the FY 2014 and the FY 2015 adjustments for area wage levels and the COLA for LTCHs located in Alaska and Hawaii. Specifically, we adjusted for differences in area wage levels in determining estimated FY 2014 payments using the current LTCH PPS labor-related share of 62.537 percent (78 FR 50995 through 50996) and the wage index values established in the Tables 12A and 12B listed in the Addendum to the FY 2014 IPPS/LTCH PPS final rule (which are available via the Internet on the CMS Web site. We also applied the FY 2014 COLA factors shown in the table in section V.C. of the Addendum to that final rule (78 FR 50997 through 50998) to adjust the FY 2014 nonlabor-related share (37.463 percent) for LTCHs located in Alaska and Hawaii. Similarly, we adjusted for differences in area wage levels in determining the estimated FY 2015 payments using the FY 2015 LTCH PPS labor-related share of 62.306 percent and the FY 2015 wage index values, including the 50/50 blended wage index, determined from the wage index values presented in Tables 12A through 12D listed in section VI. of the Addendum to this final rule (and available via the Internet). We also applied the FY 2015 COLA factors shown in the table in section V.C. of the Addendum to this final rule to the FY 2015 nonlabor-related share (37.694 percent) for LTCHs located in Alaska and Hawaii. As discussed above, our impact analysis reflects an estimated change in payments for SSO cases, as well as an estimated increase in payments for HCO cases (as described in E:\FR\FM\22AUR2.SGM 22AUR2 50440 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations section V.D. of the Addendum to this final rule). In modeling payments for SSO and HCO cases in FY 2015, we applied an inflation factor of 5.0 percent (determined by OACT) to estimate the costs of each case using the charges reported on the claims in the FY 2013 MedPAR files and the best available CCRs from the March 2014 update of the PSF. Furthermore, in modeling estimated LTCH PPS payments for FY 2015 in this impact analysis, we used the FY 2015 fixed-loss amount of $14,972 (as discussed in section V.D. of the Addendum to this final rule). These impacts reflect the estimated ‘‘losses’’ or ‘‘gains’’ among the various classifications of LTCHs from FY 2014 to FY 2015 based on the payment rates and policy changes presented in this final rule. Table IV illustrates the estimated aggregate impact of the LTCH PPS among various classifications of LTCHs. • The first column, LTCH Classification, identifies the type of LTCH. • The second column lists the number of LTCHs of each classification type. • The third column identifies the number of LTCH cases. • The fourth column shows the estimated payment per discharge for FY 2014 (as described above). • The fifth column shows the estimated payment per discharge for FY 2015 (as described above). • The sixth column shows the percentage change in estimated payments per discharge from FY 2014 to FY 2015 due to the annual update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this final rule, including the 2.0 percentage point reduction to the update to the standard Federal rate for LTCHs that fail to submit data to the LTCHQR Program) and the final year of the phase-in of a one-time prospective adjustment factor for FY 2015. • The seventh column shows the percentage change in estimated payments per discharge from FY 2014 to FY 2015 for changes to the area wage level adjustment (that is, the wage indexes, including the implementation of the new OMB delineations, and the labor-related share), including the application of an area wage level budget neutrality factor (as discussed in section V.B. of the Addendum to this final rule. This column includes the wage index calculated as a 50/50 blend of the wage index under the current CBSA designations and the wage index under the new OMB delineations under our transitional wage index policy for the implementation of the new OMB delineations. • The eighth column shows the percentage change in estimated payments per discharge from FY 2014 (Column 4) to FY 2015 (Column 5) for all changes (and includes the effect of estimated changes to HCO and SSO payments). TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2015 [Estimated FY 2014 payments compared to estimated FY 2015 payments] Number of LTCH PPS cases (1) tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Number of LTCHs (2) (3) (6) (4) ALL PROVIDERS ........ BY LOCATION: RURAL .................. URBAN ................. LARGE ........... OTHER .......... BY PARTICIPATION DATE: BEFORE OCT. 1983 .................. OCT. 1983–SEPT. 1993 .................. OCT. 1993–SEPT. 2002 .................. OCTOBER 2002 and AFTER ....... BY OWNERSHIP TYPE: VOLUNTARY ........ PROPRIETARY .... GOVERNMENT .... BY REGION: NEW ENGLAND ... MIDDLE ATLANTIC ..................... SOUTH ATLANTIC EAST NORTH CENTRAL .......... EAST SOUTH CENTRAL .......... WEST NORTH CENTRAL .......... WEST SOUTH CENTRAL .......... VerDate Mar<15>2010 18:25 Aug 21, 2014 Percent change in estimated payments per discharge from FY 2014 to FY 2015 for changes to the area wage level adjustment with budget neutrality 3 Percent change in payments per discharge from FY 2014 to FY 2015 for all changes 4 (7) Average FY 2015 LTCH PPS payment per case 1 (5) LTCH Classification Average FY 2014 LTCH PPS payment per case Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the annual update to the federal rate 2 (8) 422 138,281 40,149 40,600 0.8 0.0 1.1 22 400 200 200 5,695 132,586 76,559 56,027 35,361 40,355 42,561 37,341 35,770 40,808 43,060 37,730 0.8 0.8 0.8 0.8 ¥0.1 0.0 0.1 ¥0.1 1.2 1.1 1.2 1.0 16 5,209 37,151 38,039 0.8 0.9 2.4 44 16,841 43,306 43,778 0.8 ¥0.1 1.1 181 62,870 39,354 39,754 0.8 ¥0.1 1.0 181 53,361 40,383 40,845 0.8 0.0 1.1 80 330 12 18,696 117,767 1,818 41,099 39,916 45,491 41,674 40,350 45,750 0.8 0.8 0.8 0.2 0.0 ¥0.4 1.4 1.1 0.6 14 6,959 36,468 37,339 0.8 1.0 2.4 29 61 8,545 18,609 42,861 42,491 43,626 42,848 0.8 0.8 0.9 ¥0.2 1.8 0.8 70 20,160 41,699 42,165 0.8 0.2 1.1 31 8,962 39,380 39,745 0.8 ¥0.4 0.9 26 6,473 39,500 39,986 0.8 0.1 1.2 134 48,290 35,668 35,968 0.8 ¥0.4 0.8 Jkt 232001 PO 00000 Frm 00588 Fmt 4701 Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations 50441 TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2015—Continued [Estimated FY 2014 payments compared to estimated FY 2015 payments] Number of LTCHs Number of LTCH PPS cases (1) (2) (3) (6) (4) MOUNTAIN ........... PACIFIC ................ BY BED SIZE: BEDS: 0–24 .......... BEDS: 25–49 ........ BEDS: 50–74 ........ BEDS: 75–124 ...... BEDS: 125–199 .... BEDS: 200 + ......... Percent change in estimated payments per discharge from FY 2014 to FY 2015 for changes to the area wage level adjustment with budget neutrality 3 Percent change in payments per discharge from FY 2014 to FY 2015 for all changes 4 (7) Average FY 2015 LTCH PPS payment per case 1 (5) LTCH Classification Average FY 2014 LTCH PPS payment per case Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the annual update to the federal rate 2 (8) 32 25 6,809 13,474 43,154 50,143 43,692 50,825 0.8 0.8 0.1 0.2 1.2 1.4 24 200 117 45 22 14 2,591 47,301 37,621 22,107 15,387 13,274 35,097 39,156 40,747 41,907 39,065 41,312 35,370 39,565 41,258 42,416 39,492 41,708 0.9 0.8 0.8 0.8 0.8 0.8 ¥0.3 ¥0.1 0.1 0.2 ¥0.1 ¥0.2 0.8 1.0 1.3 1.2 1.1 1.0 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1 Estimated FY 2015 LTCH PPS payments based on the payment rate and factor changes presented in the preamble of and the Addendum to this final rule. 2 Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the annual update to the standard Federal rate and the one-time prospective adjustment factor for FY 2015 as discussed in section V.A.2. of the Addendum to this final rule. 3 Percent change in estimated payments per discharge from FY 2014 to FY 2015 for changes to the area wage level adjustment under § 412.525(c) (as discussed in section V.B. of the Addendum to this final rule). 4 Percent change in estimated payments per discharge from FY 2014 LTCH PPS (shown in Column 4) to FY 2015 LTCH PPS (shown in Column 5), including all of the changes to the rates and factors presented in the preamble of and the Addendum to this final rule. Note, this column, which shows the percent change in estimated payments per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge for the annual update to the standard Federal rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated. e. Results Based on the most recent available data for 422 LTCHs, we have prepared the following summary of the impact (as shown above in Table IV) of the LTCH PPS payment rate and policy changes presented in this final rule. The impact analysis in Table IV shows that estimated payments per discharge are expected to increase 1.1 percent, on average, for all LTCHs from FY 2014 to FY 2015 as a result of the payment rate and policy changes presented in this final rule, including an estimated slight increase in HCO payments. This estimated 1.1 percent increase in LTCH PPS payments per discharge from the FY 2014 to FY 2015 for all LTCHs (as shown in Table IV) was determined by comparing estimated FY 2015 LTCH PPS payments (using the payment rates and factors discussed in this final rule) to estimated FY 2014 LTCH PPS payments (as described in section I.K.3.d. of this Appendix). We are establishing a standard Federal rate of $41,043.71 (or a standard Federal rate of $40,240.51 for LTCHs that failed to submit data under the requirements of the LTCHQR Program) for FY 2015. Specifically, we are updating the standard Federal rate for FY 2015 by 2.2 percent, which is based on the latest estimate of the LTCH PPS market basket increase (2.9 percent), the reduction of 0.5 percentage point for the MFP adjustment, and the 0.2 percentage point reduction consistent with sections 1886(m)(3) and VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 (m)(4) of the Act. For LTCHs that fail to submit quality data under the requirements of the LTCHQR Program, as required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point reduction is applied to the annual update to the standard Federal rate. In addition, we are applying a one-time prospective adjustment factor for FY 2015 of 0.98734 (approximately –1.3 percent) to the standard Federal rate for the final year of the 3-year phase-in. We noted earlier in this section that, for most categories of LTCHs, as shown in Table IV (Column 6), the payment increase due to the 2.2 percent annual update to the standard Federal rate and the application of a one-time prospective adjustment for FY 2015 of approximately ¥1.3 percent for the final year of the 3-year phase-in is projected to result in approximately a 0.8 percent increase in estimated payments per discharge for all LTCHs from FY 2014 to FY 2015. In addition, our estimate of the changes in payments due to the update to the standard Federal rate also reflects estimated payments for SSO cases that are paid using special methodologies that are not affected by the update to the standard Federal rate. For these reasons, we estimate that payments may increase by less than 0.9 percent for certain hospital categories due to the annual update to the standard Federal rate and the application of the final phase of the one-time prospective adjustment for FY 2015. PO 00000 Frm 00589 Fmt 4701 Sfmt 4700 (1) Location Based on the most recent available data, the vast majority of LTCHs are located in urban areas. Only approximately 5 percent of the LTCHs are identified as being located in a rural area, and approximately 4 percent of all LTCH cases are treated in these rural hospitals. The impact analysis presented in Table IV shows that the average percent increase in estimated payments per discharge from FY 2014 to FY 2015 for all hospitals is 1.1 percent for all changes. For rural LTCHs, the percent change for all changes is estimated to be a 1.2 percent increase, while for urban LTCHs, we estimate the increase will be 1.1 percent. Large urban LTCHs are projected to experience an increase of 1.2 percent in estimated payments per discharge from FY 2014 to FY 2015, while other urban LTCHs are projected to experience an increase of 1.0 percent in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. (2) Participation Date LTCHs are grouped by participation date into four categories: (1) Before October 1983; (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) October 2002 and after. Based on the most recent available data, the categories of LTCHs with the largest percentage of LTCH cases (approximately 45 percent) are in hospitals that began participating in the Medicare program E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50442 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations between October 1993 and September 2002, and they are projected to experience a 1.0 percent increase in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. Approximately 4 percent of LTCHs began participating in the Medicare program before October 1983, and these LTCHs are projected to experience a higher than average percent increase (2.4 percent) in estimated payments per discharge from FY 2014 to FY 2015, as shown in Table IV. Approximately 10 percent of LTCHs began participating in the Medicare program between October 1983 and September 1993. These LTCHs are projected to experience a 1.1 percent increase in estimated payments from FY 2014 to FY 2015. LTCHs that began participating in the Medicare program after October 1, 2002, which treat approximately 39 percent of all LTCH cases, are projected to experience a 1.1 percent increase in estimated payments from FY 2014 to FY 2015. (3) Ownership Control LTCHs are grouped into three categories based on ownership control type: voluntary, proprietary, and government. Based on the most recent available data, approximately 19 percent of LTCHs are identified as voluntary (Table IV). The majority (nearly 78 percent) of LTCHs are identified as proprietary while government-owned and operated LTCHs represent about 3 percent of LTCHs. Based on ownership type, voluntary LTCHs are expected to experience an above average increase in payments of 1.4 percent; proprietary LTCHs are expected to experience an increase of 1.1 percent in payments, while government-owned and operating LTCHs are expected to experience an increase in payments that is less than the national average of 0.6 percent from FY 2014 to FY 2015. (4) Census Region Estimated payments per discharge for FY 2015 are projected to increase for LTCHs located in all regions in comparison to FY 2014. Of the 9 census regions, we project that the increase in estimated payments per discharge will have the largest positive impact on LTCHs in the New England and Middle Atlantic regions (2.4 percent and 1.8 percent, respectively as shown in Table IV). The estimated percent increase in payments per discharge from FY 2014 to FY 2015 for those regions is largely attributable to the changes in the area wage level adjustment. In contrast, LTCHs located in the South Atlantic and West South Central regions are projected to experience the smallest increase in estimated payments per discharge from FY 2014 to FY 2015. The lower than national average estimated increase in payments of 0.8 percent is primarily due to estimated decreases in payments associated with the changes to the area wage level adjustment. (5) Bed Size LTCHs are grouped into six categories based on bed size: 0–24 beds; 25–49 beds; 50–74 beds; 75–124 beds; 125–199 beds; and greater than 200 beds. Most bed size categories are projected to receive either a slightly higher or slightly lower than average increase in estimated payments per discharge VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 from FY 2014 to FY 2015. We project that small LTCHs (0–24 beds) will experience a 0.8 percent increase in payments, which is less than the nation average mostly due to decreases in the area wage level adjustment, while large LTCHs (200+ beds) will experience a 1.0 percent increase in payments. LTCHs with between 75 and 124 beds are expected to experience an above average increase in payments per discharge from FY 2014 to FY 2015 (1.2 percent). 4. Effect on the Medicare Program As noted previously, we project that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments in FY 2015 relative to FY 2014 of approximately $62 million (or approximately 1.1 percent) for the 422 LTCHs in our database. 5. Effect on Medicare Beneficiaries Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. L. Effects of Requirements for the Hospital Inpatient Quality Reporting (IQR) Program In section IX.A. of the preamble of this final rule, we discuss our requirements for hospitals to report quality data under the Hospital IQR Program in order to receive the full annual percentage increase for the FY 2017 payment determination. We are removing a total of 19 measures from the Hospital IQR Program for the FY 2017 payment determination and subsequent years, which begins in the CY 2015 reporting period. The first five measures are: (1) AMI– 1 Aspirin at arrival (NQF #0132); (2) AMI– 3 ACEI/ARB for left ventricular systolic dysfunction (NQF #0137); (3) AMI–5 Betablocker prescribed at discharge (NQF #0160); (4) SCIP INF–6 Appropriate Hair Removal; and (5) Participation in a systematic database for cardiac surgery (NQF #0113). Of these five measures, the first four are currently suspended. The fifth measure was recommended by the MAP for removal because it is ‘‘topped-out.’’ We believe that an additional 14 chart-abstracted measures are ‘‘topped out,’’ based on the previously adopted criteria, and we are removing them from the FY 2017 payment determination and subsequent years measure set. However, we are retaining the electronic clinical quality measure version of 10 of these chartabstracted measures for Hospital IQR Program reporting as discussed in section IX.A.7.f. of the preamble of this final rule. We also are adding one chart-abstracted measure for the FY 2017 payment determination and subsequent years in this final rule: Severe sepsis and septic shock: management bundle (NQF #0500). We are incorporating refinements for several measures for the FY 2017 payment determination and subsequent years that were previously adopted in the Hospital IQR Program. These refinements have either arisen out of the NQF endorsement PO 00000 Frm 00590 Fmt 4701 Sfmt 4700 maintenance process, or during our internal efforts to harmonize measure approaches. The measure refinements include the following: (1) Refining the planned readmission algorithm for all seven readmission measures included in the Hospital IQR Program; (2) modifying the hip/ knee readmission and complication measure cohorts to exclude index admissions with a secondary fracture diagnosis; and (3) modifying the hip/knee complication measure to not count as complications coded as ‘‘present on admission’’ (POA) during the index admission. We do not anticipate any hospital burden associated with these revisions, as each is based on claims submitted by hospitals for payment purposes. Information is not available to determine the precise number of hospitals that would not meet the requirements to receive the full annual percentage increase for the FY 2017 payment determination. Historically, an average of 100 hospitals that participate in the Hospital IQR Program do not receive the full annual percentage increase in any fiscal year. We anticipate that because of the new requirements we are finalizing for reporting for the FY 2017 payment determination, the number of hospitals not receiving the full annual percentage increase may be higher than average. The highest number of hospitals failing to meet program requirements was approximately 200 after the introduction of new NHSN reporting requirements. If the number of hospitals failing does increase because of new requirements, we anticipate that over the long run, this number will decline as hospitals gain more experience with these requirements. In the FY 2014 IPPS/LTCH PPS final rule, we estimated that the burden for the FY 2016 payment determination was 1,775 hours annually per hospital and 5.86 million hours across all 3,300 hospitals participating in the Hospital IQR Program (78 FR 50956). However, we have re-estimated the total number of hours associated with the requirements finalized for the FY 2016 payment determination to be 1,309 hours per hospital or a total of 4.3 million hours for all hospitals using more recent information from the clinical data warehouse than was available in August 2013. As discussed in section XIII.B.6. of the preamble of this final rule, we estimate that our proposals for the adoption and removal of measures will result in an overall reduction in the total burden for hospitals for the FY 2017 payment determination for reporting chart-abstracted and structural measures, completing forms, reviewing reports, and submitting validation templates of 160 hours per hospital or 0.5 million hours across all hospitals compared to the total burden for participating hospitals in the Hospital IQR Program for the FY 2016 payment determination. The numbers included in our finalized policy more accurately reflect the burden associated with our program than the estimates provided in our proposal. As a result, the total burden for approximately 3,300 hospitals for the FY 2017 payment determination will be 1,149 hours per hospital or 3.8 million hours across all hospitals. This burden estimate includes E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations both the newly finalized measures and the measures we are continuing. The burden estimates in this final rule are the estimates for which we are requesting OMB approval. 50443 The table below describes the hospital burden associated with the Hospital IQR Program requirements. BURDEN IMPACT OF HOSPITAL IQR PROGRAM REQUIREMENTS FOR FY 2017 Hospital IQR Program Requirement Number of hospitals impacted Burden per hospital for previously finalized requirements Burden per hospital for all requirements as finalized (continuing, removed, added) Chart-abstracted and structural measures, forms .... Review reports for claims-based measures ............. Reporting of voluntary electronic clinical quality measures in place of chart-abstracted measures. Validation templates .................................................. Electronic clinical quality measure validation test .... Validation charts photocopying ................................. 3,300 ......................... 3,300 ......................... Unknown* .................. 1,291 hours ............... 4 hours ...................... ¥385 hours ............... 1,131 hours ............... 4 hours ...................... ¥425 hours ............... ¥160 hours. 0. ¥40 hours. Up to 600** ................ Up to 100** ................ Up to 600 .................. 72 hours .................... 0 ................................ $8,640 ....................... 72 hours .................... 16 hours .................... $8,496 ....................... 0. 16 hours. $¥144. Net change in burden per hospital * This number is unknown at the time this table was prepared because final submission deadlines have not passed. Because the burden associated with participation is negative, we assumed this number to be 0 in summary calculations included in the narrative. ** Maximum numbers were used in summary calculations included in the narrative. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV We estimate that the total burden associated with the voluntary electronic clinical quality measure reporting option will be similar to the burden outlined for hospitals in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 53968 through 54162). In this rule, we finalize a policy allowing hospitals to submit data for a maximum of 16 measures that can be used to satisfy partial requirements for both programs. We estimate that each hospital that participates in the voluntary electronic quality measure reporting option could realize a maximum reduction in burden of up to approximately 425 hours by submitting data for all 12 required chart-abstracted measures that are also electronically specified. M. Effects of Requirements for the PPSExempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2017 In section IX.B. of the preamble of this final rule, we discuss our policies for the quality data reporting program for PPSexempt cancer hospitals (PCHs), which we refer to as the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program. The PCHQR Program is authorized under section 1866(k) of the Act, which was added by section 3005 of the Affordable Care Act. In this final rule, we are requiring that PCHs submit data on one additional measure beginning with the FY 2017 program which will increase the total number of measures in the FY 2017 PCHQR measure set to 19 measures. We also are updating the specifications for the five previously finalized clinical process/oncology care measures to require PCHs to report all-patient data for each of these measures, and to adopt a new sampling methodology that PCHs can use to report these measures, as well as the newly finalized EBRT for bone metastases measure. We also are providing PCHs with two reporting options to report the clinical process/oncology care, SCIP, and clinical process/cancer specific treatment measures. The impact of the new requirements for the PCHQR Program is expected to be minimal overall because some PCHs are already submitting previously adopted quality measure data to CMS. As a result, these PCHs VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 are familiar with our IT infrastructure and programmatic operations. In addition to fostering transparency and facilitating public reporting, we believe our requirements uphold our goals in improving quality of care and achieving better health outcomes, which outweighs burden. One expected effect of the PCHQR Program is to keep the public informed of the quality of care provided by PCHs. We will publicly display quality measure data collected under the PCHQR Program as required under the Act. These data will be displayed on the Hospital Compare Web site. The goals of making these data available to the public in a user-friendly and relevant format, include, but are not limited to: (1) Allowing the public to compare PCHs in order to make informed health care decisions regarding care setting; and (2) providing information about current trends in health care. Furthermore, PCHs can use their own health care quality data for many purposes such as in risk management programs, healthcare associated infection prevention programs, and research and development activities, among others. N. Effects of Requirements for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2018 In section IX.C. of the preamble of this final rule, we discuss the implementation of section 1886(m)(5) of the Act, which was added by section 3004(a) of the Affordable Care Act. Section 1886(m)(5) of the Act provides that, for rate year 2014 and each subsequent year, any LTCH that does not submit data to the Secretary in accordance with section 1886(m)(5)(C) of the Act shall receive a 2-percentage point reduction to the annual update to the standard Federal rate for discharges for the hospital during the applicable fiscal year. In the FY 2012 IPPS/ LTCH PPS final rule (76 FR 51839 through 51840), we estimated that only a few LTCHs would not receive the full annual percentage increase in any fiscal year as a result of failure to submit data under the LTCHQR Program. Information is not available to determine the precise number of LTCHs that would not meet the requirements to receive the full annual percentage increase for the FY 2016 payment determination. At the time PO 00000 Frm 00591 Fmt 4701 Sfmt 4700 that this analysis was prepared, 8 of the 442 active Medicare-certified LTCHs did not receive the full annual percentage increase for the FY 2014 payment determination. We believe that a majority of LTCHs will continue to collect and submit data for the FY 2015 payment determination and subsequent years because they will continue to view the LTCHQR Program as an important step in improving the quality of care patients receive in the LTCHs. We believe that the burden associated with the LTCHQR Program is the time and effort associated with data collection. There are approximately 442 LTCHs currently reporting quality data to CMS. In this final rule, we are retaining seven previously finalized measures, revising two previously finalized measures, and are finalizing three additional quality measures for inclusion in the LTCHQR Program. In section IX.C.7. of the preamble of this final rule, we are finalizing three new quality measures for inclusion in the LTCHQR Program affecting the FY 2018 payment determination and subsequent years: (1) Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function; (2) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and (3) National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure. Six of the previously adopted and newly finalized measures will be collected via the NHSN. In section IX.C.7.b. of the preamble of this final rule, we are finalizing our proposal to collect the NHSN VAE Outcome Measure. Normally, we would only discuss the burden associated with those measures that were proposed or finalized in any given rule. Because we have access to information that now indicates our previous calculations for the CAUTI, CLABSI, MRSA, and CDI were incorrect (we estimated in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50959 through 50964) that LTCHs would submit six infection events per month for each of these measures), we offer below the recalculation of the associated burden. Based on submissions to the NHSN, we now estimate E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 50444 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations that each LTCH will make approximately 7 NHSN submissions per month: 1 MRSA event; 1 CDI event; 2 CLABSI events; 3 CAUTI events (84 events per LTCH annually). This equates to a total of approximately 37,128 submissions of events to the NHSN from all LTCHs per year (includes CAUTI, CLABSI, MRSA, and CDI). The CDC estimated the public reporting burden of the collection of information for each measure to include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. MRSA and CDI events are estimated to require an average of 15 minutes per response (10 minutes of clinical (RN) time, and 5 minutes of clerical (Medical Record or Healthcare Information Technician)). CAUTI is estimated to require an average of 29 minutes per response, and CLABSI events are estimated to require an average of 32 minutes per response. In addition, each LTCH must also complete a Patient Safety Monthly Reporting Plan estimated at 35 minutes per Plan and a Denominator for Specialty Care Area, which is estimated at 5 hours per month. Based on this estimate, we expect each LTCH will expend 8.6 hours per month for each LTCH, 103.2 hours annually for each LTCH or 45,614.4 hours annually for all LTCHs reporting to the NHSN. In addition, each LTCH must submit the Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), which the CDC estimates will take 10 minutes annually per LTCH, or an additional 73.66 hours for all LTCHs annually. In total, the burden we have recalculated for all previously finalized measures (including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) will equal 103.4 hours annually per LTCH or 45,072.8 hours for all LTCHs annually. For the newly finalized VAE measure, which will also be reported by LTCHs through the CDC’s NHSN, the CDC estimates that each LTCH will submit 1 VAE per month, which will require approximately 22 minutes of clinical time per response. This equates to 22 minutes per LTCH monthly, 4.4 hours per LTCH annually, and 1,944.8 hours for all LTCHs annually. According to the US Bureau of Labor and Statistics, the mean hourly wage for a registered nurse (RN) is $33.13 250; the mean hourly wage for a medical records and health information technician is $16.81. However, in order to account for overhead and fringe benefits, we have doubled the mean hourly wage, making it $66.26 for an RN and $33.62 for a Medical Record or Health Information Technician. We estimate that the annual cost per each LTCH for the previously finalized measures, for which we have recalculated burden (including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) to be $6,770.10 and that the total yearly cost to all LTCHs for the submission of data to NHSN will be $2,992,384.20. We estimate that the total cost for the newly finalized VAE measure will be $291.54 per LTCH annually, or $128,860.68 for all LTCHs annually. The All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from Long-Term Care Hospitals is a Medicare claims-based measure; because claims-based measures can be calculated based on data that are already reported to the Medicare program for payment purposes, we believe there will be no additional impact. The remaining five measures will be collected utilizing the LTCH CARE Data Set. The burden estimates associated with OMB control number 0938–1163 estimate that each LTCH has an impact data collection burden of 243.24 hours or $6,755.84 associated with collection of the LTCH CARE Data Set, which includes the following three measures: Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (NQF #0678); Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (NQF #0680); and the Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674). We are also finalizing our proposal to use the LTCH CARE Data Set to report the two additional newly finalized measures— Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support; and Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function—for the FY 2018 payment determination and subsequent years. In addition, the LTCH CARE Data Set will be used to report the previously finalized measure. We estimate the additional elements for two newly finalized measures will take 13.5 minutes of nursing/clinical staff time to report data for Admission assessment and 13 minutes of nursing/ clinical staff time to report data for Discharge assessment, for a total of 26.5 minutes. In accordance with OMB control number 0920– 0666, we estimate 202,050 discharges from all LTCHs annually, with an additional burden of 26.5 minutes. This would equate to 89,238.75 total hours or 201.9 hours per LTCH. We believe this work will be completed by RN staff. As previously noted, per the US Bureau of Labor and Statistics, the mean hourly wage for a registered nurse (RN) is $33.13.251 However, in order to account for overhead and fringe benefits, we have doubled the mean hourly wage, making it $66.26 for an RN. The total cost related to the two newly finalized functional status measures referenced above is estimated at 250 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/ healthcare/registered-nurses.htm. Fringe benefits are calculated at a rate of 36.25 percent in accordance with OMB Circular A–76, Attachment C, Table C.1. After adding the fringe benefits, the total hourly cost for an RN is $42.89. 251 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/ healthcare/registered-nurses.htm. Fringe benefits are calculated at a rate of 36.25 percent in accordance with OMB Circular A–76, Attachment C, Table C.1. After adding the fringe benefits, the total hourly cost for an RN is $42.89. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00592 Fmt 4701 Sfmt 4700 $13,377.89 per LTCH annually, or $5,913,027.38 for all LTCHs annually. As discussed in section IX.C.7.a.1 of the preamble of this final rule, in response to several public comments concerned that the proposed functional status measures are excessively burdensome and that some of the included data items used to collect the data for the measures had ‘‘low response rates’’ during demonstration testing, we have decided to reduce the number of LTCH CARE Data Set data items required for the measure Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function. We have reduced the number of data items for this quality measure from the originally proposed 45 to 35. We estimate that this reduction effectively reduces the annual cost per LTCH from the originally estimated $13,377.89 to $10,348.82 annually, and reduces the annual cost for all LTCHs from the originally estimated $5,913,027.38 to $4,574,178.44. This equates to a reduction of $3,029.07 per LTCH annually, and $1,338,851.38 for all LTCHs annually. Lastly, as discussed in section IX.C.11. of the preamble of this final rule, in response to public comments, we are not finalizing our proposal to validate the accuracy of LTCH data at this time. In summary, the total cost for all previously finalized HAI and vaccination measures (CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly Reporting plan, and Denominator for Specialty Care Area) reported through the CDC’s NHSN, that we have recalculated based on new information regarding the number of infection events reported by LTCHs per month, is $6,770.10 per LTCH annually, or $2,992,384.20 for all LTCHs annually. The total cost per LTCH for the three newly finalized measures in this final rule (Functional Outcome Measure: Change in Mobility among Inpatients requiring Ventilator Support, Percent of LTCH Inpatients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function, and Ventilator-Associated Events) is $10,640.36 per LTCH annually, or $4,703,039.12 for all LTCHs annually. Comment: Several commenters expressed concern over the burden associated with collection the two functional status measures we proposed. Response: For a full discussion of the public comments, our responses, and our associated analysis of the reduction in required data items for the measure Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function, we refer readers to the comment and response portion of section IX.C.7.a.1 of the preamble of this final rule. As we discuss above, as a result of our response, we have reduced our estimate of the burden for these measures, as we are finalizing them, by $1,338,851.38. Comment: One commenter expressed concern over the burden with which the LTCH program is growing year to year, noting that there has been a 300 percent increase in burden each year, and that hospitals cannot endure such increases. This commenter further noted that the total cost for the E:\FR\FM\22AUR2.SGM 22AUR2 tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations LTCHQR Program to all LTCHs, with the inclusion of the three additional finalized measures in this rule is close to $12 million, while the initially estimated cost for the LTCHQR Program in the FY 2012 IPPS/LTCH PPS final rule was $750,000. Response: We believe that the commenter’s reference to $750,000 is a reference to our estimate in section IX.b.6 the FY 2012 IPPS/ LTCH PPS final rule of the costs of submitting the CAUTI and CLABSI data to NHSN (76 FR 51780 through 51781). Our estimate of the effects of the LTCHQR Program in that final rule (76 FR 51839) was $1,128,440. Our original estimate in the FY 2012 IPPS/LTCH PPS final rule was based on projected costs for the program, as we had no data related to the rate of submission of our proposed measures. While the commenter is correct that the estimates in the proposed FY 2015 IPPS/ LTCH PPS proposed rule, as well as this final rule, equal approximately $12 million, we would like to take this opportunity to explain the increase. Our original estimate in the FY 2012 IPPS/LTCH PPS final rule was based on projected costs for the program, as we had no data related to the rate of submission of our proposed measures. In subsequent years, as we added measures to the LTCHQR Program and as we have obtained a better understanding of the rate at which LTCHs would submit HAI data to the NHSN, we calculated and recalculated these costs in order to provide a more accurate representation of the program costs. As we have done in past rules, based on new information from the CDC, we have again recalculated the program costs related to previously finalized quality measures and required data submission. The estimates contained within this final rule resulted from actual CDC data regarding the rate of submission of all quality measures submitted via the CDC’s NHSN, as well as from OMBapproved burden estimates for each of these measures. In addition, we accounted for actual burden, such as the Patient Safety Reporting Plan and Denominator for Specialty Care Area, which together, added an additional 64.2 hours per year per provider or 28,248 hours for all LTCHs. Finally, in the FY 2015 IPPS/LTCH PPS proposed rule, as well as this final rule, we accounted for overhead and fringe benefits, which effectively doubled many of our earlier cost estimates. Our inclusion of these costs (overhead and fringe), which we have not included in the past, is a substantial factor associated with the increase in burden. We believe that this cost estimate cannot be compared to the cost estimate in the FY 2014 and previous IPPS/LTCH PPS final rules, without recognition of the factors discussed above. However, we are mindful of the burden of LTCHQR Program requirements and we have attempted to balance the need for a robust LTCHQR Program with this burden. For example, we have authorized sampling for certain measure reporting. In addition, as discussed in section IX.C.7.a.(1) of the preamble of this final rule, in response to commenters’ specific concerns regarding burden, we are not adopting the reporting of several proposed new items in the LTCH CARE Tool, which overlap other VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 items we are retaining, had high ‘‘Activity Did Not Occur’’ rates, and can be removed from the quality measure without affecting the measure substantively. As noted above, these modifications reduce our burden estimate by $1,333,851.38. O. Effects of Regarding Electronic Health Record (EHR) Incentive Program and Hospital IQR Program In sections IX.D. of the preamble of this final rule, we discuss requirements for the EHR Incentive Program. We are aligning the Medicare EHR Incentive Program reporting and submission timelines for clinical quality measures for eligible hospitals and CAHs with the Hospital IQR Program’s reporting and submission timelines. However we are not finalizing our proposal to require quarterly submission of electronic clinical quality measure data. We have determined that the electronic submission of aggregate-level data using QRDA–III will not be feasible in 2015 for eligible hospitals and CAHs under the Medicare EHR Incentive Program. We are finalizing our proposal to continue, for FY 2015, the policy we adopted for FY 2014 for eligible hospitals and CAHs submitting electronic clinical quality measures under the Medicare EHR Incentive Program. For FY 2015, eligible hospitals and CAHs will be able to electronically submit using a method similar to the 2012 and 2013 EHR Incentive Program electronic reporting pilot for eligible hospitals and CAHs, which used QRDA–I (patient-level data). Eligible hospitals and CAHs that are beyond their first year of meaningful use may continue to report aggregate electronic clinical quality measure results through attestation. We also are clarifying our policy on zero denominators and the case threshold exemption for clinical quality measures. We do not believe that our newly finalized proposals to align the Medicare EHR Incentive program reporting and submission timelines for clinical quality measures with the Hospital IQR Program’s reporting and submission timelines and to allow the electronic submission of QRDA–I (patientlevel data) for eligible hospitals and CAHs to electronic submit electronic clinical quality measures under the Medicare EHR Incentive Program will have a significant impact. P. Effects of Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data Under section X. of the preamble of this final rule, we are revising the existing regulations at § 422.310(f) to broaden the specified uses of Medicare Advantage (MA) risk adjustment data in order to strengthen program management and increase transparency in the MA program and to specify the conditions for release of risk adjustment data to entities outside of CMS. We are revising the regulations to specify four additional purposes for which CMS may use or release risk adjustment data submitted by MA organizations: (1) To conduct evaluations and other analysis to support the Medicare program (including demonstrations) and to support public health initiatives and other health care-related PO 00000 Frm 00593 Fmt 4701 Sfmt 4700 50445 research; (2) for activities to support the administration of the Medicare program; (3) for activities conducted to support program integrity; and (4) for purposes authorized by other applicable laws. In addition, the existing regulations do not specify conditions for release by CMS of risk adjustment data submitted by MA organizations. Therefore, we are adding regulatory language to address CMS’ release of such data to non-CMS entities. We have determined that the regulatory amendments do not impose any mandatory costs on entities that may choose, under this newly finalized policy, to request data files from CMS for their research analyses or other purposes listed in the proposal. Requesting data from CMS is at the discretion of the requester. Therefore, we have determined that there are not any economically significant effects of the provisions. We also have determined that the regulatory amendments will not impose a burden on the entity requesting data files. Q. Effects of Changes to Enforcement Provisions for Organ Transplant Centers Under section XI. of the preamble of this final rule, we are finalizing our proposals to expand and clarify the current organ transplant regulation as it relates to a transplant program’s ability to request approval for participation in Medicare based on mitigating factors, the timelines for such review, and potential System Improvement Agreements that may allow a transplant program to improve outcomes and avert Medicare termination when outcomes have not met CMS requirements. Our finalized policies also will allow for consideration of factors such as innovative practice in the field of organ transplantation, and for potential mitigating factors consideration of a transplant program’s outcomes using Bayesian methodology for calculating outcomes for patient death and graft failure. These finalized policies will not have a significant effect on Medicare and Medicaid programs as it will allow organ transplant programs to continue to participate in Medicare if approved based on mitigating factors or during the time established in the Systems Improvement Agreement. There is an added benefit to patients who receive transplants, and to the Medicare program, when a transplant program improves patient and graft survival through completion of a system Improvement Agreement. However, sufficient data are not currently available to quantify the added benefit of System Improvement Agreements or innovative practices. Therefore, we project only that the cost impact of the policies to the Medicare and Medicaid programs will be negligible. Historical data reflect that between the date the transplant regulation was codified in 2007 and August 2013, CMS rendered a final determination for 129 organ transplant programs that applied for Medicare approval based on mitigating factors. Of the 129 transplant programs, 20 terminated Medicare participation. An additional 33 transplant programs averted Medicare termination by successful completion of a Systems Improvement Agreement and resulting substantial improvement in patient and graft E:\FR\FM\22AUR2.SGM 22AUR2 50446 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations survival. The remaining programs were approved for mitigating factors based on improved outcomes (without needing a System Improvement Agreement), special circumstances, or came into compliance with CMS requirements during the mitigating factors review period. We estimate the cost associated with the application for mitigating factors at $10,000. This is based on the salary for the transplant administrator to prepare the documents for the application during the 30-day timeframe allotted. The cost does not represent any increase from what is anticipated in the existing transplant regulation related to mitigating factors. For transplant programs that enter into a Systems Improvement Agreement, the estimated cost to the transplant program is $200,000 to $250,000 based on reports from programs that have completed such Agreements in the past. Both a mitigating factors review and completion of a System Improvement Agreement are voluntary acts on the part of a hospital that maintains a transplant program. Since the 2007 effective date of the CMS regulation, only one hospital has elected not to file a mitigating factors review after being cited by CMS for a condition-level deficiency for patient outcomes or clinical experience, and few hospitals have declined a CMS offer to complete a System Improvement Agreement. Therefore, we conclude that the costs involved in these activities are much lower for the hospital compared with other alternatives, such as filing an appeal and incurring the legal costs of that appeal. Our finalized policies will not have a significant impact on a substantial number of small businesses or other small entities. Nor will they have a significant impact on small rural hospitals. II. Alternatives Considered This final rule contains a range of policies. It also provides descriptions of the statutory provisions that are addressed, identifies the finalized policies, and presents rationales for our decisions and, where relevant, alternatives that were considered. III. Overall Conclusion tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV 1. Acute Care Hospitals Table I of section I.G. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for the MS–DRG and wage index changes, and for the wage index reclassifications under the MGCRB. Table I also shows an overall decrease of 0.6 percent in operating payments. As discussed in section I.G. of this Appendix, we estimate that operating payments will decrease by approximately $654 million in FY 2015 relative to FY 2014. However, when we account for the impact of the changes in Medicare DSH payments and the impact of the new additional payments based on uncompensated care in accordance with section 3133 of the Affordable Care Act, based on estimates provided by the CMS Office of the Actuary, consistent with our policy discussed in section IV.F. of the preamble of this final rule, we estimate that operating payments will decrease by approximately $457 million relative to FY 2014. In addition, we estimate a savings of $27 million associated with the HACs policies in FY 2015, which is an additional $1 million in savings as compared to FY 2014. We estimate the implementation of the HAC Reduction Program, under section 3008 of the Affordable Care Act, will reduce payments by $369 million in FY 2015. We estimate that the expiration of the expansion of low-volume hospital payments for discharges beginning on April 1, 2015, under the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93) will result in a decrease in payments of approximately $152 million relative to FY 2014. We estimate that the new technology add-on payments for FY 2015 will increase spending by approximately $91 million. Finally, we estimate that the policies related to validation, including submission of and payment for secure electronic versions of medical information for validation for the FY 2017 payment determination and subsequent years, as described in the ICRs for the Hospital IQR Program in section XII.B.6. of the preamble of this final rule, will result in no change in payments for CMS for FY 2015. These estimates, combined with our estimated decrease in FY 2015 operating payment of ¥$457 million, result in an estimated decrease of approximately $888 million for FY 2015. We estimate that hospitals will experience a 1.5 percent increase in capital payments per case, as shown in Table III of section I.I. of this Appendix. We project that there will be a $132 million increase in capital payments in FY 2015 compared to FY 2014. The cumulative operating and capital payments would result in a net decrease of approximately $756 million to IPPS providers. The discussions presented in the previous pages, in combination with the rest of this final rule, constitute a regulatory impact analysis. 2. LTCHs Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2015. In the impact analysis, we are using the rates, factors, and policies presented in this final rule, including updated wage index values and relative weights, and the best available claims and CCR data to estimate the change in payments under the LTCH PPS for FY 2015. Accordingly, based on the best available data for the 422 LTCHs in our database, we estimate that FY 2015 LTCH PPS payments will increase approximately $62 million relative to FY 2014 as a result of the payment rates and factors presented in this final rule. In addition, we estimate that net effect of the projected impact of certain other LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25 percent threshold’’ payment adjustment as discussed in section VII.E. of the preamble of this final rule; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds as discussed in section VII.G. of the preamble of this final rule; the revocation of onsite discharges and readmissions policy as discussed in section VII.F. of the preamble of this final rule; and the payment adjustment for ‘‘subclause (II)’’ LTCHs as discussed in section VII.H. of the preamble of this final rule) is estimated to result in an increase in LTCH PPS payments of approximately $116 million. The impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other LTCH PPS policy changes, will result in a net increase of $178 million to LTCH providers. Additionally, costs to LTCHs associated with the completion of the data for the LTCHQR Program are increasing by $4.7 million for FY 2015. IV. Accounting Statements and Tables A. Acute Care Hospitals As required by OMB Circular A–4 (available at https://www.whitehouse.gov/ omb/circulars/a004/a-4.pdf), in Table V below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule as they relate to acute care hospitals. This table provides our best estimate of the change in Medicare payments to providers as a result of the changes to the IPPS presented in this final rule. All expenditures are classified as transfers to Medicare providers. The savings to the Federal Government associated with the policies in this final rule are estimated at $756 million. TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS FROM FY 2014 TO FY 2015 Category Transfers Annualized Monetized Transfers .............................................................. From Whom to Whom .............................................................................. VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 PO 00000 Frm 00594 Fmt 4701 ¥$756 million. Federal Government to IPPS Medicare Providers. Sfmt 4700 E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations B. LTCHs As discussed in section I.L. of this Appendix, the impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, As discussed in section I.L. of this Appendix, the impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the ‘‘25-percent threshold’’ payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and increase in the number of LTCH beds; the revocation of onsite discharges and readmissions policy; and the payment adjustment for ‘‘subclause (II)’’ LTCHs), is projected to result in an increase in estimated aggregate LTCH PPS payments in FY 2015 relative to FY 2014 of approximately $178 million based on the data for 422 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A–4 (available at https:// www.whitehouse.gov/omb/circulars/a004/a4.pdf), in Table VI below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule as they 50447 relate to the changes to the LTCH PPS. Table VI provides our best estimate of the estimated increase in Medicare payments under the LTCH PPS as a result of the payment rates and factors and other provisions presented in this final rule based on the data for the 422 LTCHs in our database. All expenditures are classified as transfers to Medicare providers (that is, LTCHs). Lastly, we present the costs to LTCHs associated with the completion of the data for the LTCHQR Program at $4.7 million than in FY 2014. The cost to the Federal Government associated with the policies for LTCHs in this final rule is estimated at $178 million. TABLE VI—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FROM THE FY 2014 LTCH PPS TO THE FY 2015 LTCH PPS Category Transfers Annualized Monetized Transfers .............................................................. From Whom to Whom .............................................................................. $178 million. Federal Government to LTCH Medicare Providers. Category Costs tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV Annualized Monetized Costs for LTCHs to Submit Quality Data ............ V. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the SBA definition of a small business (having revenues of less than $7.0 million to $35.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 36 of the Table of Small Business Size Standards for NAIC 622 found on the SBA Web site at: https://www.sba.gov/ sites/default/files/files/Size_Standards_ Table.pdf.) For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this final rule relating to acute care hospitals would have a significant impact on small entities as explained in this Appendix. Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section I.L. of this Appendix. MACs are not considered to be small entities. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule constitutes our regulatory flexibility analysis. In FY 2015 IPPS/LTCH PPS proposed rule, we solicited public comments on our estimates and analysis of the impact of our proposals on those small VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 $4.7 million. entities. Any public comments that we received and our responses are presented throughout this final rule. VI. Impact on Small Rural Hospitals Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the policy changes under the IPPS for operating costs.) VII. Unfunded Mandates Reform Act Analysis Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2014, that threshold level is approximately $141 million. This final rule will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs. VIII. Executive Order 12866 In accordance with the provisions of Executive Order 12866, the Executive Office PO 00000 Frm 00595 Fmt 4701 Sfmt 4700 of Management and Budget reviewed this final rule. Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules, respectively. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the Puerto Rico-specific standardized amount, the hospital-specific rate for SCHs and MDHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs. In prior years, we have made a recommendation in the IPPS proposed rule and final rule for the update factors for the payment rates for IRFs and IPFs. However, for FY 2015, we plan to include the Secretary’s recommendation for the update factors for IRFs and IPFs in separate Federal Register documents at the time that we announce the annual updates for IRFs and IPFs. We also discuss our response to MedPAC’s recommended update factors for inpatient hospital services. II. Inpatient Hospital Update for FY 2015 A. FY 2015 Inpatient Hospital Update As discussed in section IV.B. of the preamble to this final rule, for FY 2015, E:\FR\FM\22AUR2.SGM 22AUR2 50448 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a 33 1/3 percent reduction to three-fourths of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful electronic health record (EHR) users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.2 percentage point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2015 adjustment of 0.2 percentage point may result in the applicable percentage increase being less than zero. In the FY 2015 IPPS/LTCH PPS proposed rule, based on the most recent data available at that time, in accordance with section 1886(b)(3)(B) of the Act, we proposed to establish the FY 2015 market basket update used to determine the applicable percentage increase for the IPPS based on IHS Global Insight, Inc.’s (IGI’s) first quarter 2014 forecast of the FY 2010-based IPPS market basket rate-of-increase with historical data through fourth quarter 2013, which was estimated to be 2.7 percent. Based on the most recent data available for this FY 2015 final rule, in accordance with section 1886(b)(3)(B) of the Act, we are establishing the FY 2015 market basket update used to determine the applicable percentage increase for the IPPS based on IHS Global Insight, Inc.’s (IGI’s) second quarter 2014 forecast of the FY 2010-based IPPS market basket rateof-increase, which is estimated to be 2.9 percent. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B.1. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), we proposed a multifactor productivity (MFP) adjustment (the 10-year moving average of MFP for the period ending FY 2015) of 0.4 percent. Therefore, based on IGI’s first quarter 2014 Hospital submitted quality data and is a meaningful EHR user FY 2015 Market Basket Rate-of-Increase ...................................................................... Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ......................................................................... Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act .......................................................................... MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......................... Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... Applicable Percentage Increase Applied to Standardized Amount ................. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV B. Update for SCHs and MDHs for FY 2015 Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2015 applicable percentage increase in the hospital-specific rate for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). As discussed in section IV.G. of the preamble of this final rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113–67), enacted on December 26, 2013, extended the MDH program from the end of FY 2013 through the first half of FY 2014 (that is, for discharges occurring before April 1, 2014). Subsequently, section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113–93), enacted on April 1, 2014, further extended the MDH program through the first half of FY 2015 (that is, for discharges occurring before April 1, 2015). VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 Frm 00596 Fmt 4701 Sfmt 4700 Hospital submitted quality data and is NOT a meaningful EHR user Hospital did NOT submit quality data and is a meaningful EHR user Hospital did NOT submit quality data and is NOT a meaningful EHR user 2.9 2.9 2.9 2.9 0.0 0.0 ¥0.725 ¥0.725 0.0 ¥0.5 ¥0.2 2.2 ¥0.725 ¥0.5 ¥0.2 1.475 0.0 ¥0.5 ¥0.2 1.475 ¥0.725 ¥0.5 ¥0.2 0.75 Prior to the enactment of Public Law 113–67, the MDH program was to be in effect through the end of FY 2013 only. The MDH program expires for discharges beginning on April 1, 2015, under current law. Accordingly, the update of the hospital-specific rates for FY 2015 for MDHs will apply in determining payments for FY 2015 discharges occurring before April 1, 2015. As mentioned above, the update to the hospital specific rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, depending on whether a hospital submits quality data and is a meaningful EHR user, we are establishing the same four applicable percentage increases in the table above for the hospital-specific rate applicable to SCHs and MDHs. PO 00000 forecast of the FY 2010-based IPPS market basket, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), we presented in the proposed rule four possible applicable percentage increases that could be applied to the standardized amount. Based on the most recent data available for this FY 2015 IPPS/LTCH PPS final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B.1. of the preamble of this final rule, we are establishing a MFP adjustment (the 10-year moving average of MFP for the period ending FY 2015) of 0.5 percent. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, as discussed in section IV.B.1. of the preamble of this final rule, we are establishing the applicable percentages increases for the FY 2015 updates based on IGI’s second quarter 2014 forecast of the FY 2010-based IPPS market basket, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, as outlined in the table below. C. FY 2015 Puerto Rico Hospital Update Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject E:\FR\FM\22AUR2.SGM 22AUR2 Federal Register / Vol. 79, No. 163 / Friday, August 22, 2014 / Rules and Regulations to the IPPS). Accordingly, we are making an applicable percentage increase to the Puerto Rico-specific standardized amount of 2.2 percent. D. Update for Hospitals Excluded From the IPPS for FY 2015 Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children’s hospitals, cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and America Samoa). Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, RNHCIs are paid under the provisions of § 413.40, which also use section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits. Currently, children’s hospitals, PPSexcluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa are among the remaining types of hospitals still paid under the reasonable cost methodology, subject to the rate-of-increase limits. We are applying the FY 2015 percentage increase in the IPPS operating market basket to the target amount for children’s hospitals, PPSexcluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. For this final rule, the current estimate of the FY 2015 IPPS operating market basket percentage increase is 2.9 percent. tkelley on DSK3SPTVN1PROD with REGISTER-BK 2 CV E. Update for LTCHs for FY 2015 Section 123 of Public Law 106–113, as amended by section 307(b) of Public Law 106–554 (and codified at section 1886(m)(1) of the Act), provides the statutory authority for updating payment rates under the LTCH PPS. As discussed in section V.A. of the Addendum to this final rule, we are establishing an update to the LTCH PPS standard Federal rate for FY 2015 based on the full LTCH PPS market basket increase estimate (for this final rule, estimated to be 2.9 percent), subject to an adjustment based on changes in economy-wide productivity and an additional reduction required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we are reducing the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points for failure of a LTCH to VerDate Mar<15>2010 18:25 Aug 21, 2014 Jkt 232001 submit the required quality data. The MFP adjustment described in section 1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to be 0.5 percent for FY 2015. In addition, section 1886(m)(3)(A)(ii) of the Act requires that any annual update for FY 2015 be reduced by the ‘‘other adjustment’’ at section 1886(m)(4)(E) of the Act, which is 0.2 percentage point. Therefore, based on IGI’s second quarter 2014 forecast of the FY 2015 LTCH PPS market basket increase, we are establishing an annual update to the LTCH PPS standard Federal rate of 2.2 percent (that is, the current FY 2015 estimate of the market basket rate-of-increase of 2.9 percent less an adjustment of 0.5 percentage point for MFP and less 0.2 percentage point). Accordingly, we are applying an update factor of 1.022 in determining the LTCH PPS standard Federal rate for FY 2015. For LTCHs that fail to submit quality data for FY 2015, we are applying an annual update to the LTCH PPS standard Federal rate of 0.2 percent (that is, the final annual update for FY 2015 of 2.2 percent less 2.0 percentage points for failure to submit the required quality data in accordance with section 1886(m)(5)(C) of the Act and our rules) by applying an update factor of 1.002 in determining the LTCH PPS standard Federal rate for FY 2015. Furthermore, we are making an adjustment for the final year of the 3-year phase-in of the one-time prospective adjustment to the standard Federal rate under § 412.523(d)(3) by applying a factor of 0.97834 (or approximately ¥1.3 percent) in FY 2015, consistent with current law. III. Secretary’s Recommendations MedPAC is recommending an inpatient hospital update equal to 3.25 percent for FY 2015. MedPAC’s rationale for this update recommendation is described in more detail below. As mentioned above, section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Consistent with current law, depending on whether a hospital submits quality data and is a meaningful EHR user, we are recommending the four applicable percentage increases to the standardized amount listed in the table under section II. of this Appendix B. We are recommending that the same applicable percentage increases apply to SCHs and MDHs. For the Puerto Rico-specific standardized amount, we are recommending an update of 2.2 percent. In addition to making a recommendation for IPPS hospitals, in accordance with PO 00000 Frm 00597 Fmt 4701 Sfmt 9990 50449 section 1886(e)(4)(A) of the Act, we are recommending update factors for certain other types of hospitals excluded from the IPPS. Consistent with our policies for these facilities, we are recommending an update to the target amounts for children’s hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa of 2.9 percent. For FY 2015, consistent with policy set forth in section VII. of the preamble of this final rule, we are recommending an update of 2.2 percent (that is, the current FY 2015 estimate of the LTCH PPS market basket rateof-increase of 2.9 percent less an adjustment of 0.5 percentage point for MFP and less 0.2 percentage point) to the LTCH PPS standard Federal rate. IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare In its March 2014 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates equal to 3.25 percent concurrent with changes to the outpatient prospective payment system and with initiating change to the LTCH PPS. We refer the reader to the March 2014 MedPAC report, which is available for download at www.medpac.gov for a complete discussion on this recommendation. MedPAC expects Medicare margins to remain low in 2014. At the same time, MedPAC’s analysis finds that efficient hospitals have been able to maintain positive Medicare margins while maintaining a relatively high quality of care. Response: With regard to MedPAC’s recommendation of an update to the hospital inpatient rates equal to 3.25 percent, for FY 2015, as discussed above, sections 3401(a) and 10319(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act. Section 1886(b)(3)(B) of the Act, as amended by these sections, sets the requirements for the FY 2015 applicable percentage increase. Therefore, we are establishing an applicable percentage increase for FY 2015 of 2.2 percent, provided the hospital submits quality data and is a meaningful EHR user, consistent with these statutory requirements. We note that, because the operating and capital prospective payment systems remain separate, we are continuing to use separate updates for operating and capital payments. The update to the capital rate is discussed in section III. of the Addendum to this final rule. [FR Doc. 2014–18545 Filed 8–4–14; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\22AUR2.SGM 22AUR2

Agencies

[Federal Register Volume 79, Number 163 (Friday, August 22, 2014)]
[Rules and Regulations]
[Pages 49853-50449]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18545]

[[Page 49853]]

Vol. 79

Friday,

No. 163

August 22, 2014

Part II

Department of Health and Human Services

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Center for Medicare & Medicaid Services

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

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

Federal Register / Vol. 79 , No. 163 / Friday, August 22, 2014 /
Rules and Regulations

[[Page 49854]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1607-F and CMS-1599-F3]
RINs 0938-AS11; 0938-AR12; and 0938-AR53

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

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

ACTION: Final rule.

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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems. Some of these changes implement certain
statutory provisions contained in the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010
(collectively known as the Affordable Care Act), the Protecting Access
to Medicare Act of 2014, and other legislation. These changes are
applicable to discharges occurring on or after October 1, 2014, unless
otherwise specified in this final rule. We also are updating the rate-
of-increase limits for certain hospitals excluded from the IPPS that
are paid on a reasonable cost basis subject to these limits. The
updated rate-of-increase limits are effective for cost reporting
periods beginning on or after October 1, 2014.
We also are updating the payment policies and the annual payment
rates for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs) and
implementing certain statutory changes to the LTCH PPS under the
Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR)
Reform Act of 2013 and the Protecting Access to Medicare Act of 2014.
In addition, we discuss our proposals on the interruption of stay
policy for LTCHs and on retiring the ``5 percent'' payment adjustment
for co-located LTCHs. While many of the statutory mandates of the
Pathway for SGR Reform Act apply to discharges occurring on or after
October 1, 2014, others will not begin to apply until 2016 and beyond.
In addition, we are making a number of changes relating to direct
graduate medical education (GME) and indirect medical education (IME)
payments. We are establishing new requirements or revising requirements
for quality reporting by specific providers (acute care hospitals, PPS-
exempt cancer hospitals, and LTCHs) that are participating in Medicare.
We are updating policies relating to the Hospital Value-Based
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program,
and the Hospital-Acquired Condition (HAC) Reduction Program. In
addition, we are making technical corrections to the regulations
governing provider administrative appeals and judicial review; updating
the reasonable compensation equivalent (RCE) limits, and revising the
methodology for determining such limits, for services furnished by
physicians to certain teaching hospitals and hospitals excluded from
the IPPS; making regulatory revisions to broaden the specified uses of
Medicare Advantage (MA) risk adjustment data and to specify the
conditions for release of such risk adjustment data to entities outside
of CMS; and making changes to the enforcement procedures for organ
transplant centers.
We are aligning the reporting and submission timelines for clinical
quality measures for the Medicare EHR Incentive Program for eligible
hospitals and critical access hospitals (CAHs) with the reporting and
submission timelines for the Hospital IQR Program. In addition, we
provide guidance and clarification of certain policies for eligible
hospitals and CAHs such as our policy for reporting zero denominators
on clinical quality measures and our policy for case threshold
exemptions.
In this document, we are finalizing two interim final rules with
comment period relating to criteria for disproportionate share hospital
uncompensated care payments and extensions of temporary changes to the
payment adjustment for low-volume hospitals and of the Medicare-
Dependent, Small Rural Hospital (MDH) Program.

DATES: Effective Date: These final rules are effective on October 1,
2014.
Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835
are applicable to appeals based on untimely contractor determinations
that are pending or were filed on or after August 21, 2008, subject to
the rules of administrative finality and reopening at 42 CFR 405.1807
and 405.1885. The provisions discussed in section IV.I.4.c. of the
preamble of this final rule are applicable on or after July 1, 2015;
and the provisions discussed in section IV.I.5.a. of the preamble of
this final rule are applicable on or after January 1, 2015.

FOR FURTHER INFORMATION, CONTACT:
Ing-Jye Cheng, (410) 786-4548 and Donald Thompson, (410) 786-4487,
Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions
(HAC), Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, and Medicare
Disproportionate Share Hospital (DSH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and
Hospital Value-Based Purchasing--Program Administration, Validation,
and Reconsideration Issues.
Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare
Providers and Systems Issues; and Readmission Measures for Hospitals
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Kellie Shannon, (410) 786-0416, Administrative Appeals by Providers and
Judicial Review Issues.
Amelia Citerone, (410) 786-3901, and Robert Kuhl (410) 786-4597,

[[Page 49855]]

Reasonable Compensation Equivalent (RCE) Limits for Physician Services
Provided in Providers.
Anne Calinger, (410) 786-3396, and Jennifer Harlow, (410) 786-4549,
Medicare Advantage Risk Adjustment Data Issues.
Thomas Hamilton, (410) 786-6763, Organ Transplant Center Issues.
Jennifer Phillips, (410) 786-1023, 2-Midnight Rule Benchmark Issues.

SUPPLEMENTARY INFORMATION:

Electronic Access

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

Tables Available Only Through the Internet on the CMS Web site

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

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Pub. L. 111-5
ASCA Administrative Simplification Compliance Act of 2002, Pub. L.
107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Pub. L. 112-240
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L.
106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Pub. L. 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile (C. difficile)
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99-
272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronis obstructive pulmonary disease
CPI Consumer price index
CQM Clinical quality measure
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External Bean Radiotherapy
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Pub. L.
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Pub. L. 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
IBR Intern- and Resident-to-Bed Ratio
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]

[[Page 49856]]

IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L.
110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991, Pub.
L. 104-113
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Pub. L. 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAMA Protecting Access to Medicare Act of 2014, Pub. L. 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QRDA Quality Reporting Data Architecture
RCE Reasonable compensation equivalent
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standardized mortality rate
RSRR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-
248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/Total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Pub. L.
110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UMRA Unfunded Mandate Reform Act, Pub. L. 104-4
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded From the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Summary of Provisions of Recent Legislation Discussed in This
Final Rule
1. Patient Protection and Affordable Care Act (Pub. L. 111-148)
and the Health Care and Education Reconciliation Act of 2010 (Pub.
L. 111-152)
2. American Taxpayer Relief Act of 2012 (Pub. L. 112-240)
3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013
(Pub. L. 113-67)
4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
D. Issuance of Notice of Proposed Rulemaking
E. Public Comments Received in Response to the FY 2015 IPPS/LTCH
PPS Proposed Rule
F. Finalization of Interim Final Rule With Comment Period on
Extension of Payment Adjustment for Low-Volume Hospitals and the MDH
Program
G. Finalization of Interim Final Rule With Comment Period
Related to Changes to Certain Cost Reporting Procedures for
Disproportionate Share Hospital Uncompensated Care Payments
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. FY 2015 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Pub. L. 110-90
2. Adjustment to the Average Standardized Amounts Required by
Pub. L. 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub.
L. 110-90
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Pub. L. 110-90
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Pub. L. 110-90
5. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Pub. L. 110-90

[[Page 49857]]

6. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA)
7. Prospective Adjustment for the MS-DRG Documentation and
Coding Effect Through FY 2010
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion for FY 2015
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired
Conditions (HACs), Including Infections for FY 2015
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in Preparation for Transition to ICD-
10-CM and ICD-10-PCS
5. Current HACs and Previously Considered Candidate HACs
6. RTI Program Evaluation
7. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
G. Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for MS-DRG
Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Edition (ICD-10)
b. Basis for FY 2015 MS-DRG Updates
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Intracerebral Therapies: Gliadel[supreg] Wafer
b. Endovascular Embolization or Occlusion of Head and Neck
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat): Avery Breathing Pacemaker System
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Exclusion of Left Atrial Appendage
b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
c. Endovascular Cardiac Valve Replacement Procedures
d. Abdominal Aorta Graft
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Shoulder Replacement Procedures
b. Ankle Replacement Procedures
c. Back and Neck Procedures
6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and
Disorders): Disorders of Porphyria Metabolism
7. MDC 15 (Newborns and Other Neonates With Conditions
Originating in the Perinatal Period)
8. Medicare Code Editor (MCE) Changes
9. Changes to Surgical Hierarchies
10. Changes to the MS-DRG Diagnosis Codes for FY 2015
a. Major Complications or Comorbidities (MCCs) and Complications
or Comorbidities (CCs) Severity Levels for FY 2015
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
11. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
b. CC Exclusions List for FY 2015
12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
c. Adding Diagnosis or Procedure Codes to MDCs
13. Changes to the ICD-9-CM Coding System
a. ICD-10 Coordination and Maintenance Committee
b. Code Freeze
14. Public Comments on Issues Not Addressed in the Proposed Rule
a. Request for Review and MS-DRG Assignment for ICD-9-CM
Diagnosis Code 784.7 Reported with Procedure Code 39.75
b. Coding for Extracorporeal Membrane Oxygenation (ECMO)
Procedures
c. Adding Severity Levels to MS-DRGs 245 Through 251
H. Recalibration of the FY 2015 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
2. Methodology for Calculation of the Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2015 Status of Technologies Approved for FY 2014 Add-On
Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
b. DIFICID^TM (Fidaxomicin) Tablets
c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
d. Kcentra^TM
e. Argus[supreg] II Retinal Prosthesis System
f. Zilver[supreg] PTX[supreg] Drug Eluting Stent
4. FY 2015 Applications for New Technology Add-On Payments
a. Dalbavancin (Durata Therapeutics, Inc.)
b. Heli-FX^TM EndoAnchor System (Aptus Endosystems,
Inc.)
c. CardioMEMS^TM HF (Heart Failure) System
d. MitraClip[supreg] System
f. Responsive Neurostimulator (RNS[supreg]) System
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
1. Background
2. Implementation of New Labor Market Area Delineations
a. Micropolitan Statistical Areas
b. Urban Counties That Became Rural Under the New OMB
Delineations
c. Rural Counties That Became Urban Under the New OMB
Delineations
d. Urban Counties That Moved to a Different Urban CBSA Under the
New OMB Delineations
e. Transition Period
C. Worksheet S-3 Wage Data for the FY 2015 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Suppliers and Providers Other Than
Acute Care Hospitals Under the IPPS
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the FY 2015 Unadjusted Wage Index
F. Occupational Mix Adjustment to the FY 2015 Wage Index
1. Development of Data for the FY 2015 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2015
G. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2015 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the
Occupational Mix Adjusted Wage Index
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
b. Imputed Floor and Alternative, Temporary Methodology for
Computing the Rural Floor for FY 2015
c. Frontier Floor
3. FY 2015 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification and
Redesignation
2. FY 2015 MGCRB Reclassifications
a. FY 2015 Reclassification Requirements and Approvals
b. Effects of Implementation of New OMB Labor Market Area
Delineations on Reclassified Hospitals
c. Applications for Reclassifications for FY 2016
3. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
a. New Lugar Areas for FY 2015
b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
c. Rural Counties No Longer Meeting the Criteria to be
Redesignated as Lugar
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
5. Update of Application of Urban to Rural Reclassification
Criteria
I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Notice of Change to Wage Index Development Timetable
L. Labor-Related Share for the FY 2015 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
Graduate Medical Education (GME) Costs
A. Changes to MS-DRGs Subject to the Postacute Care Transfer
Policy (Sec. 412.4)

[[Page 49858]]

B. Changes in the Inpatient Hospital Updates for FY 2015
(Sec. Sec. 412.64(d) and 412.211(c))
1. FY 2015 Inpatient Hospital Update
2. FY 2015 Puerto Rico Hospital Update
C. Rural Referral Centers (RRCs): Annual Updates to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
D. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
2. Provisions of the Protecting Access to Medicare Act of 2014
3. Low-Volume Hospital Definition and Payment Adjustment for FY
2015
E. Indirect Medical Education (IME) Payment Adjustment (Sec.
412.105)
1. IME Adjustment Factor for FY 2015
2. IME Add-On Payments for Medicare Part C Discharges to Sole
Community Hospitals (SCHs) That Are Paid According to Their
Hospital-Specific Rates and Change in Methodology in Determining
Payment to SCHs
3. Other Policy Changes Affecting IME
F. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) (Sec. 412.106)
1. Background
2. Impact on Medicare DSH Payment Adjustment of Implementation
of New OMB Labor Market Area Delineations
3. Payment Adjustment Methodology for Medicare Disproportionate
Share Hospitals (DSHs) under Section 3133 of the Affordable Care Act
(Sec. 412.106)
a. General Discussion
b. Eligibility for Empirically Justified Medicare DSH Payments
and Uncompensated Care Payments
c. Empirically Justified Medicare DSH Payments
d. Uncompensated Care Payments
e. Limitations on Review
G. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108) and Sole Community Hospitals Sec. 412.92)
1. Background for the MDH Program
2. PAMA of 2014 Provisions for FY 2015
3. Expiration of the MDH Program
4. Effects on MDHs of Adoption of New OMB Delineations
5. Effects on SCHs of Adoption of New OMB Delineations
H. Hospital Readmissions Reduction Program: Changes for FY 2015
Through FY 2017 (Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Regulatory Background
3. Overview of Policies for the FY 2015 Hospital Readmissions
Reduction Program
4. Refinement of the Readmissions Measures and Related
Methodology for FY 2015 and Subsequent Years Payment Determinations
a. Refinement of Planned Readmission Algorithm for Acute
Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN),
Chronic Obstructive Pulmonary Disease (COPD), and Total Hip
Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day
Readmission Measures
b. Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort
c. Anticipated Effect of Refinements on Measures
5. No Expansion of the Applicable Conditions for FY 2016
6. Expansion of the Applicable Conditions for FY 2017 To Include
Patients Readmitted Following Coronary Artery Bypass Graft (CABG)
Surgery Measure
a. Background
b. Overview of the CABG Readmissions Measure: Hospital-Level,
30-Day, All-Cause, Unplanned Readmission Following Coronary Artery
Bypass Graft (CABG) Surgery
c. Methodology for the CABG Measure: Hospital-Level, 30-Day,
All-Cause, Unplanned Readmission Following Coronary Artery Bypass
Graft (CABG) Surgery
7. Maintenance of Technical Specifications for Quality Measures
8. Waiver From the Hospital Readmissions Reduction Program for
Hospitals Formerly Paid under Section 1814(b)(3) of the Act (Sec.
412.152 and Sec. 412.154(d))
9. Floor Adjustment Factor for FY 2015 (Sec. 412.154(c)(2))
10. Applicable Period for FY 2015
11. Inclusion of THA/TKA and COPD Readmissions Measures to
Calculate Aggregate Payments for Excess Readmissions Beginning in FY
2015
12. Hospital Readmissions Reduction Program Extraordinary
Circumstances Exceptions
I. Hospital Value-Based Purchasing (VBP) Program
1. Statutory Background
2. Overview of Previous Hospital VBP Program Rulemaking
3. FY 2015 Payment Details
a. Payment Adjustments
b. Base Operating DRG Payment Amount Definition for Medicare-
Dependent, Small Rural Hospitals (MDHs)
4. Measures for the FY 2017 Hospital VBP Program
a. Measures Previously Adopted
b. Changes Affecting Topped-Out Measures
c. New Measures for the FY 2017 Hospital VBP Program
d. Adoption of the Current CLABSI Measure (NQF 0139)
for the FY 2017 Hospital VBP Program
e. Summary of Previously Adopted and New Measures for the FY
2017 Hospital VBP Program
5. Additional Measures for the FY 2019 Hospital VBP Program
a. Hospital-level Risk-Standardized Complication Rate (RSCR)
Following Elective Primary Total Hip Arthroplasty (THA) and Total
Knee Arthroplasty (TKA)
b. PSI-90 Measure
6. Possible Measure Topics for Future Program Years
a. Care Transition Measure (CTM-3) Items for HCAHPS Survey
b. Possible Future Efficiency and Cost Reduction Domain Measure
Topics
7. Previously Adopted and Final Performance Periods and Baseline
Periods for the FY 2017 Hospital VBP Program
a. Background
b. Previously Adopted Baseline and Performance Periods for the
FY 2017 Hospital VBP Program
c. Clinical Care--Process Domain Performance Period and Baseline
Period for the FY 2017 Hospital VBP Program
d. Patient and Caregiver-Centered Experience of Care/Care
Coordination Domain Performance Period and Baseline Period for the
FY 2017 Hospital VBP Program
e. Performance Period and Baseline Period for NHSN Measures in
the Safwety Domain for the FY 2017 Hospital VBP Program
f. Efficiency and Cost Reduction Domain Performance Period and
Baseline Period for the FY 2017 Hospital VBP Program
g. Summary of Previously Adopted and Finalized Performance
Periods and Baseline Periods for the FY 2017 Hospital VBP Program
8. Previously Adopted and Finalized Performance Periods and
Baseline Periods for Certain Measures for the FY 2019 Hospital VBP
Program
a. Previously Adopted and Finalized Performance Period and
Baseline Period for the FY 2019 Hospital VBP Program for Clinical
Care--Outcomes Domain Measures
b. Performance Period and Baseline Period for the PSI-90 Safety
Domain Measure for the FY 2019 Hospital VBP Program
c. Summary of Previously Adopted and Finalized Performance
Periods and Baseline Periods for Certain Measures for the FY 2019
Hospital VBP Program
9. Performance Period and Baseline Period for the Clinical
Care--Outcomes Domain for the FY 2020 Hospital VBP Program
10. Performance Standards for the Hospital VBP Program
a. Background
b. Performance Standards for the FY 2016 Hospital VBP Program
c. Previously Adopted Performance Standards for the FY 2017, FY
2018, and FY 2019 Hospital VBP Programs
d. Additional Performance Standards for the FY 2017 Hospital VBP
Program
e. Performance Standards for the FY 2019 and FY 2020 Hospital
VBP Programs
f. Technical Updates Policy for Performance Standards
g. Solicitation of Public Comments on ICD-10-CM/PCS Transition
11. FY 2017 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
b. Domain Weighting for the FY 2017 Hospital VBP Program for
Hospitals That Receive a Score on All Domains
c. Domain Weighting for the FY 2017 Hospital VBP Program for
Hospitals Receiving Scores on Fewer Than Four Domains
12. Minimum Numbers of Cases and Measures for the FY 2016 and FY
2017 Hospital VBP Program's Quality Domains

[[Page 49859]]

a. Previously Adopted Minimum Numbers of Cases and FY 2016
Minimum Numbers of Cases
b. Minimum Number of Measures--Safety Domain
c. Minimum Number of Measures--Clinical Care Domain
d. Minimum Number of Measures--Efficiency and Cost Reduction
Domain
e. Minimum Number of Measures--Patient and Caregiver Centered
Experience of Care/Care Coordination (PEC/CC) Domain
13. Applicability of the Hospital VBP Program to Maryland
Hospitals
14. Disaster/Extraordinary Circumstance Exception under the
Hospital VBP Program
J. Hospital-Acquired Condition (HAC) Reduction Program
1. Background
2. Statutory Basis for the HAC Reduction Program
3. Implementation of the HAC Reduction Program for FY 2015
a. Overview
b. Payment Adjustment Under the HAC Reduction Program, Including
Exemptions
c. Measure Selection and Conditions, Including Risk Adjustment
Scoring Methodology
d. Criteria for Applicable Hospitals and Performance Scoring
Policy
e. Reporting Hospital-Specific Information, Including the Review
and Correction of Information
f. Limitation on Administrative and Judicial Review
4. Maintenance of Technical Specifications for Quality Measures
5. Extraordinary Circumstances Exceptions/Exemptions
6. Implementation of the HAC Reduction Program for FY 2016
a. Measure Selection and Conditions, including a Risk-Adjustment
Scoring Methodology
b. Measure Risk Adjustment
c. Measure Calculation
d. Applicable Time Period
e. Criteria for Applicable Hospitals and Performance Scoring
f. Rules To calculate the Total HAC Score for FY 2016
7. Future Consideration for the Use of Electronically Specified
Measures
K. Payments for Indirect and Direct Graduate Medical Education
(GME) Costs (Sec. Sec. 412.105 and 413.75 through 413.83)
1. Background
2. Changes in the Effective Date of the FTE Resident Cap, 3-Year
Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for
New Programs in Teaching Hospitals
3. Changes to IME and Direct GME Policies as a Result of New OMB
Labor Market Area Delineations
a. New Program FTE Cap Adjustment for Rural Hospitals
Redesignated as Urban
b. Participation of Redesignated Hospitals in Rural Training
Track
4. Clarification of Policies on Counting Resident Time in
Nonprovider Settings Under Section 5504 of the Affordable Care Act
5. Changes to the Review and Award Process for Resident Slots
Under Section 5506 of the Affordable Care Act
a. Effective Date of Slots Awarded Under Section 5506 of the
Affordable Care Act
b. Removal of Seamless Requirement
c. Revisions to Ranking Criteria One, Seven, and Eight for
Applications Under Section 5506
d. Clarification to Ranking Criterion Two Regarding Emergency
Medicare GME Affiliation Agreements
6. Regulatory Clarification Applicable To Direct GME Payments to
Federally Qualified Health Centers (FQHCs) and Rural Health Clinics
(RHCs) for Training Residents in Approved Programs
L. Rural Community Hospital Demonstration Program
1. Background
2. FY 2015 Budget Neutrality Offset Amount
M. Requirement for Transparency of Hospital Charges Under the
Affordable Care Act
1. Overview
2. Transparency Requirement Under the Affordable Care Act
N. Medicare Payment for Short Inpatient Hospital Stays
O. Suggested Exceptions to the 2-Midnight Benchmark
P. Finalization of Interim Final Rule With Comment Period on
Extension of Payment Adjustment for Low-Volume Hospitals and the
Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014
Discharges Through March 31, 2014
1. Background
2. Summary of the Provisions of the Interim Final Rule With
Comment Period
Q. Finalization of Interim Final Rule With Comment Period on
Changes to Certain Cost Reporting Procedures Related to
Disproportionate Share Hospital Uncompensated Care Payments
V. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Annual Update for FY 2015
VI. Changes for Hospitals Excluded From the IPPS
A. Rate-of-Increase in Payments to Excluded Hospitals for FY
2015
B. Report on Adjustment (Exception) Payments
C. Updates to the Reasonable Compensation Equivalent (RCE)
Limits on Compensation for Physician Services Provided in Providers
(Sec. 415.70)
1. Background
2. Overview of the Current RCE Limits
a. Application of the RCE Limits
b. Exceptions to the RCE Limits
c. Methodology for Establishing the RCE Limits
3. Changes to the RCE Limits
D. Critical Access Hospitals (CAHs
1. Background
2. Proposed and Final Policy Changes Related to
Reclassifications as Rural for CAHs
3. Revision of the Requirements for Physician Certification of
CAH Inpatient Services
VII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2015
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
b. Hospitals Excluded From the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2015
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2015
3. Development of the FY 2015 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2015
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the FY 2015 MS-LTC-DRG Relative Weights
C. LTCH PPS Payment Rates for FY 2015
1. Overview of Development of the LTCH Payment Rates
2. FY 2015 LTCH PPS Annual Market Basket Update
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Adjustment to the Annual Update to the LTCH PPS Standard
Federal Rate Under the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
1. Background
2. Reduction to the Annual Update to the LTCH PPS Standard
Federal Rate under the LTCHQR Program
d. Market Basket Under the LTCH PPS for FY 2015
e. Annual Market Basket Update for LTCHs for FY 2015
3. Adjustment for the Final Year of the Phase-In of the One-Time
Prospective Adjustment to the Standard Federal Rate under Sec.
412.523(d)(3)
D. Revision of LTCH PPS Geographic Classifications
1. Background
2. Use of New OMB Labor Market Area Delineations (``New OMB
Delineations'')
a. Micropolitan Statistical Areas

[[Page 49860]]

b. Urban Counties That Became Rural Under the New OMB Labor
Market Area Delineations
c. Rural Counties That Became Urban Under the New OMB Labor
Market Area Delineations
d. Urban Counties That Moved to a Different Urban CBSA Under the
New OMB Labor Market Area Delineations
e. Transition Period
E. Reinstatement and Extension of Certain Payment Rules for LTCH
Services--The 25-Percent Threshold Payment Adjustment
1. Background
2. Implementation of Section 1206(b)(1) of Pub. L. 113-67
F. Discussion of the ``Greater Than 3-Day Interruption of Stay''
Policy and the Transfer to Onsite Providers Policies Under the LTCH
PPS
G. Moratoria on the Establishment of LTCHs and LTCH Satellite
Facilities and on the Increase in the Number of Beds in Existing
LTCHs or LTCH Satellite Facilities
H. Evaluation and Treatment of LTCHs Classified Under Section
1886(d)(1)(B)(iv)(II) of the Act
I. Description of Statutory Framework for Patient-Level
Criteria-Based Payment Adjustment Under the LTCH PPS Under Pub. L.
113-67
1. Overview
2. Additional LTCH PPS Issues
J. Technical Change
VIII. Administrative Appeals by Providers and Judicial Review
A. Proposed and Final Changes Regarding the Claims Required in
Provider Cost Reports and for Provider Administrative Appeals
B. Proposed and Final Changes to Conform Terminology From
``Intermediary'' to ``Contractor''
C. Technical Correction to Sec. 405.1835 of the Regulations and
Corresponding Amendment to Sec. 405.1811 of the Regulations
1. Background and Technical Correction to Sec. Sec. 405.1811
and 405.1835 of the Regulations
2. Waiver of Notice of Proposed Rulemaking
3. Effective Date and Applicability Date; Finality and Reopening
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital
IQR Program
b. Removal of Hospital IQR Program Measures for the FY 2017
Payment Determination and Subsequent Years
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
4. Additional Considerations in Expanding and Updating Quality
Measures Under the Hospital IQR Program
5. Previously Adopted Hospital IQR Program Measures for the FY
2016 Payment Determination and Subsequent Years
6. Refinements and Clarification to Existing Measures in the
Hospital IQR Program
a. Refinement of Planned Readmission Algorithm for 30-Day
Readmission Measures
b. Refinement of Total Hip Arthroplasty and Total Knee
Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures
c. Anticipated Effect of Refinements to Existing Measures
d. Clarification Regarding Influenza Vaccination for Healthcare
Personnel
7. Additional Hospital IQR Program Measures for the FY 2017
Payment Determination and Subsequent Years
a. Hospital 30-day, All-Cause, Unplanned, Risk-Standardized
Readmission Rate (RSRR) Following Coronary Artery Bypass Graft
(CABG) Surgery
b. Hospital 30-day, All-Cause, Risk-standardized Mortality Rate
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery
c. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care
Payment Measure for Pneumonia
d. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care
Payment Measure for Heart Failure
e. Severe Sepsis and Septic Shock: Management Bundle Measure
(NQF 0500)
f. Electronic Health Record-Based Voluntary Measures
g. Readoption of Measures as Voluntarily Reported Electronic
Clinical Quality Measures
h. Electronic Clinical Quality Measures
8. Possible New Quality Measures and Measure Topics for Future
Years
a. Mandatory Electronic Clinical Quality Measure Reporting for
FY 2018 Payment Determination
b. Possible Future Electronic Clinical Quality Measures
9. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2017 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures With Hospital IQR
Program Reporting and Submission Timelines
e. Sampling and Case Thresholds for the FY 2017 Payment
Determination and Subsequent Years
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
g. Data Submission Requirements for Structural Measures for the
FY 2017 Payment Determination and Subsequent Years
h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
10. Submission and Access of HAI Measures Data Through the CDC's
NHSN Web Site
11. Modifications to the Existing Processes for Validation of
Chart-Abstracted Hospital IQR Program Data
a. Eligibility Criteria for Hospitals Selected for Validation
b. Number of Charts To Be Submitted per Hospital for Validation
c. Combining Scores for HAI and Clinical Process of Care Topic
Areas
d. Processes To Submit Patient Medical Records for Chart-
Abstracted Measures
e. Plans To Validate Electronic Clinical Quality Measure Data
f. Data Submission Requirements for Quality Measures That May Be
Voluntarily Electronically Reported for the FY 2017 Payment
Determination
12. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2017 Payment Determination and Subsequent Years
13. Public Display Requirements for the FY 2017 Payment
Determination and Subsequent Years
14. Reconsideration and Appeal Procedures for the FY 2017
Payment Determination and Subsequent Years
15. Hospital IQR Program Extraordinary Circumstances Extensions
or Exemptions
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Previously Finalized PCHQR Program Quality Measures
4. Update to the Clinical Process/Oncology Care Measures
Beginning With the 2016 Program
5. New Quality Measures Beginning With the FY 2017 Program
a. Considerations in the Selection of Quality Measures
b. New Quality Measure Beginning With the FY 2017 Program
6. Possible New Quality Measure Topics for Future Years
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements Beginning With the FY 2014
Program
9. Form, Manner, and Timing of Data Submission Beginning With
the FY 2017 Program
a. Background
b. Reporting Requirements for the Proposed New Measure: External
Beam Radiotherapy for Bone Metastases (NQF 1822) Beginning
With the FY 2017 Program
c. Reporting Options for the Clinical Process/Cancer Specific
Treatment Measures Beginning With the FY 2015 Program and the SCIP
and Clinical Process/Oncology Care Measures Beginning With the FY
2016 Program
d. New Sampling Methodology for the Clinical Process/Oncology
Care Measures Beginning With the FY 2016 Program

[[Page 49861]]

10. Exceptions From Program Requirements
C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Background
2. General Considerations Used for Selection of Quality Measures
for the LTCHQR Program
3. Policy for Retention of LTCHQR Program Measures Adopted for
Previous Payment Determinations
4. Policy for Adopting Changes to LTCHQR Program Measures
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY
2016 Payment Determinations and Subsequent Years
b. Previously Adopted Quality Measures for the FY 2017 and FY
2018 Payment Determinations and Subsequent Years
6. Revision to Data Collection Timelines and Submission
Deadlines for Previously Adopted Quality Measures
a. Revisions to Data Collection Timelines and Submission
Deadlines for Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF
0680)
b. Revisions to Data Collection Timelines and Submission
Deadlines for the Application of Percent of Residents Experiencing
One or More Falls With Major Injury (Long Stay) (NQF 0674)
7. New LTCHQR Program Quality Measures for the FY 2018 Payment
Determination and Subsequent Years
a. New LTCHQR Program Functional Status Quality Measures for the
FY 2018 Payment Determination and Subsequent Years
b. Quality Measure: National Healthcare Safety Network (NHSN)
Ventilator-Associated Event (VAE) Outcome Measure
8. LTCHQR Program Quality Measures and Concepts Under
Consideration for Future Years
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2016 Payment Determinations and Subsequent Years
a. Background
b. Finalized Timeline for Data Submission Under the LTCHQR
Program for the FY 2016 and FY 2017 Payment Determinations (Except
NQF 0680 and NQF 0431)
c. Revision to the Previously Adopted Data Collection Timelines
and Submission Deadlines for Percent of Residents or Patients Who
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 680) for the FY 2016 Payment
Determination and Subsequent Years
d. Data Submission Mechanisms for the FY 2018 Payment
Determination and Subsequent Years for New LTCHQR Program Quality
Measures and for Revision to Previously Adopted Quality Measure
e. Data Collection Timelines and Submission Deadlines Under the
LTCHQR Program for the FY 2018 Payment Determination
f. Data Collection Timelines and Submission Deadlines for the
Application of Percent of Residents Experiencing One or More Falls
With Major Injury (Long Stay) (NQF 0674) Measure for the FY
2018 Payment Determination and Subsequent Years
g. Data Collection Timelines and Submission Deadlines Under the
LTCHQR Program for the FY 2019 Payment Determination
10. LTCHQR Program Data Completion Threshold for the FY 2016
Payment Adjustment and Subsequent Years
a. Overview
b. LTCHQR Program Data Completion Threshold for the Required
LTCH CARE Data Set (LCDS) Data Items
c. LTCHQR Program Data Completion Threshold for Measures
Submitted Using the Centers for Disease Control and Prevention (CDC)
National Healthcare Safety Network (NHSN)
d. Application of the 2 Percentage Point Reduction for LTCHs
That Fail To Meet the Data Completion Thresholds
11. Data Validation Process for the FY 2016 Payment
Determination and Subsequent Years
a. Data Validation Process
b. Application of the 2 Percentage Point Reduction for LTCHs
That Fail To Meet the Data Accuracy Threshold
12. Public Display of Quality Measure Data for the LTCHQR
Program
13. LTCHQR Program Submission Exception and Extension
Requirements for the FY 2017 Payment Determination and Subsequent
Years
14. LTCHQR Program Reconsideration and Appeals Procedures for
the FY 2016 Payment Determination and Subsequent Years
a. Previously Finalized LTCHQR Program Reconsideration and
Appeals Procedures for the FY 2014 and FY 2015 Payment
Determinations
b. LTCHQR Program Reconsideration and Appeals Procedures for the
FY 2016 Payment Determination and Subsequent Years
15. Electronic Health Records (EHR) and Health Information
Exchange (HIE)
D. Electronic Health Record (EHR) Incentive Program and
Meaningful Use (MU)
1. Background
2. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures With Hospital IQR
Program Reporting and Submission Timelines
3. Quality Reporting Data Architecture Category III (QRDA-III)
Option in 2015
4. Electronically Specified Clinical Quality Measures (CQMs)
Reporting for 2015
5. Clarification Regarding Reporting Zero Denominators
X. Revision of Regulations Governing Use and Release of Medicare
Advantage Risk Adjustment Data
A. Background
B. Regulatory Changes
1. Expansion of Uses and Reasons for Disclosure of Risk
Adjustment Data
2. Conditions for CMS Release of Data
3. Technical Change
XI. Changes to Enforcement Provisions for Organ Transplant Centers
A. Background
B. Basis for Changes
1. Expansion of Mitigating Factors Based on CMS' Experience
2. Coordination With Efforts of the Organ Procurement and
Transplantation Network (OPTN) and Health Resources and Services
Administration
C. Provisions of the Proposed and Final Regulations
1. Expansion of Mitigating Factors List, Content, and Timeframe
2. Content and Timeframe for Mitigating Factors Requests
3. System Improvement Agreements (SIAs)
a. Purpose and Intent of an SIA
b. Description and Contents of an SIA
c. Effective Period for an SIA
XII. MedPAC Recommendations
XIII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the FY 2015 Wage
Index (Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICR Regarding Electronic Health Record (EHR) Incentive
Program and Meaningful Use (MU)
11. ICR Regarding Revision of Regulations Governing Use and
Release of Medicare Advantage (MA) Risk Adjustment Data (Sec.
422.310(f))
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective with Cost Reporting Periods
Beginning on or After October 1, 2014 and Payment Rates for LTCHs
Effective With Discharges Occurring on or After October 1, 2014
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2015
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2015
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update

[[Page 49862]]

B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2015
C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2015
V. Updates to the Payment Rates for the LTCH PPS for FY 2015
A. LTCH PPS Standard Federal Rate for FY 2015
1. Background
2. Development of the FY 2015 LTCH PPS Standard Federal Rate
B. Adjustment for Area Wage Levels under the LTCH PPS for FY
2015
1. Background
2. Geographic Classifications Based on the New OMB Delineations
3. LTCH PPS Labor-Related Share
4. LTCH PPS Wage Index for FY 2015
5. Budget Neutrality Adjustment for Changes to the Area Wage
Level Adjustment
C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii
D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
1. Background
2. Determining LTCH CCRs Under the LTCH PPS
3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2015
4. Application of the Outlier Policy to SSO Cases
E. Update to the IPPS Comparable/Equivalent Amounts To Reflect
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
F. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2015
VI. Tables Referenced in This Final Rule and Available Through the
Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
1. Effects of Policy on MS-DRGs for Preventable HACs, Including
Infections
2. Effects of Policy Relating to New Medical Service and
Technology Add-On Payments
3. Effects of Changes to List of MS-DRGs Subject to Postacute
Care Transfer and DRG Special Pay Policy
4. Effects of Payment Adjustment for Low-Volume Hospitals for FY
2015
5. Effects of Policy Changes Related to IME Medicare Part C Add-
On Payments to SCHs Paid According to Their Hospital-Specific Rates
6. Effects of the Extension of the MDH Program for the First
Half of FY 2015
7. Effects of Changes Under the FY 2015 Hospital Value-Based
Purchasing (VBP) Program
8. Effects of the Changes to the HAC Reduction Program for FY
2015
9. Effects of Policy Changes Relating to Payments for Direct GME
and IME
10. Effects of Implementation of Rural Community Hospital
Demonstration Program
11. Effects of Changes Related to Reclassifications as Rural for
CAHs
12. Effects of Revision of the Requirements for Physician
Certification of CAH Inpatient Services
13. Effects of Changes Relating to Administrative Appeals by
Providers and Judicial Review for Appropriate Claims in Provider
Cost Reports
I. Effects of Changes to Updates to the Reasonable Compensation
Equivalent (RCE) Limits for Physician Services Provided to Providers
J. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
K. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of LTCH PPS Payment Rate Changes and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
L. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
M. Effects of Requirements for the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program for FY 2015
N. Effects of Requirements for the LTCH Quality Reporting
(LTCHQR) Program for FY 2015 Through FY 2019
O. Effects of Policy Changes Regarding Electronic Health Record
(EHR) Incentive Program and Hospital IQR Program
P. Effects of Revision of Regulations Governing Use and Release
of Medicare Advantage Risk Adjustment Data
Q. Effects of Changes to Enforcement Provisions for Organ
Transplant Centers
II. Alternatives Considered
III. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
IV. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2015
A. FY 2015 Inpatient Hospital Update
B. Update for SCHs for FY 2015
C. FY 2015 Puerto Rico Hospital Update
D. Update for Hospitals Excluded From the IPPS for FY 2015
E. Update for LTCHs for FY 2015
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
This final rule makes payment and policy changes under the Medicare
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals
and hospital units excluded from the IPPS. In addition, it makes
payment and policy changes for inpatient hospital services provided by
long-term care hospitals (LTCHs) under the long-term care hospital
prospective payment system (LTCH PPS). It also makes policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs.
Under various statutory authorities, we are making changes to the
Medicare IPPS, to the LTCH PPS, and to other related payment
methodologies and programs for FY 2015 and subsequent fiscal years.
These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; and short-term acute care hospitals located in the Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa.
Religious nonmedical health care institutions (RNHCIs) are also
excluded from the IPPS.
Sections 123(a) and (c) of Pub. L. 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.

[[Page 49863]]

Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-Exempt Cancer Hospitals.''
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are complications or
comorbidities (CCs) or major complications or comorbidities (MCCs); and
(c) could reasonably have been prevented through the application of
evidence-based guidelines. Section 1886(d)(4)(D) of the Act also
specifies that the list of conditions may be revised, again in
consultation with CDC, from time to time as long as the list contains
at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires
that hospitals, effective with discharges occurring on or after October
1, 2007, submit information on Medicare claims specifying whether
diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of
the Act specifies that effective for discharges occurring on or after
October 1, 2008, Medicare no longer assigns an inpatient hospital
discharge to a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act. A payment for indirect
medical education (IME) is made under section 1886(d)(5)(B) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase in payments to a
subsection (d) hospital for a fiscal year if the hospital does not
submit data on measures in a form and manner, and at a time, specified
by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes an adjustment to hospital
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital payments under section 1886(d)(5)(F) of
the Act and for a new uncompensated care payment to eligible hospitals.
Specifically, section 1886(r) of the Act now requires that, for
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d)
hospitals'' that would otherwise receive a ``disproportionate share
hospital payment . . . made under subsection (d)(5)(F)'' will receive
two separate payments: (1) 25 percent of the amount they previously
would have received under subsection (d)(5)(F) for DSH (``the
empirically justified amount''), and (2) an additional payment for the
DSH hospital's proportion of uncompensated care, determined as the
product of three factors. These three factors are: (1) 75 percent of
the payments that would otherwise be made under subsection (d)(5)(F);
(2) 1 minus the percent change in the percent of individuals under the
age of 65 who are uninsured (minus 0.1 percentage points for FY 2014,
and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a
hospital's uncompensated care amount relative to the uncompensated care
amount of all DSH hospitals expressed as a percentage.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for SGR Reform Act of 2013, which provided
for the establishment of patient criteria for payment under the LTCH
PPS for implementation beginning in FY 2016.
Section 1206(b)(1) of the Pathway for SGR Reform Act of
2013, which further amended section 114(c) of the MMSEA, as amended by
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the
Affordable Care Act, by retroactively reestablishing and extending the
statutory moratorium on the full implementation of the 25-percent
threshold payment adjustment policy under the LTCH PPS so that the
policy will be in effect for 9 years (except for ``grandfathered''
hospital-within-hospitals (HwHs), which are permanently exempt from
this policy); and section 1206(b)(2) (as amended by section 112(b) of
Pub. L. 113-93), which together further amended section 114(d) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c)
and 10312(a) of the Affordable Care Act to establish a new moratoria
(subject to certain defined exceptions) on the development of new LTCHs
and LTCH satellite facilities and a new moratorium on increases in the
number of beds in existing LTCHs and LTCH satellite facilities
beginning January 1, 2015 and ending on September 30, 2017; and section
1206(d), which instructs the Secretary to evaluate payments to LTCHs
classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust
payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate,
based upon the evaluation findings.
Section 1886(m)(5)(D)(iv) of the Act, as added by section
1206 (c) of the Pathway for SGR Reform Act of 2013, which provides for
the establishment, no later than October 1, 2015, of a functional
status quality measure under the LTCHQR Program for change in mobility
among inpatients requiring ventilator support.
In this final rule, we are making technical and conforming changes
and nomenclature changes to the regulations regarding the claims
required in provider cost reports and for provider administrative
appeals to conform terminology from ``intermediary'' to ``contractor''
We are aligning the reporting and submission timelines for clinical
quality measures for the Medicare EHR Incentive Program for eligible
hospitals and critical access hospitals (CAHs) with the reporting and
submission timelines for the Hospital IQR Program. In addition, we
provide guidance and clarification of certain policies for eligible
hospitals and CAHs such as our

[[Page 49864]]

policy for reporting zero denominators on clinical quality measures and
our policy for case threshold exemptions.
In addition, this final rule contains several provisions that are
not directly related to these Medicare payment systems, such as
regulatory revisions to broaden the specified uses and reasons for
disclosure of risk adjustment data and to specify the conditions for
release of risk adjustment data to entities outside of CMS and changes
to the enforcement procedures for organ transplant centers. The
specific statutory authority for these other provisions is discussed in
the relevant sections below.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. This adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimated that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014,
it is often our practice to delay or phase in rate adjustments over
more than one year, in order to moderate the effects on rates in any
one year. Therefore, consistent with the policies that we have adopted
in many similar cases, we made a -0.8 percent recoupment adjustment to
the standardized amount in FY 2014. We are making an additional -0.8
percent recoupment adjustment to the standardized amount in FY 2015.
b. Reduction of Hospital Payments for Excess Readmissions
We are making changes in policies to the Hospital Readmissions
Reduction Program, which is established under section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payment to account for excess readmissions of
selected applicable conditions. For FYs 2013 and 2014, these conditions
are acute myocardial infarction, heart failure, and pneumonia. For FY
2014, we established additional exclusions to the three existing
readmission measures (that is, the excess readmission ratio) to account
for additional planned readmissions. We also established additional
readmissions measures, Chronic Obstructive Pulmonary Disease (COPD),
and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be
used in the Hospital Readmissions Reduction Program for FY 2015 and
future years. We are expanding the readmissions measures for FY 2017
and future years by adding a measure of patients readmitted following
coronary artery bypass graft (CABG) surgery. We also are refining the
readmission measures and related methodology for FY 2015 and subsequent
years payment determinations. In addition, we are providing that the
readmissions payment adjustment factors for FY 2015 can be no more than
a 3-percent reduction in accordance with the statute. We also are
revising the calculation of aggregate payments for excess readmissions
to include THA/TKA and COPD readmissions measures beginning in FY 2015.
c. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital Value-Based Purchasing (VBP) Program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
In this final rule, we are adopting quality measures for the FY
2017, FY 2019, and FY 2020 Hospital VBP Program years and establishing
performance periods and performance standards for measures we are
adopting for those fiscal years. We are also adopting additional
policies related to performance standards and revising the domain
weighting previously adopted for the FY 2017 Hospital VBP Program.
d. Hospital-Acquired Condition (HAC) Reduction Program
In this final rule, we are making a change in the scoring
methodology with the addition of a previously finalized measure for the
FY 2016 payment adjustment under the HAC Reduction Program. Section
1886(p) of the Act, as added under section 3008(a) of the Affordable
Care Act, establishes an adjustment to hospital payments for HACs, or a
HAC Reduction program, under which payments to applicable hospitals are
adjusted to provide an incentive to reduce HACs, effective for
discharges beginning on October 1, 2014 and for subsequent program
years. This 1-percent payment reduction applies to a hospital whose
ranking is in the top quartile (25 percent) of all applicable
hospitals, relative to the national average, of conditions acquired
during the applicable period and on all of the hospital's discharges
for the specified fiscal year. The amount of payment shall be equal to
99 percent of the amount of payment that would otherwise apply to such
discharges under section 1886(d) or 1814(b)(3) of the Act, as
applicable.
e. DSH Payment Adjustment and Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Under section 1886(r) of the Act, which was added by section
3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive
25 percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of
the Act. The remaining amount, equal to 75 percent of what otherwise
would have been paid as Medicare DSH payments, will be paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH
hospital will receive its additional amount based on its share of the
total amount of uncompensated care for all Medicare DSH hospitals for a
given time period. In this final rule, we are updating the
uncompensated care amount to be distributed for FY 2015, and we are
making changes to the methodology for calculating the uncompensated
care payment amounts such that we will combine uncompensated care data
for hospitals that have merged in order to calculate the relative share
of uncompensated care for the surviving hospital.
f. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, hospitals are
required to report data on measures selected by the Secretary for the
Hospital IQR Program in order to receive the full annual percentage
increase. In past rules, we

[[Page 49865]]

have established measures for reporting and the process for submittal
and validation of the data.
We are finalizing a total of 63 measures (47 required and 16
voluntary electronic clinical quality measures) in the Hospital IQR
Program measure set for the FY 2017 payment determination and
subsequent years. In this final rule, we are finalizing 11 new measures
(1 chart-abstracted, 4 claims-based, and 6 voluntary electronic
clinical quality measures). We proposed to remove 20 measures, but are
only finalizing the removal of 19. The SCIP-INF-4 measure was proposed
for removal, but will be retained as it was recently retooled for the
2014 collection period. Ten of these 19 measures are topped-out, chart-
abstracted measures that are being retained as voluntary electronic
clinical quality measures.
While we are finalizing our proposal to align the reporting and
submission timelines of the Medicare EHR Incentive Program with those
of the Hospital IQR Program on the calendar year for CQMs that are
reported electronically for 2015, we are not finalizing the proposal to
require quarterly submission of CQM data. Hospitals can voluntarily
submit one calendar year (CY) quarter of data for Q 1, Q 2, or Q3 of
2015 by November 30, 2015, in order to partially fulfill requirements
for both programs for CY 2015. In addition, we are finalizing a number
of new policies related to the administration of the program, including
access to specific NHSN data, updates to validation, and an electronic
clinical quality measures validation pilot test.
g. Changes to the LTCH PPS
Section 1206(b) of the Pathway for SGR Reform Act provides for the
retroactive reinstatement and extension, for an additional 4 years, of
the moratorium on the full implementation of the 25-percent threshold
payment adjustment under the LTCH PPS established under section 114(c)
of the MMSEA, as further amended by subsequent legislation. In keeping
with this mandate, we are reinstating this payment adjustment
retroactively for LTCH cost reporting periods beginning on or after
July 1, 2013, or October 1, 2013.
Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by
section 112(b) of the Protecting Access to Medicare Act of 2014,
provides for new statutory moratoria on the establishment of new LTCHs
and LTCH satellite facilities (subject to certain defined exceptions)
and a new statutory moratorium on bed increases in existing LTCHs
effective for the period beginning April 1, 2014 and ending September
30, 2017.
In accordance with section 1206(d) of the Pathway for SGR Reform
Act of 2013, we are applying a payment adjustment under the LTCH PPS to
subclause (II) LTCHs beginning in FY 2015 that will result in payments
to this type of LTCH resembling reasonable cost payments under the
TEFRA payment system model.
We also discuss our proposed changes to the LTCH interruption of
stay policy, which is a payment adjustment that is applied when, during
the course of an LTCH hospitalization, a patient is discharged to an
inpatient acute care hospital, an IRF, or a SNF for treatment or
services not available at the LTCH for a specified period followed by
readmittance to the same LTCH. In addition, we are finalizing our
proposal to remove the 5-percent payment threshold policy for patient
transfers between LTCHs and onsite providers.
3. Summary of Costs and Benefits
Adjustment for MS-DRG Documentation and Coding Changes. We
are making a -0.8 percent recoupment adjustment to the standardized
amount for FY 2015 to implement, in part, the requirement of section
631 of the ATRA that the Secretary make an adjustment totaling $11
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This
recoupment adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimated that a -9.3 percent recoupment
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014, it is often our practice to delay or phase in rate
adjustments over more than one year, in order to moderate the effects
on rates in any one year. Therefore, consistent with the policies that
we have adopted in many similar cases and the adjustment we made for FY
2014, we are making a -0.8 percent recoupment adjustment to the
standardized amount in FY 2015. We estimated that this level of
adjustment, combined with leaving the -0.8 percent adjustment made for
FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into
account the approximately $1 billion recovered in FY 2014, this will
leave approximately $8 billion remaining to be recovered by FY 2017.
Reduction to Hospital Payments for Excess Readmissions.
The provisions of section 1886(q) of the Act which establishes the
Hospital Readmissions Reduction Program are not budget neutral. For FY
2015, a hospital's readmissions payment adjustment factor is the higher
of a ratio of a hospital's aggregate payments for excess readmissions
to its aggregate payments for all discharges, or 0.97 (that is, or a 3-
percent reduction). In this final rule, we estimate that the reduction
to a hospital's base operating DRG payment amount to account for excess
readmissions of selected applicable conditions under the Hospital
Readmissions Reduction Program will result in a 0.2 percent decrease in
payments to hospitals for FY 2015 relative to FY 2014.
Value-Based Incentive Payments under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net
financial impact to the Hospital VBP Program for FY 2015 in the
aggregate because, by law, the amount available for value-based
incentive payments under the program in a given fiscal year must be
equal to the total amount of base operating DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating DRG payment amount reductions for FY 2015 and,
therefore, the estimated amount available for value-based incentive
payments for FY 2015 discharges is approximately $1.4 billion. We
believe that the program's benefits will be seen in improved patient
outcomes, safety, and in the patient's experience of care. However, we
cannot estimate these benefits in actual dollar and patient terms.
Payment Adjustment under the HAC Reduction Program for FY
2015. Under section 1886(p) of the Act, (as added by section 3008 of
the Affordable Care Act), the incentive to reduce hospital-acquired
conditions with a payment adjustment to applicable hospitals under the
HAC Reduction Program is made beginning FY 2015. We estimate that,
under this provision, overall payments will decrease approximately 0.3
percent or $369 million.
Medicare DSH Payment Adjustment and Additional Payment for
Uncompensated Care. Under section 1886(r) of the Act (as added by
section 3313 of the Affordable Care Act), disproportionate share
hospital payments to hospitals under section 1886(d)(5)(F) of the Act
are reduced and an additional payment is made to eligible hospitals
beginning in FY 2014. Hospitals that receive Medicare DSH

[[Page 49866]]

payments will receive 25 percent of the amount they previously would
have received under the current statutory formula for Medicare DSH
payments in section 1886(d)(5)(F) of the Act. The remainder, equal to
75 percent of what otherwise would have been paid as Medicare DSH
payments, will be the basis for determining the additional payments for
uncompensated care after the amount is reduced for changes in the
percentage of individuals that are uninsured and additional statutory
adjustments. Each hospital that receives Medicare DSH payments will
receive an additional payment based on its share of the total
uncompensated care amount reported by Medicare DSHs. The reduction to
Medicare DSH payments is not budget neutral.
For FY 2015, we are providing that the 75 percent of what otherwise
would have been paid for Medicare DSH is adjusted to approximately
76.19 percent of the amount for changes in the percentage of
individuals that are uninsured and additional statutory adjustments. In
other words, our estimate of Medicare DSH payments prior to the
application of section 3133 of the Affordable Care Act is adjusted to
approximately 57.1 percent (the product of 75 percent and 76.19
percent) and the resulting payment amount is used to create an
additional payment to hospitals for their relative share of the total
amount of uncompensated care. We project that Medicare DSH payments and
additional payments for uncompensated care made for FY 2015 will reduce
payments overall by 1.3 percent as compared to the Medicare DSH
payments and uncompensated care payments distributed in FY 2014. The
additional payments have redistributive effects based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are estimated to receive Medicare DSH payments, and
the final payment amount is not tied to a hospital's discharges.
Hospital Inpatient Quality Reporting (IQR) Program. In
this final rule, we are finalizing 11 new measures (1 chart-abstracted,
4 claims-based, and 6 voluntary electronic clinical quality measures).
We proposed to remove 20 measures, but are only finalizing the removal
of 19. The SCIP-INF-4 measure was proposed for removal, but will be
retained as it was recently retooled for the 2014 collection period. 10
of these 19 measures are topped-out, chart-abstracted measures that are
being retained as voluntary electronic clinical quality measures. We
estimate that the adoption and removal of these measures will decrease
hospital costs by $39.8 million.
Update to the LTCH PPS Standard Federal Rate and Other
Payment Factors. Based on the best available data for the 423 LTCHs in
our database, we estimate that the changes to the payment rates and
factors we are presenting in the preamble and Addendum of this final
rule, including the update to the standard Federal rate for FY 2015,
the changes to the area wage adjustment for FY 2015, and the expected
changes to short-stay outliers and high-cost outliers, will result in
an increase in estimated payments from FY 2014 of approximately $62
million (or 1.1 percent). In addition, we estimate that net effect of
the projected impact of certain other LTCH PPS policy changes (that is,
the reinstatement of the moratorium on the full implementation of the
``25 percent threshold'' payment adjustment; the reinstatement of the
moratorium on the development of new LTCHs and LTCH satellite
facilities and additional LTCH beds; the revocation of onsite
discharges and readmissions policy; and the payment adjustment for
``subclause (II)'' LTCHs) is estimated to result in an increase in LTCH
PPS payments of approximately $116 million.
The impact analysis of the payment rates and factors presented in
this final rule under the LTCH PPS, in conjunction with the estimated
payment impacts of certain other LTCH PPS policy changes will result in
a net increase of $178 million to LTCH providers. Additionally, we
estimate that the costs to LTCHs associated with the completion of the
data for the LTCHQR Program to be approximately $4.7 million more than
FY 2014.

B. Summary

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

[[Page 49867]]

rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before April 1, 2015, an MDH will receive
the higher of the Federal rate or the Federal rate plus 75 percent of
the amount by which the Federal rate is exceeded by the highest of its
FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the
statutory provision for payments to MDHs expires on March 31, 2015,
under current law.) SCHs are the sole source of care in their areas,
and MDHs are a major source of care for Medicare beneficiaries in their
areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an
SCH as a hospital that is located more than 35 road miles from another
hospital or that, by reason of factors such as isolated location,
weather conditions, travel conditions, or absence of other like
hospitals (as determined by the Secretary), is the sole source of
hospital inpatient services reasonably available to Medicare
beneficiaries. In addition, certain rural hospitals previously
designated by the Secretary as essential access community hospitals are
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as
a hospital that is located in a rural area, has not more than 100 beds,
is not an SCH, and has a high percentage of Medicare discharges (not
less than 60 percent of its inpatient days or discharges in its cost
reporting year beginning in FY 1987 or in two of its three most
recently settled Medicare cost reporting years). Both of these
categories of hospitals are afforded this special payment protection in
order to maintain access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; certain cancer hospitals; and short-term acute care
hospitals located in Guam, the U.S. Virgin Islands, the Northern
Mariana Islands, and American Samoa. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, certain cancer
hospitals, short-term acute care hospitals located in Guam, the U.S.
Virgin Islands, the Northern Mariana Islands, and American Samoa, and
RNHCIs continue to be paid solely under a reasonable cost-based system
subject to a rate-of-increase ceiling on inpatient operating costs, as
updated annually by the percentage increase in the IPPS operating
market basket.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of section 123 of the BBRA
and section 307(b) of the BIPA (as codified under section 1886(m)(1) of
the Act). During the 5-year (optional) transition period, a LTCH's
payment under the PPS was based on an increasing proportion of the LTCH
Federal rate with a corresponding decreasing proportion based on
reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. The existing regulations governing payment under
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with
FY 2009, annual updates to the LTCH PPS are published in the same
documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Part
413.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR Part 413.

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

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

[[Page 49868]]

suppliers. The provisions of the Affordable Care Act that were
applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012
were implemented in the June 2, 2010 Federal Register notice (75 FR
31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY
2012 IPPS/LTCH PPS final rule (76 FR 51476).
The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
enacted on January 2, 2013, also made a number of changes that affect
the IPPS. We announced changes related to certain IPPS provisions for
FY 2013 in accordance with sections 605 and 606 of Public Law 112-240
in a document that appeared in the Federal Register on March 7, 2013
(78 FR 14689).
The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on
December 26, 2013, also made a number of changes that affect the IPPS
and the LTCH PPS. We implemented changes related to the low-volume
hospital payment adjustment and MDH provisions for FY 2014 in
accordance with sections 1105 and 1106 of Public Law 113-67 in an
interim final rule with comment period that appeared in the Federal
Register on March 18, 2014 (79 FR 15022).
The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93),
enacted on April 1, 2014, also made a number of changes that affect the
IPPS and LTCH PPS.
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
In this final rule, we are making policy changes to implement (or,
as applicable, continue to implement in FY 2015) the following
provisions (or portions of the following provisions) of the Affordable
Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt
cancer hospitals for FY 2015:
Section 3001(a) of Public Law 111-148, which requires the
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments are made in a fiscal year to
hospitals that meet performance standards for the performance period
for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data by LTCHs in order for them to receive the
full annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals beginning with FY 2014, and for subsequent program years.
Section 3008 of Public Law 111-148, which establishes the
Hospital-Acquired Condition (HAC) Reduction Program and requires the
Secretary to make an adjustment to hospital payments for applicable
hospitals, effective for discharges beginning on October 1, 2014, and
for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3133 of Public Law 111-148, as amended by section
10316 of Public Law 111-148 and section 1104 of Public Law 111-152,
which modifies the methodologies for determining Medicare DSH payments
and creates a new additional payment for uncompensated care effective
for discharges beginning on or after October 1, 2013.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2015.
Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
In this final rule, we are making policy changes to implement
section 631 of the American Taxpayer Relief Act of 2012, which amended
section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment
adjustment to the standardized amounts under section 1886(d) of the Act
based upon the Secretary's estimates for discharges occurring in FY
2014 through FY 2017 to fully offset $11 billion (which represents the
amount of the increase in aggregate payments from FYs 2008 through 2013
for which an adjustment was not previously applied).
3. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
In this final rule, we are making policy changes to implement, or
discuss the need for future policy changes, to carry out provisions
under section 1206 of the Pathway for SGR Reform Act of 2013. These
include:
Section 1206(a), which provides the establishment of
patient criteria for ``site neutral'' payment rates under the LTCH PPS,
portions of which will begin to be implemented in FY 2016.
Section 1206(b)(1), which further amended section 114(c)
of the MMSEA, as amended by section 4302(a) of the ARRA and sections
3106(c) and 10312(a) of the Affordable Care Act by retroactively
reestablishing, and extending, the statutory moratorium on the full
implementation of the 25-percent threshold payment adjustment policy
under the LTCH PPS so that the policy will be in effect for 9 years
(except for grandfathered hospitals-within-hospitals (HwHs), which are
permanently exempt from this policy).
Section 1206(b)(2), which amended section 114(d) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c)
and 10312(a) of the Affordable Care Act to establish new moratoria
(subject to certain defined exceptions) on the development of new LTCHs
and LTCH satellite facilities and a new moratorium on increases in the
number of beds in existing LTCHs and LTCH satellite facilities.
Section 1206(d), which instructs the Secretary to evaluate
payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the
Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS,
as appropriate, based upon the evaluation findings.
4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
In this final rule, we are making policy changes to implement, or
making conforming changes to regulations in accordance with, the
following provisions (or portions of the following provisions) of the
Protecting Access to Medicare Act of 2014 that are applicable to the
IPPS and the LTCH PPS for FY 2015:
Section 105, which extends the temporary changes to the
Medicare inpatient hospital payment adjustment for low-volume
subsection (d) hospitals through March 31, 2015.

[[Page 49869]]

Section 106, which extends the MDH program through March
31, 2015.
Section 112, which makes certain changes to Medicare LTCH
provisions, including modifications to the statutory moratoria on the
establishment of new LTCHs and LTCH satellite facilities.
Section 212, which prohibits the Secretary from requiring
implementation of ICD-10 code sets before October 1, 2015.

D. Issuance of Notice of Proposed Rulemaking

Earlier this year, we published a proposed rule that set forth
proposed changes to the Medicare IPPS for operating costs and for
capital-related costs of acute care hospitals for FY 2015. The proposed
rule appeared in the Federal Register on May 15, 2014 (79 FR 27978). In
the proposed rule, we also set forth proposed changes relating to
payments for IME and GME costs and payments to certain hospitals that
continue to be excluded from the IPPS and paid on a reasonable cost
basis. In addition, in the proposed rule, we set forth proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for FY 2015.
Below is a summary of the major changes that we proposed to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we included--
Proposed changes to MS-DRG classifications based on our
yearly review, including a discussion of the conversion of MS-DRGs to
ICD-10 and the status of the implementation of the ICD-10-CM and ICD-
10-PCS systems.
Proposed application of the documentation and coding
adjustment for FY 2015 resulting from implementation of the MS-DRG
system.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2015.
A discussion of the FY 2015 status of new technologies
approved for add-on payments for FY 2014 and a presentation of our
evaluation and analysis of the FY 2015 applicants for add-on payments
for high-cost new medical services and technologies (including public
input, as directed by Pub. L. 108-173, obtained in a town hall
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we proposed
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed included the
following:
Proposed changes in CBSAs as a result of new OMB labor
market area delineations and proposed policies related to the proposed
changes in CBSAs.
The proposed FY 2015 wage index update using wage data
from cost reporting periods beginning in FY 2011.
Analysis and implementation of the proposed FY 2015
occupational mix adjustment to the wage index for acute care hospitals,
including the proposed application of the rural floor, the proposed
imputed rural floor, and the proposed frontier State floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2015 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2015 hospital wage index and proposed
revisions to that timetable.
Determination of the labor-related share for the proposed
FY 2015 wage index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section IV. of the preamble of the proposed rule, we discussed
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412 and 413, including the following:
Proposed changes in postacute care transfer policies as a
result of proposed new MS-DRGs.
Proposed changes to the inpatient hospital updates for FY
2015, including incorporation of the adjustment for hospitals that are
not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2015.
The statutorily required IME adjustment factor for FY 2015
and proposed IME add-on payments for Medicare Part C discharges to SCHs
that are paid according to their hospital-specific rates.
Effect of expiration of the MDH program on April 1, 2015.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Proposed changes to the measures and payment adjustments
under the Hospital Readmissions Reduction Program.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2015.
Proposed IME and direct GME policy changes regarding the
effective date of the FTE resident cap, 3-year rolling average, and IRB
ratio cap in new programs in teaching hospitals; effect of new OMB
labor market area delineations on certain teaching hospitals training
residents in rural areas; clarification of effective date of provisions
on counting resident time in nonprovider settings; proposed changes to
the process for reviewing applications for and awarding slots made
available under section 5506 of the Affordable Care Act by teaching
hospitals that close; and clarification regarding direct GME payment to
FQHCs and RHCs that train residents in approved programs.
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Discussion of the requirements for transparency of
hospital charges under the Affordable Care Act.
Discussion of and solicitation of comments on an
alternative payment methodology under the Medicare program for short
inpatient hospital stays.
Discussion of the process for submitting suggested
exceptions to the 2-midnight benchmark.
4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs
In section V. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2015 and other related proposed
policy changes.

[[Page 49870]]

5. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VI. of the preamble of the proposed rule, we discussed--
Proposed changes to payments to certain excluded hospitals
for FY 2015.
Proposed updates to the RCE limits and proposed changes to
the methodology for determining such limits for services furnished by
physicians to IPPS-excluded hospitals and certain teaching hospitals.
Proposed CAH related changes regarding reclassifications
as rural.
Proposed changes to the physician certification
requirements for services furnished in CAHs.
6. Proposed Changes to the LTCH PPS
In section VII. of the preamble of the proposed rule, we set
forth--
Proposed changes to the payment rates, factors, and other
payment rate policies under the LTCH PPS for FY 2015.
Proposed revisions to the LTCH PPS geographic
classifications based on the new OMB delineations.
Proposals to implement section 1206(b)(1) of the Pathway
for SGR Reform Act, which provides for the retroactive reinstatement
and extension, for an additional 4 years, of the statutory moratorium
on the full implementation of the 25-percent threshold payment
adjustment established under section 114(c) of the MMSEA, as further
amended by subsequent legislation.
Proposals to implement section 1206(b)(2) of the Pathway
for SGR Reform Act, as amended by section 112(b) of the Protecting
Access to Medicare Act of 2014, which provides for moratoria (subject
to certain defined exceptions) on the establishment of new LTCHs and
LTCH satellite facilities and a moratorium on bed increases in LTCHs
effective for the period beginning April 1, 2014, and ending September
30, 2017.
Proposed changes to the LTCH interruption of stay policy
by revising the fixed-day thresholds under the ``greater than 3-day
interruption of stay policy'' to apply a uniform 30-day threshold as an
``acceptable standard'' for determining a linkage between an index
discharge and a readmission.
Proposal to remove the discharge and readmission
requirement, ``Special Payment Provisions for Patients Who are
Transferred to Onsite Providers and Readmitted to an LTCH'' (the ``5
percent payment threshold'') beginning in FY 2015.
Proposal to apply a payment adjustment under the LTCH PPS
to subclause (II) LTCHs beginning in FY 2015 that would result in
payments to this type of LTCH resembling reasonable cost payment under
the TEFRA payment system model, consistent with the provisions of
section 1206(d) of the Pathway for SGR Reform Act of 2013.
7. Proposed Changes to Regulations Governing Administrative Appeals by
Providers and Judicial Review of Provider Claims
In section VIII. of the preamble of the proposed rule, we set forth
proposals to revise the regulations governing administrative appeals
and judicial review of provider claims in Medicare cost reports.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we addressed--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting (LTCHQR) Program.
9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data
In section X. of the preamble of the proposed rule, we set forth
proposed regulatory revisions to broaden the specified uses of Medicare
Advantage (MA) risk adjustment data and to specify the conditions for
release of such risk adjustment data to entities outside of CMS.
10. Proposed Changes to Enforcement Provisions for Organ Transplant
Centers
In section XI. of the preamble of the proposed rule, we proposed to
revise the regulations governing organ transplant centers that request
approval, based on mitigating factors for initial approval and re-
approval, for participation in Medicare when the centers have not met
one or more of the conditions of participation.
11. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2015
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We also proposed to establish the threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2015 for certain hospitals excluded
from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2015 LTCH
PPS standard Federal rate. We proposed to establish the adjustments for
wage levels (including proposed changes to the LTCH PPS labor market
area delineations based on the new OMB delineations), the labor-related
share, the cost-of-living adjustment, and high-cost outliers, including
the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under
the LTCH PPS.
13. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals, LTCHs, and PCHs.
14. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2015 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
15. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2014 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and

[[Page 49871]]

capital-related costs for hospitals under the IPPS. We addressed these
recommendations in Appendix B of the proposed rule. For further
information relating specifically to the MedPAC March 2014 report or to
obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: https://www.medpac.gov.

E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS
Proposed Rule

We received approximately 653 timely pieces of correspondence
containing multiple comments on the FY 2015 IPPS/LTCH PPS proposed
rule. We note that some of these public comments were outside of the
scope of the proposed rule. These out-of-scope public comments are not
addressed in the policy responses in this final rule. Summaries of the
public comments that are within the scope of the proposed rule and our
responses to those public comments are set forth in the various
sections of this final rule under the appropriate headings.

F. Finalization of Interim Final Rule With Comment Period on Extension
of Payment Adjustment for Low-Volume Hospitals and the Medicare-
Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges
Through March 31, 2014

In an interim final rule with comment period (CMS-1599-IFC2) that
appeared in the Federal Register on March 18, 2014, we implemented the
extension of the temporary changes to the payment adjustment for low-
volume hospitals and the MDH program under the IPPS for FY 2014
(through March 31, 2014) in accordance with sections 1105 and 1106,
respectively, of the Pathway for SGR Reform Act of 2013 (79 FR 15022
through 15030). We received four timely pieces of correspondence on
this interim final rule with comment period. In section IV.P. of the
preamble of this final rule, we summarize the provisions of the interim
final rule, summarize and respond to the public comments received, and
finalize the provisions of the interim final rule with comment period.

G. Finalization of Interim Final Rule With Comment Period on Changes to
Certain Cost Reporting Procedures Related to Disproportionate Share
Hospital Uncompensated Care Payments

In an interim final rule with comment period (CMS-1599-IFC) that
appeared in the Federal Register on October 13, 2013 (78 FR 61191), we
revised certain operational considerations for hospitals with Medicare
cost reporting periods that span more than one Federal fiscal year and
also made chnges to the data that will be used in the uncompensated
care payment calculation in order to ensure that data from Indian
Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of
that calculation (78 FR 61191 through 61197). We received 12 timely
pieces of correspondence in response to this interim final rule with
comment period. In section IV.Q. of the preamble of this final rule, we
summarize the provisions of the interim final rule with comment period,
summarize and respond to the public comments received, and finalize the
provisions of the interim final rule with comment period.

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

A. Background

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

B. MS-DRG Reclassifications

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

C. Adoption of the MS-DRGs in FY 2008

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

D. FY 2015 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Pub. L. 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (In FY 2014, there are
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We provided for phasing in this -4.8
percent adjustment over 3 years. Specifically, we established
prospective documentation and coding adjustments of -1.2 percent for FY
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical

[[Page 49872]]

Assistance], Abstinence Education, and QI [Qualifying Individuals]
Programs Extension Act of 2007 (Pub. L. 110-90). Section 7(a) of Public
Law 110-90 reduced the documentation and coding adjustment made as a
result of the MS-DRG system that we adopted in the FY 2008 IPPS final
rule with comment period to -0.6 percent for FY 2008 and -0.9 percent
for FY 2009, and we finalized the FY 2008 adjustment through
rulemaking, effective October 1, 2007 (72 FR 66886).
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking effective October 1, 2008 (73 FR
48447). The documentation and coding adjustments established in the FY
2008 IPPS final rule with comment period, which reflected the
amendments made by section 7(a) of Public Law 110-90, are cumulative.
As a result, the -0.9 percent documentation and coding adjustment for
FY 2009 was in addition to the -0.6 percent adjustment for FY 2008,
yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Pub. L.
110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L.
110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Pub. L. 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
matched the changes that occurred in those years. Public Law 110-90
requires that the Secretary only make these recoupment or repayment
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011 IPPS/
LTCH PPS proposed and final rules, and subsequent evaluations in FY
2012, supported that the 5.4 percent estimate accurately reflected the
FY 2009 increases in documentation and coding under the MS-DRG system.
We were persuaded by both MedPAC's analysis (as discussed in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the CMS Web site at:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-
Hospital (National). This CMS Web page describes the file and provides
directions and further detailed instructions for how to order.
Persons placing an order must send the following: A Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check (refer to
the Web site for the required payment amount) to:
Mailing address if using the U.S. Postal Service: Centers for
Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O.
Box 7520, Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare &
Medicaid Services, OFM/Division of Accounting--RDDC, 7500 Security
Boulevard, C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Pub. L. 110-90
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total
prospective documentation and coding effect of 5.4 percent. After
accounting for the -0.6 percent and the -0.9 percent documentation and
coding adjustments in FYs 2008 and 2009, we found a remaining
documentation and coding

[[Page 49873]]

effect of 3.9 percent. As we have discussed, an additional cumulative
adjustment of -3.9 percent would be necessary to meet the requirements
of section 7(b)(1)(A) of Public Law 110-90 to make an adjustment to the
average standardized amounts in order to eliminate the full effect of
the documentation and coding changes that do not reflect real changes
in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law
110-90, section 7(b)(1)(A) does not specify when we must apply the
prospective adjustment, but merely requires us to make an
``appropriate'' adjustment. Therefore, as we stated in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50061), we believed the law provided
some discretion as to the manner in which we applied the prospective
adjustment of -3.9 percent. As we discussed extensively in the FY 2011
IPPS/LTCH PPS final rule, it has been our practice to moderate payment
adjustments when necessary to mitigate the effects of significant
downward adjustments on hospitals, to avoid what could be widespread,
disruptive effects of such adjustments on hospitals. Therefore, we
stated that we believed it was appropriate to not implement the -3.9
percent prospective adjustment in FY 2011 because we finalized a -2.9
percent recoupment adjustment for that fiscal year. Accordingly, we did
not propose a prospective adjustment under section 7(b)(1)(A) of Public
Law 110-90 for FY 2011 (75 FR 23868 through 23870). We noted that, as a
result, payments in FY 2011 (and in each future fiscal year until we
implemented the requisite adjustment) would be higher than they would
have been if we had implemented an adjustment under section 7(b)(1)(A)
of Public Law 110-90.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that, because further delay of this prospective adjustment
would result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment to the standardized
amount instead of the full -3.9 percent.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through
53276), we completed the prospective portion of the adjustment required
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9
percent adjustment to the standardized amount for FY 2013. We stated
that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009. We believed that it was
imperative to implement the full remaining adjustment, as any further
delay would result in an overstated standardized amount in FY 2013 and
any future fiscal years until a full adjustment was made.
We noted again that delaying full implementation of the prospective
portion of the adjustment required under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY
2012 being overstated. These overpayments could not be recovered by CMS
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Pub. L. 110-90
Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to
make an adjustment to the standardized amounts under section 1886(d) of
the Act to offset the estimated increase or decrease in aggregate
payments for FY 2008 and FY 2009 (including interest) resulting from
the difference between the estimated actual documentation and coding
effect and the documentation and coding adjustments applied under
section 7(a) of Public Law 110-90. This determination must be based on
a retrospective evaluation of claims data. Our actuaries estimated that
there was a 5.8 percentage point difference resulting in an increase in
aggregate payments of approximately $6.9 billion. Therefore, as
discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through
50067), we determined that an aggregate adjustment of -5.8 percent in
FYs 2011 and 2012 would be necessary in order to meet the requirements
of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized
amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to
offset the estimated amount of the increase in aggregate payments
(including interest) in FYs 2008 and 2009.
It is often our practice to phase in payment rate adjustments over
more than one year in order to moderate the effect on payment rates in
any one year. Therefore, consistent with the policies that we have
adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule,
we made an adjustment to the standardized amount of -2.9 percent,
representing approximately half of the aggregate adjustment required
under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An
adjustment of this magnitude allowed us to moderate the effects on
hospitals in one year while simultaneously making it possible to
implement the entire adjustment within the timeframe required under
section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY
2012). For FY 2012, in accordance with the timeframes set forth by
section 7(b)(1)(B) of Public Law 110-90, and consistent with the
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the
recoupment adjustment by implementing the remaining -2.9 percent
adjustment, in addition to removing the effect of the -2.9 percent
adjustment to the standardized amount finalized for FY 2011 (76 FR
51489 and 51498). Because these adjustments, in effect, balanced out,
there was no year-to-year change in the standardized amount due to this
recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53276), we made a final +2.9 percent adjustment to the
standardized amount, completing the recoupment portion of section
7(b)(1)(B) of Public Law 110-90. We note that with this positive
adjustment, according to our estimates, all overpayments made in FY
2008 and FY 2009 have been fully recaptured with appropriate interest,
and the standardized amount has been returned to the appropriate
baseline.
6. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier,
this delay in implementation resulted in overstated payment rates in
FYs 2010, 2011, and 2012. The resulting overpayments could not have
been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA is a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, any adjustment made to reduce
payment rates in one year would eventually be offset by a positive
adjustment, once the necessary amount of overpayment is recovered.
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515

[[Page 49874]]

through 50517), our actuaries estimate that a -9.3 percent adjustment
to the standardized amount would be necessary if CMS were to fully
recover the $11 billion recoupment required by section 631 of the ATRA
in FY 2014. It is often our practice to phase in payment rate
adjustments over more than one year, in order to moderate the effect on
payment rates in any one year. Therefore, consistent with the policies
that we have adopted in many similar cases, and after consideration of
the public comments we received, in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50515 through 50517), we implemented a -0.8 percent
recoupment adjustment to the standardized amount in FY 2014. We stated
that if adjustments of approximately -0.8 percent are implemented in
FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we
estimate that the entire $11 billion will be accounted for by the end
of the statutory 4-year timeline. As estimates of any future
adjustments are subject to slight variations in total savings, we did
not provide for specific adjustments for FYs 2015, 2016, or 2017 at
that time. We stated that we believed that this level of adjustment for
FY 2014 was a reasonable and fair approach that satisfies the
requirements of the statute while mitigating extreme annual
fluctuations in payment rates. In addition, we again noted that this -
0.8 percent recoupment adjustment, and future adjustments under this
authority, will be eventually offset by an equivalent positive
adjustment once the full $11 billion recoupment requirement has been
realized.
Consistent with the approach discussed in the FY 2014 rulemaking
for recouping the $11 billion required by section 631 of the ATRA, in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27997 through 27998), we
proposed an additional -0.8 percent recoupment adjustment to the
standardized amount for FY 2015. We estimated that this level of
adjustment, combined with leaving the -0.8 percent adjustment made for
FY 2014 in place, would recover up to $2 billion in FY 2015. Taking
into account the approximately $1 billion recovered in FY 2014, this
would leave approximately $8 billion remaining to be recovered by FY
2017.
Comment: Several commenters restated their previous position, as
set forth in comments submitted in response to the FY 2014 IPPS/LTCH
PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final
rule, that CMS overstated the impact of documentation and coding
effects for prior years. Commenters cited potential deficiencies in the
CMS methodology and disagreed that the congressionally mandated
adjustment is warranted. However, the majority of these commenters
conceded that CMS is required by section 631 of the ATRA to recover $11
billion by FY 2017, and supported CMS' policy to phase in the
adjustments over a 4-year period.
Response: We appreciate the commenters' support. We refer readers
to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for
our response to the commenters' position that CMS overstated the impact
of documentation and coding effects.
After consideration of the public comments we received, we are
finalizing the proposal to make an additional -0.8 percent adjustment
to the standardized amount for FY 2015. Considering the -0.8 percent
adjustment made in FY 2014, we expect the combined impact of these
adjustments will be to recover $2 billion dollars in overpayments in FY
2015. Combined with the estimated $1 billion adjustment made in FY
2014, we estimate that $3 billion of the $11 billion in overpayments
required to be recovered by section 631 of the ATRA will be accounted
for.
We continue to believe that if adjustments of approximately -0.8
percent are implemented in FYs 2014, 2015, 2016, and 2017, using
standard inflation factors, the entire $11 billion will be accounted
for by the end of the statutory 4-year timeline. As we explained in the
FY 2014 IPPS/LTCH PPS final rule, estimates of any future adjustments
are subject to slight variations in total savings. Therefore, we have
not yet addressed specific adjustments for FY 2016 and FY 2017. We
continue to believe that the -0.8 percent adjustment for FY 2015 is a
reasonable and fair approach that will help satisfy the requirements of
the statute while mitigating extreme annual fluctuations in payment
rates. In addition, we again note that this -0.8 percent recoupment
adjustment, and future adjustments under this authority, will be
eventually offset by an equivalent positive adjustment once the full
$11 billion recoupment requirement has been realized.
7. Prospective Adjustment for the MS-DRG Documentation and Coding
Effect Through FY 2010
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through
50517), we discussed the possibility of applying an additional
prospective adjustment to account for the cumulative MS-DRG
documentation and coding effect through FY 2010. In that final rule, we
stated that if we were to apply such an adjustment, we believed the
most appropriate additional adjustment was -0.55 percent. However, we
decided not to apply such an adjustment in FY 2014, in light of the
need to make the retrospective adjustments required by the ATRA. We
continue to believe that if we were to apply an additional prospective
adjustment for the cumulative MS-DRG documentation and coding effect
through FY 2010, the most appropriate additional adjustment is -0.55
percent. However, we did not propose such an adjustment for FY 2015, in
light of the ongoing recoupment required by the ATRA. We will consider
whether such an additional adjustment is appropriate in future years'
rulemaking.
Comment: Commenters reiterated their concern, as set forth in
comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed
rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS
overstated the adjustment factor for documentation and coding,
including the revised -0.55 percent factor to adjust for documentation
and coding that occurred in FY 2010. Commenters believed that
adjustments related to FY 2010 documentation and coding are not
required under section 631 of the ATRA. Commenters urged CMS to not
consider additional adjustments, other than those required by section
631 of the ATRA.
Response: We appreciate the commenters' concerns. We refer readers
to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for
our response to the commenters' position that CMS overstated the impact
of documentation and coding effects. We did not propose to make any
additional prospective adjustment to address the cumulative
documentation and coding effect through FY 2010 for FY 2015. We will
consider these comments in future years' rulemaking.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public

[[Page 49875]]

commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single cost-to-charge
ratio (CCR) is applied to items of widely varying costs in the same
cost center. To address this concern, in August 2006, we awarded a
contract to the Research Triangle Institute, International (RTI) to
study the effects of charge compression in calculating the relative
weights and to consider methods to reduce the variation in the CCRs
across services within cost centers. For a detailed summary of RTI's
findings, recommendations, and public comments that we received on the
report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR
48452 through 48453). In addition, we refer readers to RTI's July 2008
final report titled ``Refining Cost to Charge Ratios for Calculating
APC and MS-DRG Relative Payment Weights'' (https://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in
response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS final rule, we focused on the CCR for
Medical Supplies and Equipment because RTI found that the largest
impact on the MS-DRG relative weights could result from correcting
charge compression for devices and implants. In determining the items
that should be reported in these respective cost centers, we adopted
the commenters' recommendations that hospitals should use revenue codes
established by the AHA's National Uniform Billing Committee to
determine the items that should be reported in the ``Medical Supplies
Charged to Patients'' and the ``Implantable Devices Charged to
Patients'' cost centers. Accordingly, a new subscripted line for
``Implantable Devices Charged to Patients'' was created in July 2009.
This new subscripted cost center has been available for use for cost
reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRIs, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized our proposal to create
standard cost centers for CT scans, MRIs, and cardiac catheterization,
and to require that hospitals report the costs and charges for these
services under new cost centers on the revised Medicare cost report
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080) for a detailed discussion of the
reasons for the creation of standard cost centers for CT scans, MRIs,
and cardiac catheterization.) The new standard cost centers for CT
scans, MRIs, and cardiac catheterization are effective for cost
reporting periods beginning on or after May 1, 2010, on the revised
cost report Form CMS-2552-10.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for ``Implantable Devices
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43782), due to delays in the issuance of the revised cost report
Form CMS 2552-10, we determined that a new CCR for ``Implantable
Devices Charged to Patients'' might not be available before FY 2013.
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS
final rule to add new cost centers for CT scans, MRIs, and cardiac
catheterization, we explained that data from any new cost centers that
may be created will not be available until at least 3 years after they
are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH
PPS rulemaking, we checked the availability of data in the
``Implantable Devices Charged to Patients'' cost center on the FY 2009
cost reports, but we did not believe that there was a sufficient amount
of data from which to generate a meaningful analysis in this particular
situation. Therefore, we did not propose to use data from the
``Implantable Devices Charged to Patients'' cost center to create a
distinct CCR for ``Implantable Devices Charged to Patients'' for use in
calculating the MS-DRG relative weights for FY 2012. We indicated that
we would reassess the availability of data for the ``Implantable
Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS
rulemaking cycle and, if appropriate, we would propose to create a
distinct CCR at that time.
During the development of the FY 2013 IPPS/LTCH PPS proposed and
final rules, hospitals were still in the process of transitioning from
the previous cost report Form CMS-2552-96 to the new cost report Form
CMS-2552-10. Therefore, we were able to access only those cost reports
in the FY 2010 HCRIS with fiscal year begin dates on or after October
1, 2009, and before May 1, 2010; that is, those cost reports on Form
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not
available because cost reports filed on the Form CMS-2552-10 were not
accessible in the HCRIS. Further complicating matters was that, due to
additional unforeseen technical difficulties, the corresponding
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to continue computing the
relative weights with the current CCR that combines the costs and
charges for supplies and implantable devices. We stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do
have the necessary data for supplies and implantable devices on the
claims in the MedPAR file to create distinct CCRs for the respective
cost centers for supplies and implantable devices, we hoped that we
would also have data for an analysis of

[[Page 49876]]

creating distinct CCRs for CT scans, MRIs, and cardiac catheterization,
which could then be finalized through rulemaking. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53281), we stated that, prior to proposing
to create these CCRs, we would first thoroughly analyze and determine
the impacts of the data, and that distinct CCRs for these new cost
centers would be used in the calculation of the relative weights only
if they were first finalized through rulemaking.
At the time of the development of the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27506 through 27507), we had a substantial number
of hospitals completing all, or some, of these new cost centers on the
FY 2011 Medicare cost reports, compared to prior years. We stated that
we believed that the analytic findings described using the FY 2011 cost
report data and FY 2012 claims data supported our original decision to
break out and create new cost centers for implantable devices, MRIs, CT
scans, and cardiac catheterization, and we saw no reason to further
delay proposing to implement the CCRs of each of these cost centers.
Therefore, beginning in FY 2014, we proposed to calculate the MS-DRG
relative weights using 19 CCRs, creating distinct CCRs from cost report
data for implantable devices, MRIs, CT scans, and cardiac
catheterization (78 FR 27509).
We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27507 through 27509) and final rule (78 FR 50518 through 50523) in
which we presented data analyses using distinct CCRs for implantable
devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/
LTCH PPS final rule also set forth our responses to public comments we
received on our proposal to implement these CCRs. As explained in more
detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our
proposal to use 19 CCRs to calculate MS-DRG relative weights beginning
in FY 2014--the then existing 15 cost centers and the 4 new CCRs for
implantable devices, MRIs, CT scans, and cardiac catheterization.
Therefore, beginning in FY 2014, we calculated the IPPS MS-DRG relative
weights using 19 CCRs, creating distinct CCRs for implantable devices,
MRIs, CT scans, and cardiac catheterization.
2. Discussion of Policy for FY 2015
As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
27999), to calculate the MS-DRG relative weights for FY 2015, we used
two data sources: the MedPAR file as the claims data source and the
HCRIS as the cost report data source. We adjusted the charges from the
claims to costs by applying the 19 national average CCRs developed from
the cost reports. The description of the calculation of the 19 CCRs and
the MS-DRG relative weights for FY 2015 is included in section II.H. of
the preamble of this final rule.
Comment: One commenter supported CMS' plans to continue to use data
from the implantable devices cost center to create a distinct CCR for
implantable devices in the calculation of the FY 2015 relative weights.
The commenter also urged CMS to promote transparency by making detailed
data from the implantable device cost center available to the public so
that hospitals could evaluate these costs in the context of overall
hospital charges.
Response: We did not propose any changes to the methodology or data
sources for the FY 2015 CCRs and relative weights. Regarding the
commenter's request to make data from the implantable devices cost
center available to the public, we note that hospital cost report data,
via HCRIS, are available to the public. For more information, we refer
to readers to the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/?redirect=/costReports.

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

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

[[Page 49877]]

[GRAPHIC] [TIFF OMITTED] TR22AU14.000

2. HAC Selection
Beginning in FY 2007, we have set forth proposals, and solicited
and responded to public comments, to implement section 1886(d)(4)(D) of
the Act through the IPPS annual rulemaking process. For specific
policies addressed in each rulemaking cycle, including a detailed
discussion of the collaborative interdepartmental process and public
input regarding selected and potential candidate HACs, we refer readers
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100)
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed
rule (72 FR 24716 through 24726) and final rule with comment period (72
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547)
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and
final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283
through 53303); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27509 through 27512) and final rule (78 FR 50523 through 50527). A
complete list of the 11 current categories of HACs is included on the
CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
Currently, as we have discussed in the prior rulemaking cited under
section II.I.2. of the preamble of this final rule, the POA indicator
reporting requirement only applies to IPPS hospitals because they are
subject to this HAC provision. Non-IPPS hospitals, including CAHs,
LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals, RNHCIs, and
the Department of Veterans Affairs/Department of Defense hospitals, are
exempt from POA reporting.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50524 through
50525), we noted that hospitals in Maryland operating under a statutory
waiver were not paid under the IPPS, but rather were paid under the
provisions of section 1814(b)(3) of the Act, and therefore prior to FY
2014 these hospitals were exempt from reporting POA indicators.
However, we believed it was appropriate to require them to use POA
indicator reporting on their claims so that we could include their data
and have as complete a dataset as possible when we analyze trends and
make further payment policy determinations, such as those authorized
under section 1886(p) of the Act. Therefore, in the FY 2014 IPPS/LTCH
PPS final rule, we finalized our policy that hospitals in Maryland that
formerly operated under section 1814(b)(3) of the Act were no longer
exempted from the POA indicator reporting requirement beginning with
claims submitted on or after October 1, 2013, including all claims for
discharges on or after October 1, 2013. We noted that, while this
requirement was not effective until October 1, 2013, hospitals in
Maryland could submit data with POA indicators before that date with
the expectation that these data would be accepted by Medicare's claims
processing systems. (We refer readers to the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50707 through 50712) for a discussion of our FY 2014
final policies to implement section 1886(p) of the Act that are
applicable to Maryland hospitals.)
Subsequent to our FY 2014 rulemaking, the State of Maryland entered
into an agreement with CMS, effective January 1, 2014, to participate
in CMS' new Maryland All-Payer Model, a 5-year hospital payment model.
This model is being implemented under section 1115A of the Act, as
added by section 3021 of the Affordable Care Act, which authorizes the
testing of innovative payment and service delivery models, including
models that allow States to ``test and evaluate systems of all-payer
payment reform for the medical care of residents of the State,
including dual eligible individuals.'' Section 1115A of the Act

[[Page 49878]]

authorizes the Secretary to waive such requirements of titles XI and
XVIII of the Act as may be necessary solely for purposes of carrying
out section 1115A of the Act with respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare make payments to Maryland hospitals in
accordance with section 1814(b)(3) of the Act. Maryland also
represented that it is no longer in continuous operation of a
demonstration project reimbursement system since July 1, 1977, as
specified under section 1814(b)(3) of the Act. Because Maryland
hospitals are no longer paid under section 1814(b)(3) of the Act, they
are no longer subject to those provisions of the Act and related
implementing regulations that are specific to section 1814(b)(3)
hospitals. Although CMS has waived certain provisions of the Act for
Maryland hospitals, as set forth in the agreement between CMS and
Maryland and subject to Maryland's compliance with the terms of the
agreement, CMS has not waived the POA indicator reporting requirement.
In other words, the changes to the status of Maryland hospitals under
section 1814(b)(3) of the Act as described above do not in any way
change the POA indicator reporting requirement for Maryland hospitals.
There are currently four POA indicator reporting options, ``Y'',
``W'', ``N'', and ``U'', as defined by the ICD-9-CM Official Guidelines
for Coding and Reporting. We note that prior to January 1, 2011, we
also used a POA indicator reporting option ``1''. However, beginning on
or after January 1, 2011, hospitals were required to begin reporting
POA indicators using the 5010 electronic transmittal standards format.
The 5010 format removes the need to report a POA indicator of ``1'' for
codes that are exempt from POA reporting. We issued CMS instructions on
this reporting change as a One-Time Notification, Pub. No. 100-20,
Transmittal No. 756, Change Request 7024, effective on August 13, 2010,
which can be located at the following link on the CMS Web site: https://www.cms.gov/manuals/downloads/Pub100_20.pdf.) The current POA
indicators and their descriptors are shown in the chart below:

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

Under the HAC payment policy, we treat HACs coded with ``Y'' and
``W'' indicators as POA and allow the condition on its own to cause an
increased payment at the CC and MCC level. We treat HACs coded with
``N'' and ``U'' indicators as Not Present on Admission (NPOA) and do
not allow the condition on its own to cause an increased payment at the
CC and MCC level. We refer readers to the following rules for a
detailed discussion of POA indicator reporting: the FY 2009 IPPS
proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487);
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final
rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through
50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through
25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77
FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525).
In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53324), the 5010 format allows the reporting and,
effective January 1, 2011, the processing of up to 25 diagnoses and 25
procedure codes. As such, it is necessary to report a valid POA
indicator for each diagnosis code, including the principal diagnosis
and all secondary diagnoses up to 25.
4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM
and ICD-10-PCS
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in
preparation for the transition to the ICD-10-CM and ICD-10-PCS code
sets, we indicated that further information regarding the use of the
POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they
pertain to the HAC policy would be discussed in future rulemaking.
At the March 5, 2012 and the September 19, 2012 meetings of the
ICD-9-CM Coordination and Maintenance Committee, an announcement was
made with regard to the availability of the ICD-9-CM HAC list
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were
informed that the list of the ICD-9-CM selected HACs has been
translated into codes using the ICD-10-CM and ICD-10-PCS classification
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the selected HACs available on the
CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under the
link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of
Contents--Full Titles--HTML Version in Appendix I--Hospital-Acquired
Conditions (HACs).'' This CMS Web site regarding the ICD-10-MS-DRG
Conversion Project is also available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encouraged the public to submit comments on these
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC
Translation Feedback Mailbox that was set up for this purpose under the
Related Links section titled ``CMS HAC Feedback.''
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated
that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-
PCS would be subject to formal rulemaking. We encouraged readers to
review the educational materials and draft code sets available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: https://www.cms.gov/ICD10/. In
addition, we stated that the draft ICD-10-CM/ICD-10-PCS Coding
Guidelines could be viewed on the CDC Web site at: https://www.cdc.gov/nchs/icd/icd10cm.htm.
The HACs code translation list from ICM-9-CM to ICD-10-CM/ICD-10-
PCS is available to the public on the CMS Web site at: https://
www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-

[[Page 49879]]

DRG-Conversion-Project.html. We note that Appendix I of the ICD-10-CM/
PCS MS-DRG V31R Definitions Manual Table of Contents--Full Titles files
(available in both text and HTML formats) are posted on the Web site
and contain the DRA HACs translated to ICD-10.
We note that section 212 of the Protecting Access to Medicare Act
of 2014 (Pub. L. 113-93), enacted on April 1, 2014, provides that the
Secretary may not adopt ICD-10 prior to October 1, 2015. This
effectively delayed the transition from ICD-9-CM to ICD-10. The
Secretary expects to release a final rule in the near future that will
include a new compliance date for use of ICD-10.
5. Current HACs and Previously Considered Candidate HACs
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28002), we did
not propose to add or remove categories of the HACs. However, we
indicated that we continue to encourage public dialogue about
refinements to the HAC list by written stakeholder comments about both
previously selected and potential candidate HACs. We refer readers to
section II.F.6. of the FY 2008 IPPS final rule with comment period (72
FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS
final rule (73 FR 48774 through 48491) for detailed discussion
supporting our determination regarding each of these conditions. We
also refer readers to section II.F.5. of the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898), the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013,
and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512)
and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50523 through 50527)
for the HAC policy for FY 2014.
Comment: Some commenters stated they were pleased the CMS did not
propose to expand the list of categories or conditions subject to the
Deficit Reduction Act of 2005 provisions that would reduce payment for
HACs not present on admission. However, one commenter suggested that
CMS remove ``falls and trauma'' from the categories of conditions to
which the HAC policy applies. Another believed that iatrogenic
pneumothorax with thoracentesis and accidental puncture/bleeding with
paracentesis are two conditions that meet the HAC criteria for
inclusion and urged CMS to expand the HAC program in FY 2015 to include
them.
Response: We value and appreciate these public comments, and we
will take the comments and suggestions into consideration in future
rulemaking.
Comment: One commenter recognized the importance of targeting HACs,
but stated that the DRA HAC program does not recognize that certain
conditions are not 100 percent preventable, despite adherence to
evidence-based practices. The commenter noted that facilities that
treat patients with greater comorbidities and complex conditions are at
a greater risk for penalties. Specifically, the commenter reiterates
concerns about the inclusion of Surgical Site Infections (SSI)
Following Cardiac Implantable Electronic Device (CIED) as a HAC
category. The commenter stated that there are many variables that may
contribute to the risk of CIED-related infections and that the
implanting physician may not be able to control all circumstances (for
example, pre-operative white blood cell count, fever within 24 hours,
and timing of perioperative antibiotic administration).
Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51510
through 51511), we addressed commenters' concerns regarding the
preventability of DRA HACs and noted that the statute does not require
that a condition be ``always preventable'' in order to qualify as an
HAC. We stated that the statute indicated that the condition be
``reasonably preventable,'' which necessarily implies something less
than 100 percent.
Comment: One commenter recommended that CMS address the question
that its hospital customers have posed regarding the effect of the DRA
HAC policy when a patient is discharged from a hospital and then
returns to a hospital to have a foreign object removed. Specifically,
the commenter stated that hospitals need to be better informed about
how Medicare payment changes if the hospital removing the foreign
object is the same hospital at which the foreign object was left or is
a different hospital, and if the foreign object is removed during an
outpatient procedure or during an inpatient procedure.
Response: Questions related to payment for HACs are dependent upon
how the conditions are coded and reported with ICD-9-CM and the
corresponding POA indicator. The American Hospital Association (AHA)
Central Office^TM is the national clearinghouse for medical
coding advice. Coding inquiries can be directed to the following AHA
Web site: https://www.CodingClinicAdvisor.com. Instructions for how to
assign the correct POA indicator can be found in the ICD-9-CM Official
Guidelines for Coding and Reporting located at the CDC Web site: https://www.cdc.gov/nchs/icd/icd9cm_addenda_guidelines.htm. Also,
illustrations of how to assign POA indicators are included in the
Present on Admission (POA) Indicator Reporting by Acute Inpatient
Prospective Payment System (IPPS) Hospitals Fact Sheet located on the
CMS Hospital-Acquired Conditions Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/EducationalResources.html in the ``Downloads'' section. Table 1: CMS
POA Indicator Reporting Options, Description, and Payment contains an
explanation of when payment for a condition is made or not made, based
on the POA indicator assigned, as shown below.

------------------------------------------------------------------------
POA indicator Description Medicare payment
------------------------------------------------------------------------
Y.......................... Diagnosis was present Payment made for
at time of inpatient condition by
admission. Medicare, when an
HAC is present.
N.......................... Diagnosis was not No payment made for
present at time of condition by
inpatient admission. Medicare, when an
HAC is present.
U.......................... Documentation No payment made for
insufficient to condition by
determine if Medicare, when an
condition was HAC is present.
present at the time
of inpatient
admission.
W.......................... Clinically Payment made for
undetermined. condition by
Provider unable to Medicare, when an
clinically determine HAC is present.
whether the
condition was
present at the time
of inpatient
admission.
------------------------------------------------------------------------

[[Page 49880]]

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

G. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
Providers use the code sets under the ICD-9-CM coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system. A later coding edition, the ICD-10
coding system, includes the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure
coding, as well as the Official ICD-10-CM and ICD-10-PCS Guidelines for
Coding and Reporting. The ICD-10 coding system was initially adopted
for transactions conducted on or after October 1, 2013, as described in
the Health Insurance Portability and Accountability Act of 1996 (HIPAA)
Administrative Simplification: Modifications to Medical Data Code Set
Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the
Federal Register on January 16, 2009 (74 FR 3328 through 3362)
(hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final
rule''). However, the Secretary of Health and Human Services issued a
final rule that delayed the compliance date for ICD-10 from October 1,
2013, to October 1, 2014. That final rule, entitled ``Administrative
Simplification: Adoption of a Standard for a Unique Health Plan
Identifier; Addition to the National Provider Identifier Requirements;
and a Change to the Compliance Date for ICD-10-CM and ICD-10-PCS
Medical Data Code Sets,'' CMS-0040-F, was published in the Federal
Register on September 5, 2012 (77 FR 54664) and is available for
viewing on the Internet at: https://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare
Act of 2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that
the Secretary may not adopt ICD-10 prior to October 1, 2015. Section
212 of Public Law 113-93, titled ``Delay in Transition from ICD-9 to
ICD-10 Code Sets,'' provides that ``[t]he Secretary of Health and Human
Services may not, prior to October 1, 2015, adopt ICD-10 code sets as
the standard for code sets under section 1173(c) of Act. On May 1,
2014, the Secretary announced plans to release an interim final rule in
the near future that will include a new compliance date to require the
use of ICD-10 beginning October 1, 2015. The rule will also require
HIPAA covered entities to continue to use ICD-9-CM through September
30, 2015.
The anticipated move to ICD-10 necessitated the development of an
ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to
convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to
the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on
the creation of the ICD-10 version of the MS-DRGs, which will be
implemented at the same time as ICD-10 (75 FR 50127 and 50128). While
we did not propose an ICD-10 version of the MS-DRGs in the FY 2011
IPPS/LTCH PPS proposed rule, we noted that we have been actively
involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10
codes and sharing this information through the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee. We undertook this early
conversion project to assist other payers and providers in
understanding how to implement their own conversion projects. We posted
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We

[[Page 49881]]

also posted a paper that describes how CMS went about completing this
project and suggestions for other payers and providers to follow.
Information on the ICD-10 MS-DRG conversion project can be found on the
ICD-10 MS-DRG Conversion Project Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have
continued to keep the public updated on our maintenance efforts for
ICD-10-CM and ICD-10-PCS coding systems, as well as the General
Equivalence Mappings that assist in conversion through the ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee.
Information on these committee meetings can be found on the CMS Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion Project
Web site. To make the review of Version 28-R1 updates easier for the
public, we also made available pilot software on a CD ROM that could be
ordered through the National Technical Information Service (NTIS). A
link to the NTIS ordering page was provided on the CMS ICD-10 MS-DRGs
Web page. We stated that we believed that, by providing the ICD-10 MS-
DRGs Version 28-R1 Pilot Software (distributed on CD ROM), the public
would be able to more easily review and provide feedback on updates to
the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs Version 28-
R1 at the September 14, 2011 ICD-9-CM Coordination and Maintenance
Committee meeting. We encouraged the public to continue to review and
provide comments on the ICD-10 MS-DRGs so that CMS could continue to
update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We
also prepared a document that describes changes made from Version 28.0
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting on March 5, 2012. Information was provided on the types of
updates made. Once again the public was encouraged to review and
comment on the most recent update to the ICD-10 MS-DRGs.
CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site. We also
prepared a document that describes changes made from Version 29.0 to
Version 30.0 to facilitate a review. We produced mainframe and computer
software for Version 30.0, which was made available to the public in
February 2013. Information on ordering the mainframe and computer
software through NTIS was posted on the ICD-10 MS-DRG Conversion
Project Web site. The ICD-10 MS-DRGs Version 30.0 computer software
facilitated additional review of the ICD-10 MS-DRGs conversion.
We provided information on a study conducted on the impact of
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10
MS-DRGs Conversion Project Web site and was distributed and discussed
at the September 15, 2010 ICD-9-CM Coordination and Maintenance
Committee meeting. The paper described CMS' approach to the conversion
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) which was
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the
impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The impact of the conversion from ICD-9-CM
to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY
2009 Medicare claims data. The study found a hospital payment increase
of 0.05 percent using the ICD-10 MS-DRGs Version 27.0.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting. This presentation followed presentations on the creation of
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be
found on the CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/. At this March 2012 meeting, CMS
announced that it would produce an update on this impact study based on
an updated version of the ICD-10 MS-DRGs. This update of the impact
study was presented at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. The study found that moving from an ICD-
9-CM-based system to an ICD-10 MS-DRG replicated system would lead to
DRG reassignments on only 1 percent of the 10 million MedPAR sample
records used in the study. Ninety-nine percent of the records did not
shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1
percent of the records that shifted, 45 percent of the shifts were to a
higher weighted MS-DRG, while 55 percent of the shifts were to lower
weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by
4/10000 or minus 4 pennies per $100. The updated paper is posted on the
CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section.
Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance
Committee meeting can be found on the CMS Web site at: https://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-
10 MS-DRG Version 30.0 software provided additional information to the
public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-
DRGs.
CMS prepared the ICD-10 MS-DRGs Version 31.0 based on the FY 2014
MS-DRGs (Version 31.0) that we finalized in the FY 2014 IPPS/LTCH PPS
final rule. In November 2013, we posted a Definitions Manual of the
ICD-10 MS-DRGs Version 31.0 on the ICD-10 MS-DRG Conversion Project Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described
changes made from Version 30.0 to Version 31.0 to facilitate a review.
We

[[Page 49882]]

produced mainframe and computer software for Version 31.0, which was
made available to the public in December 2013. Information on ordering
the mainframe and computer software through NTIS was posted on the CMS
Web site at: https://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 31.0 computer software facilitated additional review
of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to
CMS any comments on areas where they believed the ICD-10 MS-DRGs did
not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs
Version 31.0.
We reviewed comments received and developed an update of ICD-10 MS-
DRGs Version 31.0, which we called ICD-10 MS-DRGs Version 31.0-R. We
have posted a Definitions Manual of the ICD-10 MS-DRGs Version 31.0-R
on the ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made
from Version 31.0 to Version 31.0-R to facilitate a review. We will
continue to share ICD-10-MS-DRG conversion activities with the public
through this Web site.
b. Basis for FY 2015 MS-DRG Updates
CMS encourages input from our stakeholders concerning the annual
IPPS updates when that input is made available to us by December 7 of
the year prior to the next annual proposed rule update. For example, to
be considered for any updates or changes in FY 2016, comments and
suggestions should be submitted by December 7, 2014. The comments that
were submitted in a timely manner for FY 2015 are discussed below in
this section.
Following are the changes we proposed to the MS-DRGs for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28004), we invited
public comment on each of the MS-DRG classification proposed changes
described below, as well as our proposals to maintain certain existing
MS-DRG classifications, which also are discussed below. In some cases,
we proposed changes to the MS-DRG classifications based on our analysis
of claims data. In other cases, we proposed to maintain the existing
MS-DRG classification based on our analysis of claims data. For the FY
2015 proposed rule, our MS-DRG analysis was based on claims data from
the December 2013 update of the FY 2013 MedPAR file, which contains
hospital bills received through September 30, 2013, for discharges
occurring through September 30, 2013. In our discussion of the proposed
MS-DRG reclassification changes that follows, we refer to our analysis
of claims data from the ``December 2013 update of the FY 2013 MedPAR
file.''
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modification to the MS-DRGs for
particular circumstances brought to our attention, we considered
whether the resource consumption and clinical characteristics of the
patients with a given set of conditions are significantly different
than the remaining patients in the MS-DRG. We evaluated patient care
costs using average costs and lengths of stay and relied on the
judgment of our clinical advisors to decide whether patients are
clinically distinct or similar to other patients in the MS-DRG. In
evaluating resource costs, we considered both the absolute and
percentage differences in average costs between the cases we selected
for review and the remainder of cases in the MS-DRG. We also considered
variation in costs within these groups; that is, whether observed
average differences were consistent across patients or attributable to
cases that were extreme in terms of costs or length of stay, or both.
Further, we considered the number of patients who will have a given set
of characteristics and generally preferred not to create a new MS-DRG
unless it would include a substantial number of cases.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Intracerebral Therapies: Gliadel[supreg] Wafer
During the comment period for the FY 2014 IPPS/LTCH PPS proposed
rule, we received a public comment that we considered to be outside the
scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50550) that we would consider this issue in future
rulemaking as part of our annual review process. The commenter
requested that a new MS-DRG be created for intracerebral therapies,
including implantation of chemotherapeutic agents. Specifically, the
commenter referred to the Gliadel[supreg] Wafer for the treatment of
High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors
originating in the brain.
The Gliadel[supreg] Wafer has been discussed in prior rulemaking,
including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule
(68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005
IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR
48957 through 48971); and the FY 2008 IPPS/LTCH PPS final rule (72 FR
47252 through 47253). We refer readers to these prior discussions for
further background information regarding the Gliadel[supreg] Wafer.
Effective October 1, 2002, ICD-9-CM procedure code 00.10
(Implantation of chemotherapeutic agent) was created to identify and
describe insertion of the Gliadel[supreg] Wafer. This procedure code is
assigned to MS-DRG 023 (Craniotomy with Major Device Implant/Acute
Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in
MDC 1. According to the commenter, this current MS-DRG assignment does
not compensate providers adequately for the expenses incurred to
perform the surgery and implantation of the wafer device. The commenter
noted that MS-DRG 023 has a national average payment rate of
approximately $28,016. However, the commenter stated, ``the acquisition
cost for 1 box of the Gliadel[supreg] Wafer alone (typical utilization
per procedure is 8 wafers or 1 box) is $29,035.''
We conducted an analysis using claims data from the December 2013
update of the FY 2013 MedPAR file. Our findings are shown in the table
below.

[[Page 49883]]

As shown in the table above, there were a total of 5,383 cases in
MS-DRG 023 with an average length of stay of 10.98 days and average
costs of $36,982. The number of cases reporting procedure code 00.10 in
MS-DRG 023 totaled 158, with an average length of stay of 7.0 days and
average costs of $34,027.
The data clearly demonstrate that the volume of cases reporting
procedure code 00.10 within MS-DRG 023 have a shorter average length of
stay and are lower in average costs in comparison to all the cases in
the MS-DRG. As we stated in the proposed rule, given the low volume of
cases, shorter average length of stay, and lower average costs, the
data do not support the creation of a new MS-DRG for cases utilizing
the Gliadel[supreg] Wafer. In addition, our clinical advisors
determined that cases reporting procedure code 00.10 are appropriately
assigned within MS-DRG 023.
As discussed in the FY 2005 IPPS final rule (69 FR 48959),
Gliadel[supreg] Wafer cases were assigned to a new DRG that was
clinically coherent and reflected the resources used to treat those
cases, which appropriately addressed the concerns of commenters who
raised questions regarding DRG assignment for those cases at that time.
Subsequently, with the adoption of the MS-DRGs, in the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47252 through 47253), we assigned all cases
utilizing the Gliadel[supreg] Wafer technology to MS-DRG 023, the
higher severity level, and revised the title of this MS-DRG in
recognition of the complexity and costs associated with the
implantation. Our clinical advisors continue to support this assignment
for these same reasons. Therefore, in the FY 2015 IPPS/LTCH PPS
proposed rule, we did not propose to create a new MS-DRG for FY 2015
for cases where ICD-9-CM procedure code 00.10 is reported. We invited
public comments on our proposal to maintain the current MS-DRG
structure.
Comment: Several commenters supported CMS' proposal to maintain
cases reporting procedure code 00.10 in MS-DRG 23, stating it was
reasonable given the data and information provided.
Response: We appreciate the commenters' support.
Comment: Some commenters believed that MS-DRG 23 does not provide
adequate payment to hospitals that perform craniotomies with insertion
of the Gliadel[supreg] Wafer. These commenters suggested the MedPAR
data are flawed for a number of reasons. The commenters indicated that,
upon conducting their own analysis of FY 2012 MedPAR data, there
appears to be confusion among providers on how to accurately report
procedure code 00.10. The commenters reported that, during their
analysis, they encountered claims where procedure code 00.10 was
reported for diagnoses of several other types of cancers (small and
large bowel, pancreatic, and liver) that were completely unrelated to
the brain. One commenter suggested that several providers who have
reported procedure code 00.10 did not ever purchase the Gliadel[supreg]
Wafer product. This commenter noted that it is unclear if the product
should be classified as an implant or a drug within the revenue codes
and that this uncertainty results in additional confusion. The same
commenter urged CMS to consider more input from the professional
community and Medicare beneficiaries, as well as data sources other
than the MedPAR file when evaluating MS-DRG assignments for low volume
procedures so as not to restrict access to care for patients in need of
this intracerebral therapy.
Response: We acknowledge the commenters' concerns. With regard to
confusion on how to accurately report procedure code 00.10 and concern
that the code is being reported for other types of cancers besides
brain cancer, we point out that the AHA's Coding Clinic for ICD-9-CM
has provided coding instruction and examples for how to appropriately
assign and report this code. Specifically, Coding Clinic Fourth
Quarter, 2002, explains how the chemotherapy wafer is utilized in brain
cancer and that chemotherapy wafers also have been used to treat the
liver and bladder as well as other sites. We also note that the terms
associated with procedure code 00.10 within ICD-9-CM are not restricted
solely for use of the Gliadel[supreg] Wafer product. The ICD-9-CM
coding classification system is not device specific.
With respect to the comment that providers are confused as to
assigning an implant or drug revenue code to the Gliadel[supreg] Wafer
product, we note that where explicit instructions are not provided,
providers should report their charges under the revenue code that will
result in the charges being assigned to the same cost center to which
the cost of those services are assigned in the cost report. We
appreciate the commenter's suggestion to obtain additional input from
the professional community.
Comment: One commenter recommended that a new MS-DRG be created
specifically for the Gliadel[supreg] Wafer product. The commenter
stated that it is unacceptable for CMS to state there are too few cases
to do so.
Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule,
our analysis of the claims data and our clinical advisors did not
support creation of a new MS-DRG. Furthermore, the MS-DRGs are a
classification system intended to group together those diagnoses and
procedures with similar clinical characteristics and utilization of
resources. Basing a new MS-DRG on such a small number of cases could
lead to distortions in the relative payment weights for the MS-DRG
because several expensive cases could impact the overall relative
payment weight. Having larger clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights. Moreover, our clinical advisors have examined this issue and
continue to advise us that the procedure code 00.10 cases are
appropriately classified within MS-DRG 23 because they are clinically
similar based on both the craniotomy and the insertion of the device,
among other reasons. Our advisors reaffirmed their assessment that the
groupings were not overly broad or heterogeneous, reiterating that the
clinical flexibility of both physicians and hospitals is maximized when
larger cohorts of clinically similar patients are grouped and the costs
averaged. They note that many factors are considered when comparing
groups of patients, including such factors as length of stay, cost of
specific devices, type of device, type of procedure, and anatomical
location, among others, and stated that the commenter did not identify
any factors that would necessitate an atypical small, separate grouping
when these cases are categorized. Our clinical advisors do not support
creating a new MS DRG for such a small number of cases but would not
support creating a separate DRG even if the volume of cases was large.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current structure for MS-DRG 23
for FY 2015.
b. Endovascular Embolization or Occlusion of Head and Neck
We received a request to change the MS-DRG assignment for the
following three ICD-9-CM procedure codes representing endovascular
embolization or occlusion procedures of the head and neck:
39.72 (Endovascular (total) embolization or occlusion of
head and neck vessels);
39.75 (Endovascular embolization or occlusion of vessel(s)
of head or neck using bare coils); and
39.76 (Endovascular embolization or occlusion of vessel(s)
of head or neck using bioactive coils).

[[Page 49884]]

These three procedure codes are currently assigned to the following
eight MS-DRGs under MDC 1. Cases assigned to MS-DRGs 020, 021, and 022
require a principal diagnosis of hemorrhage. Cases assigned to MS-DRGs
023 and 024 require the insertion of a major implant or an acute
complex central nervous system (CNS) principal diagnosis. Cases
assigned to MS-DRGs 025, 026, and 027 do not have a principal diagnosis
of hemorrhage, an acute complex CNS principal diagnosis, or a major
device implant.

MS-DRG 020 (Intracranial Vascular Procedures with Principal
Diagnosis of Hemorrhage with MCC)
MS-DRG 021 (Intracranial Vascular Procedures with Principal
Diagnosis of Hemorrhage with CC)
MS-DRG 022 (Intracranial Vascular Procedures with Principal
Diagnosis of Hemorrhage without CC/MCC)
MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex
CNS Principal Diagnosis with MCC or Chemo Implant)
MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex
CNS Principal Diagnosis without MCC)
MS-DRG 025 (Craniotomy & Endovascular Intracranial Procedures
with MCC)
MS-DRG 026 (Craniotomy & Endovascular Intracranial Procedures
with CC)
MS-DRG 027 (Craniotomy & Endovascular Intracranial Procedures
without CC/MCC)

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

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

Our clinical advisors reviewed the results of our examination and
determined that the endovascular embolization or occlusion of head and
neck procedures are appropriately classified within MS-DRGs 025, 026,
and 027 because they do not have an acute complex CNS principal
diagnosis or a major device implant which would add to their clinical
complexity. Cases in MS-DRG 024 have average costs that are $4,049
higher than cases in MS-DRG 027 with procedure code 39.72, 39.75, or
39.76. We acknowledge that the 1,245 cases with procedure code 39.72,
39.75, or 39.76 in MS-DRGs 025 and 026 have average costs that are
closer to those in MS-DRGs 023 and 024. However, these cases are 1,245
of the total 2,976 cases that would be involved if we moved all MS-DRGs
025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to
MS-DRGs 023 and 024, even if they did not have an acute complex CNS
principal diagnosis or a major device implant. Based on these findings
and the recommendations from our clinical advisors, we determined that
proposing to move endovascular embolization or occlusion of head and
neck procedures from MS-DRGs 025, 026, and 027 to MS-DRGs 023 and 024
was not warranted. Therefore, in the FY 2015 IPPS/LTCH PPS proposed
rule, we proposed to maintain the current MS-DRG assignments for
endovascular embolization or occlusion of head and neck procedures. We
invited public comments on our proposal.
Comment: A number of commenters supported CMS' proposal to maintain
the current MS-DRG assignment for codes 39.72, 39.75, or 39.76 in MS-
DRGs 025, 026, and 027. The commenters stated this was reasonable,
given the data and information provided.

[[Page 49885]]

A number of commenters objected to the proposal to maintain the
current MS-DRG assignments for endovascular embolizations captured in
codes 39.72, 39.75 and 39.76. The commenters recommended that CMS move
the three codes to MS-DRGs 023 and 024. The commenters stated that the
coils used in the endovascular embolizations are expensive and the
endovascular procedures require substantial additional resources. The
commenters stated that their hospitals are significantly underpaid for
these cases. The commenters recommended that endovascular embolization
codes 39.72, 39.75 and 39.76 be classified a ``Major Device Implants''
and therefore assigned to MS-DRGs 023 and 024.
Several commenters recommended that CMS create new severity
subgroups within MS-DRG 024 to indicate cases with CC and cases without
CC/MCC. The commenters recommended a three-level severity split as
follows:

MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex
CNS Principal Diagnosis with MCC or Chemo Implant);
MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex
CNS Principal Diagnosis with CC); and
MS-DRG XXX (Craniotomy with Major Device Implant/Acute Complex
CNS Principal Diagnosis without CC/MCC)

The commenters recommended that endovascular embolizations captured
in codes 39.72, 39.75 and 39.76 be added to these three recommended MS-
DRGs as part of the Major Device Implant group.
One of the commenters recommended the creation of a new set of MS-
DRGs to capture intracranial endovascular embolization procedures if
CMS decided not to modify the current MS-DRGs by moving codes 39.72,
39.75, and 39.76 to MS-DRGs 023 and 024. The commenter suggested the
following titles for the recommended new MS-DRGs:

Recommended new MS-DRG 043 (Intracranial Endovascular
Embolization Procedures with MCC)
Recommended new MS-DRG 044 (Intracranial Endovascular
Embolization Procedures with CC)
Recommended new MS-DRG 045 (Intracranial Endovascular
Embolization Procedures with Device Implant without CC/MCC).

The commenter acknowledged that there were a limited number of
other intracranial endovascular procedures that could also be
considered for inclusion in the new base MS-DRG with this new option.
The commenter supported including any additional intracranial
endovascular embolization procedures that CMS deemed to be clinically
appropriate.
Response: We appreciate the commenters' support of our proposal to
maintain the current MS-DRG assignment. We examined the commenters'
recommendation of subdividing MS-DRG 024 by adding an additional
severity level (with CC and without CC/MCC). The findings from the
examination of the claims data in the December 2013 update of the FY
2013 MedPAR file on endovascular embolization or occlusion of head and
neck procedures are shown in the first table below. We applied the
following criteria established in FY 2008 (72 FR 47169) to determine if
the creation of a new CC or MCC subgroup within a base MS-DRG was
warranted:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20 percent different in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
In order to warrant creation of a CC or MCC subgroup within a base
MS-DRG, the subgroup must meet all five of the criteria.

Endovascular Embolization or Occlusion of Head and Neck Procedures
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 23--All cases............................................ 5,383 10.98 $36,982
MS-DRG 24--All cases............................................ 1,745 6.30 26,250
----------------------------------------------------------------------------------------------------------------

The following table shows the number of cases that would be within
each of the new requested three MS-DRGs, including the two proposed
severity levels.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 23 (Craniotomy with Major Device Implant/Acute Complex 5,383 10.98 $36,982
CNS Principal Diagnosis with MCC or Chemo Implant).............
Proposed MS-DRG 24 (Craniotomy with Major Device Implant/Acute 1,211 7.65 27,360
Complex CNS Principal Diagnosis with CC or Chemo Implant)......
Proposed MS-DRG XX (Craniotomy with Major Device Implant/Acute 534 3.25 23,733
Complex CNS Principal Diagnosis without CC/MCC or Chemo
Implant).......................................................
----------------------------------------------------------------------------------------------------------------

We determined that the requested new severity subdivision of with
CC and without CC/MCC would meet only four of the five criteria. The
requested new with CC and without CC/MCC severity levels do not meet
the criterion that there is at least a 20 percent difference in average
costs between subgroups.
Because the requested new severity level does not meet all five
criteria, we are not modifying MS-DRG 024 to create severity levels for
cases with CC and cases without CC/MCC.
We also evaluated the request to add endovascular embolizations
captured by codes 39.72, 39.75 and 39.76 to the group labeled ``Major
Device Implants'' within MS-DRGs 023 and 024. Major Device Implants
within MS-DRGs 023 and 024 include the following three sets

[[Page 49886]]

of intracranial neurostimulator procedures. Each of the three is
composed of the implantation of an intracranial neurostimulator pulse
generator which is implanted in the patient, as well as the insertion
of a neurostimulator lead which is inserted through a burr hole in the
skull into the patient's brain.

01.20 (Cranial implantation or replacement of neurostimulator
pulse generator) and 02.93 (Implantation or replacement of intracranial
neurostimulator lead(s))
02.93 (Implantation or replacement of intracranial
neurostimulator lead(s)) and 86.95 (Insertion or replacement of
multiple array neurostimulator pulse generator, not specified as
rechargeable)
02.93 (Implantation or replacement of intracranial
neurostimulator lead(s)) and 86.98 (Insertion or replacement of
multiple array (two or more) rechargeable neurostimulator pulse
generator)

Our clinical advisors reviewed this issue and advised us not to
classify endovascular embolization procedures in the same manner as
patients who receive intracranial neurostimulators. They advised
against classifying endovascular embolizations as Major Device Implants
for several reasons. First, the endovascular embolization device itself
is a simple mechanical device, such as a wire, not a complex electronic
device. The work involved in configuring the neurostimulator device to
the patient, both before and after insertion, is significantly
different from that of the endovascular embolizations. Second,
endovascular embolizations are not devices implanted through an open
procedure as are intracranial neurostimulator pulse generators and
neurostimulator leads. Our clinical advisors stated that open
procedures, including open procedures to implant the generator but
especially including open skull procedures, from a clinical standpoint
are significantly different than endovascular procedures, both in terms
of the work, the facilities, the risks, and recovery rates (length of
stay). Our clinical advisors specifically stated that the insertion of
coils through an endovascular approach is not similar to the insertion
of a complex electronic device. Endovascular embolizations do not match
the clinical complexity and severity of the intracranial
neurostimulators which have greater lengths of stay. Our clinical
advisors stated that care of patients who receive endovascular
embolizations is not at the same severity level as for those patients
who have a major device implant such as an intracranial neurostimulator
or those patients with an acute complex central nervous system
principal diagnosis. Therefore, our clinical advisors recommended not
moving endovascular embolizations to MS-DRGs 023 or 024. They
recommended maintaining their current assignments in MS-DRGs 025, 026,
and 027.
We evaluated the request to create a new set of MS-DRGs to capture
intracranial endovascular embolization procedures. The requestor
recommended including codes 39.72, 39.75, and 39.76 and any other
procedures which CMS deemed appropriate. Our clinical advisors stated
that codes 39.72, 39.75, and 39.76 were appropriately assigned to MS-
DRGs 025, 026, and 027 because they are clinically similar to other
cases in MS-DRGs 025, 026, and 027. In addition, as stated earlier,
these cases do not match the clinical complexity and severity of the
intracranial neurostimulators within MS-DRGs 023 and 024. For these
reasons, our clinical advisors did not support creating a new set of
MS-DRG for these codes and any additional intracranial endovascular
embolization procedures.
After consideration of public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignments for
codes 39.72, 39.75 and 39.76 in MS-DRGs 025, 026, and 027.
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat):
Avery Breathing Pacemaker System
We received a request to create a new MS-DRG for the Avery
Breathing Pacemaker System. This system is also called a diaphragmatic
pacemaker and is captured by ICD-9-CM procedure code 34.85
(Implantation of diaphragmatic pacemaker). The requestor stated that
the diaphragmatic pacemaker is indicated for adult and pediatric
patients with chronic respiratory insufficiency that would otherwise be
dependent on ventilator support. The procedure consists of surgically
implanted receivers and electrodes mated to an external transmitter by
antennas worn over the implanted receivers. The external transmitter
and antennas send radiofrequency energy to the implanted receivers
under the skin. The receivers then convert the radio waves into
stimulating pulses sent down the electrodes to the phrenic nerves,
causing the diaphragm to contract. The requestor stated that this
normal pattern is superior to mechanical ventilators that force air
into the chest. The requestor also stated that the system is expensive;
the device cost is approximately $57,000. According to the requestor,
given the cost of the device, hospitals are reluctant to use it. The
requestor did not make a specific MS-DRG reassignment request.
When used for a respiratory failure patient, procedure code 34.85
is assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with
MCC, with CC, and without CC/MCC, respectively).
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for diaphragmatic pacemaker cases. The following table
shows our findings.

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

There were only 48 cases of diaphragmatic pacemakers within MS-DRGs
163, 164, and 165. The average costs of these diaphragmatic pacemaker
cases ranged from $22,977 for the single case in MS-DRG 165 to $29,406
for the cases in MS-DRG 163, compared to the average costs for all
cases in MS-DRGs 163, 164, and 165, which range from $13,081 to
$34,308. The average cost for diaphragmatic pacemaker cases in MS-DRG
163 was lower than that for all cases in MS-DRG 163, $29,406 compared
to $34,308 for all cases. The average cost for diaphragmatic

[[Page 49887]]

pacemaker cases was higher for MS-DRG 164, $23,406 compared to $18,352
for all cases. While the average cost for the single diaphragmatic
pacemaker case was significantly higher for MS-DRG 165, $22,977
compared to $13,081, we were unable to determine if additional factors
might have impacted the higher cost for this single case.
We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, given
the small number of diaphragmatic pacemaker cases that we found, we did
not believe that there was justification for creating a new MS-DRG.
Basing a new MS-DRG on such a small number of cases could lead to
distortions in the relative payment weights for the MS-DRG because
several expensive cases could impact the overall relative payment
weight. Having larger clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights. We noted that, as discussed in section II.G.4.c. of the
preamble of the proposed rule, one of the criteria we apply in
evaluating whether to create new severity subgroups within an MS-DRG is
whether there are at least 500 cases in the CC or MCC subgroup. While
this criterion is used to evaluate whether to create a severity
subgroup within an MS-DRG, applying it here suggests that creating a
new MS-DRG for only 48 cases would not be appropriate. Although the
average costs of these diaphragmatic pacemaker cases are higher than
the average costs of all cases in MS-DRG 164, the average costs are
lower than all cases in MS-DRG 163. We believe the current MS-DRG
assignment is appropriate and that the data do not support creating an
MS-DRG because there are so few cases.
Our clinical advisors reviewed this issue and determined that the
diaphragmatic pacemaker cases are appropriately classified within MS-
DRGs 163, 164, and 165 because they are clinically similar to other
cases of patients with major chest procedures within MS-DRGs 163, 164,
and 165. Our clinical advisors did not support creating a new MS-DRG
for such a small number of cases.
Based on the results of the examination of the claims data, the
recommendations from our clinical advisors, and the small number of
diaphragmatic pacemaker cases, in the FY 2015 IPPS/LTCH PPS proposed
rule, we did not propose to create a new MS-DRG for diaphragmatic
pacemaker cases for FY 2015. We proposed to maintain the current MS-DRG
assignments for diaphragmatic pacemaker cases. We invited public
comments on our proposal.
Comment: A number of commenters supported CMS' proposal to maintain
the current MS-DRG assignment for diaphragmatic pacemakers. The
commenters stated that the proposal was reasonable given the data and
information presented.
Another commenter expressed appreciation for the analysis performed
on this issue, but disagreed with the conclusion to leave diaphragmatic
pacemakers in MS-DRGs 163, 164, and 165. The commenter stated that,
although the number of cases identified (48) is small, they are unique
in both their costs and their length of stay. The commenter stated that
these cases do not represent the full universe of Medicare
beneficiaries who would be good candidates for the diaphragmatic
pacemaker. The commenter expressed surprise at the average cost data
presented in the table in the proposed rule. The commenter stated that
it sells this system directly to hospitals and does not know what
insurance plan covers the procedure. However, in investigating systems
hospitals reported with code 34.85, the commenter stated that it
discovered that this code covers systems provided by other
manufacturers and that the cost of devices by other manufacturers is
lower than the Avery system and is closer to the costs in CMS' claims
data. The commenter stated that the Avery system is fully implantable,
whereas other systems are not. The commenter asserted that one other
system has percutaneous lead wires that leave the patients; therefore,
the other system is not totally implantable. The commenter made
inquiries of hospitals and found that a majority of those hospitals
contacted were using a lower priced system. The commenter stated that
by grouping multiple manufacturers' devices into the same MS-DRG, with
the same payment rate, CMS was limiting physician and patient choice of
a device. The commenter recommended that MS-DRG payments be made based
on the equipment provided and allow hospitals to recoup the costs of
each system used.
The commenter stated that inadequate payment discourages hospitals
from offering the service to patients. The commenter also stated that
these cases are anomalies in the current MS-DRGs to which they are
assigned and should be classified into a single, unique MS-DRG that
would be clinically and financially coherent. The commenter believed
that such a correction could increase the number of eligible Medicare
beneficiaries who would benefit from use of the device, allowing them
to stop using mechanical ventilation, which would greatly improve their
overall health and quality of life.
The commenter also stated that the average costs for 35 of the
cases with procedure code 34.85 exceed the average costs of the other
cases in the MS-DRG to which they are assigned. The commenter stated
that it found the average length of stay for all 48 cases to be
substantially less than the average length of stay for all of the other
cases. Therefore, the commenter stated that the costs for the hospital
are related primarily to the device and not to the direct hospital care
provided to the patients. The commenter stated that the small number of
diaphragmatic pacemaker cases compared to the large volume of other
cases in each MS-DRG means that the unique cost factors of most of the
pacemaker cases will never be reflected in the payment for these MS-
DRGs. The commenter stated that hospitals have no incentive to make the
service available to patients who could use the system. The commenter
stated that the number of individuals who can use the pacemaker is
small because of the comparatively small volume of individuals who
suffer from the conditions that make the pacemaker necessary, but there
are more than 48 Medicare beneficiaries who could benefit from the
device.
The commenter further questioned the rationale for not basing a new
MS-DRG on such a small number of cases. The commenter questioned the
reference to the use of 500 cases, which is one of the criteria for a
severity level, when the requestor did not want a severity level, but
instead was requesting a new MS-DRG for these Avery Diaphragmatic
Pacemaker cases.
In conclusion, the commenter urged CMS to create a new MS-DRG for
procedure code 34.85.
Response: We appreciate the commenters' support for our proposal
not to change the MS-DRG for diaphragmatic pacemakers. As noted by one
commenter, the ICD-9-CM procedure codes capture the procedure
performed, in this case the implantation of a diaphragmatic pacemaker.
The codes are not manufacturer specific. This is the case for all types
of implanted devices such as cardiac pacemakers, defibrillators, and
orthopedic devices. The procedure codes are grouped into clinically
appropriate MS-DRGs. MS-DRGs were not created to capture a device by a
single manufacturer. It is assumed that hospitals and their physician
staff will select the appropriate devices. CMS makes Medicare payments
to hospitals for groups of similar patients within

[[Page 49888]]

each MS-DRG. The average costs provided in the tables above were based
on Medicare patients reported to have received a diaphragmatic
pacemaker. Hospitals have been receiving payments by diagnosis-related
groups for several decades and are aware that average payments will
exceed the costs of some cases and be less than the costs of other
cases. They are aware that the selection of a particular manufacturer,
or a particular device made by one manufacturer, should be consistent
with the needs of the patient. Our data do not identify which
manufacturer's devices the hospitals and physicians chose to utilize.
As stated earlier, given the small number of diaphragmatic
pacemaker cases, we do not believe there is justification for creating
a new MS-DRG. Basing a new MS-DRG on such a small number of cases could
lead to distortions in the relative payment weights for the MS-DRG
because several expensive cases could impact the overall relative
payment weight. Having larger clinical cohesive groups within an MS DRG
provides greater stability for annual updates to the relative payment
weights.
Our clinical advisors reviewed this issue and the public comments
received and continue to advise that that the diaphragmatic pacemaker
cases are appropriately classified within MS-DRGs 163, 164, and 165
because they are clinically similar to other cases of patients with
major chest procedures within MS-DRGs 163, 164, and 165. They stated
that the clinical flexibility of both physicians and hospitals is
maximized when larger cohorts of clinically similar patients are
grouped and the costs averaged. Our clinical advisors note that many
factors are considered when comparing groups of patients, including
such factors as length of stay, cost of specific devices, type of
device, type of procedure, and anatomical location, among others. They
stated that the commenter did not identify any factors that they had
failed to consider when categorizing these cases. Our clinical advisors
do not support creating a new MS DRG for such a small number of cases.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignments for
diaphragmatic pacemaker cases within MS-DRGs 163, 164, and 165.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Exclusion of Left Atrial Appendage
We received a request to move the exclusion of the left atrial
appendage procedure, which is a non-O.R. procedure and captured by ICD-
9-CM procedure code 37.36 (Excision, destruction or exclusion of left
atrial appendage (LAA)), from MS-DRGs 250 (Percutaneous Cardiovascular
without Coronary Artery Stent with MCC) and 251 (Percutaneous
Cardiovascular without Coronary Artery Stent without MCC) to MS-DRGs
237 (Major Cardiovascular Procedures with MCC) and 238 (Major
Cardiovascular Procedures without MCC). The requestor stated that the
exclusion of the left atrial appendage procedure code 37.36 is not
clinically coherent with the other procedures in MS-DRGs 250 and 251
and that this current assignment to MS-DRGs 250 and 251 does not
compensate providers adequately for the expenses incurred to perform
this procedure and placement of the device.
The exclusion of the left atrial appendage procedure involves a
percutaneous placement of a snare/suture around the left atrial
appendage to close it off. The exclusion of the left atrial appendage
procedure takes place in the cardiac catheterization laboratory under
general anesthesia and is a catheter based closed-chest procedure
instead of an open heart surgical technique to treat the same clinical
condition, with the same intended results. The procedure can be
performed by either an interventional cardiologist or an
electrophysiologist.
We analyzed claims data from the December 2013 update of the FY
2013 MedPAR file for cases assigned to MS-DRGs 250 and 251 and MS-DRGs
237 and 238. Our findings are shown in the table below.

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

The data in the table above show that, while the average costs of
the atrial appendage exclusion procedures are higher ($29,637) than
those for all cases ($21,319) within MS-DRG 250 and are higher
($18,298) than for all cases ($14,614) within MS-DRG 251, they are
lower than those in MS-DRGs 237 ($35,642) and 238 ($24,511). Our
clinical advisors reviewed this issue and recommended not moving these
stand-alone percutaneous cases to MS-DRGs 237 and 238 because they do
not consider them to be major cardiovascular procedures. Our clinical
advisors stated that cases reporting ICD-9-CM procedure code 37.36 are
appropriately assigned within MS-DRG 250 and 251 because they are
percutaneous cardiovascular procedures and are clinically similar to
other procedures within the MS-DRG. Therefore, in the FY 2015 IPPS/LTCH
PPS proposed rule, we did not propose to reassign exclusion of atrial
appendage procedure cases from MS-DRGs 250 and 251 to MS-DRGs 237 and
238 for FY 2015. We invited public comments on our proposal to maintain
the current MS-DRG structure for the exclusion of the left atrial
appendage.
Comment: Several commenters supported CMS' proposal to maintain the
current MS-DRGs 250 and 251 assignment for exclusion of the left atrial
appendage. Several commenters disagreed with the proposal and
recommended that CMS assign exclusion of the left atrial appendage to
MS-DRG 237 and 238 because the procedure can be performed as a
standalone percutaneous procedure or in combination with an open chest
procedure such as cardiac bypass surgery. The commenters stated that
when the procedure is performed in conjunction with an open chest
procedure, the procedure is performed in a surgical suite. Therefore,
the commenters recommended that exclusion of the left atrial appendage
be assigned to MS-DRGs 237 and 238 when it is a standalone procedure.
Response: We appreciate the commenters' support for our proposal to
maintain the current MS-DRG assignment for the exclusion of atrial

[[Page 49889]]

appendage procedures. We are not accepting the commenters'
recommendation to move the cases to MS-DRGs 237 and 238. Our clinical
advisors reviewed these public comments and continue to maintain that
cases reporting ICD-9-CM procedure code 37.36 are appropriately
assigned within MS-DRG 250 and 251 because they are percutaneous
cardiovascular procedures and are clinically similar to other
procedures within the MS-DRGs. They also stated that when performed
with an open chest procedure, these procedures would map to a
clinically appropriate open chest MS-DRG under the current MS-DRG
logic. Our clinical advisors confirmed that although these are not
insignificant procedures, the procedures are not considered to be major
cardiovascular procedures on the same scale and with similar
characteristics as cases grouped together in MS-DRGs 237 and 238.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignment for
exclusion of atrial appendage in MS-DRGs 250 and 251 for FY 2015.
b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
The MitraClip[supreg] System (hereafter referred to as
MitraClip[supreg]) for transcatheter mitral valve repair has been
discussed in extensive detail in previous rulemaking, including the FY
2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR
51528 through 51529) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27902 through 27903) and final rule (77 FR 53308 through 53310), in
response to requests for MS-DRG reclassification, as well as, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552) under the
new technology add-on payment policy. In the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50575), the application for a new technology add-on
payment for MitraClip[supreg] was unable to be considered further due
to lack of FDA approval by the July 1, 2013 deadline.
Subsequently, on October 24, 2013, MitraClip[supreg] received FDA
approval. As a result, the manufacturer has submitted new requests for
both an MS-DRG reclassification and new technology add-on payment for
FY 2015. We refer readers to section II.I. of the preamble of the
proposed rule and this final rule for a discussion regarding the
application for MitraClip[supreg] under the new technology add-on
payment policy. Below we discuss the MS-DRG reclassification request.
The manufacturer's request for MS-DRG reclassification involves two
components. The first component consists of reassigning cases reporting
a transcatheter mitral valve repair using the MitraClip[supreg] from
MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedure without
Coronary Artery Stent with MCC and without MCC, respectively) to MS-
DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with
Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC),
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC). The second component of the manufacturer's request was for CMS to
examine the creation of a new base MS-DRG for transcatheter valve
therapies.
Effective October 1, 2010, ICD-9-CM procedure code 35.97
(Percutaneous mitral valve repair with implant) was created to identify
and describe the MitraClip[supreg] technology.
To address the first component of the manufacturer's request, we
conducted an analysis of claims data from the December 2013 update of
the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS-
DRGs 250 and 251. The table below shows our findings.

----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRG cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250--All cases........................................... 9,174 6.90 $21,319
MS-DRG 250--Cases with procedure code 35.97..................... 67 8.48 39,103
MS-DRG 251--All cases........................................... 26,331 3.01 14,614
MS-DRG 251--Cases with procedure code 35.97..................... 127 3.94 25,635
----------------------------------------------------------------------------------------------------------------

As displayed in the table above, the data demonstrate that, for MS-
DRG 250, there were a total of 9,174 cases with an average length of
stay of 6.90 days and average costs of $21,319. The number of cases
reporting the ICD-9-CM procedure code 35.97 in MS-DRG 250 totaled 67
with an average length of stay of 8.48 days and average costs of
$39,103. For MS-DRG 251, there were a total of 26,331 cases with an
average length of stay of 3.01 days and average costs of $14,614. There
were 127 cases found in MS-DRG 251 reporting the procedure code 35.97
with an average length of stay of 3.94 days and average costs of
$25,635. We recognize that the cases reporting procedure code 35.97
have a longer length of stay and higher average costs in comparison to
all the cases within MS-DRGs 250 and 251. However, as stated in prior
rulemaking (77 FR 53309), it is a fundamental principle of an averaged
payment system that half of the procedures in a group will have above
average costs. It is expected that there will be higher cost and lower
cost subsets, especially when a subset has low numbers.
We also evaluated the claims data from the December 2013 update of
the FY 2013 MedPAR file for MS-DRGs 216 through 221. Our findings are
shown in the table below.

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

[[Page 49890]]

MS-DRG 221--All cases........................................... 4,586 5.32 34,310
----------------------------------------------------------------------------------------------------------------

The data in our findings did not warrant reassignment of cases
reporting use of the MitraClip[supreg]. We stated in the proposed rule
that if we were to propose reassignment of cases reporting procedure
code 35.97 to MS-DRGs 216 through 221, they would be significantly
overpaid, as the average costs range from $34,310 to $65,478 for those
MS-DRGs. In addition, our clinical advisors did not support reassigning
these cases. They noted that the current MS-DRG assignment is
appropriate for the reasons stated in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53309). To reiterate, our clinical advisors noted that the
current MS-DRG assignment is reasonable because the operating room
resource utilizations of percutaneous procedures, such as those found
in MS-DRGs 250 and 251, tend to group together, and are generally less
costly than open procedures, such as those found in MS-DRGs 216 through
221. Percutaneous procedures by organ system represent groups that are
reasonably clinically coherent. More significantly, our clinical
advisors stated that postoperative resource utilization is
significantly higher for open procedures with much greater morbidity
and consequent recovery needs. Because the equipment, technique, staff,
patient populations, and physician specialty all tend to group by type
of procedure (percutaneous or open), separately grouping percutaneous
procedures and open procedures is more clinically consistent.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not
propose to modify the current MS-DRG assignment for cases reporting
procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 216 through
221 for FY 2015. We invited public comments on our proposal to not make
any modifications to the current MS-DRG logic for these cases.
Comment: Several commenters supported the proposal to maintain
cases reporting procedure code 35.97 in MS-DRGs 250 and 251, stating it
was reasonable given the data and information provided.
Response: We acknowledge and appreciate the commenters' support.
Comment: Some commenters suggested that cases utilizing the
MitraClip[supreg] should be compensated similarly to mitral valve
procedures that are performed with an open approach due to the time,
staff and resources involved. Commenters reported that this novel
technology has improved the quality of life for patients suffering from
congestive heart failure. However, the commenters indicated that due to
inadequate payment, their respective facilities are not able to offer
the MitraClip[supreg] to the entire population that is eligible for it.
The commenters also indicated that patients do not have access to this
life-saving technology not only due to the lack of adequate payment to
providers but also due to the cost of the device. Another commenter
reported that ``the price of the device should be reduced to a level
that is feasible for both sponsor and hospital.'' Commenters also
suggested that congestive heart failure readmissions would be reduced
if patients could be treated with the MitraClip[supreg].
Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule,
our clinical advisors believe that the current MS-DRG assignment for
the MitraClip[supreg] is reasonable because the operating room resource
utilizations of percutaneous procedures, such as those found in MS-DRGs
250 and 251, tend to group together, and are generally less costly than
open procedures. In addition, the data do not support reassignment. We
stated in the proposed rule that if we were to propose reassignment of
cases reporting procedure code 35.97 to MS-DRGs 216 through 221, they
would be significantly overpaid, as the average costs range from
$34,310 to $65,478 for those MS-DRGs and the average costs for cases
reporting procedure code 35.97 are $30,286 for MS-DRGs 250 and 251.
Comment: One commenter suggested an alternative option regarding
MS-DRG reassignment for the MitraClip[supreg] and requested that CMS
reassign cases reporting procedure code 35.97 from MS-DRGs 250 and 251
to MS-DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and
without MCC, respectively) with concurrent approval of the new
technology add-on payment application. The commenter stated that this
would allow the MitraClip[supreg] to be recognized in MS-DRGs involving
a major cardiovascular procedure with an implantable device.
Response: We did not propose to reassign cases reporting procedure
code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 237 and 238. Therefore,
we consider this comment to be outside of the scope of the FY 2015
IPPS/LTCH PPS proposed rule. We note that, as referenced in section
II.G.1.b. of the preamble of this final rule, we encourage input from
our stakeholders concerning the annual IPPS updates when that input is
made available to us by December 7 of the year prior to the next annual
proposed rule update. For example, to be considered for any updates or
changes in FY 2016, comments and suggestions should be submitted by
December 7, 2014.
We note that the MitraClip[supreg] technology is discussed in
section II.I. of the preamble of this final rule under the new
technology add-on payment policy.
After consideration of the public comments we received, we are
finalizing our proposal to not modify the current MS-DRG assignment for
cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-
DRGs 216 through 221 for FY 2015.
As indicated above, the second component of the manufacturer's
request involved the creation of a new base MS-DRG for transcatheter
valve therapies. We also received a similar request from another
manufacturer recommending that CMS create a new MS-DRG for procedures
referred to as endovascular cardiac valve replacement procedures. We
reviewed each of these requests using the same data analysis, as set
forth below. The discussion for endovascular cardiac valve replacement
procedures is included in section II.G.4.c. of the preamble of this
final rule and includes findings from the analysis and our proposals
and final policies for each of these similar, but distinct requests.
c. Endovascular Cardiac Valve Replacement Procedures
As noted in the previous section related to the MitraClip[supreg]
technology, we received two requests to create a new base MS-DRG for
what was referred to as ``transcatheter valve therapies'' by one
manufacturer and ``endovascular cardiac valve replacement'' procedures
by another manufacturer. Below we summarize the details of each request
and review results of the data analysis that was performed.
Transcatheter Valve Therapies
The request related to transcatheter valve therapies consisted of
creating a new MS-DRG that would include the MitraClip[supreg]
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve
repair with implant)), along

[[Page 49891]]

with the following list of ICD-9-CM procedure codes that identify the
various types of valve replacements performed by an endovascular or
transcatheter technique:
35.05 (Endovascular replacement of aortic valve);
35.06 (Transapical replacement of aortic valve);
35.07 (Endovascular replacement of pulmonary valve);
35.08 (Transapical replacement of pulmonary valve); and
35.09 (Endovascular replacement of unspecified valve).
We performed analysis of claims data from the December 2013 update
of the FY 2013 MedPAR file for both the percutaneous mitral valve
repair and the transcatheter/endovascular cardiac valve replacement
codes in their respective MS-DRGs. The percutaneous mitral valve repair
with implant (MitraClip[supreg]) procedure code is currently assigned
to MS-DRGs 250 and 251, while the transcatheter/endovascular cardiac
valve replacement procedure codes are currently assigned to MS-DRGs
216, 217, 218, 219, 220, and 221. As illustrated in the table below,
the data demonstrate that, for MS-DRGs 250 and 251, there were a total
of 194 cases reporting procedure code 35.97, with an average length of
stay of 5.5 days and average costs of $30,286.

----------------------------------------------------------------------------------------------------------------
Average length
MS-DRG Number of cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250 through 251--Cases with procedure code 35.97...... 194 5.5 $30,286
----------------------------------------------------------------------------------------------------------------

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

The data clearly demonstrate that the volume of cases for the
transcatheter/endovascular cardiac valve replacement procedures is much
higher in comparison to the volume of cases for the percutaneous mitral
valve repair (MitraClip[supreg]) procedure (7,287 compared to 194). In
addition, the average costs of the transcatheter/endovascular cardiac
valve replacement procedures are significantly higher than the average
costs of the percutaneous mitral valve repair with implant ($53,802
compared to $30,286).
Our clinical advisors did not support grouping a percutaneous valve
repair procedure with transcatheter/endovascular valve replacement
procedures. They do not believe that these procedures are clinically
coherent or similar in terms of resource consumption because the
MitraClip[supreg] technology identified by procedure code 35.97 is
utilized for a percutaneous mitral valve repair, while the other
technologies, identified by procedure codes 35.05 through 35.09, are
utilized for transcatheter/endovascular cardiac valve replacements.
Consequently, the data analysis and our clinical advisors did not
support the creation of a new MS-DRG. Therefore, for FY 2015, we did
not propose to create a new MS-DRG to group cases reporting the
percutaneous mitral valve repair (MitraClip[supreg]) procedure with
transcatheter/endovascular cardiac valve replacement procedures. We
invited public comments on our proposal.
Comment: One commenter recommended reassignment of procedure code
35.97 to a more appropriate MS-DRG. However, the commenter did not
offer a specific recommendation as to which MS-DRG would be more
appropriate.
Response: We appreciate the commenter's recommendation. However, as
the commenter did not provide a specific MS-DRG to which procedure code
35.97 should be reassigned, we were unable to evaluate the
recommendation. As we noted earlier, and as referenced in section
II.G.1.b. of the preamble of this final rule, we encourage input from
our stakeholders concerning the annual IPPS updates when that input is
made available to us by December 7 of the year prior to the next annual
proposed rule update. For example, to be considered for any updates or
changes in FY 2016, comments and suggestions should be submitted by
December 7, 2014.
Comment: One commenter urged CMS to reassign procedure code 35.97
from its current assignment in MS-DRGs 250 and 251 to a more
appropriate MS-DRG that would better recognize case complexity as a
major cardiovascular procedure with a permanent implant. This commenter
specifically recommended the inclusion of transcatheter mitral valve
repair (TMVR) within the newly proposed MS-DRGs 266 and 267, and to
subsequently retitle these MS-DRGs, ``Endovascular Transcatheter Valve
Therapy with Implant.''
Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule, our
analysis did not support including cases reporting procedure code 35.97
for percutaneous mitral valve repair procedures together with
transcatheter/endovascular cardiac valve replacement procedures in a
new MS-DRG. The average costs of the transcatheter/endovascular cardiac
valve replacement procedures are significantly higher than the average
costs of the percutaneous mitral valve repair procedures with implant
($53,802 compared to $30,286).
In addition, our clinical advisors did not support grouping a
percutaneous valve repair procedure with transcatheter/endovascular
valve replacement procedures. They do not believe that these procedures
are clinically coherent or similar in terms of resource consumption
because the MitraClip[supreg] technology identified by procedure code
35.97 is utilized for a percutaneous mitral valve repair, while the
other technologies, identified by procedure codes 35.05 through 35.09,
are utilized for transcatheter/endovascular cardiac valve replacements.

[[Page 49892]]

Comment: One commenter disagreed with the CMS analysis that
transcatheter mitral valve repair (TMVR) is significantly different
than transcatheter aortic valve replacement (TAVR). The commenter
asserted that ``unlike alternative open repair and replacement
procedures, a heart valve prosthesis is being manipulated/modified from
a Transcatheter approach; whether the prosthesis serves to `replace' or
`repair' an existing valve is irrelevant in regards to resource
consumption.'' The commenter urged CMS to consider all transcatheter
valve procedures equally with respect to DRG assignment.
Response: We disagree with the commenter that TMVR and TAVR are not
significantly different. As explained in the FY 2015 IPPS/LTCH PPS
proposed rule, our analysis of the claims data and the recommendation
from our clinical advisors do not support treating TMVR and all
transcatheter valve procedures equally with respect to MS-DRG
assignment. As noted previously, the average costs of the
transcatheter/endovascular cardiac valve replacement procedures are
significantly higher than the average costs of the percutaneous mitral
valve repair procedures with implant ($53,802 compared to $30,286).
After consideration of the public comments we received, we are
finalizing our proposal to not create a new MS-DRG to group cases
reporting the percutaneous mitral valve repair (MitraClip[supreg])
procedure with transcatheter/endovascular cardiac valve replacement
procedures.
Endovascular Cardiac Valve Replacement
The similar but separate request relating to endovascular cardiac
valve replacement procedures consisted of creating a new MS-DRG that
would only include the various types of cardiac valve replacements
performed by an endovascular or transcatheter technique. In other
words, this request specifically did not include the MitraClip[supreg]
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve
repair with implant)) and only included the list of ICD-9-CM procedure
codes that identify the various types of valve replacements performed
by an endovascular or transcatheter technique (ICD-9-CM procedure codes
35.05 through 35.09) as described earlier in this section.
The human heart contains four major valves--the aortic, mitral,
pulmonary, and tricuspid valves. These valves function to keep blood
flowing through the heart. When conditions such as stenosis or
insufficiency/regurgitation occur in one or more of these valves,
valvular heart disease may result. Cardiac valve replacement surgery is
performed in an effort to correct these diseased or damaged heart
valves. The endovascular or transcatheter technique presents a viable
option for high-risk patients who are not candidates for the
traditional open surgical approach.
We reviewed the claims data from the December 2013 update of the FY
2013 MedPAR file for cases in MS-DRGs 216 through 221. Our findings are
shown in the chart below. The data analysis shows that cardiac valve
replacements performed by an endovascular or transcatheter technique
represent a total of 7,287 of the cases in MS-DRGs 216 through 221,
with an average length of stay of 8.1 days and higher average costs
($53,802 compared to $47,177) in comparison to all of the cases in MS-
DRGs 216 through 221.

As the data appear to indicate support for the creation of a new
base MS-DRG, based on our evaluation of resource consumption, patient
characteristics, volume, and costs between the cardiac valve
replacements performed by an endovascular or transcatheter technique
and the open surgical technique, we then applied our established
criteria to determine if these cases would meet the requirements to
create subgroups. We use five criteria established in the FY 2008 IPPS
final rule (72 FR 47169) to review requests involving the creation of a
new CC or an MCC subgroup within a base MS-DRG. As outlined in the FY
2012 IPPS proposed rule (76 FR 25819), the original criteria were based
on average charges but were later converted to average costs. In order
to warrant creation of a CC or an MCC subgroup within a base MS-DRG,
this subgroup must meet all of the following five criteria:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or the MCC subgroup.
At least 500 cases are in the CC or the MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
In applying the five criteria, we found that the data support the
creation of a new MS-DRG subdivided into two severity levels. We also
consulted with our clinical advisors. Our clinical advisors stated that
patients receiving endovascular cardiac valve replacements are
significantly different from those patients who undergo an open chest
cardiac valve replacement. They noted that patients receiving
endovascular cardiac valve replacements are not eligible for open chest
cardiac valve procedures because of a variety of health constraints.
This highlights the fact that peri-operative complications and post-
operative morbidity have significantly different profiles for open
chest procedures compared with endovascular interventions. This is also
substantiated by the different average lengths of stay demonstrated by
the two cohorts. Our clinical advisors further noted that separately
grouping these endovascular valve replacement procedures provides
greater clinical cohesion for this subset of high-risk patients.
In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create
the following MS-DRGs for endovascular cardiac valve replacements:
Proposed new MS-DRG 266 (Endovascular Cardiac Valve
Replacement with MCC); and
Proposed new MS-DRG 267 (Endovascular Cardiac Valve
Replacement without MCC).

[[Page 49893]]

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

We invited public comments on our proposal to create these new MS-
DRGs for FY 2015.
Comment: Several commenters supported the proposal to create new
MS-DRGs for endovascular cardiac valve replacement procedures. One
commenter noted that ``the endovascular or transcatheter approach
presents a viable option for high-risk patients who are not candidates
for the traditional open chest surgical approach. The proposed MS-DRGs
better align the more extensive cardiac valve procedures based on
clinical coherence and similar resource costs.'' Another commenter
stated that, by establishing these new MS-DRGs, ``CMS will continue to
be able to collect the necessary information that will help assure
appropriate payment in the future as these technologies evolve.'' Other
commenters supported creation of the new MS-DRGs, noting it was
reasonable given the data and information provided. Another commenter
applauded CMS for proposing the two new MS-DRGs, noting that ``this
decision will allow patients, particularly women, to have increased
access to innovative therapies that will ease their suffering from the
debilitating effects of severe aortic stenosis.''
Response: We appreciate the commenters' support.
Comment: One commenter commended CMS for proposing new MS-DRGs to
identify endovascular/transcatheter valve procedures. However, the
commenter suggested that CMS reconsider the title of the proposed MS-
DRGs. The commenter noted that the accepted nomenclature is
``transcatheter'' and not ``endovascular''.
Response: We acknowledge that many individuals prefer the use of
the term ``transcatheter'', such as occurs in the frequently used
acronym TAVR (transcatheter aortic valve replacement). However, we note
that this nomenclature is by no means universal. ``Endovascular'' is
also used to describe these procedures. The current ICD-9-CM procedure
code for TAVR, for example, is 35.05 (Endovascular replacement of
aortic valve). Recognizing that universal agreement on medical
nomenclature is still an unachievable goal at the present time, we have
elected to retain the term ``endovascular'' to maintain consistency
with the current ICD-9-CM terminology.
After consideration of the public comments we received, we are
finalizing our proposal to create new MS-DRG 266 (Endovascular Cardiac
Valve Replacement with MCC) and MS-DRG 267 (Endovascular Cardiac Valve
Replacement without MCC).
d. Abdominal Aorta Graft
We received a request that we change the MS-DRG assignment for
procedure code 39.71 (Endovascular implantation of other graft in
abdominal aorta), which is assigned to MS-DRGs 237 and 238 (Major
Cardiovascular Procedures with MCC and without MCC, respectively). The
requestor asked that we reassign procedure code 39.71 to MS-DRGs 228,
229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and
without CC/MCC, respectively). The requestor stated that the average
cost of endovascular abdominal aorta graft implantation cases is
significantly higher than other cases in MS-DRGs 237 and 238. The
requestor stated that the average cost of endovascular abdominal aorta
graft implantation cases is closer to those in MS-DRGs 228, 229, and
230.
The requestor stated that the goal of endovascular repair for
abdominal aneurysm is to isolate the diseased, aneurismal portion of
the aorta and common iliac arteries from continued exposure to systemic
blood pressure. The procedure involves the delivery and deployment of
endovascular prostheses, also referred to as a graft, as required to
isolate the aneurysm above and below the extent of the disease. The
requestor stated that this significantly reduces patient morbidity and
death caused by leakage and/or sudden rupture of an untreated aneurysm.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for cases of endovascular abdominal aorta graft
implantations. The following table shows our findings.

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

As this table shows, endovascular abdominal aorta graft
implantation cases have higher average costs and shorter lengths of
stay than all cases within MS-DRGs 237 and 238. The average cost for
endovascular abdominal aorta graft implantation cases in MS-DRG 237 is
$9,256 greater than that for all cases in MS-DRG 237 ($44,898 compared
to $35,642). The average cost for endovascular abdominal aorta graft
implantation cases in MS-DRG 238 is $3,973 higher than that for all
cases in MS-DRG 238 ($28,484 compared to $24,511). Cases in MS-DRG 228
have average costs that are $7,417 higher than the endovascular
abdominal aorta graft implantation cases in MS-DRG 237 ($52,315
compared to $44,898). MS-DRG 228 and MS-DRG 237 both contain cases with
MCCs. Cases in MS-DRG 229, which contain a CC, have average costs that
are $3,586 higher than average costs of the endovascular abdominal
aorta graft implantation cases in MS-DRG 238, which do not contain an
MCC ($32,070 compared to $28,484). Cases in MS-DRG 230, which have
neither an MCC nor a CC, have average costs that are $797 higher than
the endovascular abdominal aorta graft implantation cases in MS-DRG 238
($29,281 compared to $28,484). While the average costs were

[[Page 49894]]

higher for endovascular abdominal aorta graft implantation cases
compared to all cases within MS-DRGs 237 and 238, each MS-DRG has some
cases that are higher and some cases that are lower than the average
costs for the entire MS-DRG. MS-DRGs were developed to capture cases
that are clinically consistent with similar overall average resource
requirements. This results in some cases within an MS-DRG having costs
that are higher than the overall average and other cases having costs
that are lower than the overall average. This may be due to specific
types of cases included within the MS-DRGs or to the fact that some
cases will simply require additional resources on a specific admission.
However, taken as a whole, the hospital will be paid an appropriate
amount for the group of cases that are assigned to the MS-DRG. We
believe the endovascular abdominal aorta graft implantation cases are
appropriately grouped with other procedures within MS-DRGs 237 and 238.
Our clinical advisors reviewed this issue and determined that the
endovascular abdominal aorta graft implantation cases are appropriately
classified within MS-DRGs 237 and 238 because they are clinically
similar to the other procedures in MS-DRGs 237 and 238, which include
other procedures on the aorta. While the endovascular abdominal aorta
graft implantation cases have higher average costs than the average for
all cases within MS-DRGs 237 and 238, our clinical advisors do not
believe this justifies moving the cases to MS-DRGs 228, 229 and 230,
which involve a different set of cardiothoracic surgeries.
As we stated in the FY 2015 IPPS/LTCH PPS proposed rule, based on
the results of examination of the claims data and the recommendations
of our clinical advisors, we did not believe that proposing to
reclassify endovascular abdominal aorta graft implantation cases from
MS-DRGs 237 and 238 was warranted. We proposed to maintain the current
MS-DRG assignments for endovascular abdominal aorta graft implantation
cases. We invited public comments on our proposal.
Comment: A number of commenters supported CMS' proposal to maintain
the current MS-DRG assignments for endovascular abdominal aorta graft
implantation cases. The commenters stated that the proposal was
reasonable given the data and information provided. One commenter
disagreed with the proposal and stated that endovascular abdominal
aorta graft implantation cases should be reassigned to MS-DRGs 228,
229, and 230. The commenter stated that neither MS-DRGs 237 and 238 nor
MS-DRGs 228, 229, and 230 have absolute clinical coherence and that
there are a mix of procedures in both set of MS-DRGs. The commenter
also expressed concern that CMS was prioritizing clinical coherence
over total resource cost in deciding not to approve this request to
assign procedure code 39.71 to MS-DRGs 228, 229, and 230. The commenter
stated that if CMS is concerned about the perception regarding clinical
coherence of the MS-DRG assignment for procedures represented by code
39.71, CMS should change the titles for these five MS-DRGs to
accommodate the evolution of these procedures while also allowing for
new indications of various types of grafts in the aorta and its
branches. The commenter did not suggest specific new MS-DRG titles for
MS-DRGs 228, 229, 230, 237, and 238.
Response: We appreciate the commenters' support for our proposal to
maintain the current assignments for endovascular abdominal aorta graft
implantation cases in MS-DRGs 237 and 238. We are not accepting the
commenter's suggestion that we modify the titles of MS-DRGs 228, 229,
230, 237, and 238 in order to justify the reassignment of abdominal
aorta graft procedures to MS-DRGs 228, 229, and 230. Our clinical
advisors reviewed this issue and disagree with the commenters'
statement that CMS puts too high a priority on the clinical coherence
of the MS-DRGs. MS-DRGs were developed based on clinical similarities
of groups of medical and surgical patients. We also consider average
costs of these patients in evaluating the need to make modifications to
the MS-DRGs. However, for the reasons described previously, we do not
believe that the higher average costs for the endovascular abdominal
aorta graft implantation cases as compared to the average for all cases
within MS-DRGs 237 and 238 warrant reassigning these cases to MS-DRGs
228, 229, and 230. We will continue to evaluate the need to make
updates to the MS-DRGs to better capture procedures of the aorta and
its branches. We welcome any specific recommendations for refinements
to better capture changes in medical treatment. Any requests for MS-DRG
updates must be received by December 7, 2014, in order to be considered
for the FY 2016 proposed rule.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current assignments for
endovascular abdominal aorta graft implantation cases in MS-DRGs 237
and 238.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Shoulder Replacement Procedures
We received a request to change the MS-DRG assignment for shoulder
replacement procedures. This request involved the following two
procedure codes:
81.88 (Reverse total shoulder replacement); and
81.97 (Revision of joint replacement of upper extremity).
With respect to procedure code 81.88, the requestor asked that
reverse total shoulder replacements be reassigned from MS-DRGs 483 and
484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with
CC/MCC and without CC/MCC, respectively) to MS-DRG 483 only. The
reassignment of procedure code 81.88 from MS-DRGs 483 and 484 was
discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50534 through 50536). The result of reassigning reverse shoulder
replacements from MS-DRGs 483 and 484 to MS-DRG 483 only would be that
this procedure would be assigned to MS-DRG 483 whether or not the case
had a CC or an MCC. The requestor stated that reverse shoulder
replacement procedures are more clinically cohesive with higher
severity MS-DRGs due to the complexity and resource consumption of
these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50534 through 50536) for a discussion of the reverse total
shoulder replacement.
The requestor also recommended that we reassign what it described
as another shoulder procedure involving procedure code 81.97, which is
assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and
Connective Tissue O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively), to MS-DRG 483. We point out that MS-DRG 483
contains upper joint replacements, including shoulder replacements. MS-
DRG 483 does not contain any joint revision procedures. Similar to the
request for reassignment of procedure code 81.88, this would mean that
procedure code 81.97 would be assigned to MS-DRG 483 whether or not the
case had a CC or an MCC. If CMS did not support this recommendation for
moving procedure code 81.97 to MS-DRG 483, the requestor recommended an
alternative reassignment to MS-DRG 515 (Other Musculoskeletal System
and Connective Tissue O.R. procedures with MCC) even if the case had no
MCC.
We point out that, while the requestor refers to procedure code
81.97 as a

[[Page 49895]]

shoulder procedure, the code description actually includes revisions of
joint replacements of a variety of upper extremity joints, including
those in the elbow, hand, shoulder, and wrist.
As stated earlier, reverse shoulder replacements are assigned to
MS-DRGs 483 and 484. Revisions of upper joint replacements are assigned
to MS-DRGs 515, 516, and 517. We examined claims data from the December
2013 update of the FY 2013 MedPAR file for MS-DRGs 483 and 484. The
following table shows our findings of cases of reverse shoulder
replacement.

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

As the above table shows, MS-DRG 484 reverse shoulder replacement
cases have similar average costs to those in MS-DRG 483 ($18,719 for
reverse shoulder replacements in MS-DRG 484 compared to $18,807 for all
cases in MS-DRG 483). However, in reviewing the data, we observed that
the claims data no longer support two severity levels for MS-DRGs 483
and 484.
We use the five criteria established in FY 2008 (72 FR 47169) to
review requests involving the creation of a new CC or MCC subgroup
within a base MS-DRG. As outlined in the FY 2012 IPPS/LTCH PPS proposed
rule (76 FR 25819), the original criteria were based on average charges
but were later converted to average costs. In order to warrant creation
of a CC or an MCC subgroup within a base MS-DRG, the subgroup must meet
all of the following five criteria:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
We found through our examination of the claims data from the
December 2013 update of the FY 2013 MedPAR file that the two severity
subgroups of MS-DRG 483 and 484 no longer meet the fourth criterion of
at least a 20-percent difference in average costs between subgroups. We
found that there is a $2,453 difference in average costs between MS-DRG
483 and MS-DRG 484. The difference in average costs would need to be
$3,761 to meet the fourth criterion. Therefore, our claims data support
collapsing MS-DRGs 483 and 484 into a single MS-DRG. Our clinical
advisors reviewed this issue and agreed that there is no longer enough
difference between the two severity levels to justify separate severity
subgroups for MS-DRGs 483 and 484, which include a variety of upper
joint replacements. Therefore, our clinical advisors supported our
recommendation to collapse MS-DRGs 483 and 484 into a single MS-DRG.
In the FY 2015 IPPS/LTCH PPS proposed rule, based on the results of
examination of the claims data and the advice of our clinical advisors,
we proposed to collapse MS-DRGs 483 and 484 into a single MS-DRG by
deleting MS-DRG 484 and revising the title of MS-DRG 483 to read
``Major Joint/Limb Reattachment Procedure of Upper Extremities''.
The following table shows our findings of cases of revisions of
upper joint replacement from the December 2013 update of the FY 2013
MedPAR file.

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

Cases identified by code 81.97 in MS-DRGs 515, 516, and 517 have
lower average costs and shorter lengths of stay than all cases in MS-
DRG 515. The average costs of cases in MS-DRG 515 are $3,977 higher
than the average costs of the cases with procedure code 81.97 in MS-DRG
516 ($22,191 compared to $18,214). The average costs of cases in MS-DRG
515 are $6,271 higher than cases with procedure code 81.97 in MS-DRG
517 ($22,191 compared to $15,920).
The table above shows that the average costs of cases in MS-DRG 483
are $3,278 lower than the average costs of cases with procedure code
81.97 in MS-DRG 515 ($18,807 compared to $22,085). The average costs of
cases in MS-DRG 483 are $593 higher than the average costs of cases
with procedure code 81.97 in MS-DRG 516 ($18,807 compared to $18,214).
The average costs of cases in MS-DRG 483 are $2,887 higher than the
average costs of cases with procedure code 81.97 in MS-DRG 517 ($18,807
compared to $15,920).
The claims data did not support moving all procedure code 81.97
cases to MS-DRG 515 or MS-DRG 483, whether or not there is a CC or an
MCC. We also pointed out once again that procedure code 81.97 is a
nonspecific code that captures revisions to not only the shoulder, but
also a variety of upper extremity joints including those in the elbow,
hand, shoulder, and wrist. Therefore, we have no way of determining how
many cases reporting procedure code 81.97 were actually shoulder
procedures as opposed to procedures on the elbow, hand, or wrist.
Our clinical advisors reviewed this issue and determined that the
revisions of upper joint replacement procedures

[[Page 49896]]

are appropriately classified within MS-DRGs 515, 516, and 517, which
include other joint revision procedures. They did not support moving
revisions of upper joint replacement procedures to MS-DRG 515, whether
or not there is an MCC. They supported the current classification,
which bases the severity level on the presence of a CC or an MCC. They
also did not support moving revisions of upper joint replacement
procedures to MS-DRG 483, whether or not there is a CC or an MCC,
because these revisions are not joint replacements. Based on the
results of our examination and the advice of our clinical advisors, in
the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose moving
revisions of upper joint replacement procedures to MS-DRG 515 or MS-DRG
483, whether or not there is a CC or an MCC.
In summation, we proposed to collapse MS-DRGs 483 and 484 into a
single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG
483 to read ``Major Joint/Limb Reattachment Procedure of Upper
Extremities''. We proposed to maintain the current MS-DRG assignments
for revisions of upper joint replacement procedures in MS DRGs 515,
516, and 517. We invited public comments on our proposals.
Comment: A number of commenters supported the proposal to collapse
MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and
revising the title of MS-DRG 483 to read ``Major Joint/Limb
Reattachment Procedure of Upper Extremities.'' The commenters stated
that the proposal was reasonable given the data and information
provided.
One commenter stated that collapsing the two MS-DRGs is supported
by claims data indicating little cost difference between cases in the
current two severity levels. Several commenters stated that the new,
single MS-DRG represented clinically cohesive procedures with similar
complexity and resource consumption.
Response: We appreciate the commenters' support for our proposal to
collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG
484 and revising the title of MS-DRG 483 to read ``Major Joint/Limb
Reattachment Procedure of Upper Extremities''.
After consideration of the public comments we received, we are
adopting as final, without modification, our proposal to collapse MS-
DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and
revising the title of MS-DRG 483 to read ``Major Joint/Limb
Reattachment Procedure of Upper Extremities''.
Comment: A number of commenters supported the proposal to maintain
the MS-DRG assignment for code 81.97 in MS-DRGs 515, 516, and 517. The
commenters stated that the recommendation was reasonable give the data
and information provided. One commenter disagreed with the proposal and
stated that code 81.97 would be more accurately classified in MS-DRG
483 (Major Joint/Limb Reattachment of Upper Extremities with CC/MCC)
because MS-DRG 483 includes upper extremity procedures.
Response: We appreciate the commenters' support for our proposal to
maintain the current MS-DRG assignment for code 81.97 in MS-DRGs 515,
516, and 517. We disagree with the commenter that code 81.97 is similar
to other procedures currently assigned to MS-DRG 483. MS-DRG 483
contains replacements, not revisions, of the wrist, shoulder, and elbow
as well as reattachments of the forearm. Revision of the joint could
include a variety of procedures to joints of the upper extremity.
Procedure code 81.97 is a nonspecific code that captures revisions to
not only the shoulder, but also a variety of upper extremity joints
including those in the elbow, hand, shoulder, and wrist. Therefore, we
have no way of determining how many cases reporting procedure code
81.97 were actually shoulder procedures as opposed to procedures on the
elbow, hand, or wrist.
Our clinical advisors reviewed this issue and continue to advise
that code 81.97 not be reassigned to MS-DRG 483 because the procedure
is neither a replacement nor a reattachment procedure as are the
current procedures within MS-DRG 483. In addition, the code captures a
variety of joint revisions of the upper extremities and is not
clinically similar to the replacements and reattachment procedures in
MS-DRG 483. Our clinical advisors recommend that code 81.97 continue to
be assigned to MS-DRG 515, 516, and 517.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current assignment of code
81.97 in MS-DRG 515, 516, and 517.
b. Ankle Replacement Procedures
We received a request to change the MS-DRG assignment for two ankle
replacement procedures. The request involved the following two
procedure codes:
81.56 (Total ankle replacement); and
81.59 (Revision of joint replacement of lower extremity,
not elsewhere classified).
The reassignment of procedure code 81.56 from MS-DRGs 469 and 470
(Major Joint Replacement or Reattachment of Lower Extremity with MCC
and without MCC, respectively) to a new MS-DRG or, alternatively, to
MS-DRG 469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50536 through 50537). We refer readers to this final rule for a
discussion of ankle replacement procedures. The requestor asked that we
again evaluate reassigning total ankle replacement procedures. The
requestor also asked that we reassign what it referred to as another
ankle replacement revision procedure captured by procedure code 81.59
(Revision of joint replacement of lower extremity, not elsewhere
classified), which is assigned to MS-DRGs 515, 516, and 517 (Other
Musculoskeletal System and Connective Tissue O.R. Procedures with MCC,
with CC, and without CC/MCC, respectively).
The requestor asked that we reassign procedure code 81.56 from MS-
DRGs 469 and 470 to MS-DRG 483 (Major Joint/Limb Reattachment Procedure
of Upper Extremities with CC/MCC) and rename the MS-DRG to better
capture the additional lower extremity cases. The requestor stated that
the result would be assignment of lower joint procedures to an MS-DRG
that currently captures only upper extremity cases and assignment to
the highest severity level even if the case did not have a CC or an
MCC. If CMS did not find this acceptable, the requestor made an
alternative recommendation of assigning procedure code 81.56 to MS-DRG
469 and renaming the MS-DRG to better capture the additional cases.
Cases would be assigned to the highest severity level whether or not
the case had an MCC.
The requestor also recommended that procedure code 81.59, which is
assigned to MS-DRGs 515, 516, and 517, be reassigned to MS-DRG 483 and
that the MS-DRG be given a new title to better capture the additional
lower extremity cases. The requestor stated that the result would be
assignment of lower joint procedures to an MS-DRG that currently
captures only upper extremity cases and assignment to the highest
severity level even if the patient did not have a CC or an MCC. If CMS
did not support this recommendation, the requestor suggested two
additional recommendations. One involves moving procedure code 81.59 to
MS-DRG 515 even when the case had no MCC. The other recommendation was
to move

[[Page 49897]]

procedure code 81.59 to MS-DRG 469, whether or not the case had a MCC.
We point out that while the requestor refers to procedure code
81.59 as a revision of an ankle replacement, the code actually includes
revisions of joint replacements of a variety of lower extremity joints
including the ankle, foot, and toe.
The following table shows the number of total ankle replacement
cases, average length of stay, and average costs for procedure code
81.56 in MS-DRGs 469 and 470 found in claims data from the December
2013 update of the FY 2013 MedPAR file compared to all cases within MS-
DRGs 469, 470, and 483.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,916 7.22 $22,548
MS-DRG 469--Cases with procedure code 81.56..................... 32 6.19 27,419
MS-DRG 470--All cases........................................... 406,344 3.25 15,119
MS-DRG 470--Cases with procedure code 81.56..................... 1,379 2.13 19,332
MS-DRG 483...................................................... 14,220 3.20 18,807
----------------------------------------------------------------------------------------------------------------

In summary, the requestor asked us to reassign procedure code 81.56
in MS-DRGs 469 and 470 to one of the following two options: MS-DRG 483
(highest severity level); or MS-DRG 469 (highest severity level).
As the table for total ankle replacement above shows, the average
cost of cases with procedure code 81.56 in MS-DRG 469 is $27,419 and
$19,332 in MS-DRG 470. This compares with the average costs of all
cases in MS-DRGs 469 and 470 of $22,548 and $15,119, respectively.
While the average cost of cases reporting procedure code 81.56 in MS-
DRG 469 is $4,871 higher than the average cost for all cases in MS-DRG
469, we point out that there were only 32 cases. The relatively small
number of cases may have been impacted by other factors such as
complications or comorbidities. Several expensive cases could impact
the average costs for a very small number of patients. The average cost
of cases reporting procedure code 81.56 in MS-DRG 470 is $4,213 higher
than the average cost for all cases in MS-DRG 470. While the average
costs are higher, within all MS-DRGs, some cases have higher and some
cases have lower average costs. MS-DRGs are groups of clinically
similar cases that have similar overall costs. Within a group of cases,
one would expect that some cases have costs that are higher than the
overall average and some cases have costs that are lower than the
overall average.
MS-DRG 469 ankle replacement cases have average costs that are
$8,612 higher than the average costs of all cases in MS-DRG 483
($27,419 compared to $18,807). Moving these cases (procedure code
81.56) to MS-DRG 483 would result in payment below average costs
compared to the current MS-DRG assignment in MS-DRG 469. Furthermore,
as noted earlier, moving total ankle replacement cases to MS-DRG 483
would result in a lower extremity procedure being added to what is now
an upper extremity MS-DRG. This would significantly disrupt the
clinical cohesion of MS-DRG 483.
The average costs of all cases in MS-DRG 469 are $3,216 higher than
the average costs of those cases with procedure code 81.56 in MS-DRG
470 ($22,548 compared to $19,332). The data did not support moving
procedure code 81.56 cases to MS-DRG 483 or 469 because it would not
result in payments that more accurately reflect their current average
costs. Our clinical advisors reviewed this issue and determined that
the ankle replacement cases are appropriately classified within MS-DRGs
469 and 470 with the severity level leading to the MS-DRG assignment.
They did not support moving these cases to MS-DRG 483 because ankle
replacements, which are lower joint procedures, are not clinically
similar to upper joint replacement procedures. Based on the results of
examination of the claims data, the issue of clinical cohesion, and the
recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH
PPS proposed rule, we did not propose to move total ankle procedures to
MS-DRG 483 or MS-DRG 469 when there is no MCC. We proposed to maintain
the current MS-DRG assignments for ankle replacement cases. We invited
public comments on our proposal.
Comment: A number of commenters supported the proposal to maintain
the current MS-DRG assignments for ankle replacement cases. The
commenters stated the proposal was reasonable given the data and
information provided. Several other commenters urged CMS to reconsider
its decision and to create a new MS-DRG for total ankle replacements
for FY 2015 that is more appropriate both in terms of resource
utilization and clinical cohesiveness, and reassign ICD-9-CM procedure
code 81.56 to the new MS-DRG. The commenters stated that, despite
evidence that the current Medicare assignment results in payments to
hospitals below the average costs for total ankle replacement
procedures, and the greater clinical complexity of total ankle
replacements relative to other procedures that map to these same MS-
DRGs, CMS proposed to maintain the current MS-DRG assignment for total
ankle replacement procedures. The commenters stated that total ankle
replacement is a complex surgical procedure involving the replacement
of the damaged parts of three bones (talus, tibia, and fibula) that
make up the articulations of the ankle, as compared to two bones in
most other total joint replacement procedures, including hips and
knees. The commenters stated that the resources involved with total
ankle replacement procedures are not comparable to other procedures in
the major joint MS-DRG and that failure to establish a new MS-DRG that
more appropriately reflects the higher cost will likely comprise
patient access to this procedure.
One commenter acknowledged that there are a relatively small volume
of total ankle replacement procedures compared to total hip and total
knee replacements. However, the commenter suggested that this imbalance
in case volume of total ankle replacements compared to total hip and
knee replacements dampens the influence of actual hospital cost data
for the total ankle replacements. The commenter recommended that all
total ankle replacements be assigned to MS-DRG 469 even if the case
does not have a MCC. This commenter acknowledged that the average cost
of cases with procedure code 81.56 in MS-DRG 470 is $19,332 compared to
average cost of $22,548 for all cases in MS-DRG of 469. However, the
commenter suggested that moving all total ankle replacements to MS-DRG
469 was more appropriate than having cases assigned to MS-DRGs 469 and
470 based on the presence of an MCC. The commenter also acknowledged
CMS' statement that under the MS-DRG system in general, some cases will
have average costs

[[Page 49898]]

higher than the overall average costs for the MS-DRG, while other cases
will have lower average costs. However, the commenter stated that this
was an insufficient rationale to apply to total ankle replacements. The
commenter disagreed with the determination of the CMS clinical advisors
that ankle replacement cases are appropriately classified within MS-
DRGs 469 and 470, based on severity level. The commenter stated that
total ankle replacement is a complicated surgery that involves the
replacement of the damaged parts of the three bones that make up the
ankle joint, as compared to two bones in hip and knee replacement
procedures. The commenter stated that this surgery required a
specialized skill set, operative technique, and level of operating room
resource utilization that is vastly dissimilar from that of total hip
and total knee replacements. The commenter recommended that CMS create
a new MS-DRG for total ankle replacements or move all total ankle
replacements to MS-DRG 469.
Response: We appreciate the commenters' support for our proposal to
maintain the current MS-DRG assignment for total ankle replacements. We
are not accepting the commenter's recommendation to create a new MS-DRG
for total ankle replacements or to move all cases to MS-DRG 469. We
point out that there were only 1,411 total ankle replacements with 32
cases in MS-DRG 469 and 1,379 cases in MS-DRG 470. Creating a new MS-
DRG for this single procedure would not be appropriate. MS-DRGs were
created to provide payment to hospitals for groups of clinically
similar conditions and procedures. MS-DRGs were not created to provide
payment for each single procedure. MS-DRGs 469 and 470 contain
replacement and reattachment procedures of the lower extremity,
including those of the hip, knee, ankle, foot, lower leg, and thigh.
Within each MS-DRG, there will be cases with costs higher than the
average costs and others with costs below the average costs. Basing a
new MS-DRG on a small number of cases could lead to distortions in the
relative payment weights for the MS DRG because several expensive cases
could impact the overall relative payment weight. Having larger
clinically cohesive groups within an MS-DRG provides greater stability
for annual updates to the relative payment weights. We also point out
that combining total ankle replacements into a single new MS-DRG would
result in the same payment for cases with an MCC as those without an
MCC. As indicated above, total ankle replacements with MCCs have
average costs of $27,419 and those without MCCs have average costs of
$19,332. Combining all total ankle replacements into a single, newly
created MS-DRG would reduce the payment accuracy of cases with
different severity levels.
We also disagree with the recommendation to move all total ankle
replacement to MS-DRG 469. As stated earlier, total ankle replacements
with MCCs have average costs of $27,419 and those without MCCs have
average costs of $19,332. The average cost of all cases in MS-DRG 469
(which includes cases with MCCs) is $22,548. We point out again that,
under the MS-DRGs, some cases will have average costs higher than the
overall average costs for the MS-DRG while other cases will have lower
average costs. The total ankle replacements are appropriately assigned
to MS-DRGs 469 and 470 based on the presence of a MCC.
Our clinical advisors reviewed the public comments and clinical
data and continue to support maintaining the current MS-DRG assignment
for total ankle replacements. They advised that total ankle
replacements are appropriately assigned to MS-DRGs 469 and 470 along
with other major joint replacement and reattachment procedures of the
lower extremities because they are all replacement and reattachment
procedures of the lower extremities. Our clinical advisors noted that,
whereas they consider average cost as one element of the decision, they
expect the average cost of any subset to be different than the average
cost of the MS-DRG, as that is inherent in a system of averages. They
note that average length of stay, another metric of resource usage, is
lower than the MS-DRG average for this subgroup. Even more importantly,
they further noted that leaving these procedures in a MS-DRG with other
lower extremity procedures promotes greater clinical consistency than
could be achieved by moving the ankle procedures into an upper
extremity DRG. They noted that, for the inpatient prospective system,
clinical consistency includes not just technical considerations of the
surgery or device costs but also consideration of pre- and post-
operative patient care needs, medications, and care for common comorbid
conditions, among other factors. Finally, our clinical advisors also
pointed out that creating a new MS-DRG for total ankle replacements
would result in combining cases with average length of stay of 6.19
days for cases with MCC and 2.13 days for cases without MCC. The cases
are more appropriately assigned to MS-DRGs 469 and 470 with the two
severity levels. Our clinical advisors do not support creating a new
MS-DRG which would contain only total ankle replacements.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignment for
total ankle replacements in MS-DRGs 469 and 470.
The following table shows our findings from examination of the
claims data from the December 2013 update of the FY 2013 MedPAR file
for the number of cases reporting procedure code 81.59 in MS-DRGs 515,
516, and 517 (revision of joint replacement of lower extremity) and
their average length of stay and average costs as compared to all cases
within MS-DRGs 515, 516, and 517 (where procedure code 81.59 is
currently assigned), as well as data for MS-DRGs 469 and 483.

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

[[Page 49899]]

The requestor asked that all cases with procedure code 81.59 in MS-
DRGs 515, 516, and 517 be assigned to one of the following three
choices:
MS-DRG 483 (highest severity level);
MS-DRG 515 (highest severity level) whether or not there
is an MCC; or
MS-DRG 469 (highest severity level).
Our review of data from the above revision of joint replacement of
lower extremity table shows that cases in MS-DRG 483 have average costs
that are $5,560 higher than the average costs of cases with procedure
code 81.59 in MS-DRG 515; $5,550 greater than those in MS-DRG 516; and
$8,844 greater than those in MS-DRG 517 ($22,548 compared to $16,988;
$22,548 compared to $16,998, and $22,548 compared to $13,704,
respectively). As mentioned earlier, MS-DRG 483 is currently composed
of only upper extremity procedures. Moving lower extremity procedures
into this MS-DRG would disrupt the clinical cohesiveness of MS-DRG 483.
The average costs of all cases in MS-DRG 469 are $18,807, compared
to average costs of $16,988, $16,998, and $13,703 for procedure code
81.59 cases in MS-DRGs 515, 516, and 517, respectively. The data did
not support moving all procedure code 81.59 cases to MS-DRG 469 even
when there is no MCC. We also point out that moving cases with
procedure code 81.59 to MS-DRG 469 would disrupt the clinical
cohesiveness of MS-DRG 469, which currently captures major joint
replacement or reattachment procedures of the lower extremity.
Procedure code 81.59 includes revisions of joint replacements of a
variety of lower extremity joints including the ankle, foot, and toe.
This nonspecific code would not be considered a major joint procedure.
The code captures revisions of an ankle replacement as well as a more
minor revision of the toe.
Our clinical advisors reviewed this issue and determined that the
revision of joint replacement of lower extremity cases are
appropriately classified within MS-DRGs 515, 516, and 517 where
revisions of other joint replacements are captured. They supported the
current severity levels in MS-DRGs 515, 516, and 517, which allow the
presence of a CC or an MCC to determine the severity level assignment.
They did not support moving these cases to MS-DRG 483, which is applied
to upper extremity procedures because these procedures are not
clinically consistent with revisions of lower joint procedures. They
also did not support moving these cases to MS-DRG 469 when there is no
MCC because these procedures are not joint replacement procedures.
Based on the findings of our examination of the claims data, the issue
of clinical cohesion, and the recommendations from our clinical
advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not
propose to move the revision of joint replacement of lower extremity
cases to MS-DRGs 483 or 469, whether or not there is an MCC. We
proposed to maintain the current MS-DRG assignments for revision of
joint replacement of lower extremity cases.
In summary, we proposed to maintain the current MS-DRG assignment
for total ankle replacements in MS-DRGs 469 and 470 and revision of
joint replacement of lower extremity procedures in MS-DRGs 515, 516,
and 517. We invited public comments on our proposals.
Comment: A number of commenters supported the proposal to maintain
the current MS-DRG assignment for code 81.59. One commenter agreed with
this proposal given the lack of specificity for this code which does
not identify the specific joint being revised. The commenter
recommended that CMS create the following new ICD-9-CM procedure code:
81.58 (Revision of ankle replacement, not otherwise specified). Once
this code is created, the commenter recommended that this new code be
assigned to MS-DRGs 466, 467, and 468 and that these MS-DRGs be renamed
Revision of Hip, Knee or Ankle (with MCC, with CC, and without CC/MCC,
respectively).
Response: We appreciate the commenters' support for our proposal
not to change the MS-DRG assignment for code 81.59. We agree with the
commenter who pointed out that code 81.59 does not identify the joint
being revised and, therefore, code 81.59 should continue to be assigned
to MS-DRGs 515, 516, and 517. ICD-10-PCS codes provide greater detail
than do ICD-9-CM codes and provide the ability to identify the joint
being revised. As mentioned earlier, the Secretary announced plans to
release an interim final rule in the near future that will include a
new compliance date to require the use of ICD-10 beginning October 1,
2015. The interim final rule will also require HIPAA covered entities
to continue to use ICD-9-CM through September 30, 2015. Given this
timeline, it will not be possible to create a new ICD-9-CM procedure
code for the next annual update on October 1, 2015 because ICD-10 will
be implemented on that date. However, ICD-10-PCS will provide the
necessary level of detail.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignment for
total ankle replacements in MS-DRGs 469 and 470 and revision of joint
replacement of lower extremity procedures in MS-DRGs 515, 516, and 517.
c. Back and Neck Procedures
We received a request to reassign cases identified with a
complication or comorbidity (CC) in MS-DRG 490 (Back & Neck Procedures
Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) to MS-
DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or
Disc Device/Neurostimulator). The requester suggested that we create a
new MS-DRG that would be subdivided based solely on the ``with MCC or
Disc Device/Neurostimulator'' and the ``without MCC'' (and no device)
criteria.
For the FY 2008 rulemaking cycle, we performed a comprehensive
analysis of all the spinal DRGs as we proposed (72 FR 24731 through
24735) and finalized (72 FR 47226 through 47232) adoption of the MS-
DRGs. With the revised spinal MS-DRGs, we were better able to identify
a patient's level of severity, complexity of service, and utilization
of resources. This was primarily attributed to the new structure for
the severity level designations of ``with MCC,'' ``with CC,'' and
``non-CC'' (or without CC/MCC). Another contributing factor was that we
incorporated specific procedures and technologies into the GROUPER
logic for some of those spinal MS-DRGs. Specifically, as noted above,
in the title of MS-DRG 490, we accounted for disc devices and
neurostimulators because the data demonstrated that the procedures
utilizing those technologies were more complex and required greater
utilization of resources.
According to the requester, since that time, concerns have been
expressed in the provider community regarding inadequate payment for
MS-DRG 490 when these technologies are utilized. An analysis conducted
by the requester alleged that the subset of patients identified in the
``with MCC or disc device/neurostimulator'' group are different with
regard to resource use from the ``without CC/MCC'' (and no device)
patient group.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for MS-DRGs 490 and 491. The table below shows our
findings.

[[Page 49900]]

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

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

For the first subgroup, ``with MCC or Disc Device/
Neurostimulator,'' we found a total of 3,379 cases with an average
length of stay of 6.6 days and average costs of $21,493. In the second
subgroup, ``with CC'' (no device), we found a total of 13,551 cases
with an average length of stay of 3.9 days and average costs of
$11,791. In the third subgroup, ``without CC/MCC'' (no device), we
found a total of 25,778 cases with an average length of stay of 2.2
days and average costs of $8,151.
The results of this additional data analysis demonstrate a better
distribution of cases with regard to length of stay and average costs.
Our clinical advisors agreed that a patient's severity of illness is
captured more appropriately with this subdivision. The data also meet
the established criteria for creating subgroups within a base MS-DRG as
discussed earlier.
As the subdivision of the claims data based on these subgroups
better captures a patient's severity level and utilization of resources
and is supported by our clinical advisors, in the FY 2015 IPPS/LTCH PPS
proposed rule, we proposed to create three new MS-DRGs and to delete
MS-DRGs 490 and 491. We proposed that these proposed new MS-DRGs would
be titled as follows and would be effective as of October 1, 2014:
Proposed new MS-DRG 518 (Back & Neck Procedures Except
Spinal Fusion with MCC or Disc Device/Neurostimulator);
Proposed new MS-DRG 519 (Back & Neck Procedures Except
Spinal Fusion with CC); and
Proposed new MS-DRG 520 (Back & Neck Procedures Except
Spinal Fusion without CC/MCC).
We invited public comments on our proposal to create these proposed
new MS-DRGs for FY 2015.
Comment: Several commenters supported the proposal to delete MS-
DRGs 490 and 491 and to create three new MS-DRGs that better account
for a patient's severity of illness and utilization of resources when
disc devices and neurostimulators are involved. One commenter stated
that the new MS-DRGs would enable CMS to assess utilization of
resources for these services and ensure that ``important innovation in
device dependent neurosurgical procedures is adequately accounted for
and reimbursed appropriately.'' Another commenter expressed its
appreciation for CMS' careful data analysis that resulted in the
development of the proposal. This commenter noted ``that the data
presented by CMS make a compelling case for the proposed three
subdivisions, because it would more appropriately compensate hospitals
for the costs associated with implantation of a disc device or
neurostimulator than the current two-division framework.'' Another
commenter applauded CMS' past efforts to assure MS-DRGs 490 and 491
reflect the most appropriate payment amounts for these procedures. This
commenter stated ``the proposed three-way split of cases in current MS-
DRGs 490 and 491 demonstrates a better distribution of cases with
regard to resource use. CMS should proceed with its proposed change to
this MS-DRG category to improve the accuracy of the payments,
consistent with its criteria for establishing severity levels within
the MS-DRGs.'' Another commenter noted that ``subdividing the code set
into three distinct MS-DRGs is not only a more accurate representation
of the clinical condition experienced by the patient, but also better
categorizes the resources expended by the facility, as evidenced by the
supporting claims data.''
Response: We thank the commenters for their support. As noted in
the FY 2015 IPPS/LTCH PPS proposed rule, the additional data analysis
demonstrated a better distribution of cases with regard to length of
stay and average costs. Our clinical advisors also agreed that a
patient's severity of illness is captured more appropriately with this
subdivision. Lastly, the data also meet the established criteria for
creating subgroups within a base MS-DRG as discussed earlier.
After consideration of the public comments we received, for FY 2015
we are adopting as final our proposal to create new MS-DRG 518 (Back &
Neck Procedures Except Spinal Fusion with MCC or Disc Device/
Neurostimulator); MS-DRG 519 (Back & Neck Procedures Except Spinal
Fusion with CC); and MS-DRG 520 (Back & Neck Procedures Except Spinal
Fusion without CC/MCC).

[[Page 49901]]

6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and
Disorders): Disorders of Porphyrin Metabolism
We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule
that we considered out of scope for the proposed rule. We stated in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider
this issue in future rulemaking as part of our annual review process.
The request was for the creation of a new MS-DRG to better identify
cases where patients with disorders of porphyrin metabolism exist, to
recognize the resource requirements in caring for these patients, to
ensure appropriate payment for these cases, and to preserve patient
access to necessary treatments. This issue has been discussed
previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and
27905) and final rule (77 FR 53311 through 53313).
Porphyria is defined as a group of rare disorders (``porphyrias'')
that interfere with the production of hemoglobin that is needed for red
blood cells. While some of these disorders are genetic (inborn) and
others can be acquired, they all result in the abnormal accumulation of
hemoglobin building blocks, called porphyrins, which can be deposited
in the tissues where they particularly interfere with the functioning
of the nervous system and the skin. Treatment for patients suffering
from disorders of porphyrin metabolism consists of an intravenous
injection of Panhematin[supreg] (hemin for injection). In 1984, this
pharmaceutical agent became the first approved drug for a rare disease
to be designated under the Orphan Drug Act. The requestor stated that
it is the only FDA-approved prescription treatment for acute
intermittent porphyria. ICD-9-CM diagnosis code 277.1 (Disorders of
porphyrin metabolism) describes these cases, which are currently
assigned to MS-DRG 642 (Inborn and Other Disorders of Metabolism).
We analyzed claims data from the December 2013 update of the FY
2013 MedPAR file for cases assigned to MS-DRG 642. Our findings are
shown in the table below.

----------------------------------------------------------------------------------------------------------------
Average length
MS-DRG Number of cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 642--All cases..................................... 1,486 4.61 $8,151
MS-DRG 642--Cases with principal diagnosis code 277.1..... 299 5.98 13,303
----------------------------------------------------------------------------------------------------------------

As shown in the table above, we found a total of 1,486 cases in MS-
DRG 642, with an average length of stay of 4.61 days and average costs
of $8,151. We then analyzed the data for cases reporting diagnosis code
277.1 as the principal diagnosis in this same MS-DRG. We found a total
of 299 cases, with an average length of stay of 5.98 days and average
costs of $13,303.
While the data show that the average costs for the 299 cases
reporting a principal diagnosis code of 277.1 were higher than the
average costs for all cases in MS-DRG 642 ($13,303 compared to $8,151),
the number of cases is small. In the FY 2015 IPPS/LTCH PPS proposed
rule, we stated that, given the small number of porphyria cases, we did
not believe there is justification for creating a new MS-DRG. Basing a
new MS-DRG on such a small number of cases could lead to distortions in
the relative payment weights for the MS-DRG because several expensive
cases could impact the overall relative payment weight. Having larger
clinical cohesive groups within an MS-DRG provides greater stability
for annual updates to the relative payment weights. In addition, as
discussed earlier, one of the criteria we apply in evaluating whether
to create new severity subgroups within an MS-DRG is whether there are
at least 500 cases in the CC or MCC subgroup. While this criterion is
used to evaluate whether to create a severity subgroup within an MS-
DRG, applying it here suggests that creating a new MS-DRG for cases
reporting a principal diagnosis of code 277.1 would not be appropriate.
Our clinical advisors reviewed this issue and recommended no MS-DRG
change for porphyria cases because they fit clinically within MS-DRG
642.
In summary, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not
propose to create a new MS-DRG for porphyria cases. We invited public
comments on our proposal to maintain porphyria cases in MS-DRG 642.
Comment: Several commenters supported the proposal to maintain
porphyria cases in MS-DRG 642 and to not create a new MS-DRG for these
cases.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to maintain porphyria cases in MS-DRG 642 and
to not create a new MS-DRG for these cases.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
We received a request to evaluate the MS-DRG assignment of seven
ICD-9-CM diagnosis codes in MS-DRG 794 (Neonate with Other Significant
Problems) under MDC 15. The requestor stated that these codes have no
bearing on the infant, and are not representative of a neonate with a
significant problem. The requestor recommended that we change the MS-
DRG logic so that the following seven ICD-9-CM codes would not lead to
assignment of MS-DRG 794. The requestor recommended that the diagnoses
be added to the ``only secondary diagnosis'' list under MS-DRG 795
(Normal newborn) so that the case would be assigned to MS-DRG 795
(Normal newborn).

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

In the case of a newborn with one of these diagnosis codes reported
as a secondary diagnosis, the case would be assigned to MS-DRG 794. The
commenter believed that any of these seven diagnosis codes (noted
above), when reported as a secondary diagnosis for a newborn case,
should be assigned to MS-DRG 795 instead of MS-DRG 794.
Our clinical advisors reviewed this request and concurred with the
commenter that the seven ICD-9-CM diagnosis codes noted above should
not continue to be assigned to MS-DRG 794, as there is no clinically
usable information reported in those codes identifying significant
problems. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28017), we proposed to reassign these following seven diagnoses to the
``only secondary diagnosis list'' under MS-DRG 795 so that the case
would be assigned to MS-DRG 795.

[[Page 49902]]

We invited public comments on this proposal.
Comment: Several commenters supported the proposal to reassign the
identified seven diagnoses to the ``only secondary diagnosis'' list
under MS-DRG 795 so that the case would be assigned to MS-DRG 795.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to reassign the following seven diagnoses to
the ``only secondary diagnosis list'' under MS-DRG 795 so that the case
would be assigned to MS-DRG 795:

V17.0 (Family history of psychiatric condition)
V17.2 (Family history of other neurological diseases)
V17.49 (Family history of other cardiovascular diseases)
V18.0 (Family history of diabetes mellitus)
V18.19 (Family history of other endocrine and metabolic
diseases)
V18.8 (Family history of infectious and parasitic diseases)
V50.3 (Ear piercing)
8. Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
As discussed in section II.G.1.a. of the preamble of this final
rule, we developed an ICD-10 version of the current MS-DRGs, which are
based on ICD-9-CM codes. We refer to this version of the MS-DRGs as the
ICD-10 MS-DRGs Version 31.0-R. In November 2013, we also posted a
Definitions of Medicare Code Edits Manual of the ICD-10 MCE Version
31.0 on the ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We produced mainframe and computer software for Version
31.0 of the MS-DRG GROUPER with Medicare Code Editor, which was made
available to the public in December 2013. Information on ordering the
mainframe and computer software through NTIS was posted on the CMS Web
site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRG GROUPER with Medicare Code Editor Version 31.0 computer
software facilitated additional review of the ICD-10 MS-DRGs
conversion. We encouraged the public to submit to CMS any comments on
areas where they believed the ICD-10 MS-DRG GROUPER and MCE did not
accurately reflect the logic and edits found in the ICD-9-CM MS-DRG
GROUPER and MCE Version 31.0.
We also have posted an ICD-10 version of the current MCE, which is
based on ICD-9-CM codes, and refer to that version of the MCE as the
ICD-10 MCE Version 31.0-R. Both of these documents are posted on our
ICD-10 MS-DRG Conversion Project Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We will
continue to share ICD-10 MS-DRG and MCE conversion activities with the
public through this Web site.
In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we
proposed to remove extracranial-intracranial (EC-IC) bypass surgery
from the ``Noncovered Procedure'' edit code list for Version 32.0 of
the MCE. This procedure is identified by ICD-9-CM procedure code 39.28
(Extracranial-intracranial (EC-IC) vascular bypass).
Because of the complexity of appropriately classifying the
circumstances under which the EC-IC bypass surgery may, or may not, be
considered reasonable and necessary for certain conditions, we proposed
to remove the MCE ``Noncovered Procedure'' edit for EC-IC bypass
surgery from the ``Noncovered Procedure'' edit code list for Version
32.0 of the MCE. We invited public comments on this proposal.
Comment: Several commenters supported the proposal to remove the
MCE ``Noncovered Procedure'' edit for EC-IC bypass surgery (procedure
code 39.28) from the ``Noncovered Procedure'' edit code list for
Version 32.0 of the MCE. The commenters stated that the proposal was
reasonable given the information that was provided. Commenters also
agreed that because of the complexity of appropriately classifying the
circumstances under which the EC-IC bypass surgery may be considered
reasonable and necessary for certain conditions, the Medicare
noncovered procedure edit for EC-IC bypass surgery should be removed.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove procedure code 39.28 (Extracranial-
intracranial (EC-IC) vascular bypass) from the noncovered procedure
edit effective FY 2015.
9. Changes to Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2015, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-

[[Page 49903]]

DRG 002. To determine whether surgical class A should be higher or
lower than surgical class B in the surgical hierarchy, we would weigh
the average costs of each MS-DRG in the class by frequency (that is, by
the number of cases in the MS-DRG) to determine average resource
consumption for the surgical class. The surgical classes would then be
ordered from the class with the highest average resource utilization to
that with the lowest, with the exception of ``other O.R. procedures''
as discussed below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
Based on the changes that we proposed to make for FY 2015, as
discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the
preamble of the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to
revise the surgical hierarchy for MDC 5 (Diseases and Disorders of the
Circulatory System) and MDC 8 (Diseases and Disorders of the
Musculoskeletal System and Connective Tissue) as follows:
In MDC 5, we proposed to sequence proposed new MS-DRG 266
(Endovascular Cardiac Valve Replacement with MCC) and proposed new MS-
DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS-
DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization
with AMI/HF/Shock with MCC).
In MDC 8, we proposed to delete MS-DRGs 490 (Back & Neck Procedures
Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and
MS-DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC
or Disc Device/Neurostimulator) from the surgical hierarchy. We
proposed to sequence proposed new MS-DRG 518 (Back & Neck Procedure
Except Spinal Fusion with MCC or Disc Device/Neurostimulator), proposed
new MS-DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC),
and proposed new MS-DRG 520 (Back & Neck Procedure Except Spinal Fusion
without CC/MCC) above MS-DRG 492 (Lower Extremity and Humerus Procedure
Except Hip, Foot, Femur with MCC).
We invited public comments on our proposals.
Comment: We did not receive any public comments opposing our
proposals for the surgical hierarchy. Commenters expressed general
support for the proposals, noting they were reasonable given the
information that was provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal for MDC 5 to sequence new MS-DRG 266
(Endovascular Cardiac Valve Replacement with MCC) and new MS-DRG 267
(Endovascular Cardiac Valve Replacement without MCC) above MS-DRG 222
(Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/
HF/Shock with MCC). We also are finalizing our proposal for MDC 8 to
delete MS-DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/
MCC or Disc Device/Neurostimulator) and MS-DRG 491 (Back & Neck
Procedures Except Spinal Fusion without CC/MCC or Disc Device/
Neurostimulator) from the surgical hierarchy. We are sequencing new MS-
DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc
Device/Neurostimulator), new MS-DRG 519 (Back & Neck Procedure Except
Spinal Fusion with CC), and new MS-DRG 520 (Back & Neck Procedure
Except Spinal Fusion without CC/MCC) above MS-DRG 492 (Lower Extremity
and Humerus Procedure Except Hip, Foot, Femur with MCC), effective FY
2015.
10. Changes to the MS-DRG Diagnosis Codes for FY 2015
a. Major Complications or Comorbidities (MCCs) and Complications or
Comorbidities (CC) Severity Levels for FY 2015
A complete updated MCC, CC, and Non-CC Exclusion List is available
via the Internet on the CMS Web site at: https://cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/ as
follows:
Table 6I (Complete MCC list);
Table 6J (Complete CC list); and
Table 6K (Complete list of CC Exclusions).
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
We received a request that we change the severity level for ICD-9-
CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified
coronary lesion) from a non-CC to an MCC. This issue was previously
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50542).
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for ICD-9-CM diagnosis code 414.4. The following chart
shows our findings.

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

[[Page 49904]]

We ran the above data as described in the FY 2008 IPPS final rule
with comment period (72 FR 47158 through 47161). The C1 value reflects
a patient with no other secondary diagnosis or with all other secondary
diagnoses that are non-CCs. The C2 value reflects a patient with at
least one other secondary diagnosis that is a CC, but none that is an
MCC. The C3 value reflects a patient with at least one other secondary
diagnosis that is an MCC.
The chart above shows that the C1 finding is 1.16. A value close to
1.0 in the C1 field suggests that the diagnosis produces the same
expected value as a non-CC. A value close to 2.0 suggests the condition
is more like a CC than a non-CC, but not as significant in resource
usage as an MCC. A value close to 3.0 suggests the condition is
expected to consume resources more similar to an MCC than a CC or a
non-CC. The C2 finding was 2.18. A C2 value close to 2.0 suggests the
condition is more like a CC than a non-CC, but not as significant in
resource usage as an MCC when there is at least one other secondary
diagnosis that is a CC but none that is an MCC. While the C1 value of
1.16 is above the 1.0 value for a non-CC, it does not support
reclassification to an MCC. As stated earlier, a value close to 3.0
suggests the condition is expected to consume resources more similar to
an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not
support reclassifying this diagnosis code to an MCC. Our clinical
advisors reviewed the data and evaluated this condition. They
recommended that we not change the severity level of diagnosis code
414.4 from a non-CC to an MCC. They did not believe that this diagnosis
would increase the severity level of patients. They pointed out that a
similar code, diagnosis code 414.2 (Chronic total occlusion of coronary
artery), is a non-CC. Our clinical advisors believe that diagnosis code
414.4 represents patients who are less severe than diagnosis code
414.2. Considering the C1 and C2 ratings of diagnosis code 414.4 and
the input from our clinical advisors, in the FY 2015 IPPS/LTCH PPS
proposed rule, we did not propose to reclassify diagnosis code 414.4 to
an MCC; the diagnosis code would continue to be considered a non-CC.
Therefore, based on the data and clinical analysis, we proposed to
maintain diagnosis code 414.4 as a non-CC. We invited public comments
on our proposal.
Comment: Several commenters supported the proposal to keep
diagnosis code 414.4 as a non-CC. One commenter requested that
diagnosis code 414.4, when present as a secondary diagnosis, be
included on the MCC list. The commenter believed that treating
calcified coronary lesions with atherectomy is underpaid by the
Medicare program for patients requiring percutaneous coronary
intervention when calcified coronary lesions prevent successful
angioplasty and placement of coronary stents. The commenter further
stated that treating coronary calcification is significantly more
difficult to treat, requires more time and equipment, and has clinical
outcomes that are much worse compared to treating noncalcified or
mildly calcified coronary obstructions. Consequently, the commenter
believed it costs hospitals more to treat patients with calcified
coronary lesions and that hospitals should be compensated for their
expense to treat coronary atherosclerosis in Medicare beneficiaries.
The commenter recognized the opinion of our clinical advisors that
patients with a code 414.4 diagnosis are less severe than those with a
code 414.2 diagnosis, but disagreed with that opinion. The commenter
believed that both disease states add substantial treatment time and
costs to the providers, health care systems, and society and both are
worthy of classification as an MCC.
Response: We appreciate the commenters' support for our proposal to
maintain code 414.4 as a non-CC. We are not accepting the commenter's
recommendation to change this code to an MCC because our clinical data
do not support such a change. The data continue to support keeping
diagnosis code 414.4 as a non-CC and do not support changing the code
to an MCC, for the reasons described above.
We examined claims data from the December 2013 update of the FY
2013 MedPAR file for ICD-9-CM diagnosis code 414.2. The following chart
shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC level Cnt 1 impact Cnt 2 impact Cnt 3 impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.2........................ Chronic total occlusion of Non-CC 15,814 1.25 21,483 2.09 19,955 3.04
coronary artery.
--------------------------------------------------------------------------------------------------------------------------------------------------------

The chart above for diagnosis code 414.2 shows that the C1 finding
is 1.25. A value close to 1.0 in the C1 field suggests that the
diagnosis produces the same expected value as a non-CC. A value close
to 2.0 suggests the condition is more like a CC than a non-CC, but not
as significant in resource usage as an MCC. A value close to 3.0
suggests the condition is expected to consume resources more similar to
an MCC than a CC or a non-CC. The C2 finding was 2.09. A C2 value close
to 2.0 suggests the condition is more like a CC than a non-CC, but not
as significant in resource usage as an MCC when there is at least one
other secondary diagnosis that is a CC but none that is an MCC. While
the C1 value of 1.25 is above the 1.0 value for a non-CC, it does not
support reclassification to an MCC. As stated earlier, a value close to
3.0 suggests the condition is expected to consume resources more
similar to an MCC than a CC or a non-CC. The C2 finding of 2.09 also
does not support reclassifying this diagnosis code to an MCC.
Our clinical advisors reviewed the data and evaluated the severity
level for both diagnosis code 414.4 and 414.2. They continue to
recommend that we not change the severity level of diagnosis code 414.4
from a non-CC to an MCC. Furthermore, they recommend that we not change
the severity level for diagnosis code 414.2. They do not believe that
the diagnosis represented by either code would increase the severity
level of patients. After reviewing the commenter's justification for
changing diagnosis code 414.4 from a non-CC to an MCC, our clinical
advisors continue to recommend that we not change the severity level of
diagnosis code 414.4 from a non-CC to an MCC. They again pointed out
that diagnosis code 414.2 is a similar code and is a non-CC. As noted,
they also recommend maintaining diagnosis code 414.2 as a non-CC. Our
clinical advisors continue to believe that diagnosis code 414.4
represents patients who are less severe than diagnosis code 414.2.
After consideration of the public comments we received, the C1 and
C2 ratings in our claims data, and the input from our clinical
advisors, we are finalizing our proposal to not reclassify diagnosis
code 414.4 from a non-CC to an MCC; the diagnosis code will continue to
be considered a non-CC.

[[Page 49905]]

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

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

In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we did not
propose any changes to the CC Exclusion List. Therefore, we did not
develop or publish Tables 6G (Additions to the CC Exclusion List) or
Table 6H (Deletions from the CC Exclusion List). We developed Table 6K
(Complete List of CC Exclusions), which is available only via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Because of the
length of Table 6K, we are not publishing it in the Addendum to this
final rule. Each of these principal diagnosis codes for which there is
a CC exclusion is shown with an asterisk and the conditions that will
not count as a CC are provided in an indented column immediately
following the affected principal diagnosis. Beginning with discharges
on or after October 1 of each year, the indented diagnoses are not
recognized by the GROUPER as valid CCs for the asterisked principal
diagnoses.
A complete updated MCC, CC, and Non-CC Exclusions List is available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.
Because there were no proposed new, revised, or deleted diagnosis
or procedure codes for FY 2015, we have not developed Table 6A (New
Diagnosis Codes), Table 6B (New Procedure Codes), Table 6C (Invalid
Diagnosis Codes), Table 6D (Invalid Procedure Codes), Table 6E (Revised
Diagnosis Code Titles), and Table 6F (Revised Procedure Codes) to the
final rule and they are not published as part of this final rule.
We did not propose any additions or deletions to the MS-DRG MCC
List for FY 2015 nor any additions or deletions to the MS-DRG CC List
for FY 2015. Therefore, as we proposed, for this final rule, we have
not developed Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions
to the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions
to the CC List), and they are not published as part of this final rule.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 31.0, is available on a CD
for $225.00. This manual may be obtained by writing 3M/HIS at the
following address: 100 Barnes Road, Wallingford, CT 06492; or by
calling (203) 949-0303, or by obtaining an order form at the Web site:
https://www.3MHIS.com. Please specify the revision or revisions
requested. Version 32.0 of this manual, which includes the final FY
2015 MS-DRG changes, is available on a CD for

[[Page 49906]]

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

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

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

[[Page 49907]]

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

[[Page 49908]]

be available 6 months earlier than would be possible with updates
occurring only once a year on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance
Committee holds its meetings in the spring and fall in order to update
the codes and the applicable payment and reporting systems by October 1
of each year. Items are placed on the agenda for the Committee meeting
if the request is received at least 2 months prior to the meeting. This
requirement allows time for staff to review and research the coding
issues and prepare material for discussion at the meeting. It also
allows time for the topic to be publicized in meeting announcements in
the Federal Register as well as on the CMS Web site. The public decides
whether or not to attend the meeting based on the topics listed on the
agenda. Final decisions on code title revisions are currently made by
March 1 so that these titles can be included in the IPPS proposed rule.
A complete addendum describing details of all diagnosis and procedure
coding changes, both tabular and index, is published on the CMS and
NCHS Web sites in May of each year. Publishers of coding books and
software use this information to modify their products that are used by
health care providers. This 5-month time period has proved to be
necessary for hospitals and other providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this new April update would have on
providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee meeting
are considered for an April 1 update if a strong and convincing case is
made by the requester at the Committee's public meeting. The request
must identify the reason why a new code is needed in April for purposes
of the new technology process. The participants at the meeting and
those reviewing the Committee meeting summary report are provided the
opportunity to comment on this expedited request. All other topics are
considered for the October 1 update. Participants at the Committee
meeting are encouraged to comment on all such requests. There were no
requests approved for an expedited April l, 2014 implementation of a
code at the September 18-19, 2013 Committee meeting. Therefore, there
were no new codes implemented on April 1, 2014.
ICD-9-CM addendum and code title information is published on the
CMS Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and
ICD-10-PCS addendum and code title information is published on the CMS
Web site at https://www.cms.gov/Medicare/Coding/ICD10/.
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at:
https://www.cdc.gov/nchs/icd/icd10cm.html. Information on new, revised,
and deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for
publication in the Coding Clinic for ICD-10. AHA also distributes
information to publishers and software vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore,
although we publish the code titles in the IPPS proposed and final
rules, they are not subject to comment in the proposed or final rules.
b. Code Freeze
In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR
3340), there was a discussion of the need for a partial or total freeze
in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS
codes. The public comment addressed in that final rule stated that the
annual code set updates should cease l year prior to the implementation
of ICD-10. The commenters stated that this freeze of code updates would
allow for instructional and/or coding software programs to be designed
and purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. The Committee also considered the delay in implementation of
ICD-10 until October 1, 2014. There was an announcement at the
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be
implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012 and October 1, 2013, there will be only
limited code updates to both ICD-9-CM and ICD-10 code sets to capture
new technology and new diseases.
On October 1, 2014, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to

[[Page 49909]]

be no updates to ICD-9-CM on October 1, 2014.
On October 1, 2015, one year after the originally
scheduled implementation of ICD-10, regular updates to ICD-10 were to
begin.
On May 15, 2014, CMS posted an updated Partial Code Freeze schedule
on the CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-9-CM-Coordination-and-Maintenance-Committee-Meetings.html. This updated
schedule provided information on the extension of the partial code
freeze until 1 year after the implementation of ICD-10. As stated
earlier, on April 1, 2014, the Protecting Access to Medicare Act of
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the
Secretary may not adopt ICD-10 prior to October 1, 2015. On May 1,
2014, the Department announced that it expects to release a interim
final rule in the near future that will include a new compliance date
to require the use of ICD-10 beginning October 1, 2015. The rule will
also require HIPAA covered entities to continue to use ICD-9-CM through
September 30, 2015. Accordingly, the updated schedule for the partial
code freeze is as follows:
The last regular annual updates to both ICD-9-CM and ICD-
10 code sets were made on October 1, 2011.
On October 1, 2012, October 1, 2013, and October 1, 2014,
there will be only limited code updates to both the ICD-9-CM and ICD-10
code sets to capture new technologies and diseases as required by
section 1886(d)(5)(K) of the Act.
On October 1, 2015, there will be only limited code
updates to ICD-10 code sets to capture new technologies and diagnoses
as required by section 1886(d)(5)(K) of the Act. There will be no
updates to ICD-9-CM, as it will no longer be used for reporting.
On October 1, 2016 (1 year after implementation of ICD-
10), regular updates to ICD-10 will begin.
The ICD-10 (previously ICD-9-CM) Coordination and Maintenance
Committee announced that it would continue to meet twice a year during
the freeze. At these meetings, the public will be encouraged to comment
on whether or not requests for new diagnosis and procedure codes should
be created based on the need to capture new technology and new
diseases. Any code requests that do not meet the criteria will be
evaluated for implementation within ICD-10 one year after the
implementation of ICD-10, once the partial freeze is ended.
Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-10
Coordination and Maintenance Committee Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting,
along with both written and audio transcripts of this meeting, is
posted on the Web site at: https://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
This partial code freeze has dramatically decreased the number of
codes created each year as shown by the following information.

Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
ICD-9-CM codes ICD-10-CM and ICD-10-PCS codes
----------------------------------------------------------------------------------------------------------------
Fiscal year No. Change Fiscal year No. Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008): ........... ............ FY 2009:
Diagnoses...................... 14,025 348 ICD-10-CM.......... 68,069 +5
Procedures..................... 3,824 56 ICD-10-PCS......... 72,589 -14,327
FY 2010 (October 1, 2009): ........... ............ FY 2010:
Diagnoses...................... 14,315 290 ICD-10-CM.......... 69,099 +1,030
Procedures..................... 3,838 14 ICD-10-PCS......... 71,957 -632
FY 2011 (October 1, 2010):
Diagnoses...................... 14,432 117 ICD-10-CM.......... 69,368 +269
Procedures..................... 3,859 21 ICD-10-PCS......... 72,081 +124
FY 2012 (October 1, 2011): ........... ............ FY 2012:
Diagnoses...................... 14,567 135 ICD-10-CM.......... 69,833 +465
Procedures..................... 3,877 18 ICD-10-PCS......... 71,918 -163
FY 2013 (October 1, 2012): ........... ............ FY 2013:
Diagnoses...................... 14,567 0 ICD-10-CM.......... 69,832 -1
Procedures..................... 3,878 1 ICD-10-PCS......... 71,920 +2
FY 2014 (October 1, 2013): ........... ............ FY 2014:
Diagnoses...................... 14,567 0 ICD-10-CM.......... 69,823 -9
Procedures..................... 3,882 4 ICD-10-PCS......... 71,924 +4
FY 2015 (October 1, 2014): ........... ............ FY 2015:
Diagnoses...................... 14,567 0 ICD-10-CM.......... 69,823 0
Procedures..................... 3,882 0 ICD-10-PCS......... 71,924 0
----------------------------------------------------------------------------------------------------------------

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

[[Page 49910]]

comments on any code requests discussed at the September 18-19, 2013
and March 19-20, 2014 Committee meetings for implementation as part of
the October 1, 2014 update. The deadline for commenting on code
proposals discussed at the September 18-19, 2013 Committee meeting was
November 15, 2013. The deadline for commenting on code proposals
discussed at the March 19-20, 2014 Committee meeting was April 18,
2014.
14. Public Comments on Issues Not Addressed in the Proposed Rule
We received three public comments regarding MS-DRG issues that were
outside of the scope of the proposals included in the FY 2014 IPPS/LTCH
PPS proposed rule. Below we summarize these public comments. However,
because we consider these public comments to be outside of the scope of
the proposed rule, we are not responding to them in this final rule. As
stated in section II.G.1.b. of the preamble of this final rule, we
encourage individuals with comments about MS-DRG classifications to
submit these comments no later than December 7 of each year so they can
be considered for possible inclusion in the annual proposed rule and,
if included, may be subjected to public review and comment. We will
consider these public comments for possible proposals in future
rulemaking as part of our annual review process.
a. Request for Review and MS-DRG Reassignment for ICD-9-CM Diagnosis
Code 784.7 Reported With Procedure Codes 39.75 and 39.76
One commenter expressed concern regarding specific procedure codes
that are assigned to MS-DRGs 981 through 983; 984 through 986; and 987
through 989 in relation to our discussion of the annual review of these
MS-DRGs in section II.G.12. of the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28020). The commenter noted that the endovascular embolization
of the arteries of the branches of the internal maxillary artery is
frequently performed for intractable posterior epistaxis. The commenter
stated that, currently, diagnosis code 784.7 (Epistaxis) reported with
procedure codes 39.75 (Endovascular embolization or occlusion of
vessel(s) of head or neck using bare coils) and 39.76 (Endovascular
embolization or occlusion of vessel(s) of head or neck using bioactive
coils) groups to MS-DRG 981(Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC), MS-DRG 982 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with CC), and MS-DRG 983 (Extensive
O.R. Procedure Unrelated to Principal Diagnosis without CC/MCC). The
commenter indicated that it also found this grouping with ICD-10
diagnosis code R04.0 (Epistaxis) reported with artery occlusion
procedure codes. The commenter requested that CMS review these
groupings and consider the possibility of reassigning these procedure
codes into a more specific MS-DRG.
We consider this public comment to be outside of the scope of the
FY 2015 IPPS/LTCH PPS proposed rule and therefore are not addressing it
in this final rule. However, we will consider this public comment for
possible proposals in future rulemaking as part of our annual review
process.
b. Coding for Extracorporeal Membrane Oxygenation Procedures (ECMO)
Several commenters expressed concern that hospitals may not be
correctly reporting extracorporeal membrane oxygenation (ECMO) and
percutaneous cardiopulmonary bypass procedures. The commenters
requested that CMS inform hospitals that they should appropriately code
each procedure separately because each code captures different
procedures.
We consider this coding issue to be outside of the scope of the FY
2015 IPPS/LTCH PPS proposed rule. We refer commenters to the American
Hospital Association's Central Office on Coding, which has
responsibility for providing coding advice on such specific coding
issues through its publication Coding Clinic.
c. Adding Severity Levels to MS-DRGs 245 through 251
One commenter recommended including additional severity levels
under MS-DRG 245 (AICD Generator Procedures); MS-DRG 246 (Percutaneous
Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+
Vessels/Stents); MS-DRG 247 (Percutaneous Cardiovascular Procedure with
Drug-Eluting Stent without MCC); MS-DRG 248 (Percutaneous
Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+
Vessels/Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedure with
Non-Drug-Eluting Stent without MCC); MS-DRG 250 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent with MCC); and
MS-DRG 251 (Percutaneous Cardiovascular Procedure without Coronary
Artery Stent without MCC).
We consider this public comment to be outside of the scope of the
FY 2015 IPPS/LTCH PPS proposed rule, and therefore are not addressing
it in this final rule. However, we will consider the comment for
possible proposals in future rulemaking as part of our annual review
process.

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

1. Data Sources for Developing the Relative Weights
In developing the FY 2015 system of weights, we used two data
sources: Claims data and cost report data. As in previous years, the
claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2013 MedPAR data used in this final rule include
discharges occurring on October 1, 2012, through September 30, 2013,
based on bills received by CMS through March 31, 2014, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which at that time were under a waiver from the IPPS under
section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in
calculating the relative weights includes data for approximately
10,090,385 Medicare discharges from IPPS providers. Discharges for
Medicare beneficiaries enrolled in a Medicare Advantage managed care
plan are excluded from this analysis. These discharges are excluded
when the MedPAR ``GHO Paid'' indicator field on the claim record is
equal to ``1'' or when the MedPAR DRG payment field, which represents
the total payment for the claim, is equal to the MedPAR ``Indirect
Medical Education (IME)'' payment field, indicating that the claim was
an ``IME only'' claim submitted by a teaching hospital on behalf of a
beneficiary enrolled in a Medicare Advantage managed care plan. In
addition, the March 31, 2014 update of the FY 2013 MedPAR file complies
with version 5010 of the X12 HIPAA Transaction and Code Set Standards,
and includes a variable called ``claim type.'' Claim type ``60''
indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims.
Therefore, the calculation of the relative weights for FY 2015 also
excludes claims with claim type values not equal to ``60.'' The data
exclude CAHs, including hospitals that subsequently became CAHs after
the period from which the data were taken. We note that the FY 2015
relative weights are based on the ICD-9-CM diagnoses and procedures
codes from the MedPAR

[[Page 49911]]

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

[[Page 49912]]

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

[[Page 49913]]

C--1--C7--60
PBP Clinic C--1--C5--61......... C--1--C6--61 D3--HOS--C2--61
Laboratory
Services.
C--1--C7--61
074X, 086X...... Electro- C--1--C5--70......... C--1--C6--70 D3--HOS--C2--70
Encephalography.
C--1--C7--70
Radiology.................... Radiology 032X, 040X...... Radiology--Diagn C--1--C5--54......... C--1--C6--54 D3--HOS--C2--54
Charges. ostic.
C--1--C7--54
028x, 0331, Radiology--Thera C--1--C5--55......... C--1--C6--55 D3--HOS--C2--55
0332, 0333, peutic.
0335, 0339,
0342.
0343 and 344.... Radioisotope.... C--1--C5--56......... C--1--C6--56 D3--HOS--C2--56
C--1--C7--56
Computed Tomography (CT) Scan CT Scan Charges. 035X............ Computed C--1--C5--57......... C--1--C6--57 D3--HOS--C2--57
Tomography (CT)
Scan.
C--1--C7--57
Magnetic Resonance Imaging MRI Charges..... 061X............ Magnetic C--1--C5--58......... C--1--C6--58 D3--HOS--C2--58
(MRI). Resonance
Imaging (MRI).
C--1--C7--58
Emergency Room............... Emergency Room 045x............ Emergency....... C--1--C5--91......... C--1--C6--91 D3--HOS--C2--91
Charges.
C--1--C7--91
Blood and Blood Products..... Blood Charges... 038x............ Whole Blood & C--1--C5--62......... C--1--C6--62 D3--HOS--C2--62
Packed Red C--1--C7--62
Blood Cells.
Blood Storage/ 039x............ Blood Storing, C--1--C5--63......... C--1--C6--63 D3--HOS--C2--63
Processing. Processing, & C--1--C7--63
Transfusing.
Other Services............... Other Service 0002-0099, 022X,
Charge. 023X, 024X,
052X, 053X.
055X-060X, 064X-
070X, 076X-
078X, 090X-095X
and 099X.
Renal Dialysis.. 0800X........... Renal Dialysis.. C--1--C5--74......... C--1--C6--74 D3--HOS--C2--74
ESRD Revenue 080X and 082X- C--1--C7--74 .....................
Setting Charges. 088X.
Home Program C--1--C5--94......... C--1--C6--94 D3--HOS--C2--94
Dialysis.
C--1--C7--94
Outpatient 049X............ ASC (Non C--1--C5--75......... C--1--C6--75 D3--HOS--C2--75
Service Charges. Distinct Part).
Lithotripsy 079X............ C--1--C7--75
Charge.
Other Ancillary. C--1--C5--76......... C--1--C6--76 D3--HOS--C2--76
C--1--C7--76
Clinic Visit 051X............ Clinic.......... C--1--C5--90......... C--1--C6--90 D3--HOS--C2--90
Charges.
C--1--C7--90
Observation beds C--1--C5--92.01...... C--1--C6--92.01 D3--HOS--C2--92.01
C--1--C7--92.01
Professional 096X, 097X, and Other Outpatient C--1--C5--93......... C--1--C6--93 D3--HOS--C2--93
Fees Charges. 098X. Services.
C--1--C7--93
Ambulance 054X............ Ambulance....... C--1--C5--95......... C--1--C6--95 D3--HOS--C2--95
Charges.
C--1--C7--95
Rural Health C--1--C5--88......... C--1--C6--88 D3--HOS--C2--88
Clinic.
C--1--C7--88
FQHC............ C--1--C5--89......... C--1--C6--89 D3--HOS--C2--89
C--1--C7--89
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 49914]]

We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR
48462) for a discussion on the revenue codes included in the Supplies
and Equipment and Implantable Devices CCRs, respectively.
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2012 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The FY 2015 cost-based relative weights were then normalized by an
adjustment factor of 1.645837 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 19 national average CCRs for FY 2015 are as follows:

------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.489
Intensive Days................................................. 0.407
Drugs.......................................................... 0.192
Supplies & Equipment........................................... 0.292
Implantable Devices............................................ 0.349
Therapy Services............................................... 0.344
Laboratory..................................................... 0.128
Operating Room................................................. 0.212
Cardiology..................................................... 0.123
Cardiac Catheterization........................................ 0.133
Radiology...................................................... 0.165
MRIs........................................................... 0.087
CT Scans....................................................... 0.043
Emergency Room................................................. 0.195
Blood and Blood Products....................................... 0.360
Other Services................................................. 0.405
Labor & Delivery............................................... 0.398
Inhalation Therapy............................................. 0.181
Anesthesia..................................................... 0.114
------------------------------------------------------------------------

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

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

[[Page 49915]]

794................... Neonate with Other Final FY 2014 relative
Significant Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
795................... Normal Newborn....... Final FY 2014 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
------------------------------------------------------------------------

We did not receive any public comments on this proposal and,
therefore, are finalizing it for FY 2015 as proposed.
4. Bundled Payments for Care Improvement (BPCI) Initiative
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS' Center
for Medicare and Medicaid Innovation's Web site at https://innovation.cms.gov/initiatives/Bundled-Payments/ and to
section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53341 through 53343) for a discussion on the BPCI initiative.
In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent
fiscal years, we finalized a policy to treat hospitals that participate
in the BPCI initiative the same as prior fiscal years for the IPPS
payment modeling and ratesetting process without regard to a hospital's
participation within these bundled payment models (that is, as if a
hospital were not participating in those models under the BPCI
initiative). Therefore, for FY 2015, we proposed to continue to include
all applicable data from subsection (d) hospitals participating in BPCI
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process.
Comment: One commenter was concerned about the policy to treat all
providers that participate in the BPCI initiative the same as prior
fiscal years for the IPPS payment modeling and ratesetting process
without regard to a hospital's participation within these bundled
payment models. The commenter stated that while it is unlikely to have
a demonstrable effect in FY 2015, the BPCI initiative has just begun
and has few participants compared to the total number of PPS hospitals.
The commenter further stated that the cohort is expected to expand
dramatically, given the additional round of applications, and it
expected participants to focus their cost reduction activities in
select MS-DRGs, which could skew specific weights and inappropriately
shift payments to other MS-DRGs. The commenter added that providers
that are not part of the initiative cannot be expected to reach the
same performance levels without the same tools available within the
BPCI. The commenter recommended that CMS reconsider removing BPCI
participants from the IPPS relative weight setting process.
Response: As the commenter stated, the BPCI initiative is unlikely
to have a demonstrable effect for FY 2015. Accordingly, we are
finalizing our proposal to continue to include all applicable data from
subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in
our IPPS payment modeling and ratesetting calculations for FY 2015.
However, we will monitor the possible impact that hospitals enrolled in
the BPCI initiative may have on the MS-DRG relative weights in future
fiscal years.

I. Add-On Payments for New Services and Technologies

1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. Below we highlight
some of the major statutory and regulatory provisions relevant to the
new technology add-on payment criteria as well as other information.
For a complete discussion on the new technology add-on payment
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our
policy regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for

[[Page 49916]]

new medical services or technologies, the MS-DRG prospective payment
rate otherwise applicable to the discharge involving the new medical
services or technologies must be assessed for adequacy. Under the cost
criterion, to assess the adequacy of payment for a new technology paid
under the applicable MS-DRG prospective payment rate, we evaluate
whether the charges for cases involving the new technology exceed
certain threshold amounts. Table 10 that was released with the FY 2014
IPPS/LTCH PPS final rule contains the final thresholds that we use to
evaluate applications for new technology add-on payments for FY 2015.
We refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page.html for a complete viewing of Table 10 from the FY 2014
IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a more detailed discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment is limited to the full MS-DRG payment plus 50 percent of the
estimated costs of the new technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We also amended Sec. 412.87(c) to specify that all
applicants for new technology add-on payments must have FDA approval or
clearance for their new medical service or technology by July 1 of each
year prior to the beginning of the fiscal year that the application is
being considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center for Clinical Standards and
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is
also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: https://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
CTI@cms.hhs.gov.
We note that applicants for add-on payments for new medical
services or technologies for FY 2016 must submit a

[[Page 49917]]

formal request, including a full description of the clinical
applications of the medical service or technology and the results of
any clinical evaluations demonstrating that the new medical service or
technology represents a substantial clinical improvement, along with a
significant sample of data to demonstrate that the medical service or
technology meets the high-cost threshold. Complete application
information, along with final deadlines for submitting a full
application, will be posted as it becomes available on the CMS Web site
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify
the new medical services or technologies under review before the
publication of the proposed rule for FY 2016, the CMS Web site also
will post the tracking forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2015 prior
to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published
a document in the Federal Register on November 29, 2013 (78 FR 71555
through 71557), and held a town hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February 12, 2014. In the announcement
notice for the meeting, we stated that the opinions and alternatives
provided during the meeting would assist us in our evaluations of
applications by allowing public discussion of the substantial clinical
improvement criterion for each of the FY 2015 new medical service and
technology add-on payment applications before the publication of the FY
2015 proposed rule.
Approximately 91 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting and posted
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=WXyR_TILfKo&list=TLiu1B_AxXsinTW6EEn4BVUdR4iEM61eV4. We
considered each applicant's presentation made at the town hall meeting,
as well as written comments submitted on the applications that were
received by the due date of January 21, 2014, in our evaluation of the
new technology add-on payment applications for FY 2015 in the proposed
rule.
In response to the published document and the New Technology Town
Hall meeting, we received written comments regarding the applications
for FY 2015 new technology add-on payments. We summarized these
comments in the preamble of the proposed rule or, if applicable,
indicated that there were no comments received, at the end of each
discussion of the individual applications in the proposed rule.
A number of attendees at the New Technology Town Hall meeting
provided comments that were unrelated to the ``substantial clinical
improvement'' criterion. As explained above and in the Federal Register
document announcing the New Technology Town Hall meeting (78 FR 71555
through 71557), the purpose of the meeting was specifically to discuss
the substantial clinical improvement criterion in regard to pending new
technology add-on payment applications for FY 2015. Therefore, we did
not summarize those comments in the proposed rule. Commenters were
informed that they were welcome to resubmit these comments during the
comment period in response to proposals presented in the proposed rule.
We summarize and respond to these comments under the applicable
discussions within this final rule.
We also received public comments in response to the proposed rule
relating to topics such as marginal cost factors for new technology
add-on payments, mapping new technologies to the appropriate MS-DRG,
deeming a new technology a substantial clinical improvement if it
receives HDE approval from the FDA, and the use of external data in
determining the cost threshold. Because we did not request public
comments nor propose to make any changes to any of the issues above, we
are not summarizing these public comments nor responding to them in
this final rule.
Another commenter asked CMS to consider the implications of the new
technology add-on payment policy on antibiotics that fall under the
current IPPS and, in particular, the Hospital VBP Program for which the
inclusion of the MRSA bacteremia measure and the C-difficile measure
are proposed. The commenter was concerned that current payment policy
will be inadequate and place further financial pressure on hospitals.
The commenter stated that CMS must consider the evolving payment
paradigm facing inpatient facilities (IQR, HAC, and VBP) and ensure
that these various policies do not have competing goals. Although we
agree with the commenter that CMS should consider the evolving payment
paradigm facing inpatient facilities regarding payment reductions under
the Hospital IQR Program, the HAC Reduction Program, and the Hospital
VBP Program and ensure that these various policies do not have
competing goals, we are not providing a detailed response because we
did not present any policy proposals concerning these issues.
Comment: One commenter expressed concern that services identified
as appropriate for new technology add-on payments do not receive the
new technology add-on payment even when the claims for these services
are correctly submitted to the Medicare administrative contractors
(MACs). The commenter stated that the MACs are often unable to explain
the reason for the failure to include the new technology add-on payment
or answer inquiries regarding this issue. The commenter recommended
that CMS provide additional education to the MACs regarding CMS
regulations related to services available for new technology add-on
payments.
Response: We encourage providers to work with their MACs to ensure
that the

[[Page 49918]]

new technology add-on payments are accurately and appropriately made.
If MACs are having any issues, they can contact the CMS Central Office
for further assistance. Also, the regulations at Sec. 412.88 explain
how the new technology add-on payments are made. We note that, under
certain conditions, even if an approved new technology was billed on
the claim, a new technology add-on payment may not be made, such as if
the total payment for the claim without the new technology add-on
payment exceeds the costs of the case. In addition, each year after the
final rule, CMS issues a transmittal to the MACs listing the
eligibility and maximum add-on payment for each approved new
technology.
3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. submitted an application for new technology
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY
2013. Glucarpidase is used in the treatment of patients who have been
diagnosed with toxic methotrexate (MTX) concentrations as of result of
renal impairment. The administration of Glucarpidase causes a rapid and
sustained reduction of toxic MTX concentrations.
Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350).
Voraxaze[supreg] was available on the market in the United States as a
commercial product to the larger population as of April 30, 2012. In
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we
expressed concerns about whether Voraxaze[supreg] could be considered
new for FY 2013. After consideration of all of the public comments
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which
is the date of market availability.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for Voraxaze[supreg]
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg]
are identified with ICD-9-CM procedure code 00.95 (Injection or
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per
vial. The applicant stated that an average of four vials is used per
Medicare beneficiary. Therefore, the average cost per case for
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for Voraxaze[supreg] is $45,000 per case.
As stated above, the new technology add-on payment regulations
provide that a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology (Sec. 412.87(b)(2)). Our practice has been to begin and end
new technology add-on payments on the basis of a fiscal year, and we
have generally followed a guideline that uses a 6-month window before
and after the start of the fiscal year to determine whether to extend
the new technology add-on payment for an additional fiscal year. In
general, we extend add-on payments for an additional year only if the
3-year anniversary date of the product's entry on the market occurs in
the latter half of the fiscal year (70 FR 47362).
With regard to the newness criterion for Voraxaze[supreg], as
stated above, we consider the beginning of the newness period to
commence when Voraxaze[supreg] was first available on the market on
April 30, 2012. Because the 3-year anniversary date for
Voraxaze[supreg] will occur in the latter half of FY 2015 (April 30,
2015), we proposed to continue new technology add-on payments for this
technology for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: Several public commenters supported the proposal to
continue new technology add-on payments for Voraxaze[supreg] for FY
2015.
Response: We appreciate the commenters' support. Because the 3-year
anniversary date for Voraxaze[supreg] will occur in the latter half of
FY 2015 (April 30, 2015), we are finalizing our proposal to continue to
make new technology add-on payments for Voraxaze[supreg] for FY 2015.
b. DIFICID^TM (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of
DIFICID^TM tablets. As indicated on the labeling submitted to
the FDA, the applicant noted that Fidaxomicin is taken twice a day as a
daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral
antibiotic. The applicant asserted that Fidaxomicin provides potent
bactericidal activity against C. Diff., and moderate bactericidal
activity against certain other gram-positive organisms, such as
enterococcus and staphylococcus. Unlike other antibiotics used to treat
CDAD, the applicant noted that the effects of Fidaxomicin preserve
bacteroides organisms in the fecal flora. These are markers of normal
anaerobic microflora. The applicant asserted that this helps prevent
pathogen introduction or persistence, which potentially inhibits the
re-emergence of C. Diff., and reduces the likelihood of overgrowths as
a result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserted that Fidaxomicin
does not alter this native intestinal microflora.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through
27941), we expressed concern that DIFICID^TM may not be
eligible for new technology add-on payments because eligibility is
limited to new technologies associated with procedures described by
ICD-9-CM codes. We further stated that drugs that are only taken orally
(such as DIFICID^TM) may not be eligible for consideration
for new technology add-on payments because there is no procedure
associated with these drugs and, therefore, no ICD-9-CM code(s). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after
consideration of the public comments received, we revised our policy to
allow the use of National Drug Codes (NDCs) to identify oral
medications that have no inpatient procedure for the purposes of new
technology add-on payments. The revised policy is effective for
payments for discharges occurring on or after October 1, 2012. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete
discussion on this issue.
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we
established that the beginning of the newness period for this
technology is its FDA approval date of May 27, 2011.

[[Page 49919]]

After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
DIFICID^TM and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved DIFICID^TM for new technology add-on payments for FY
2013. Cases of DIFICID^TM are identified with ICD-9-CM
diagnosis code 008.45 (Intestinal infection due to Clostridium
difficile) in combination with NDC code 52015-0080-01. Providers must
report the NDC on the 837i Health Care Claim Institutional form (in
combination with ICD-9-CM diagnosis code 008.45) in order to receive
the new technology add-on payment. According to the applicant, the cost
of DIFICID^TM is $2,800 for a 10-day dosage. The average cost
per day for DIFICID^TM is $280 ($2,800/10). Cases of
DIFICID^TM within the inpatient setting typically incur an
average dosage of 6.2 days, which results in an average cost per case
for DIFICID^TM of $1,736 ($280 x 6.2). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the technology or 50 percent of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum new technology add-on payment for DIFICID^TM is
$868.
As stated above, the new technology add-on payment regulations
provide that a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology (Sec. 412.87(b)(2)).
The manufacturer commented through a letter to CMS, prior to the
publication of the proposed rule, requesting that CMS extend the
eligibility for a third year of new technology add-on payments for
DIFICID^TM in FY 2015. The manufacturer maintained that the
technology still meets all three criteria for new technology add-on
payments. Regarding the substantial clinical improvement criterion, the
applicant stated that DIFICID^TM continues to remain the only
FDA-approved treatment to demonstrate substantial clinical improvement
over existing therapies. No new treatments for CDAD have been approved
by the FDA since DIFICID^TM. The applicant further stated
that a third year of new technology add-on payments for
DIFICID^TM would continue to reduce access barriers in the
acute care hospital inpatient setting, which would support the
appropriate use of DIFICID^TM, a treatment that offers a
substantial clinical improvement over existing therapies.
With respect to the cost criterion, the applicant stated that
DIFICID^TM continues to meet the cost criterion. Using claims
data from the FY 2012 MedPAR file, the applicant provided updated data
from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53350 through 53358), and demonstrated that the average case-
weighted standardized charge per case exceeded the average case-
weighted thresholds under both analyses. The applicant stated that the
new technology add-on payment is intended to offer additional payments
to support patient access and appropriate use of new technologies for a
period of time until the MS-DRGs are adjusted to reflect the cost of
the new technology. The applicant believed that the analyses conducted
with the most recent MedPAR claims data available demonstrate that the
MS-DRG recalibrations are insufficient to accommodate the cost
associated with CDAD and new technologies to treat CDAD under the IPPS
within the allotted timeframe of 2 years. According to the applicant,
these payment amounts remain an obstacle for the appropriate use of new
technologies for CDAD that demonstrate substantial clinical improvement
over existing treatments, such as DIFICID^TM. The applicant
concluded that a third year of new technology add-on payments for
DIFICID^TM is needed to allow sufficient data for future MS-
DRG recalibration analyses.
With regard to newness criterion, the manufacturer commented that
it believed that the technology still meets the newness criterion for
the following reason: Sec. 412.87(b)(2) states that ``A medical
service or technology may be considered new within 2 or 3 years after
the point at which data begin to become available reflecting the
International Classification of Diseases, Ninth Revision, Clinical
Modification (ICD-9-CM) code assigned to the new service or technology
(depending on when a new code is assigned and data on the new service
or technology become available for DRG recalibration). After CMS has
recalibrated the DRGs, based on available data, to reflect the costs of
an otherwise new medical service or technology, the medical service or
technology will no longer be considered `new' under the criterion of
this section.'' The manufacturer noted that DIFICID^TM was
not assigned an ICD-9-CM procedure code and DIFICID^TM is the
first product for which no inpatient procedure is associated to receive
a new technology add-on payment since the implementation of the new
technology add-on payment policy.
The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53352), which indicated that ``Hospitals currently code and
report procedures and more invasive services such as surgeries,
infusion of drugs, and specialized procedures such as cardiac
catheterizations. Hospitals neither code nor report self-administered
drugs.'' Therefore, the manufacturer contended that, as an oral
therapy, neither DIFICID^TM nor its administration was
assigned an ICD-9-CM procedure code and, therefore, the technology
should still be eligible for the new technology add-on payments.
The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS
final rule, because an ICD-9-CM procedure code for the administration
of an oral medication did not exist and hospitals had no other
mechanism to report the use of DIFICID^TM, for FY 2013, CMS
instructed hospitals to report the DIFICID^TM NDC on hospital
inpatient claims to receive the new technology add-on payment for
DIFICID^TM. Prior to October 1, 2012, hospitals did not use
NDCs on hospital inpatient claims, which prevented CMS from isolating
DIFICID^TM cases and their associated costs. The manufacturer
further stated that the NDC methodology was a bold change in policy and
inpatient billing processes, and it stands to reason that, because of
hospitals unfamiliarity with reporting NDCs on inpatient claims,
hospitals' use of the DIFICID^TM NDC would greatly lag behind
the traditional use of ICD-9-CM procedure codes. As such, the
manufacturer reasoned that any lag in hospital reporting would directly
impact CMS' ability to track and analyze the cost data associated with
DIFICID^TM cases.
The manufacturer also noted that on August 31, 2012, CMS issued
Transmittal 2539, which is a change request for MACs concerning updates
for the upcoming fiscal year. The manufacturer stated that because the
new technology add-on heading was omitted in the transmittal, this
change request did not highlight the NDC billing approach to ensure
that hospitals recognized the important change, which may have caused
hospitals to overlook the claim reporting instructions for
DIFICID^TM.
The manufacturer added that Transmittal 2539 and a Medicare
Learning Network[supreg] Matters (MLN) article were rescinded and
replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted
that among CMS' reasons for replacing the transmittal was to insert the
omitted

[[Page 49920]]

new technology add-on section heading. The manufacturer stated that,
although the original transmittal further supports that collection of
DIFICID^TM-specific data did not begin until at least October
1, 2012, CMS' reissuance of the claims processing instructions, and the
missing header in the initial instructions, effectively delayed
implementation of the new technology add-on payments for 3 months past
the October 2012 beginning date. The manufacturer also believed that
the need to replace the transmittal underlies hospitals' difficulties
instituting claims' reporting instructions to receive new technology
add-on payments for DIFICID^TM at the hospital level.
The manufacturer noted that anecdotal feedback from hospitals,
which was shared with CMS during a meeting in June 2013, suggests that
some hospitals faced challenges implementing the appropriate billing
and coding processes. The manufacturer was concerned that that these
challenges were, in part, caused by the missing header, and that these
challenges may have impacted whether eligible cases were properly
billed and coded to receive the new technology add-on payment for
DIFICID^TM. The manufacturer was further concerned that the
effects of any lag or delay caused by unfamiliarity with reporting NDCs
and the missing header would also impact the data available to CMS to
recalibrate the MS-DRGs and, separately, to evaluate the impact of the
new technology add-on payment for DIFICID^TM. The
manufacturer further explained that, while DIFICID^TM was
available to hospitals after its launch in July 2011, hospitals had no
experience reporting NDCs until October 2012, and may not have
recognized the opportunity to, or understood the mechanism for doing
so, until after January 2013. For the purposes of inpatient data
collection and ratesetting, the manufacturer believed that this meant
that 2 complete years of DIFICID^TM costs would not be fully
reflected in the Medicare claims data for the FY 2015 MS-DRG
recalibrations.
The manufacturer also analyzed the 100 percent sample of the
Standard Analytical File (SAF) for CY 2012, which contained first
quarter claims data for FY 2013, the first 3 months that
DIFICID^TM was eligible for the new technology add-on
payments. The manufacturer found a total of 43,608 cases with a
diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38
cases across 26 hospitals that reported new technology add-on payments
for DIFICID^TM on submitted claims. The manufacturer stated
that this preliminary data suggests that the number of cases available
for MS-DRG recalibrations for FY 2015 is limited. The manufacturer
stated that it is currently attempting to secure FY 2013 MedPAR claims
data and that it will likely provide further insights on these issues.
In addition, the manufacturer noted that prior new technology add-
on payment application approvals have involved technologies with much
narrower patient populations compared to DIFICID^TM, allowing
the costs of those technologies to influence the MS-DRG relative
payment weights for the small number of MS-DRGs with which they are
associated. The manufacturer explained that, unlike other technologies
approved for new technology add on payments, the DIFICID^TM
therapeutic value, while limited to patients with CDAD, is used in
patients across a wide range of MS-DRGs due to it being reported as a
secondary diagnosis in two-thirds of the cases compared to other
technologies, which are assigned to a relatively small number of MS-
DRGs. For example, cases involving the Spiration IBV[supreg] Valve
System, which was granted approval for new technology add-on payments
in FY 2010, primarily mapped to three MS-DRGs: 163 (Major Chest
Procedures with MCC); 164 (Major Chest Procedures with CC); and 165
(Major Chest Procedures without CC/MCC). In its analysis of the FY 2012
MedPAR data for the cost criterion, the manufacturer found cases using
DIFICID^TM mapped to 544 unique MS-DRGs. Under the 100
percent sample of the SAF for CY 2012, the 38 cases mentioned above
mapped to 20 different MS-DRGs. The manufacturer maintained that
because of the diffuse nature of the DIFICID^TM cases mapping
to many MS-DRGs, it believed an extension of the newness period is
required for the costs to be adequately reflected in the MS-DRG
relative payment weights. In the unique case of DIFICID^TM
for the treatment of CDAD, the manufacturer stated that 2 years of new
technology add-on payments is insufficient to allow the 544 MS-DRGs to
be recalibrated to sufficiently reflect the cost of the use of
DIFICID^TM, a treatment that offers significant clinical
improvement over existing therapies.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28032 through
28033), we responded to the comments above. Specifically, with regard
to the technology's newness, as discussed in the FY 2005 IPPS final
rule (69 FR 49003), the timeframe that a new technology can be eligible
to receive new technology add-on payments begins when data become
available. Section 412.87(b)(2) clearly states that a medical service
or technology may be considered new within 2 or 3 years after the point
at which data begin to become available reflecting the ICD-9-CM code
assigned to the new service or technology (depending on when a new code
is assigned and data on the new service or technology become available
for DRG recalibration). Section 412.87(b)(2) also states that after CMS
has recalibrated the DRGs, based on available data, to reflect the
costs of an otherwise new medical service or technology, the medical
service or technology will no longer be considered ``new'' under the
criterion of this section. Therefore, regardless of whether a
technology can be individually identified by a separate ICD-9-CM code
or whether it can only be identified using a NDC code, if the costs of
the technology are included in the charge data, and the MS-DRGs have
been recalibrated using that data, then the technology can no longer be
considered ``new'' for the purposes of this provision. We further
stated in that final rule that the period of newness does not
necessarily start with the approval date for the medical service or
technology, and does not necessarily start with the issuance of a
distinct code. Instead, it begins with availability of the product on
the U.S. market, which is when data become available. We have
consistently applied this standard, and believe that it is most
consistent with the purpose of new technology add-on payments.
In addition, similar to our discussion in the FY 2006 IPPS final
rule (70 FR 47349), we do not believe that case volume is a relevant
consideration for making the determination as to whether a product is
``new.'' Consistent with the statute, a technology no longer qualifies
as ``new'' once it is more than 2 to 3 years old, irrespective of how
frequently it has been used in the Medicare population. Similarly, this
same determination is applicable no matter how many MS-DRGs the
technology is spread across. Therefore, if a product is more than 2 to
3 years old, we consider its costs to be included in the MS-DRG
relative weights whether its use in the Medicare population has been
frequent or infrequent. We recognize that using an NDC was a novel
billing practice under the IPPS. Nevertheless, even though hospitals
may not have coded all uses of DIFICID^TM with the NDC,
hospital bills would still include charges for all items and services
furnished to a Medicare patient, including use of DIFICID^TM.
Therefore, even though we may be not be able to

[[Page 49921]]

identify all uses of DIFICID^TM in the Medicare charge data,
hospital charges for the MS-DRGs would continue to reflect use of this
technology.
With respect to the Transmittal 2539 omitting the header referenced
above, as noted above, CMS corrected this issue as soon as possible by
rescinding and reissuing this transmittal. Additionally, as noted by
the manufacturer, this transmittal was meant for MACs and not
hospitals. We believe the guidance issued in Transmittal 2539 clearly
described to MACs how hospitals were to report the NDC on the inpatient
claim in order to identify cases using DIFICID^TM for
purposes of new technology add-on payments. Additionally, the MLN
article that the manufacturer referred to above (MLN articles are
typically a summary of transmittals for the general public) clearly
indicated that DIFICID^TM was new for FY 2013 new technology
add-on payments and clearly described how to properly code
DIFICID^TM on the inpatient bill in order to receive the new
technology add-on payment for FY 2013. The MLN article can be
downloaded from the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM8041.pdf.
After considering the manufacturer's comments above, as we
explained in the FY 2015 IPPS/LTCH PPS proposed rule, we continue to
consider the beginning of the newness period to commence when
DIFICID^TM was first approved by the FDA on May 27, 2011.
Because the 3-year anniversary date of the product's entry on the U.S.
market occurred in the second half of the fiscal year (after April 1,
2014), we continued new technology add-on payments for
DIFICID^TM for FY 2014. However, for FY 2015, the 3-year
anniversary date of the product's entry on the U.S. market occurred on
May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we
proposed to discontinue new technology add-on payments for
DIFICID^TM for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: One commenter stated that CMS has the authority to grant a
third year of new technology add-on payments for DIFICID^TM.
The commenter stated that if Congress intended for the Secretary to
begin the data collection period described in the statute based on the
date of FDA approval, Congress would have done so. The commenter added
that it agrees that, as a threshold matter, a product must be ``new.''
Specifically, the commenter reasoned that Congress did not intend to
make available the new technology add-on payment for technologies that
have been approved for years and received a unique code years later.
The commenter believed that once a product is deemed ``new,'' the
statute requires that data are to be collected for 2 to 3 years from
the date of the ICD-9-CM code assignment. The commenter believed that
CMS has the authority to first deem a product new and then collect data
two to three years from the date of the inpatient code assignment. The
commenter explained that sections 1886(d)(5)(K)(i) and
1886(d)(5)(K)(ii) of the Act mandate two separate legal requirements.
The commenter further stated that this policy would mitigate the effect
of older technologies that receive ICD-9-CM codes many years after
their FDA approval date being eligible for new technology add-on
payments. Therefore, the commenter stated that, under this policy,
DIFICID^TM is eligible for a third year of new technology
add-on payments.
The commenter also quoted the FY 2005 IPPS final rule (69 FR 49002
through 49003) where CMS stated the following: ``Using the ICD-9-CM
code alone is not an appropriate test of newness because technologies
that are new to the market are automatically placed into the closest
ICD-9-CM category when they first come on the market, unless the
manufacturer requests the assignment of a new ICD-9-CM code because
existing codes do not adequately reflect or describe the medical
service or device. The services and technologies that have been placed
into existing ICD-9-CM codes have been paid for using those
descriptors.'' The commenter believed that this policy is not relevant
to oral drugs because hospitals do not typically code for oral
medications. Therefore, the commenter stated that CMS must make a
special exception for oral drugs and rely on the statutory authority to
measure the length of time for data collection for new technology add-
on payments based on the date of the ``hospital inpatient code.''
Response: As discussed above, and as we stated in the FY 2005 IPPS
final rule (69 FR 49003), the timeframe that a new technology can be
eligible to receive new technology add-on payments begins when data
become available. We have consistently applied this standard, and
believe that it is most consistent with the purpose of new technology
add-on payments. We refer readers to the discussion above and the FY
2005 IPPS final rule (69 FR 49002 through 49003) for further details
regarding this issue. For these reasons, we disagree with the commenter
that DIFICID^TM is eligible for a third year of new
technology add-on payments.
With respect to the second comment, while oral drugs are not
typically coded by hospitals, we maintain what we stated in the FY 2005
IPPS final rule that the services and technologies that have been
assigned existing ICD-9-CM codes have been paid for using those
descriptors. Although DIFICID^TM did not receive a specific
ICD-9-CM code, it can be described or identified through additional
ICD-9-CM procedure or diagnosis codes (such as diagnosis code 008.45,
Intestinal infection due to Clostridium difficile). Moreover, as we
noted above and in the proposed rule, hospital charges would include
charges for all items and services furnished to a Medicare beneficiary,
including use of DIFICID^TM. Therefore, we disagree with the
commenter and continue to believe that DIFICID^TM is no
longer new nor is any special exception warranted.
Comment: Several commenters reiterated the arguments made by the
manufacturer as explained above and in the proposed rule that
DIFICID^TM should be eligible for new technology add-on
payments in FY 2015.
Response: After considering these comments, for the reasons stated
above and in the proposed rule, we consider the beginning of the
newness period to commence when DIFICID^TM was first approved
by the FDA on May 27, 2011. The 3-year anniversary date of the
product's entry on the U.S. market occurred on May 27, 2014, which is
prior to the beginning of FY 2015. Therefore, we are finalizing our
proposal to discontinue new technology add-on payments for
DIFICID^TM for FY 2015.
c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. The applicant stated that the current treatment for patients who
have had an AAA is an endovascular graft. The applicant explained that
the Zenith[supreg] F. Graft is an implantable device designed to treat
patients who have an AAA and who are anatomically unsuitable for
treatment with currently approved AAA endovascular grafts because of
the length of the infrarenal aortic neck. The applicant noted that,
currently, an AAA is treated through an open surgical repair or medical
management for those patients not

[[Page 49922]]

eligible for currently approved AAA endovascular grafts.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we
stated that because the Zenith[supreg] F. Graft was approved by the FDA
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the
newness criterion as of that date.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
Zenith[supreg] F. Graft and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved the Zenith[supreg] F. Graft for new technology add-on payments
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are
eligible for new technology add-on payments are identified by ICD-9-CM
procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta). In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 is for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we do not believe it is appropriate to include these costs in our
calculation of the maximum cost to determine the maximum add-on payment
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for
the Zenith[supreg] F. Graft is $16,343 ($17,264--$921). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum add-on payment for a case involving the Zenith[supreg] F. Graft
is $8,171.50.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zenith[supreg] F. Graft, as stated above, we consider the
beginning of the newness period to commence when the Zenith[supreg] F.
Graft was approved by the FDA on April 4, 2012. Because the 3-year
anniversary date of the entry of the Zenith[supreg] F. Graft on the
U.S. market will occur in the second half of the fiscal year (April 4,
2015), we proposed to continue new technology add-on payments for this
technology for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: Several commenters supported the proposal to continue new
technology add-on payments for the Zenith[supreg] F. Graft [supreg] for
FY 2015.
Response: We appreciate the commenters' support. Because the 3-year
anniversary date for Zenith[supreg] F. Graft will occur in the latter
half of FY 2015 (April 4, 2015), we are finalizing our proposal to
continue to make new technology add-on payments for the Zenith[supreg]
F. Graft for FY 2015.
d. Kcentra^TM
CSL Behring submitted an application for new technology add-on
payments for Kcentra^TM for FY 2014. Kcentra^TM is
a replacement therapy for fresh frozen plasma (FFP) for patients with
an acquired coagulation factor deficiency due to warfarin and who are
experiencing a severe bleed. Kcentra^TM contains the Vitamin
K dependent coagulation factors II, VII, IX and X, together known as
the prothrombin complex, and antithrombotic proteins C and S. Factor IX
is the lead factor for the potency of the preparation. The product is a
heat-treated, non-activated, virus filtered and lyophilized plasma
protein concentrate made from pooled human plasma. Kcentra^TM
is available as a lyophilized powder that needs to be reconstituted
with sterile water prior to administration via intravenous infusion.
The product is dosed based on Factor IX units. Concurrent Vitamin K
treatment is recommended to maintain blood clotting factor levels once
the effects of Kcentra^TM have diminished.
Kcentra^TM was approved by the FDA on April 29, 2013. In
the FY 2014 IPPS/LTCH PPS final rule, we approved new ICD-9-CM
procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex
Concentrate) which uniquely identifies Kcentra^TM.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted
that we were concerned that Kcentra^TM may be substantially
similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS
final rule, in response to comments submitted by the manufacturer, we
stated that we agree that Kcentra^TM may be used in a patient
population that is experiencing an acquired coagulation factor
deficiency due to Warfarin and who are experiencing a severe bleed
currently but are ineligible for FFP, particularly for use by IgA
deficient patients and other patient populations that have no other
treatment option to resolve severe bleeding in the context of an
acquired Vitamin K deficiency. In addition, FFP is limited because it
requires special storage conditions while Kcentra^TM is
stable for up to 36 months at room temperature thus allowing hospitals
that otherwise would not have access to FFP (for example, small rural
hospitals as discussed by the applicant in its comments) to keep a
supply of Kcentra^TM and treat patients who would possibly
have no access to FFP. We noted that FFP is considered perishable and
can be scarce by nature (due to production and other market
limitations) thus making some hospitals unable to store FFP, which
limits access to certain patient populations in certain locations.
Therefore, we stated that we believe that Kcentra^TM provides
a therapeutic option for a new patient population and is not
substantially similar to FFP. Also, we gave credence to the information
presented by the manufacturer that Kcentra^TM provides a
simple and rapid repletion relative to FFP and reduces the risk of a
transfusion reaction relative to FFP because it does not contain ABO
antibodies and does not require ABO typing. As a result, we concluded
that Kcentra^TM is not substantially similar to FFP, and that
it meets the newness criterion.
After evaluation of the newness, cost, and substantial clinical
improvement criteria for new technology add-on payments for
Kcentra^TM and consideration of the public comments we
received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we
approved Kcentra^TM for new technology add-on payments for FY
2014 (78 FR 50575 through 50580). Cases involving Kcentra^TM
that are eligible for new technology add-on payments are identified by
ICD-9-CM procedure code 00.96. In the application, the applicant
estimated that the average Medicare beneficiary would require an
average dosage of 2500 International Units (IU). Vials contain 500 IU
at a cost of $635 per vial. Therefore, cases of Kcentra^TM
would incur an average cost per case of $3,175 ($635 x 5). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the technology or 50 percent of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum add-on payment for a

[[Page 49923]]

case of Kcentra^TM is $1,587.50 for FY 2014.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated
that new technology add-on payments for Kcentra^TM would not
be available with respect to discharges for which the hospital received
an add-on payment for a blood clotting factor administered to a
Medicare beneficiary with hemophilia who is a hospital inpatient. Under
section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG
prospective payment rate is ``the amount of the payment with respect to
the operating costs of inpatient hospital services (as defined in
subsection (a)(4) of this section)'' for discharges on or after April
1, 1988. Section 1886(a)(4) of the Act excludes from the term
``operating costs of inpatient hospital services'' the costs with
respect to administering blood clotting factors to individuals with
hemophilia. The costs of administering a blood clotting factor to a
Medicare beneficiary who has hemophilia and is a hospital inpatient are
paid separately from the IPPS. (For information on how the blood
clotting factor add-on payment is made, we refer readers to Section
20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which
can be downloaded from the CMS Web site at: https://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we
stated that if Kcentra^TM is approved by the FDA as a blood
clotting factor, we believed that it may be eligible for blood clotting
factor add-on payments when administered to Medicare beneficiaries with
hemophilia. We make an add-on payment for Kcentra^TM for such
discharges in accordance with our policy for payment of a blood
clotting factor, and the costs would be excluded from the operating
costs of inpatient hospital services as set forth in section 1886(a)(4)
of the Act.
Section 1886(d)(5)(K)(i) of the Act requires the Secretary to
``establish a mechanism to recognize the costs of new medical services
and technologies under the payment system established under this
subsection'' beginning with discharges on or after October 1, 2001. We
believe that it is reasonable to interpret this requirement to mean
that the payment mechanism established by the Secretary recognizes only
costs for those items that would otherwise be paid based on the
prospective payment system (that is, ``the payment system established
under this subsection''). As noted above, under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is the amount of payment for the operating costs of
inpatient hospital services, as defined in section 1886(a)(4) of the
Act, for discharges on or after April 1, 1988. We understand this to
mean that a new medical service or technology must be an operating cost
of inpatient hospital services paid based on the prospective payment
system, and not excluded from such costs, in order to be eligible for
the new technology add-on payment. We pointed out that new technology
add-on payments are based on the operating costs per case relative to
the prospective payment rate as described in Sec. 412.88. Therefore,
we believe that new technology add-on payments are appropriate only
when the new technology is an operating cost of inpatient hospital
services and are not appropriate when the new technology is excluded
from such costs.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated
that we believe that hospitals may only receive new technology add-on
payments for discharges where Kcentra^TM is an operating cost
of inpatient hospital services. In other words, a hospital would not be
eligible to receive the new technology add-on payment when it is
administering Kcentra^TM in treating a Medicare beneficiary
who has hemophilia. In those instances, Kcentra^TM is
specifically excluded from the operating costs of inpatient hospital
services in accordance with section 1886(a)(4) of the Act and paid
separately from the IPPS. However, when a hospital administers
Kcentra^TM to a Medicare beneficiary who does not have
hemophilia, the hospital would be eligible for a new technology add-on
payment because Kcentra^TM would not be excluded from the
operating costs of inpatient hospital services. Therefore, discharges
where the hospital receives a blood clotting factor add-on payment are
not eligible for a new technology add-on payment for the blood clotting
factor. We refer readers to Chapter Three, Section 20.7.3 of the
Medicare Claims Processing Manual for a complete discussion on when a
blood clotting factor add-on payment is made. The manual can be
downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
As stated above, the new technology add-on payment regulations
provide that a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology (Sec. 412.87(b)(2)). With regard to the newness criterion
for Kcentra^TM, as stated above, we consider the beginning of
the newness period to commence when Kcentra^TM was approved
by the FDA on April 29, 2013. Because Kcentra^TM is still
within the 3-year newness period, we proposed to continue new
technology add-on payments for this technology for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: Several commenters supported the proposal to continue new
technology add-on payments for Kcentra^TM for FY 2015.
Response: We appreciate the commenters' support. Because the 3-year
anniversary date for Kcentra^TM will occur in the second half
of FY 2016 (April 29, 2016), we are finalizing our proposal to continue
to make new technology add-on payments for Kcentra^TM FY
2015.
e. Argus[supreg] II Retinal Prosthesis System
Second Sight Medical Products, Inc. submitted an application for
new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System (Argus[supreg] II System) for FY 2014. The
Argus[supreg] II System is an active implantable medical device that is
intended to provide electrical stimulation of the retina to induce
visual perception in patients who are profoundly blind due to retinitis
pigmentosa (RP). These patients have bare or no light perception in
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally
worn video camera. The Argus[supreg] II implant is intended to be
implanted in a single eye, typically the worse-seeing eye. Currently,
bilateral implants are not intended for this technology. According to
the applicant, the surgical implant procedure takes approximately 4
hours and is performed under general anesthesia.
The Argus[supreg] II System consists of three primary components:
(1) An implant which is an epiretinal prosthesis that is fully
implanted on and in the eye (that is, there are no percutaneous leads);
(2) external components worn by the user; and (3) a ``fitting'' system
for the clinician that is periodically used to perform diagnostic tests
with the system and to custom-program the external unit for use by the
patient. We describe these components more fully below.
Implant: The retinal prosthesis implant is responsible for
receiving information from the external components of the system and
electrically stimulating the retina to induce visual perception. The
retinal

[[Page 49924]]

implant consists of: (a) A receiving coil for receiving information and
power from the external components of the Argus[supreg] II System; (b)
electronics to drive stimulation of the electrodes; and (c) an
electrode array. The receiving coil and electronics are secured to the
outside of the eye using a standard scleral band and sutures, while the
electrode array is secured to the surface of the retina inside the eye
by a retinal tack. A cable, which passes through the eye wall, connects
the electronics to the electrode array. A pericardial graft is placed
over the extra-ocular portion on the outside of the eye.
External Components: The implant receives power and data
commands wirelessly from an external unit of components, which include
the Argus II Glasses and Video Processing Unit (VPU). A small
lightweight video camera and transmitting coil are mounted on the
glasses. The telemetry coils and radio-frequency system are mounted on
the temple arm of the glasses for transmitting data from the VPU to the
implant. The glasses are connected to the VPU by a cable. This VPU is
worn by the patient, typically on a belt or a strap, and is used to
process the images from the video camera and convert the images into
electrical stimulation commands, which are transmitted wirelessly to
the implant.
``Fitting System'': To be able to use the Argus[supreg] II
System, a patient's VPU needs to be custom-programmed. This process,
which the applicant called ``fitting'', occurs in the hospital/clinic
shortly after the implant surgery and then periodically thereafter as
needed. The clinician/physician also uses the ``Fitting System'' to run
diagnostic tests (for example, to obtain electrode and impedance
waveform measurements or to check the radio-frequency link between the
implant and external unit). This ``Fitting System'' can also be
connected to a ``Psychophysical Test System'' to evaluate patients'
performance with the Argus[supreg] II System on an ongoing basis.
These three components work together to stimulate the retina and
allow a patient to perceive phosphenes (spots of light), which they
then need to learn to interpret. While using the Argus[supreg] II
System, the video camera on the patient-worn glasses captures a video
image. The video camera signal is sent to the VPU, which processes the
video camera image and transforms it into electrical stimulation
patterns. The electrical stimulation data are then sent to a
transmitter coil mounted on the glasses. The transmitter coil sends
both data and power via radio-frequency (RF) telemetry to the implanted
retinal prosthesis. The implant receives the RF commands and delivers
stimulation to the retina via an array of electrodes that is secured to
the retina with a retinal tack.
In patients with RP, the photoreceptor cells in the retina, which
normally transduce incoming light into an electro-chemical signal, have
lost most of their function. The stimulation pulses delivered to the
retina via the electrode array of the Argus[supreg] II System are
intended to mimic the function of these degenerated photoreceptors
cells. These pulses induce cellular responses in the remaining, viable
retinal nerve cells that travel through the optic nerve to the visual
cortex where they are perceived as phosphenes (spots of light).
Patients learn to interpret the visual patterns produced by these
phosphenes.
With respect to the newness criterion, according to the applicant,
the FDA designated the Argus[supreg] II System a Humanitarian Use
Device in May 2009 (HUD designation 09-0216). The applicant
submitted a Humanitarian Device Exemption (HDE) application
(H110002) to the FDA in May 2011 to obtain market approval for
the Argus[supreg] II System. The HDE was referred to the Ophthalmic
Devices Panel of the FDA's Medical Devices Advisory Committee for
review and recommendation. At the Panel's meeting held on September 28,
2012, the Panel voted 19 to 0 that the probable benefits of the
Argus[supreg] II System outweigh the risks of the system for the
proposed indication for use. The applicant received the HDE approval
from the FDA on February 14, 2013. Currently there are no other
approved treatments for patients with severe to profound RP. The
Argus[supreg] II System has an IDE number of G050001 and is a Class III
device. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50580 through
50583), we approved new ICD-9-CM procedure code 14.81 (Implantation of
Epiretinal Visual Prosthesis), which uniquely identifies the
Argus[supreg] II System. The other two codes approved by CMS are for
removal, revision, or replacement of the device. More information on
these codes can be found on the CMS Web site at: https://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html.
After evaluation of the new technology add-on payment application
and consideration of public comments received, we concluded that the
Argus[supreg] II System met all of the new technology add-on payment
policy criteria. Therefore, we approved the Argus[supreg] II System for
new technology add-on payments in FY 2014 (78 FR 50580 through 50583).
Cases involving the Argus[supreg] II System that are eligible for new
technology add-on payments are identified by ICD-9-CM procedure code
14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that
the Secretary establish a mechanism to recognize the costs of new
medical services or technologies under the payment system established
under that subsection, which establishes the system for paying for the
operating costs of inpatient hospital services. The system of payment
for capital costs is established under section 1886(g) of the Act,
which makes no mention of any add-on payments for a new medical service
or technology. Therefore, it is not appropriate to include capital
costs in the add-on payments for a new medical service or technology.
In the application, the applicant provided a breakdown of the costs of
the Argus[supreg] II System. The total operating cost of the
Argus[supreg] II System is $144,057.50. Under Sec. 412.88(a)(2), new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the device or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum add-on
payment for a case involving the Argus[supreg] II System for FY 2014 is
$72,028.75.
As stated above, the new technology add-on payment regulations
provide that a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Argus[supreg] II System, as stated above, we consider the
beginning of the newness period to commence when the Argus[supreg] II
System was approved by the FDA on February 14, 2013. Because the
Argus[supreg] II System is still within the 3-year newness period, we
proposed to continue new technology add-on payments for this technology
for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: Several commenters supported the proposal to continue new
technology add-on payments for the Argus[supreg] II System for FY 2015.
Some commenters noted that, while the Argus[supreg] II System received
FDA approval on February 14, 2013, it was not available on the U.S.
market until December 20, 2013. The commenters explained that as part
of this lengthy process, the manufacturer first had to submit a request
to the Federal Communications Commission (FCC) for a waiver of section
15.209(a) of the FCC

[[Page 49925]]

rules to allow the manufacturer to then apply for FCC authorization to
utilize this specific RF band. The FCC granted the request for a waiver
of the rules on November 30, 2011. After receiving the FCC waiver of
section 15.209(a), the manufacturer was required to obtain a Grant of
Equipment Authorization to utilize the specific RF band, which the FCC
issued on December 20, 2013. Therefore, the commenters stated that the
date the Argus[supreg] II System first became available for commercial
sale in the United States was December 20, 2013.
Response: We appreciate the commenters' input and support. We agree
with the commenters that due to the delay described above, the date of
newness for the Argus[supreg] II System is now December 20, 2013,
instead of February 14, 2013. Because the 3-year anniversary date for
the Argus[supreg] II System will occur in the first half of FY 2017
(December 20, 2016), we are finalizing our proposal to continue to make
new technology add-on payments for the Argus[supreg] II System for FY
2015.
f. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The
Zilver[supreg] PTX[supreg] is intended for use in the treatment of
peripheral artery disease (PAD) of the above-the-knee femoropopliteal
arteries (superficial femoral arteries). According to the applicant,
the stent is percutaneously inserted into the artery(s), usually by
accessing the common femoral artery in the groin. The applicant stated
that an introducer catheter is inserted over the wire guide and into
the target vessel where the lesion will first be treated with an
angioplasty balloon to prepare the vessel for stenting. The applicant
indicated that the stent is self-expanding, made of nitinol (nickel
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug
approved for use as an anticancer agent and for use with coronary
stents to reduce the risk of renarrowing of the coronary arteries after
stenting procedures.
The applicant received FDA approval on November 15, 2012, for the
Zilver[supreg] PTX[supreg]. The applicant maintains that the
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for
superficial femoral arteries. The technology is currently described by
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of
the superficial femoral artery).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through
50585), after evaluation of the new technology add-on payment
application and consideration of the public comments received, we
approved the Zilver[supreg] PTX[supreg] for new technology add-on
payments in FY 2014. Cases involving the Zilver[supreg] PTX[supreg]
that are eligible for new technology add-on payments are identified by
ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH
PPS final rule, to determine the amount of Zilver[supreg] PTX[supreg]
stents per case, instead of using the amount of stents used per case
based on the ICD-9-CM codes, the applicant used an average of 1.9
stents per case based on the Zilver[supreg] PTX[supreg] Global Registry
Clinical Study. The applicant stated in its application that the
anticipated cost per stent is approximately $1,795. Therefore, cases of
the Zilver[supreg] PTX[supreg] would incur an average cost per case of
$3,410.50 ($1,795 x 1.9). Under Sec. 412.88(a)(2), new technology add-
on payments are limited to the lesser of 50 percent of the average cost
of the device or 50 percent of the costs in excess of the MS-DRG
payment for the case. As a result, the maximum add-on payment for a
case of the Zilver[supreg] PTX[supreg] is $1,705.25 for FY 2014.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zilver[supreg] PTX[supreg], as stated above, we consider the
beginning of the newness period to commence when the Zilver[supreg]
PTX[supreg] was approved by the FDA on November 15, 2012. Because the
Zilver[supreg] PTX[supreg] is still within the 3-year newness period,
we proposed to continue new technology add-on payments for this
technology for FY 2015.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on this proposal.
Comment: Several commenters supported the proposal to continue new
technology add-on payments for the Zilver[supreg] PTX[supreg] for FY
2015.
Response: We appreciate the commenters' support. Because the 3-year
anniversary date for the Zilver[supreg] PTX[supreg] will occur in the
first half of FY 2016 (November 12, 2015), we are finalizing our
proposal to continue to make new technology add-on payments for the
Zilver[supreg] PTX[supreg] FY 2015.
4. FY 2015 Applications for New Technology Add-On Payments
We received seven applications for new technology add-on payments
for FY 2015, three of which were applications resubmitted from FY 2014.
However, one applicant withdrew its application prior to the
publication of the proposed rule. In addition, the applicant for the
Watchman[supreg] System withdrew its application prior to the
publication of this final rule. In accordance with the regulations
under Sec. 412.87(c), applicants for new technology add-on payments
must have FDA approval by July 1 of each year prior to the beginning of
the fiscal year that the application is being considered. A discussion
of the five remaining applications is presented below.
Comment: One commenter stated that CMS was critical of evidence
presented by the applicants to support their claims that the new
technology represents a substantial clinical improvement. The commenter
explained that CMS finds fault with peer-reviewed literature, registry
data, meta-analysis of clinical trials, lack of long-term outcome data,
age of clinical trial participants below the age of Medicare
beneficiaries, single arm studies, non-inferiority studies, and weak
primary efficacy results. The commenter urged CMS to avoid blanket
judgments on what types of evidence are considered adequate and to
carefully consider the totality of the circumstances associated with a
particular product. The applicant concluded that, given the list of
evidence cited by CMS, it would appear that only head to head trials
are sufficient to show substantial clinical improvement over standard
of care, but it is important to note that in the case of first in class
products, such trials are not feasible.
Another commenter shared similar concerns and stated that a study
may be designed to measure noninferiority when compared to conventional
treatment, but the results of the study may demonstrate superiority in
terms of other measures, such as reduced pain, decreased recovery time
or shorter hospitalizations. In addition, the commenter stated that
study data that provide information regarding patient outcomes may be
more important than whether the study was designed as a superiority
trial or a noninferiority trial. The commenter concluded that a policy
to require superiority studies, or at least to question noninferiority
studies, could have negative results, including delaying patient access
to innovative treatments, improved care outcomes, curtailing
innovation, and discouraging competition. The commenter stated that CMS
should give great weight to the totality of the evidence, including
non-inferiority studies and other methodological approaches, as it

[[Page 49926]]

considers approval of applications for new technology add-on payments.
Some commenters stated that CMS has a precedent of accepting
noninferiority studies to evaluate technologies under the substantial
clinical improvement criterion. In particular, these commenters
indicated that CMS approved new technology add-on payments for
Fidaxomicin in FY 2013 (77 FR 53350-53358) and Kcentra^TM in
FY 2014 (78 FR 50575-50580) and that both of these technologies
submitted data from clinical trials demonstrating non-inferiority. One
commenter stated that CMS' approval of Fidaxomicin for new technology
add-on payments establishes a precedent for approval for a technology
that shows non-inferiority for a primary end point in addition to the
acceptance of other clinically important secondary analysis, and that
precedent should be used to approve all technologies. Another commenter
stated that CMS' approval of Kcentra^TM for new technology
add-on payments is an example of how a technology can use data from
randomized controlled trials demonstrating noninferiority to show that
the technology represents a substantial clinical improvement.
One commenter stated that non-inferiority trials are a well-
established and appropriately accepted standard, and noninferiority
designs are the only affordable and ethical option for drug developers
in researching acute bacterial skin and skin structure infections. The
commenter also stated that primary focus for developing new agents
targeted for acute bacterial skin and skin structure infection patients
is not to improve clinical cure rates, but to ``enhance the efficiency
and cost effectiveness of achieving clinical cures, ease therapeutic
administration (and, therefore, improve compliance) and limit avoidable
exposure to healthcare acquired infections (which, when they occur,
significantly increase costs and create patient safety risks).'' The
commenter urged CMS to clarify that it has not suggested or proposed to
adopt a blanket judgment approach against technologies studied on a
noninferiority basis.
Response: We appreciate the commenters' input and support. CMS
always considers the totality of the clinical evidence whenever it
makes a substantial clinical improvement determination. We agree with
the commenters that we approved new technology add-on payments for
Fidaxomicin and Kcentra^TM by determining that both of these
technologies not only met the newness and cost criteria for new
technology add-on payments, but also represented a substantial clinical
improvement in the treatment options available for Medicare
beneficiaries. We also appreciate that the commenter reviewed the
policies we established in FY 2002 (66 FR 46902) with regard to the
substantial clinical improvement criterion and clarified in FY 2008 (72
FR 47301). We continue to believe, as we did in FY 2008, that it is a
reasonable concern that establishing specific data standards may make
it more difficult for an applicant to qualify for a new technology add-
on payment because such standards cannot account for the various types
of new technologies that may become available in the future and the
types of requirements that those novel technologies may or may not be
able to meet. In other words, we clarify that we did not propose to
establish nor are we establishing a blanket judgment approach against
technologies studied on a non-inferiority basis. As we stated in the
final rule that appeared in the Federal Register on September 7, 2001
(referred to hereinafter as the Inpatient New Technology Add-on Payment
Final Rule), one of the ways to determine if a technology meets the
substantial clinical improvement criterion is for the applicant to
demonstrate that use of the technology significantly improves clinical
outcomes for a patient population as compared with currently available
treatments (66 FR 46914). In that rule, we finalized the policy that we
would require applicants to submit evidence to demonstrate this. For
the purposes of seeking additional payment from Medicare under the
IPPS, we believe that it is preferable, when possible, for applicants
to submit evidence that demonstrates superiority of the applicant
technology as compared with currently available treatments. We note
that this superiority can be derived, extrapolated, or inferred from
noninferiority studies in which the results demonstrate a far greater
delta than proposed in the power analysis. This belief is based on
earlier experiences, which we described in the FY 2002 final rule:
``[W]e would point out that various new technologies introduced over
the years have been demonstrated to have been less effective than
initially thought, or in some cases even potentially harmful. We
believe it is in the best interest of Medicare beneficiaries to proceed
very carefully with respect to the incentives created to quickly adopt
new technology'' (66 FR 46913). However, we point out that in that same
rule, we provide two additional ways for an applicant technology to
demonstrate substantial clinical improvement: if the device offers a
treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments; or if the device offers
the ability to diagnose a medical condition in a patient population
where that medical condition is currently undetectable or offers the
ability to diagnose a medical condition earlier in a patient population
than allowed by currently available methods. There must also be
evidence that the use of the device to make a diagnosis affects the
management of the patient's care. (We refer readers to the Inpatient
New Technology Add-on Payment Final Rule (66 FR 46914).) Similarly, for
these two additional ways to meet the substantial clinical improvement
criterion, we continue to believe that it is appropriate to require
that applicants submit evidence that the technology in fact meets the
criterion through one of these two ways. We do not require an applicant
to meet the criterion in more than one of these ways, but emphasize
that we require evidence to support an applicant's claim. If an
applicant chooses to demonstrate that use of its technology
significantly improves clinical outcomes, we believe that it is
appropriate for CMS to consider all of the evidence presented in
determining whether there is sufficient objective clinical evidence to
determine if a new technology meets the substantial clinical
improvement criterion.
a. Dalbavancin (Durata Therapeutics, Inc.)
Durata Therapeutics, Inc. submitted an application for new
technology add-on payments for FY 2015 for the use of Dalbavancin.
Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic
administered as a once-weekly 30-minute infusion via a peripheral line
for the treatment of patients with acute bacterial skin and skin
structure infections, or ABSSSI. According to the applicant,
Dalbavancin's unique pharmacokinetic profile demonstrates rapid
bactericidal activity that is potent and sustained against serious
gram-positive bacteria, including methicillin-resistant Staphylococcus
aureus (MRSA).
With respect to the newness criterion, the applicant stated that
Dalbavancin's once-weekly dosing, a simpler regimen than the current
standard of care (Vancomycin) of daily or multiple-times daily
intravenous dosing, allows for the discontinuation of IV access with
its attendant risks of line-related thrombosis and infection. The
applicant submitted a New Drug Approval Application (NDA) on September
26,

[[Page 49927]]

2013, and as stated in the FY 2015 IPPS/LTCH PPS proposed rule,
anticipated FDA approval of Dalbavancin sometime in May of 2014. The
applicant also applied for a new ICD-10-PCS code to describe the
administration of Dalbavancin, which was presented at the March 19-20,
2014 ICD-10 Coordination and Maintenance Committee meeting. To date, no
ICD-10-PCS code specifically describes the administration of
Dalbavancin. However, if approved, the new ICD-10-PCS code will be
effective on October 1, 2014. We also note in section II.G. of the
preamble of this final rule that, per section 212 of the PAMA (Pub. L.
113-93), the Secretary announced plans to establish a new compliance
date for ICD-10. We also discuss in that section the requests for ICD-
10-PCS codes for FY 2015. We refer readers to section II.G. of the
preamble of this final rule for a complete discussion of these issues.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the technology meets the newness criterion.
However, we did not receive any public comments regarding whether the
technology meets the newness criterion. After the publication of the FY
2015 IPPS/LTCH PPS proposed rule, we were informed that the applicant
received FDA approval for the use of the technology on May 23, 2014.
Therefore, for purposes of consideration for FY 2015 IPPS new
technology add-on payments, we believe that the technology should be
considered ``new'' as of May 23, 2014, when the technology received FDA
approval.
We note that in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43813 through 43814), we established criteria for evaluating whether a
new technology is substantially similar to an existing technology,
specifically: (1) whether a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) whether a
product is assigned to the same or a different MS-DRG; and (3) whether
the new use of the technology involves the treatment of the same or
similar type of disease and the same or similar patient population. If
a technology meets all three of the criteria above, it would be
considered substantially similar to an existing technology and would
not be considered ``new'' for purposes of new technology add-on
payments.
In evaluating the first criterion, the applicant stated that
Dalbavancin's mechanism of action is unique compared to other
antibiotics as it involves the interruption of cell wall synthesis
resulting in bacterial cell death. Furthermore, the applicant cited
Dalbavancin's long half-life as the factor that differentiates itself
from existing antibacterial agents active against MRSA. With respect to
the second criterion, as we stated in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28036), we believe that cases of ABSSSI that use
Dalbavancin or other antibiotics for treatment would be assigned to the
same MS-DRGs. Finally, with respect to the third criterion, we believe
that Dalbavancin and other antibiotics used to treat cases of ABSSSI
treat the same disease and patient population. Based on evaluation of
the substantially similarity criteria, we stated in the FY 2015 IPPS/
LTCH PPS proposed rule, it appears that Dalbavancin is not
substantially similar to other antibiotics for the treatment of ABSSSI
because it does not use the same or a similar mechanism of action to
achieve a therapeutic outcome.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments regarding whether Dalbavancin is substantially similar to
existing antibiotics and whether Dalbavancin meets the newness
criterion. However, we did not receive any public comments discussing
whether Dalbavancin is substantially similar to existing antibiotics in
the context of the newness criterion. After further evaluation of the
new technology add-on payment application, we believe that Dalbavancin
is not substantially similar to other antibiotics for the treatment of
ABSSSI because it does not use the same or a similar mechanism of
action to achieve a therapeutic outcome.
According to the applicant, Dalbavancin is indicated to treat gram-
positive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These
conditions may be a primary diagnosis, but are often secondary to an
underlying condition such as diabetes, heart failure, and pressure
ulcers, among others. Therefore, the technology is eligible to be used
across all MS-DRGs. To demonstrate that it meets the cost criterion,
the applicant searched the FY 2012 MedPAR file (across all MS-DRGs) for
cases where at least one ABSSSI ICD-9-CM code was present on the claim,
including those where MRSA was present on a claim with an ABSSSI
diagnosis. Specifically, the applicant searched for cases with one of
the following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and
abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and
paronychia of finger); 681.10 (Cellulitis and abscess of toe,
unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis
and abscess of unspecified digit); 682.0-682.9 (Other cellulitis and
abscess of face, neck, trunk, upper arm and forearm, hand except
fingers and thumb, buttock, leg except foot, foot except toes,
specified sites, unspecified sites); 686.00 (Pyoderma, unspecified);
686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic
granuloma of skin and subcutaneous tissue); 686.8 (Other specified
local infections of skin and subcutaneous tissue); 686.9 (Unspecified
local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic
wound infection not elsewhere classified); 998.51 (Infected
postoperative seroma); and 998.59 (Other postoperative infection). The
applicant believed that these cases represent potential cases eligible
for the administration of Dalbavancin.
The applicant found 570,698 cases across 682 MS-DRGs and noted that
almost 25 percent of the total number of cases would map to MS-DRGs 603
(Cellulitis without MCC), while the top 10 MS-DRGs accounted for almost
half (or 49 percent) of the total number of cases. Of the 682 MS-DRGs,
only 90 of these MS-DRGs accounted for 1,000 cases or more. The
applicant standardized the charges for all 570,698 cases, which equated
to an average case-weighted standardized charge per case of $46,138. We
note that the applicant did not inflate the charges nor did it include
charges for Dalbavancin in the average case-weighted standardized
charge per case. The applicant calculated an average case-weighted
threshold of $44,255 across all MS-DRGs. Therefore, the applicant
asserted the average case-weighted standardized charge per case
(without inflating and including charges for Dalbavancin) exceeds the
average case-weighted threshold of $44,255 (as indicated in Table 10 of
the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant
maintained that Dalbavancin meets the cost criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments regarding whether Dalbavancin meets the cost criterion,
particularly with regard to the assumptions and methodology used in the
applicant's analysis.
Comment: The applicant submitted a public comment maintaining that
Dalbavancin meets the cost criterion requirement because the cost of
the target cases exceeds the average case-weighted cost threshold
requirement prior to accounting for an inflation factor, or including
the costs of Dalbavancin. The applicant further stated that it also
included the ``costs of Dalbavancin in its analysis to further

[[Page 49928]]

demonstrate that Dalbavancin exceeds the established NTAP cost
threshold.''
Response: We appreciate the applicant's response. We reviewed the
applicant's analysis. We note that, while the applicant's analysis
included the charges associated with Dalbavancin in their final cost
estimate, the applicant did not remove the charges for the current
therapy for treating acute bacterial skin and skin structure
infections. We agree that the applicant's analysis using data from all
570,698 cases across 682 MS-DRGs showed that Dalbavancin exceeds the
average case-weighted threshold prior to the inclusion of inflation
factors and charges associated with Dalbavancin.
We note that it is unclear to what degree Dalbavancin would be used
in each of these cases across the specific MS-DRGs, in part, because a
procedure code has not been established to identify the technology's
use in the claims data. Therefore, we reviewed the additional analyses
using the claims data submitted by the applicant to substantiate that
the technology meets the cost criterion. For example, in the data
submitted by the applicant, the top 10 MS-DRGs ranked by case volume
constitute roughly half of the cases with at least one ICD-9-CM code
associated with acute bacterial skin infections. These 10 MS-DRGs
include: MS-DRG 0603 (Cellulitics Without MCC); MS-DRG 0602
(Cellulitics With MCC); MS-DRG 0871 (Septicemia or Severe Sepsis
Without MV 96+ Hours With MCC); MS-DRG 0863 (Postoperative & Post-
Traumatic Infections Without MCC); MS-DRG 0872 (Septicemia or Severe
Sepsis Without MV 96+ Hours Without MCC); MS-DRG 0300 (Peripheral
Vascular Disorders With CC); MS-DRG 0292 (Heart Failure & Shock with
CC); MS-DRG 0862 (Postoperative & Post-Traumatic Infections With MCC);
MS-DRG 0857 (Postoperative or Post-Traumatic Infections With O.R.
Procedure With CC); and MS-DRG 0853 (Infectious and Parasitic Diseases
With O.R. Procedure With MCC). An average case-weighted threshold and
standardized charges could be calculated using these MS-DRGs and
compared to determine if the standardized charges exceed the average
case-weighted threshold for these top 10 MS-DRGs.
In summary, we agree with the applicant that the technology meets
the cost criterion.
With regard to substantial clinical improvement, as previously
stated by the applicant, Dalbavancin is a new intravenous (IV)
lipoglycopeptide antibiotic administered as a once-weekly 30 minute
infusion via a peripheral line for the treatment of patients with acute
bacterial skin and skin structure infections, or ABSSSI. The applicant
noted that, in the setting of continuing emergence of resistance among
gram-positive pathogens worldwide, there is an increasing medical need
for new antibacterial agents with enhanced gram-positive activity. The
applicant cited the Infectious Diseases Society of America (IDSA),\3\
stating the need for a multi-pronged approach to address the impact of
antibiotic resistance. In addition, the applicant stated the FDA has
also designated MRSA as a pathogen of special interest which allows an
antibiotic effective against this organism to be designated as a
``Qualified Infectious Disease Product,'' recognizing the medical need
for drugs to treat infections caused by this pathogen. The applicant
believed that having a medicinal agent with clinical efficacy against
gram-positive pathogens, including MRSA and CA-MRSA, a favorable
benefit/risk ratio, and a favorable pharmacokinetics profile allowing
convenient dosing in inpatients and outpatients with the potential for
minimizing patient noncompliance would be a valuable addition to the
antibacterial armamentarium for the treatment of ABSSSI. The applicant
also noted that, when taking Dalbavancin, there is no need for oral
step-down therapy.
---------------------------------------------------------------------------

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

The applicant suggested that Dalbavancin offers treatment
advantages over other available options for therapy for skin infections
as a result of the following:
Improved potency against key bacterial pathogens with the
concentration of Dalbavancin required to kill key target pathogens
lower relative to other antibiotics commonly used to treat such
pathogens;
Retained activity against staphylococcus aureus resistant
to other antibiotics;
Improved safety profile as Dalbavancin exhibits more
favorable tolerability and safety than alternative approved
antibacterial drugs in areas such as no evidence of thrombocytopenia as
seen with linezolid and tedezolid, superior infusion related
tolerability relative to other antibiotics, an absence or reduction of
drug specific toxicities, and once a week dosing of IV Dalbavancin
avoids pitfalls of patient noncompliance with an oral medication;
Lack of drug interactions due to metabolic profile which
minimizes risk of unexpected adverse events when co-administered with
other compounds as seen with linezolid and quinupristin/dalfopristin;
Decreased requirement for therapeutic interventions,
specifically the need for an intravenous catheter as Dalbavancin is
administered once a week, thus reducing catheter related infection as
well;
Reduced time to patient defined recovery;
Reduced mortality rate as demonstrated in the combined
phase of the Discover 1 and Discover 2 clinical trials;
The potential for avoidance of admission to the hospital
as Dalbavancin allows the utilization of a weekly treatment regimen,
thus potentially increasing the convenience of outpatient therapy for
patients.
The applicant conducted three phase three randomized, controlled,
double blinded clinical trials. The first was the pivotal VER001-9
study with a total of 873 patients with ABSSSIs, which compared the
safety and efficacy of IV Dalbavancin with possible switch to oral
placebo to IV Linezolid with possible switch to oral Linezolid.
According to the applicant, the primary efficacy endpoint of clinical
response at test of 14 days with a plus or minus of 2 days after
completion of therapy demonstrated comparable clinical efficacy to
linezolid and met the requirement of statistical demonstration of non-
inferiority. In the clinically evaluable population, 88.9 percent of
patients who received Dalbavancin compared to 91.2 percent of patients
who received vancomycin/linezolid were clinical successes. The
applicant also noted that Dalbavancin had an improved safety profile
compared to Linezolid as the overall incidence and percentage of
adverse events and deaths were lower in the Dalbavancin group, which
was statistically significant.
The second and third clinical trials were the Discover 1 and
Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI
and compared IV Dalbavancin with IV placebo every 12 hours to match
Vancomycin with possible switch to oral Vancomycin to IV Vancomycin
with IV placebo to match IV Dalbavancin with possible switch to oral
Linezolid. The applicant reported that in both studies, the primary
efficacy outcome measure was clinical response in 48 to 72 hours post-
study drug initiation and a secondary outcome measure was clinical
status at the end of treatment visit (day 14) in the Intent to Treat
(ITT) and clinically evaluable at End of Treatment populations.
Clinical status was also

[[Page 49929]]

determined at the short-term follow-up and long-term follow-up visits.
According to the applicant, the Discover 1 trial demonstrated that
83.3 percent of patients in the ITT population who received Dalbavancin
were responders at 48 to 72 hours after the start of therapy compared
to 81.8 percent of patients who received Vancomycin/Linezolid. The
applicant also noted that Dalbavancin was non-inferior to Vancomycin/
Linezolid (Absolute Difference in Success Rates (95 percent confidence
interval): -4.6 percent; 7.9 percent).
The applicant further noted that the Discover 2 trial showed
similar results to the Discover 1 trial. Specifically, the trial
demonstrated that 76.8 percent of patients in the ITT population who
received Dalbavancin were responders at 48 to 72 hours after the start
of therapy compared to 78.3 percent of patients who received
Vancomycin/Linezolid. The applicant again noted that Dalbavancin was
non-inferior to Vancomycin/Linezolid (Absolute Difference in Success
Rates (95 percent confidence interval): -7.4 percent; 4.6 percent).
The applicant found Dalbavancin to be effective against MRSA and
other gram-positive bacteria associated with ABSSSI. The applicant
stated that 25 percent of patients in the study were treated without an
inpatient admission.
We stated in the FY 2015 IPPS/LTCH PPS proposed rule that we are
concerned with the details of the trial design and the primary efficacy
endpoints used within those trials that were used to provide the
clinical data supplied by the applicant. All of the trials were
noninferiority studies, which prevent any determination as to
substantial clinical improvement from the trial data. The primary
efficacy endpoint was defined as having no increase in lesion size, and
no fever 48 to 72 hours after drug initiation. The secondary endpoint
was a >20 percent reduction in infection area at defined points in
time. At neither endpoint is the patient oriented endpoint of
resolution of infection increased. With these limitations in using
efficacy data to establish substantial clinical improvement, the
applicant suggested that the outpatient treatment, elimination of
central lines and avoidance of hospitalization all may improve safety,
avoid treatment-associated infections and improve patient satisfaction,
and that these factors demonstrate substantial clinical improvement.
While the factors mentioned may be true, the applicant did not present
any evidence to support its assertions.
We invited public comments on whether Dalbavancin meets the
substantial clinical improvement criterion, including public comments
in response to our concern that the applicant has only provided
efficacy data of noninferiority, and no data for the other suggested
benefits.
Comment: Several commenters stated that Dalbavancin meets the
substantial clinical improvement criteria and, therefore, CMS should
approve the application for new technology add-on payments in FY 2015.
Response: We appreciate the commenters' input. We considered these
public comments in our determination of whether this technology
represents a substantial clinical improvement in the treatment options
currently available to Medicare beneficiaries.
Comment: As previously summarized, some of the commenters stated
that CMS has a precedent of accepting noninferiority studies to
evaluate technologies under the substantial clinical improvement
criterion. In particular, these commenters indicated that CMS approved
new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350
through 53358) and Kcentra^TM in FY 2014 (78 FR 50575 through
50580), and both of these technologies submitted data from clinical
trials demonstrating non-inferiority. One commenter stated that CMS'
approval of Fidaxomicin for new technology add-on payments establishes
a precedent for approval for a technology that shows noninferiority for
a primary end point in addition to the acceptance of other clinically
important secondary analysis. The commenters believed that precedent
should be used to approve the application for new technology add-on
payments for Dalbavancin. Another commenter stated that CMS' approval
of Kcentra^TM for new technology add-on payments is an
example of how a technology can use data from randomized controlled
trials demonstrating noninferiority to show that technology represents
a substantial clinical improvement.
The applicant also provided additional data from its clinical
trials on the degree to which patients who were improving were
permitted to stop their treatment after 10 days. The data showed that
patients randomized to Dalbavancin were more likely to stop therapy at
10 days, and less likely to continue treatment through 14 days. The
applicant stated that by day 10 most patients were being treated on an
outpatient basis on oral therapy (either with an oral placebo or oral
linezolid), and that treatment was discontinued at the patient's
discretion. The applicant further stated that ``the implication of this
finding is that, from the patient's perspective, resolution of the
underlying infection was occurring more rapidly for those randomized to
Dalbavancin.''
Response: We refer readers to section II.I.4. of the preamble of
this final rule for our detailed response to commenters' concerns
regarding noninferiority trials.
We believe that our preliminary assessment (and final determination
described later in this section) with regard to Dalbavancin is
consistent with prior determinations made with regard to other approved
technologies, including the two technologies identified by the
commenters, Fidaxomicin and Kcentra^TM. With regard to
Fidaxomicin, we note that we stated that we believed that it
represented a treatment option with the potential to decrease
utilization, reduce the recurrence of clostridium-difficile associated
disease (CDAD), and improve quality of life. We also note that we
considered the information the applicant provided with regard to the
endpoints in its clinical trial, which as the commenters point out,
were indeed to demonstrate that the effects of administering
Fidaxomicin were non-inferior to administering Vancomycin. (We refer
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53357 through
53358).) Similarly, with regard to Kcentra^TM, we note that
we stated that we believed that it provided a rapid beneficial
resolution of the patient's blood clotting factor deficiency, decreases
the risk of exposure to blood borne pathogens, and reduces the rate of
transfusion-associated complications. These conclusions also were based
on information the applicant provided with regard to the endpoints in
its clinical trial. (We refer readers to the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50578 through 50579).) However, we note that in their
clinical trials, these applicants were able to show a wider margin of
difference between the treatment and control groups. The small margin
of difference between the groups in this study leads us to conclude
that any additional analysis of the trial data would be unlikely to
demonstrate superiority of the treatment group.
With regard to the additional data the applicant provided regarding
days of therapy, it is our understanding that most patients in both
groups were on oral therapy by day 10 and that patients in both groups
were allowed to discontinue their therapy at their discretion. The
treatment group was more likely to discontinue use of

[[Page 49930]]

Dalbavancin by day 10. We believe that it is difficult to assess the
degree to which this implied that resolution of the underlying
infection was occurring more rapidly, or would meet our definition of
substantial clinical improvement. However, in light of the data from
the applicant's non-inferiority trial, which did not show a wide margin
of difference between the treatment and control groups, we do not
believe that this is sufficient objective evidence to determine that
Dalbavancin is a substantial clinical improvement in the treatment
options available for Medicare beneficiaries.
Comment: Many commenters described how they believed that
Dalbavancin's administration would improve patient safety and reduce
adverse events, improve medication compliance, and reduce potential
additional health care utilization.
With regard to patient safety and adverse events, many commenters
asserted that using Dalbavancin does not require an indwelling IV
access, unlike treatments using Vancomycin and, therefore, it is self-
evident that the potential for catheter-associated infections is
eliminated. Some of these commenters emphasized the importance of
reducing catheter-associated infections, and noted that Dalbavancin
could help achieve this goal.
In addition, with regard to patient safety and adverse events, the
applicant provided references discussing the frequency of central
venous catheter complications nationally. The applicant also provided
data from their pivotal clinical trial showing the number and
proportion of patients who died and those with adverse events,
including drug-related adverse events and treatment-related serious
adverse events. The applicant asserted that the data showed that fewer
patients randomized to Dalbavancin died relative to the standard of
care, showing that one patient (0.2 percent) treated with Dalbavancin
died while 7 patients (1.1 percent) treated with Vancomycin/Linezolid
died. Notably, while these data showed with a p value of 0.05 that 33
percent of patients treated with Dalbavancin had an adverse event
compared to 38 percent of patients treated with Vancomycin or
Linezolid, the data also showed that it was difficult to distinguish
between the two groups in terms of drug-related adverse events and
treatment-related serious adverse event. The data showed that 12
percent of patients treated with Dalbavancin experienced a drug-related
adverse event compared to 14 percent of patients treated with
Vancomycin/Linezolid with a p value of 0.45. The data also showed that
0.3 percent of patients treated with Dalbavancin experienced a
treatment-related serious adverse event compared to 0.6 percent of
patients treated with Vancomycin/Linezolid with a p value of 0.41. In
addition to these data, the applicant also presented data collected in
their clinical program that compared the infusion-related adverse
events of patients receiving Dalbavancin to those of patients receiving
commonly used alternative agents. These data showed that 2.2 percent of
patients treated with Dalbavancin experienced an infusion-related
adverse event, while 3.1 of comparator agent patients experienced an
infusion-related adverse event.
One commenter, having reviewed the applicant's clinical trial data,
concluded that while the safety profile to date of Dalbavancin appears
similar to Vancomycin, the ultimate determination of safety must await
broader clinical use. The commenter noted that future clinical trials
are needed to define the safety profile of Dalbavancin.
Response: We appreciate commenters' input and the additional data
submitted by the applicant.
We disagree with commenters that it is self-evident that the
technology eliminates the potential for catheter-associated infections,
particularly with respect to indwelling catheters. It is not clear if
these patients already would have had indwelling catheters in place,
whether for antibiotic administration or other purposes. Therefore, it
is not evident that simply having the option of an antibiotic that does
not require an indwelling catheter would eliminate the potential for
catheter-associated infections. We agree with the commenters that the
administration of Dalbavancin could reduce the potential for these
infections in patients that otherwise would not have an indwelling
catheter, but note that it was not possible to discern the degree to
which this potential reduction occurs based on the data and comments
provided.
As previously stated, we appreciate the applicant's submission of
additional data from its trials regarding safety and adverse events. We
agree with the applicant that Dalbavancin appears to be associated with
fewer infusion-associated adverse events and patient deaths relative to
the comparator group. We note that the applicant's data showed that
drug-related and treatment-related serious adverse events appeared to
be less frequent for patients treated with Dalbavancin relative to the
comparator group, but that it was not clear to what degree the groups
actually differed because the p values were in excess of 0.4. We also
agree with the commenter that stated that it would appear that more
clinical use and data should be gathered to more fully develop
Dalbavancin's safety profile.
Comment: Many commenters stated that they believed that Dalbavancin
would improve medication compliance and reduce potential additional
health care utilization. Some commenters noted that patients diagnosed
with acute bacterial skin and skin structure infections are often
treated as inpatients. One commenter noted that the rate of these skin
and skin structure infections are higher than they have ever
historically been. One commenter described these hospitalizations as
unnecessary. Another commenter stated that while Dalbavancin is not
more efficacious than Vancomycin, it is easier to administer. The
commenter concluded that Dalbavancin would make it possible to treat
patients with complicated skin and skin structure infections that might
otherwise require hospitalization on an outpatient basis without
compromising efficacy and without the need for either laboratory
monitoring or an indwelling intravenous catheter. Several commenters
noted that less pharmacist monitoring time was required for the
administration of Dalbavancin relative to Vancomycin. Several
commenters stated that no additional data beyond the pivotal trials are
needed to show that a single infusion involves fewer administrations
and requires less health care resources than a course of therapy that
lasts a week or more. One commenter described the importance of
medication compliance in the context of treating a patient population
that faces socioeconomic hardships. Specifically, the commenter noted
that noncompliant patients are more likely to present to the emergency
department with worsening infections and that Dalbavancin's dosing
profile reduces the risk of noncompliance that is typically associated
with oral therapy.
Response: We appreciate the commenters' input. We agree with the
commenters that there is the possibility that Dalbavancin could make it
possible for certain patients to be treated on an outpatient basis
rather than as inpatients of a hospital. We further agree with
commenters that there is the potential for treatment benefits for
Medicare beneficiaries that would help avoid hospitalizations,
including avoiding potential future iatrogenic events. However, we are
concerned that neither the applicant, nor any of the commenters,
provided specific information or data regarding the reduced resource
use that they believe would occur. It is common that benefits

[[Page 49931]]

from events that appear to be ``self-evident,'' as suggested by the
commenters, prove to not be beneficial events when subjected to the
rigors of a clinical trial.
After consideration of the public comments we received, we do not
believe that Dalbavancin meets the substantial clinical improvement
criterion to qualify the technology for new technology add-on payments
under the IPPS in FY 2015. In particular, we do not believe there is
sufficient objective clinical evidence to determine that Dalbavancin
significantly improves clinical outcomes for Medicare beneficiaries in
order for the technology to qualify for new technology add-on payments.
While we recognize that Dalbavancin has met FDA standards for safety
and effectiveness, the new technology add-on payment application
process and approval requires a demonstration of a substantial clinical
improvement, which is not inherent in the FDA's regulatory process. We
recognize that the technology is the first drug designated as a
Qualified Infectious Disease Product (QIDP) to receive FDA approval and
was granted QIDP designation because it is an antibacterial or
antifungal human drug intended to treat serious or life-threatening
infections. We are equally committed to encouraging increased
development and approval of new antibacterial drugs, providing
physicians and patients with important new treatment options and will
support this endeavor by providing payment for Dalbavancin through our
prospective payment processes. However, in the case of this
application, we do not believe that the technology meets the
substantial clinical improvement criterion. Therefore, we are not
approving new technology add-on payments for Dalbavancin for FY 2015.
b. Heli-FX^TM EndoAnchor System (Aptus Endosystems, Inc.)
The Heli-FX^TM EndoAnchor System is indicated for use in
the treatment of patients whose endovascular grafts during treatment of
aortic aneurysms have exhibited migrations or endoleaks, or in the
treatment of patients who are at risk of such complications, and in
whom augmented radial fixation and/or sealing is required to regain or
maintain adequate aneurysm exclusion.
The Heli-FX^TM EndoAnchor System is comprised of the
following three components: (1) The EndoAnchor Implant; (2) the Heli-
FX^TM Applier; and (3) the Heli-FX^TM Guide with
Obturator. The Heli-FX^TM EndoAnchor System is a mechanical
fastening device that is designed to enhance the long-term durability
and reduce the risk of repeat interventions in endovascular aneurysm
repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By
deploying a small helical screw (the Heli-FX^TM EndoAnchors)
to connect the endograft to the aorta, the Heli-FX^TM System
seeks to provide a permanent seal and fixation, similar to the
stability achieved with an open surgical anastomosis.
The original Heli-FX^TM EndoAnchor System, designed for
treating abdominal aortic aneurysms (AAA), was cleared by the FDA
through the ``de novo'' 510(k) process on November 21, 2011 (reference
K102333). The Heli-FX^TM Thoracic System, which allows the
expanded use of the Heli-FX^TM EndoAnchor System technology
to the treatment of thoracic aortic aneurysms (TAA), was cleared by the
FDA on August 14, 2012 (reference K121168).
The applicant submitted two applications for approval for new
technology add-on payment in FY 2015: one for the treatment of AAAs and
the other for the treatment of TAA repair. We note that, as stated in
the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915),
two applications are necessary in this instance, because patients that
may be eligible for use of the technology under the first indication
are not expected to be assigned to the same MS-DRGs as patients
receiving treatment using the new technology under the second
indication. Specifically, patients who have endovascular grafts
implanted for the treatment of AAA map to MS-DRGs 237 (Major
Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular
Procedures without MCC), while patients who have endovascular grafts
implanted for the treatment of TAA map to MS-DRGs 219 (Cardiac Valve
and Other Major Cardiothoracic Procedure without Cardiac Catheter with
MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure
without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other
Major Cardiothoracic Procedure without Cardiac Catheter without CC/
MCC). Each indication/application must also meet the cost criterion and
the substantial clinical improvement criterion in order to be eligible
for new technology add-on payments beginning in FY 2015. We discuss
both of these applications below.
(1) Heli-FX^TM EndoAnchor System for the Treatment of AAA
(Heli-FX^TM AAA)
As mentioned above, the original Heli-FX^TM EndoAnchor
System, designed for treating patients diagnosed with AAA, was cleared
by the FDA through the ``de novo'' 510(k) process on November 21, 2011
(reference K102333). According to the applicant, the device became
available to Medicare beneficiaries following the product launch at the
Society of Vascular Surgery (SVS) Annual Meeting held on June 7-9,
2012. Therefore, the applicant maintained that the Heli-FX^TM
AAA meets the ``newness'' criterion because the technology was not
available on the U.S. market until June 2012. The applicant explained
that the delay in the general market availability of the original Heli-
FX^TM AAA, following initial FDA clearance, was mainly
because of the regulatory uncertainty inherent in the ``de novo''
510(k) process. This uncertainty prevented the manufacturer from being
able to secure the venture capital funding that was necessary to
prepare for commercialization before obtaining market clearance. The
ability to secure venture capital through the fundraising process was
dependent upon the FDA clearance. According to the applicant, funding
to commercially market the technology was not obtained until June 2012.
In subsequent discussions with the applicant, the applicant confirmed
that the Heli-FX^TM AAA was available on the U.S. market as
of November 2011. Further, the applicant acknowledged that four
implantations were performed on Medicare beneficiaries between November
2011 and June 2012. Therefore, the Heli-FX^TM AAA is
considered ``new'' as of November 2011 when the technology was cleared
by the FDA and became available on the U.S. market.
Section 412.87(b)(2) of the regulations state that a medical
service or technology may be considered new within 2 or 3 years after
the point at which data begin to become available reflecting the ICD-9-
CM code assigned to the new service or technology. Our past practice
has been to begin and end the eligibility for new technology add-on
payments on a fiscal year basis. We have generally followed a guideline
that uses a 6-month window, before and after the beginning of the
fiscal year, to determine whether to still consider a technology
``new'' and extend approved new technology add-on payments for an
additional fiscal year. In general, a technology is still considered
``new'' (and eligible to receive new technology add-on payments) only
if the 3-year anniversary date of the product's entry on the market
occurs in the latter half of the fiscal year. (We refer readers to 70
FR 47362.) With regard to the newness criterion for the Heli-
FX^TM AAA, as stated above, we consider the beginning

[[Page 49932]]

of the newness period for the device to begin when the technology first
became available on the U.S. market in November 2011. As previously
stated, the applicant acknowledged that four implantations were
performed on Medicare beneficiaries between November 2011 and June
2012. Therefore, the costs of the Heli-FX^TM AAA are
currently reflected in the MS-DRGs, and the 3-year anniversary date
under the newness criterion for the product's entry on the U.S. market
will occur during November 2014 (the first half of FY 2015). As such,
we do not believe that the Heli-FX^TM AAA meets the newness
criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the Heli-FX^TM AAA meets the newness
criterion. We note that the applicant requested an ICD-10-PCS code, and
presented comments at the March 2014 ICD-10 Coordination & Maintenance
Committee meeting. We also note in section II.G. of the preamble of
this final rule that, per section 212 of the PAMA (Pub. L. 113-93), the
Secretary announced plans to establish a new compliance date for ICD-
10-PCS. We also discuss in that section requests for ICD-10-PCS codes
for FY 2015. We refer readers to section II.G. of the preamble of this
final rule for a complete discussion of these issues.
Comment: The applicant submitted a public comment in response to
the concerns that CMS presented in the FY 2015 IPPS/LTCH PPS proposed
rule regarding the newness criterion. The applicant noted that
questions raised by CMS centered solely on whether the Heli-
FX^TM AAA was charged to Medicare prior to the product launch
in June 2012. Additionally, the applicant asserted that CMS did not
reference the relevance of the April 1 date for purposes of determining
whether a technology meets the newness criterion.
Based on CMS' concerns presented in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28039), the applicant conducted another review of
the data previously provided to CMS. As previously submitted, there
were four cases where the applicant was able to determine that the
Heli-FX AAA was implanted in Medicare beneficiaries, and where charges
were submitted to Medicare, prior to the product launch. These
procedures occurred on April 24, 2012, May 7, 2012, May 23, 2012, and
June 4, 2012. The applicant stated that because all of these cases were
completed after April 1, 2012, it believes that the Heli-
FX^TM AAA meets the newness criterion for FY2015.
Response: In a further follow-up discussion to clarify the
availability of the Heli-FX^TM AAA, the applicant's
representatives noted that, although not in large quantities, the Heli-
FX AAA was available to patients prior to April 1, 2012. We appreciate
the information the applicant provided regarding the newness criterion.
As we explained in the FY 2015 IPPS/LTCH PPS proposed rule, in general,
a new technology is still considered ``new'' (and eligible to receive
new technology add-on payments) only if the 3-year anniversary date of
the product's entry on the market occurs in the latter half of the
fiscal year. Although the applicant has stated that the initial four
implantations were after April 1, 2012, the technology was still
available prior to April 1, 2012. Therefore, we still consider the
beginning of the newness period for the device to begin when the
technology first became available on the U.S. market in November 2011,
which is prior to April 1, 2012. As stated in the FY 2015 IPPS/LTCH PPS
proposed rule, the 3-year anniversary date under the newness criterion
for the product's entry on the U.S. market will occur during November
2014 (the first half of FY 2015). As such, the Heli-FX^TM AAA
does not meet the newness criterion and, therefore, is not eligible for
new technology add-on payments for FY 2015.
To demonstrate that the technology meets the cost criterion, the
applicant researched claims data from the 100 percent sample of the
2012 Inpatient Hospital Standard Analytical File (SAF) for cases
reporting either procedure code 39.71 (Endovascular implantation of
other graft in abdominal aorta), or procedure code 39.79 (Other
endovascular procedures on other vessels) in the first or second
procedure position on the claim, in combination with one of the
following primary diagnosis codes: 441.4 (Abdominal aneurysm without
mention of rupture); 996.1 (Mechanical complication of other vascular
device, implant, and graft); or 996.74 (Other complications due to
other vascular device, implant, and graft). The applicant believed that
this combination of ICD-9-CM codes identifies cases treated for AAA. We
note that the 2012 SAF dataset includes all claims submitted from
hospitals paid under the IPPS for calendar year 2012.
The applicant focused its analysis on MS-DRGs 237 and 238 because
these are the MS-DRGs that cases treated with the implantation of
endovascular grafts for AAAs would most likely map to. The applicant
found a total of 8,142 cases, and noted that 9.35 percent of the total
number of cases would map to MS-DRG 237, and 90.65 percent of the total
number of cases would map to MS-DRG 238. The applicant standardized the
charges for all 8,142 cases. Using the inflation factor of 1.47329
published in the FY 2014 IPPS/LTCH final rule (78 FR 50982), the
applicant inflated the standardized charges by 14.88 percent (the
applicant multiplied 1.47329 x 1.47329 x 1.47329 in order to inflate
the charges from 2012 to 2015). The applicant then added the charges
for the Heli-FX^TM AAA to the standardized charges by
dividing the cost of the Heli-FX^TM AAA device by each
individual hospital specific CCR from the FY 2012 impact file. This
equated to an average case-weighted inflated standardized charge per
case of $111,613. The applicant noted that the average case-weighted
inflated standardized charge per case did not contain additional
operating room charges that relate to the Heli-FX^TM AAA.
Therefore, the applicant determined that it was necessary to add an
additional $1,440 for operating room charges, which was based on an
additional half hour of operating room time from one hospital, to the
average case-weighted standardized charge per case. This resulted in an
average case-weighted standardized charge per case of $113,053. The
applicant calculated an average case-weighted threshold of $86,278
across both MS-DRGs 237 and 238. The applicant noted that the average
case-weighted standardized charge per case, computed without including
the additional operating room charges that relate to the Heli-
FX^TM AAA, exceeded the average case-weighted threshold of
$86,278. Therefore, the applicant maintained that the technology meets
the cost criterion.
The applicant also submitted claims data from the ANCHOR (Aneurysm
Treatment Using the Heli-FX Aortic Securement System Global Registry)
study to demonstrate that the technology meets the cost criterion. A
total of 51 cases were submitted with 11.76 percent of all the cases
mapping to MS-DRG 237, and 88.24 percent of all the cases mapping to
MS-DRG 238. The applicant standardized the charges for all 51 cases,
and determined an average case-weighted standardized charge per case of
$128,196. The applicant calculated an average case-weighted threshold
of $87,118 across MS-DRGs 237 and 238. Therefore, because the average
case-weighted standardized charge per case exceeds the average case-
weighted threshold, the applicant maintained that the technology meets
the cost criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the Heli-FX^TM AAA meets the cost
criterion,

[[Page 49933]]

particularly with regard to the assumptions and methodology used in the
applicant's analyses.
Comment: Some commenters believed that the high cost of the Heli-
FX^TM device would deter facilities from using it.
Response: As discussed above, because the Heli-FX^TM AAA
does not meet the newness criterion, it is not eligible for new
technology add-on payments for FY 2015. Therefore, we are not
summarizing the details of this comment nor are we responding to the
issues presented in this discussion. However, we do address this
comment in the later discussion of the Heli-FX^TM EndoAnchor
System for the Treatment of Thoracic Aortic Aneurysms.
We discuss whether the Heli-FX^TM EndoAnchor System (for
the treatment of AAA and TAA) represents a substantial clinical
improvement over other treatments used for the repair of both abdominal
and thoracic aortic aneurysms in one discussion below.
(2) Heli-FX^TM EndoAnchor System for the Treatment of
Thoracic Aortic Aneurysms (Heli-FX^TM TAA)
The Heli-FX^TM TAA, which allows the expanded use of the
Heli-FX^TM EndoAnchor System technology to TAA repair, was
cleared by the FDA on August 14, 2012 (reference K121168). The new
system consists of a longer delivery device with additional tip
configurations to allow the helical EndoAnchor technology to treat TAA.
A line extension to the original Heli-FX^TM EndoAnchor
System, allowing improved treatment of AAA patients with larger aortic
neck diameters, was cleared by the FDA on April 12, 2013 (reference
K130677).
With regard to the newness criterion for the Heli-FX^TM
TAA, we consider the newness period for the device to begin when the
technology was approved by the FDA on August 14, 2012. Because the 3-
year anniversary date of the product's entry on the U.S. market would
occur in the second half of FY 2015 (August 14, 2015), we believe that
the Heli-FX^TM TAA meets the newness criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the Heli-FX^TM TAA meets the newness
criterion. As noted above, the applicant requested an ICD-10-PCS code,
and presented comments at the March 2014 ICD-10 Coordination &
Maintenance Committee meeting. We also note in section II.G. of the
preamble of this final rule that, per section 212 of the PAMA (Pub. L.
113-93), the Secretary announced plans to establish a new compliance
date for the ICD-10-PCS. We also discuss in that section requests for
ICD-10-PCS codes for FY 2015. We refer readers to section II.G. of the
preamble of this final rule for a complete discussion these issues. We
did not receive any public comments on whether the Heli-FX^TM
TAA meets the newness criterion.
To demonstrate that the Heli-FX^TM TAA meets the cost
criterion, similar to the analysis performed for the Heli-
FX^TM AAA, the applicant researched claims data from the 100
percent sample of the 2012 SAF for cases reporting procedure code 39.73
(Endovascular implantation of graft in thoracic aorta) in the first or
second procedure position on the claim, in combination with one of the
following primary diagnosis codes: 404.93 (Hypertensive heart and
chronic kidney disease, unspecified, with heart failure and chronic
kidney disease stage V or end-stage renal disease); 441.01 (Dissection
of aorta, thoracic); 441.03 (Dissection of aorta, thoracoabdominal);
441.2 (Thoracic aneurysm without mention of rupture); 441.4 (Abdominal
aneurysm without mention of rupture); 441.7 (Thoracoabdominal aneurysm,
without mention of rupture); 996.1 (Mechanical complication of other
vascular device, implant, and graft); or 996.74 (Other complications
due to other vascular device, implant, and graft). The applicant
believed that this combination of ICD-9-CM codes identifies cases
treated for TAA. We note that the 2012 SAF dataset includes all claims
submitted from hospitals paid under the IPPS for CY 2012.
The applicant focused its analysis on MS-DRGs 219, 220, and 221
because these are the MS-DRGs to which cases treated with the
implantation of endovascular grafts for TAA repair would most likely
map. The applicant found a total of 642 cases, and noted that 27.88
percent of the total number of cases would map to MS-DRG 219, 40.50
percent of the total number of cases would map to MS-DRG 220, and 31.62
percent of the total number of cases would map to MS-DRG 221. The
applicant standardized the charges for all 642 cases. Using the
inflation factor of 1.47329 published in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50982), the applicant inflated the standardized
charges by 14.88 percent (the applicant multiplied 1.47329 x 1.47329 x
1.47329 in order to inflate the charges from 2012 to 2015). The
applicant then added the charges for the Heli-FX^TM TAA to
the standardized charges by dividing the cost of the Heli-
FX^TM TAA by each individual hospital specific CCR from the
FY 2012 impact file. This equated to an average case-weighted inflated
standardized charge per case of $156,625. The applicant noted that the
average case-weighted inflated standardized charge per case did not
contain additional operating room charges related to the use of this
technology. Therefore, the applicant determined that it was necessary
to add an additional $2,160 for operating room charges, which was based
on an additional 45 minutes of operating room time from one hospital,
to the average case-weighted standardized charge per case. This
resulted in an average case-weighted standardized charge per case of
$158,785. The applicant calculated an average case-weighted threshold
of $141,194 across MS-DRGs 219, 220, and 221. The applicant noted that
the average case-weighted standardized charge per case, without
including charges for additional operating room time, exceeded the
average case-weighted threshold of $141,194. Therefore, the applicant
maintained that the technology meets the cost criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the Heli-FX^TM TAA meets the cost
criterion, particularly with regard to the assumptions and methodology
used in the applicant's analysis.
Comment: Some commenters stated that the high cost of the Heli-
FX^TM device would deter facilities from using it. Therefore,
the commenters supported the approval of the Heli-FX^TM TAA
for new technology add-on payment in order to assist with cost coverage
so that more facilities would be willing to use the device in the
treatment of their patients.
Response: We appreciate the commenters' input and support. We agree
with the commenters that the Heli-FX^TM TAA meets the cost
criterion.
(3) Evaluation of the Substantial Clinical Improvement Criterion for
the Heli-FX^TM EndoAnchor System for the Treatment of
Abdominal and Thoracic Aortic Aneurysms
The applicant stated that the Heli-FX^TM EndoAnchor
System represents a substantial clinical improvement for the following
reasons: the technology improves overall rates of aneurysm exclusion
and long-term success after EVAR by increasing the integrity and long-
term durability of the proximal seal and fixation; the technology
reduces the risk and rate of secondary interventions and readmissions
due to aneurysm-related complications (for example, endoleaks,
migration, aneurysm enlargement) caused by failure of the proximal
seal; the technology improves the general applicability of EVAR to

[[Page 49934]]

patients with a broader spectrum of aortoiliac anatomy, including those
with hostile proximal neck anatomy; and the technology reduces the
rigor of life-long imaging follow-up for EVAR patients by reducing the
rate of late failure and increasing the post-EVAR rates of aneurysm sac
regression due to complete, endoleak-free durable aneurysm exclusion.
While current devices and capabilities are greatly improved over
the first generation of devices, the applicant noted that EVAR
treatments using the first generation of devices has not proven to be
as durable, anatomically applicable, or complication-free as open
surgery.^{4 5 6 7} Several critical and life-threatening
limitations continue to require improvement to these devices and
procedures, including the need to reduce serious early and late device
and procedure-related complications, such as loss of stability, and
integrity and robustness of the clinical proximal aortic landing zone,
and to offer an alternative method of EVAR to a broader segment of the
patient population.
---------------------------------------------------------------------------

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

The applicant provided literature, analyses of data from the
``STAPLE-2'' clinical trial and the ANCHOR Registry, and a meta-
analysis of EVAR trials to demonstrate that the Heli-FX^TM
EndoAnchor System represents a substantial clinical improvement above
current treatments available. We summarize the information provided by
the applicant that supports the clinically beneficial results of using
the Heli-FX^TM EndoAnchor System.
The ``STAPLE-2'' clinical trial enrolled 155 patients at 25 U.S.
centers between September 2007 and January 2009. Clinical (and imaging)
data are available for 147, 139 and 125 patients at 1-year, 2-year, and
3-year follow-up, respectively, representing the complete data sets at
these time points. Patients enrolled in the clinical trial and observed
under the study will continue to be followed per protocol for 5 years
following aneurysm repair. According to the applicant, the results of
the trial and study demonstrate that the Heli-FX^TM
EndoAnchor System is associated with an extremely low rate of proximal
neck-related issues in long-term follow-up. The applicant maintained
that this determination results in improved outcomes for aortic
aneurysm patients, and reduced rate of re-interventions, which are
associated with hospital admissions, procedural risks, and reversions
to increased follow-up frequency requiring more physician visits and
radiographic imaging studies.
The data used for this analysis was extracted from the clinical
database on February 1, 2013, and are identical to those used to
generate the most recent Annual Progress Report (APR) submitted to the
FDA, as required under the U.S. IDE regulations.
While the ``STAPLE-2'' clinical trial was conducted exclusively
with the Aptus AAA endograft (which remains investigational), the
applicant believed that the use of the Heli-FX^TM EndoAnchor
System-related data is applicable to the use of the anchor with the
compatible Cook, Gore, and Medtronic manufactured endografts in
treatment anatomies for AAA and TAA cases.
Through 3-year follow-up, the applicant noted that there have been
no anchor fractures as observed by the core lab. Further, there have
been no relative migrations of the Heli-FX^TM EndoAnchor
System as compared to other endografts reported by the core laboratory.
In the analysis of the ``STAPLE-2'' clinical trial data at 1-year
follow-up, the applicant noted that the core lab observed no proximal
migrations, and a single case of Type I endoleak. A single secondary
intervention was required to address the Type I endoleak in a patient
with a circumferentially incomplete proximal neck within the 1-year
follow-up period.
The applicant further noted that no additional Type I endoleaks
have been observed beyond the 1-year follow-up in any patient enrolled
in the trial. In addition, there were no reported instances of aneurysm
rupture, vessel perforation, vessel dissection, catheter embolization,
enteric fistula, infection, Type III endoleak, conversion, allergic
reactions, renal emboli, or patient death associated with the use of
the Heli-FX^TM EndoAnchor System. Further, there have been no
reports of bleeding or hematoma at the EndoAnchor penetration locations
in the aortic neck.
Beyond the 1-year follow-up, three patients have demonstrated
proximal migrations less than 1 cm. None of these cases were associated
with Type I endoleaks or aneurysm sac expansions.
The applicant then compared migrations and Type I endoleaks data
from the ``STAPLE-2'' clinical trial to analogous data from five
compatible AAA endografts that were not anchored (data taken from
published SSE data obtained from the FDA's Web site). One year of data
was compared because this timeframe is what is reported in a standard
fashion from IDE trials of endografts. The applicant noted that the
Heli-FX^TM EndoAnchor System data compares favorably against
the data obtained in U.S. pivotal trials of devices that did not employ
discrete independent fixation means, particularly when viewed in light
of the shorter average neck lengths treated in the ``STAPLE-2''
clinical trial versus those involving the Cook, Gore, and Medtronic
manufactured endografts. According to the applicant, the number of
proximal migrations were low across devices as reported in the SSE
data, and an analysis using the Fisher's exact method demonstrated no
statistically significant differences when compared to the anchored
endografts used in the ``STAPLE-2'' clinical trial (all p=NS). The
incidence of Type I endoleaks and the need for secondary interventions
to address them was significantly lower for the Heli-FX^TM
EndoAnchor System endografts analyzed under the ``STAPLE-2'' clinical
trial versus the Medtronic, AneuRx, and Talent manufactured endografts
(p=0.026 versus AneuRx and p=0.015 versus Talent). The applicant stated
that the applicability of post-hoc statistical analyses is limited.
However, the applicant believed that because the data being compared
under the analyses were collected through similar protocols and with
the same endpoint definitions, post-hoc comparisons were deemed
appropriate. The applicant further believed that the comparison of this
data demonstrates that the Heli-FX^TM EndoAnchor System is
associated with very low rates of Type I endoleaks and migrations.
The applicant also provided data from the ANCHOR Registry, which is
a post-market, prospective, observational, multi-center, international,
dual-arm study designed to capture real-world data on the usage
patterns and clinical results associated with the use of the Heli-
FX^TM EndoAnchor System as a method of treatment for patients
in need of EVAR. The applicant explained that the ANCHOR Registry
represents a growing body of data on the application of the Heli-
FX^TM EndoAnchor System used as a method of endovascular
aortic aneurysm repair. The applicant noted

[[Page 49935]]

that to its knowledge, the anatomical challenges present in the
registry are greater than those in any large scale published series.
The applicant further noted that, although long-term results are
limited, the acute results demonstrate a high level of device safety,
technical feasibility and acute success in a patient population with
few viable options.
Primary safety for the ANCHOR Registry is being measured as a
composite of freedom from device or procedure-related serious adverse
events through 1-year follow-up following the Heli-FX^TM
EndoAnchor System implantation. Primary effectiveness is being measured
as a composite of acute technical success and freedom from Type Ia
endoleaks and endograft migrations through 1-year follow-up. Inclusion
and exclusion criteria are minimal, essentially following the IFU
requirements. Patients are being followed in the registry by their
physician's standard of care for 5 years.
Enrollment in the ANCHOR Registry began in March 2012. Through
August 2013, a total of 258 patients were enrolled at 40 participating
centers (29 located in the United States and 11 located in the European
Union), and data are available in the registry's database. Of these,
195 patients (76 percent) were enrolled in the primary arm, having the
Heli-FX^TM EndoAnchor System implanted at the time of their
initial aneurysm treatment, either as a prophylactic measure, or to
address an acute leak seen on completion arteriography. The remaining
patients (63 or 24 percent) were enrolled in the revision arm, having
the Heli-FX^TM EndoAnchor Systems implanted at a secondary
procedure to arrest migration, or address endoleaks discovered on
follow-up in previously implanted endografts.
The applicant noted that physicians are choosing to apply the Heli-
FX^TM EndoAnchor System in a subset of patients that are at a
higher risk for proximal neck-related complications during follow-up.
The large average sac diameter in the revision arm suggested that these
patients' initial treatments were unsuccessful and, as such, they have
experienced continued sac expansion post-EVAR. These patients also
represent a high-risk subset of patients.
Acute results are measured in terms of technical success. In the
primary arm, 193 of 194 procedures were successful, and in the revision
arm, 57 of 63 procedures were successful. All technical failures were
persistence of Type Ia endoleaks. There has been a single re-
intervention at 69 days post-Endoanchor implantation for a persistent
Type Ia endoleak in one patient in the revision arm, in which the Heli-
FX^TM EndoAnchor System combined with a proximal cuff were
unable to completely resolve the endoleak. There have been no device-
related serious adverse events.
As mentioned above, because the ``STAPLE-1'',\8\ and ``STAPLE-2''
clinical trials were single-arm studies, no data are available from
them to assess the impact of the Heli-FX^TM EndoAnchor System
on endograft performance. To make this assessment, a meta-analysis was
conducted. The meta-analysis combined long-term AAA endograft
performance from endografts marketed in the United States, and compared
these measures to those from long-term follow-up in the ``STAPLE-2''
trial.
---------------------------------------------------------------------------

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

According to the applicant, the key findings from the meta-analysis
are as follows:
Heli-FX^TM EndoAnchors reduced the proportion of
treated aneurysms with enlargement greater than 5 mm at 3 years from
12.7 percent to 3.9 percent (p=.002).
Heli-FX EndoAnchor System reduced the proportion of leaks
requiring treatment at 3 years from 12 percent to 1.3 percent (p.001).
Heli-FX^TM EndoAnchor System reduced (all-cause)
mortality at 3 years from 18.8 percent to 8.4 percent (p=.002).
However, this does not appear to have been totally mediated by AAA-
related mortality, which was reduced by the Heli-FX^TM
EndoAnchor System from 2.5 percent to 0.7 percent at 3 years (but was
not statistically significant, p=.372).
According to the applicant, in general, patients in the ANCHOR
Registry were similar to the patients in the AAA endograft studies. The
applicant noted that the results of the analysis using the Fisher's
Exact Tests were consistent between the All-Studies' comparisons and
the IDE-Studies' comparisons: All-Cause Mortality, Leaks requiring
Treatment, and Enlargement were all significantly lower at 3 years in
the endografts implanted with the Heli-FX^TM EndoAnchor
System than in standard endografts.
The applicant asserted that the meta-analysis shows that there is
objective evidence that the Heli-FX^TM EndoAnchor System
effectively reduces well-documented problems with endografts. By
providing the endograft with better apposition to the native artery,
the applicant noted that the Heli-FX^TM EndoAnchor System
reduces the rates of enlargement and endoleaks requiring treatment. The
applicant further noted that these results were consistent in the All-
Studies' and IDE Studies' meta-analyses. The applicant believed that
lower rates of leaks requiring intervention would save payers money
over the long term.
The applicant observed that, while there was no significant
improvement in the rate of ruptures with the Heli-FX^TM
EndoAnchor System, this may be due to the fact that leaks were treated
and, thereby, prevented any ruptures. The applicant believed that the
higher rate of treated endoleaks in endografts implanted without the
Heli-FX^TM EndoAnchor System provides for this hypothesis.
Also, migration did not appear to be significantly reduced by the Heli-
FX^TM EndoAnchor System (3.5 percent at 3 years in both
groups; p=1.0).
Finally, the applicant concluded that, overall, the lower
complication rates seen with the Heli-FX^TM EndoAnchor System
in the meta-analysis provide evidence of the clinical benefits and
likely economic benefits associated with the use of the Heli-
FX^TM EndoAnchor System. The applicant believed that the
technology may be especially helpful in patients with difficult
anatomy, and that it may be reasonable to consider using the Heli-
FX^TM EndoAnchor System prophylactically in the treatment of
all such patients.
In addition to the formal study data from the ``STAPLE-2'' trial,
the Global ANCHOR Registry, and the meta-analysis based on these, the
applicant provided published peer-reviewed literature that represent an
early state of scientific data dissemination outside of non-company
sponsored clinical studies, which is commensurate with the recent
market approvals of the Heli-FX^TM EndoAnchor System
technology. The applicant believed that these data demonstrate strong
initial physician enthusiasm and resulting favorable clinical results
in their experience to date. The applicant noted that the general body
of scientific literature is considered meaningful and growing for this
early stage of market introduction. However, the applicant asserted
that the literature supports the study and meta-analysis data above
that documents that improved clinical outcomes were observed, including
outcomes in a broader range of patients that are often ineligible for,
or at greatest risk with, EVAR.

[[Page 49936]]

In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we are
concerned that the three sources of data, the ``STAPLE-2'' clinical
trial, the Anchor registry, and the literature review that the
applicant submitted to support their application are not high quality
evidence. The `STAPLE-2'' study was a single-arm study and only used
one endograft, the registry is an observational study, and the
literature review does not provide clinical data. Also, the meta-
analysis of all the submitted data is only as good as the data used.
While the clinical data submitted suggests that some outcomes such as
EVAR failure are improved, we stated that we are concerned that there
is not enough clinical evidence to support the substantial clinical
improvement criterion.
We invited public comments on whether the submitted data
demonstrate that the Heli-FX^TM EndoAnchor System represents
a substantial clinical improvement in the treatment of Medicare
beneficiaries, particularly in regard to the concerns we identified.
Comment: Several commenters stated that the Heli-FX^TM
System meets the substantial clinical improvement criterion and,
therefore, CMS should approve the Heli-FX^TM System for new
technology add-on payments in FY 2015.
Response: We appreciate the commenters' support. We considered
these comments in our determination of whether the Heli-FX^TM
System represents a substantial clinical improvement in the treatment
options available to Medicare beneficiaries.
Comment: The applicant commented in response to CMS' concerns
presented in the FY 2015 IPPS/LTCH PPS proposed rule regarding the lack
of enough high quality evidence to support the substantial improvement
criterion because the three sources of data submitted by the applicant
were not considered to be `high quality evidence.' Specifically, CMS
stated that it believed that the meta-analysis of submitted data is
only as good as the data used, the STAPLE-2 Pivotal FDA Study was a
single arm study and only used one Endograft, and the ANCHOR Registry
is an observational study and the literature review does not provide
clinical data. The applicant first outlined some basic background
information into the EVAR regulatory process.
With respect to the concerns regarding the meta-analysis of
submitted data being only as good as the data used, the applicant
asserted that it has not attempted to substantiate the finding of
substantial clinical improvement through a single source of
information. The applicant believed that the entirety of evidence
demonstrated that this criterion was met as stated in its application.
Specifically, the applicant stated that the Heli-FX^TM
EndoAnchor System offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments,
including the primary cases with hostile necks and complex revisions
(refer to the ANCHOR Registry data demonstrating 90.2 percent of
hostile necks in the population). The technology has shown
significantly improved clinical outcomes for the short proximal aortic
neck patient population when compared to current available treatments
(refer to STAPLE-2 average neck length of 22.1mm, shorter than any
conventional Endograft IDE Study), and has been shown to reduce
aneurysm related mortality (refer to the meta-analysis results). The
applicant further stated that the Heli-FX^TM has also been
shown to reduce proximal neck related device complications and reduced
subsequent therapeutic interventions (refer to STAPLE-2 where no late
Type 1 endoleaks or proximal neck related revisions were required), and
with previously unseen aneurysm sac regression (refer to STAPLE-2 which
showed the highest reported at 81.7 percent at 3 years), indicating
more rapid resolution of the disease process. Based on all of the above
information, the applicant stated that it believes that the Heli-
FX^TM EndoAnchor System has met this evidentiary threshold
for the substantial clinical improvement criterion.
The applicant also addressed CMS' concerns about the quality of
evidence that the Aptus' single arm STAPLE-2 study may provide,
specifically, that the STAPLE-2 Pivotal FDA Study was a single arm
study and only used one Endograft. According to the applicant, the
STAPLE-2 Study was a two arm study of patients treated with the Aptus
Stent Graft in conjunction with the EndoAnchors versus an historical
open surgical control (SVS Lifeline database). The applicant stated
that this kind of trial design is typical for U.S. pre-market IDE EVAR
Studies with current Endovascular stent grafts. According to the
applicant, many of the recently approved endografts in the United
States used a similar study design and the FDA has no requirement for a
concurrent surgical control. The applicant noted that in no case for
the device regulatory approval processes for recent endografts were
randomization or blinding utilized.
The applicant also addressed CMS' concern that the STAPLE-2 Study
utilized a single type of Endograft. According to the applicant, while
the STAPLE-2 Study utilized a single type of Endograft, this may
provide a uniquely compelling indication of substantial clinical
improvement based on two aspects relating to STAPLE-2. While the
Endograft was an entirely conventional design utilizing Polyester
fabric supported by a Nitinol stent structure with infrarenal fixation
and an unsupported main body (eliminating any contribution of columnar
strength to aid in fixation), the applicant stated that this Endograft
has no other means of fixation beyond the Aptus EndoAnchors. Despite
this, the applicant stated that results indicated highly favorable
proximal seal related outcomes in this most challenging proximal neck
anatomy patient population. In this cohort, the proximal necks in
STAPLE-2 patients contained the shortest average neck length of any
conventional (non-Fenestrated) Endograft evaluated in a U.S. PMA trial
to date. The applicant further stated that unlike other endografts,
such as the Medtronic Endurant or the Gore Excluder, being utilized
with Heli-FX currently both in the ANCHOR trial and commercially
worldwide, the graft studied in STAPLE-2 has no inherent fixation,
active or otherwise. The applicant explained that this is because there
are no integral hooks, barbs, supra-renal fixation, ``anatomical
fixation'' or ``anchor pins'' or other means to secure the Aptus
Endograft beyond the fixation provided by the Heli-FX^TM
EndoAnchors. In effect, because the Heli-FX^TM is the only
source of fixation for the graft studied, the applicant stated that it
represents a ``worst case'' and significant performance challenge of
the clinical effectiveness of the Heli-FX^TM EndoAnchors.
Despite this worst-case aspect of no inherent fixation in the STAPLE-2
Endograft other than Heli-FX^TM EndoAnchors for Endograft
fixation and sealing to the aortic wall, the applicant reported that
there were excellent clinical and technical results with respect to
proximal neck seal and fixation. This was observed despite the very
short proximal necks treated in the study cohort. The applicant noted
that the aneurysm size regression is also among the most rapid and
highest frequency seen with any Endograft U.S. IDE study. The applicant
stated that in the setting of an Endograft with no means of fixation
beyond the Heli-FX^TM EndoAnchors, this is especially
meaningful and indicative of the EndoAnchor capabilities with more
advanced, current generation commercial Endografts.

[[Page 49937]]

With respect to CMS' concern that the ANCHOR Registry is an
observational study, the applicant believed that the Anchor Registry
provides important, highly valuable and meaningful evidence in support
of the substantial clinical improvement criterion. The applicant stated
that the ANCHOR Registry is a formal, Institutional Review Board (IRB)
and Ethics Committee (EC) approved Post-Market Study that utilizes a
Core Lab and a Safety Medical Reviewer for aneurysm related outcomes,
anatomical adjudication for all patients at each follow-up time-point,
as well as clinical outcomes acutely and in follow- up. The applicant
further noted that the use of a Core Lab and a Safety Medical Reviewer
in the setting of EVAR for both baseline and outcome data and the
associated aneurysm anatomical aspects is extremely rare and,
therefore, so far only the ANCHOR Registry has utilized this approach
within the known EVAR Registries. The applicant stated that this
optimizes the scientific rigor and robustness of this real-world study.
The applicant further noted that there are currently 417 patients
enrolled (there were 258 patients at the time of the application), with
core lab analysis available for 311 subjects, and the data has
continued to be highly favorable in what is now among the most hostile
proximal necks studied in any Endograft population seen in the
scientific literature. The applicant asserted that a key and applicable
aspect where Heli-FX^TM is having significant patient impact
(including as seen in the patients' challenging proximal neck anatomy
in STAPLE-2 and ANCHOR cohorts) is offering a treatment option for a
patient population ineligible for currently available treatments. While
the applicant acknowledged the important and favorable aneurysm
exclusion results and expanded patient applicability provided by the
recently FDA-approved Cook Zenith Fenestrated Endograft system, which
expanded proximal neck capabilities as low as 4mm in length, there are
situations affecting patients which limit access to this advanced
Endograft technology. The applicant believed that these higher risk
situations often require physicians to utilize Heli-FX^TM
EndoAnchors with conventional Endografts in sub-optimal proximal neck
anatomy. The applicant asserted that this is especially applicable in
patients deemed unsuitable for open surgical repair.
With respect to CMS' concern that the literature review did not
provide clinical data, the applicant acknowledged that the non-STAPLE-2
and ANCHOR related Heli-FX^TM peer-reviewed scientific
literature did not constitute formal clinical data in themselves, but
nonetheless the applicant believed that the information provided the
manuscripts to highlight the various applicability and utility of the
Heli-FX^TM in various settings, including primary revision,
in AAA and TAA.
Response: We appreciate the applicant's response to our concerns
presented in the proposed rule. While we recognize that Heli-
FX^TM EndoAnchor System has received regulatory approval for
marketing, therefore meeting FDA standards for safety and
effectiveness, the new technology add-on payment process requires
demonstration of a substantial clinical improvement, which is not
inherent in the FDA's regulatory process. As previously stated, we
believe that data used to support substantial clinical improvement
should come from high quality evidence. For example, well-designed
studies that compare the new technology to other similar services that
the applicant is contending will be replaced by the new technology. We
did not suggest that the comparative should have been an open, surgical
procedure. The substantial clinical improvement criterion requires that
technologies demonstrate substantial clinical improvement over existing
technologies. In this case, we would have liked to have seen a
randomized trial comparing the use of Heli-FX^TM anchors with
various endografts such as hooks, barbs, supra-renal fixation,
anatomical fixation or anchor pins using the same brands of endografts.
That data, if positive, would have been sufficient to demonstrate
substantial clinical improvement over existing technologies.
Further, we also believe that the alternatives just mentioned--
hooks, barbs, supra-renal fixation, anatomical fixation, or anchor
pins--are alternatives to the Heli-FX^TM System and the data
submitted does not support that patients have no other alternatives.
Therefore, based on the reasoning above, we do not believe that the
Heli-FX^TM System meets the substantial clinical improvement
criterion.
After consideration of the public comments we received, and as
discussed above, we conclude that the Heli-FX^TM AAA does not
meet the newness criterion and, therefore, the technology is not
eligible for new technology add-on payments for FY 2015. The Heli-
FX^TM TAA meets the newness and cost criteria. However, as
discussed above, the Heli-FX^TM AAA and TAA do not meet the
substantial clinical improvement criterion. Therefore, we are not
approving new technology add-on payments for the Heli-FX^TM
TAA because the technology does not meet the substantial clinical
improvement criterion.
c. CardioMEMS^TM HF (Heart Failure) Monitoring System
CardioMEMS, Inc. submitted an application for new technology add-on
payment for FY 2015 for the CardioMEMS^TM HF (Heart Failure)
Monitoring System, which is an implantable hemodynamic monitoring
system comprised of an implantable sensor/monitor placed in the distal
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in
the management of heart failure. The CardioMEMS^TM HF
Monitoring System measures multiple pulmonary artery pressure
parameters for an ambulatory patient to measure and transmit data via a
wireless sensor to a secure Web site.
The CardioMEMS^TM HF Monitoring System utilizes
radiofrequency (RF) energy to power the sensor and to measure pulmonary
artery (PA) pressure and consists of three components: an Implantable
Sensor with Delivery Catheter, an External Electronics Unit, and a
Pulmonary Artery Pressure Database. The system provides the physician
with the patient's PA pressure waveform (including systolic, diastolic,
and mean pressures) as well as heart rate. The sensor is permanently
implanted in the distal pulmonary artery using transcatheter techniques
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a
supine position on a padded antenna, pushing one button which records
an 18-second continuous waveform. The data also can be recorded from
the hospital, physician's office or clinic.
The hemodynamic data, including a detailed waveform, are
transmitted to a secure Web site that serves as the Pulmonary Artery
Pressure Database, so that information regarding PA pressure is
available to the physician or nurse at any time via the Internet.
Interpretation of trend data allows the clinician to make adjustments
to therapy and can be used along with heart failure signs and symptoms
to adjust medications.
The applicant believed that a large majority of patients receiving
the sensor would be admitted as an inpatient to a hospital with a
diagnosis of acute or chronic heart failure, which is typically
described by ICD-9-CM diagnosis code 428.43 (Acute or chronic combine
systolic and diastolic heart failure) and the sensor would be implanted
during

[[Page 49938]]

the inpatient stay. The applicant stated that for safety
considerations, a small portion of these patients may be discharged and
the sensor would be implanted at a future date in the hospital
outpatient setting. In addition, there would likely be a group of
patients diagnosed with chronic heart failure who are not currently
hospitalized, but who have been hospitalized in the past few months for
which the treating physician believes that regular pulmonary artery
pressure readings are necessary to optimize patient management.
Depending on the patient's status, the applicant stated that these
patients may have the sensor implanted in the hospital inpatient or
outpatient setting.
The applicant received FDA approval on May 28, 2014. The
CardioMEMS^TM HF Monitoring System is currently described by
ICD-9-CM procedure code 38.26 (Insertion of implantable pressure sensor
without lead for intracardiac or great vessel hemodynamic monitoring).
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments regarding how the CardioMEMS^TM HF System meets the
newness criterion. We did not receive any public comments concerning
how the CardioMEMS^TM HF Monitoring System meets the newness
criterion. Therefore, after evaluation of the information provided by
the applicant, we believe that the CardioMEMS^TM HF
Monitoring System meets the newness criterion, and we consider the
technology to be ``new'' as of May 28, 2014, when the technology
received FDA approval.
With respect to cost criterion, the applicant submitted actual
claims from the CHAMPION \9\ clinical trial. Of the 550 patients
enrolled in the trial, the applicant received 310 hospital bills. The
applicant excluded the following claims: incomplete or missing
procedure codes, incomplete charge information and bills that were
statistical outliers (three standard deviations away from the geometric
mean). This resulted in a final cohort of 138 claims. The applicant
noted that cases treated with the CardioMEMS^TM HF Monitoring
System would typically map to MS-DRG 264 (Other Circulatory System
Operating Room Procedures). Using the 138 clinical trial claims, the
applicant standardized the charges and added charges for the
CardioMEMS^TM HF Monitoring System (because the clinical
trial claims did not contain charges for the CardioMEMS^TM HF
Monitoring System). This resulted in an average case-weighted
standardized charge per case of $79,218.
---------------------------------------------------------------------------

\9\ Abraham WT, Adamson PB, Bourge RC, Aaron MF, Costanzo MR,
Stevenson LW, Strickland W, Neelagaru S, Raval N, Krueger S, Weiner
S, Shavelle D, Jeffries B, Yadav JS; for the CHAMPION Trial Study
Group. Wireless pulmonary artery hemodynamic monitoring in chronic
heart failure: a randomized controlled trial, Lancet, February 19,
2011, Vol. 377(9766), pp:658-666.
---------------------------------------------------------------------------

Using the FY 2014 Table 10 thresholds, the threshold for MS-DRG 264
is $60,172. Because the average case-weighted standardized charge per
case exceeded the threshold amount, the applicant maintained that the
CardioMEMS^TM HF Monitoring System would meet the cost
criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether or not the CardioMEMS^TM HF System meets
the cost criterion. We did not receive any public comments regarding
whether or not the CardioMEMS^TM HF System meets the cost
criterion. Based on the analysis above, we believe the
CardioMEMS^TM HF System meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserted that elevated PA pressures occur prior to signs and symptoms
of heart failure and changes in PA pressures provide a sound
physiologic basis for its management. The applicant also contended
that, until the creation of the CardioMEMS wireless PA implant,
knowledge of PA pressure was only feasible in the hospital with the
performance of a right heart catheterization. According to the
applicant, the CardioMEMS HF Monitoring System provides physicians
knowledge of PA pressure while the patient is at home, allowing
proactive management to prevent heart failure decompensation and
hospitalization.
The applicant cited clinical data from the CHAMPION trial. The
trial is a prospective, multicenter, randomized, single-blinded
clinical trial conducted in the United States, designed to evaluate the
safety and efficacy of the CardioMEMS^TM HF Monitoring System
in reducing heart failure-related hospitalizations in a subset of
subjects suffering from heart failure. The applicant shared several
major findings from the CHAMPION trial as described below.
The primary efficacy endpoint of the CHAMPION trial was the rate of
HF hospitalizations during the first 6 months of randomized access.
There were 84 heart failure hospitalizations in the treatment group
compared with 120 heart failure hospitalizations in the control group.
This difference between the groups represented a 28-percent reduction
in the rate of hospitalization for heart failure in the treatment group
(0.32 hospitalizations per patient in the treatment group versus 0.44
hospitalizations per patient in the control group, p=0.0002). Although
not a primary end point, the rate of HF hospitalizations after 18
months was 33 percent lower in the treatment group than in the control
group.
According to the applicant, secondary endpoints of the CHAMPION
trial are changes in pulmonary artery pressures, proportion of subjects
hospitalized, days alive outside of the hospital, quality of life
(QOL), and heart failure management which demonstrated the following
results:
Pulmonary Artery Pressures: At baseline, both treatment
and control patients had similar PA mean pressures. The change in
pressure over the first 6 months was evaluated by integrating the area
under the pressure curve (AUC). At 6 months of follow-up, the treatment
group had a significantly greater reduction in AUC of -155.7 mmHg days
compared to the control group which had an increase in AUC of +33.1
mmHg-days; p=0.0077.
Proportion of Subjects Hospitalized: During the 6-month
follow-up period, the proportion of subjects hospitalized for 1 or more
HF hospitalizations was significantly lower in the treatment group (55
out of 270 patients) than in the control group (80 out of 280 patients)
(20.4 percent versus 28.6 percent; p=0.0292).
Days Alive Outside of the Hospital: At 6 months, treatment
patients had a nonsignificant and clinically not meaningful increase in
days alive outside of the hospital (174.4 versus 172.1; p=0.0280) and
fewer average days in the hospital (2.2 versus 3.8; p=0.0246) compared
to control patients.
Quality of Life: The heart failure specific quality of
life was assessed with the MLHFQ total score at 6 months. The average
total score in the treatment group was 45.2 26.4 which was
significantly better than the average total score in the control group
50.6 24.8 (p=0.0236). The difference in total quality of
life was primarily due to the physical domain. The average physical
score for the treatment group (19.8 11.2) was
significantly better than the control group (22.4 10.9)
(p=0.0096). There was also a significant difference in the emotional
domain with an average score of 9.5 8.1 for the treatment
group and 11.0 7.7 for the control group (p=0.0398).
Heart Failure Management: Physicians responded to
treatment of patients' elevated PA pressures by making medication
changes to lower PA pressures and reduce the risk for HF
hospitalization. Physicians documented

[[Page 49939]]

all medication changes for all patients and indicated whether the
change was made in response to PA pressures or standard of care
information. During the 6-month follow-up period, physicians made
approximately one additional HF medication change per patient per month
in the treatment group when compared to the control group.
Specifically, treatment patients had 1.55 medication changes per month
on average compared to control patients having 0.65 medication changes
per month (p<0.0001). The difference in HF management between the
treatment and control group was due to HF medication changes made in
response to PA pressures.
The study met the two primary safety endpoints: (1) freedom from
device/system related complications (DSRC); and (2) freedom from sensor
failure. The protocol pre-specified objective performance criterion
(OPC) were that at least 80 percent of patients were to be free from
DSRC and at least 90 percent were to be free from pressure sensor
failure. Of the 575 patients in the safety population, 567 (98.6
percent) were free from DSRC at 6 months (lower confidence limit 97.3
percent, p<0.0001). This lower limit of 97.3 percent is greater than
the pre-specified OPC of 80 percent. There were no sensor explants or
repeat implants and all sensors were operational at 6 months for a
freedom from sensor failure of 100 percent (lower confidence limit 99.3
percent, p<0.0001). This lower limit of 99.3 percent is greater than
the pre-specified OPC of 90 percent.
The applicant also noted that the CardioMEMS^TM HF System
reduces the occurrence of HF hospitalizations in NYHA Class III heart
failure patients. According to the applicant, the device had very few
device and system related complications occurring over the course of
the clinical trial. All primary and secondary study endpoints were
successfully achieved. In addition, the CHAMPION trial suggests the
safety and effectiveness of the device was maintained during longer
term follow-up.
After reviewing the information provided by the applicant, we
stated in the FY 2015 IPPS/LTCH PPS proposed rule that we have the
following concerns. The applicant did not discuss long-term outcomes,
specifically death. We stated that we believe additional long-term
outcome information and information regarding how the technology
changes long-term outcomes would further assist in our determination of
whether the technology represents a substantial clinical improvement.
With regard to the clinical trial, information from the randomized
access period and the open access period did not include the total
number of deaths in each group. While the data support a reduction in
total hospitalizations, the rate of hospitalization in each group (0.32
versus 0.44) does not appear to be clinically meaningful. This is
supported by total days alive out of the hospital being virtually
identical in both groups. Finally, we stated that we are concerned
about the cause of the significant dropouts in the Kaplan Meier curves
which further demonstrates lack of impact on survival.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether or not the CardioMEMS^TM HF Monitoring
System technology represents a substantial clinical improvement in the
treatment options available to Medicare beneficiaries.
Comment: Several commenters, including various physicians,
supported the approval of new technology add-on payment for the
CardioMEMS^TM HF Monitoring System.
Response: We appreciate the commenters' support. We considered
these comments in our determination of whether the
CardioMEMS^TM HF Monitoring System represents a substantial
clinical improvement.
Comment: The applicant submitted a public comment, which included
responses to each of CMS' concerns presented in the proposed rule. CMS'
major concern outlined in the FY 2015 IPPS/LTCH PPS proposed rule was
the lack of mortality data to support the improvement seen in the
specified endpoint, hospitalizations. The applicant provided
information that the Randomized Access Period includes approximately
800 patient-years of follow-up, with an average patient follow-up of 18
months. The primary endpoint of the CHAMPION trial was HF
hospitalizations because it remains a major clinical and public health
problem, which is inadequately addressed by current treatment options.
Although the trial was not powered to assess mortality, the applicant
stated that the data showed strong favorable trends for reduced
mortality, and a highly significant reduction for HF hospitalization or
mortality. During the first 6 months of follow-up, the applicant stated
that the proportion of patients who died that were enrolled in the
treatment group (n=15, 5.6 percent) was lesser than in the proportion
patients who died that were enrolled in the control Group (n=20, 7.1
percent), with a nonsignificant but favorable relative risk reduction
rate of 23 percent (HR 0.77, 95 percent CI 0.40-1.51, p=0.4484). During
the entire Randomized Access Period, the applicant stated that the
proportion of patients who died that were enrolled in the treatment
group (n=50, 18.5 percent) was lesser than the proportion of patients
that were enrolled in the control group (n=64, 22.9 percent), with a
nonsignificant but favorable relative risk reduction rate of 20 percent
(HR 0.80, 95 percent CI 0.55-1.15, p=0.2303).
The applicant further stated that in measuring the combined impact
of mortality and HF hospitalizations on the study population, analysis
of the time to death or first HF hospitalization is frequently used.
During the first 6 months of the Randomized Access Period, the
applicant noted that the proportion of patients who died or that had at
least one HF hospitalization that were enrolled in the treatment group
(n=63, 23.3 percent) was lesser than the proportion of patients who
died or that had at least one HF hospitalization that were enrolled in
the control group (n=91, 32.5 percent), with a significant relative
risk reduction rate of 31 percent (HR 0.69, 95 percent CI 0.50-0.95;
p=0.0239). During the entire Randomized Access Period, the applicant
noted that the proportion of patients who died or had at least one HF
hospitalization that were enrolled in the treatment group (n=121, 44.8
percent) was lesser than the proportion of patients who died or had at
least one HF hospitalization that were enrolled in the control group
(n=145, 51.8 percent), with a significant relative risk reduction rate
of 23 percent (HR 0.77, 95 percent CI 0.60-0.98, p=0.0330). The
applicant further noted that other endpoints other than time to event
analyses are event rate analyses for repeat events, including HF
hospitalization rates (primary efficacy endpoint) and all cause
hospitalization rates. The applicant also indicated that event rate
analyses for composite events also are frequently used to assess the
impact of both mortality and HF hospitalizations (combined deaths and
HF hospitalization rates) and total morbidity and mortality (combined
deaths and all cause hospitalizations rates). According to the
applicant, the large treatment effect size on long-term outcomes and
the low number needed to treat and prevent hospitalizations and deaths
demonstrated that CardioMEMS^TM HF Monitoring System
represents a substantial clinical improvement.
CMS also was concerned that while the data supported a reduction in
total hospitalizations, the rate of

[[Page 49940]]

hospitalization in each group (0.32 versus 0.44) does not appear to be
clinically meaningful. The applicant stated in response that the days
alive outside of the hospital (DAOH) endpoint was a secondary endpoint
in the CHAMPION trial. The applicant further stated that the endpoint
is used in clinical trials as an alternative measure for evaluating the
combined impact of mortality and hospitalizations on the study
population. Endpoints that are traditionally used to measure this
combined effect include time to event analyses (for example, time to
death or first HF hospitalization) and composite event rate analyses
(for example, rate of death and repeat HF hospitalizations). The
applicant noted that, for many HF drug and device trials, these more
traditional analyses are frequently used as the primary or co-primary
efficacy endpoints. The applicant further stated that the DAOH endpoint
is susceptible to many influences including variable follow-up time
(that is, patients with longer follow-up time have the potential for
more DAOH than patients with shorter follow-up time), the length of the
study duration interval for which the DAOH endpoint is being analyzed,
and differences in proportion of patients experiencing a mortality or
hospitalization event relative to the proportion of patients not
experiencing a mortality or hospitalization event (that is, a shorter
duration interval will have a greater proportion of patients without
any events when compared to a longer duration interval where the
proportion of patients experiencing events increases over time). In
response to CMS' concerns in regard to the numerical similarity of DAOH
between the treatment and control groups which is based on the shorter
follow-up interval of 6 months, the applicant stated that during this
shorter follow-up interval, approximately 70 percent of the patients
did not experience a mortality or HF hospitalization event. The
applicant stated that indication skews the dataset because these
patients are experiencing 100 percent in measurement of DAOH. Despite
this fact, the applicant stated that there was a statistically
significant difference of 2.3 days in favor of the treatment group. The
applicant asserted that a treatment effect that increases the number of
DAOH by 2.3 days over a 6-month period is clinically meaningful to this
patient population, as evidenced by the improved quality of life of the
patients that were enrolled in the treatment group. DAOH rates were
also analyzed over a longer period of follow-up during the Randomized
Access Period. To reduce the effects of variable follow-up time and to
have a consistent study duration interval, DAOH was analyzed over the
first 12 months of follow-up. Patients enrolled in the treatment group
being managed using the CardioMEMS^TM HF Monitoring System
experienced 6.1 more DAOH than the patients that were enrolled in the
control group after 12 months of follow-up. The applicant believed that
this increase represents a substantial clinical improvement with
respect to current treatment options available to Medicare
beneficiaries.
In regard to CMS' concern about the cause of the significant
dropouts in the Kaplan Meier curves, which further demonstrates lack of
impact on survival, the applicant provided the following information in
response. According to the applicant, the dropout rates in the CHAMPION
trial were low; the patients transitioning from Randomized to Open
Access are being misconstrued as dropouts. The applicant reported that
CHAMPION enrolled 550 patients from September 2007 to October 2009. In
addition, all of the patients remained in their randomized groups until
the last patient enrolled in the CHAMPION trial completed at least 6
months of follow-up. As result of this enrollment over time, the
applicant stated that the average patient follow-up in the Randomized
Access Period was significantly longer at 18 months. The applicant
further indicated that patients with a lower enrollment number and
implanted earlier in 2008 had the potential for longer follow-up times
in the Randomized Access Period than patients with a higher enrollment
number and implanted later in 2009. As a result, the applicant believed
that these patients are being construed as dropouts on the Kaplan Meier
curve, but actually are patients being censored at the time of their
transition to the Open Access Period. According to the applicant,
because the maximum follow-up for the Randomized Access Period was
already achieved, patients in this category were not eligible or ``at
risk'' for the longer follow-up periods represented in the Kaplan Meier
curve understanding that the follow-up time is now part of the Open
Access Period.
In response to CMS' invitation for public comments on whether or
not the CardioMEMS^TM HF Monitoring System technology
represents a substantial clinical improvement in the Medicare
population, the applicant stated that heart failure is a significant
clinical burden to Medicare beneficiaries, their caregivers, and
hospitals throughout the U.S. health care system. The applicant
believed that rising HF hospitalizations rates and the increasing cost
of care for Medicare beneficiaries diagnosed with HF and the
detrimental effect the condition is having on the U.S. health care
system is not sustainable.
The applicant believed that the CardioMEMS^TM HF
Monitoring System technology represents a substantial clinical
improvement treatment options available to Medicare beneficiaries. In
the CHAMPION trial, 245 patients (45 percent) were 65 years or older at
the time of sensor implantation (120 in the treatment group and 125 in
the control group). Patients who were enrolled in the treatment group
and managed on the basis of PA pressure information obtained from the
CardioMEMS^TM HF Monitoring System had a significantly
reduced HF hospitalization rate (0.34 events/patient-year) compared to
patients who were enrolled in the control group (0.67 events/patient-
year) and managed according to best available practices (HR 0.51, 95
percent CI 0.37-0.70, p<0.0001).
Response: We appreciate the applicant's response to each of CMS'
concerns and the additional data provided. Other than data indicating
that the primary endpoint of reduced hospitalizations was met,
additional longer term data demonstrated improved mortality. Therefore,
we believe that the data indicates that the CardioMEMS^TM
Monitoring System meets the substantial clinical improvement criterion.
After consideration of the public comments we received, we believe
that the CardioMEMS^TM HF Monitoring System meets all of the
new technology add-on payment policy criteria. Therefore, we are
approving the CardioMEMS^TM HF Monitoring System for new
technology add-on payments in FY 2015. Cases involving the
CardioMEMS^TM HF Monitoring System that are eligible for new
technology add-on payments will be identified by ICD-9-CM procedure
code 38.26 (Insertion of implantable wireless pressure sensor for
intracardiac or great vessel hemodynamic monitoring), which was
effective October 1, 2011. With the new technology add-on payment
application, the applicant stated that the total operating cost of the
CardioMEMS^TM HF Monitoring System is $17,750. Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum payment for a case involving the CardioMEMS^TM HF
Monitoring System is $8,875 for FY 2015.

[[Page 49941]]

d. MitraClip[supreg] System

Abbott Vascular submitted an application for new technology add-on
payments for the MitraClip[supreg] System for FY 2015. (We note that
the applicant submitted an application for new technology add-on
payments for FY 2014 but failed to receive FDA approval by the July 1
deadline.) The MitraClip[supreg] System is a transcatheter mitral valve
repair system that includes a MitraClip[supreg] device implant, a
Steerable Guide Catheter, and a Clip Delivery System. It is designed to
perform reconstruction of the insufficient mitral valve for high-risk
patients who are not candidates for conventional open mitral valve
repair surgery.
Mitral regurgitation (MR), also referred to as mitral insufficiency
or mitral incompetence, occurs when the mitral valve fails to close
completely causing the blood to leak or flow backwards (regurgitate)
into the left ventricle. If the amount of blood that leaks backwards
into the left ventricle is minimal, then intervention is usually not
necessary. However, if the amount of blood that is regurgitated becomes
significant, this can cause the left ventricle to work harder to meet
the body's need for oxygenated blood. Severity levels of MR can range
from grade 1+ through grade 4+. If left untreated, severe MR can lead
to heart failure and death. The American College of Cardiology (ACC)
and the American Heart Association (AHA) issued practice guidelines in
2006 that recommended intervention for moderate/severe or severe MR
(grade 3+ to 4+). The applicant stated that the MitraClip[supreg]
System is ``indicated for percutaneous reduction of significant mitral
regurgitation . . . in patients who have been determined to be at
prohibitive risk for mitral value surgery by a heart team, which
includes a cardiac surgeon experienced in mitral valve surgery and a
cardiologist experienced in mitral valve disease and in whom existing
comorbidities would not preclude the expected benefit from correction
of the mitral regurgitation.''
The MitraClip[supreg] System mitral valve repair procedure is based
on the double-orifice surgical repair technique that has been used as a
surgical technique in open chest, arrested-heart surgery for the
treatment of MR since the early 1990s. According to the applicant, in
utilizing ``the double-orifice technique, a portion of the anterior
leaflet is sutured to the corresponding portion of the posterior
leaflet using standard techniques and forceps and suture, creating a
point of permanent cooptation (``approximation'') of the two leaflets.
When the suture is placed in the middle of the valve, the valve will
have a functional double orifice during diastole.''
With regard to the newness criterion, the MitraClip[supreg] System
received a premarket approval from the FDA on October 24, 2013. The
MitraClip[supreg] System is indicated ``for the percutaneous reduction
of significant symptomatic mitral regurgitation (MR >= 3+) due to
primary abnormality of the mitral apparatus (degenerative MR) in
patients who have been determined to be at prohibitive risk for mitral
valve surgery by a heart team, which includes a cardiac surgeon
experienced in mitral valve surgery and a cardiologist experienced in
mitral valve disease, and in whom existing comorbidities would not
preclude the expected benefit from reduction of the mitral
regurgitation.'' The MitraClip[supreg] System became immediately
available on the U.S. market following FDA approval. The
MitraClip[supreg] System is a Class III device, and has an
investigational device exemption (IDE) for the EVEREST study
(Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for
the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip
Percutaneous Therapy for Health Failure Patients with Functional Mitral
Regurgitation)--IDE G120024. Effective October 1, 2010, ICD-9-CM
procedure code 35.97 (Percutaneous mitral valve repair with implant)
was created to identify and describe the MitraClip[supreg] System
technology.
CMS received a formal National Coverage Decision (NCD) request from
the Society of Thoracic Surgeons (STS), the American College of
Cardiology Foundation (ACCF), the Society for Cardiovascular
Angiography and Interventions (SCAI), and the American Association for
Thoracic Surgery (AATS) jointly asking that CMS cover Transcatheter
Mitral Valve Repair procedures using a system that has received FDA
premarket approval (PMA) for the treatment of MR when performed
according to an FDA-approved indication. We refer readers to the CMS
Web site at: https://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273 for information related to this ongoing
NCD. The tracking sheet for this National Coverage Analysis (NCA)
indicates an expected NCA completion date of August 13, 2014, which is
after the FY 2015 IPPS/LTCH PPS final rule is scheduled to be
published. The processes for evaluation and determination of an NCD,
and the processes for evaluation and approval of an application for new
technology add-on payments are made independent of each other. However,
any payment made under the Medicare program for services provided to a
beneficiary would be contingent on CMS' coverage of the item, and any
restrictions on the coverage would apply.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on how the MitraClip[supreg] System meets the newness
criterion for purposes of new technology add-on payments and the issues
that may arise from concurrent NCD requests and new technology add-on
payment application review and approval processes.
Comment: The applicant stated that the technology is a first in
kind and is not substantially similar to any FDA approved technology on
the market. Therefore, the applicant believed that the technology meets
the newness criterion. Several other public comments believed that the
MitraClip[supreg] System meets the newness criterion.
Response: We appreciate the commenters' input. After consideration
of the application, we agree with the commenters that the
MitraClip[supreg] System meets the newness criterion. Therefore, for
purposes of determining eligibility for FY 2015 IPPS new technology
add-on payments, we consider the technology to be ``new'' as of October
24, 2013, and will use ICD-9-CM procedure code 35.97 (Percutaneous
mitral valve repair with implant) to identify the technology for new
technology add-on payments.
Comment: One commenter noted that the application to request a NCD
was not made by the applicant, as stated in the proposed rule. Rather,
the commenter stated that this request was made by a coalition of four
national physician specialty societies that specialize in treating
patients diagnosed with valve disease.
Response: We appreciate the commenter's input concerning this
clarification.
With regard to the cost criterion, the applicant conducted two
analyses. The applicant noted that, while ICD-9-CM procedure code 35.97
maps to MS-DRGs 246 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent with Major Complication or Comorbidity (MCC) or 4+
Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure
with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 249
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent
without MCC), 250 (Percutaneous Cardiovascular Procedure without
Coronary Artery Stent or AMI with

[[Page 49942]]

MCC), and 251 (Percutaneous Cardiovascular Procedure without Coronary
Artery Stent or AMI without MCC), clinical experience with the
MitraClip[supreg] System device has demonstrated that it is extremely
rare for a patient to receive stents concurrently during procedures
using the MitraClip[supreg] System device. The applicant further cited
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53308) which stated,
``According to the Food and Drug Administration's (FDA's) terms of the
clinical trial for MitraClip[supreg] System, the device is to be
implanted in patients without any additional surgeries performed.
Therefore, based on these terms, we stated that while the procedure
code is assigned to MS-DRGs 246 through 251, the most likely MS-DRG
assignments would be MS-DRGs 250 and 251.'' As a result, the applicant
stated that it conducted its analyses solely for MS-DRGs 250 and 251 to
demonstrate that the cases involving the MitraClip[supreg] System
device meet the incremental cost thresholds provided in Table 10 for
those MS-DRGs.
The applicant researched the FY 2012 MedPAR file for claims for
cases reporting ICD-9-CM procedure code 35.97. Under the first analysis
and methodology, the applicant noted that this search yielded actual
claims for cases in which the MitraClip[supreg] System device was used
in procedures performed in an IDE study type setting, and hospitals
obtained the MitraClip[supreg] System device at a reduced
investigational price. The applicant further stated that it is likely
that hospitals did not report the charges for the investigational
device, or submitted claims for charges that were significantly less
than the actual device acquisition costs (we refer readers to the
explanation below). The applicant found 57 cases in MS-DRG 250 (29.38
percent of the total number of cases), and 137 cases in MS-DRG 251
(70.61 percent of the total number of cases), which resulted in an
average case-weighted standardized charge per case of $232,670.
The applicant standardized the charges using the FY 2014 IPPS final
rule impact file, and inflated the result using three different
inflation factors. We note that, since the applicant used FY 2012
MedPAR data, we believe it is appropriate to use comparable data for
standardization. Therefore, we believe use of the FY 2012 final rule
impact file is more appropriate rather than the FY 2014 final rule
impact file. The first analysis and methodology used an inflation
factor of 4.57 percent, which was based on data from the BLS' non-
seasonally adjusted CPI for all urban consumers between January 2011
and January 2013. This resulted in an average case-weighted
standardized charge per case of $94,517. The second methodology under
the first analysis used an inflation factor of 9.92 percent, which was
based on the 2-year charge inflation factor listed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50982). This resulted in an average case-
weighted standardized charge per case of $96,199. The third methodology
used under the first analysis used an inflation factor of 4.63 percent,
which was based on the Medicare Economic Index (MEI) from the IPPS
market basket update between the third quarter of 2012 projected
through the third quarter of 2014. This resulted in an average case-
weighted standardized charge per case of $91,570. The applicant noted
that all three methodologies used under the first analysis to determine
each respective average case-weighted standardized charge per case were
calculated without any adjustments to reflect the reduced
investigational price, or inadequate hospital claim reporting and
billing.
Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations
above were performed using unrounded numbers). Because the average
case-weighted standardized charge per case for the applicable MS-DRGs
calculated under each methodology under the first analysis discussed
above exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion.
Under the second analysis, which used the same premise as the first
analysis, the applicant researched the FY 2012 MedPAR file for claims
for cases reporting procedure code 35.97 that mapped to MS-DRGs 250 and
251, except that the applicant excluded charges related to the
MitraClip[supreg] System by removing all charges from the claim that
would map to the implantable cost center on the cost report. The
applicant then standardized the charges, inflated the result using the
three inflation factors above, and added a fixed amount of commercial
charges based on post-FDA approval pricing. This resulted in an average
case weighted standardized charge per case of $139,536 under the first
inflation factor (4.57 percent), $142,364 under the second inflation
factor (9.2 percent), and $139,568 under the third inflation factor
(4.63 percent).
Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations
above were performed using unrounded numbers). Because the average
case-weighted standardized charge per case for the applicable MS-DRGs
calculated under all three methodologies discussed above exceeds the
average case-weighted threshold amount, the applicant maintained that
the MitraClip[supreg] System meets the cost criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether or not the MitraClip[supreg] System meets the cost
criterion. In addition, we invited public comments on the methodologies
used by the applicant in its two analyses.
Comment: In response to CMS' statement in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28049) that it believed use of the FY 2012 final
rule impact file is more appropriate rather than the FY 2014 final rule
impact file for standardization, the applicant submitted the following
supplemental data updating its cost analyses.
With regard to the second analysis, the applicant submitted revised
data using the FY 2012 MedPAR file and the FY 2012 impact file to
standardize the charges. We note that in the proposed rule we
inadvertently listed $232,670 as the average case-weighted standardized
charge per case. This amount is the average case-weighted non-
standardized charge per case. Based on the revised data, the corrected
average case-weighted standardized charge per case is $151,111.
Using the same methodology described above and the FY 2012 impact
file, under the second analysis, the applicant determined an inflated
average case-weighted standardized charge per case of $136,479 under
the first inflation factor (4.57 percent), $139,151 under the second
inflation factor (9.2 percent), and $139,509 under the third inflation
factor (4.63 percent). The applicant compared these amounts to the
average case-weighted threshold of $71,467 for MS-DRGs 250 and 251 (all
calculations above were performed using unrounded numbers). Because the
inflated average case-weighted standardized charge per case for the
applicable MS-DRGs calculated under all three methodologies discussed
above exceeds the average case-weighted threshold amount of $71,467,
the applicant maintained that the MitraClip[supreg] System meets the
cost criterion.
The applicant also revised the second analysis using FY 2013 MedPAR
and the FY 2013 impact file. Based on this data, similar to above, the
applicant searched the FY 2013 MedPAR file for claims for cases
reporting ICD-9-CM procedure code 35.97. The applicant found 43 cases
in MS-DRG 250 (28.66

[[Page 49943]]

percent of the total number of cases), and 107 cases in MS-DRG 251
(71.33 percent of the total number of cases), which resulted in an
average case-weighted standardized charge per case of $149,725.
The first methodology used an inflation factor of 3.20 percent,
which was based on data from the BLS' non-seasonally adjusted CPI for
all urban consumers between January 2012 and January 2013. This
resulted in an inflated average case-weighted standardized charge per
case of $152,945 (which included a fixed amount of commercial charges
based on post-FDA approval pricing). The second methodology used an
inflation factor of 11.46 percent (second quarter of FY 2012 through
first quarter of FY 2014), which was based on the outlier inflation
factor in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). This
resulted in an inflated average case-weighted standardized charge per
case of $158,425 (which included a fixed amount of commercial charges
based on post-FDA approval pricing). The third methodology used an
inflation factor of 4.53 percent, which was based on the MEI from the
IPPS market basket update between the third quarter of 2013 projected
through the third quarter of 2015. This resulted in an average case-
weighted standardized charge per case of $153,827 (which included a
fixed amount of commercial charges based on post-FDA approval pricing).
Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $75,772 (all calculations
above were performed using unrounded numbers). Because the inflated
average case-weighted standardized charge per case for the applicable
MS-DRGs calculated under each methodology under this analysis discussed
above exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion.
Several other commenters believed that the MitraClip[supreg] System
meets the cost criterion.
Response: We appreciate the applicant's submission of the
supplemental data. We agree with the commenters that the
MitraClip[supreg] System meets the cost criterion. We note that in
section II.I.4.b. of the preamble of this final rule, we denied the
applicant's request to reassign cases reporting a TMVR using the
MitraClip[supreg] System from MS-DRGs 250 and 251 to MS-DRGs 216
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC), 217 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC),
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC). We also denied the applicant's request to create a new base MS-
DRG for transcatheter valve therapies. We refer readers to section
II.G. for a complete discussion on these requests.
The applicant asserted that the MitraClip[supreg] System meets the
substantial clinical improvement criterion. Severe MR is associated
with significant morbidity and mortality rates, and is a progressive
condition. For symptomatic patients diagnosed with significant MR,
surgical repair or replacement is considered the gold standard--
offering improvements in symptoms and longer survival rates. However,
the applicant explained that studies have indicated that a significant
proportion of patients are not eligible for mitral valve repair and/or
replacement surgery because of risk factors, including reduced left
ventricular function, significant comorbidities, and advanced age. As a
result, the applicant stated that there is a significant unmet clinical
need for patients diagnosed with severe MR who are too high-risk for
surgery, who are receiving palliative medical management.
The applicant also stated that the MitraClip[supreg] System meets
the substantial clinical improvement criterion based on clinical
studies ^{10 11 12 13 14 15 16 17 18} that have consistently
shown that procedures performed using the MitraClip[supreg] System
device lead to a significant reduction of MR; improvements in left
ventricular (LV) function including LV volumes and dimensions; improved
patient outcomes as measured by improvements in New York Heart
Association (NYHA) functional class, improvement in health-related
quality of life measures, and reductions in heart-failure related
hospitalizations; and significantly lower mortality rates than
predicted surgical mortality rates.
---------------------------------------------------------------------------

\10\ Feldman, et al., ``Percutaneous Repair or Surgery for
Mitral Regurgitation,'' New England Journal of Medicine, 2011, Vol.
364, pp. 1395-1406.
\11\ Foster, et al., ``Percutaneous Mitral Valve Repair in the
Initial EVEREST Cohort: Evidence of Reverse Left Ventricular
Remodeling,'' Circulation in Cardiovascular Imaging, July 2013, Vol.
6(4), pp. 522-530.
\12\ Grayburn, et al., ``The Relationship between the Magnitude
of Reduction in Mitral Regurgitation Severity and Left Ventricular
and Left Atrial Reverse Remodeling after MitraClip Therapy,''
Circulation in Cardiovascular Imaging, September 2013, epub,
September 6, 2013.
\13\ Lim, et al., ``Improved Functional Status and Quality of
Life in Prohibitive Surgical Risk Patients With Degenerative Mitral
Regurgitation Following Transcatheter Mitral Valve Repair with the
MitraClip[supreg] System,'' Journal of American College of
Cardiology, 2013, In Press, Accepted Manuscript, Available online,
October 31, 2013.
\14\ Maisano, F., et al., ``Percutaneous Mitral Valve
Interventions in the Real World: Early and One Year Results From the
ACCESS-EU, a Prospective, Multicenter, Non-Randomized Post-Approval
Study of the MitraClip Therapy in Europe,'' Journal of American
College of Cardiology, 2013, doi: 10.1016/j.jacc.2013.02.094.
\15\ Mauri, et al., ``4-Year Results of a Randomized Controlled
Trial of Percutaneous Repair Versus Surgery for Mitral
Regurgitation,'' Journal of American College of Cardiology, Volume
62, Issue 4, 2013, p. 317-328.
\16\ Munkholm, et al., ``Asystemic Review on the Safety and
Efficacy of Percutaneousedge-to-edge Mitral Valve Repair with the
MitraClip System for high surgical risk candidates,'' Heart, June
27, 2013.
\17\ Reichenspurner, H., et al., ``Clinical Outcomes Through 12
Months in Patients With Degenerative Mitral Regurgitation Treated
With the MitraClip Device in the ACCESS-Europe Phase I Trial,''
European Journal of Cardiology-and Thoracic Surgy, 2013, Vol. 15,
pp. 919-927.
\18\ Whitlow, et al,. ``Acute And 12-Month Results With
Catheter-Based Mitral Valve Leaflet Repair: The EVEREST II
(Endovascular Valve Edge-to-Edge Repair) High Risk Study,'' Journal
of American College of Cardiology, 2012, Vol. 59, pp. 130-139.
---------------------------------------------------------------------------

The applicant cited clinical data from the EVEREST II High-Risk
Study and the EVEREST II (REALISM) Continued Access Study/Registry. The
applicant also cited clinical data from a high-risk cohort of patients
(the EVEREST II High-Risk Cohort), which is an integrated analysis of
the following: (1) patients within the EVEREST II High-Risk Study who
met eligibility criteria for being too high-risk to undergo mitral
valve repair surgery; and (2) patients within the EVEREST II (REALISM)
Continued Access Study/Registry who were too high-risk for surgery
using identical eligibility inclusion criteria. The applicant also
cited data from the Prohibitive Risk Degenerative Mitral Regurgitation
(DMR) Cohort, which is an analysis of retrospectively evaluated high-
risk patients diagnosed with DMR enrolled in the EVEREST II studies
that had 1-year follow-up available.
In addition to the published clinical experience from the EVEREST
studies, the applicant cited data on the use of the MitraClip[supreg]
System device in a ``real-world'' setting published recently by a
select number of European centers as part of their individual and/or
multi-center commercial experience or enrollment in the
MitraClip[supreg] System device group of the ACCESS-EU post-approval
clinical trial in Europe. The European use of the MitraClip[supreg]
System device is focused on patients who are

[[Page 49944]]

too high-risk for surgery, and patients who are selected for therapy
using a multi-disciplinary ``heart team'' approach.
The applicant stated that published reports on the
MitraClip[supreg] System device and the procedures in which the device
was used have consistently demonstrated a significant reduction in MR
incidents that have been durable out to 1, 2, 3, and 4 years. The
applicant cited the EVEREST II High-Risk Study (an analysis of 78
patients diagnosed with degenerative or functional MR enrolled in the
trial), which stated that ``objective measures of MR grade improved in
the MitraClip^TM group, including MR grade of <=2+ in 78
percent of surviving patients at 1 year. These patients also
experienced clinically significant improvements in left ventricular
volume measurements. The clinical significance of these improvements is
reflected in the NYHA class improvements. At baseline, 89 percent of
patients were NYHA III/IV, improving to Class I/II in 74 percent of
surviving patients at 12 months. Quality of life scores also improved
significantly. Finally, the number of admissions for heart failure was
significantly reduced compared to the year prior to
MitraClip^TM therapy.''
The applicant cited clinical outcomes from the Prohibitive Risk DMR
cohort. These results are the basis of the FDA premarket approval.
Major effectiveness endpoints evaluated at 12 months demonstrated
clinically important improvements in MR severity, with MR severity
grades of 3+/4+ decreasing from 90.4 percent at baseline to 16.7
percent at 1 year; NYHA Class III/IV decreasing from 86.6 percent at
baseline to 13.1 percent at 1 year; and the SF-36 Physical/Mental scale
measuring 33.4/46.6 at baseline increasing to 39.4/52.2 at 1 year.
The applicant stated in its new technology add-on payment
application that, ``Heart failure hospitalizations were reduced by 73
percent in the 12 months post MitraClip^TM procedure from the
12 month pre-MitraClip^TM procedure . . .,'' and ``the
primary safety analysis indicated low procedural (30-day) mortality
(6.3 percent) after MitraClip^TM in comparison with the STS
predicted surgical mortality risk score for these patients (13.2
percent).''
The applicant discussed published results \19\ ``assessing the
relationship between the magnitude of reduction in MR and left
ventricular (LV) and left atrial (LA) remodeling after the
MitraClip^TM therapy.'' In this study of patients diagnosed
with significant (grade 3+ or 4+) DMR or functional MR (FMR), the
authors found that, ``even reduction of MR severity to moderate (2+) is
associated with LV and LA reverse remodeling. In both DMR and FMR,
reduction in left ventricular end-diastolic volume (LVEDV) and LA
volumes were improved proportionally to the degree of MR reduction at
one year.''
---------------------------------------------------------------------------

\19\ Grayburn, et al., ``The Relationship between the Magnitude
of Reduction in Mitral Regurgitation Severity and Left Ventricular
and Left Atrial Reverse Remodeling after MitraClip Therapy,''
Circulation in Cardiovascular Imaging, September 2013, epub,
September 6, 2013.
---------------------------------------------------------------------------

In conclusion, the applicant cited data from the ACCESS-EU study,
which noted improvement in disease-specific quality of life measures,
including the Minnesota Living with Heart Failure Questionnaire and
Six-Minute Walk Test. The applicant also provided data supporting the
overall safety and effectiveness of the MitraClip[supreg] System device
in European ``real-world'' outcome studies.
We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, as noted
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552),
we are concerned that the applicant revised its initial FDA request for
the use of the MitraClip[supreg] System device in all patients
diagnosed with significant MR, after learning that the FDA expressed
concern that the initial study, EVEREST II, demonstrated that, while
the MitraClip[supreg] System device had clinically meaningful
improvements in LV volume and QOL, the surgical option had better
outcomes than the MitraClip[supreg] System device in surgical
candidates. The FDA then required a second trial focused on high
surgical risk patients. We noted that the data evaluated by the FDA and
presented by the applicant in its application for new technology add-on
payments included information from the following:
[ssquf] EVEREST I feasibility trial; enrollment 2003-2006; 55
patients.
[ssquf] EVEREST II RCT; enrollment 2005-2008; 279 patients.
[ssquf] EVEREST II High-Risk Study; enrollment 2007-2008; 78
patients. (A comparator group of 36 patients was identified from
patients who were screened for the study, but did not meet the mitral
valve anatomic criteria for placement of the device.)
[ssquf] EVEREST (REALISM) Continued Access Study and compassionate
use; enrollment 2009-2013; 49 patients.
The applicant provided comparisons of various outcomes prior to the
procedure using the MitraClip[supreg] System device and outcomes 12
months later. MR severity, LV end diastolic volume, NYHA Class, SF36
Physical/Mental scale, and heart failure hospitalization rates all had
clinically meaningful improvements. For the EVEREST II HRS, the
applicant provided analysis demonstrating a significant survival
benefit (76 percent versus 55 percent/p<0.047) over the comparator
group.
We stated in the FY 2015 IPPS/LTCH PPS proposed rule that in our
review of the clinical trials' data, we have the following key points
of concern:
Post-hoc analyses of pooled data sets retain all of the
individual shortcomings of the individual data sets;
Pooling does not enhance the utility and scientific value
of uncontrolled single-arm registries with no comparators; and
Inappropriate pooling introduces additional confounders.
We stated that it is also unclear if the appropriate target
population for the MitraClip[supreg] System device has been identified
because the clinical trials conducted by the applicant included
patients diagnosed with both DMR and FMR. This makes it difficult to
determine which group of patients may benefit more, or less, from the
new technology. For example, in a subgroup analysis of the EVEREST II
RCT, the authors concluded that, older patients and those patients
diagnosed with FMR or abnormal left ventricular function had results
more comparable to surgical repair. Data results from 2 years of the
EVEREST II RCT also demonstrated that surgery reduced incidents of MR
more than the procedures performed using the percutaneous
MitraClip[supreg] System device. However, both the surgical patients
and the patients who were treated using the MitraClip[supreg] System
device showed comparable results for improved left ventricular
function, NYHA functional class, and quality of life.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether this technology meets the substantial clinical
improvement criterion, particularly in comparison to other surgical
therapies, such as mitral valve repair or replacement, and the
appropriate target population for this technology.
Comment: A number of commenters agreed with the applicant that the
MitraClip[supreg] System meets the substantial clinical improvement
criterion. The commenters also recommended the approval of the
MitraClip[supreg] System for new technology add-on payments in FY 2015.
One commenter, an association of thoracic surgeons, expressed support
for the approval of the MitraClip[supreg] System for new technology
add-on payments. The commenter explained that the MitraClip[supreg]
System provides a treatment option to Medicare beneficiaries that

[[Page 49945]]

represents a substantial clinical improvement for patients who are too
high risk for surgical mitral valve repair or replacement. Other
commenters indicated that they had experience using the
MitraClip[supreg] System.
Response: We appreciate the commenters' support. Many of the
commenters described their positive experiences using the
MitraClip[supreg] System, which improved the clinical outcome of the
patients treated. Furthermore, the commenters believed that most, if
not all, of the cases treated using the MitraClip[supreg] System would
have had no other treatment option available. In addition, the
commenters asserted that the MitraClip[supreg] System helped to provide
improvements to the quality of life of the patients treated with the
technology. We considered the commenters' positive experiences using
the MitraClip[supreg] System in our determination of whether the
MitraClip[supreg] System represents a substantial clinical improvement
in the treatment options available to Medicare beneficiaries.
Comment: The applicant submitted a public comment that stated peer-
reviewed evidence supported the belief that the MitraClip[supreg]
System meets the substantial clinical improvement criterion. The
applicant further noted that in previous rulemaking, CMS has indicated
that new technologies represent a substantial clinical improvement if
``the device offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatment.''
The commenter believed that the MitraClip[supreg] System meets this
criterion when used in accordance with the FDA-approved indication for
the treatment of prohibitive risk degenerative mitral regurgitation
(DMR). Specifically, the applicant stated that for those patients who
are ineligible for surgery due to prohibitive surgical risk, the
MitraClip[supreg] System offers the first available option to
mechanically correct their mitral valve disease and, therefore, improve
cardiac functioning and functional status and quality of life, while
decreasing heart failure related hospitalizations and potentially
reducing mortality.
The applicant reiterated the opinion that the clinical evidence
^{20 21} demonstrated that the technology represents a
substantial clinical improvement in the treatment options available to
Medicare beneficiaries for the following reasons:
---------------------------------------------------------------------------

\20\ Lim et al. Improved Functional Status and Quality of Life
in Prohibitive Surgical Risk Patients With Degenerative Mitral
Regurgitation Following Transcatheter Mitral Valve Repair with the
MitraClip[supreg] System, JACC (2013), In Press, Accepted
Manuscript, Available online 31 October 2013.
\21\ MitraClip[supreg] Clip Delivery System Instructions for
Use, at abbottvascular.com/ifu.
---------------------------------------------------------------------------

A majority of patients experience MR reduction from 3+/4+
to <=2+ after the procedure. This improvement is sustained in 83
percent of patients at 12 months. Results at 2 years demonstrated that
82.5 percent of surviving patients remained at <=2+, which demonstrated
that there is no evidence of deterioration of MR severity between 1-
year and 2-year follow up.
Reduction in MR with the MitraClip therapy to <=2+ has
been shown to provide significant symptomatic DMR patients with
meaningful clinical benefits including reduction of left ventricular
volumes.
Patients experienced clinically important improvement in
NYHA Functional Class at 12 months; roughly 87 percent of patients
experienced NYHA Class III or Class IV symptoms at baseline, which
improved to less than 15 percent at 12 months.
Despite the elderly and highly comorbid nature of the
population, quality of life scores improved. The improvements in both
the Physical Component Summary and Mental Component Summary scores
exceeded the 2-3 point threshold generally considered to represent a
minimum clinically important difference.
Heart failure hospitalizations were reduced by 73 percent
in the 12 months post-MitraClip procedure from the 12 months pre-
MitraClip procedure.
The commenter concluded that, in recognition of these benefits, the
2014 AHA/ACC Guidelines for the Management of Patients with Valvular
Heart Disease recommended the MitraClip therapy as a treatment option
for the FDA-approved indication. The commenter noted that the
guidelines state that TMVR may be considered for severely symptomatic
patients (NYHA Class III to Class IV) with chronic severe primary MR
(stage D) who have favorable anatomy for the repair procedure and a
reasonable life expectancy, but who have a prohibitive surgical risk
because of severe comorbidities and remain severely symptomatic despite
optimal GDMT for HF.
The applicant also addressed CMS' concerns presented in the
proposed rule. Specifically, with respect to the concern regarding the
appropriate target population for this technology, the commenter
believed that the target population has been clearly defined in the FDA
approval indication and associated labeling for the MitraClip[supreg]
System. The applicant noted that since the publication of the proposed
rule, as stated above, the AHA/ACC has reviewed the MitraClip[supreg]
System evidence and updated their guidelines to recommend consideration
for the use of the MitraClip[supreg] System for patients meeting the
FDA-approved indication. In addition, the applicant indicated that the
CMS Coverage and Analysis Group has also reviewed the MitraClip[supreg]
evidence and issued a proposed decision memorandum to extend coverage
for the FDA-approved indication at highly experienced centers of
excellence meeting specific criteria. Further, the applicant noted that
detailed multi-society requirements have been published specifying
operator and institutional criteria for performing the
MitraClip[supreg] System procedure, and these have been incorporated by
CMS into the proposed decision memorandum. Finally, the applicant
stated that it has worked together with national societies and CMS to
establish a new mitral module of the national TVT registry to
systematically track adherence to these requirements by all health care
centers using the MitraClip[supreg] System and to collect data on
patient outcomes with linkage to the CMS claims database.
With respect to CMS' concerns regarding how the MitraClip[supreg]
system compares to other surgical therapies, such as mitral valve
repair or replacement, the applicant stated that clinical outcomes from
the prohibitive risk DMR Cohort were determined by the FDA to
adequately establish the safety, effectiveness, and positive benefit-
risk profile of the MitraClip[supreg] System for the indicated
population, and these data are the basis for Premarket Approval
Application (PMA) approval. In conclusion of thought, the applicant
stated that the FDA concluded that the totality of clinical evidence
demonstrated the reasonable assurance of safety and effectiveness of
the MitraClip[supreg] System to reduce MR and provide patient benefit
in this discrete and specific patient population.
The applicant also commented that the prohibitive risk DMR Cohort,
on which FDA approval was granted, included 127 consecutively-enrolled
patients who completed 12 months of follow-up after treatment with the
MitraClip[supreg] System device. The applicant explained that this
Cohort included 25 patients from the EVEREST II High Risk Registry
(HRR) study, 98 patients from the high risk arm of the REALISM
Continued Access study, and 4 Compassionate Use patients. The applicant
further explained that the four Compassionate Use patients are included
for analysis in the Prohibitive

[[Page 49946]]

Risk DMR Cohort because they meet the definition of prohibitive risk
and all valve anatomic criteria for eligibility. For inclusion in this
Cohort, three physicians (two experienced mitral valve surgeons and one
experienced mitral valve cardiologist) had to concur that the patient
met the definition of prohibitive risk.
The applicant further stated that patients in the prohibitive risk
DMR Cohort were all enrolled under a highly-rigorous IDE clinical trial
protocol that included pre-specified eligibility criteria and
adjudicated endpoints. The applicant stated that pooling of the EVEREST
II Continued Access Study (REALISM) data with EVEREST II HRR was
intended and pre-specified in the REALISM protocol. The applicant noted
that one of the REALISM protocol's stated objectives was to gather
additional safety and effectiveness data to support the PMA. The
applicant further stated that the same device design was used, and care
was taken to ensure the two studies had identical entry criteria, data
collection, monitoring, and analysis methods. In addition, the
applicant stated that the REALISM protocol defined the evaluation of
poolability and specified clinically important baseline variables to be
compared. The applicant stated that the majority (10/13) of these
baseline characteristics, especially high-risk characteristics/
comorbidities, was similar in REALISM and HRR, resulting in comparable
average STS predicted mortality risk scores.
The applicant stated that the findings from the prohibitive risk
DMR Cohort were highly consistent with real-world evidence from a large
number of published European studies that included similar groups of
high-risk patients.
The applicant concluded that despite some limitations in evaluating
evidence from pooled datasets, it should be noted that all available
evidence on the MitraClip[supreg] System consistently indicate that the
use of this technology provides both mechanistic and clinical benefit
for these high surgical risk patients.
Response: We appreciate the applicant's subsequent analysis of
data. With respect to the substantial clinical improvement represented
by this technology, we considered all the case specific clinical
information presented by the applicant and the public to determine
whether there is evidence to support a conclusion that the use of the
MitraClip[supreg] System represents a substantial clinical improvement
in the treatment options available to Medicare beneficiaries.
Specifically, we considered the peer-reviewed medical literature,
clinical studies, and the clinically accepted use of the device. We
believe that it is important that the MitraClip[supreg] System be used
in the treatment of the appropriate target population and that the NCD
will establish the appropriate Medicare patient population for this
procedure. We agree with the applicant that the MitraClip[supreg]
System offers a treatment option for a patient population unresponsive
to, or ineligible for, currently available treatment; specifically
those patients that have been determined to be at prohibitive risk for
mitral valve surgery (per the FDA indications). In addition, we
received positive comments from a major cardiovascular and a major
thoracic society and from many physicians who indicated that the
MitraClip[supreg] System helped to produce positive clinical outcomes
by providing a treatment option for patients with no other available
options, as well as resolving MR. Furthermore, the MitraClip[supreg]
System is the only device currently available to mechanically correct
mitral valve disease. Without the availability of this device, patients
with DMR might otherwise receive general treatment to maintain their
condition, which would eventually result in death rather than a
treatment to resolve their condition. Also, the MitraClip[supreg]
System can be an effective treatment option that improves quality of
life and reduces heart failure symptoms and hospitalizations.
Therefore, after reviewing the totality of the evidence, we believe
that the MitraClip[supreg] System represents a substantial clinical
improvement over existing therapies. We remain interested in seeing
whether the clinical evidence will continue to find that the
MitraClip[supreg] System will be effective. We will continue to monitor
the clinical data as the data become available.
After consideration of the public comments we received, we are
approving the MitraClip[supreg] System for new technology add-on
payments in FY 2015. As noted above, any payment made under the
Medicare program for services provided to a beneficiary is contingent
upon CMS' coverage of the item, and any restrictions on the coverage
apply. This approval is on the basis of using the MitraClip[supreg]
consistent with any coverage decision that will be issued by CMS after
the publication of this final rule. Subject to any coverage
determinations made by CMS regarding the MitraClip[supreg] System,
cases involving the MitraClip[supreg] System that are eligible for the
new technology add-on payments will be identified by ICD-9-CM procedure
code 35.97. The average cost of the MitraClip[supreg] System is
reported as $30,000. Under section 412.88(a)(2), new technology add-on
payments are limited to the lesser of 50 percent of the average cost of
the device or 50 percent of the costs in excess of the MS-DRG payment
for the case. As a result, the maximum add-on payment for a case
involving the MitraClip[supreg] System is $15,000 for FY 2015.
e. Responsive Neurostimulator (RNS[supreg]) System
NeuroPace, Inc. submitted an application for new technology add-on
payments for FY 2015 for the use of the RNS[supreg] System. (We note
that the applicant submitted an application for new technology add-on
payments for FY 2014, but failed to receive FDA approval prior to the
July 1 deadline.) Seizures occur when brain function is disrupted by
abnormal electrical activity. Epilepsy is a brain disorder
characterized by recurrent, unprovoked seizures. According to the
applicant, the RNS[supreg] System is the first implantable medical
device (developed by NeuroPace, Inc.) for treating persons diagnosed
with epilepsy whose partial onset seizures have not been adequately
controlled with antiepileptic medications. The applicant further stated
that, the RNS[supreg] System is the first closed-loop, responsive
system to treat partial onset seizures. Responsive electrical
stimulation is delivered directly to the seizure focus in the brain
when abnormal brain activity is detected. A cranially implanted
programmable neurostimulator senses and records brain activity through
one or two electrode-containing leads that are placed at the patient's
seizure focus/foci. The neurostimulator detects electrographic patterns
previously identified by the physician as abnormal, and then provides
brief pulses of electrical stimulation through the leads to interrupt
those patterns. Stimulation is delivered only when abnormal
electrocorticographic activity is detected. The typical patient is
treated with a total of 5 minutes of stimulation a day. The RNS[supreg]
System incorporates remote monitoring, which allows patients to share
information with their physicians remotely.
With respect to the newness criterion, the applicant stated that
some patients diagnosed with partial onset seizures that cannot be
controlled with antiepileptic medications may be candidates for the
vagus nerve stimulator (VNS) or for surgical removal of the seizure
focus. According to the applicant, these treatments are not appropriate
for, or helpful to, all

[[Page 49947]]

patients. Therefore, the applicant believed that there is an unmet
clinical need for additional therapies for partial onset seizures. The
applicant further stated that the RNS[supreg] System addresses this
unmet clinical need by providing a novel treatment option for treating
persons diagnosed with medically intractable partial onset seizures.
The applicant received FDA premarket approval in November 2013. The
following ICD-9-CM procedure codes are used to identify this
technology: 01.20 (Cranial implantation or replacement of
neurostimulator pulse generator); 01.29 (Removal of cranial
neurostimulator pulse generator); and 02.93 (Implantation or
replacement of intracranial neurostimulator lead(s)).
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the technology meets the newness criterion.
However, we did not receive any public comments in response to the
proposed rule regarding whether the technology meets the newness
criterion. The applicant received FDA premarket approval on November
14, 2013. Therefore, for the purpose of evaluation for determinng
eligibility for FY 2015 IPPS new technology add-on payments, we
consider this technology to be ``new'' as of November 14, 2013, and we
will use the following ICD-9-CM procedure codes to identify the
technology for purposes of new technology add-on payments: 01.20
(Cranial implantation or replacement of neurostimulator pulse
generator); 01.29 (Removal of cranial neurostimulator pulse generator);
and 02.93 (Implantation or replacement of intracranial neurostimulator
lead(s)).
With regard to the cost criterion, the applicant stated that
substantially all cases eligible for the RNS[supreg] System would map
to MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex
Central Nervous System Principal Diagnosis without MCC). The applicant
further stated that, while it is possible for some cases to occur in
MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central
Nervous System Principal Diagnosis with MCC or Chemotherapy Implant),
it would be extremely rare because the applicant believed that these
major complications and/or comorbidities would probably preclude a
patient from receiving treatment using the RNS[supreg] System because
the technology is an elective procedure.
The applicant submitted two analyses to demonstrate that the
technology meets the cost criterion. For the first analysis, the
applicant used clinical trial claims data collected in the RNS[supreg]
System Pivotal Clinical Investigation to calculate the anticipated
average case-weighted standardized charge per case. The applicant
maintained that this analysis best represents the anticipated charges
for the technology because it is based on actual cases treated using
this technology. The applicant analyzed 163 claims from 28 hospitals
participating in the clinical trial. Five claims from one hospital were
excluded because no hospital-specific information regarding
standardization was available. The resulting 158 claims included dates
of service ranging from May 2006 through May 2009. The average case-
weighted standardized charge per case for these 158 claims was $54,691.
The applicant then standardized the charges for each claim. The
applicant noted that it was not necessary to remove any charges from
these claims because the technology was provided at no charge in the
trial. After standardizing the charges for each claim, the applicant
inflated the charges reported on each claim using the BLS' CPI-IP data
covering the same period. Specifically, because the publicly available
FY 2012 MedPAR data do not identify the month of the discharge on
inpatient claims, but do identify the calendar quarter, the applicant
used a mid-month convention to determine the relevant monthly CPI-IP
for each calendar quarter. The applicant then calculated the percentage
change from the relevant quarter to the quarter of the most recently
available CPI-IP, which was the August 2013 CPI-IP. Specifically, the
applicant used the following assumptions:

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

After inflating the charges, the applicant estimated charges for
the RNS[supreg] System by multiplying the device cost to the hospital
by an anticipated hospital markup of 100 percent, or conversely by
dividing the device cost by a CCR of 0.50. The applicant based its
estimated CCR on four analyses. First, the applicant reviewed the 2007
and 2008 reports prepared by RTI for CMS on charge compression, which
found that the national aggregate CCR for devices and implants was 0.43
and 0.467, as presented in the respective reports. Second, the
applicant queried hospitals participating in the RNS[supreg] System
Pivotal trial, and these queries yielded a mean and median CCR for
implantable devices of 0.37 and 0.36, respectively. Third, the
applicant reviewed data from the (All Payor) Premier database for cases
performed during 2000 through 2010 that reported ICD-9 CM procedure
codes 02.93 and/or 86.95 on a claim, and calculated a mean and median
CCR for implanted leads and neurostimulators of 0.50 and 0.44,
respectively. The applicant then reviewed other discussions of past new
technology add-on payment applications published in the Federal
Register, and noted that other applicants used lower CCRs (higher
markups) for implanted devices than the CCR of 0.50 used in the
applicant's analyses.
Using this approach, the applicant added the anticipated hospital
charge for the implantable RNS[supreg] System to the average case-
weighted standardized charge per case, and determined a final average
case-weighted standardized charge per case of $128,723. The anticipated
hospital charge for the implantable RNS[supreg] System is $73,900.
Using the FY 2014 IPPS Table 10 thresholds, the threshold for MS-DRG
024 is $91,197. Because the final average case-weighted standardized
charge per case of $128,723 for MS-DRG 024 exceeds the average case-
weighted threshold amount, the applicant maintained that the
RNS[supreg] System meets the cost criterion.
In the second analysis, which the applicant characterizes as
supplementary, the applicant

[[Page 49948]]

researched the FY 2012 MedPAR file for cases reporting the following
combinations of ICD-9-CM procedures codes: 02.93 and 86.95, or
procedures codes 02.93 and 01.20 that mapped to MS-DRG 024. The
applicant found 383 claims for cases reporting the combination of ICD-
9-CM procedures codes 02.93 and 01.20, and pointed out that these cases
were coded with procedure code 01.20 in error because no new
RNS[supreg] System implantations occurred after May 2009. The applicant
analyzed these 383 claims, and found that more than 90 percent of these
cases had a primary or secondary diagnosis of Parkinson's disease,
essential tremor, or dystonia. These diagnoses are FDA-approved
indications for deep brain stimulation (DBS). In addition, the
applicant noted that the total covered charges for these cases were
less than the estimated charges for a full DBS system, and hypothesized
that these cases did not represent implantation of a full DBS system,
but did represent the implantation of leads only. The applicant
contacted two hospitals that reported claims for cases where total
covered charges were less than the charges for a full DBS system, and
the hospitals confirmed that their claims represented lead
implantations only. Therefore, for the second analysis, the applicant
included all of the cases assigned to MS-DRG 024 reporting a
combination of ICD-9-CM procedures codes 02.93 and 86.95, and all of
the cases assigned to MS-DRG 024 reporting a combination of ICD-9-CM
procedures codes 02.93 and 01.20 where the covered charges were greater
than, or equal to, the estimated charges of a full DBS system. The
applicant maintained that 374 claims from 106 providers met this
criterion, and data represented claims from the fourth calendar quarter
of 2011 through the third calendar quarter of 2012. Based on this
assumption, the applicant calculated an average case-weighted
standardized charge per case of $65,555.
The applicant then removed DBS charges from the average case-
weighted standardized charge per case. The applicant estimated charges
for a full DBS system, and maintained that the average cost for a full
DBS system is $25,979. Similar to its first analysis, the applicant
assumed a CCR of 0.50, or 100 percent markup, which resulted in
estimated charges for a full DBS system of $51,958. After removing the
DBS system charges, the applicant inflated the charges to the current
period using the same methodology in the first analysis, added charges
for the RNS[supreg] System, and determined a final average case-
weighted standardized charge per case of $130,233. As noted above, the
anticipated hospital charge for the implantable RNS[supreg] System is
$73,900. Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRG 024 is $91,197. Because the final average
standardized charge per case of $130,233 for MS-DRG 024 exceeds the
threshold amount, the applicant maintained that the RNS[supreg] System
meets the cost criterion.
Under either analysis, the applicant maintained that the final
average case-weighted standardized charge per case would exceed the
average case-weighted threshold.
In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public
comments on whether the RNS[supreg] System meets the cost criterion,
particularly based on the assumptions and methodology used in the
applicant's analyses. However, we did not receive any public comments
in response to the proposed rule regarding whether this technology
meets the cost criterion. After further evaluation of the new
technology add-on payment application, we believe that the technology
meets the cost criterion.
With regard to substantial clinical improvement, as previously
stated, some patients diagnosed with partial onset seizures may not be
able to control their seizures with antiepileptic medications, VNS, or
with surgical removal of the seizure focus. The applicant stated that
the RNS[supreg] System provides treatment for those patients diagnosed
with partial onset seizures who fail treatment with antiepileptic
medications, or VNS therapy, and who are ineligible for respective
surgery because of the extent and/or location of the seizure focus, or
patients who do not elect surgery. According to the applicant, the
RNS[supreg] System clinical trials provide Class I evidence that
treatment using the RNS[supreg] System substantially reduces disabling
seizures in patients diagnosed with severe epilepsy, who have tried and
failed treatment with antiepileptic medications, and in many cases, VNS
or epilepsy surgery. The applicant maintained that the results from
their clinical trials demonstrate significant and sustained
improvements in health outcomes over the controlled period and over the
long term. The applicant conducted a feasibility trial, which was
designed to demonstrate adequate safety of its treatment, and provide
evidence of effectiveness to support commencement of a randomized
double-blinded pivotal trial. In addition, the applicant has an ongoing
long-term treatment clinical investigation trial (LTT trial) to assess
the long-term safety and effectiveness of the treatment on patients who
have completed either the Feasibility trial, or the RNS[supreg] System
Pivotal trial for an additional seven years. The LTT trial started in
April 2006, and the final patient is expected to complete the trial in
2018. The applicant noted that patients enrolled in the LTT trial
continued to experience a reduction in seizures over several years of
follow-up, further demonstrating the positive effect of responsive
stimulation from the RNS[supreg] System is durable.
The applicant stated that their pivotal trial met its primary
effectiveness endpoint by proving that there was a statistically
significant greater reduction in seizures in the treatment group
compared to the control group (p = 0.012). Significant improvements at
1 and 2 years post-implant included:
A significant reduction in disabling seizures of 44
percent and 53 percent at 1 and 2 years, respectively;
Fifty-five percent of patients who reached 2 years post-
implant experienced a 50 percent or greater reduction in seizures; and
Significant improvements in overall quality of life, as
well as individual quality of life measures including memory, language,
attention, concentration and medication effects.
The applicant asserted that there was no negative effect of
treatment using the RNS[supreg] System on neuropsychological function
(including verbal functioning, visual spatial processing, and memory)
or mood. The applicant concluded that the RNS[supreg] System Pivotal
trial provides Class I evidence that responsive cortical stimulation is
effective in significantly reducing seizure frequency in adults with
one or two seizure foci who have failed two or more antiepileptic
medication trials. The applicant stated that experience across all of
the RNS[supreg] System trials demonstrates the reduction in seizure
frequency of disabling partial onset seizures improves over time. In
addition, the applicant noted that sustained improvements were also
seen in quality of life. Finally, the applicant noted that safety and
tolerability measures compare favorably to alternative treatments, such
as antiepileptic medications, VNS, and epilepsy surgery.
With regard to the substantial clinical improvement criterion, we
stated in the proposed rule that we are concerned that the average age
of the patients enrolled in the applicant's trials was 35 years.
Although the applicant maintained that 31 percent of the patients
enrolled in the pivotal trial were Medicare beneficiaries, we are
unsure of the extent to which this

[[Page 49949]]

technology would be used by Medicare beneficiaries because of the
relatively young age of the majority of the patients enrolled in the
pivotal trial. We also are concerned that further clarification on how
the RNS[supreg] System compares to other neurostimulation treatments
was not provided by the applicant.
Because the applicant included claims with DBS charges in one of
its cost analyses, we believe that the similarities and differences
between DBS and the RNS[supreg] System may also be relevant under the
substantial clinical improvement criterion. In addition, we stated in
the proposed rule that we are concerned that the time period in the
clinical trial may not be sufficient to confirm durability. In the
RNS[supreg] System Pivotal Clinical Investigation, the primary
effectiveness endpoint considered seizure frequency over the last 3
months of the blinded period of the trial. We note that the applicant
is currently conducting a 5-year study.
We invited public comments on whether the RNS[supreg] System meets
the substantial clinical improvement criterion, particularly in regard
to the degree in which the technology would be used by Medicare
beneficiaries, the comparison to other neurostimulation treatments, and
its durability.
Comment: Commenters stated that the technology is currently used
and will continue to be used in the treatment of Medicare beneficiaries
who have been diagnosed with epilepsy. One commenter noted that 31
percent of individuals in the RNS[supreg] System clinical trial were
Medicare beneficiaries, and all of these individuals were enrolled in
the Medicare program because of a disability as opposed to being
enrolled in the Medicare program because of their age. In addition, the
commenter provided an analysis of data obtained from publicly available
databases, specifically using the Premier Perspective all payor
database for the time period from 2008 through 2013 and the CMS MedPAR
database for FY 2012 and FY 2013. This analysis showed that, for
Medicare beneficiaries who have been diagnosed with medically
intractable partial epilepsy, 72 to 77 percent of the Medicare claims
were submitted for payment of services provided to patients who were
under the age of 65. The commenter also queried the public Web sites of
the healthcare centers that participated in the RNS[supreg] System
Pivotal trial, which included data on patients who have participated in
specific programs directed by 120 adult comprehensive epilepsy centers,
and found that these centers reported that 33 percent of their patients
who have been diagnosed with epilepsy were enrolled in the Medicare
program and 76 percent of these Medicare beneficiaries were under the
age of 65. Several other commenters asserted that patients who have
been diagnosed with epilepsy and receive treatment using this
technology would be eligible for Medicare based on a disabling
condition. The commenter provided examples of the types of patients
that they have treated who are younger than the age of 65, but who are
insured through the Medicare program based on a disabling condition.
Response: We appreciate the information detailed within the
commenter's analysis. We agree with the commenters that this technology
will be available for use by Medicare beneficiaries.
Comment: Commenters provided comparison analyses for this
technology and VNS therapy, DBS, surgical resection, and other
medications, and also conducted assessments of the durability of the
RNS[supreg] System. (We further discuss the results of the comparison
analyses and assessments conducted by these commenters below.) Many of
these commenters pointed out that this technology is capable of
capturing and storing information regarding seizure activity, which
could enable the use of this technology to initiate possible changes in
medical management of patients treated with an implant over time.
In comparison to VNS therapy, commenters stated that the
RNS[supreg] System is a closed loop system that provides electrical
stimulation in response to brain activity, while VNS therapy is an open
loop system that provides electrical stimulation continuously or
intermittently at programmed intervals. In addition, commenters stated
that the RNS[supreg] System can be applied directly to the seizure
focus or foci in the brain, while VNS therapy provides stimulation to
the vagus nerve. The commenters noted that this distinction represents
an improvement relative to VNS therapy because patients receive less
stimulation using the RNS[supreg] System. The commenters also pointed
out that the side effects of VNS therapy, such as hoarseness, coughing,
and throat pain, are distressing and uncomfortable for patients and can
make VNS therapy difficult to tolerate. These commenters also noted
that these side effects do not emerge with the use of the RNS[supreg]
System. One commenter provided data from the clinical trials for VNS
therapy, which showed that more than half of the patients treated with
VNS therapy ``perceived'' stimulation. The commenter also provided data
from clinical trials for VNS therapy that showed that the side effects
for VNS therapy included voice alternation, increased coughing,
pharyngitis, dyspnea, dyspepsia, nausea, and laryngismus. The commenter
compared the indications from the clinical trial data with data from
the RNS[supreg] System trials, which indicate that there were no
patients with ongoing complaints related to ``perception of
stimulation,'' although some patients experienced symptoms such as
flashing lights or focal muscle twitching. The commenter stated that
stimulation with the RNS[supreg] System was adjusted for patients
experiencing these symptoms, such that the symptoms became
imperceptible. Many commenters stated that they were able to use the
RNS[supreg] System to reduce the frequency of seizures in patients who
have been diagnosed with epilepsy for whom VNS therapy did not reduce
seizures. One commenter provided clinical trial data regarding VNS
therapy that showed that in two studies in blinded periods VNS therapy
reduced median seizures per day by 6 to 23 percent, and that over 3
years VNS therapy reduced median seizures per day by 31 to 41 percent.
The commenter also provided clinical trial data regarding the
RNS[supreg] System that showed in the blinded period a 28 percent
reduction of median seizures per day compared to 19 percent for the
control group. In addition, the commenter also provided clinical trial
data regarding the RNS[supreg] System that showed that over 3 years the
RNS[supreg] System reduced median seizures by 44 to 60 percent. The
commenter also pointed out that 34 percent of patients enrolled in the
RNS[supreg] System trial were previously treated with VNS therapy, but
experienced positive outcomes with the RNS[supreg] System.
In comparison to DBS, commenters stated that the RNS[supreg] System
was not approved by the FDA for treatment of epilepsy, and DBS is not
considered to be the standard of care for the treatment of epilepsy by
the American Academy of Neurology or the American Epilepsy Society. The
commenters stated that they did not have experience with the
RNS[supreg] System to compare with DBS to because it is not typically
used, or approved for, treating patients diagnosed with epilepsy. One
commenter noted that DBS is only available to patients on an
experimental or investigational basis for the treatment of epilepsy.
Another commenter stated that no direct comparison trial has been
conducted between DBS and the RNS[supreg] System. The commenter
reviewed data from a clinical trial that studied the use

[[Page 49950]]

of DBS treatment of the anterior nucleus of the thalamus in subjects
with medically intractable partial seizures. While the commenter stated
that some of the data appeared to be comparable to the results of the
RNS[supreg] System trials in terms of seizure reduction and quality of
life, differences existed in the construction of the trials, including
inclusion and exclusion criteria and primary efficacy endpoints. The
commenter also stated that, similar to VNS therapy, DBS provides
continuous or intermittent stimulation at program intervals, resulting
in more stimulation being delivered than delivered using the
RNS[supreg] System.
In comparison to surgical resection, commenters noted that the
RNS[supreg] System can be used when surgical resection is not available
as a treatment option. Commenters stated that some patients who have
been diagnosed with epilepsy have seizure focus or foci area(s) in
regions of the brain that should not be removed because removal would
result in serious neurological defects. Therefore, commenters stated
that the RNS[supreg] System represents a treatment option for patients
who have been diagnosed with epilepsy for whom surgery is not an
option. In addition, commenters stated that they were able to use the
RNS[supreg] System to reduce the frequency of seizures in patients who
had been treated with surgical resection and did not experience a
reduction in seizures after surgery.
In comparison to antiepileptic medications used to treat patients
who have been diagnosed with epilepsy, commenters stated that the
RNS[supreg] System offers a treatment option that does not have the
unpleasant side effects associated with some of these medications. The
commenters stated that these side effects include problems with
cognition or coordination, depression, and fatigue.
With regard to durability, one commenter provided data from the
RNS[supreg] System clinical trial for 6 years. The results of the trial
indicate that the median percent reduction in seizures compared to the
baseline year was sustained or improved at 60 percent 3 years after
implantation and 66 percent 6 years after implantation. The median
follow-up time for this group of patients based on the trial's data was
5.4 years. The commenter indicated that these results are comparable,
or better, for the subset of patients who were enrolled in the
RNS[supreg] System clinical trial and that were Medicare beneficiaries.
The commenter further stated that the updated data showed that the
proportion of patients who were enrolled in the RNS[supreg] System
clinical trial that experienced extended periods of seizure freedom of
3 or 6 months was slightly larger than previously shared in the
November 1, 2012 new technology add-on payment application for the
RNS[supreg] System.
Response: We appreciate the commenters' input. We agree with the
commenters that the RNS[supreg] System offers a treatment option for a
patient population that is unresponsive to currently available
treatments. Specifically, we agree with the commenters that the
RNS[supreg] System clinical trial data showed that the technology
reduces seizure frequency in patients who have received treatment with
VNS therapy or surgical resection and continued to have seizures
subsequent to those treatments. We also agree with the commenters that
the technology could be a treatment option for patients for whom
surgical resection is not appropriate due to the location of the
seizure focus or foci area(s). In addition, we agree with the
commenters that use of the device improves clinical outcomes compared
to currently available treatments. For example, it appears that seizure
reduction over time using the RNS[supreg] System appears to be at least
comparable with documented seizure reductions using VNS therapy,
although no direct comparison of the two systems has been completed,
and the RNS[supreg] System appears not to have the side effects that
have been associated with VNS therapy. We agree with the commenters
that it is inappropriate to compare the RNS[supreg] System to a
technology that is not FDA approved for the same treatment.
After consideration of the public comments we received, we believe
that the RNS[supreg] System meets all of the new technology add-on
payment criteria. Therefore, we are approving new technology add-on
payments for the RNS[supreg] System for FY 2015. Cases involving the
RNS[supreg] System that are eligible for new technology add-on payments
will be identified using the following ICD-9-CM procedure codes: 01.20
(Cranial implantation or replacement of neurostimulator pulse
generator) in combination with 02.93 (Implantation or replacement of
intracranial neurostimulator lead(s)). According to the applicant,
cases using the RNS[supreg] System would incur an anticipated cost per
case of $36,950. Under Sec. 412.88(a)(2) of the regulations, new
technology add-on payments are limited to the lesser of 50 percent of
the average costs of the device or 50 percent of the costs in excess of
the MS-DRG payment rate for the case. As a result, the maximum add-on
payment for cases involving the RNS[supreg] System is $18,475 for FY
2015.

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

A. Background

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

[[Page 49951]]

appears under section III.F. of the preamble of this final rule.

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

1. Background
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by the Office of Management and Budget (OMB). The
statistical areas used in FY 2014 are based on OMB standards published
on December 27, 2000 (65 FR 82228) and Census 2000 data and Census
Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10-02).
For a discussion of OMB's delineations of CBSAs and our implementation
of the CBSA definitions, we refer readers to the preamble of the FY
2005 IPPS final rule (69 FR 49026 through 49032). We also discussed in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582) and the FY 2013
IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013, OMB planned to
announce new labor market area delineations based on new standards
adopted in 2010 (75 FR 37246) and the 2010 Census of Population and
Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB
issued OMB Bulletin No. 13-01, which established revised delineations
for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas, and provided guidance on the use of the
delineations of these statistical areas. A copy of this bulletin may be
obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. According to OMB, ``[t]his bulletin
provides the delineations of all Metropolitan Statistical Areas,
Metropolitan Divisions, Micropolitan Statistical Areas, Combined
Statistical Areas, and New England City and Town Areas in the United
States and Puerto Rico based on the standards published on June 28,
2010, in the Federal Register (75 FR 37246 through 37252) and Census
Bureau data.'' In this FY 2015 IPPS/LTCH PPS final rule, when
referencing the new OMB geographic boundaries of statistical areas, we
are using the term ``delineations'' rather than the term ''
definitions'' that we have used in the past, consistent with OMB's use
of the terms (75 FR 37249).
In order to implement these changes for the IPPS, it is necessary
to identify the new labor market area delineation for each county and
hospital in the country. While the revisions OMB published on February
28, 2013 are not as sweeping as the changes OMB announced in 2003, the
February 28, 2013 bulletin does contain a number of significant
changes. For example, under the new OMB delineations, there would be
new CBSAs, urban counties that would become rural, rural counties that
would become urban, and existing CBSAs would be split apart. In
addition, the effect of the new OMB delineations on various hospital
reclassifications, the out-migration adjustment (established by section
505 of Pub. L. 108-173), and treatment of hospitals located in certain
rural counties (that is, ``Lugar'' hospitals) provided for under
section 1886(d)(8)(B) of the Act must be considered. These are just a
few of the many issues that need to be reviewed regarding the effects
of the new OMB labor market area delineations prior to proposing and
establishing policies.
However, because the bulletin was not issued until February 28,
2013, with supporting data not available until later, and because the
changes made by the bulletin and their ramifications needed to be
extensively reviewed and verified, we were unable to undertake such a
lengthy process before publication of the FY 2014 IPPS/LTCH PPS
proposed rule and, thus, did not implement changes to the wage index
for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50586), we stated that we intended to
propose changes to the wage index based on the new OMB delineations in
the FY 2015 IPPS/LTCH PPS proposed rule. As discussed below, in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28064, we
proposed to implement the new OMB delineations as described in the
February 28, 2013 OMB Bulletin No. 13-01, effective for the FY 2015
IPPS wage index.
2. Implementation of New Labor Market Area Delineations
As discussed previously, CMS did not implement the new OMB labor
market area delineations for FY 2014 because we needed sufficient time
to assess the new changes. We believe it is important for the IPPS to
use the latest labor market area delineations available as soon as is
reasonably possible in order to maintain a more accurate and up-to-date
payment system that reflects the reality of population shifts and labor
market conditions. While CMS and other stakeholders have explored
potential alternatives to the current CBSA-based labor market system
(we refer readers to the CMS Web site at: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus has been achieved regarding how best to
implement a replacement system. As discussed in the FY 2005 IPPS final
rule (69 FR 49027), ``While we recognize that MSAs are not designed
specifically to define labor market areas, we believe they do represent
a useful proxy for this purpose.'' We further believe that using the
most current delineations will increase the integrity of the IPPS wage
index system by creating a more accurate representation of geographic
variations in wage levels. We have reviewed our findings and impacts
relating to the new OMB delineations, and find no compelling reason to
delay implementation. Therefore, we proposed to implement the new OMB
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective for the FY 2015 IPPS wage index. In the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28055), we also proposed to use these new
delineations to calculate area wage indexes in a manner that is
generally consistent with the CBSA-based methodologies finalized in the
FY 2005 IPPS final rule, and refined in subsequent rulemaking. We also
proposed a wage index transition period applicable to all hospitals
that experience negative impacts due to the proposed implementation of
the new OMB delineations. This transition is discussed in more detail
below.
Comment: Commenters were supportive of the proposal to adopt the
new OMB delineations. One commenter, while supportive of CMS' proposal
to adopt the new OMB delineations, effective for FY 2015, recommended
that CMS adopt an alternative hospital wage index system in future
rulemaking. Another commenter suggested that CMS implement new labor
market area definitions to distinguish ``core'' urban areas from
surrounding areas within a CBSA.
Response: We appreciate the support for our proposal to adopt the
new OMB delineations. For FY 2015, we did not propose any modification
to the current CBSA-based labor market area methodology, aside from
proposing to adopt the new OMB labor market area delineations. However,
we thank the commenters for their continued interest in examining
alternative means for defining labor market areas. CMS presented an
alternative wage index methodology in a Report to Congress on April 11,
2012 (https://www.cms.gov/

[[Page 49952]]

Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/
Wage-Index-Reform-Report-to-Congress-2012.zip). As discussed in the
report, implementation of such a reform would require revisions to
several statutory provisions that provide various forms of wage index
reclassification and redesignation. Until a consensus on wage index
reform is achieved, we believe that implementing the most recent OMB
delineations is critical in maintaining the efficacy and integrity of
the Medicare hospital wage index system. We did not propose, nor will
we finalize, any additional changes to the CBSA-based labor market area
delineations, including the concept of defining core and noncore
portions of a CBSA.
After consideration of the public comments we received, we are
finalizing the implementation of the new OMB delineations as described
in the February 28, 2013 OMB Bulletin No. 13-01, effective beginning
with the FY 2015 IPPS wage index. We received public comments on our
proposals with respect to the use of these new OMB delineations to
calculate the area wage indexes and the transition periods, which we
address in sections III.B.2.a. through d. of the preamble of this final
rule. We also finalize our policies in those sections.
a. Micropolitan Statistical Areas
As discussed in the FY 2005 IPPS final rule (69 FR 49029 through
49032), CMS considered whether to use Micropolitan Statistical Areas to
define the labor market areas for the purpose of the IPPS wage index.
OMB defines a ``Micropolitan Statistical Area'' as a CBSA ``associated
with at least one urban cluster that has a population of at least
10,000, but less than 50,000'' (75 FR 37252). We refer to these areas
as Micropolitan Areas. After extensive impact analysis, CMS determined
the best course of action would be to treat all hospitals located in
Micropolitan Areas as ``rural'' and include them in the calculation of
each State's rural wage index. Because Micropolitan areas tend to
encompass smaller population centers and contain fewer hospitals than
MSAs, we determined that if Micropolitan Areas were to be treated as
separate labor market areas, the IPPS wage index would have included
drastically more single-provider labor market areas. This larger number
of labor market areas with fewer hospitals could create instability in
year-to-year wage index values for a large number of hospitals; could
reduce the averaging effect of the wage index, thus lessening some of
the efficiency incentive inherent in a system based on the average
hourly wages for a large number of hospitals; and could arguably create
an inequitable system when so many hospitals have wage indexes based
solely on their own wage data while other hospitals' wage indexes are
based on an average hourly wage across many hospitals. For these
reasons, we adopted a policy to include Micropolitan Areas in the
State's rural wage area, and have continued this policy through the
present.
Based upon the new 2010 Decennial Census data, a number of urban
counties have switched status and have joined or became Micropolitan
Areas, and some counties that once were part of a Micropolitan Area,
under current OMB delineations, have become urban. Overall, there are
fewer Micropolitan Areas (541) under the new OMB delineations based on
the 2010 Census than existed under the latest data from the 2000 Census
(581). We believe that the best course of action would be to continue
the policy established in the FY 2005 IPPS final rule and include
hospitals located in Micropolitan Areas in each State's rural wage
index. These areas continue to be defined as having relatively small
urban cores (populations of 10,000-49,999). We do not believe it would
be appropriate to calculate a separate wage index for areas that
typically may include only a few hospitals for the reasons set forth in
the FY 2005 IPPS/LTCH PPS final rule, as discussed above. Therefore, in
conjunction with our proposal to implement the new OMB labor market
area delineations beginning in FY 2015, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28055), we proposed to continue to treat
Micropolitan Areas as ``rural'' and to include the Micropolitan Areas
in the calculation of each State's rural wage index.
Comment: A number of commenters supported CMS' proposal to continue
to treat Micropolitan Areas as rural for hospital wage index purposes.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, in
conjunction with our policy to implement the new OMB labor market area
delineations beginning in FY 2015, we are continuing to treat
Micropolitan Areas as ``rural'' and to include the Micropolitan Areas
in the calculation of each State's rural wage index.
b. Urban Counties That Became Rural Under the New OMB Delineations
As previously discussed, we proposed to implement the new OMB labor
market area delineations (based upon the 2010 Decennial Census data)
beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28055 through 28056), we stated that our analysis shows that a total of
37 counties (and county equivalents) and 12 hospitals that were once
considered part of an urban CBSA would be considered to be located in a
rural area, beginning in FY 2015, under these new OMB delineations. In
the proposed rule, we included a listing of the 37 urban counties that
would be rural if we finalized our proposal to implement the new OMB
delineations.
We proposed that the wage data for all hospitals currently located
in the 37 urban counties listed in the proposed rule would be
considered rural under the new OMB delineations when calculating their
respective State's rural wage index. We stated that we recognize that
rural areas typically have lower area wage index values than urban
areas, and hospitals located in these counties may experience a
negative impact in their IPPS payment due to the proposed adoption of
the new OMB delineations. We refer readers to section III.B.2.e. of the
preamble of this final rule for a discussion of the proposed and
finalized wage index transition period, in particular, the discussion
regarding the 3-year transition for hospitals located in these specific
counties.
Comment: Commenters were supportive of the proposal to adopt the
new OMB delineations, including the proposed reassignment of counties
from urban areas to rural areas.
Response: We appreciate the commenters' support.
As discussed above, we are finalizing our proposal to adopt the new
OMB delineations. After consideration of the public comments we
received, we also are finalizing our proposed reassignment of counties
from urban areas to rural areas based on these new OMB delineations.
The following chart lists the 37 urban counties that are considered to
be rural under this policy.

[[Page 49953]]

Counties That Will Lose Urban Status and Become Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
Previous
County State CBSA No. CBSA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Greene County.......................... IN 14020 Bloomington, IN.
Anson County........................... NC 16740 Charlotte-Gastonia-Rock Hill, NC-SC.
Franklin County........................ IN 17140 Cincinnati-Middletown, OH-KY-IN.
Stewart County......................... TN 17300 Clarksville, TN-KY.
Howard County.......................... MO 17860 Columbia, MO.
Delta County........................... TX 19124 Dallas-Fort Worth-Arlington, TX.
Pittsylvania County.................... VA 19260 Danville, VA.
Danville City.......................... VA 19260 Danville, VA.
Preble County.......................... OH 19380 Dayton, OH.
Gibson County.......................... IN 21780 Evansville, IN-KY.
Webster County......................... KY 21780 Evansville, IN-KY.
Franklin County........................ AR 22900 Fort Smith, AR-OK.
Ionia County........................... MI 24340 Grand Rapids-Wyoming, MI.
Newaygo County......................... MI 24340 Grand Rapids-Wyoming, MI.
Greene County.......................... NC 24780 Greenville, NC.
Stone County........................... MS 25060 Gulfport-Biloxi, MS.
Morgan County.......................... WV 25180 Hagerstown-Martinsburg, MD-WV.
San Jacinto County..................... TX 26420 Houston-Sugar Land-Baytown, TX.
Franklin County........................ KS 28140 Kansas City, MO-KS.
Tipton County.......................... IN 29020 Kokomo, IN.
Nelson County.......................... KY 31140 Louisville/Jefferson County, KY-IN.
Geary County........................... KS 31740 Manhattan, KS.
Washington County...................... OH 37620 Parkersburg-Marietta-Vienna, WV-OH.
Pleasants County....................... WV 37620 Parkersburg-Marietta-Vienna, WV-OH.
George County.......................... MS 37700 Pascagoula, MS.
Power County........................... ID 38540 Pocatello, ID.
Cumberland County...................... VA 40060 Richmond, VA.
King and Queen County.................. VA 40060 Richmond, VA.
Louisa County.......................... VA 40060 Richmond, VA.
Washington County...................... MO 41180 St. Louis, MO-IL.
Summit County.......................... UT 41620 Salt Lake City, UT.
Erie County............................ OH 41780 Sandusky, OH.
Franklin County........................ MA 44140 Springfield, MA.
Ottawa County.......................... OH 45780 Toledo, OH.
Greene County.......................... AL 46220 Tuscaloosa, AL.
Calhoun County......................... TX 47020 Victoria, TX.
Surry County........................... VA 47260 Virginia Beach-Norfolk-Newport News, VA-NC.
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rural Counties That Became Urban Under the New OMB Delineations
As previously discussed, we proposed to implement the new OMB labor
market area delineations (based upon the 2010 Decennial Census data)
beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28056 through 28058), we indicated that analysis of these OMB labor
market area delineations shows that a total of 105 counties (and county
equivalents) and 81 hospitals that were located in rural areas would be
located in urban areas under the new OMB delineations. In the proposed
rule, we included a listing of the 105 rural counties that would be
urban if we finalized our proposal to implement the new OMB
delineations.
We proposed that when calculating the area wage index, the wage
data for hospitals located in these 105 rural counties would be
included in their new respective urban CBSAs. Typically, hospitals
located in an urban area would receive a higher wage index value than
hospitals located in their State's rural area. However, with regard to
the wage index applicable to individual hospitals, we proposed to
implement a transitional wage index adjustment for any hospital that
would receive a lower wage index under the new OMB delineations than it
would have received under the current CBSA definitions. We refer
readers to section III.B.2.e. of the preamble of this final rule for
further discussion of this transition.
Comment: Commenters were supportive of the proposal to adopt the
new OMB delineations, including the proposed reassignments of counties
from rural areas to urban areas for purposes of the wage index.
Response: We appreciate the commenters' support.
As discussed above, we are finalizing our proposal to adopt the new
OMB delineations. After consideration of the public comments we
received, we also are finalizing our proposed reassignment of counties
from rural to urban for purposes of the wage index based on these new
OMB delineations. The following chart lists the 105 rural counties that
will be urban for purposes of the wage index for FY 2015 under this
policy.

Counties That Will Lose Rural Status and Become Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
New CBSA
County State No. CBSA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Utuado Municipio....................... PR 10380 Aguadilla-Isabela, PR.
Linn County............................ OR 10540 Albany, OR.
Oldham County.......................... TX 11100 Amarillo, TX.

[[Page 49954]]

Morgan County.......................... GA 12060 Atlanta-Sandy Springs-Roswell, GA.
Lincoln County......................... GA 12260 Augusta-Richmond County, GA-SC.
Newton County.......................... TX 13140 Beaumont-Port Arthur, TX.
Fayette County......................... WV 13220 Beckley, WV.
Raleigh County......................... WV 13220 Beckley, WV.
Golden Valley County................... MT 13740 Billings, MT.
Oliver County.......................... ND 13900 Bismarck, ND.
Sioux County........................... ND 13900 Bismarck, ND.
Floyd County........................... VI 13980 Blacksburg-Christiansburg-Radford, VA.
De Witt County......................... IL 14010 Bloomington, IL.
Columbia County........................ PA 14100 Bloomsburg-Berwick, PA.
Montour County......................... PA 14100 Bloomsburg-Berwick, PA.
Allen County........................... KY 14540 Bowling Green, KY.
Butler County.......................... KY 14540 Bowling Green, KY.
St. Mary's County...................... MD 15680 California-Lexington Park, MD.
Jackson County......................... IL 16060 Carbondale-Marion, IL.
Williamson County...................... IL 16060 Carbondale-Marion, IL.
Franklin County........................ PA 16540 Chambersburg-Waynesboro, PA.
Iredell County......................... NC 16740 Charlotte-Concord-Gastonia, NC-SC.
Lincoln County......................... NC 16740 Charlotte-Concord-Gastonia, NC-SC.
Rowan County........................... NC 16740 Charlotte-Concord-Gastonia, NC-SC.
Chester County......................... SC 16740 Charlotte-Concord-Gastonia, NC-SC.
Lancaster County....................... SC 16740 Charlotte-Concord-Gastonia, NC-SC.
Buckingham County...................... VA 16820 Charlottesville, VA.
Union County........................... IN 17140 Cincinnati, OH-KY-IN.
Hocking County......................... OH 18140 Columbus, OH.
Perry County........................... OH 18140 Columbus, OH.
Walton County.......................... FL 18880 Crestview-Fort Walton Beach-Destin, FL.
Hood County............................ TX 23104 Dallas-Fort Worth-Arlington, TX.
Somervell County....................... TX 23104 Dallas-Fort Worth-Arlington, TX.
Baldwin County......................... AL 19300 Daphne-Fairhope-Foley, AL.
Monroe County.......................... PA 20700 East Stroudsburg, PA.
Hudspeth County........................ TX 21340 El Paso, TX.
Adams County........................... PA 23900 Gettysburg, PA.
Hall County............................ NE 24260 Grand Island, NE.
Hamilton County........................ NE 24260 Grand Island, NE.
Howard County.......................... NE 24260 Grand Island, NE.
Merrick County......................... NE 24260 Grand Island, NE.
Montcalm County........................ MI 24340 Grand Rapids-Wyoming, MI.
Josephine County....................... OR 24420 Grants Pass, OR.
Tangipahoa Parish...................... LA 25220 Hammond, LA.
Beaufort County........................ SC 25940 Hilton Head Island-Bluffton-Beaufort, SC.
Jasper County.......................... SC 25940 Hilton Head Island-Bluffton-Beaufort, SC.
Citrus County.......................... FL 26140 Homosassa Springs, FL.
Butte County........................... ID 26820 Idaho Falls, ID.
Yazoo County........................... MS 27140 Jackson, MS.
Crockett County........................ TN 27180 Jackson, TN.
Kalawao County......................... HI 27980 Kahului-Wailuku-Lahaina, HI.
Maui County............................ HI 27980 Kahului-Wailuku-Lahaina, HI.
Campbell County........................ TN 28940 Knoxville, TN.
Morgan County.......................... TN 28940 Knoxville, TN.
Roane County........................... TN 28940 Knoxville, TN.
Acadia Parish.......................... LA 29180 Lafayette, LA.
Iberia Parish.......................... LA 29180 Lafayette, LA.
Vermilion Parish....................... LA 29180 Lafayette, LA.
Cotton County.......................... OK 30020 Lawton, OK.
Scott County........................... IN 31140 Louisville/Jefferson County, KY-IN.
Lynn County............................ TX 31180 Lubbock, TX.
Green County........................... WI 31540 Madison, WI.
Benton County.......................... MS 32820 Memphis, TN-MS-AR.
Midland County......................... MI 33220 Midland, MI.
Martin County.......................... TX 33260 Midland, TX.
Le Sueur County........................ MN 33460 Minneapolis-St. Paul-Bloomington, MN-WI.
Mille Lacs County...................... MN 33460 Minneapolis-St. Paul-Bloomington, MN-WI.
Sibley County.......................... MN 33460 Minneapolis-St. Paul-Bloomington, MN-WI.
Maury County........................... TN 34980 Nashville-Davidson--Murfreesboro--Franklin, TN.
Craven County.......................... NC 35100 New Bern, NC.
Jones County........................... NC 35100 New Bern, NC.
Pamlico County......................... NC 35100 New Bern, NC.
St. James Parish....................... LA 35380 New Orleans-Metairie, LA.
Box Elder County....................... UT 36260 Ogden-Clearfield, UT.

[[Page 49955]]

Gulf County............................ FL 37460 Panama City, FL.
Custer County.......................... SD 39660 Rapid City, SD.
Fillmore County........................ MN 40340 Rochester, MN.
Yates County........................... NY 40380 Rochester, NY.
Sussex County.......................... DE 41540 Salisbury, MD-DE.
Worcester County....................... MD 41540 Salisbury, MD-DE.
Highlands County....................... FL 42700 Sebring, FL.
Webster Parish......................... LA 43340 Shreveport-Bossier City, LA.
Cochise County......................... AZ 43420 Sierra Vista-Douglas, AZ.
Plymouth County........................ IA 43580 Sioux City, IA-NE-SD.
Union County........................... SC 43900 Spartanburg, SC.
Pend Oreille County.................... WA 44060 Spokane-Spokane Valley, WA.
Stevens County......................... WA 44060 Spokane-Spokane Valley, WA.
Augusta County......................... VA 44420 Staunton-Waynesboro, VA.
Staunton City.......................... VA 44420 Staunton-Waynesboro, VA.
Waynesboro City........................ VA 44420 Staunton-Waynesboro, VA.
Little River County.................... AR 45500 Texarkana, TX-AR.
Sumter County.......................... FL 45540 The Villages, FL.
Pickens County......................... AL 46220 Tuscaloosa, AL.
Gates County........................... NC 47260 Virginia Beach-Norfolk-Newport News, VA-NC.
Falls County........................... TX 47380 Waco, TX.
Columbia County........................ WA 47460 Walla Walla, WA.
Walla Walla County..................... WA 47460 Walla Walla, WA.
Peach County........................... GA 47580 Warner Robins, GA.
Pulaski County......................... GA 47580 Warner Robins, GA.
Culpeper County........................ VA 47894 Washington-Arlington-Alexandria, DC-VA-MD-WV.
Rappahannock County.................... VA 47894 Washington-Arlington-Alexandria, DC-VA-MD-WV.
Jefferson County....................... NY 48060 Watertown-Fort Drum, NY.
Kingman County......................... KS 48620 Wichita, KS.
Davidson County........................ NC 49180 Winston-Salem, NC.
Windham County......................... CT 49340 Worcester, MA-CT.
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. Urban Counties That Moved to a Different Urban CBSA Under the New
OMB Delineations
As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28058 through 28060), in addition to rural counties becoming urban and
urban counties becoming rural, several urban counties would shift from
one urban CBSA to another urban CBSA under our proposal to adopt the
new OMB delineations. In certain cases, adopting the new OMB
delineations would involve a change only in CBSA name or number, while
the CBSA continues to encompass the same constituent counties. For
example, CBSA 29140 (Lafayette, IN) would experience both a change to
its number and its name, and become CBSA 29200 (Lafayette-West
Lafayette, IN), while all of its three constituent counties would
remain the same. For the proposed rule, we identified 19 counties that
would remain in a CBSA that experienced a change in name or number
under the new delineations, but would retain the same constituent
counties. In the proposed rule, we included a table listing those 19
counties.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059), we did
not discuss further in this section the above proposed changes because
they are inconsequential changes with respect to the IPPS wage index.
However, we did discuss that, in other cases, which if we adopted the
new OMB delineations, counties would shift between existing and new
CBSAs, changing the constituent makeup of the CBSAs.
In one type of change, an entire CBSA would be subsumed by another
CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single
county (Flagler, FL) CBSA. Flagler County would become a part of CBSA
19660 (Deltona-Daytona Beach-Ormond Beach, FL) under the new OMB
delineations.
In another type of change, some CBSAs have counties that would
split off to become part of or to form entirely new labor market areas.
For example, CBSA 37964 (Philadelphia Metropolitan Division) currently
is comprised of five Pennsylvania counties (Bucks, Chester, Delaware,
Montgomery, and Philadelphia). We stated that if we adopted the new OMB
delineations, Montgomery, Bucks, and Chester counties would split off
and form the new CBSA 33874 (Montgomery County-Bucks County-Chester
County, PA Metropolitan Division), while Delaware and Philadelphia
counties would remain in CBSA 37964.
Finally, in some cases, a CBSA would lose counties to another
existing CBSA if we adopted the new OMB delineations. For example,
Lincoln County and Putnam County, WV would move from CBSA 16620
(Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV-KY-OH). CBSA
16620 still would exist in the new labor market delineations with fewer
constituent counties.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059 through
28060), we included a listing of the urban counties that would move
from one urban CBSA to another urban CBSA if we adopted the new OMB
delineations. If hospitals located in these counties move from one CBSA
to another under the new OMB delineations, there may be impacts, both
negative and positive, upon their specific wage index values. We
referred readers to section III.B.2.e. of the preamble of the proposed
rule for a discussion of our proposals to moderate the impact of our
proposed adoption of the new OMB delineations.
Comment: Commenters were supportive of the proposal to adopt the
new OMB delineations, including the proposed reassignments of counties

[[Page 49956]]

from one urban area to another urban area.
Response: We appreciate the commenters' support.
As discussed above, we are finalizing our proposal to adopt the new
OMB delineations. After consideration of the public comments we
received, we also are finalizing our proposed reassignment of counties
from one urban area to another urban area for purposes of the wage
index based on these new OMB delineations. The following chart
identifies the 19 counties that remain in a CBSA that experienced a
change in name or number under this policy, but will retain the same
constituent counties for purposes of the FY 2015 wage index.

Counties That Will Remain in CBSA That Changed Number
----------------------------------------------------------------------------------------------------------------
Prior CBSA No. New CBSA No. County State
----------------------------------------------------------------------------------------------------------------
14484.................................... 14454 Norfolk County.............. MA
14484.................................... 14454 Plymouth County............. MA
14484.................................... 14454 Suffolk County.............. MA
47644.................................... 47664 Lapeer County............... MI
47644.................................... 47664 Livingston County........... MI
47644.................................... 47664 Macomb County............... MI
47644.................................... 47664 Oakland County.............. MI
47644.................................... 47664 St. Clair County............ MI
26180.................................... 46520 Honolulu County............. HI
29140.................................... 29200 Benton County............... IN
29140.................................... 29200 Carroll County.............. IN
29140.................................... 29200 Tippecanoe County........... IN
42044.................................... 11244 Orange County............... CA
42060.................................... 42200 Santa Barbara County........ CA
44600.................................... 48260 Jefferson County............ OH
44600.................................... 48260 Brooke County............... WV
44600.................................... 48260 Hancock County.............. WV
13644.................................... 43524 Frederick County............ MD
13644.................................... 43524 Montgomery County........... MD
----------------------------------------------------------------------------------------------------------------

The following chart lists the urban counties that will move from
one urban CBSA to another urban CBSA under our adoption of the new OMB
delineations for purposes of the FY 2015 wage index.

Counties That Will Change to Another CBSA
----------------------------------------------------------------------------------------------------------------
Prior CBSA New CBSA County State
----------------------------------------------------------------------------------------------------------------
11300.................................... 26900 Madison County.............. IN
11340.................................... 24860 Anderson County............. SC
14060.................................... 14010 McLean County............... IL
37764.................................... 15764 Essex County................ MA
16620.................................... 26580 Lincoln County.............. WV
16620.................................... 26580 Putnam County............... WV
16974.................................... 20994 DeKalb County............... IL
16974.................................... 20994 Kane County................. IL
21940.................................... 41980 Ceiba Municipio............. PR
21940.................................... 41980 Fajardo Municipio........... PR
21940.................................... 41980 Luquillo Municipio.......... PR
26100.................................... 24340 Ottawa County............... MI
31140.................................... 21060 Meade County................ KY
34100.................................... 28940 Grainger County............. TN
35644.................................... 35614 Bergen County............... NJ
35644.................................... 35614 Hudson County............... NJ
20764.................................... 35614 Middlesex County............ NJ
20764.................................... 35614 Monmouth County............. NJ
20764.................................... 35614 Ocean County................ NJ
35644.................................... 35614 Passaic County.............. NJ
20764.................................... 35084 Somerset County............. NJ
35644.................................... 35614 Bronx County................ NY
35644.................................... 35614 Kings County................ NY
35644.................................... 35614 New York County............. NY
35644.................................... 20524 Putnam County............... NY
35644.................................... 35614 Queens County............... NY
35644.................................... 35614 Richmond County............. NY
35644.................................... 35614 Rockland County............. NY
35644.................................... 35614 Westchester County.......... NY
37380.................................... 19660 Flagler County.............. FL
37700.................................... 25060 Jackson County.............. MS
37964.................................... 33874 Bucks County................ PA
37964.................................... 33874 Chester County.............. PA
37964.................................... 33874 Montgomery County........... PA

[[Page 49957]]

39100.................................... 20524 Dutchess County............. NY
39100.................................... 35614 Orange County............... NY
41884.................................... 42034 Marin County................ CA
41980.................................... 11640 Arecibo Municipio........... PR
41980.................................... 11640 Camuy Municipio............. PR
41980.................................... 11640 Hatillo Municipio........... PR
41980.................................... 11640 Quebradillas Municipio...... PR
48900.................................... 34820 Brunswick County............ NC
49500.................................... 38660 Gu[aacute]nica Municipio.... PR
49500.................................... 38660 Guayanilla Municipio........ PR
49500.................................... 38660 Pe[ntilde]uelas Municipio... PR
49500.................................... 38660 Yauco Municipio............. PR
----------------------------------------------------------------------------------------------------------------

e. Transition Period
(1) Background
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060), we stated
that, overall, we believe implementing the new OMB labor market area
delineations would result in wage index values being more
representative of the actual costs of labor in a given area. However,
we recognized that some hospitals would experience decreases in wage
index values as a result of the implementation of the new labor market
area delineations. We also realize that some hospitals would have
higher wage index values due to the implementation of the new labor
market area delineations.
We explained that, in the past, we have provided for transition
periods when adopting changes that have significant payment
implications, particularly large negative impacts. For example, when
implementing the new OMB definitions after the 2000 Census in the FY
2005 IPPS final rule (69 FR 49032 through 49034) for FY 2005, we
evaluated several options to ease the transition to the new CBSA
system.
As discussed in that FY 2005 IPPS final rule, we determined that
the transition to the current wage index system would have the largest
negative impacts upon hospitals that were originally considered urban,
but would be considered rural under the new labor market area
definitions. To alleviate the decreased payments associated with having
a rural wage index, in calculating the area wage index, in the FY 2005
IPPS final rule, we allowed urban hospitals that became rural under new
definitions to maintain their assignment to the labor market area where
they were located for FY 2004. This adjustment was granted for a period
of 3 fiscal years.
In the FY 2005 IPPS final rule, for all hospitals that experienced
negative payment impacts due to adoption of new labor market area
definitions (for example, they were moved to an urban CBSA with a lower
wage index value than their previous rural or urban labor market area),
we implemented a 1-year blended adjustment. We calculated wage indexes
for all hospitals using both old and new labor market definitions.
Hospitals received 50 percent of their wage index based on the new OMB
delineations, and 50 percent of their wage index based on their current
labor market area. This adjustment only applied to hospitals that would
have experienced a drop in wage index values due to a change in labor
market area definitions. Hospitals that benefitted from the labor
market area transition received their new wage index at the time the
new labor market area definitions became effective.
We continue to have the same concerns expressed in the FY 2005 IPPS
final rulemaking. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28060 through 28064), we proposed a similar transition
methodology to mitigate any negative financial impacts experienced by
hospitals due to our proposal to implement the new OMB labor market
area delineations for FY 2015.
(2) Transition for Hospitals in Urban Areas That Would Become Rural
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060 through
28061), for hospitals that are currently located in an urban county
that would become rural under the new OMB delineations, and would have
no form of wage index reclassification or redesignation in place for FY
2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the
Act, redesignations under section 1886(d)(8)(B) of the Act, or rural
reclassifications under section 1886(d)(8)(E) of the Act), we proposed
a policy to assign them the urban wage index value of the CBSA in which
they are physically located for FY 2014 for a period of 3 fiscal years
(with the rural and imputed floors applied and with the rural floor
budget neutrality adjustment applied to the area wage index). As stated
in the FY 2005 IPPS proposed rule (69 FR 28252), we have in the past
provided transitions when adopting changes that have significant
payment implications, particularly large negative impacts. We believe
it is appropriate to apply a 3-year transition period for hospitals
located in urban counties that would become rural under the new OMB
delineations, given the potentially significant payment impacts for
these hospitals. This is consistent with the transition policy adopted
in FY 2005 (69 FR 49032 through 49034). We continue to believe, as we
stated in the FY 2005 IPPS final rule (69 FR 49033), that the longer
transition period is appropriate because, as a group, we expect these
hospitals would experience a steeper and more abrupt reduction in their
wage index due to the labor market revisions compared to other
hospitals. Assigning these hospitals the urban wage index value of the
CBSA in which they are physically located for FY 2014 for a period of 3
fiscal years (with the rural and imputed floors applied and with the
rural floor budget neutrality adjustment applied to the area wage
index) would be the most similar to the actual payment wage index that
these hospitals received in FY 2014, thereby minimizing the negative
impact of adopting the new OMB delineations for these hospitals.
Accordingly, for FYs 2015, 2016, and 2017, assuming no other form of
wage index reclassification or redesignation is granted, we proposed to
assign these hospitals the area wage index value of the urban CBSA in
which they were geographically located in FY 2014 (with the rural and
imputed floors applied and with the rural floor budget neutrality
adjustment applied to the area wage index). For example, if urban CBSA
12345 consisted of three counties in FY 2014, and, under the new OMB

[[Page 49958]]

delineations, one of those counties, County X, would no longer be part
of CBSA 12345 and would become rural for FY 2015, we proposed that
hospitals in County X would be assigned the FY 2015 wage index of CBSA
12345, computed using the remaining two counties, with the rural and
imputed floors applied and with the rural floor budget neutrality
adjustment applied to the area wage index. We believe that assigning
the wage index of the hospitals' current area is the simplest and most
effective method for mitigating negative payment impacts due to the
proposed adoption of the new OMB delineations. We have identified
relatively few hospitals that are located in urban counties that would
become rural, and fewer yet that do not have a reclassification or
redesignation in effect for FY 2015. Because we believe that these
urban to rural transitions would be the most likely to cause
significant negative payment impacts, we believe that these hospitals
should be granted a longer transition period than hospitals that may be
switching between urban labor market areas, which as discussed later,
we proposed to apply a 1-year blended wage index.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), we noted
that there are situations where a hospital cannot be assigned the wage
index value of the CBSA to which it geographically belonged in FY 2014
because that CBSA would be split and no longer exist and some or all of
the constituent counties would be added to another urban labor market
area under the new OMB delineations. If the hospital cannot be assigned
the wage index value of the CBSA to which it is geographically located
in FY 2014 because that CBSA would be split apart and no longer exist,
and some or all of its constituent counties would be added to another
urban labor market area under the new OMB delineations, we proposed
that hospitals located in such counties that would become rural under
the new OMB delineations would be assigned the wage index of the FY
2015 urban labor market area that contains the urban county in their FY
2014 CBSA to which they are closest (with the rural and imputed floors
applied and with the rural floor budget neutrality adjustment applied)
for a period of 3 fiscal years. We believe this approach of assigning
the wage index of the FY 2015 urban labor market area that contains the
urban county in their FY 2014 CBSA to which they are closest (with the
rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied) would most closely approximate the
hospitals' FY 2014 actual payment wage index, thereby minimizing the
negative effects of the proposed change in the OMB delineations. For
example, George County, MS and Jackson County, MS, together, in FY
2014, comprise the urban CBSA 37700 (Pascagoula, MS). Under the new OMB
delineations, George County would be considered rural and Jackson
County, MS would become part of the urban labor market area of
Gulfport-Biloxi-Pascagoula, MS (CBSA 25060). In this instance, we
proposed that hospitals in George County, MS would be assigned the FY
2015 wage index for CBSA 25060 (Gulfport-Biloxi-Pascagoula, MS), with
the rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied.
Furthermore, we proposed that any hospital that is currently
located in an urban county that would become rural for FY 2015 under
the new OMB delineations, but also has a reclassification or
redesignation in effect for FY 2015 (from a pre-existing
reclassification or redesignation granted prior to FY 2015), would not
be eligible for the 3-year transition wage index. This is because if
the hospital is reclassified or redesignated in some manner, it would
instead receive a wage index that reflects its own choice to obtain its
reclassified or redesignated status. Accordingly, if a hospital is
currently located in an urban county that would become rural for FY
2015 under the new OMB delineations and such hospital sought and was
granted reclassification or redesignation for FY 2015 or such hospital
seeks and is granted any reclassification or redesignation for FY 2016
or FY 2017, we proposed that the hospital would permanently lose its 3-
year transitional assigned wage index status, and would not be eligible
to reinstate it. For example, if a hospital that is currently urban but
would become rural under the new OMB delineations received a 3-year
transition wage index in FY 2015 based on the wage index of the urban
CBSA to which it was geographically located in FY 2014 and then by its
own choice, reclassifies to obtain a different area wage index in FY
2016, the hospital would not be eligible to reinstate the transition
wage index, even if it opts to cancel its reclassification for FY 2017.
We proposed the transition adjustment to assist hospitals if they
experience a negative payment impact specifically due to the proposed
adoption of the new OMB delineations in FY 2015. If a hospital chooses
in a future fiscal year to forego this transition adjustment by
obtaining some form of reclassification or redesignation, we do not
believe reinstatement of this transition adjustment would be
appropriate. The purpose of the adjustment is to assist hospitals that
may be negatively impacted by the new OMB delineations in transitioning
to a wage index based on these delineations. By obtaining a
reclassification or redesignation, we believe that the hospital has
made the determination that the transition adjustment is not necessary
because it has other viable options for mitigating the impact of the
transition to the new OMB delineations.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), with
respect to the wage index computation, we proposed to follow our
existing policy regarding the inclusion of a hospital's wage index data
in the CBSA in which it is geographically located (we refer readers to
Step 6 of the method for computing the unadjusted wage index in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51592)). Accordingly, beginning
with FY 2015, we proposed that the wage data of all hospitals receiving
this type of 3-year transition adjustment would be included in the
statewide rural area in which they are geographically located under the
new OMB labor market area delineations. After the 3-year transition
period, beginning in FY 2018, we proposed that these formerly urban
hospitals discussed above would receive their statewide rural wage
index, absent any reclassification or redesignation.
In addition, we proposed that the hospitals receiving this 3-year
transition because they are in counties that were urban under the
current CBSA definitions, but would be rural under the new OMB
delineations, would not be considered urban hospitals. Rather, they
would maintain their status as rural hospitals for other payment
considerations. This is because our proposal to apply a 3-year
transitional wage index for these newly rural hospitals only applies
for the purpose of calculating the wage index under our proposal to
adopt the new CBSA delineations. We did not propose transitions for
other IPPS payment policies that may be impacted by the proposed
adoption of the new CBSA delineations. However, we will continue to
apply the existing regulations at Sec. 412.102 with respect to
determining DSH payments in the first year after a hospital loses urban
status (we refer readers to section II.B.2.e.(7) of the preambles of
the proposed rule and this final rule).
Comment: Commenters were supportive of CMS' proposals to provide

[[Page 49959]]

a 3-year transition adjustment for hospitals that are shifting from
urban to rural areas. Commenters appreciated CMS' attempt to mitigate
the negative effects of the application of the new OMB labor market
delineations. Some commenters questioned why hospitals that switch from
urban to rural could benefit from a longer 3-year transition
adjustment, while other hospitals that would also be negatively
affected by the transition could only benefit from a single year of a
blended transition adjustment. They suggested a similar 3-year
transition adjustment for all hospital experiencing a negative impact,
including hospitals that are moving from urban to urban, or are not
moving at all, but are being impacted by other hospitals moving in or
out of the labor market area.
Response: We appreciate the commenters' support for our proposals.
We address comments pertaining to the difference between the 3-year
urban to rural transition adjustment and the 1-year 50/50 blended wage
index transition adjustment, as well as the requested 3-year transition
period for all hospitals experiencing a negative impact in section
III.B.2.e.(4) of the preamble of this final rule.
After consideration of the public comments we received, we are
finalizing our proposals without modification. We will provide
hospitals that are changing from an urban to a rural labor market area
a 3-year wage index adjustment. Specifically, for hospitals that are
currently located in an urban county that became rural under the new
OMB delineations, and have no form of wage index reclassification or
redesignation in place for FY 2015 (that is, MGCRB reclassifications
under section 1886(d)(10) of the Act, redesignations under section
1886(d)(8)(B) of the Act, or rural reclassifications under section
1886(d)(8)(E) of the Act), we will assign them the urban wage index
value of the CBSA in which they are physically located for FY 2014 for
a period of 3 fiscal years (with the rural and imputed floors applied
and with the rural floor budget neutrality adjustment applied to the
area wage index). If the hospital cannot be assigned the wage index
value of the CBSA to which it is geographically located in FY 2014
because that CBSA is split apart and no longer exists, and some or all
of its constituent counties are added to another urban labor market
area under the new OMB delineations, hospitals located in such counties
that became rural under the new OMB delineations will be assigned the
wage index of the FY 2015 urban labor market area that contains the
urban county in their FY 2014 CBSA to which they are closest (with the
rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied) for a period of 3 fiscal years. Any
hospital that is currently located in an urban county that would become
rural for FY 2015 under the new OMB delineations, but also has a
reclassification or redesignation in effect for FY 2015 (from a
preexisting reclassification or redesignation granted prior to FY
2015), will not be eligible for the 3-year transition wage index.
Accordingly, if a hospital is currently located in an urban county that
would become rural for FY 2015 under the new OMB delineations and such
hospital sought and was granted reclassification or redesignation for
FY 2015 or such hospital seeks and is granted any reclassification or
redesignation for FY 2016 or FY 2017, the hospital will permanently
lose its 3-year transitional assigned wage index status, and will not
be eligible to reinstate it.
With respect to the wage index computation, we will follow our
existing policy regarding the inclusion of a hospital's wage index data
in the CBSA in which it is geographically located (we refer readers to
Step 6 of the method for computing the unadjusted wage index in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51592)). Beginning with FY 2015,
the wage data of all hospitals receiving this type of 3-year transition
adjustment will be included in the statewide rural area in which they
are geographically located under the new OMB delineations. After the 3-
year transition period, beginning in FY 2018, these formerly urban
hospitals discussed above will receive their statewide rural wage
index, absent any reclassification or redesignation. In addition, the
hospitals receiving this 3-year transition because they are in counties
that are urban under the current CBSA definitions, but become rural
under the new OMB delineations, will not be considered urban hospitals.
Rather, they will maintain their status as rural hospitals for other
payment considerations.
(3) Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B)
of the Act Where the Urban Area Became Rural Under the New OMB
Delineations
As discussed in section II.H.3. of the preamble of the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28061 through 28062) and this final
rule, there are some hospitals that are currently geographically
located in rural areas but are deemed to be urban under section
1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals
currently redesignated under section 1886(d)(8)(B) of the Act would no
longer be eligible for deemed urban status under the new OMB
delineations, as discussed in detail in section III.H.3. of the
preamble of this final rule. Similar to the policy implemented in the
FY 2005 IPPS final rule (69 FR 49059), and consistent with the policy
we proposed for other hospitals in counties that were urban and would
become rural under the new OMB delineations, we proposed to apply the
3-year transition to these hospitals currently redesignated to urban
areas under section 1886(d)(8)(B) of the Act that would no longer be
deemed urban under the new OMB delineations and would revert to being
rural. That is, for FYs 2015, 2016, and 2017, assuming no other form of
wage index reclassification or redesignation is granted, we proposed to
assign these hospitals the FY 2015 area wage index value of hospitals
reclassified to the urban CBSA (that is, the attaching wage index) to
which they were redesignated in FY 2014 (with the rural and imputed
floors applied and with the rural floor budget neutrality adjustment
applied). If the hospital cannot be assigned the reclassified wage
index value of the CBSA to which it was redesignated in FY 2014 because
that CBSA would split apart and no longer exist, and some or all of its
constituent counties would be added to another urban labor market area
under the new OMB delineations, we proposed that such hospitals would
be assigned the wage index of the hospitals reclassified to the FY 2015
urban labor market area that contains the urban county in their FY 2014
redesignated CBSA to which they are closest for a period of 3 fiscal
years. We proposed to assign these hospitals the area wage index of
hospitals reclassified to a CBSA because hospitals deemed urban under
section 1886(d)(8)(B) of the Act are treated as reclassified under
current policy, under which such hospitals receive an area wage index
that includes wage data of all hospitals reclassified to the area.
We did not receive any specific public comment addressing these
proposals. In general, commenters were supportive of CMS' proposal to
implement the new OMB labor market delineations, including the policy
to mitigate the negative effects of the transition to a new labor
market area. We are finalizing our proposal to provide a 3-year
adjustment to hospitals that were deemed urban under 1886(d)(8)(B) of
the Act under the current labor market delineations, but are considered
rural under the new delineations. We will

[[Page 49960]]

apply the 3-year transition to these hospitals currently redesignated
to urban areas under section 1886(d)(8)(B) of the Act that are no
longer be deemed urban under the new OMB delineations and will revert
to being rural. That is, for FYs 2015, 2016, and 2017, assuming no
other form of wage index reclassification or redesignation is granted,
we will assign these hospitals the FY 2015 area wage index value of
hospitals reclassified to the urban CBSA (that is, the attaching wage
index) to which they were redesignated in FY 2014 (with the rural and
imputed floors applied and with the rural floor budget neutrality
adjustment applied). If the hospital cannot be assigned the
reclassified wage index value of the CBSA to which it was redesignated
in FY 2014 because that CBSA was split apart and no longer exists, and
some or all of its constituent counties were added to another urban
labor market area under the new OMB delineations, such hospitals will
be assigned the wage index of the hospitals reclassified to the FY 2015
urban labor market area that contains the urban county in their FY 2014
redesignated CBSA to which they are closest for a period of 3 fiscal
years. We will assign these hospitals the area wage index of hospitals
reclassified to a CBSA because hospitals deemed urban under section
1886(d)(8)(B) of the Act are treated as reclassified under current
policy, under which such hospitals receive an area wage index that
includes wage data of all hospitals reclassified to the area. Beginning
in FY 2015, affected hospitals will be assigned the reclassified wage
index of an urban area (as described above) for a period of up to 3
years. This wage index assignment will be forfeited if the hospital
obtains any form of wage index reclassification or redesignation.
(4) Transition for Hospitals That Will Experience a Decrease in Wage
Index Under the New OMB Delineations
While we believe that instituting the latest OMB labor market area
delineations would create a more accurate wage index system, we also
recognize that implementing the new OMB delineations may cause some
short-term instability in hospital payments. Therefore, in addition to
the 3-year transition adjustment for hospitals being transitioned from
urban to rural status as discussed above, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28062), we proposed a 1-year blended wage index
for all hospitals that would experience any decrease in their actual
payment wage index (that is, a hospital's actual wage index used for
payment, which accounts for all applicable effects of reclassification
and redesignation) exclusively due to the proposed implementation of
the new OMB delineations. Similar to the policy adopted in the FY 2005
IPPS final rule (69 FR 49033), we proposed that a post-reclassified
wage index with the rural and imputed floor applied would be computed
based on the hospital's FY 2014 CBSA (that is, using all of its FY 2014
constituent county/ies), and another post-reclassified wage index with
the rural and imputed floor applied would be computed based on the
hospital's new FY 2015 CBSA (that is, the FY 2015 constituent county/
ies). We proposed to compare these two wage indexes. If the proposed FY
2015 wage index with FY 2015 CBSAs would be lower than the proposed FY
2015 wage index with FY 2014 CBSAs, we proposed that a blended wage
index would be computed, consisting of 50 percent of each of the two
wage indexes added together. We proposed that this blended wage index
would be the hospital's wage index for FY 2015. We stated our belief
that a 1-year, 50/50 blend would mitigate the short-term instability
and negative payment impacts due to the proposed implementation of the
new OMB delineations, providing hospitals with a transition period
during which they may adjust to their new geographic CBSA or may assess
any reclassification options that would be available to them starting
in FY 2016. We proposed a longer 3-year transition adjustment for
hospitals losing urban status because there are significantly fewer
affected urban-to-rural hospitals, and we believe the negative impacts
to a hospital shifting from urban to rural status would typically be
greater than other types of transitions. We believe that a transition
period longer than 1 year to address other impacts of the proposed
adoption of new OMB delineations would reduce the accuracy of the
overall labor market area wage index system because far more hospitals
would be affected.
In addition, for FY 2015, for hospitals that would receive the
proposed 3-year transition, it is possible that receiving the FY 2015
wage index (with the rural and imputed floors applied and with the
rural floor budget neutrality adjustment applied) of the CBSA where the
hospital is geographically located for FY 2014 might still be less than
the FY 2015 wage index that the hospital would have received in the
absence of the adoption of the new OMB delineations (particularly in
States where the rural floor is historically very high). Therefore,
such a hospital may additionally benefit from application of the 50/50
blended wage indexes. Accordingly, we proposed to include the
assignment of the 3-year transitional wage index in our calculation of
the FY 2015 portion of the 50/50 blended wage index for that hospital.
After FY 2015, such a hospital may revert to the second year of the 3-
year transition. For example, if Hospital X (formerly part of CBSA
12345, now rural) is assigned CBSA 12345's FY 2015 wage index value of
1.0000 as part of the 3-year transition, but that FY 2015 wage index
value would have been 1.1000 under the previous OMB delineations, that
hospital would receive a 50/50 blended wage index of 1.0500 for FY
2015. In FY 2016 and FY 2017, Hospital X would still be eligible to
receive the remaining 2 years of the 3-year transition wage index of
CBSA 12345 (that is, in FY 2016, Hospital X would receive the FY 2016
wage index of CBSA 12345 (with the rural and imputed floors applied and
with the rural floor budget neutrality adjustment applied)), and in FY
2017, Hospital X would receive the FY 2017 wage index of CBSA 12345
(with the rural and imputed floors applied and with the rural floor
budget neutrality adjustment applied).
Comment: Commenters were generally supportive of CMS' efforts to
mitigate the negative impacts from the transition to the new OMB
delineations. A number of commenters requested that CMS expand the 1-
year 50/50 blended wage index adjustment for a longer period of time.
One commenter suggested the adjustment be phased in over multiple
years, with a first year adjustment equal to the hospital's wage index
under the current CBSA definitions. Several of these commenters stated
that because hospitals cannot obtain an MGCRB reclassification under
the new OMB delineations until FY 2016, the adjustment for FY 2015
should negate any negative impacts from the transition to the new OMB
delineations. These commenters explained that the MGCRB timetable would
not allow them to benefit from newly available reclassification
opportunities until at least 1 year following the implementation of new
OMB delineations. Other commenters questioned why hospitals that switch
from urban to rural could benefit from a longer 3-year transition
adjustment, while other hospitals that also would be negatively
affected by the transition could only benefit from a single year of a
blended transition adjustment, and requested a 3-year transition period
for all hospitals experiencing a negative impact. They suggested a
similar 3-year

[[Page 49961]]

transition adjustment for affected hospitals experiencing a negative
impact, including the hospitals that are moving from urban to urban, or
are not moving at all, but are being impacted by other hospitals moving
in or out of the labor market area.
Response: We appreciate the commenters' support. We explored
multiple alternatives to the proposed 1-year 50/50 blended wage index
adjustment. While we acknowledge that some providers will see negative
impacts based upon the adoption of the new OMB delineations, we also
point out that some providers will experience increases in their wage
index values from the new OMB delineations. It is CMS' longstanding
policy to provide temporary adjustments to mitigate negative impacts
from the adoption of new policies or procedures. However, these
adjustments must be made in a budget-neutral manner, and all wage index
values would be reduced to provide for any such transition benefit.
We continue to believe that, in general, rural labor markets tend
to have lower area wage index values than nearby urban areas. We
proposed a longer 3-year transition adjustment for hospitals losing
urban status because there are significantly fewer affected urban-to-
rural hospitals, and we believe the negative impacts on a hospital
shifting from urban to rural status would typically be greater than
other types of transitions. We believe that a transition period longer
than 1 year to address other impacts of the proposed adoption of new
OMB delineations would reduce the accuracy of the overall labor market
area wage index system because far more hospitals would be affected. We
identified nine hospitals that could be negatively affected by their
transition from urban to rural status under the new OMB delineations.
Based on our experience regarding the impact of the policy established
in FY 2005, we believe it is necessary to provide up to a 3-year
transition adjustment for these hospitals to prevent the potential for
drastic reductions in wage index values. The relatively small number of
affected providers causes little concern for potential budget
neutrality adjustment distortions in overall wage index values.
However, significantly more providers will be negatively affected by
other impacts from adopting the new labor market area delineations.
Moving away from a 1-year 50/50 blend to an adjustment value that more
closely approximates the hospital's previous labor market assignment,
or providing for a longer transition period, would result in a
significantly larger national budget neutrality adjustment. We believe
the implementation of the new labor market area delineations will
create more accurate representations of a hospital's labor market
areas, and we do not believe it is appropriate to expand or extend the
50/50 blended wage index adjustment further than what was proposed,
because doing so would only further delay what we believe are the more
refined and accurate labor market areas, based on the recent 2010
Census. Because the wage index is a relative measure of the value of
labor in prescribed labor market areas, we believe it is important to
implement the new delineations with as minimal a transition as is
reasonable.
Hospitals currently must wait more than a year for an MGCRB
reclassification application to become effective. We do not believe the
implementation of new OMB delineations requires any modification to
this policy. We believe the 1-year 50/50 blended wage index adjustment
provides an adequate safeguard against significant hospital payment
reductions, and provides hospitals time to assess their
reclassification options for future fiscal years.
Comment: One group of commenters suggested CMS made an error in
calculating the Connecticut rural wage index value under the old FY
2014 OMB definitions. Commenters claimed that CMS incorrectly assigned
a hospital as being reclassified under section 1886(d)(8)(B) of the Act
(that is, a ``Lugar'' hospital) when calculating the wage index under
the old delineations. This hospital is located in a county that became
urban under the new OMB delineations. Commenters claimed that the
hospital opted to waive its ``Lugar'' status effective for FYs 2013,
2014, and FY 2015 in order to receive its outmigration adjustment.
However, when CMS calculated the FY 2014 rural wage index for the
purpose of applying the proposed transition blend, CMS calculated the
rural wage index with this hospital being reclassified. By including
this hospital as reclassified to an urban area, the commenters claimed
that the wage index based on the ``old'' labor market area definitions,
and therefore, the proposed FY 2015 payment wage index was
significantly lower than it would be if this provider was properly
identified as rural under the old definitions.
Response: In prior fiscal years, the Connecticut rural wage index
was set by a single hospital. While there were multiple hospitals
located in rural areas in the State, all but one obtained or was
granted some form of reclassification to another area. The wage data of
rural hospitals that reclassify elsewhere may only be included in their
State's rural wage index if doing so would increase the wage index
value (section 1886(d)(8)(C)(ii) of the Act). Because including the
reclassified rural Connecticut hospitals would have lowered the State's
rural area wage index value, the wage index was instead based on that
single hospital's data. That hospital was designated urban under
section 1886(d)(8)(B) of the Act but waived this status to receive an
out-migration adjustment. As discussed in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51599 through 51600), a hospital may submit a request
to waive its ``Lugar'' status for a period of 3 years. By doing so, we
would no longer consider the hospital to be reclassified and would
always use that hospital's data in the calculation the State's rural
wage index. (We note that while we agree that the hospital waived its
reclassification status for FY 2014 by accepting the out-migration
adjustment, we disagree that the hospital in question waived its
reclassified status for FY 2015. According to our records, the hospital
sent a letter to CMS dated July 15, 2011, requesting to accept the out-
migration adjustment and waive its Lugar redesignation for FYs 2012,
2013, and 2014.) When calculating the wage index based on the ``old''
labor market area definitions, CMS considered this hospital as being
reclassified under section 1886(d)(8)(B) of the Act. Because all the
rural Connecticut hospitals were now considered reclassified, the wage
index was based upon their combined data because the baseline rural
wage index did not include any hospitals. The result of including all
reclassified hospitals was a rural wage index value that was
significantly lower than in previous years. Considering that several
hospitals in Connecticut benefited from the State's rural floor, this
reduction in the rural wage index affected multiple hospitals in the
State.
After further consideration of the commenters' concerns, we agree
with the commenters that this hospital should be treated as rural for
the portion of the 1-year blended wage index under the FY 2014
delineations because this hospital had waived it Lugar status by
accepting the out-migration adjustment in FY 2014. Therefore, we are
revising this hospital's wage index and the wage index of the hospitals
affected by this change for FY 2015, as reflected in Tables 2-2, 4A-2
and 4B-2, 4C-2, and 4D-2.
After consideration of the public comments we received, we are
finalizing the transition policy as proposed. We will apply a 1-year

[[Page 49962]]

blended wage index for all hospitals that would experience any decrease
in their actual payment wage index (that is, a hospital's actual wage
index used for payment, which accounts for all applicable effects of
reclassification and redesignation) exclusively due to the proposed
implementation of the new OMB delineations. In FY 2015, a post-
reclassified wage index with the rural and imputed floor applied will
be computed based on the hospital's FY 2014 CBSA (that is, using all of
its FY 2014 constituent county/ies), and another post-reclassified wage
index with the rural and imputed floor applied will be computed based
on the hospital's new FY 2015 CBSA (that is, the FY 2015 constituent
county/ies). We will compare these two wage indexes. If the FY 2015
wage index with FY 2015 CBSAs is lower than the FY 2015 wage index with
FY 2014 CBSAs, a blended wage index will be computed, consisting of 50
percent of each of the two wage indexes added together. This blended
wage index will be the hospital's wage index for FY 2015.
For FY 2015, for hospitals that would receive the proposed 3-year
transition, it is possible that receiving the FY 2015 wage index (with
the rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied) of the CBSA where the hospital is
geographically located for FY 2014 might still be less than the FY 2015
wage index that the hospital would have received in the absence of the
adoption of the new OMB delineations (particularly in States where the
rural floor is historically very high). In this situation, we will
include the assignment of the 3-year transitional wage index in our
calculation of the FY 2015 portion of the 50/50 blended wage index for
that hospital. After FY 2015, such a hospital may revert to the second
year of the 3-year transition.
(5) Impact of Adoption of New OMB Labor Market Area Delineations
As we did for the proposed rule (79 FR 28062 through 28063), for
this final rule, to illustrate how the adoption of the new OMB labor
market area delineations will impact hospitals' FY 2015 wage indexes,
we compared the final FY 2015 occupational mix adjusted post-
reclassified wage indexes with rural floor budget neutrality applied
under the FY 2014 CBSAs and under the FY 2015 CBSAs using the new OMB
delineations. (This analysis does not include the effects of the out-
migration adjustment, the frontier floor, the 3-year hold harmless
transition wage indexes, or the 1-year transition blended wage
indexes). As a result of applying the new OMB delineations to the wage
data, the wage index values for 2,409 urban hospitals (85.6 percent)
and 412 (65.2 percent) rural hospitals will increase. The wage index
values of 2,372 (84.3 percent) urban hospitals will increase by less
than 5 percent, and the wage index values of 14 (0.5 percent) urban
hospitals will increase by at least 5 percent but less than 10 percent.
The wage index values of 23 (0.8 percent) urban hospitals will increase
by greater than or equal to 10 percent. The wage index values of 383
(60.6 percent) rural hospitals will increase by less than 5 percent, 18
rural hospitals (2.8 percent) will increase by at least 5 percent but
less than 10 percent, and 11 rural hospitals (1.7 percent) will
increase by greater than or equal to 10 percent. However, the wage
index values for 397 urban hospitals (14.1 percent) and 220 (34.8
percent) rural hospitals will decrease. The wage index values of 341
(12.1 percent) urban hospitals will decrease by less than 5 percent, 50
urban hospitals (1.8 percent) will decrease by at least 5 percent but
less than 10 percent, and 6 urban hospitals (0.2 percent) will decrease
by greater than or equal to 10 percent. The wage index values of 191
(30.2 percent) rural hospitals will decrease by less than 5 percent, 28
rural hospitals (4.4 percent) will decrease by 5 percent and less than
10 percent, and 1 rural hospital (0.2 percent) will decrease by greater
than or equal to 10 percent. The wage index values of 8 (0.3 percent)
urban hospitals and zero rural hospitals will remain unchanged by the
adoption of the new OMB delineations. The largest positive impacts are
for 8 hospitals in 5 States (Texas, Michigan, Minnesota, Louisiana, and
Alabama) that will be moving from a rural to an urban area under the
new OMB delineations (ranging from a 17.23 percent increase in Texas to
a 24.02 percent increase in wage index in Alabama), and for 14
hospitals that will be moving from one urban CBSA (FY 2014 CBSA 20764,
Edison-New Brunswick, NJ) to new urban CBSA 35614 (New York-Jersey
City-White Plains, NY-NJ) under the new OMB delineations, representing
a 15.13 percent increase in wage index. The largest negative impacts
will be for 5 hospitals in 4 States (New York, Alabama, Idaho, and
North Carolina) that will be moving from an urban to a rural area under
the new OMB delineations (ranging from a 12.18 percent decrease in
North Carolina to a 27.06 percent decrease in wage index in New York).
One hospital in Delaware is moving from a rural to an urban area under
the new OMB delineations and will experience an 11.38 percent decrease
in wage index. Another hospital in Texas is moving from one urban area
to another urban area under the new OMB delineations and will
experience a 10.19 percent decrease in wage index. These results
illustrate that hospitals that move from rural CBSAs to urban CBSAs
under the new OMB delineations generally will benefit significantly,
while hospitals that move from urban to rural CBSAs generally will have
negative impacts. For all hospitals combined, the wage index values of
2,821 hospitals (81.9 percent) overall will increase, and 617 hospitals
(17.9 percent) overall will decrease, indicating that most hospitals
will be positively affected by the adoption of the new OMB
delineations. Furthermore, the magnitude of the changes will be
relatively small overall, with only 151 hospitals (4.4 percent)
experiencing either an increase or decrease of at least 5 percent.
The following table shows the impact of the adoption of the new OMB
delineations on hospitals' FY 2015 wage indexes, comparing the FY 2015
occupational mix adjusted post-reclassified wage indexes with rural
floor budget neutrality applied under the FY 2014 CBSAs and the FY 2015
CBSAs using the new OMB delineations. (This analysis does not include
the effects of the out-migration adjustment, the frontier floor, the 3-
year hold harmless transition wage indexes, or the 1-year transition
blended wage indexes.)

----------------------------------------------------------------------------------------------------------------
Number of post- Number of post-
reclassified reclassified
Percent change in FY 2015 wage index rural hospitals urban hospitals Total number of
based on FY based on FY hospitals
2014 CBSA 2014 CBSA
----------------------------------------------------------------------------------------------------------------
Decrease greater than or equal to 10.0.................... 1 6 7
Decrease greater than or equal to 5.0 but less than 10.0.. 28 50 78
Decrease greater than or equal to 2.0 but less than 5.0... 33 88 121

[[Page 49963]]

Decrease greater than 0.0 but less than 2.0............... 158 253 411
No change................................................. 0 8 8
Increase greater than 0.0 but less than 2.0............... 376 2,331 2,707
Increase greater than or equal to 2.0 but less than 5.0... 7 41 48
Increase greater than or equal to 5.0 but less than 10.0.. 18 14 32
Increase greater than or equal to 10.0.................... 11 23 34
-----------------------------------------------------
Total................................................. 632 2,814 3,446
----------------------------------------------------------------------------------------------------------------

We did not receive any public comments on the analysis in the
proposed rule showing the effects of adopting the new CBSA
delineations.
(6) Budget Neutrality
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063), for FY
2015, we proposed to apply both the 3-year transition and 50/50 blended
wage index adjustments in a budget neutral manner. We proposed to make
an adjustment to the standardized amount to ensure that the total
payments, including the effect of the transition provisions, would
equal what payments would have been if we would not be providing for
any transitional wage indexes under the new OMB delineations.
We did not receive any public comments specific to our proposal to
implement the 3-year transition and the 50/50 blended wage index
adjustments in a budget neutral manner. We are finalizing the policy as
proposed. For a complete discussion on this budget neutrality
adjustment for FY 2015, we refer readers to section II.A.4.b. of the
Addendum to this final rule.
We note that, consistent with past practice (69 FR 49034), we are
not adopting the new OMB delineations themselves in a budget neutral
manner. We do not believe that the revision to the labor market areas
in and of itself constitutes an ``adjustment or update'' to the
adjustment for area wage differences, as provided under section
1886(d)(3)(E) of the Act.
(7) Determining Disproportionate Share Hospital (DSH) Payments Under
the New OMB Delineations
As noted in the FY 2005 IPPS final rule (69 FR 49033), the
provisions of Sec. 412.102 of the regulations continue to apply with
respect to determining DSH payments for hospitals affected by our
adoption of the new OMB delineations. Specifically, in the first year
after a hospital loses urban status, the hospital would receive an
additional payment that equals two-thirds of the difference between the
urban DSH payments applicable to the hospital before its redesignation
from urban to rural and the rural DSH payments applicable to the
hospital subsequent to its redesignation from urban to rural. In the
second year after a hospital loses urban status, the hospital would
receive an additional payment that equals one-third of the difference
between the urban DSH payments applicable to the hospital before its
redesignation from urban to rural and the rural DSH payments applicable
to the hospital subsequent to its redesignation from urban to rural.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063 through
28064), we proposed to make changes to the regulations to delete Sec.
412.64(b)(1)(ii)(D). In this provision, we currently define a
``hospital reclassified as rural'' as a hospital located in a county
that, in FY 2004, was urban but was redesignated as rural after
September 30, 2004, as a result of the most recent census data and
implementation of the new MSA definitions announced by OMB on June 6,
2003. Because the term ``hospital reclassified as rural'' is not used
in Sec. 412.64, but is used in Sec. 412.102, we proposed to delete
Sec. 412.64(b)(1)(ii)(D) and revise the language at Sec. 412.102 to
address the circumstances set forth in Sec. 412.64(b)(1)(ii)(D). The
regulation at Sec. 412.102, which addresses special treatment of
hospitals located in areas that are changing from urban to rural as a
result of a geographic redesignation, is the only location that
currently references a ``hospital reclassified as rural'', as defined
at Sec. 412.64(b)(1)(ii)(D). To avoid confusion with urban hospitals
that choose to reclassify as rural under Sec. 412.103, we proposed to
revise the regulation text at Sec. 412.102 so that it no longer refers
to the defined term ``hospital reclassified as rural,'' and instead
specifically states the circumstances in which Sec. 412.102 applies.
In addition, we proposed to modify the regulation text so that it would
apply to all transitions from urban to rural status that occur as a
result of any future adoption of new or revised OMB standards for
delineating statistical areas adopted by CMS. Specifically, we proposed
to revise the regulations at Sec. 412.102 to state that an urban
hospital that was part of an MSA, but was redesignated as rural as a
result of the most recent OMB standards for delineating statistical
areas adopted by CMS, may receive an adjustment to its rural Federal
payment amount for operating costs for 2 successive fiscal years as
provided in paragraphs (a) and (b) of the section.
We did not receive any public comments regarding either of these
proposals. We are finalizing the changes to Sec. 412.102 and Sec.
412.64(b)(1)(ii)(D) as proposed, effective for FY 2015.

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

The FY 2015 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2011 (the FY 2014 wage indexes were based on
data from cost reporting periods beginning during FY 2010).
1. Included Categories of Costs
The FY 2015 wage index includes the following categories of data
associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty);
Home office costs and hours;
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47318)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS

[[Page 49964]]

final rule (76 FR 51586 through 51590)) and other deferred compensation
costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2014, the wage
index for FY 2015 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as skilled nursing
facility (SNF) services, home health services, costs related to GME
(teaching physicians and residents) and certified registered nurse
anesthetists (CRNAs), and other subprovider components that are not
paid under the IPPS. The FY 2015 wage index also excludes the salaries,
hours, and wage-related costs of hospital-based rural health clinics
(RHCs), and Federally qualified health centers (FQHCs) because Medicare
pays for these costs outside of the IPPS (68 FR 45395). In addition,
salaries, hours, and wage-related costs of CAHs are excluded from the
wage index, for the reasons explained in the FY 2004 IPPS final rule
(68 FR 45397 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute
Care Hospitals Under the IPPS
Data collected for the IPPS wage index also are currently used to
calculate wage indexes applicable to suppliers and other providers,
such as SNFs, home health agencies (HHAs), ambulatory surgical centers
(ASCs), and hospices. In addition, they are used for prospective
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient
services. We note that, in the IPPS rules, we do not address comments
pertaining to the wage indexes of any supplier or provider except IPPS
providers and LTCHs. Such comments should be made in response to
separate proposed rules for those suppliers and providers.

D. Verification of Worksheet S-3 Wage Data

The wage data for the FY 2015 wage index were obtained from
Worksheet S-3, Parts II and III of the Medicare cost report for cost
reporting periods beginning on or after October 1, 2010, and before
October 1, 2011. For wage index purposes, we refer to cost reports
during this period as the ``FY 2011 cost report,'' the ``FY 2011 wage
data,'' or the ``FY 2011 data.'' Instructions for completing the wage
index sections of Worksheet S-3 are included in the Provider
Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 40,
Sections 4005.2 through 4005.4 for Form CMS-2552-10. The data file used
to construct the FY 2015 wage index includes FY 2011 data submitted to
us as of June 25, 2014. As in past years, we performed an extensive
review of the wage data, mostly through the use of edits designed to
identify aberrant data.
We asked our MACs to revise or verify data elements that result in
specific edit failures. For the proposed FY 2015 wage index, we stated
that we identified and excluded 50 providers with aberrant data that
should not be included in the wage index, although we stated that if
data elements are corrected, we intended to include data from those
providers in the final FY 2015 wage index (79 FR 28064). We have since
determined that we had only removed 49, not 50, providers with aberrant
data from the proposed wage index. We have received corrected data from
19 providers and data from an additional provider, and therefore, we
are including the data for these 20 providers in the final FY 2015 wage
index. However, since issuance of the proposed rule, we have determined
that the data from 4 other providers (not included in the original 49
providers) were aberrant and should not be included in the final FY
2015 wage index. Therefore, in total, we are excluding the data of 34
providers from the final FY 2015 wage index.
In constructing the FY 2015 wage index, we included the wage data
for facilities that were IPPS hospitals in FY 2011, inclusive of those
facilities that have since terminated their participation in the
program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed
rule, we removed 6 hospitals that converted to CAH status on or after
February 14, 2013, the cut-off date for CAH exclusion from the FY 2014
wage index, and through and including February 13, 2014, the cut-off
date for CAH exclusion from the FY 2015 wage index. After removing
hospitals with aberrant data and hospitals that converted to CAH
status, the final FY 2015 wage index is calculated based on 3,416
hospitals.
For the final FY 2015 wage index, we allotted the wages and hours
data for a multicampus hospital among the different labor market areas
where its campuses are located in the same manner that we allotted such
hospitals' data in the FY 2014 wage index (78 FR 50587). Table 2
containing the final FY 2015 wage index associated with this final rule
(available via the Internet on the CMS Web site) includes separate wage
data for the campuses of 6 multicampus hospitals.
Comment: Commenters representing hospitals located in CBSA 46140
disagreed with the removal of the wage data of one hospital in that
CBSA from the FY 2015 wage index. They argued that CMS's removal of the
hospital's data is arbitrary and capricious, based only on the fact
that the hospital's average hourly wage is higher than those of the
other hospitals in the CBSA. The commenters noted that the hospital's
data were included in the wage index in previous years, and CMS has
provided ``no rational explanation for its inconsistent treatment
now.'' The commenters further stated that ``if CMS were to adopt a
policy of excluding the hospital with the highest wage data from each
CBSA, fairness would require that CMS also exclude the hospital with
the lowest wage data from each CBSA.'' The commenters stated that if
CMS is employing a ``bright-line cut off,'' CMS must publish such
``bright-line tests.''
Response: Section 1886(d)(3)(E) of the Act requires the Secretary
to adjust the proportion of hospitals' costs attributable to wages and
wage-related costs for area differences reflecting the relative
hospital wage level in the geographic area of the hospital compared to
the national average hospital wage level. We also refer readers to
section 1886(d)(9)(C)(iv)(I) of the Act. Since the origin of the IPPS,
the wage index has been subject to its own annual review process, first
by the MACs, and then by CMS. Hospitals are aware that both the MACs
(via instructions issued by CMS) and CMS evaluate the accuracy and
reasonableness of hospitals' wage index data. Each year, in every IPPS
proposed rule, we discuss the process wherein CMS asks the MACs to
``revise or verify data elements that result in specific edit
failures'' (most recently, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28064)). We state that, in constructing the wage index, we
include the wage data for facilities that were IPPS hospitals in the
relevant cost reporting year (that is, FY 2011 for the FY 2015 wage
index), and that we include ``those facilities that have since
terminated their participation in the program as hospitals, as long as
those data did not fail any of our edits for reasonableness. We believe
that including the wage data for these hospitals is, in general,
appropriate to reflect the economic conditions in the various labor
market

[[Page 49965]]

areas during the relevant past period and to ensure that the current
wage index represents the labor market area's current wages as compared
to the national average of wages'' (emphasis added; 79 FR 28064). CMS
has historically exercised its discretion in developing a wage index
that reflects a relative measure of the value of the labor provided to
a typical hospital in a particular labor market area. We applied these
same procedures, as discussed below, to the hospital at issue, and we
disagree with the commenters that we have arbitrarily and capriciously
removed the wage data of the cited hospital from the FY 2015 wage
index.
In the instance of the particular hospital to which the commenters
refer, while the hospital's wage data was properly documented, it did
not merely have the highest average hourly wage in the CBSA; its
average hourly wage was extremely and unusually high, significantly
higher than the next highest average hourly wage in that CBSA and in
the surrounding areas. We do not believe that the average hourly wage
of this particular hospital accurately reflects the economic conditions
in its labor market area during the FY 2011 cost reporting period, and,
therefore, its inclusion in the wage index would not ensure that the FY
2015 wage index represents the labor market area's current wages as
compared to the national average of wages. Accordingly, we have
exercised our discretion to remove this hospital's wage data from the
February 20, 2014 PUF, and from the May 2, 2014 PUF as well. Similarly,
we have exercised our discretion by removing from the wage index (in FY
2015 and in prior years) the data of hospitals with average hourly
wages that are unusually and uncharacteristically low for their
respective CBSAs because we believe that the wage data of those
hospitals also do not accurately reflect the economic conditions in
their labor market area. We included the hospital's data in the wage
index in previous years because the hospital's average hourly wage was
lower and more reasonable relative to its labor market area in the
prior years and, thus, we did not remove the hospital's wage data from
the prior years' wage index.
Questions have been raised recently regarding the reporting of
contract housekeeping and dietary services on Worksheet S-3, Part II,
lines 33 and 35 of the Medicare cost report. CMS finalized its proposal
to begin collecting contract labor costs and hours for housekeeping,
and dietary (along with management services and the overhead services
of administrative and general) in the FY 2003 IPPS final rule (67 FR
50022 through 50023). At that time, we stated, ``We continue to
consider whether to expand our contract labor definition to include
more types of contract services in the wage index. In particular, we
have examined whether to include the costs for acquired dietary and
housekeeping services, as many hospitals now provide these services
through contracts. Costs for these services tend to be below the
average wages for all hospital employees. Therefore, excluding the
costs and hours for these services if they are provided under contract,
while including them if the services are provided directly by the
hospital, creates an incentive for hospitals to contract for these
services in order to increase their average hourly wage for wage index
purposes'' (67 FR 50022). In the FY 2003 IPPS proposed rule, we
explained that we selected the three overhead services of
administrative and general, housekeeping, and dietary because they are
provided at all hospitals, either directly or through contracts, and
together they comprise about 60 percent of a hospital's overhead hours
(67 FR 31433). In the FY 2003 IPPS final rule, we stated that we ``will
monitor the hospital industry for information regarding the hospitals'
ability to provide the data. Further, we will work with hospitals and
intermediaries [MACs] to develop acceptable methods for tracking the
costs and hours. Finally, before including these additional costs in
the wage index, we will provide a detailed analysis of the impact of
including these additional costs in the wage index values in the
Federal Register and provide for public comment. Our final decision on
whether to include contract indirect patient care labor costs in our
calculation of the wage index will depend on the outcome of our
analyses and public comments'' (67 FR 50023).
Subsequent to the issuance of the FY 2003 IPPS final rule, we
revised Worksheet S-3, Part II of the Medicare cost report (CMS Form
2552-96) to add four lines for the reporting of contract labor
salaries, wages, and hours. The lines added for contract housekeeping
and dietary services were lines 26.01 and 27.01, respectively. (Line
9.03 for contract management and line 22.01 for contract administrative
and general (A&G) services were also added at that time). These lines
were effective with cost reporting periods beginning on or after
October 1, 2003 (that is, FY 2004). Because the cost report data used
for the wage index are on a 4-year lag, data from these new contract
labor lines would first be available for the FY 2008 wage index.
In the FY 2008 rulemaking process, we provided an analysis of the
effect on the inclusion in the wage index of the wages and hours
related to the new contract labor lines. At that time, 56 hospitals
(1.6 percent) failed edits for contract housekeeping line 26.01; and 99
hospitals (2.8 percent) failed edits for contract dietary line 27.01
(72 FR 24680 and 24782). We also noted that ``many of these edit
failures are for wage data that are not to be included in the wage
index and will be excluded through the wage index calculation. . . . In
addition, some of the aberrant data will be resolved by the final rule
through the correction process'' (72 FR 24680 and 24782). The small
percentage of hospitals that failed edits for these contract labor
lines indicates that the vast majority of hospitals completing these
contract labor lines were able to obtain and report reasonable
salaries, wages, and hours associated with contract housekeeping and
dietary services. In the FY 2008 IPPS final rule, we stated that we
believe that ``the impact of this policy is generally very minor, and
we do not believe the additional complexity of a transition wage index
is warranted for an impact this small. Further, we continue to believe
it is prudent policy to include in the wage index the costs for these
contract indirect patient care services'' (72 FR 47316). Therefore, we
adopted the policy to include the new contract labor lines in the wage
index, beginning with the FY 2008 wage index.
The questions that have recently come to our attention involve
hospitals that consistently do not provide documentable salaries,
wages, and hours for their contracted housekeeping and/or dietary
services. (On the Medicare cost report (CMS Form 2552-10), contract
housekeeping is on Worksheet S-3, Part II, line 33 and contract dietary
is on line 35). When this situation occurs, CMS has instructed the MACs
to use reasonable estimates, such as regional average hourly rates, as
a substitute for actual wages and hours, and to report the estimates on
the hospital's Worksheet S-3, Part II, line 33 or line 35,
respectively. Our policy has been to use reasonable estimates for these
housekeeping and dietary lines, rather than report zeroes for wages and
hours, because, as discussed above and as stated in the FY 2003 IPPS
final rule, ``{c{time} osts for these services tend to be below the
average wages for all hospital employees. Therefore, excluding the
costs and hours for these services if they

[[Page 49966]]

are provided under contract, while including them if the services are
provided directly by the hospital, creates an incentive for hospitals
to contract for these services in order to increase their average
hourly wage for wage index purposes'' (57 FR 50022). We understand that
the reason many hospitals provide for failing to report such contract
wages and hours is that their contracts do not clearly specify this
information, often because they use a single vendor to provide several
different contract labor services. We believe that allowing hospitals
to routinely use contracts that do not clearly break out the salaries,
wages, and hours associated with these services as a reason for not
being able to report proper salaries, wages, and hours for these cost
report lines undermines the purpose of instituting these lines in the
first place. Furthermore, because every hospital must provide
housekeeping and dietary services, and because the wage index is a
relative measure of the value of the labor provided to a hospital in a
particular labor market area, to report zeroes for salaries, wages, and
hours for housekeeping and dietary services is not only unrealistic (in
that every hospital provides for these services), but also
misrepresents the labor costs in that area and undermines our policy.
Consequently, CMS has instructed the MACs not to zero out these line
items when a hospital cannot document the housekeeping or dietary
salaries, wages, and hours, but instead to use a reasonable estimation
of these wages and hours.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28065 through
28066) rule, we reiterated our requirement that all hospitals must
document salaries, wages, and hours for the purpose of reporting this
information on Worksheet S-3, Part II, lines 32, 33, 34, and/or 35 (for
either directly employed housekeeping and dietary employees on lines 32
and 34, and contract labor on lines 33 and 35). It is not acceptable
for a hospital to request that the MACs zero out these line items if
the hospital's contract does not specifically break out the actual
wages and hours. As indicated above, and stated in the FY 2008 IPPS
proposed rule (72 FR 24680 and 24782), a small percentage of hospitals
failed edits associated with the contract housekeeping and dietary
lines, showing that the vast majority of hospitals reporting data on
these lines were able to obtain and report reasonable salaries, wages,
and hours associated with contract housekeeping and dietary services.
We encourage hospitals to ensure that their contracts clearly specify
the salaries, wages, and hours related to all of their contract labor.
Because these line items have been included in the cost report since FY
2004, we believe that hospitals have had adequate notice and time to
structure their contracts so that the wages and hours of contract
employees can be determined and included in the cost reports. We expect
hospitals to provide accurate data on their cost reports.
We understand that there may be rare situations where a hospital
would not have documentable salaries, wages, and hours for contract
housekeeping and dietary services. In these situations, we believe that
it is appropriate and necessary to use reasonable estimates for these
numbers in order to determinate the best, most realistic, wage index
that we can. As discussed previously, housekeeping and dietary services
are unique in that the costs for housekeeping and dietary services tend
to be below the average wages for all hospital employees. Thus, an
incentive is created for hospitals to avoid reporting these contract
labor salaries, wages, and hours on the cost report in order to
increase their average hourly wage for wage index purposes. To deter
hospitals from not reporting this information and to ensure that the
wage index more accurately reflects the labor costs in an area, we
believe that it is both necessary and appropriate for the MACs to
estimate such salaries, wages, and hours in the rare instance where a
hospital cannot provide such information. Therefore, in the absence of
documentable wages and hours for contract housekeeping and dietary
services, MACs would continue to use reasonable estimates for these
services. Examples of reasonable estimates are regional average hourly
rates, including an average of the wages and hours for dietary and
housekeeping services of other hospitals in the same CBSA as the
hospital in question. Hospitals also may conduct time studies to
determine hours worked. If, for whatever reason, regional averages or
time studies cannot be used, MACs may use data from the Bureau of Labor
Statistics to obtain average wages and hours for housekeeping and
dietary services. Commenters may also suggest alternatives for imputing
reasonable estimates for possible consideration by CMS. In all cases,
MACs must determine that the data used are reasonable.
Comment: One commenter encouraged CMS to instruct the MACs to be
consistent across their entire jurisdiction in how the MACs estimate
wages and hours for contract dietary and housekeeping services, in the
instances where there is a lack of documentable wages and hours for
these services. Another commenter noted that CMS stated that commenters
may suggest alternatives for imputing reasonable estimates for possible
consideration by CMS. This commenter asked that CMS consider
eliminating entirely all wages and hours associated with dietary and
housekeeping services, both for hospital employees and contract labor,
based on the belief that these services represent an ``immaterial''
3.27 percent of total Worksheet S-3, Part II, line 1 wages, and their
removal from the wage index would remove a time-consuming burden for
both providers and MACs. The commenter asserted that if all wages and
hours associated with dietary and housekeeping services were eliminated
from the wage index, the ``comparison among hospitals would remain
meaningful and would remove any disparity among hospitals related to
the issue.''
Response: We agree with the first commenter that it is important
for CMS' policies and instructions to be implemented uniformly by the
MACs across all jurisdictions. We provide updated and uniform
instructions to the MACs each year prior to the start of the annual
wage index desk review process, and also communicate with the MACs
through various media throughout each annual wage index cycle,
including instructions on how to estimate wages and hours for contract
dietary and housekeeping services in the absence of documentable wages
and hours for these categories. We do not agree with the second
commenter's request that CMS eliminate entirely all wages and hours
associated with dietary and housekeeping services, both for hospital
employees and contract labor. The IPPS wage index is a relative measure
of the value of all types of labor provided to a typical hospital in a
particular labor market area, not just the labor with high average
hourly wages. We believe it would be inappropriate to agree to
selectively include, or exclude, certain categories of labor from the
wage index because doing so would result in a less accurate measure of
labor costs and would undermine the relativity of the wage index as
whole. We believe that hospitals have had adequate notice and time to
structure their contracts so that the wages and hours of contract
employees can be determined and included in the cost reports. We expect
hospitals to provide accurate data on their cost reports, and the
accuracy of the wages and hours of contract labor

[[Page 49967]]

will continue to be reviewed by the MACs as part of the annual desk
review process. As we stated in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28065 through 28066), to deter hospitals from not reporting this
information and to ensure that the wage index more accurately reflects
the labor costs in an area, we believe that it is both necessary and
appropriate for MACs to estimate such salaries, wages, and hours in the
rare instance where a hospital cannot provide such information for its
dietary and housekeeping services under contract. We will continue to
instruct the MACs to use reasonable estimates for these services, in
the absence of documentable wages and hours for contract housekeeping
and dietary services.

E. Method for Computing the FY 2015 Unadjusted Wage Index

The method used to compute the FY 2015 wage index without an
occupational mix adjustment follows the same methodology that we used
to compute the FY 2012, FY 2013, and FY 2014 final wage indexes without
an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366
through 53367, and 78 FR 50587 through 50588, respectively).
As discussed in the FY 2012 final rule, in ``Step 5,'' for each
hospital, we adjust the total salaries plus wage-related costs to a
common period to determine total adjusted salaries plus wage-related
costs. To make the wage adjustment, we estimate the percentage change
in the employment cost index (ECI) for compensation for each 30-day
increment from October 14, 2010, through April 15, 2012, for private
industry hospital workers from the BLS' Compensation and Working
Conditions. We have consistently used the ECI as the data source for
our wages and salaries and other price proxies in the IPPS market
basket, and we did not propose any changes to the usage for FY 2015 (79
FR 28066). The factors used to adjust the hospital's data were based on
the midpoint of the cost reporting period, as indicated in the
following table.

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

For example, the midpoint of a cost reporting period beginning
January 1, 2011, and ending December 31, 2011, is June 30, 2011. An
adjustment factor of 1.01084 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50587 through 50588), the FY 2015 national average
hourly wage (unadjusted for occupational mix) is $39.2971. The FY 2015
Puerto Rico overall average hourly wage (unadjusted for occupational
mix) is $16.9893.

F. Occupational Mix Adjustment to the FY 2015 Wage Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the FY 2015 Occupational Mix Adjustment
Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50588),
the occupational mix adjustment to the FY 2014 wage index was based on
data collected on the 2010 Medicare Wage Index Occupational Mix Survey
(Form CMS-10079 (2010)). For the FY 2015 wage index, we proposed to use
the occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2015. We did not receive any public
comments on this proposal; therefore, we are finalizing our policy to
use the occupational mix data collected on the 2010 survey to compute
the occupational mix adjustment for FY 2015. We are including data for
3,183 hospitals that also have wage data included in the FY 2015 wage
index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2013, FY 2014, and the FY 2015 wage
index associated with this final rule. Therefore, a new measurement of
occupational mix is required for FY 2016.
On December 7, 2012, we published in the Federal Register a notice
soliciting comments on the proposed 2013 Medicare Wage Index
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013
survey, which will be applied to the FY 2016 wage index, includes the
same data elements and definitions as the 2010 survey and provides for
the collection of hospital-specific wages and hours data for nursing
employees for calendar year 2013 (that is, payroll periods ending
between January 1, 2013 and December 31, 2013). The comment period for
the notice ended on February 5, 2013. After considering the public
comments that we received on the December 2012 notice, we made a few
minor editorial changes and published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679). This survey was approved
by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/WAGE-INDEX-OCCUPATIONAL-MIX-SURVEY2013.pdf.
The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079

[[Page 49968]]

for the Wage Index Beginning FY 2016 (in excel format) is available on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html?DLPage=1&DLSort=1&DLSortDir=descending. Hospitals were
required to submit their completed 2013 surveys to their MACs by July
1, 2014. The preliminary, unaudited 2013 survey data was posted on the
CMS Web site afterward, on July 11, 2014. The FY 2012 Worksheet S-3
wage data for the FY 2016 wage index review and correction process was
posted on the CMS Web site in May 2014. Both the preliminary FY 2016
wage data and occupational mix survey data can be found on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html?DLPage=1&DLSort=1&DLSortDir=descending.
3. Calculation of the Occupational Mix Adjustment for FY 2015
For FY 2015, we proposed to calculate the occupational mix
adjustment factor using the same methodology that we used for the FY
2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77
FR 53367 through 53368, and 78 FR 50588 through 50589, respectively).
As a result of applying this methodology, the proposed FY 2015
occupational mix adjusted national average hourly wage (based on the
proposed new OMB labor market area delineations) was $39.1177. The
proposed FY 2015 occupational mix adjusted Puerto Rico-specific average
hourly wage (based on the proposed new OMB labor market area
delineations) was $17.0526.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the FY 2015 wage
index. For the proposed FY 2015 wage index, because we are using the
Worksheet S-3, Parts II and III wage data of 3,400 hospitals, and we
are using the occupational mix surveys of 3,165 hospitals for which we
also have Worksheet S-3 wage data, that represents a ``response'' rate
of 93.1 percent (3,165/3,400). In the proposed FY 2015 wage index
established in the FY 2015 IPPS/LTCH PPS proposed rule, we applied
proxy data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the 2010 occupational mix
survey. We instructed MACs to continue gathering this information as
part of the FY 2014 and FY 2015 wage index desk review process. We
stated that we would review these data for future analysis and
consideration of potential penalties for noncompliant hospitals.
Comment: One commenter stated that all hospitals should be
obligated to submit the occupational mix survey because failure to
complete the survey jeopardizes the accuracy of the wage index. The
commenter added that a penalty should be instituted for nonsubmitters.
The commenter also stated that pending CMS' analysis of the Commuting
Based Wage Index and the Institute of Medicine's study on geographic
variation in hospital wage costs, CMS should eliminate the occupational
mix survey and the significant reporting burden it creates.
Response: We appreciate the commenter's concern for the accuracy of
the wage index, and we have continually exhorted all hospitals to
complete and submit the occupational mix surveys. We did not propose a
particular penalty for hospitals that do not submit the CY 2013
occupational mix survey, but we are continuing to consider for future
rulemaking various options for ensuring full compliance. Examples
include applying a hospital's occupational mix survey data from a
previous survey period to the current wage index of a given fiscal
year; including the occupational mix survey as part of the cost report,
and if not completed, the cost report would be rejected by the MAC; or
application of a State-specific minimum or reduced occupational mix
adjustment. Regarding the commenter's request that CMS should eliminate
the survey due to the burden it creates, section 1886(d)(3)(E) of the
Act requires us to measure the earnings and paid hours of employment by
occupational category. As long as the requirement to apply an
occupational mix adjustment to the wage index remains in place in the
statute, there may be some amount of administrative burden involved in
reporting that data.
After consideration of the public comments we received, for FY
2015, we are finalizing our proposal to calculate the occupational mix
adjustment factor using the same methodology that we used for the FY
2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77
FR 53367 through 53368, and 78 FR 50588 through 50589, respectively).
As a result of applying this methodology, the FY 2015 occupational mix
adjusted national average hourly wage (based on the new OMB labor
market area delineations) is $39.2591. The FY 2015 occupational mix
adjusted Puerto Rico-specific average hourly wage (based on the new OMB
labor market area delineations) is $17.0410. For the FY 2015 wage
index, because we are using the Worksheet S-3, Parts II and III wage
data of 3,416 hospitals, and we are using the occupational mix surveys
of 3,183 hospitals for which we also have Worksheet S-3 wage data, that
represents a ``response'' rate of 93.2 percent (3,183/3,416).

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

1. Analysis of the Occupational Mix Adjustment and the Occupational Mix
Adjusted Wage Index
As discussed in section III.F. of the preamble of this final rule,
for FY 2015, we apply the occupational mix adjustment to 100 percent of
the FY 2015 wage index. We calculated the occupational mix adjustment
using data from the 2010 occupational mix survey data, using the
methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51582 through 51586).
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2015 wage index
results in a national average hourly wage (based on the new OMB labor
market area delineations) of $39.2591 and a Puerto-Rico specific
average hourly wage of $17.0410. After excluding data of hospitals that
either submitted aberrant data that failed critical edits, or that do
not have FY 2011 Worksheet S-3, Parts II and III, cost report data for
use in calculating the FY 2015 wage index, we calculated the FY 2015
wage index using the occupational mix survey data from 3,183 hospitals.
For the FY 2015 wage index, because we are using the Worksheet S-3,
Parts II and III wage data of 3,416 hospitals, and we are using the
occupational mix survey data of

[[Page 49969]]

3,183 hospitals for which we also have Worksheet S-3 wage data, those
data represent a ``response'' rate of 93.2 percent (3,183/3,416). The
FY 2015 national average hourly wages for each occupational mix nursing
subcategory as calculated in Step 2 of the occupational mix calculation
are as follows:

------------------------------------------------------------------------
Average
Occupational mix nursing subcategory hourly wage
------------------------------------------------------------------------
National RN............................................. 37.420970136
National LPN and Surgical Technician.................... 21.78229118
National Nurse Aide, Orderly, and Attendant............. 15.31107725
National Medical Assistant.............................. 17.251053917
National Nurse Category................................. 31.769556957
------------------------------------------------------------------------

The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is
$31.769556957. Hospitals with a nurse category average hourly wage (as
calculated in Step 4) of greater than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of less than 1.0. Hospitals with a nurse category
average hourly wage (as calculated in Step 4) of less than the national
nurse category average hourly wage receive an occupational mix
adjustment factor (as calculated in Step 6) of greater than 1.0.
Based on the 2010 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 43.46
percent, and the national percentage of hospital employees in the all
other occupations category is 56.54 percent. At the CBSA level, using
the new OMB delineations for FY 2015, the percentage of hospital
employees in the nurse category ranged from a low of 21.88 percent in
one CBSA to a high of 62.04 percent in another CBSA.
We compared the FY 2015 occupational mix adjusted wage indexes for
each CBSA to the unadjusted wage indexes for each CBSA. We used the FY
2015 new OMB delineations for this analysis. As a result of applying
the occupational mix adjustment to the wage data, the wage index values
for 219 (53.8 percent) urban areas and 29 (61.7 percent) rural areas
increased. One hundred and nineteen (29.2 percent) urban areas will
increase by 1 percent but less than 5 percent, and 4 (1.0 percent)
urban areas will increase by 5 percent or more. Fourteen (29.8 percent)
rural areas will increase by 1 percent but less than 5 percent, and no
rural areas will increase by 5 percent or more. However, the wage index
values for 186 (45.7 percent) urban areas and 18 (38.3 percent) rural
areas decreased. Seventy nine (19.4 percent) urban areas will decrease
by 1 percent but less than 5 percent, and 1 (0.2 percent) urban area
will decrease by 5 percent or more. Seven (14.9 percent) rural areas
will decrease by 1 percent and less than 5 percent, and no rural areas
will decrease by 5 percent or more. The largest positive impacts will
be 6.58 percent for an urban area and 3.36 percent for a rural area.
The largest negative impacts will be 5.32 percent for an urban area and
1.73 percent for a rural area. Two urban areas' wage indexes, but no
rural area wage indexes, will remain unchanged by application of the
occupational mix adjustment. These results indicate that a larger
percentage of rural areas (61.7 percent) will benefit from the
occupational mix adjustment than will urban areas (53.8 percent).
However, approximately one-third (38.3 percent) of rural CBSAs will
still experience a decrease in their wage indexes as a result of the
occupational mix adjustment.
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28068), based on the
proposed FY 2015 wage index associated with the proposed rule and based
on the proposed implementation of the new OMB delineations discussed in
section III.B. of the preamble of the proposed rule, we estimated that
441 hospitals would receive an increase in their FY 2015 proposed wage
index due to the application of the rural floor.
Based on the final FY 2015 wage index associated with this final
rule and available on the CMS Web site and based on the implementation
of the new OMB delineations, 422 hospitals are receiving an increase in
their FY 2015 wage index due to application of the rural floor.
We received some public comments concerning the application of the
rural floor. We respond to these public comments in Appendix A of this
final rule.
b. Imputed Floor for FY 2015
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy four times,
the last of which was adopted in the FY 2014 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2014. (We refer readers to
further discussion of the imputed floor in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50589 through 50590) and to our regulations at 42 CFR
412.64(h)(4).) Currently, there are two all-urban States, New Jersey
and Rhode Island, that have a range of wage indexes assigned to
hospitals in these States, including through reclassification or
redesignation (we refer readers to discussions of geographic
reclassifications and redesignations in section III.H. of the preamble
of the proposed rule and this final rule). However, as we explain
below, the method as of FY 2012 for computing the imputed floor (the
original methodology) benefitted only New Jersey, and not Rhode Island.
In computing the imputed floor for an all-urban State under the
original methodology, we calculated the ratio of the lowest-to-highest
CBSA wage index for each all-urban State as well as the average of the
ratios of lowest-to-highest CBSA wage indexes of those all-urban
States. We then compared the State's own ratio to the average ratio for
all-urban States and whichever is higher is multiplied by the highest
CBSA wage index value in the State--the product of which established
the imputed floor for the State. Under the current OMB labor market
area delineations that we used for the FY 2014 wage index, Rhode Island
has only one CBSA (Providence-New Bedford-Fall River, RI-MA) and New
Jersey has 10 CBSAs. Therefore, under the original methodology, Rhode
Island's own ratio equaled 1.0, and its imputed floor was equal to its
original CBSA wage index value. However, because the average ratio of
New Jersey and Rhode Island was higher than New Jersey's own ratio,
this methodology provided a benefit for New Jersey, but not for Rhode
Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), we retained the imputed floor calculated under the original
methodology as discussed above, and established an alternative
methodology for computing

[[Page 49970]]

the imputed floor wage index to address the concern that the original
imputed floor methodology guaranteed a benefit for one all-urban State
with multiple wage indexes (New Jersey) but could not benefit the other
all-urban State (Rhode Island). The alternative methodology for
calculating the imputed floor was established using data from the
application of the rural floor policy for FY 2013. Under the
alternative methodology, we first determined the average percentage
difference between the post-reclassified, pre-floor area wage index and
the post-reclassified, rural floor wage index (without rural floor
budget neutrality applied) for all CBSAs receiving the rural floor.
(Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which
is available on the CMS Web site) included the CBSAs receiving a
State's rural floor wage index.) The lowest post-reclassified wage
index assigned to a hospital in an all-urban State having a range of
such values then is increased by this factor, the result of which
establishes the State's alternative imputed floor. We amended Sec.
412.64(h)(4) of the regulations to add new paragraphs to incorporate
the finalized alternative methodology, and to make reference and date
changes.
In summary, for the FY 2013 wage index, we did not make any changes
to the original imputed floor methodology at Sec. 412.64(h)(4) and,
therefore, made no changes to the New Jersey imputed floor computation
for FY 2013. Instead, for FY 2013, we adopted a second, alternative
methodology for use in cases where an all-urban State has a range of
wage indexes assigned to its hospitals, but the State cannot benefit
from the methodology in existing Sec. 412.64(h)(4).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through
50590), we extended the imputed floor policy (both the original
methodology and the alternative methodology) for 1 additional year,
through September 30, 2014, while we continued to explore potential
wage index reforms.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28068 through
28069), for FY 2015, we proposed to continue the extension of the
imputed floor policy (both the original methodology and alternative
methodology) for another year, through September 30, 2015, as we
continue to explore potential wage index reforms. As discussed in
section III.B. of the preamble of the proposed rule, we proposed to
adopt the new OMB labor market area delineations beginning in FY 2015.
Under OMB's new labor market area delineations based on Census 2010
data, Delaware would become an all-urban State, along with New Jersey
and Rhode Island. Under the new OMB delineations, Delaware would have
three CBSAs, New Jersey would have seven CBSAs, and Rhode Island would
continue to have only one CBSA (Providence-Warwick, RI-MA). We referred
readers to a detailed discussion of our proposal to adopt the new OMB
labor market area delineations in section III.B. of the preamble of the
proposed rule. We proposed to revise the regulations at Sec.
412.64(h)(4) and (h)(4)(vi) to reflect the proposed 1-year extension of
the imputed floor. We invited public comments on our proposal regarding
the 1-year extension of the imputed floor.
Comment: Several commenters supported the CMS proposal to extend
the imputed floor for 1 year, stating that it establishes an approach
to remedy the competitive disadvantage suffered by all-urban States in
the absence of an imputed wage index floor; and that the imputed wage
index floor policy creates a climate of symmetry, equity and
consistency in the Medicare reimbursement process. One commenter
suggested that the industry have an opportunity to provide input to CMS
prior to finalizing any decisions regarding the imputed floor policy.
The commenter also suggested that if CMS decides to finalize a policy
that would result in the expiration of the imputed floor, CMS afford
hospitals a multiyear phase-out in order to offset their lost revenue.
One commenter stated that CMS should reconsider the extension of
the imputed floor policy, and questioned what statutory authority CMS
has to extend the imputed floor policy and declare new States eligible.
Another commenter objected to the proposal and stated that it does not
support the policy behind the imputed floor. The commenter recommended
that CMS not finalize the proposal to extend the imputed floor, and
stated it agreed with the rationale that CMS previously provided in the
FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25878 through 25879) for not
proposing to extend the imputed floor policy, and urged CMS to let the
policy expire.
Response: We appreciate the commenters' support for our proposal to
extend the imputed floor for 1 year and are finalizing this proposal.
In response to the commenters who objected to the proposed policy and
made other recommendations, we will give further consideration to those
comments as we continue to explore potential wage index reforms. As we
have done every year since the proposal of the imputed floor, we
provide and will continue to provide the industry with the opportunity
to provide input on our proposals prior to finalizing any decisions
regarding the imputed floor policy. We will take the commenters'
recommendation to afford hospitals a multiyear phase-out into
consideration should we propose not to extend the imputed floor policy
in future years.
In response to the commenter who questioned what statutory
authority CMS has to extend the imputed floor policy and declare new
States eligible, as we stated in the FY 2005 IPPS final rule (69 FR
49110), we note that the Secretary has broad authority under section
1886(d)(3)(E) of the Act to ``adjust the proportion (as estimated by
the Secretary from time to time) of hospitals' costs which are
attributable to wages and wage-related costs of the DRG prospective
payment rates . . . for area differences in hospital wage levels by a
factor (established by the Secretary) . . .'' Therefore, we believe
that we do have the discretion to adopt a policy that would adjust area
wage indexes in the stated manner. We adopted the imputed floor policy
and subsequently extended it through notice-and-comment rulemaking to
address concerns from hospitals in all-urban states. Under the new OMB
delineations discussed in section III.B. of the preamble of this final
rule, Delaware becomes an all-urban State and, therefore, is subject to
an imputed floor as well.
After consideration of the public comments we received, we are
finalizing our proposal without modification to extend the imputed
floor policy under both the original methodology and the alternative
methodology for an additional year, through September 30, 2015, while
we continue to explore potential wage index reform. We also are
adopting as final the proposed revisions to Sec. 412.64(h)(4) and
(h)(4)(vi) to reflect the 1-year extension of the imputed floor.
The wage index and impact tables associated with this FY 2015 IPPS/
LTCH PPS final rule that are available on the CMS Web site reflect the
continued application of the imputed floor policy at Sec. 412.64(h)(4)
and a national budget neutrality adjustment for the imputed floor for
FY 2015. There are 15 providers in New Jersey, and no providers in
Delaware that will receive an increase in their FY 2015 wage index due
to the continued application of the imputed floor policy under the
original methodology. The wage index and impact tables for this FY 2015
final rule also reflect the application of the alternative methodology
for computing

[[Page 49971]]

the imputed floor, which will benefit four hospitals in Rhode Island.
c. State Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160 through 50161)). Based on the implementation of the
new OMB delineations discussed in section III.B. of the preamble of
this final rule, 46 hospitals will receive the frontier floor value of
1.0000 for their FY 2015 wage index in this final rule. These hospitals
are located in Montana, North Dakota, South Dakota, and Wyoming.
Although Nevada also is defined as a frontier State, its FY 2015 rural
floor value of 1.1373 is greater than 1.0000, and therefore, no Nevada
hospitals will receive a frontier floor value for their FY 2015 wage
index.
We did not propose any changes to the frontier floor policy for FY
2015, and we did not receive any public comments on the issue.
The areas affected by the rural, imputed, and frontier floor
policies for the FY 2015 wage index are identified in Table 4D
associated with this final rule, which is available via the Internet on
the CMS Web site.
3. FY 2015 Wage Index Tables
The wage index values for FY 2015 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act),
included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site,
include the occupational mix adjustment, geographic reclassification or
redesignation as discussed in section III.H. of the preamble of this
final rule, and the application of the rural, imputed, and frontier
State floors as discussed in section III.G.2. of the preamble of this
final rule. We note that because we are adopting the new OMB labor
market area delineations for FY 2015, these tables have additional
tabulations to account for wage index calculations computed under the
previous and the new OMB delineations.
Tables 3A and 3B, available on the CMS Web site, list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 2009, 2010, and 2011 cost
reporting periods. Table 3A lists these data for urban areas, and Table
3B lists these data for rural areas. In addition, Table 2, which is
available on the CMS Web site, includes the adjusted average hourly
wage for each hospital from the FY 2009 and FY 2010 cost reporting
periods, as well as the FY 2011 period used to calculate the FY 2015
wage index. The 3-year averages are calculated by dividing the sum of
the dollars (adjusted to a common reporting period using the method
described in Step 5 in section III.G. of the preamble of this final
rule) across all 3 years, by the sum of the hours. If a hospital is
missing data for any of the previous years, its average hourly wage for
the 3-year period is calculated based on the data available during that
period. The average hourly wages in Tables 2, 3A, and 3B, which are
available on the CMS Web site, include the occupational mix adjustment.
The wage index values in Tables 4A, 4B, 4C, and 4D also include the
national rural floor budget neutrality adjustment (which includes the
imputed floor). The wage index values in Table 2 also include the out-
migration adjustment for eligible hospitals. As stated above, because
we are adopting the new OMB labor market area delineations for FY 2015,
these tables have additional tabulations to account for wage index
calculations computed under the current labor market area definitions
and the new OMB labor market area delineations. In addition, for
certain applicable hospitals, the wage index values included in Table 2
are computed to reflect the transitional wage index or the 50/50
blended wage index discussed in detail in section III.B.2.e. of the
preamble of this final rule.

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

1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (generally by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions by the end of February for reclassifications that
become effective for the following fiscal year (beginning October 1).
The regulations applicable to reclassifications by the MGCRB are
located in 42 CFR 412.230 through 412.280. (We refer readers to a
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875)
regarding how the MGCRB defines mileage for purposes of the proximity
requirements.) The general policies for reclassifications and
redesignations that we proposed for FY 2015, and the policies for the
effects of hospitals' reclassifications and redesignations on the wage
index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS
final rule for the FY 2012 final wage index (76 FR 51595 and 51596).
Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects
on the wage index of urban hospitals reclassifying to rural areas under
42 CFR 412.103. Hospitals that are geographically located in States
without any rural areas are ineligible to apply for rural
reclassification in accordance with the provisions of 42 CFR 412.103.
While our general policies on geographic reclassification,
redesignations under section 1886(d)(8)(B) of the Act, and urban
hospitals reclassifying to rural under 42 CFR 412.103 will remain
unchanged for FY 2015, we note that, due to our adoption of the new OMB
labor market area delineations for FY 2015, there are numerous unique
classification considerations for FY 2015 that are discussed in more
detail in section III.H. of the preamble of this final rule. For a
discussion of the new CBSA changes based on the new OMB labor market
area delineations and our implementation of those changes, we refer
readers to sections III.B. and VI.C. of the preamble of this final
rule.
Comment: One commenter stated that because the new OMB labor market
area delineations will be effective October 1, 2014, for FY 2015,
hospitals should have been given an opportunity to apply for
reclassification to these new labor market areas a year ago. The
commenter suggested that CMS provide a one-time expedited MGCRB
application and approval process to be effective October 1, 2014.
Similarly, another commenter stated that a hospital would not have
had an adequate opportunity to assess reclassification options for FY
2015 because CMS did not publish 3-year average hourly wage data based
on the new OMB labor market area delineations with the FY 2014 IPPS/
LTCH PPS final rule. The commenter therefore suggested that either the
effective date of the implementation of the new OMB labor market areas
delineations be postponed until FY 2016, or a new period be opened to
allow hospitals to reclassify for FY 2015.

[[Page 49972]]

Response: We do not agree with these comments. We did not propose
to adopt the new OMB labor market area delineations in the FY 2014
IPPS/LTCH PPS proposed rule and, therefore, did not finalize the new
OMB delineations in the FY 2014 IPPS/LTCH PPS final rule. Instead, we
notified hospitals of our intention to propose changes to the wage
index based on the new OMB delineations in the FY 2015 IPPS/LTCH
proposed and final rules (78 FR 27552 through 27553; 78 FR 50586).
Therefore, hospitals could not apply for reclassification on the basis
of the new OMB labor market area delineations a year ago because they
had not yet been implemented. Because we had not implemented the new
OMB delineations, we were unable to release data, including average
hourly wage data, based on these new delineations last year.
Section 1886(d)(10)(C) of the Act mandates that hospitals must
apply to the MGCRB to reclassify not later than 13 months prior to the
start of the fiscal year for which reclassification is sought
(generally by September 1), and the MGCRB must issue its decision
within 180 days after the first day of the 13-month period preceding
the fiscal year for which a hospital has filed its application.
Therefore, we believe we have balanced our obligation to implement the
reclassification decisions of the MGCRB with our responsibility to
implement the most accurate labor market areas through the new OMB
delineations in as uniform a manner as possible.
However, we recognized that the new OMB delineations could affect
reclassification decisions. Therefore, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28073), we stated that hospitals that wished to be
reassigned to an alternate CBSA (other than the CBSA to which their
reclassification would be reassigned in this proposed rule) for which
they meet the applicable proximity criteria could request reassignment
within 45 days from the publication of the proposed rule. We also
stated that if, for whatever reason, a hospital still finds itself
assigned to a labor market area that would provide a wage index for FY
2015 that is lower than the wage index the hospital would have received
under the FY 2014 CBSA delineations, we proposed a 50/50 blended wage
index adjustment in FY 2015 for all hospitals that would experience a
decrease in their FY 2015 wage index value due to the implementation of
the new OMB delineations and are finalizing this transition adjustment
in this rule. This transitional adjustment will mitigate negative
payment impacts for FY 2015, while providing hospitals additional time
to fully assess any additional reclassification options available to
them under the new OMB delineations for FY 2016. Therefore, we do not
believe it is necessary to implement a one-time expedited MGCRB
application and approval process, postpone the effective date of the
implementation of the new OMB delineations until FY 2016, or open a new
period to allow hospitals to reclassify for FY 2015.
Comment: A few commenters stated that, in cases where a countywide
(group) reclassification had been previously approved by the MGCRB, a
new hospital is not able to obtain the same reclassified wage index
until the first year that individual hospital's wage index data match
one of the 3 years' data used by the MGCRB and a new 3-year countywide
reclassification is requested by the county's hospitals (which can be a
4-year delay). The commenters stated that the hospital will have a wage
index lower than the hospitals with which it competes for skilled
labor. The commenter suggested that CMS change its policy to allow for
a timelier competitive wage index for new hospitals.
Two commenters suggested that the proximity rule for countywide
reclassifications for hospitals in an urban county be modified to
permit adjacent county reclassifications, regardless of whether they
are in the same CSA or CBSA, or at a minimum, create an exception that
would allow this in the event that half of the hospitals in the county
are seeking to reclassify.
Another commenter suggested that a county be permitted to apply for
designation as a ``core county'' if its 3-year average hourly wage is
at least 108 percent of the 3-year average hourly wage of its CBSA,
excluding the core county. The commenter also suggested that other
counties within the same CBSA that are either adjacent to or within the
same city as the core county, and whose 3-year average hourly wage is
at least 85 percent of the core county's average hourly wage, be
permitted to join the core county to form a ``core area'' if the
resulting wage index is beneficial to all hospitals in the core area.
Response: We thank the commenters for their comments. We already
have established criteria and processes for MGCRB reclassification,
which are specified in 42 CFR 412.230 et. seq, and we did not propose
any changes to these provisions for FY 2015. Consequently, we are not
making any changes to address the commenter's concerns at this time. We
refer the commenters to these regulations for complete details on wage
index reclassifications.
2. FY 2015 MGCRB Reclassifications
a. FY 2015 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2015 reclassification requests. Based on
such reviews, there were 309 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2015 that did not
withdraw or terminate their reclassifications within 45 days of the
publication of the proposed rule. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2015, hospitals
reclassified beginning during FY 2013 or FY 2014 are eligible to
continue to be reclassified to a particular labor market area based on
such prior reclassifications for the remainder of their 3-year period.
There were 155 hospitals approved for wage index reclassifications in
FY 2013 that continue for FY 2015, and 270 hospitals approved for wage
index reclassifications in FY 2014 that continue for FY 2015. Of all
the hospitals approved for reclassification for FY 2013, FY 2014, and
FY 2015, based upon the review at the time of this final rule, 734
hospitals are in a reclassification status for FY 2015.
Under the regulations at 42 CFR 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
within 45 days of the publication of a proposed rule. For information
about withdrawing, terminating, or canceling a previous withdrawal or
termination of a 3-year reclassification for wage index purposes, we
refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR
50065 through 50066). Additional discussion on withdrawals and
terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage

[[Page 49973]]

index corrections, appeals, and the Administrator's review process for
FY 2015 are incorporated into the wage index values published in this
FY 2015 IPPS/LTCH PPS final rule. These changes affect not only the
wage index value for specific geographic areas, but also the wage index
value redesignated/reclassified hospitals receive; that is, whether
they receive the wage index that includes the data for both the
hospitals already in the area and the redesignated/reclassified
hospitals. Further, the wage index value for the area from which the
hospitals are redesignated/reclassified may be affected.
Comment: One commenter stated that CMS' policy that hospitals must
request to withdraw or terminate MGCRB reclassifications within 45 days
of the proposed rule is problematic because a hospital could terminate
a reclassification based on information in the proposed rule, and with
the publication of the final rule, discover that its original
reclassified status was more desirable. The commenter stated that
hospitals cannot make informed decisions concerning their
reclassification status based on values in a proposed rule that are
likely to change and, therefore, recommended that CMS revise its
existing policy to permit hospitals to withdraw or terminate their
reclassification status within 45 days of the publication of the final
rule. Similarly, another commenter stated that the requirement for
withdrawal of an existing reclassification is unnecessary and unfair
because it requires that a hospital give up the certain benefit of the
existing reclassification for the uncertain benefit of a proposal. The
commenter stated that it is possible that CMS could modify the
reclassification rules, and suggested that hospitals be allowed 30 days
after the publication of the final rule to withdraw their
reclassification requests or to reverse a withdrawal that was made
based on the proposed rule in situations where data corrections could
result in the hospital no longer benefiting by the alternative they
selected.
Response: We did not make any proposals to change any of the
reclassification processes or criteria for FY 2015. Any changes to the
reclassification processes or criteria would first need to be proposed
in a separate rulemaking. Consequently, we are not making any changes
to address the commenters' concerns at this time. We maintain that
information provided in the proposed rule constitutes the best
available data to assist hospitals in making reclassification
decisions. The values published in the final rule represent the final
wage index values reflective of reclassification decisions.
b. Effects of Implementation of New OMB Labor Market Area Delineations
on Reclassified Hospitals
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070 through
28074), we indicated that because hospitals that have been reclassified
beginning in FY 2013, 2014, or 2015 were reclassified based on the
current labor market delineations, if we adopted the new OMB labor
market area delineations beginning in FY 2015, the areas to which they
have been reclassified, or the areas where they are located, may
change. Under the new OMB delineations, we stated that many existing
CBSAs would be reconfigured. We encouraged hospitals with current
reclassifications to verify area wage indexes on Tables 4A-2 and 4B-2
associated with the proposed rule (which are available via the Internet
on the CMS Web site), and confirm that the areas to which they have
been reclassified for FY 2015 would continue to provide a higher wage
index than their geographic area wage index. We stated that hospitals
may withdraw their FY 2015 reclassifications by contacting the MGCRB
within 45 days from the publication of the proposed rule.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070), we stated
that, in some cases, adopting the new OMB delineations would result in
counties splitting apart from CBSAs to form new CBSAs, or counties
shifting from one CBSA designation to another CBSA. Reclassifications
granted under section 1886(d)(10) of the Act are effective for 3 fiscal
years so that a hospital or county group of hospitals would be assigned
a wage index based upon the wage data of hospitals in a nearby labor
market area for a 3-year period. If CBSAs are split apart, or if
counties shift from one CBSA to another under the new OMB delineations,
it raises the question of how to continue a hospital's reclassification
for the remainder of its 3-year reclassification period, if that area
to which the hospital reclassified no longer exists, in whole or in
part. We dealt with this question in FY 2005 as well when CMS adopted
the current OMB labor market area definitions. In the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28071), we indicated that, consistent with the
policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054
through 49056), if a CBSA would be reconfigured due to the new OMB
delineations and it would not be possible for the reclassification to
continue seamlessly to the reconfigured CBSA, we believe it is
appropriate for us to determine the best alternative location to
reassign current reclassifications for the remaining 3 years.
Therefore, to maintain the integrity of a hospital's 3-year
reclassification period, we proposed a policy to assure that current
geographic reclassifications (applications approved for FY 2013, FY
2014, or FY 2015) that would be affected by CBSAs that are split apart
or counties that shift to another CBSA under the new OMB delineations,
would ultimately be assigned to a CBSA under the new OMB delineations
that contains at least one county from the reclassified CBSA under the
current FY 2014 OMB definitions, and would be generally consistent with
rules that govern geographic reclassification. That is, consistent with
the policy finalized in FY 2005 (69 FR 49054 and 49055), we proposed a
general policy that affected reclassified hospitals would be assigned
to a CBSA that (1) would contain the most proximate county that is
located outside of the hospital's proposed FY 2015 geographic labor
market area, and (2) is part of the original FY 2014 CBSA to which the
hospital is reclassified. We stated our belief that by assigning
reclassifications to the CBSA that contains the nearest eligible county
(as described above) satisfies the statutory requirement at section
1886(d)(10)(v) of the Act by maintaining reclassification status for a
period of 3 fiscal years, while generally respecting the longstanding
principle of geographic proximity in the labor market reclassification
process. The hospitals that we proposed to reassign to a different CBSA
based on our proposed policy above were listed in a special Table 9A-2
for the proposed rule, which is available via the Internet on the CMS
Web site. In addition, we proposed to allow a hospital, or county group
of hospitals, to request reassignment to another CBSA that would
contain a county that is part of the current FY 2014 CBSA to which they
are reclassified, if the hospital or county group of hospitals can
demonstrate compliance with applicable reclassification proximity
rules, as described later in this section.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28071), we stated
that we recognize that this proposed reclassification reassignment
described for hospitals that are reclassified to CBSAs that would split
apart or to counties that would shift to another CBSA under the new OMB
delineations may result in the reassignment of the

[[Page 49974]]

hospital for the remainder of its 3-year reclassification period to a
CBSA having a lower wage index than the wage index that would have been
assigned for the reclassified hospital in the absence of the proposed
adoption of the new OMB delineations. Therefore, as discussed in
section III.B.2.e.(4) of the preamble of the proposed rule, we proposed
(and are finalizing in this final rule) that all hospitals that would
experience a decrease in their FY 2015 wage index value due to the
proposed implementation of the new OMB delineations would receive a 50/
50 blended wage index adjustment in FY 2015. For FY 2015, we proposed
to calculate a wage index value based on the current FY 2014 OMB
definitions, and a wage index value based upon the proposed new OMB
delineations (including reclassification assignments discussed in this
section). If the wage index under the proposed new OMB delineations
would be lower than the wage index calculated with the current (FY
2014) OMB definitions, we proposed that the hospital would be assigned
a blended wage index (50 percent of the current; 50 percent of the
proposed). We stated our belief that this proposed transitional
adjustment would mitigate negative payment impacts for FY 2015, and
would afford hospitals additional time to fully assess any additional
reclassification options available to them under the new OMB
delineations.
We are including the following descriptions of specific situations
where we have determined that reassignment of reclassification areas is
appropriate.
(1) Reclassifications to CBSAs That Are Subsumed by Other CBSAs
For the proposed rule (79 FR 28070), we identified 66 counties that
are currently located in CBSAs that would be subsumed by another CBSA
under the new OMB labor market area delineations. As a result,
hospitals reclassifying to those CBSAs would now find that their
reclassifications are to a CBSA that no longer exists. For these
hospitals, we proposed to reassign reclassifications to the newly
configured CBSA to which all of the original constituent counties in
the FY 2014 CBSA are transferred. For example, CBSA 11300 (Anderson,
IN) would no longer exist under the proposed FY 2015 delineations. The
only constituent county in CBSA 11300, Madison County, IN, would be
moving to CBSA 26900 (Indianapolis-Carmel-Anderson, IN). Because the
original Anderson, IN labor market area no longer exists, we proposed
to reassign reclassifications from the original Anderson, IN labor
market area to a newly configured CBSA where the original constituent
county or counties are transferred, which is Indianapolis-Carmel-
Anderson, IN. For hospitals reclassified to a CBSA that would be
subsumed by another CBSA, we included a table in the proposed rule that
reflected the hospitals' current reclassified CBSA, and the CBSA to
which we proposed to assign them for FY 2015 (79 FR 28071).
We did not receive any public comments regarding this proposal to
reassign hospitals reclassified to CBSAs that were subsumed by another
CBSA. Therefore, we are finalizing this provision as proposed. For any
hospital that is reclassified to a CBSA that no longer exists, and all
of the CBSA's constituent counties moved to another CBSA under the new
OMB delineations, we assigned that hospital's reclassification to the
subsuming CBSA to which all of the original constituent counties in the
FY 2014 CBSA are transferred.
The following table lists 63 hospitals that are currently located
in CBSAs that will be subsumed by another CBSA under the new OMB labor
market area delineations and reflects the hospitals' current
reclassified CBSA and the CBSA to which we are assigning them for FY
2015. We note that three hospitals have terminated their
reclassification since publication of the proposed rule and have been
omitted.

Hospital Reclassification Reassignments for Hospitals Reclassified to a
CBSA That Is Subsumed by Another CBSA
------------------------------------------------------------------------
CMS Certification Number Current reclassified
(CCN) CBSA New CBSA
------------------------------------------------------------------------
050022 42044 11244
050054 42044 11244
050102 42044 11244
050243 42044 11244
050292 42044 11244
050329 42044 11244
050390 42044 11244
050423 42044 11244
050534 42044 11244
050573 42044 11244
050684 42044 11244
050686 42044 11244
050701 42044 11244
050765 42044 11244
050770 42044 11244
140067 14060 14010
150089 11300 26900
220001 14484 14454
220002 14484 14454
220008 14484 14454
220011 14484 14454
220019 14484 14454
220020 14484 14454
220049 14484 14454
220058 14484 14454
220062 14484 14454
220063 14484 14454
220070 14484 14454
220073 14484 14454
220074 14484 14454
220082 14484 14454
220084 14484 14454
220090 14484 14454
220095 14484 14454
220098 14484 14454
220101 14484 14454
220105 14484 14454
220163 14484 14454
220171 14484 14454
220175 14484 14454
220176 14484 14454
230002 47644 47664
230020 47644 47664
230024 47644 47664
230053 47644 47664
230089 47644 47664
230104 47644 47664
230142 47644 47664
230146 47644 47664
230165 47644 47664
230176 47644 47664
230244 47644 47664
230270 47644 47664
230273 47644 47664
230297 47644 47664
390151 13644 43524
410001 14484 14454
410004 14484 14454
410005 14484 14454
410007 14484 14454
410010 14484 14454
410011 14484 14454
410012 14484 14454
------------------------------------------------------------------------

(2) Reclassification to CBSAs Where the CBSA Number or Name Changed or
to CBSAs Containing Counties That Moved to Another CBSA
For the proposed rule (79 FR 28072), we identified six CBSAs with
current reclassifications that would maintain the same constituent
counties, but the CBSA number or name would change if we adopted the
new OMB delineations. For example, CBSA 29140 (Lafayette, IN) currently
contains three counties (Benton, Carroll, and Tippecanoe Counties). The
CBSA name and number for these counties would change to CBSA 29200
(Lafayette-West Lafayette, IN) under the new OMB delineations. Because
the constituent counties in these CBSAs would not change under the new
delineations, we would consider these CBSAs to be unchanged, and we did
not propose any

[[Page 49975]]

reassignment for hospitals reclassified to those labor market areas.
In the proposed rule, we identified eight CBSAs with current
reclassifications that have one or more counties that would split off
and move to a new CBSA or to a different existing CBSA under the new
OMB delineations. These CBSAs are shown in the following table.

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

In the proposed rule, we determined that 69 hospitals had current
reclassifications to one of these CBSAs. Similar to the methodology
finalized in the FY 2005 IPPS final rule (69 FR 49054 through 49055),
we proposed to follow the general policy discussed in section
III.H.2.b. of the preamble of the proposed rule. Specifically, we
proposed that affected reclassified hospitals would be assigned to a
CBSA (under the new OMB delineations) that would contain the most
proximate county that is (1) located outside of the hospital's proposed
FY 2015 geographic labor market area; and (2) is included in the
current CBSA to which they are reclassified. For each of the 69
hospitals, we conducted a mapping analysis and determined driving
distances from their geographic location to the borders of each county
that is in the reclassified CBSA under the FY 2014 delineations and is
also included in a CBSA under the new OMB delineations, excluding any
counties that would be located in the hospital's proposed FY 2015
geographic labor market area. Following the general reassignment
principle that we proposed, we proposed to reassign those reclassified
hospitals to the CBSA which contains the geographically closest county.
For example, there are hospitals that currently are reclassified to
CBSA 39100 (Poughkeepsie-Newburgh-Middletown, NY) under the FY 2014
delineations, which is comprised of Dutchess County and Orange County,
NY. Under the new OMB delineations, Dutchess County would become part
of new CBSA 20524 (Dutchess County-Putnam County, NY), while Orange
County would join CBSA 35614 (New York-Jersey City-White Plains, NY-NJ
Metropolitan Division). Therefore, we mapped the distances from one
reclassified hospital to the border of Dutchess County and Orange
County, NY (the two counties that were part of CBSA 39100 under the FY
2014 delineations). Our analysis showed that the hospital is 2.2 miles
from Dutchess County, and 25.9 miles from Orange County. Therefore, we
proposed to reassign this hospital's reclassification from the FY 2014
CBSA 39100 to the new CBSA 20524.
For the proposed rule, we also identified affected county group
reclassifications. For these reclassifications, we proposed that we
would follow our proposed policy discussed above, except that, for
county group reclassifications, we proposed to reassign hospitals in a
county group reclassification to the CBSA under the new OMB
delineations to which the majority of hospitals in the group
reclassification are geographically closest. Because hospitals in a
county group applied as a group, we believe the reassignment should
also be applied to the whole group. For example, the hospitals of
Fairfield County, CT are reclassified as a group to CBSA 35644 under
the FY 2014 delineations. Under the new OMB delineations, CBSA 35644
would no longer exist and would be split into the following two new
CBSAs: 20524 (Dutchess County-Putnam County, NY) and 35614 (New York-
Jersey City-White Plains, NY-NJ). Of the six hospitals in the group
reclassification, all but one would be closer to an eligible county
(Westchester, NY) in CBSA 35614 than to an eligible county (Putnam, NY)
in CBSA 20524. Because these hospitals in Fairfield, CT applied as a
group, we believe the reassignment should also be applied to the whole
group. Therefore, we proposed to assign the hospitals in this group
reclassification to CBSA 35614, the reconfigured CBSA to which the
majority of the hospitals in the group reclassification are
geographically closest.
To summarize, of the 69 hospitals identified in the proposed rule
as reclassified to 1 of the 8 CBSAs in the preceding table that have
counties that would split off and move to a new CBSA or a different
existing CBSA under the new OMB delineations, there are 27 hospitals
that would maintain the same reclassified CBSA number under our
proposals. Another 28 hospitals would be reassigned to a reconfigured
CBSA that would contain a similar number of counties from their current
reclassified CBSA. For the remaining 14 reclassified hospitals, we
proposed to assign them to a CBSA (under the new OMB delineations) that
would have a different CBSA number from the labor market area to which
they are currently reclassified (under the current FY 2014
delineations). This is because if the original CBSA to which the
hospitals are reclassified is losing counties to another urban CBSA, it
may be that the original reclassification determination would not be
reflective of the new delineations. In addition, because proximity to a
CBSA is a requirement of reclassifications approved under section
1886(d)(10) of the Act, we stated our belief that it is appropriate to
propose to reassign reclassification status to an urban CBSA that
contains the county (from the hospital's current CBSA reclassification)
that is closest to the hospital. We stated our belief that this would
more accurately reflect the geographic labor market area of the
reclassified hospital.
Consistent with refinements implemented in the FY 2005 IPPS final
rule (69 FR 49055), we proposed to allow hospitals that reclassified
under section 1886(d)(10) of the Act to one of the eight CBSAs that
split (that is, current FY 2014 CBSAs 16620, 16974, 20764, 31140,
35644, 37964, 39100, 48900) to be reclassified to any CBSA containing a
county from their original reclassification labor market area, provided
that the hospital demonstrates that it meets the applicable proximity
requirements under 42 CFR 412.230(b) and (c) (for individual
hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42 CFR
412.234(a)(2) and (a)(3) (for an urban group) to that CBSA. We stated
that hospitals that wished to be reassigned to an alternate CBSA (other
than the CBSA to which their reclassification would be reassigned in
this proposed rule) for which they meet the applicable proximity
criteria could request reassignment within 45 days from the publication
of the proposed rule. Hospitals had to send a request to
WageIndex@cms.hhs.gov and provide documentation certifying that they
meet the requisite proximity criteria for reassignment to an alternate
CBSA, as described above. We stated our belief that this option of
allowing hospitals to submit a request to CMS would provide hospitals
with greater flexibility with respect to their reclassification
reassignment, while ensuring that the proximity requirements are met.
We believe that where the proximity requirements are met, the
reclassified wage index would be consistent with the labor market area
to which the hospitals were originally approved for reclassification.
Under this proposed

[[Page 49976]]

policy, a hospital could request to be assigned a reclassification to
any CBSA that contains any county from the CBSA to which it is
currently reclassified. However, to be reassigned to an area that is
not the most proximate to the hospital (or the majority of hospitals in
a county group), we believe it is necessary that the hospital
demonstrates that it complies with the applicable proximity criteria.
If a hospital cannot demonstrate proximity to an alternate CBSA, the
hospital would not be considered for reclassification to that labor
market area, and reassignment would remain with the closest eligible
(new) CBSA.
In the proposed rule (79 FR 28073), we included a table showing
proposed hospital reclassification assignments for hospitals
reclassified to CBSAs from which counties would be split off and moved
to a different CBSA under the new OMB delineations. The table showed
the current reclassified CBSA and the CBSA to which CMS proposed
reassignment.
We proposed that hospitals that disagreed with our determination of
the most proximate county had to provide an alternative method for
determining proximity to CMS within 45 days from the publication of the
proposed rule. We stated that changes to a hospital's CBSA assignment
on the basis of a hospital's disagreement with our determination of
closest county, or on the basis of being granted a reassignment due to
meeting applicable proximity criteria to an eligible CBSA would be
announced in this FY 2015 IPPS/LTCH PPS final rule.
Comment: Commenters were generally supportive of our proposal to
adopt the new OMB delineations. Commenters did not specifically address
the proposed assignment of reclassification status for hospitals that
are reclassified to labor market areas where the CBSA number or name
changed or to CBSAs containing counties that moved to another CBSA.
Response: We thank the commenters for their support of our proposal
to implement the new OMB delineations for the hospital wage index.
After consideration of the public comments we received, we are
finalizing the reassignment methodology as proposed. Hospitals that
were reclassified to a CBSA that had one or more counties that split
off and moved to another CBSA under the new OMB delineations are
reclassified to a CBSA that will contain the most proximate county that
(1) is located outside of the hospital's FY 2015 geographic labor
market area; and (2) is included in the current CBSA to which they are
reclassified. Group reclassifications are assigned to the CBSA under
the new OMB delineations to which the majority of hospitals in that
group reclassification are geographically closest and that (1) is
located outside of the hospital's FY 2015 geographic labor market area;
and (2) is included in the current CBSA to which they are reclassified.
We also allowed hospitals that reclassified under section
1886(d)(10) of the Act to one of the eight CBSAs that split (that is,
current FY 2014 CBSAs 16620, 16974, 20764, 31140, 35644, 37964, 39100,
48900) to be reclassified to any CBSA containing a county from their
original reclassification labor market area, provided that the hospital
demonstrates that it meets the applicable proximity requirements under
42 CFR 412.230(b) and (c) (for individual hospitals), 42 CFR
412.232(a)(1) (for a rural group), and 42 CFR 412.234(a)(2) and (a)(3)
(for an urban group) to that CBSA. Hospitals that wished to be
reassigned to an alternate CBSA (other than the CBSA to which their
reclassification would be reassigned in this proposed rule) for which
they meet the applicable proximity criteria needed to request
reassignment within 45 days from the publication of the proposed rule.
We received one request in the WageIndex@cms.hhs.gov mailbox to request
reassignment to another eligible labor market area. A rural hospital in
North Carolina was originally reclassified to CBSA 48900 (Wilmington,
NC). This CBSA had more than one county that was split off and moved to
another CBSA under the new OMB delineations. Thus, under our proposed
policy (which we are finalizing in this final rule), we reclassified
this hospital to a CBSA that contained the most proximate county that
is located outside of the hospital's FY 2015 geographic labor market
area and is included in the current CBSA to which it is reclassified.
Of all the former constituent counties of CBSA 48900, the hospital is
geographically closest to Brunswick County, NC, which is outside of the
hospital's FY 2015 geographic labor market area and is included in the
current CBSA to which the hospital is reclassified. However, under the
new OMB delineations, Brunswick County is moved from CBSA 48900 to CBSA
34820 (Myrtle Beach-Conway-North Myrtle Beach, SC-NC). Therefore, we
assigned this hospital's reclassification to CBSA 34820 in the proposed
rule. The hospital provided adequate evidence to demonstrate that it is
located within 35-miles from Pender County, NC, which remains part of
CBSA 48900. Because the proximity criteria limit for MGCRB
reclassification of an individual rural hospital is 35 miles (Sec.
412.230(b)(1)), we are approving the hospital's request for
reassignment back to CBSA 48900. The change is reflected in the
proceeding table.
The following table shows hospital reclassification assignments for
hospitals reclassified to CBSAs from which counties were split off and
moved to a different CBSA under the new OMB delineations. The following
table shows the current reclassified CBSA and the CBSA to which CMS is
making reassignments. We note that 23 hospitals terminated their
reclassification status since the proposed rule was published and have
been omitted.

Hospital Reclassification Reassignments for Hospitals That Are
Reclassified to CBSAs From Which Counties Are Split Off and Moved to a
Different CBSA
------------------------------------------------------------------------
CMS Certification Number Current reclassified FY 2015 reassigned
(CCN) CBSA CBSA
------------------------------------------------------------------------
140012 16974 20994
140110 16974 16974
140155 16974 16974
140161 16974 16974
140186 16974 16974
150002 16974 16974
150004 16974 16974
150008 16974 16974
150034 16974 16974
150090 16974 16974
150125 16974 16974
150126 16974 16974
150165 16974 16974
150166 16974 16974
180012 31140 31140
180048 31140 31140
310002 35644 35614
310009 35644 35614
310014 37964 37964
310015 35644 35614
310017 35644 35614
310031 20764 35614
310050 35644 35614
310054 35644 35614
310076 35644 35614
310083 35644 35614
310096 35644 35614
310119 35644 35614
330027 35644 35614
330106 35644 35614
330167 35644 35614
330181 35644 35614
330182 35644 35614
330198 35644 35614
330224 39100 20524
330225 35644 35614
330259 35644 35614
330331 35644 35614
330332 35644 35614
330372 35644 35614
340042 48900 48900

[[Page 49977]]

340068 48900 48900
390044 37964 33874
390096 37964 33874
390316 37964 33874
420085 48900 48900
------------------------------------------------------------------------

Table 9A-2 for this final rule (which is available via the Internet
on the CMS Web site) reflects all reassignments of hospital
reclassifications for FY 2015.
(3) Reclassifications to CBSAs That Contain Hospital's Geographic
County
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074), we
identified 14 reclassified hospitals that would be geographically
located in their reclassified labor market area under the new OMB
delineations. For example, hospital 34-0015 is located in Rowan County,
NC. Rowan County is currently a Micropolitan Statistical Area in NC,
and treated as rural. The hospital is reclassified to CBSA 16740
(Charlotte-Concord-Rock Hill, NC-SC). Under the new OMB delineations,
CBSA 16740 (Charlotte-Concord-Gastonia, NC-SC) would include Rowan
County. Therefore, the current reclassification would become redundant.
CBSA 16740 did not lose any counties to another labor market area;
therefore, assignment to another alternate CBSA would not be an option
under our proposed methodology. Because, by definition, a hospital
would not be ``reclassified'' to its own geographic labor market area,
and maintaining that ``reclassified'' status to its own geographic
labor market area would serve no beneficial purpose for a hospital, we
expected that all such affected hospitals would wish to terminate their
reclassification status. Therefore, we assumed, for purposes of the
proposed rule, that the affected hospitals would be terminating their
reclassification status for the remaining years of their 3-year
reclassification period, and for FY 2015, we proposed to assign them
the wage index of the CBSA in which they are geographically located. We
stated that affected hospitals should inform CMS if they wish to retain
their current reclassification by sending notice to CMS within 45 days
from the publication of the proposed rule. If an affected hospital did
not inform us that they wished to retain their current
reclassification, we assumed that the hospital had elected to terminate
the reclassification. For purposes of the proposed rule, we presented
tables under the presumption that all 14 hospitals would opt to cancel
their reclassification status. We proposed to assign these hospitals
the wage index value of their home area from Table 4A-2 for the
proposed rule (which is available via the Internet on the CMS Web
site), and not include them as reclassified hospitals in Table 9A-2 for
the proposed rule (which is available via the Internet on the CMS Web
site).
We did not receive any public comments on this proposal, nor did
any hospital contact CMS through the WageIndex@cms.hhs.gov mailbox.
Therefore, we are finalizing the proposal without any modifications.
The following hospitals' reclassifications are terminated, and they are
assigned the wage index of the CBSA to which they are geographically
located under the new OMB delineations.

Hospitals Reclassified to Home Labor Market Area
------------------------------------------------------------------------
CMS Certification Number Current geographic Reclassified geographic
(CCN) CBSA CBSA
------------------------------------------------------------------------
340015 34 16740
340129 34 16740
340144 34 16740
420036 42 16740
450596 45 23104
420027 11340 24860
150088 11300 26900
150113 11300 26900
190003 19 29180
440073 44 34980
460017 46 36260
460039 46 36260
190144 19 43340
490019 49 47894
------------------------------------------------------------------------

c. Applications for Reclassifications for FY 2016
Applications for FY 2016 reclassifications are due to the MGCRB by
September 2, 2014 (the first working day of September 2014). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d). As
discussed in section III.B. of the preamble of this final rule, we are
adopting the new OMB labor market area delineations announced on
February 28, 2013. Therefore, hospitals should apply for
reclassifications based on the new OMB delineations we are using for FY
2015. Applications and other information about MGCRB reclassifications
may be obtained via the Internet on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/, or
by calling the MGCRB at (410) 786-1174. The mailing address of the
MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-
2670.3.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074, 28075, and
28304), we proposed changes to the regulations at Sec. 412.232(b)(2)
and Sec. 412.234(a)(3)(iv) to include reference to the most recent OMB
standards for delineating statistical areas (using the most recent
Census Bureau data and estimates) that were adopted by CMS. For rural
groups, the group of hospitals must demonstrate that the county in
which the hospitals are located meets the standards for redesignation
to an MSA as an ``outlying county.'' For urban groups, hospitals
located in counties that are in the same combined statistical area or
CBSA as the urban area to which they seek redesignation qualify as
meeting the proximity requirements for reclassification to the urban
area to which they seek redesignation. We did not propose any changes
to the reclassification policy, but included language in the
regulations to reflect use of the most recent OMB standards for
delineating statistical areas (using the most recent Census Bureau data
and estimates) that are adopted by CMS in consideration of group
reclassification applications submitted for review in FY 2015 (that is
submitted by September 2, 2014 (this date was erroneously stated in the
proposed rule as September 30, 2014), reviewed by the MGCRB in FY 2015,
to be effective in FY 2016) and future years.
We did not receive any public comments on our proposed changes to
the regulations at Sec. 412.232(b)(2) and Sec. 412.234(a)(3)(iv) to
include a reference to the most recent OMB standards for delineating
statistical areas (using the most recent Census Bureau data and
estimates) that are adopted by CMS. Therefore, we are adopting as final
the proposed changes to Sec. 412.232(b)(2) and Sec.
412.234(a)(3)(iv).
3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B)(i) of the Act requires the Secretary to
``treat a hospital located in a rural county adjacent to one or more
urban areas as being located in the urban metropolitan statistical area
to which the greatest number of workers in the county commute'' if
certain adjacency and commuting criteria are met. The criteria utilize
standards for designating Metropolitan Statistical Areas published in
the Federal Register by the Director

[[Page 49978]]

of the Office of Management and Budget (OMB) based on the most recently
available decennial population data. Effective beginning FY 2005, we
used OMB's CBSA standards based on the 2000 Census and the 2000 Census
data to identify counties in which hospitals qualify under section
1886(d)(8)(B) of the Act to receive the wage index of the urban area.
Hospitals located in these counties have been known as ``Lugar''
hospitals and the counties themselves are often referred to as
``Lugar'' counties.
As discussed in section III.B. of the preamble to the proposed
rule, we proposed to implement OMB's revised labor market area
delineations based on the Census 2010 data for purposes of determining
applicable wage indexes for acute care hospitals beginning in FY 2015.
As we have done in the past, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28075 through 28078), we also proposed to use the new OMB
delineations to identify rural counties that would qualify as ``Lugar''
under section 1886(d)(8)(B) of the Act and, therefore, would be
redesignated to urban areas for FY 2015. We proposed to revise the
regulations at Sec. 412.64(b)(3)(i) to reflect the most recent OMB
standards for delineating statistical areas adopted by CMS. In the FY
2015 IPPS/LTCH PPS proposed rule, we stated that, by applying the new
OMB delineations, the number of qualifying counties would increase from
98 in FY 2014 to 127 in FY 2015, as reflected in a chart published in
the proposed rule. Since publication of the proposed rule, we have
discovered a mistake where we inadvertently did not account for
Davidson County, NC (which was a Lugar county in FY 2014 but is in a
rural county no longer qualifying to be Lugar under the new OMB
delineations, as discussed in section III.H.3.c. of the preamble of
this final rule). Therefore, the number of qualifying counties
increases from 99 in FY 2014 to 127 in FY 2015, and we are correcting
this oversight in the preamble of this final rule. After evaluating and
analyzing the 2010 Census commuting data, we proposed that, effective
for discharges on or after October 1, 2014, in accordance with section
1886(d)(8)(B) of the Act, hospitals located in the rural counties
listed in the first column of the table in the proposed rule would be
designated as part of the urban area listed in the second column based
on the criteria discussed above.
Comment: One commenter suggested that Lugar hospitals be considered
rural for all Medicare IPPS purposes other than receiving the urban
wage index.
Response: Lugar status is a deemed status, and there are only two
provisions under the Medicare statute that would allow a Lugar hospital
to be treated as a rural provider: (1) if the hospital is eligible for
an out-migration adjustment under section 1886(d)(13) of the Act; or
(2) if the hospital applies for an urban to rural reclassification
under section 1886(d)(8)(E) of the Act. In either case, the hospital
would be treated as rural for all IPPS purposes, which includes the
wage index.
We did not receive any other specific comments with regard to our
proposal to use the new OMB delineations to identify rural counties
that would qualify as ``Lugar'' under section 1886(d)(8)(B) of the Act.
Therefore, we are finalizing the policy as proposed. We also are
finalizing our proposed revision of the regulations at Sec.
412.64(b)(3)(i) to reflect the most recent OMB standards for
delineating statistical areas adopted by CMS.
In addition, since publication of the proposed rule we discovered
that, in the FY 2015 IPPS/LTCH proposed rule, for five of the Lugar
counties, we had erroneously printed the names and codes of the entire
Metropolitan Statistical Areas rather than the Metropolitan Division
names and codes. Because we recognize Metropolitan Divisions as CBSAs,
we should have printed the division names and codes for the following
counties: Starke County, IN; Fannin County, TX; Hill County, TX; Van
Zandt County, TX; and Island County, WA. The table below contains the
corrected listing of the rural counties designated as urban under
section 1886(d)(8)(B) of the Act. We note that this error was made only
in the chart; that is, the wage index tables and data associated the FY
2015 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS
Web site) properly captured the Metropolitan Divisions for hospitals in
these five counties. We are finalizing that, effective for discharges
on or after October 1, 2014, in accordance with section 1886(d)(8)(B)
of the Act, hospitals located in the rural counties listed in the first
column of the chart below will be designated as part of the urban area
listed in the second column based on the finalized criteria discussed
above.
We note that rural counties that no longer meet the qualifying
criteria to be Lugar are discussed in section III.H.3.c. of the
preamble of this final rule.

Rural Counties Containing Hospitals Redesignated as Urban Under Section 1886(d)(8)(B) of the Act
[Based on new OMB delineations and census 2010 data]
----------------------------------------------------------------------------------------------------------------
Rural county Lugar designated CBSA
----------------------------------------------------------------------------------------------- NEW
County name State CBSA CBSA name
----------------------------------------------------------------------------------------------------------------
Chambers County...................... AL 12220 Auburn-Opelika, AL.......... New.
Cherokee County...................... AL 40660 Rome, GA.................... ................
Cleburne County...................... AL 11500 Anniston-Oxford- New.
Jacksonville, AL.
Macon County......................... AL 12220 Auburn-Opelika, AL.......... ................
Talladega County..................... AL 11500 Anniston-Oxford- ................
Jacksonville, AL.
Denali Borough....................... AK 21820 Fairbanks, AK............... New.
Hot Spring County.................... AR 26300 Hot Springs, AR............. ................
Litchfield County.................... CT 35300 New Haven-Milford, CT....... ................
Bradford County...................... FL 27260 Jacksonville, FL............ ................
Levy County.......................... FL 23540 Gainesville, FL............. ................
Washington County.................... FL 37460 Panama City, FL............. New.
Chattooga County..................... GA 40660 Rome, GA.................... ................
Jackson County....................... GA 12060 Atlanta-Sandy Springs- ................
Roswell, GA.
Lumpkin County....................... GA 12060 Atlanta-Sandy Springs- ................
Roswell, GA.
Polk County.......................... GA 40660 Rome, GA.................... ................
Talbot County........................ GA 17980 Columbus, GA-AL............. ................
Oneida County........................ ID 36260 Ogden-Clearfield, UT........ New.
Christian County..................... IL 44100 Springfield, IL............. ................
Iroquois County...................... IL 28100 Kankakee, IL................ ................

[[Page 49979]]

Logan County......................... IL 44100 Springfield, IL............. ................
Mason County......................... IL 37900 Peoria, IL.................. ................
Ogle County.......................... IL 40420 Rockford, IL................ ................
Union County......................... IL 16060 Carbondale-Marion, IL....... ................
Clinton County....................... IN 29200 Lafayette-West Lafayette, IN ................
Greene County........................ IN 14020 Bloomington, IN............. New.
Henry County......................... IN 26900 Indianapolis-Carmel- ................
Anderson, IN.
Marshall County...................... IN 43780 South Bend-Mishawaka, IN-MI. New.
Parke County......................... IN 45460 Terre Haute, IN............. New.
Spencer County....................... IN 21780 Evansville, IN-KY........... ................
Starke County........................ IN 23844 Gary, IN.................... ................
Tipton County........................ IN 26900 Indianapolis-Carmel- New.
Anderson, IN.
Warren County........................ IN 29200 Lafayette-West Lafayette, IN ................
Boone County......................... IA 11180 Ames, IA.................... ................
Buchanan County...................... IA 47940 Waterloo-Cedar Falls, IA.... ................
Cedar County......................... IA 26980 Iowa City, IA............... ................
Delaware County...................... IA 20220 Dubuque, IA................. New.
Iowa County.......................... IA 26980 Iowa City, IA............... New.
Jasper County........................ IA 19780 Des Moines-West Des Moines, New.
IA.
Franklin County...................... KS 28140 Kansas City, MO-KS.......... New.
Nelson County........................ KY 31140 Louisville/Jefferson County, New.
KY-IN.
Assumption Parish.................... LA 12940 Baton Rouge, LA............. ................
Jefferson Davis Parish............... LA 29340 Lake Charles, LA............ New.
St. Landry Parish.................... LA 29180 Lafayette, LA............... New.
Oxford County........................ ME 30340 Lewiston-Auburn, ME......... New.
Caroline County...................... MD 12580 Baltimore-Columbia-Towson, New.
MD.
Franklin County...................... MA 44140 Springfield, MA............. New.
Allegan County....................... MI 24340 Grand Rapids-Wyoming, MI.... ................
Ionia County......................... MI 24340 Grand Rapids-Wyoming, MI.... New.
Lenawee County....................... MI 11460 Ann Arbor, MI............... New.
New.aygo County...................... MI 24340 Grand Rapids-Wyoming, MI.... New.
Shiawassee County.................... MI 29620 Lansing-East Lansing, MI.... ................
Tuscola County....................... MI 40980 Saginaw, MI................. ................
Goodhue County....................... MN 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Meeker County........................ MN 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Rice County.......................... MN 33460 Minneapolis-St. Paul- New.
Bloomington, MN-WI.
Pearl River County................... MS 25060 Gulfport-Biloxi-Pascagoula, ................
MS.
Stone County......................... MS 25060 Gulfport-Biloxi-Pascagoula, New.
MS.
Dade County.......................... MO 44180 Springfield, MO............. ................
Otoe County.......................... NE 30700 Lincoln, NE................. New.
Douglas County....................... NV 16180 Carson City, NV............. New.
Lyon County.......................... NV 16180 Carson City, NV............. ................
Los Alamos County.................... NM 42140 Santa Fe, NM................ ................
Cayuga County........................ NY 45060 Syracuse, NY................ ................
Cortland County...................... NY 27060 Ithaca, NY.................. New.
Genesee County....................... NY 40380 Rochester, NY............... ................
Greene County........................ NY 10580 Albany-Schenectady-Troy, NY. ................
Lewis County......................... NY 48060 Watertown-Fort Drum, NY..... New.
Montgomery County.................... NY 10580 Albany-Schenectady-Troy, NY. New.
Schuyler County...................... NY 27060 Ithaca, NY.................. ................
Seneca County........................ NY 40380 Rochester, NY............... New.
Camden County........................ NC 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Caswell County....................... NC 15500 Burlington, NC.............. ................
Granville County..................... NC 20500 Durham-Chapel Hill, NC...... ................
Greene County........................ NC 24780 Greenville, NC.............. New.
Harnett County....................... NC 39580 Raleigh, NC................. ................
Polk County.......................... NC 43900 Spartanburg, SC............. ................
Wilson County........................ NC 40580 Rocky Mount, NC............. New.
Traill County........................ ND 24220 Grand Forks, ND-MN.......... New.
Ashtabula County..................... OH 17460 Cleveland-Elyria, OH........ ................
Champaign County..................... OH 44220 Springfield, OH............. ................
Columbiana County.................... OH 49660 Youngstown-Warren-Boardman, ................
OH-PA.
Harrison County...................... OH 48260 Weirton-Steubenville, WV-OH. New.
Preble County........................ OH 19380 Dayton, OH.................. New.
Clinton County....................... PA 48700 Williamsport, PA............ ................
Fulton County........................ PA 25180 Hagerstown-Martinsburg, MD- New.
WV.
Greene County........................ PA 38300 Pittsburgh, PA.............. ................
Lawrence County...................... PA 38300 Pittsburgh, PA.............. New.

[[Page 49980]]

Schuylkill County.................... PA 39740 Reading, PA................. ................
Susquehanna County................... PA 13780 Binghamton, NY.............. ................
Adjuntas Municipio................... PR 38660 Ponce, PR................... New.
Coamo Municipio...................... PR 41980 San Juan-Carolina-Caguas, PR New.
Las Mar[iacute]as Municipio.......... PR 32420 Mayag[uuml]ez, PR........... New.
Maricao Municipio.................... PR 32420 Mayag[uuml]ez, PR........... New.
Salinas Municipio.................... PR 25020 Guayama, PR................. New.
Clarendon County..................... SC 44940 Sumter, SC.................. ................
Colleton County...................... SC 16700 Charleston-North Charleston, New.
SC.
Lee County........................... SC 44940 Sumter, SC.................. ................
Marion County........................ SC 22500 Florence, SC................ New.
New berry County..................... SC 17900 Columbia, SC................ New.
Meigs County......................... TN 17420 Cleveland, TN............... ................
Blanco County........................ TX 12420 Austin-Round Rock, TX....... New.
Bosque County........................ TX 47380 Waco, TX.................... ................
Calhoun County....................... TX 47020 Victoria, TX................ New.
Fannin County........................ TX 19124 Dallas-Plano-Irving, TX..... ................
Grimes County........................ TX 17780 College Station-Bryan, TX... ................
Harrison County...................... TX 30980 Longview, TX................ ................
Henderson County..................... TX 46340 Tyler, TX................... ................
Hill County.......................... TX 23104 Fort Worth-Arlington, TX.... New.
Milam County......................... TX 12420 Austin-Round Rock, TX....... ................
Van Zandt County..................... TX 19124 Dallas-Plano-Irving, TX..... ................
Willacy County....................... TX 15180 Brownsville-Harlingen, TX... ................
King and Queen County................ VA 40060 Richmond, VA................ New.
Louisa County........................ VA 40060 Richmond, VA................ New.
Madison County....................... VA 16820 Charlottesville, VA......... New.
Orange County........................ VA 47900 Washington-Arlington- New.
Alexandria, DC-VA-MD-WV.
Page County.......................... VA 25500 Harrisonburg, VA............ ................
Shenandoah County.................... VA 49020 Winchester, VA-WV........... ................
Southampton County................... VA 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Surry County......................... VA 47260 Virginia Beach-Norfolk- New.
Newport News, VA-NC.
Island County........................ WA 42644 Seattle-Bellevue-Everett, WA ................
Mason County......................... WA 36500 Olympia-Tumwater, WA........ ................
Jackson County....................... WV 16620 Charleston, WV.............. ................
Morgan County........................ WV 25180 Hagerstown-Martinsburg, MD- New.
WV.
Roane County......................... WV 16620 Charleston, WV.............. ................
Green Lake County.................... WI 22540 Fond du Lac, WI............. ................
Jefferson County..................... WI 33340 Milwaukee-Waukesha-West ................
Allis, WI.
Walworth County...................... WI 33340 Milwaukee-Waukesha-West ................
Allis, WI.
----------------------------------------------------------------------------------------------------------------

a. New Lugar Areas for FY 2015
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we stated
that of the 127 qualifying counties identified as Lugar counties based
on the new OMB delineations, 58 counties would be newly designated as
Lugar for FY 2015 if we finalize our proposed adoption of the new OMB
delineations. Hospitals in these counties, with at least 25 percent of
their workers commuting to a higher wage area, effective October 1,
2014, would be deemed to be located in the CBSA to which the highest
number of their workers commute (which is identified in the column
titled ``Lugar Designated CBSA'' in the table above). Hospitals in
these counties would receive the reclassified urban wage index of the
corresponding Lugar Designated CBSA, unless they choose to waive their
Lugar status, as discussed later in this section.
In the proposed rule (79 FR 28077), we stated that some areas that
are currently urban counties would be geographically rural if we
adopted the new OMB delineations and would meet the requirements for
redesignation as Lugar areas. As described in section III.B.2.e.(2) of
the preamble of the proposed rule, we proposed a 3-year hold harmless
transitional wage index adjustment for hospitals located in urban
counties that become rural under the new OMB delineations. Because
Lugar status is a form of redesignation, hospitals that currently are
located in urban counties that would become rural under the new OMB
delineations and are also considered Lugar areas under the new OMB
delineations would not be eligible for the 3-year transition wage index
adjustment unless they chose to waive Lugar status for FY 2015 (as
discussed later in this section) and sought no other form of wage index
reclassification.
As discussed above, we did not receive any public comments with
regard to our proposal to use the new OMB delineations to identify
rural counties that would qualify as ``Lugar'' under section
1886(d)(8)(B) of the Act, and we are finalizing the policy as proposed.
We refer readers to the summary of public comments and our responses
regarding the proposed transition policies for the wage index as a
result of adoption of the OMB delineations for FY 2015 in section
III.B.2.e. of the preamble of this final rule.

[[Page 49981]]

b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we
stated that by using Table 4C associated with the proposed rule (which
is available via the Internet on the CMS Web site), affected hospitals
could compare the reclassified wage index for the labor market area
into which they would be reclassified by the MGCRB to the reclassified
wage index for the area to which they are redesignated under section
1886(d)(8)(B) of the Act. We stated that hospitals may withdraw from an
MGCRB reclassification within 45 days of the publication of the FY 2015
proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.)
We treat New England deemed counties in a manner consistent with
how we treat Lugar counties. (We refer readers to the FY 2008 IPPS
final rule with comment period (72 FR 47337 through 47338) for a
discussion of this policy.)
Since publication of the proposed rule, we discovered that there
are four hospitals in rural counties that are newly deemed Lugar areas
for FY 2015 that also have MGCRB reclassifications to the same CBSAs to
which they are redesignated as Lugar. Lugar hospitals are treated like
reclassified hospitals for purposes of determining their applicable
wage index and receive the reclassified wage index for the urban area
to which they have been redesignated. Because the Lugar redesignated
CBSA is now the same as the MGCRB reclassified CBSA, the MGCRB
reclassification becomes redundant. We note that hospitals with Lugar
redesignations and hospitals with MGCRB reclassifications receive the
wage index for hospitals that are reclassified as provided in Table 4C-
2 associated with this final rule (which is available via the Internet
on the CMS Web site). Table 9A-2 associated with this final rule (which
is available via the Internet on the CMS Web site) reflects the
reclassified and redesignated hospitals. Hospitals that are
redesignated as Lugar are indicated as such when the ``Lugar'' column
is populated. Although we did indicate in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28077) that hospitals redesignated as Lugar that
also had an MGCRB reclassification may compare the reclassified wage
index for the labor market area into which they would be reclassified
by the MGCRB to the reclassified wage index for the area to which they
are redesignated under section 1886(d)(8)(B) of the Act, and terminate
or withdraw from an MGCRB reclassification within 45 days of the
publication of the proposed rule, we acknowledge that we did not
highlight these four hospitals that also are Lugar that would have
redundant reclassifications. We also note that these hospitals did not
send requests to the MGCRB to terminate their reclassifications.
Because the new Lugar status would deem these hospitals redesignated to
the same area to which they have an approved MGCRB reclassification,
the reclassified wage index would be the same for these four hospitals
in either scenario. We realize that, for this reason, the hospitals may
not have seen a need to withdraw the MGCRB reclassification. Because we
did not state in the proposed rule that we would expect that these
affected hospitals would be terminating the remaining years of their 3-
year reclassification period, for FY 2015 we are not updating the Lugar
column on Table 9A-2 for this final rule. However, we have indicated in
a footnote that, under the new OMB delineations, these providers are
now redesignated as Lugar to the same area to which they have an
existing MGCRB reclassification that they did not terminate. We
emphasize that the effect on the wage index of these four hospitals is
immaterial because hospitals redesignated as Lugar as well as hospitals
with approved MGCRB reclassifications both receive the reclassified
wage index for the urban area to which they have been redesignated or
reclassified.

Hospitals Redesignated as Lugar to an Area Where They Have an Approved MGCRB Reclassification for FY 2015
----------------------------------------------------------------------------------------------------------------
MGCRB
CMS Certification No. (CCN) Rural county name Lugar CBSA reclassification
CBSA
----------------------------------------------------------------------------------------------------------------
150076..................................... Marshall County, IN............ 43780 43780
190017..................................... St. Landry Parish, LA.......... 29180 29180
390016..................................... Lawrence County, PA............ 38300 38300
420030..................................... Colleton County, SC............ 16700 16700
----------------------------------------------------------------------------------------------------------------

c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as
Lugar
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077 through
28078), we discussed that if we adopted the new OMB delineations, 29
rural counties would no longer meet the qualifying criteria to be
redesignated as Lugar effective October 1, 2014, either because they
would be geographically located in an urban area, or they would fail to
meet the 25 percent cumulative out-migration threshold with application
of the new 2010 Census commuting data. Since the publication of the
proposed rule, we have discovered a mistake where we inadvertently did
not account for Davidson County, NC. Therefore, the number of rural
counties that will no longer meet the qualifying criteria to be
redesignated as Lugar effective October 1, 2014, as indicated above, is
30 as opposed to 29. We are correcting this oversight in the preamble
of this final rule.
Counties that were deemed urban under section 1886(d)(8)(B) of the
Act in FY 2014, but would be geographically located in an urban area
under the new OMB delineations for FY 2015 are:

Windham County, CT
Flagler County, FL
Walton County, FL
Morgan County, GA
Peach County, GA
De Witt County, IL
Allen County, KY
St. James Parrish, LA
Montcalm County, MI
Fillmore County, MN
Davidson County, NC
Lincoln County, NC

[[Page 49982]]

Cotton County, OK
Linn County, OR
Adams County, PA
Monroe County, PA
Falls County, TX
Buckingham County, VA
Floyd County, VA
Green County, WI

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

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

In section III.B.2.e.(2) of the preamble of the proposed rule, to
help ease dramatic negative impacts in payment for hospitals designated
as urban under the current FY 2014 OMB delineations, but would be
classified as rural under the new OMB delineations, for FYs 2015, 2016,
and 2017, assuming no other form of wage index reclassification or
redesignation is granted, we proposed to assign these hospitals the FY
2015 area wage index value of the urban CBSA to which they
geographically belonged in FY 2014 (with the rural and imputed floors
applied and with the rural floor budget neutrality adjustment applied
to the area wage index). (For purposes of the wage index computation,
the wage data of these hospitals would remain assigned to the statewide
rural area in which they are located.) Similarly, we proposed that the
same 3-year transition apply to hospitals located in those counties
that would lose their deemed urban designation under section
1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB
delineations. Because these hospitals would, in fact, lose their
designated urban status, we proposed to extend the 3-year hold harmless
transitional wage index adjustment to these hospitals located in
counties formerly designated as urban under section 1886(d)(8)(B) of
the Act. That is, for FYs 2015, 2016, and 2017, assuming no other form
of wage index reclassification or redesignation is granted, we proposed
to assign these hospitals the FY 2015 area wage index value of the
urban CBSA to which they were designated as urban in FY 2014 (with the
rural and imputed floors applied and with the rural floor budget
neutrality adjustment applied). We proposed to use the wage data from
these hospitals as part of computing the rural wage index. In addition,
during this 3-year transition period, these hospitals would be eligible
to apply for reclassification by the MGCRB. As discussed in section
III.B.2.e.(3) of the preamble of the proposed rule, we proposed that if
a hospital is currently located in an urban county that would become
rural for FY 2015 under the new OMB delineations, and such hospital
seeks and is granted any reclassification or redesignation during FYs
2015, 2016, or 2017, the hospital would permanently lose its 3-year
transitional assigned wage index, and would not be able to reinstate
it. Similarly, we proposed that this policy also apply to hospitals
located in those counties that would lose their deemed urban
designation under section 1886(d)(8)(B) of the Act and would become
rural if we adopt the new OMB delineations. In FY 2018, we proposed
that these hospitals would receive their statewide rural wage index.
As indicated earlier, we did not receive any public comments with
regard to our proposal to use the new OMB delineations to identify
rural counties that would qualify as ``Lugar'' under section
1886(d)(8)(B) of the Act. Therefore, we are finalizing the policy and
designations as proposed. As discussed previously, for FYs 2015, 2016,
and 2017, assuming no other form of wage index reclassification or
redesignation is granted, we are assigning hospitals that are in urban
counties that will become rural under the new OMB delineations to the
FY 2015 area wage index value of the urban CBSA to which they
geographically belonged in FY 2014 (with the rural and imputed floors
applied and with the rural floor budget neutrality adjustment applied
to the area wage index). (For purposes of the wage index computation,
the wage data of these hospitals will remain assigned to the statewide
rural area in which they are located.) Similarly, the same 3-year
transition will apply to hospitals located in those counties that will
lose their deemed urban designation under section 1886(d)(8)(B) of the
Act and will become rural under the new OMB delineations. We will use
the wage data from these hospitals as part of computing the rural wage
index. In FY 2018, these hospitals will receive their statewide rural
wage index. Furthermore, if any such hospital seeks and is granted any
reclassification or redesignation during FYs 2015, 2016, or 2017, the
hospital will permanently lose its 3-year transitional assigned wage
index and will not be able to reinstate it. We refer readers to
summaries of public comments and our responses regarding proposed
transition policies for the wage index in section III.B.2.e. of the
preamble of this final rule.
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section IV.F. of the preamble of this final rule.)
In addition, we adopted a minor procedural change in that rule that
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45
days from the publication of the proposed rule) to waive its urban
status for the full 3-year period for which its out-migration
adjustment is effective. By doing so, such a Lugar hospital would no
longer be required during the second and third years of eligibility for
the out-migration adjustment to advise us annually that it prefers to
continue being treated as rural and receive the out-migration
adjustment. Therefore, under the procedural change, a Lugar hospital
that requests to waive its urban status in order to receive the rural
wage index in addition to the out-migration adjustment would be deemed
to have accepted the out-migration adjustment and agrees to be treated
as rural for the duration of its 3-year eligibility period, unless,
prior to its second or third year of eligibility, the hospital
explicitly notifies CMS in writing, within the required period
(generally 45 days from the publication of the proposed rule), that it
instead elects to return to its deemed urban status and no longer
wishes to accept the out-migration adjustment. If the hospital does
notify CMS that it is electing to return to its deemed urban status, it
would again be treated as urban for all IPPS payment purposes.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.
Comment: One commenter sought clarification about whether a
hospital can waive Lugar status in other

[[Page 49983]]

instances, such as to retain a special rural status such as CAH, SCH,
or MDH, and not just when a hospital is eligible for the out-migration
adjustment.
Response: As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600, the statute provides two methods for a Lugar
hospital to be treated as rural for Medicare payment purposes: (1) If
the hospital is eligible for an out-migration adjustment under section
1886(d)(13) of the Act; or (2) if the hospital applies for an urban to
rural reclassification under section 1886(d)(8)(E) of the Act. There
are no other provisions under the Medicare statute that would allow a
Lugar hospital to be treated as a rural provider.
5. Update of Application of Urban to Rural Reclassification Criteria
Section 401(a) of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (Pub. L. 106-113), which amended section
1886(d)(8) of the Act by adding a new paragraph (E), directed the
Secretary to treat any subsection (d) hospital located in an urban area
as being located in the rural area of the State in which the hospital
is located, providing that the hospital applied for reclassification in
a manner determined by the Secretary and met certain criteria. As
discussed in the FY 2001 interim final rule (65 FR 47029 through
47031), we codified in regulation at Sec. 412.103 the application
process and the qualifying criteria for any hospital seeking rural
reclassification.
In order to be approved for a rural reclassification, a hospital
that is located in an urban area must meet one of the following four
criteria under section 1886(d)(8)(E)(ii) of the Act (codified at Sec.
412.103): (1) The hospital is located in a rural census tract of an
MSA, as determined under the most recent version of the Goldsmith
Modification, the Rural-Urban Commuting Area (RUCA) codes; (2) the
hospital is located in an area designated by any law or regulation of
such State as a rural area or is designated by such State as a rural
hospital; (3) the hospital would qualify as a RRC or SCH if the
hospital were located in an urban area; and (4) the hospital meets such
other criteria as the Secretary may specify.
On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which
established revised delineations for Metropolitan Statistical Areas,
Micropolitan Statistical Areas, and Combined Statistical Areas, and
provided guidance on the use of the delineations of these statistical
areas. These delineations are based on 2010 decennial Census data.
Several modifications of RUCA codes were necessary to take into account
updated commuting data and revised OMB delineations. We refer readers
to the U.S. Department of Agriculture's Economic Research Service Web
site for a detailed listing of updated RUCA codes found at: https://www.ers.usda.gov/data-products/rural-urban-commuting-area-codes.aspx.
The updated RUCA code definitions were introduced in late 2013.
As discussed at Sec. 412.103(f), the duration of an approved rural
reclassification remains in effect without need for reapproval unless
there is a change in the circumstances under which the classification
was approved. If a hospital located in an urban area was approved for a
rural reclassification under Sec. 412.103(a)(1), that reclassification
would no longer be valid if the hospital is no longer located within a
rural census tract of an MSA defined as an RUCA. Therefore, in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28078), we encouraged all
hospitals with active rural reclassifications under section
1886(d)(8)(E) of the Act to review their original reclassification
application and determine whether the reclassification status would
still apply. As discussed in section VI.C.2. of the preamble of the
proposed rule, we proposed a 2-year grace period allowing affected CAHs
additional time to seek a new rural reclassification without the threat
of losing its CAH status. As discussed in section VI.C.2. of the
preamble of the proposed rule, we did not propose a grace period for
other types of hospitals to seek a new rural reclassification. We noted
that rural reclassification status under Sec. 412.103 is effective as
of the filing date of the application. Therefore, if the change in RUCA
codes invalidates any hospital's rural reclassification status, we
believe hospitals will have adequate time to apply for a new
reclassification using an alternative qualification criterion specified
at either Sec. 412.103(a)(2) or Sec. 412.103(a)(3). A rural referral
center (RRC) or a sole community hospital (SCH) that continues to meet
the appropriate qualification criteria would, in itself, qualify for a
rural reclassification. If a complete application is received before
October 1, 2014, and is approved by the CMS Regional Office, the
hospital would experience no interruption in its rural status.
Comment: Several commenters requested that additional provider
types (SCHs and MDHs) be afforded the 2-year transition period of
deemed rural status that was granted to CAHs. Commenters stated the
critical role these hospitals serve in their communities, and cited the
administrative burden that would be required to obtain rural status in
order to maintain their provider type. Commenters asserted that
hospitals that obtain an urban to rural reclassification are not
entitled to receive an outmigration adjustment and would require
additional time to assess their appropriate options.
Response: We thank commenters for sharing their concerns. However,
we do not believe that extending a 2-year transition period of deemed
rural status is necessary for additional provider types. While it is
true that there are potential payment consequences for a CAH, SCH, or
MDH currently located in a rural area that becomes urban under the new
OMB delineations, the payment consequences for CAHs are generally
greater, because, unlike SCHs and MDHs, CAHs are entirely excluded from
the IPPS and would face an end to payments based on 101 percent of
their reasonable costs. In addition, given the different Conditions of
Participation (CoPs) for CAHs, and that it would be generally more
difficult for a CAH to have to meet the hospital CoPs instead of the
CAH CoPs, only a CAH also faces the potential loss of its ability to
continue to participate in the Medicare and Medicaid programs.
Specifically, to avoid termination not only of its CAH status (and
associated cost-based reimbursement), but of its Medicare agreement in
its entirety, the CAH would have to convert back to a hospital,
including demonstrating via a survey that it complies with the hospital
CoPs, which are generally more stringent than those for CAHs. We
believe that the combination of the generally greater payment
consequences for CAHs relative to other provider types combined with
the unique consequences for CAHs with respect to the CoPs make it
appropriate for CAHs to be afforded a 2-year transition period in which
to reclassify not afforded to other provider types.
SCHs and MDHs that were located in rural areas that became urban
under the new OMB delineations could have known of the upcoming change
since February 2013 (when OMB published the new delineations); thus,
these hospitals have had adequate time to assess options. SCHs and MDHs
still can seek approval for rural reclassification for FY 2015 under
Sec. 412.103 if they meet the requirements of this section, provided
that they apply before the beginning of FY 2015. This approval of rural
status would be effective as of the date of the application. If any
hospital's wage index is negatively affected due to the adoption of the
new OMB

[[Page 49984]]

delineations, the hospital will receive a 50/50 blended wage index for
FY 2015 (as discussed previously).
With respect to the out-migration adjustment, commenters noted
correctly that hospitals reclassified rural under section 412.103 are
not eligible to receive an out-migration adjustment. Section
1886(d)(13)(G) of the Act specifies that a hospital is not eligible to
receive an out-migration adjustment if it is granted any form of wage
index reclassification, including urban to rural reclassification. We
believe that a hospital that chooses to reclassify to a particular
labor market area should not also receive an additional payment benefit
to reflect commuting patterns within its home area.
After consideration of the public comments we received, we are not
implementing any additional changes to grant other provider types a
transition period during which to reclassify as rural similar to that
being adopted for CAHs. We refer readers to section VI.C.2. of the
preamble of this final rule for a discussion of the CAH transition
period policy.

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

In accordance with section 1886(d)(13) of the Act, as added by
section 505 of Public Law 108-173, beginning with FY 2005, we
established a process to make adjustments to the hospital wage index
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS
final rule (69 FR 49061), provides for an increase in the wage index
for hospitals located in certain counties that have a relatively high
percentage of hospital employees who reside in the county but work in a
different county (or counties) with a higher wage index.
When this provision was implemented for the FY 2005 wage index, we
analyzed commuting data compiled by the U.S. Census Bureau which was
derived from a special tabulation of the 2000 Census journey-to-work
data for all industries (CMS extracted data applicable to hospitals).
These data were compiled from responses to the ``long-form'' survey,
which the Census Bureau used at the time, and it contained questions on
where residents in each county worked (69 FR 49062). However, the 2010
Census was ``short form'' only; therefore, this information was not
collected as part of the 2010 Census. The Census Bureau is working with
CMS to provide an alternative dataset based on the latest available
data that is expected to meet our needs for developing a new out-
migration adjustment. We believe we will have the necessary time to
obtain, review and analyze the data in order to propose new out-
migration adjustments based on new commuting patterns developed from
the 2010 Census data beginning with FY 2016. Section 1886(d)(13)(B) of
the Act requires the Secretary to use data the Secretary determines to
be appropriate to establish the qualifying counties. The data used for
the FY 2014 out-migration adjustment are the most recent data that have
been analyzed, and we believe that these data are appropriate to
establish the qualifying counties. Therefore, in the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28079 through 28080), we proposed that the FY
2015 out-migration adjustments continue to be based on the 2000 Census
data. We also proposed that the FY 2015 out-migration adjustments
continue to be based on the policies, procedures, and computation that
were used for the FY 2014 out-migration adjustment.
We did not receive any public comments with regard to the out-
migration adjustment for FY 2015. Therefore, for FY 2015, we are
finalizing our proposal that the FY 2015 out-migration adjustment
continue to be based on the 2000 Census data used for the FY 2014 out-
migration adjustment. We also are finalizing our proposal that the out-
migration adjustment be based on the policies, procedures, and
computation that were used for the FY 2014 out-migration adjustment.
(We refer readers to a full discussion of the adjustment, including
rules on deeming hospitals reclassified under section 1886(d)(8) or
section 1886(d)(10) of the Act to have waived the out-migration
adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601
through 51602)). Table 4J, which is available via the Internet on the
CMS Web site, lists the out-migration adjustments for the FY 2015 wage
index.
Section 1886(d)(13)(F) of the Act states that ``[a] wage index
increase under this paragraph shall be effective for a period of 3
fiscal years, except that the Secretary shall establish procedures
under which a subsection (d) hospital may elect to waive the
application of such wage index increase.'' Therefore, for FY 2015,
because we are continuing to use the out-migration adjustment data used
for FY 2014, consistent with the statute, we also proposed to allow
hospitals that qualified in FY 2013 or FY 2014 to receive the out-
migration adjustment based on the commuting data and the CBSA
delineations used for FY 2014 to continue to receive the same out-
migration adjustment for the remainder of their 3-year qualification
period. Similarly, if a hospital qualifies for and opts to receive the
out-migration adjustment for the first time in FY 2015, we also
proposed to allow that hospital to receive the out-migration adjustment
based on the data used for FY 2014 for FYs 2015, 2016, and 2017.
Accordingly, even if we propose to adopt new out-migration adjustment
data for FY 2016, as we believe we will be able to do, hospitals that
are already receiving an out-migration adjustment beginning with a
fiscal year prior to FY 2016 would still receive their out-migration
adjustment based on the data used for FY 2014 for the years that remain
of their 3-year qualification period in FY 2016 and after.
We did not receive any public comments with regard to our
proposals. Therefore, we are finalizing our proposal that hospitals
that qualified in FY 2013 or FY 2014 to receive the out-migration
adjustment based on the commuting data and the CBSA delineations used
for FY 2014 will continue to receive the same out-migration adjustment
for the remainder of their 3-year qualification period. If a hospital
qualifies for and opts to receive the out-migration adjustment for the
first time in FY 2015, we will allow that hospital to receive the out-
migration adjustment based on the data used for FY 2014 for FYs 2015,
2016, and 2017.
We intend to address application of the FY 2016 out-migration
adjustment in greater detail in the FY 2016 proposed rule. However, in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28079), we solicited
public comments on how to implement the new out-migration adjustment
data for FY 2016, given the statutory requirement at section
1886(d)(13)(F) of the Act that an out-migration adjustment be effective
for 3 fiscal years. We did not receive any public comments on how to
implement the new out-migration adjustment data for FY 2016.
As discussed in section III.B. of the preamble of this final rule,
we are using OMB's new labor market area delineations based on the 2010
Census data to identify counties qualifying as Lugar counties for FY
2015. In section III.H.3 of the preamble of this final rule, we discuss
hospitals located in rural counties that are deemed to be urban under
section 1886(d)(8)(B) of the Act. These rural counties are known as
``Lugar'' counties. Under the new OMB delineations, there are counties
newly qualifying as Lugar as well as counties that were previously
Lugar counties that will no longer meet the criteria to be redesignated
as Lugar. As discussed in

[[Page 49985]]

section III.H.4. of the preamble of this final rule, if a Lugar
hospital qualifies for and accepts the out-migration adjustment, it
must waive its deemed urban status and can do so for the 3-year period
for which the out-migration adjustment is effective. Therefore,
hospitals located in counties newly designated as Lugar due to the new
OMB delineations will have the choice to either maintain their Lugar
status or waive it in order to receive the out-migration adjustment in
FY 2015 based on the out-migration adjustment data used for FY 2014.
On the other hand, there are hospitals in counties deemed to be
Lugar under the current OMB delineations that waived their Lugar status
for the out-migration adjustment, but are not Lugar under the new OMB
delineations. These hospitals will continue to receive the out-
migration adjustment for the 3-year eligibility period through FY 2015
or FY 2016. However, these hospitals that are located in urban counties
under the new OMB delineations, and wish to continue to maintain their
rural status effective October 1, 2014, must do so by reclassifying
from urban to rural under Sec. 412.103. Section 1886(d)(13)(G) of the
Act states that a hospital cannot simultaneously receive the out-
migration adjustment and be subject to a reclassification under section
1886(d)(8) or 1886(d)(10) of the Act. Therefore, if such hospital is
not located in a geographically rural area under the new OMB
delineations, and reclassifies under Sec. 412.103 of the regulations
in order to be treated as rural for IPPS purposes, the hospital is
ineligible to receive an out-migration adjustment, even if the 3-year
eligibility period has not expired.
As discussed in section III.B.5. of the preamble of this final
rule, we are finalizing our proposal to apply a 1-year blended wage
index for any provider that experiences a decrease in wage index value
due to the implementation of the new OMB labor market area
delineations. This policy creates a wage index that is 50 percent of
the wage index derived using the current FY 2014 OMB delineations, and
50 percent of the wage index based on the new OMB delineations. As
discussed in section III.B.2.e.(4) of the preamble of this final rule,
as we proposed, we are applying this blended wage index value to any
affected hospital in a budget neutral manner. However, we proposed that
hospitals receiving the out-migration adjustment would have it added to
the result of the 50/50 blended wage index, after budget neutrality is
applied. We established the blended wage index transition adjustment
specifically to address any negative impact that may be caused by the
adoption of the new OMB delineations in FY 2015. To specifically
identify and address any such negative payment impact, we proposed to
apply the out-migration adjustment independent of the blended wage
index and other wage index adjustments (for example, the rural floor)
and related budget neutrality adjustments. This is consistent with our
current policy to apply the out-migration adjustment after all other
wage index adjustments and related budget neutrality adjustments have
been applied. Therefore, we believe the out-migration adjustment would
be properly applied as a supplemental addition to a hospital's final
wage index value, similar to our treatment of hospitals receiving the
frontier State floor value of 1.00, as described under 42 CFR
412.64(m), that also qualify for an out-migration adjustment and would
receive that adjustment.
One group of commenters suggested CMS made an error in calculating
the rural wage index for Connecticut under the old OMB delineations (as
discussed in section III.B.2.e.(4) of the preamble of this final rule)
for the purpose of applying the proposed transition blend. We respond
to this comment in section III.B.2.e.(4) of the preamble of this final
rule, and we refer readers to this section for further discussion.
After consideration of the public comments we received, we are
finalizing our proposal without modification that we will add the out-
migration adjustment for hospitals receiving such adjustment to the
result of the 50/50 blended wage index, after budget neutrality is
applied. Therefore, we will apply the out-migration adjustment
independent of the blended wage index and other wage index adjustments
(for example, the rural floor) and related budget neutrality
adjustments.

J. Process for Requests for Wage Index Data Corrections

The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2015 wage index were made
available on September 13, 2013, through the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this file does not
alter the current wage index process or schedule. We notify the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encourage hospitals to sign up for automatic notifications of
information about hospital issues and the scheduling of the Hospital
Open Door forums at the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/.
In a memorandum dated September 16, 2013, we instructed all MACs to
inform the IPPS hospitals they service of the availability of the wage
index data files and the process and timeframe for requesting revisions
(including the specific deadlines listed below). We also instructed the
MACs to advise hospitals that these data were also made available
directly through their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the September 13, 2013 wage and occupational mix data files, the
hospital was to submit corrections along with complete, detailed
supporting documentation to its MAC by November 21, 2013. Hospitals
were notified of this deadline and of all other deadlines and
requirements, including the requirement to review and verify their data
as posted in the preliminary wage index data files on the Internet,
through the September 16, 2013 memorandum referenced above.
In the September 16, 2013 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in September, highlight the revised
cells on its spreadsheet, and submit its spreadsheet(s) and complete
documentation to its MAC no later than November 21, 2013.
The MACs notified the hospitals by early-February 2014 of any
changes to the wage index data as a result of the desk reviews and the
resolution of the hospitals' late-November revision requests. The MACs
also submitted the revised data to CMS by late January 2014. CMS
published the proposed wage index public use files that included
hospitals' revised wage index data on February 20, 2014. Hospitals had
until March 3, 2014, to submit requests to the MACs for reconsideration
of adjustments made by the MACs as a result of the desk review, and to
correct errors due to CMS' or the

[[Page 49986]]

MAC's mishandling of the wage index data. Hospitals also were required
to submit sufficient documentation to support their requests.
After reviewing requested changes submitted by hospitals, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by April 9, 2014. The deadline for
a hospital to request CMS intervention in cases where the hospital
disagreed with the MAC's policy interpretations was April 16, 2014. We
note that, beginning with the FY 2015 wage index, in accordance with
the FY 2015 wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the April appeals
had to be sent via mail and email. We refer readers to the wage index
timeline for complete details.
Hospitals were given the opportunity to examine Table 2, which was
listed in section VI. of the Addendum to the proposed rule and
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. Table 2 contained each
hospital's proposed adjusted average hourly wage used to construct the
wage index values for the past 3 years, including the FY 2011 data used
to construct the proposed FY 2015 wage index. We noted that the
proposed hospital average hourly wages shown in Table 2 only reflected
changes made to a hospital's data that were transmitted to CMS by
February 26, 2014.
The final wage index data public use files were posted on May 2,
2014 on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. The May 2014 public use files are made available
solely for the limited purpose of identifying any potential errors made
by CMS or the MAC in the entry of the final wage index data that
resulted from the correction process described above (revisions
submitted to CMS by the MACs by April 9, 2014).
After the release of the May 2014 wage index data files, changes to
the wage and occupational mix data could only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by the
MACs on or before April 9, 2014.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 20,
2014 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the May 2014 final public use files, a hospital
believed that its wage or occupational mix data were incorrect due to a
MAC or CMS error in the entry or tabulation of the final data, the
hospital was given the opportunity to notify both its MAC and CMS
regarding why the hospital believes an error exists and provide all
supporting information, including relevant dates (for example, when it
first became aware of the error). The hospital was required to send its
request to CMS and to the MAC no later than June 2, 2014. Similar to
the April appeals, beginning with the FY 2015 wage index, in accordance
with the FY 2015 wage index timeline posted on the CMS Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the June appeals
were required to be sent via mail and email to CMS and the MACs. We
refer readers to the wage index timeline for complete details. (We
refer readers to section II.K. of the preamble to this final rule where
we are making revisions to the wage index timetable.)
Verified corrections to the wage index data received timely by CMS
and the MACs (that is, by June 2, 2014) were incorporated into the
final wage index in this FY 2015 IPPS/LTCH PPS final rule, which will
be effective October 1, 2014.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2015 payment rates. Accordingly,
hospitals that did not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the MAC's decision with respect to requested
changes. Specifically, our policy is that hospitals that do not meet
the procedural deadlines set forth above will not be permitted to
challenge later, before the PRRB, the failure of CMS to make a
requested data revision. We refer readers also to the FY 2000 IPPS
final rule (64 FR 41513) for a discussion of the parameters for appeals
to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the MAC's attention. Moreover,
because hospitals had access to the final wage index data by early May
2014, they had the opportunity to detect any data entry or tabulation
errors made by the MAC or CMS before the development and publication of
the final FY 2015 wage index by August 2014, and the implementation of
the FY 2015 wage index on October 1, 2014. Given these processes, the
wage index implemented on October 1 should be accurate. Nevertheless,
in the event that errors are identified by hospitals and brought to our
attention after June 2, 2014, we retain the right to make midyear
changes to the wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) the MAC or CMS made an
error in tabulating its data; and (2) the requesting hospital could not
have known about the error or did not have an opportunity to correct
the error, before the beginning of the fiscal year. For purposes of
this provision, ``before the beginning of the fiscal year'' means by
the June deadline for making corrections to the wage data for the
following fiscal year's wage index (for example, June 2, 2014, for the
FY 2015 wage index). This provision is not available to a hospital
seeking to revise another hospital's data that may be affecting the
requesting hospital's wage index for the labor market area. As
indicated earlier, because CMS makes the wage index data available to
hospitals on the CMS Web site prior to publishing both the proposed and
final IPPS rules, and the MACs notify hospitals directly of any wage
index data changes after completing their desk reviews, we do not
expect that midyear corrections will be necessary. However, under our
current policy, if the correction of a data error changes the wage
index value for an area, the revised wage index value will be effective
prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage

[[Page 49987]]

index, a change to the wage index can be made retroactive to the
beginning of the Federal fiscal year only when CMS determines all of
the following: (1) the MAC or CMS made an error in tabulating data used
for the wage index calculation; (2) the hospital knew about the error
and requested that the MAC and CMS correct the error using the
established process and within the established schedule for requesting
corrections to the wage index data, before the beginning of the fiscal
year for the applicable IPPS update (that is, by the June 2, 2014
deadline for the FY 2015 wage index); and (3) CMS agreed before October
1 that the MAC or CMS made an error in tabulating the hospital's wage
index data and the wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 2, 2014 deadline for the FY 2015 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the MAC's mishandling of the data, we believe that
the hospital should not be penalized by our delay in publishing or
implementing the correction. As with our current policy, we indicated
that the provision is not available to a hospital seeking to revise
another hospital's data. In addition, the provision cannot be used to
correct prior years' wage index data; and it can only be used for the
current Federal fiscal year. In situations where our policies would
allow midyear corrections other than those specified in 42 CFR
412.64(k)(2)(ii), we continue to believe that it is appropriate to make
prospective-only corrections to the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.

K. Notice of Change to Wage Index Development Timetable

As explained in section III.J. of the preamble of this final rule,
the preliminary, unaudited Worksheet S-3 wage data and occupational mix
survey data files for the proposed FY 2015 wage index were made
available on September 13, 2013, through the Internet on the CMS Web
site. The posting of these preliminary files initiates what is
virtually a year-long cycle for developing the wage index associated
with the following IPPS fiscal year. This lengthy, almost year-long
cycle is unique to the development of the IPPS wage index, and occurs
independently from the development of the IPPS proposed and final
rules, which typically are published in the spring and summer each
year. In addition, the wage index, which is based on hospitals' wage
data reported on Worksheets S-3, Parts II and III of Form CMS-2552-10
of the Medicare cost report and occupational mix data, is the only
portion of the IPPS that historically has been subject to its own
annual review process, first by the MACs, and then by CMS, followed by
distinct opportunities for hospitals to appeal decisions made by the
MACs or CMS. This process is separate and independent from the standard
cost report settlement and appeals processes established under the
regulations at 42 CFR 405.1800 through 405.1889.
Although this unique wage index development timetable has been in
place since the early days of the IPPS, the current timetable is rooted
in changes adopted in the FY 1998 IPPS final rule with comment period
(62 FR 45990 through 45993). However, with numerous legislative and
regulatory changes made to the IPPS since FY 1998, the demands on
hospitals, MACs, and CMS have increased substantially. As a result, it
has become increasingly challenging for wage index stakeholders to
manage the wage index timetable with competing priorities. For the FY
2015 wage index, CMS made slight changes to the wage index development
timetable, by posting the preliminary public use file (PUF) in
September 2013 rather than in October 2013, which, in turn, moved back
the deadline for hospitals to request revisions to the data displayed
in that preliminary PUF to November 2013, instead of December 2013. In
addition, the date for the MACs to complete desk reviews on that data
was similarly moved to a slightly earlier deadline in early CY 2014.
The FY 2015 Wage Index Development Timetable, which is posted on the
CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, shows that
hospitals have a little more than 2 months to request revisions to
their data displayed in the September 13, 2013 preliminary PUF, until
the commencement of the desk review process by the MACs on November 21,
2013. The MACs also have a little more than 2 months to complete the
desk reviews and submit revised cost report data to CMS by January 29,
2014. Less than a month later, on February 20, 2014, the revised FY
2015 wage index and occupational mix PUFs were posted on the CMS Web
site. Ensuring the accuracy of the February PUF is extremely important
and beneficial to hospitals because, as the timetable shows, it is the
basis for hospitals to appeal data that are incorrect, with March 3,
2014 being the last date that hospitals can request revisions to errors
in the February 20, 2014 PUF.
Therefore, we want to take steps to improve the accuracy of the
February PUF, most importantly by proposing changes to the wage index
timetables for future IPPS fiscal years that are much more significant
and fundamental than the slight revisions to the timetable implemented
for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28082),
we stated that we believe that the changes we proposed in that proposed
rule would not only improve the accuracy of the February PUF, but also
would reduce the number of hospital appeals based on the February PUF.
For example, as specified below, instead of the current timetable which
only provides CMS with less than a month to review the MACs' desk
reviews and prepare the February PUF, we proposed approximately 3
months between the date that the MACs' desk reviews would end and the
date that CMS would post the subsequent PUF. To allow hospitals and
MACs adequate time to prepare for the changes to the wage index
development timetable, we proposed to make significant changes
beginning with the FY 2017 wage index cycle. We listed the proposed
changes for FY 2017 in a table in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28082) shown below side by side with the existing timetable
so that commenters could read the proposed changes in the context of
the existing timetable. Under the proposed changes for FY 2017,
although we did not provide exact dates for the FY 2017 wage index
timetable, we noted that, with every change listed, we intend to
provide hospitals and MACs with the same or somewhat more time than
under the current timetable to complete reviews and request revisions.
We stated that the proposed revisions would not reduce the amount of
time that either hospitals or MACs have to review wage data. Therefore,
the proposed changes would not result in additional work on the part of
the hospitals or MACs; in fact, in shifting the various dates, we
expect that more time would be provided to hospitals, MACs, and CMS

[[Page 49988]]

to ensure an even more accurate wage index.

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

With regard to the FY 2016 wage index cycle, we believe it can
serve as a transition to the more significant changes we proposed for
the FY 2017 wage index cycle. We believe that there are steps we can
take to improve the accuracy of the February 2016 PUF by building in
more time to the FY 2016 wage index review process as well.
Specifically, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083),
we stated that we were notifying hospitals of changes to the deadlines
only in the beginning of the FY 2016 wage index timetable, as a
transition to the more significant proposed changes for the entire FY
2017 wage index timetable. That is, for FY 2016, we were only changing
the following four dates: The posting of the preliminary wage index
PUF; the posting of the CY 2013 occupational mix survey data
preliminary PUF; the deadline for hospitals to request revisions to the
wage data and occupational mix data preliminary PUFs; and the deadline
for MACs to complete the desk reviews. We stated that we were not
changing the remainder of the FY 2016 timetable at this time. We stated
that we expect that making these changes for the FY 2016 timetable will
improve the accuracy of the February 2016 PUF, and also mitigate the
number of hospital appeals based on the February 2016 PUF. In addition,
we believe these changes will help hospitals, MACs, and CMS adjust to
the more significant timeline changes proposed for FY 2017. We listed
only the changes for FY 2016 in the table shown below side by side with
the existing FY 2015 timetable so that commenters could read the FY
2016 changes in the context of the existing timetable. We stated that
we were not listing dates that would remain unchanged for FY 2016.

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

Typically, the preliminary PUF initiating the start of an IPPS wage
index fiscal year contains one spreadsheet with the Worksheet S-3 wage
data for the applicable fiscal year on one tab, and another tab with
the preliminary occupational mix data for that fiscal year. For the FY
2016 wage index, new occupational mix survey data will be available for
use, based on the CY 2013 occupational mix survey. Hospitals were
required to submit their CY 2013 occupational mix surveys to their MACs
no later than July 1, 2014. Therefore, we did not have the preliminary
CY 2013 occupational mix survey data in time to post it simultaneously
in late May 2014 with the preliminary FY 2016 wage data. Accordingly,
as the table above indicates, we posted the preliminary FY 2016 wage
data by itself first in late May 2014, followed by a separate posting
of the preliminary CY 2013 occupational mix survey data when the data
became available, in mid-July 2014.
We invited public comments on our proposals set forth above to make
revisions to the wage index timetables for FY 2017.
Comment: Numerous commenters were supportive of the general concept
of changing the wage index timeline, and that the overall accuracy of
the wage index could be improved by altering the timing of the process.
Commenters generally agreed with CMS' adjusted FY 2016 timetable, which
specified that the preliminary PUF would be posted in May 2014, and
hospitals would request revisions to the preliminary PUF by early
October, 2014. Commenters believed the extra time between the posting
of the preliminary PUF and the desk review program would allow
hospitals more time to ``scrub'' their data. However, commenters also
asked that CMS work with its MACs to ensure that the MACs also are
meeting their respective deadlines, as some hospitals have noticed that
their MACs missed deadlines to submit revisions to CMS.
With respect to the adjustments to the FY 2017 timetable, the
commenters believed that an early August 2015 deadline for hospitals to
request revisions to the May 2015 preliminary PUFs was too ambitious
because it would not provide sufficient time for hospitals to review
their data, particularly when key personnel may be on vacation during
the summer months. The commenters added that an August deadline would
leave less time to compare the preliminary wage index information to
the prior year's wage index data, given that the prior year's data are
not even finalized and available to the public before August 1. Some
commenters recommended an early October deadline, while others stated
that an early September, mid-September, or a late September deadline
would be feasible. One commenter believed that a December deadline
would be best for hospitals with June 30

[[Page 49989]]

fiscal year ends, while another commenter stated that a late September
or early October deadline would be acceptable for such hospitals. One
commenter stated that the proposed FY 2017 deadline does not provide
enough time for hospitals to incorporate their pension data into the
desk review process because the Internal Revenue Service (IRS) Form
5500 (used as the basis for reporting pension contributions for defined
benefit plans) is due 7 months after the end of the plan year (July
31), with possible extensions through mid-September. The commenter
recommended that CMS either move the proposed deadline to October, or
allow hospitals to submit their revisions for pension data during the
MAC desk review process.
Response: We appreciate the commenters' general support for our
proposed revisions to the wage index timetable. We listed general
timeframes in the FY 2016 timetable but will communicate the exact
dates for the FY 2016 timetable to hospitals through their MACs after
issuance of this FY 2015 final rule. Regarding the FY 2017 Wage Index
Timetable, we understand the commenters' concerns that an August
deadline for hospitals to submit revisions to their preliminary wage
data may be too challenging to meet. However, while almost all of the
commenters believed that an August deadline was too ambitious, there
was no consensus from the commenters regarding when the deadline should
be, with recommendations ranging from early September to December. We
also partially agree with the commenter who raised the point that
hospitals may not be able to provide their pension data until October,
as further discussed below. In addition, we noted that commenters
requested that CMS work with the MACs to ensure that the MACs are
meeting their respective deadlines. We understand that the MACs have
also faced pressure to accurately complete desk reviews and submit to
CMS the appropriate revisions on behalf of hospitals in a timely
fashion. The longer the time that hospitals have to submit revisions to
their preliminary wage data, the less time the MACs have to conduct
their desk reviews. Therefore, we believe that it is important to
accommodate both the hospitals' and MACs' need for more time to
adequately review the wage and occupational mix data. Because the
earliest deadline that commenters stated would be feasible is early
September, we are finalizing a date within the first week of September
2015 (rather than early August) as the deadline for hospitals to
request revisions to their FY 2017 preliminary wage and occupational
mix data. A deadline in early September would be manageable for
hospitals, yet also provide the MACs with the most amount of time
possible to complete their desk reviews. In addition to a general
deadline of early September, we are providing a limited exception for
submission of a certain hospital's pension data. Specifically, we are
only providing an extension for hospitals that have a fiscal year begin
date on or after August 15 of a year to submit their pension data by
mid-October because hospitals with fiscal year begin dates prior to
August 15 would have already made their 3-year pension contributions by
the end of September. We believe that the majority of hospitals, which
do have fiscal year begin dates prior to August 15 of a year, would be
able to submit their pension data, along with the remainder of their
wage index documentation, to their MACs by the beginning of September
each year. In this final rule, we are changing our wage index timetable
for FY 2016 and after so that hospitals with fiscal years that begin on
or after August 15 may submit their pension data to their MACs by mid-
October. However, in future rulemaking, we may consider revisions to
the 3-year average pension policy, which would allow all hospitals to
submit their pension data at the same time. For FY 2017, the MACs would
work on the desk reviews until mid-November 2015 (instead of mid
October, as proposed). Following are the revised FY 2016 and FY 2017
Wage Index Timetables that we are finalizing:

FY 2016 Wage Index Timetable
----------------------------------------------------------------------------------------------------------------
Deadlines FY 2015 timetable Adjusted FY 2016 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary Wage Data PUF on September 13, 2013................. May 23, 2014.
CMS Web site.
Posting of Preliminary CY 2013 September 13, 2013................. July 11, 2014.
Occupational Mix Data PUF on CMS Web
site.
Deadline for Hospitals to Request November 21, 2013.................. Early October 2014.
Revisions to Preliminary PUF.
Deadline for Hospitals with FYBs on or November 21, 2013.................. Mid October 2014.
after August 15 to Submit Pension Data
to MACs.
Deadline for MACs to Complete Desk January 29, 2014................... Mid-December 2014.
Reviews.
----------------------------------------------------------------------------------------------------------------

FY 2017 Wage Index Timetable
----------------------------------------------------------------------------------------------------------------
Deadlines FY 2015 timetable FY 2017 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web September 13, 2013................. Mid-May 2015.
site.
Deadline for Hospitals to Request November 21, 2013.................. First week of September 2015.
Revisions to Preliminary PUF.
Deadline for Hospitals with FYBs on or November 21, 2013.................. Mid-October 2015.
after August 15 to Submit Pension Data
to MACs.
Deadline for MACs to Complete Desk January 29, 2014................... Mid-November 2015.
Reviews.
Posting of February PUF on CMS Web site February 20, 2014.................. Late January 2016
Deadline Following Posting of February March 3, 2014...................... Mid-February 2016.
PUF for Hospitals to Request Revisions.
Completion of Appeals by MACs and April 9, 2014...................... Mid- to Late March 2016.
Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in April 16, 2014..................... Early April 2016.
April.
Posting of Final Rule PUF.............. May 2, 2014........................ Late April 2016.
Deadline for Hospitals to Appeal in June 2, 2014....................... Late May 2016.
June.
Expected Issuance of IPPS final rule... August 1, 2014..................... August 1, 2016.
----------------------------------------------------------------------------------------------------------------

Comment: Commenters asked that CMS instruct MACs to notify State
hospital associations of aberrant data, in addition to the current
practice of notifying State hospital associations about hospitals that
do not respond to

[[Page 49990]]

requests for data. In addition, commenters recommended that CMS provide
more instructions to MACs and hospitals regarding how to correct errors
and the timeframe for correcting errors. They believed that this action
is necessary because the notification to hospital associations would be
after the deadline for hospitals to request data adjustments. Another
commenter suggested that accuracy and consistency in wage index
verification would be improved if CMS would assign a single MAC to
review all wage index data.
Response: We will take these comments into consideration as we
develop the details of the Wage Index Timetables and the desk review
instructions that we provide to the MACs.

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

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion (as estimated by the Secretary from time to
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates. . . .'' We refer to
the portion of hospital costs attributable to wages and wage-related
costs as the labor-related share. The labor-related share of the
prospective payment rate is adjusted by an index of relative labor
costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate ``from time to time'' the proportion of hospitals'
costs that are ``attributable to wages and wage-related costs.'' Thus,
hospitals receive payment based on either a 62-percent labor-related
share, or the labor-related share estimated from time to time by the
Secretary, depending on which labor-related share resulted in a higher
payment.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through
50607), we rebased and revised the hospital market basket. We
established a FY 2010-based IPPS hospital market basket to replace the
FY 2006-based IPPS hospital market basket, effective October 1, 2013.
In that final rule, we presented our analysis and conclusions regarding
the frequency and methodology for updating the labor-related share for
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a
labor-related share for FY 2014 of 69.6 percent. In addition, we
implemented this revised and rebased labor-related share in a budget
neutral manner. However, consistent with section 1886(d)(3)(E) of the
Act, we did not take into account the additional payments that would be
made as a result of hospitals with a wage index less than or equal to
1.0000 being paid using a labor-related share lower than the labor-
related share of hospitals with a wage index greater than 1.0000.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083), for
FY 2015, we did not propose to not make any further changes to the
national average proportion of operating costs that are attributable to
wages and salaries, employee benefits, contract labor, the labor-
related portion of professional fees, administrative and facilities
support services, and all other labor-related services. Therefore, for
FY 2015, we proposed to continue to use a labor-related share of 69.6
percent for discharges occurring on or after October 1, 2014.
Tables 1A and 1B, which were published in section VI. of the
Addendum to the FY 2015 IPPS/LTCH PPS proposed rule and available via
the Internet on the CMS Web site, reflected this proposed labor-related
share. For FY 2015, for all IPPS hospitals whose wage indexes are less
than or equal to 1.0000, we proposed to apply the wage index to a
labor-related share of 62 percent of the national standardized amount.
For all IPPS hospitals whose wage indexes are greater than 1.0000, for
FY 2015, we proposed to apply the wage index to a proposed labor-
related share of 69.6 percent of the national standardized amount. We
note that, for Puerto Rico hospitals, the national labor-related share
is 62 percent because the national wage index for all Puerto Rico
hospitals is less than 1.0000.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through
50603), we also rebased and revised the labor-related share for the
Puerto Rico-specific standardized amounts using FY 2010 as a base year.
We finalized a labor-related share for the Puerto Rico-specific
standardized amounts for FY 2014 of 63.2 percent. In the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28084), for FY 2015, we did not propose
to make any further changes to the Puerto Rico specific average
proportion of operating costs that are attributable to wages and
salaries, employee benefits, contract labor, the labor-related portion
of professional fees, administrative and facilities support services,
and all other labor-related services. For FY 2015, we proposed to
continue to use a labor-related share for the Puerto Rico-specific
standardized amounts of 63.2 percent for discharges occurring on or
after October 1, 2014. Puerto Rico hospitals are paid based on 75
percent of the national standardized amounts and 25 percent of the
Puerto Rico-specific standardized amounts. For FY 2015, we proposed
that the labor-related share of a hospital's Puerto Rico-specific rate
would be either the Puerto Rico-specific labor-related share of 63.2
percent or 62 percent, depending on which results in higher payments to
the hospital. If the hospital has a Puerto Rico-specific wage index
greater than 1.000 for FY 2015, we proposed to set the hospital's rates
using a labor-related share of 63.2 percent for the 25 percent portion
of the hospital's payment determined by the Puerto Rico standardized
amounts because this amount would result in higher payments.
Conversely, a hospital with a Puerto Rico-specific wage index of less
than or equal to 1.000 for FY 2015 would be paid using the Puerto Rico-
specific labor-related share of 62 percent of the Puerto Rico-specific
rates because the lower labor-related share would result in higher
payments. The proposed Puerto Rico labor-related share of 63.2 percent
for FY 2015 is reflected in Table 1C, which was published in section
VI. of the Addendum to the FY 2015 IPPS/LTCH PPS proposed rule and
available via the Internet on the CMS Web site.
Comment: One commenter believed that CMS has provided incentives
for hospitals to reduce costs through a declining wage index. The
commenter stated that CMS has not kept pace by adjusting the labor-
related share of 62 percent for hospitals with a wage index below
1.0000. The commenter noted that current law requires a labor-related
share of 62 percent for hospitals with a wage index less than or equal
to 1.0000. However, the commenter requested that, despite current law,
in consideration of its comments, CMS lower the labor-related share
from 62 percent to 42 percent for hospitals with a wage index below
1.0000.
One commenter recommended that CMS compute an alternative labor and
nonlabor-related share percentage under the national standardized
amount for hospitals in Puerto Rico. The

[[Page 49991]]

commenter explained that the current labor-related share percentage of
62 percent under the national standardized amounts meets the statutory
definition in section 1886(d)(3)(E) of the Act, resulting in lower
payments for providers in Puerto Rico. Therefore, the commenter
believed that CMS should calculate an alternative national labor-
related share percentage for hospitals in Puerto Rico that is lower
than 62 percent.
Response: As mentioned by the commenter, current law requires that
the labor-related share be set at 62 percent for hospitals with a wage
index less than or equal to 1.0000. Specifically, as discussed above,
section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of the
Act to provide that the Secretary must employ 62 percent as the labor-
related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' Therefore, we are unable to
change the labor-related share of 62 percent. In addition, the
commenters did not provide any empirical data to demonstrate why a
lower labor-related share percentage is justified. Therefore, we are
unable to verify the commenters' statement.
After consideration of public comments received, we are finalizing
our proposals without modification. For FY 2015, we are continuing to
use a labor-related share of 69.6 percent for discharges occurring on
or after October 1, 2014. Tables 1A and 1B, which are published in
section VI. of the Addendum to this final rule and available via the
Internet on the CMS Web site, reflect this labor-related share. For FY
2015, for all IPPS hospitals whose wage indexes are less than or equal
to 1.0000, we are applying the wage index to a labor-related share of
62 percent of the national standardized amount. For all IPPS hospitals
whose wage indexes are greater than 1.0000, for FY 2015, we are
applying the wage index to a labor-related share of 69.6 percent of the
national standardized amount. For Puerto Rico hospitals, the national
labor-related share is 62 percent because the national wage index for
all Puerto Rico hospitals is less than 1.0000. For FY 2015, we also are
continuing to use a labor-related share for the Puerto Rico-specific
standardized amounts of 63.2 percent for discharges occurring on or
after October 1, 2014. Puerto Rico hospitals are paid based on 75
percent of the national standardized amounts and 25 percent of the
Puerto Rico-specific standardized amounts. For FY 2015, the labor-
related share of a hospital's Puerto Rico-specific rate will be either
the Puerto Rico-specific labor-related share of 63.2 percent or 62
percent, depending on which results in higher payments to the hospital.
If the hospital has a Puerto Rico-specific wage index greater than
1.000 for FY 2015, we will set the hospital's rates using a labor-
related share of 63.2 percent for the 25-percent portion of the
hospital's payment determined by the Puerto Rico standardized amounts
because this amount will result in higher payments. The Puerto Rico
labor-related share of 63.2 percent for FY 2015 is reflected in Table
1C, which is published in section VI. of the Addendum to this final
rule and available via the Internet on the CMS Web site.

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

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

1. Background
Existing regulations at Sec. 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
acute care transfers, and Sec. 412.4(c) defines postacute care
transfers. Our policy, set forth in Sec. 412.4(f), provides that when
a patient is transferred and his or her length of stay is less than the
geometric mean length of stay for the MS-DRG to which the case is
assigned, the transferring hospital is generally paid based on a
graduated per diem rate for each day of stay, not to exceed the full
MS-DRG payment that would have been made if the patient had been
discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full DRG payment by the geometric mean length of stay for
the MS-DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
generally provides for payment that is twice the per diem amount for
the first day, with each subsequent day paid at the per diem amount up
to the full MS-DRG payment (Sec. 412.4(f)(1)). Transfer cases are also
eligible for outlier payments. In general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic
variations in costs), divided by the geometric mean length of stay for
the MS-DRG, and multiplied by the length of stay for the case, plus one
day.
We established the criteria set forth in Sec. 412.4(d) for
determining which DRGs qualify for postacute care transfer payments in
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The
determination of whether a DRG is subject to the postacute care
transfer policy was initially based on the Medicare Version 23.0
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is
revised, we use the current version of the Medicare GROUPER and the
most recent complete year of MedPAR data to determine if the DRG is
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds
the 55th percentile for all MS-DRGs and the proportion of short-stay
discharges to postacute care to total discharges in the MS-DRG exceeds
the 55th percentile for all MS-DRGs, CMS will apply the postacute care
transfer policy to that MS-DRG and to any other MS-DRG that shares the
same base MS-DRG. In the preamble to the FY 2006 IPPS final rule (70 FR
47419), we stated that ``we will not revise the list of DRGs subject to
the postacute care transfer policy annually unless we are making a
change to a specific DRG.''
To account for MS-DRGs subject to the postacute care transfer
policy that exhibit exceptionally higher shares of costs very early in
the hospital stay, Sec. 412.4(f) also includes a special payment
methodology. For these MS-DRGs, hospitals receive 50 percent of the
full MS-DRG payment, plus the single per diem payment, for the first
day of the stay, as well as a per diem payment for subsequent days (up
to the full MS-DRG payment (Sec. 412.4(f)(6)). For an MS-DRG to
qualify for the special payment methodology, the geometric mean length
of stay must be greater than 4 days, and the average charges of 1-day
discharge cases in the MS-DRG must be at least 50 percent of the
average charges for all cases within the MS-DRG. MS-DRGs that are part
of an MS-DRG group will qualify under the DRG special payment policy if
any one of the MS-DRGs that share that same base MS-DRG qualifies
(Sec. 412.4(f)(6)).
2. Changes to the Postacute Care Transfer MS-DRGs
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28084 through
28086), we discussed that, based on our annual review of MS-DRGs, we
had identified a number of MS-DRGs that should be included on the list
of MS-DRGs subject to the postacute care transfer policy. In response
to public comments and based on our analysis of

[[Page 49992]]

FY 2013 MedPAR claims data, we proposed to make several changes to MS-
DRGs to better capture certain severity of illness levels, to be
effective for FY 2015. Specifically, we proposed to modify the
assignment of endovascular cardiac valve replacements currently
assigned to MS-DRGs 216 (Cardiac Valve & Other Major Cardiothoracic
Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve &
Other Major Cardiothoracic Procedures with Cardiac Catheterization with
CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with
Cardiac Catheterization without CC/MCC), 219 (Cardiac Valve & Other
Major Cardiothoracic Procedures without Cardiac Catheterization with
MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures
without Cardiac Catheterization with CC), and 221 (Cardiac Valve &
Other Major Cardiothoracic Procedures without Cardiac Catheterization
without CC/MCC) to MS-DRGs 266 and 267 (Endovascular Cardiac Valve
Replacement with and without MCC, respectively) to better reflect the
differences in patients receiving endovascular cardiac valve
replacements from patients who undergo an open chest cardiac valve
replacement. We also proposed to further refine back and neck
procedures currently assigned to MS-DRGs 490 and 491 (Back & Neck
Procedure Except Spinal Fusion with CC/MCC or Disc Device/
Neurostimulator and without CC/MCC or Disc Device/Neurostimulator,
respectively) into additional severity levels, now identified as MS-
DRGs 518, 519, and 520 (Back & Neck Procedure Except Spinal Fusion with
MCC or Disc Device/Neurostimulator, with CC, and without MCC/CC,
respectively). Finally, we proposed to remove the severity levels for
reverse shoulder replacements, merging MS-DRGs 483 and 484 (Major Joint
& Limb Reattachment Procedure of Upper Extremity with CC/MCC and
without CC/MCC, respectively) into MS-DRG 483 (Major Joint/Limb
Reattachment Procedure of Upper Extremities). A discussion of these
proposed changes can be found in section II.G.4.c., II.G.5.c. and
II.G.5.a., respectively, of the preamble of the proposed rule.
In light of these proposed changes to the MS-DRGs according to the
regulations under Sec. 412.4(c), we evaluated these proposed FY 2015
MS-DRGs against the general postacute care transfer policy criteria
using the FY 2013 MedPAR data. If an MS-DRG qualified for the postacute
care transfer policy, we also evaluated that MS-DRG under the special
payment methodology criteria according to regulations at Sec.
412.4(f)(6). We continue believe it is appropriate to reassess MS-DRGs
when proposing reassignment of diagnostic codes that would result in
material changes to an MS-DRG. As a result of our review, we found that
MS-DRGs 216 through 221 would require no revisions in postacute care
transfer or special payment policy status. However, we proposed to
update the list of MS-DRGs that are subject to the postacute care
transfer policy to include the proposed new MS-DRGs 266, 267, 518, 519,
and 520. (These MS-DRGs are reflected in Table 5, which is listed in
section VI. of the Addendum to this final rule and available via the
Internet on the CMS Web site, and also are listed in the charts at the
end of this section.)
In addition, based on our evaluation of the proposed FY 2015 MS-
DRGs using the FY 2013 Med PAR data, we determined that proposed
revised MS-DRG 483 would no longer meet the postacute care transfer
criteria. Therefore, we proposed that it be removed from the list of
MS-DRGs subject to the postacute care transfer policy, effective FY
2015. We refer readers to the asterisk (*) bolded text in the following
table for which criterion was not met in our analysis for each MS-DRG
removed from the postacute care transfer policy list.

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

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

[[Page 49993]]

List of MS-DRGs That Changed DRG Special Payment Policy Status in FY 2015
----------------------------------------------------------------------------------------------------------------
50% of
Geometric mean Average average
MS-DRG MS-DRG title length of charges of 1- charges for Special pay policy
stay day all cases status
discharges within MS-DRG
----------------------------------------------------------------------------------------------------------------
266.................. Endovascular Cardiac 8.3643 $42,081 $126,326 YES.*
Valve Replacement
with MCC.
267.................. Endovascular Cardiac 5.0271 128,013 95,141 YES.
Valve Replacement
without MCC.
518.................. Back & Neck Procedure 4.2882 68,515 43,514 YES.
Except Spinal Fusion
with MCC or Disc
Device/
Neurostimulator.
519.................. Back & Neck Procedure 3.0507 0 0 YES.*
Except Spinal Fusion
with CC.
520.................. Back & Neck Procedure 1.7315 0 0 YES.*
Except Spinal Fusion
without CC/MCC).
----------------------------------------------------------------------------------------------------------------
*As described in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify
under the DRG special payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

We did not receive any public comments regarding our proposals to
change the postacute care transfer and the special payment policy
status for the identified MS-DRGs. Therefore, we are adopting the
proposed changes as final for FY 2015.

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

1. FY 2015 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.'' In FY
2014, consistent with section 1886(b)(3)(B) of the Act, as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act, we set the
applicable percentage increase under the IPPS by applying the following
adjustments in the following sequence. Specifically, the applicable
percentage increase under the IPPS is equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas, subject to
a reduction of 2.0 percentage points if the hospital fails to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.3 percentage point as required by section
1886(b)(3)(B)(xii) of the Act. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
For FY 2015, there are three statutory changes to the applicable
percentage increase compared to FY 2014. First, under section
1886(b)(3)(B)(viii) of the Act, beginning with FY 2015, the reduction
in the applicable percentage increase for hospitals that fail to submit
quality information under rules established by the Secretary is one-
quarter of the applicable percentage increase (prior to the application
of statutory adjustments under sections 1886(b)(3)(B)(ix),
1886(b)(3)(B)(xi), and 1886(b)(3)(B)(xii) of the Act) or one-quarter of
the applicable market basket update. For FY 2014, the reduction to the
applicable percentage increase for hospitals that failed to submit
quality information under rules established by the Secretary was 2.0
percentage points. Second, beginning with FY 2015, section
1886(b)(3)(B)(ix) of the Act requires that any hospital that is not a
meaningful electronic health record (EHR) user (as defined in section
1886(n)(3) of the Act and not subject to an exception under section
1886(b)(3)(B)(ix) of the Act)) will have ``three-quarters'' of the
applicable percentage increase (prior to the application of statutory
adjustments under sections 1886(b)(3)(B)(viii), 1886(b)(3)(B)(xi), and
1886(b)(3)(B)(xii) of the Act), or three-quarters of the applicable
market basket update, reduced by 33\1/3\ percent. The reduction to
three-quarters of the applicable percentage increase for those
hospitals that are not meaningful EHR users increases to 66\2/3\
percent for FY 2016, and, for FY 2017 and subsequent fiscal years, to
100 percent. Third, for FY 2015, section 1886(b)(3)(B)(xii) of the Act
applies an additional reduction of 0.2 percentage point compared to 0.3
percentage point for FY 2014.
To summarize, for FY 2015, consistent with section 1886(b)(3)(B) of
the Act, as amended by sections 3401(a) and 10319(a) of the Affordable
Care Act, we are setting the applicable percentage increase by applying
the following adjustments in the following sequence. Specifically, the
applicable percentage increase under the IPPS is equal to the rate-of-
increase in the hospital market basket for IPPS hospitals in all areas,
subject to a reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act and a 33\1/3\ percent reduction to
three-fourths of the applicable percentage increase (prior to the
application of other statutory adjustments; also referred to as the
market basket update or rate-of-increase (with no adjustments)) for
hospitals not considered to be meaningful EHR users in accordance with
section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment
based on changes in economy-wide productivity (the multifactor
productivity (MFP) adjustment), and an additional reduction of 0.2
percentage point as required by section 1886(b)(3)(B)(xii) of the Act.
As noted previously, sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of
the Act, as added by section 3401(a) of the Affordable Care Act, state
that application of the MFP adjustment and the additional FY 2015
adjustment of 0.2 percentage point may result in the applicable
percentage increase being less than zero.
We note that, in compliance with section 404 of the MMA, in the FY
2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS
operating and capital market baskets with the revised and rebased FY
2010-based IPPS operating and capital market baskets for FY 2014. In
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28086), we proposed to
continue to use the FY 2010-based IPPS operating and capital market
baskets for FY 2015. We also proposed to continue to use a labor-
related share that is reflective of the FY 2010 base year. For FY 2015,
we

[[Page 49994]]

proposed to continue using the labor-related share of 69.6 percent,
which is based on the FY 2010-based IPPS market basket. We did not
receive any public comments on this proposal and, therefore, for FY
2015, we will continue to use the FY 2010-based IPPS operating and
capital market baskets and the labor-related share of 69.6 percent.
Based on the most recent data available for the FY 2015 proposed
rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087) to base the
proposed FY 2015 market basket update used to determine the applicable
percentage increase for the IPPS on IHS Global Insight, Inc.'s (IGI's)
first quarter 2014 forecast of the FY 2010-based IPPS market basket
rate-of-increase with historical data through fourth quarter 2013,
which was estimated to be 2.7 percent. We proposed that if more recent
data became subsequently available (for example, a more recent estimate
of the market basket and the MFP adjustment), we would use such data,
if appropriate, to determine the FY 2015 market basket update and MFP
adjustment in the final rule.
Based on updated data for this FY 2015 IPPS/LTCH PPS final rule,
that is, the IGI's second quarter 2014 forecast of the FY 2010-based
IPPS market basket rate-of-increase with historical data through first
quarter 2014, we estimate that the FY 2015 market basket update used to
determine the applicable percentage increase for the IPPS is 2.9
percent.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. For FY 2015, we did not propose to make any change in
our methodology for calculating and applying the MFP adjustment. For FY
2015, we proposed a MFP adjustment of -0.4 percentage point. Similar to
the market basket adjustment, for the proposed rule, we used the most
recent data available to compute the MFP adjustment.
Based on updated data for this final rule, we computed an MFP
adjustment is 0.5 percentage point for FY 2015.
Comment: One commenter stated that the FY 2015 update factor is
understated, as the productivity adjustment should be 0.4 (as projected
in the proposed rule), not 0.5. The commenter stated that, as a result,
instead of a 1.2 percent update factor, the projection should use a 1.3
percent update factor.
Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28087), the proposed productivity adjustment for FY 2015 was 0.4
percent. Furthermore, we proposed to make a 1.3 percent update to the
national standardized amount (79 FR 28355), which reflects a proposed
2.7 percent market basket update, the proposed reduction of 0.4
percentage point for the multifactor productivity adjustment, the 0.2
percentage point reduction in accordance with the Affordable Care Act
and the proposed FY 2015 documentation and coding recoupment adjustment
of -0.8 percent on the national standardized amount as part of the
recoupment required by section 631 of the ATRA.
As stated in the proposed rule, we proposed to use more recently
available data to determine the final market basket and multifactor
productivity adjustment. We did not receive any public comments on this
proposal. Therefore, for this final rule, we are finalizing a market
basket update of 2.9 percent and an MFP adjustment of 0.5 percent based
on more recently available data.
For FY 2015, depending on whether a hospital submits quality data
under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital
that submits quality data) and is a meaningful EHR user under section
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that
is a meaningful EHR user), we discussed in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28087) that there are four possible applicable
percentage increases that can be applied to the standardized amount. As
noted above, we proposed that if more recent data became subsequently
available (for example, a more recent estimate of the market basket and
the MFP adjustment), we would use such data, if appropriate, to
determine the FY 2015 market basket update and MFP adjustment in the
final rule.
We did not receive any public comments on the four applicable
percentage increases and our finalizing our proposal. Based on the more
recent data described earlier, we have determined final applicable
percentage increases to the standardized amount for FY 2015, as
specified below.
For a hospital that submits quality data and is a
meaningful EHR user, we are finalizing an applicable percentage
increase to the FY 2015 operating standardized amount of 2.2 percent
(that is, the FY 2015 estimate of the market basket rate-of-increase of
2.9 percent less an adjustment of 0.5 percentage point for economy-wide
productivity (that is, the MFP adjustment) and less 0.2 percentage
point).
For a hospital that submits quality data and is not a
meaningful EHR user, we are finalizing an applicable percentage
increase to the operating standardized amount of 1.475 percent (that
is, the FY 2015 estimate of the market basket rate-of-increase of 2.9
percent, less an adjustment of 0.725 percentage point (the market
basket rate-of-increase of 2.9 percent x 0.75)/3) for failure to be a
meaningful EHR user, less an adjustment of 0.5 percentage point for the
MFP adjustment, and less an additional adjustment of 0.2 percentage
point).
For a hospital that does not submit quality data and is a
meaningful EHR user, we are finalizing an applicable percentage
increase to the operating standardized amount of 1.475 percent (that
is, the FY 2015 estimate of the market basket rate-of-increase of 2.9
percent, less an adjustment of 0.725 percentage point (the market
basket rate-of-increase of 2.9 percent/4) for failure to submit quality
data, less an adjustment of 0.5 percentage point for the MFP
adjustment, and less an additional adjustment of 0.2 percentage point).
For a hospital that does not submit quality data and is
not a meaningful EHR user, we are finalizing an applicable percentage
increase to the operating standardized amount of 0.75 percent (that is,
the FY 2015 estimate of the market basket rate-of-increase of 2.9
percent, less an adjustment of 0.725 percentage point (the market
basket rate-of-increase of 2.9 percent/4) for failure to submit quality
data, less an adjustment of 0.725 percentage point (the market basket
rate-of-increase of 2.9 percent x 0.75)/3) for failure to be a
meaningful EHR user, less an adjustment of 0.5 percentage point for the
MFP adjustment, and less an additional adjustment of 0.2 percentage
point). Below we provide a table summarizing the four final applicable
percentage increases.

[[Page 49995]]

Final FY 2015 Applicable Percentage Increases for the IPPS
----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2015 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate-of-Increase.................. 2.9 2.9 2.9 2.9
Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.725 -0.725
under Section 1886(b)(3)(B)(viii) of the Act.
Adjustment for Failure to be a Meaningful EHR 0.0 -0.725 0.0 -0.725
User under Section 1886(b)(3)(B)(ix) of the
Act.
MFP Adjustment under Section 1886(b)(3)(B)(xi) -0.5 -0.5 -0.5 -0.5
of the Act.....................................
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act..................
Final Applicable Percentage Increase Applied to 2.2 1.475 1.475 0.75
Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), we
proposed to revise the existing regulations at 42 CFR 412.64(d) to
reflect the current law for the FY 2015 update. Specifically, in
accordance with section 1886(b)(3)(B) of the Act, we proposed to add a
new paragraph (vi) to Sec. 412.64(d)(1) to reflect the applicable
percentage increase to the FY 2015 operating standardized amount as the
percentage increase in the market basket index, subject to a reduction
of one-fourth of the applicable percentage increase (prior to the
application of other statutory adjustments) if the hospital fails to
submit quality information (under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act) and a 33\1/3\
percent reduction to three-fourths of the applicable percentage
increase (prior to the application of other statutory adjustments) for
a hospital that is not a meaningful EHR user in accordance with section
1886(b)(3)(B)(ix) of the Act, less an MFP adjustment and less an
additional reduction of 0.2 percentage point.
In addition, we proposed to make technical changes to Sec. Sec.
412.64(d)(1), (d)(1)(i) through (d)(1)(v), (d)(2)(i), (d)(2)(ii), and
(d)(3) introductory text to reflect the order in which CMS applies the
statutory adjustments to the applicable percentage increase under
section 1886(b)(3)(B) of the Act. As mentioned above, consistent with
section 1886(b)(3)(B) of the Act, CMS sets the applicable percentage
increase under the IPPS by applying the following adjustments in the
following sequence. Specifically, we set the applicable percentage
increase under the IPPS equal to the rate-of-increase in the hospital
market basket for IPPS hospitals in all areas subject to a reduction
for hospitals that fail to submit quality information under rules
established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act and, beginning in FY 2015, a reduction
for hospitals not considered to be meaningful EHR users in accordance
with section 1886(b)(3)(B)(ix) of the Act; and then subject to an
adjustment based on changes in economy-wide productivity (the MFP
adjustment), and an additional reduction as required by section
1886(b)(3)(B)(xii) of the Act.
The existing regulation text at Sec. 412.64(d)(2) and (d)(3)
describes the reductions for hospitals that fail to submit quality
information under rules established by the Secretary in accordance with
section 1886(b)(3)(B)(viii) of the Act and hospitals not considered to
be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of
the Act as reductions to ``the applicable percentage change specified
in paragraph (d)(1) of this section.'' Section 412.64(d)(1) describes
the applicable percentage change for the applicable fiscal year as the
percentage increase in the market basket index less the MFP adjustment
and less the additional reduction required by section
1886(b)(3)(B)(xii) of the Act. This text suggests that CMS applies the
reduction for hospitals that fail to submit quality information and,
beginning in FY 2015, the reduction for hospitals not considered to be
meaningful EHR users, after it applies the MFP adjustment and the
additional reduction under section 1886(b)(3)(B)(xii) of the Act.
Therefore, we proposed to revise the regulations in Sec. 412.64(d) to
reflect the order in which CMS applies the adjustments to the
applicable percentage increase under section 1886(b)(3)(B) of the Act.
We note that we also proposed clarifying amendments to the regulatory
text for prior fiscal years under Sec. Sec. 412.64(d)(1)(i) through
(d)(1)(v) to reflect the determination of the applicable percentage
change for those prior years as well as other technical changes for
readability.
We did not receive any public comments on our proposed changes to
the regulations at Sec. Sec. 412.64(d)(1), (d)(1)(i) through
(d)(1)(v), (d)(2)(i), (d)(2)(ii), and (d)(3) introductory text and
therefore are finalizing these proposed changes without modification.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs and MDHs
equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all
other hospitals subject to the IPPS). Therefore, the update to the
hospital-specific rates for SCHs and MDHs is also subject to section
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act. Accordingly, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28088), for FY 2015, we proposed the
following updates to the hospital-specific rates applicable to SCHs and
MDHs: An update of 2.1 percent for a hospital that submits quality data
and is a meaningful EHR user; an update of 1.425 percent for a hospital
that fails to submit quality data and is a meaningful EHR user; an
update of 1.425 percent for a hospital that submits quality data and is
not a meaningful EHR user; an update of 0.75 percent for a hospital
that fails to submit quality data and is not a meaningful EHR user. (As
noted below, under current law, the MDH program is effective for
discharges occurring on or before March 31, 2015.) For FY 2015, the
existing regulations in Sec. Sec. 412.73(c)(16), 412.75(d), 412.77(e),
412.78(e), and 412.79(d) contain provisions that set the update factor
for SCHs and MDHs equal to the update factor applied to the national
standardized amount for all IPPS hospitals. Therefore, we did not
propose to make any further changes to these five regulatory provisions
to reflect the FY 2015 update factor for the hospital-specific rates of
SCHs and MDHs. As mentioned above, for the proposed rule, we used IGI's
first quarter 2014 forecast of the FY 2010-based IPPS market

[[Page 49996]]

basket update with historical data through fourth quarter 2013.
Similarly, we used IGI's first quarter 2014 forecast of the MFP
adjustment. For the final rule, we proposed to use the most recent data
available. We did not receive any public comments on these proposals
and therefore our finalizing them as proposed to set the update for
SCHs and MDHs in this final rule using the most recent data available.
As discussed above, based on the more recent data for IGI's second
quarter 2014 forecast of the FY 2010-based IPPS market basket update
with historical data through first quarter 2014, we estimate that the
FY 2015 market basket update used to determine the update factor for
this final rule for the hospital-specific rates of SCHs and MDHs is 2.9
percent. Similarly, for this final rule, we used IGI's second quarter
2014 forecast of the MFP adjustment, which is estimated at 0.5
percentage point for FY 2015. Accordingly, we are finalizing the
following updates to the hospital-specific rates applicable to SCHs and
MDHs: An update of 2.2 percent for a hospital that submits quality data
and is a meaningful EHR user; an update of 1.475 percent for a hospital
that fails to submit quality data and is a meaningful EHR user; an
update of 1.475 percent for a hospital that submits quality data and is
not a meaningful EHR user; an update of 0.75 percent for a hospital
that fails to submit quality data and is not a meaningful EHR user.
We note that, as discussed in section IV.G. of the preamble of this
final rule, section 1106 of the Pathway for SGR Reform Act of 2013
(Pub. L. 113-67), enacted on December 26, 2013, extended the MDH
program from the end of FY 2013 through the first half of FY 2014 (that
is, for discharges occurring before April 1, 2014). Subsequently,
section 106 of the Protecting Access to Medicare Act of 2014, Public
Law 113-93, enacted on April 1, 2014, further extended the MDH program
through the first half of FY 2015 (that is, for discharges occurring
before April l, 2015). Prior to the enactment of Public Law 113-67, the
MDH program was to be in effect through the end of FY 2013 only. The
MDH program expires for discharges beginning on April 1, 2015 under
current law. Accordingly, the update of the hospital-specific rates for
FY 2015 for MDHs will apply in determining payments for FY 2015
discharges occurring before April 1, 2015.
2. FY 2015 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28088), we proposed an
applicable percentage increase to the Puerto Rico-specific operating
standardized amount of 2.1 percent for FY 2015. We also proposed, for
the final rule, to use the most recent data available to determine the
FY 2015 applicable percentage increase. We note that the provisions of
section 1886(b)(3)(B)(viii) of the Act, which specify the adjustments
to the applicable percentage increase for ``subsection (d)'' hospitals
that do not submit quality data under the rules established by the
Secretary, and the provisions of section 1886(b)(3)(B)(ix) of the Act,
which specify the adjustments to the applicable percentage increase for
``subsection (d)'' hospitals that are not meaningful EHR users, are not
applicable to hospitals located in Puerto Rico.
We did not receive any public comments concerning our proposal.
Therefore, using the most recent data available, we are finalizing an
applicable percentage increase to the Puerto Rico-specific operating
amount of 2.2 percent for FY 2015. As we noted above, for the proposed
rule, we used the first quarter 2014 forecast of the FY 2010-based IPPS
market basket update with historical data through fourth quarter 2013.
For this final rule, we used the most recent data available, which is
IGI's second quarter 2014 forecast of the FY 2010-based IPPS market
basket update with historical data through first quarter 2014.
Similarly, for the proposed rule, we used IGI's first quarter 2014
forecast of the MFP adjustment. For this final rule, we used the most
recent data available, which was IGI's second quarter 2014 forecast of
the MFP adjustment.
For FY 2015, the existing regulations in Sec. 412.211(c) set the
update factor for Puerto Rico-specific standardized amount equal to the
update factor applied to the national standardized amount for all IPPS
hospitals. Therefore, we are not making any further changes to this
regulatory provision to reflect the FY 2015 update factor for the
Puerto Rico-specific standardized amount.
Comment: One commenter indicated that the nonlabor costs in Puerto
Rico are closer or equal to those in the United States. It is unclear
what the commenter was requesting. Based on our interpretation of the
comment, it appears that the commenter may be requesting that CMS make
equal the nonlabor payment amount of the Puerto Rico-specific
standardized amount to the nonlabor payment amount of the national
standardized amount.
Response: The commenter did not provide any empirical data to
demonstrate how the nonlabor costs in Puerto Rico are equal to those in
the United States. Therefore, we are unable to verify the commenter's
statement. In addition, we did not propose to make any updates to the
national or Puerto Rico-specific standardized amounts aside from
applying the statutory updates as discussed earlier. We will continue
to work with Puerto Rico and other stakeholders to ensure we are using
appropriate data for ratesettting.

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

Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs are also not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average

[[Page 49997]]

hourly wage must exceed, by a certain percentage, the average hourly
wage of the labor market area where the hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, ``[a]ny
hospital classified as an RRC by the Secretary . . . for fiscal year
1991 shall be classified as such an RRC for fiscal year 1998 and each
subsequent year.'' In the August 29, 1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated RRC status for all hospitals that
lost the status due to triennial review or MGCRB reclassification.
However, CMS did not reinstate the status of hospitals that lost RRC
status because they were now urban for all purposes because of the OMB
designation of their geographic area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were
revisiting that decision. Specifically, we stated that we would permit
hospitals that previously qualified as an RRC and lost their status due
to OMB redesignation of the county in which they are located from rural
to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR
Part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum CMI and a minimum number of discharges), and
at least one of three optional criteria (relating to specialty
composition of medical staff, source of inpatients, or referral
volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53 FR 38513).) With respect to the
two mandatory prerequisites, a hospital may be classified as an RRC
if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. (The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The national median CMI
value for FY 2015 is based on the CMI values of all urban hospitals
nationwide, and the regional median CMI values for FY 2015 are based on
the CMI values of all urban hospitals within each census region,
excluding those hospitals with approved teaching programs (that is,
those hospitals that train residents in an approved GME program as
provided in Sec. 413.75). These values are based on discharges
occurring during FY 2013 (October 1, 2012 through September 30, 2013),
and include bills posted to CMS' records through March 2014.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28089), we
proposed that, in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2014, they must have a CMI value for FY 2013 that is at least--
1.5730; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located. (We refer readers to the table set forth
in the FY 2015 IPPS/LTCH PPS proposed rule at 79 FR 28089.)
The final CMI values for FY 2015 are based on the latest available
data (FY 2013 bills received through March 2014). In addition to
meeting other criteria, if rural hospitals with fewer than 275 beds are
to qualify for initial RRC status for cost reporting periods beginning
on or after October 1, 2014, they must have a CMI value for FY 2013
that is at least--
1.5723; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The final CMI values by region are set forth in the following
table:

------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.3587
2. Middle Atlantic (PA, NJ, NY)......................... 1.4318
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.4807
4. East North Central (IL, IN, MI, OH, WI).............. 1.4938
5. East South Central (AL, KY, MS, TN).................. 1.4107
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.5459
7. West South Central (AR, LA, OK, TX).................. 1.6039
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.6586
9. Pacific (AK, CA, HI, OR, WA)......................... 1.5658
------------------------------------------------------------------------

A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28090), we proposed to update the regional
standards based on discharges for urban hospitals' cost reporting
periods that began during FY 2012 (that is October 1, 2011 through
September 30, 2012), which are the latest cost report data available at
the time the proposed rule was developed.
We proposed that, in addition to meeting other criteria, a
hospital, if it is

[[Page 49998]]

to qualify for initial RRC status for cost reporting periods beginning
on or after October 1, 2014, must have, as the number of discharges for
its cost reporting period that began during FY 2012, at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located. (We refer readers to
the table set forth in the FY 2015 IPPS/LTCH PPS proposed rule at 79 FR
28090.)
Based on the latest discharge data available at this time (that is,
based on FY 2012 cost report data), the final median number of
discharges for urban hospitals by census region are set forth in the
following table:

------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,635
2. Middle Atlantic (PA, NJ, NY)......................... 10,841
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 10,642
4. East North Central (IL, IN, MI, OH, WI).............. 8,530
5. East South Central (AL, KY, MS, TN).................. 7,975
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,925
7. West South Central (AR, LA, OK, TX).................. 4,960
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 8,525
9. Pacific (AK, CA, HI, OR, WA)......................... 8,504
------------------------------------------------------------------------

We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2014, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2012.

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

1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital that is paid under IPPS
beginning in FY 2005. Sections 3125 and 10314 of the Affordable Care
Act provided for a temporary change in the low-volume hospital payment
policy for FYs 2011 and 2012. Section 605 of the American Taxpayer
Relief Act of 2012 (ATRA) extended, for FY 2013, the temporary changes
in the low-volume hospital payment policy provided for in FYs 2011 and
2012 by the Affordable Care Act. Prior to the enactment of the Pathway
for SGR Reform Act of 2013 (Pub. L. 113-67) on December 26, 2013, and
section 106 of the Protecting Access to Medicare Act of 2014 (Pub. L.
113-93) on April l, 2014, for FY 2014 (and subsequent years), the low-
volume hospital qualifying criteria and payment adjustment returned to
the statutory requirements under section 1886(d)(12) of the Act that
were in effect prior to the amendments made by the Affordable Care Act
and the ATRA. (For additional information on the expiration of the
temporary changes in the low-volume hospital payment policy for FYs
2011 through 2013 provided for by the Affordable Care Act and the ATRA,
we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610
through 50613).)
Section 1105 of the Pathway for SGR Reform Act extended, for the
first 6 months of FY 2014 (that is, through March 31, 2014), the
temporary changes in the low-volume hospital payment policy provided
for in FYs 2011 and 2012 by the Affordable Care Act and extended
through FY 2013 by the ATRA. We addressed the extension of the
temporary changes to the low-volume hospital payment policy through
March 31, 2014 under the Pathway for SGR Reform Act in an interim final
rule with comment period that appeared in the Federal Register on March
18, 2014 (79 FR 15022 through 15025) (hereafter referred to as the
``March 2014 IFC''). In that March 2014 IFC, we also amended the
regulations at 42 CFR 412.101 to reflect the extension of the temporary
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals through March 31, 2014. (In section IV.P. of the
preamble of this final rule, we are responding to the public comments
we received on the March 2014 IFC and are stating our finalized policy
for the extension of the temporary changes to the low-volume hospital
payment policy through March 31, 2014, under the Pathway for SGR Reform
Act.)
2. Provisions of the Protecting Access to Medicare Act of 2014
Section 105 of the Protecting Access to Medicare Act of 2014 (PAMA)
(Pub. L. 113-93) extends, for an additional year (that is, through
March 31, 2015), the temporary changes in the low-volume hospital
payment policy provided for in FYs 2011 and 2012 by the Affordable Care
Act and extended through FY 2013 by the ATRA and the first half of FY
2014 by the Pathway for SGR Reform Act. We addressed the extension of
the temporary changes to the low-volume hospital payment policy for the
second half of FY 2014 (that is, from April 1, 2014 through September
30, 2014) under the PAMA in a notice that appeared in the Federal
Register on June 17, 2014 (79 FR 34444). However, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28090), we proposed to make conforming
changes to the existing regulations text at Sec. 412.101 to reflect
the extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through the first half
of FY 2015 (that is, through March 31, 2015) in accordance with section
105 of the PAMA. Specifically, we proposed to revise paragraphs
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec. 412.101. Under
these proposed changes to Sec. 412.101, beginning with FY 2015
discharges occurring on or after April 1, 2015, consistent with section
1886(d)(12) of the Act, as amended, the low-volume hospital qualifying
criteria and payment adjustment methodology would revert to that which
was in effect prior to the amendments made by the Affordable Care Act
and subsequent legislation (that is, the low-volume hospital payment
adjustment policy in effect for FYs 2005 through 2010).
We did not receive any public comments on our proposed conforming
changes to the existing regulations text at Sec. 412.101 to reflect
the extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through the first half
of FY 2015 (that is, through March 31, 2015) in accordance with section
105 of the PAMA. Therefore, in this final rule, we are adopting our
proposed revisions to

[[Page 49999]]

paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec.
412.101 as final without modification. We note that these revisions
supersede the conforming changes to these same regulatory provisions
made in the March 2014 IFC to reflect the extension of the changes to
the qualifying criteria and the payment adjustment methodology for low-
volume hospitals through March 31, 2014, under the Pathway for SGR
Reform Act, as discussed in section IV.P. of the preamble of this final
rule. The public comments we received on our proposals related to the
low-volume hospital payment policy for FY 2015 and our responses are
presented in section IV.D.3. of the preamble of this final rule.
3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015
As discussed above, under section 1886(d)(12) of the Act, as
amended, the temporary changes in the low-volume hospital payment
policy originally provided by the Affordable Care Act and extended
through subsequent legislation, are effective for FY 2015 discharges
occurring before April 1, 2015. To implement the extension of the
temporary change in the low-volume hospital payment policy through the
first half of FY 2015 (that is, for discharges occurring through March
31, 2015) provided for by the PAMA, in accordance with proposed Sec.
412.101(b)(2)(ii) and consistent with our historical approach, we
proposed to update the discharge data source used to identify
qualifying low-volume hospitals and calculate the payment adjustment
(percentage increase) for FY 2015 discharges occurring before April 1,
2015. Under existing Sec. 412.101(b)(2)(ii), for the applicable fiscal
years, a hospital's Medicare discharges from the most recently
available MedPAR data, as determined by CMS, are used to determine if
the hospital meets the discharge criteria to receive the low-volume
payment adjustment in the current year. The applicable low-volume
percentage increase, as originally provided for by the Affordable Care
Act, is determined using a continuous linear sliding scale equation
that results in a low-volume hospital payment adjustment ranging from
an additional 25 percent for hospitals with 200 or fewer Medicare
discharges to a zero percent additional payment adjustment for
hospitals with 1,600 or more Medicare discharges. For FY 2015
discharges occurring before April 1, 2015, consistent with our
historical policy, we proposed that qualifying low-volume hospitals and
their payment adjustment would be determined using the most recently
available Medicare discharge data from the FY 2013 MedPAR file, as
these data are the most recent data available. Table 14 listed in the
Addendum of the proposed rule (which is available only through the
Internet on the CMS Web site at https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) lists the ``subsection (d)''
hospitals with fewer than 1,600 Medicare discharges based on the
December 2013 update of the FY 2013 MedPAR file and their proposed low-
volume payment adjustment for FY 2015 discharges occurring before April
1, 2015 (if eligible). We noted that the list of hospitals with fewer
than 1,600 Medicare discharges in Table 14 did not reflect whether or
not the hospital meets the mileage criterion. Eligibility for the low-
volume hospital payment adjustment for the first 6 months of FY 2015
would also be dependent upon meeting the mileage criterion specified at
proposed Sec. 412.101(b)(2)(ii); that is, the hospital is located more
than 15 road miles from any other IPPS hospital. In addition, we
indicated that if more recent Medicare discharge data become available,
we intended to use updated data to determine the list of ``subsection
(d)'' hospitals with fewer than 1,600 Medicare discharges based on the
March 2014 update of the FY 2013 MedPAR file and their potential low-
volume payment adjustment for FY 2015 discharges occurring before April
1, 2015 (if eligible) in Table 14 of the final rule.
We did not receive any public comments on our proposal that
qualifying low-volume hospitals and their payment adjustment for FY
2015 discharges occurring before April 1, 2015 would be determined
using the most recently available Medicare discharge data from the FY
2013 MedPAR file, as these data are the most recent data available.
Therefore, in this final rule, as we proposed, we are establishing that
qualifying low-volume hospitals (that is, the list of ``subsection
(d)'' hospitals with fewer than 1,600 Medicare discharges) and their
potential low-volume payment adjustment for FY 2015 discharges
occurring before April 1, 2015 (if eligible) will be based on Medicare
discharge data from the March 2014 update of the FY 2013 MedPAR file.
Table 14 listed in the Addendum of this final rule (which is available
only through the Internet on the CMS Web site at https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) lists the
``subsection (d)'' hospitals with fewer than 1,600 Medicare discharges
based on the March 2014 update of the FY 2013 MedPAR file and their
low-volume payment adjustment for FY 2015 discharges occurring before
April 1, 2015 (if eligible). We note that the list of hospitals with
fewer than 1,600 Medicare discharges in Table 14 does not reflect
whether or not the hospital meets the mileage criterion. Eligibility
for the low-volume hospital payment adjustment for FY 2015 discharges
occurring before April 1, 2015, is also dependent upon meeting (in the
case of a hospital that did not qualify for the low-volume hospital
payment adjustment in FY 2014) or continuing to meet (in the case of a
hospital that did qualify for the low-volume hospital payment
adjustment in FY 2014) the mileage criterion specified at revised Sec.
412.101(b)(2)(ii) (that is, the hospital is located more than 15 road
miles from any other subsection (d) hospital).
In accordance with section 1886(d)(12) of the Act, as amended,
beginning with FY 2015 discharges occurring on or after April 1, 2015,
the low-volume hospital definition and payment adjustment methodology
will revert back to the statutory requirements that were in effect
prior to the amendments made by the Affordable Care Act and subsequent
legislation (including the PAMA). Therefore, as we stated in the
proposed rule, consistent with section 1886(d)(12) of the Act, as
amended, effective for FY 2015 discharges occurring on or after April
1, 2015 and subsequent years, in order to qualify as a low-volume
hospital, a subsection (d) hospital must be more than 25 road miles
from another subsection (d) hospital and have less than 200 discharges
(that is, less than 200 discharges total, including both Medicare and
non-Medicare discharges) during the fiscal year. Consistent with our
existing policy for FYs 2005 through 2010, we stated that, effective
for FY 2015 discharges occurring on or after April 1, 2015 and
subsequent years, qualifying hospitals would receive the low-volume
hospital payment adjustment of an additional 25 percent for discharges
occurring during the fiscal year (or portion of the fiscal year). Also
consistent with our existing policy for FYs 2005 through 2010, for FY
2015 discharges occurring on or after April 1, 2015 (and subsequent
years), we stated that the discharge determination for the low-volume
hospital payment adjustment would be made based on the hospital's
number of total discharges, that is, Medicare and non-Medicare
discharges based on the hospital's most recently submitted cost report.
We use cost report data to determine if a hospital meets the discharge
criterion because these data are the best available

[[Page 50000]]

data source that includes information on both Medicare and non-Medicare
discharges. In addition to a discharge criterion, eligibility for the
low-volume hospital payment adjustment also depends on the hospital
meeting a mileage criterion. As specified at Sec. 412.101(b)(2)(i), to
meet the mileage criterion to qualify for the low-volume hospital
payment adjustment for FY 2015 discharges occurring on or after April
1, 2015 (and subsequent years), a hospital must be located more than 25
road miles from the nearest subsection (d) hospital.
Comment: A few commenters expressed concern about the financial
impact of the expiration of the temporary changes in the low-volume
hospital adjustment originally provided for by the Affordable Care Act.
Some of these commenters requested that CMS permanently adopt the
temporary changes in the low-volume hospital adjustment, while other
commenters urged CMS to support legislative efforts to permanently
extend these provisions beyond the current March 31, 2015 statutory
expiration date. (These comments are similar to comments we received
previously, prior to the statutory extensions of the temporary changes
in the low-volume hospital adjustment for FYs 2013 and 2014 provided by
subsequent legislation.)
Response: While we appreciate the commenters' concerns about the
change to the low-volume hospital policy that will occur for discharges
occurring on or after April 1, 2015 under current law, we are unable to
extend the temporary changes to the low-volume hospital adjustment
originally provided for by the Affordable Care Act beyond the current
March 31, 2015 statutory expiration date. As discussed in response to
similar comment in both the FY 2013 IPPS/LTCH PPS final rule (77 FR
53408 through 53409) and the FY 2014 IPPS/LTCH PPS final rule (78 FR
50612 through 50613), to implement the original low-volume hospital
payment adjustment provision, and as mandated by statute, we developed
an empirically justified adjustment based on the relationship between
costs and total discharges of hospitals. (For more information on this
analysis, we refer readers to the FY 2005 IPPS final rule (69 FR 49101
through 49102).) Under current law, the low-volume hospital definition
and payment adjustment methodology will revert back to the policy
established under statutory requirements that were in effect prior to
the amendments made by the Affordable Care Act and subsequent
legislation (include the PAMA) beginning with discharges occurring on
after April 1, 2015.
Therefore, consistent with section 1886(d)(12) of the Act, as
amended, under the conforming changes to Sec. 412.101(b)(2), effective
for FY 2015 discharges occurring on or after April 1, 2015, and
subsequent years, in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 discharges total, including both Medicare and non-
Medicare discharges) during the fiscal year. Consistent with our
existing policy for FYs 2005 through 2010, effective for FY 2015
discharges occurring on or after April 1, 2015, and subsequent years,
qualifying hospitals will receive the low-volume hospital payment
adjustment of an additional 25 percent for discharges occurring during
the fiscal year (or portion of the fiscal year). The discharge
determination for the low-volume hospital payment adjustment will be
made based on the hospital's number of total discharges, that is,
Medicare and non-Medicare discharges, as specified at Sec.
412.101(b)(2)(i). The hospital's most recently submitted cost report is
used to determine if the hospital meets the discharge criterion to
receive the low-volume hospital payment adjustment in the current
fiscal year. We use cost report data to determine if a hospital meets
the discharge criterion because these data are the best available data
source that includes information on both Medicare and non-Medicare
discharges. In addition to a discharge criterion, eligibility for the
low-volume hospital payment adjustment also depends on the hospital
meeting a mileage criterion. As specified at Sec. 412.101(b)(2)(i), to
meet the mileage criterion to qualify for the low-volume hospital
payment adjustment for FY 2015 discharges occurring on or after April
1, 2015 (and subsequent years), a hospital must be located more than 25
road miles from the nearest subsection (d) hospital.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28091 through
28092), for FY 2015, we proposed a process for requesting and obtaining
the low-volume hospital payment adjustment that was consistent with our
previously established procedure. We proposed that in order to receive
a low-volume hospital payment adjustment under Sec. 412.101, a
hospital must notify and provide documentation to its MAC that it meets
the discharge and distance requirements under proposed Sec.
412.101(b)(2)(ii) for FY 2015 discharges occurring before April 1,
2015, and under proposed Sec. 412.101(b)(2)(i) for FY 2015 discharges
occurring on or after April 1, 2015, if also applicable. Specifically,
for FY 2015, we proposed that a hospital must make a written request
for low-volume hospital status that is received by its MAC no later
than September 1, 2014, in order for the applicable low-volume hospital
payment adjustment to be applied to payments for its discharges
occurring on or after October 1, 2014, and through March 31, 2015, or
through September 30, 2015, for hospitals that also meet the low-volume
hospital payment adjustment qualifying criteria for discharges
occurring during the second half of FY 2015. Under this proposal, a
hospital that qualified for the low-volume payment adjustment in FY
2014 may continue to receive a low-volume payment adjustment for FY
2015 discharges occurring before April 1, 2015, without reapplying if
it continues to meet the Medicare discharge criterion established for
FY 2015 and the distance criterion. However, the hospital must send
written verification that is received by its MAC no later than
September 1, 2014, stating that it continues to be more than 15 miles
from any other ``subsection (d)'' hospital. We also proposed that if a
hospital's written request for low-volume hospital status for FY 2015
is received after September 1, 2014, and if the MAC determines that the
hospital meets the criteria to qualify as a low-volume hospital, the
MAC would apply the applicable low-volume hospital payment adjustment
to determine the payment for the hospital's FY 2015 discharges,
effective prospectively within 30 days of the date of its low-volume
hospital status determination.
Comment: One commenter requested that CMS not impose a notification
requirement for hospitals that qualified for the low-volume hospital
payment adjustment in FY 2014. The commenter stated that eliminating
this verification would reduce the administrative burden for those
hospitals and their MACs.
Response: We appreciate the commenter's suggestion to reduce the
administrative burden for hospitals and MACs by not having a
notification requirement under the FY 2015 low-volume hospital policy
for hospitals that qualified for the low-volume hospital payment
adjustment in FY 2014. However, as we explained in the proposed rule,
under our proposal a hospital that qualified for the low-volume payment
adjustment in FY 2014 does not need to reapply for FY 2015 if it
continues to meet the applicable discharge and distance criteria (that
is,

[[Page 50001]]

such a hospital would not have to resubmit a low-volume hospital
request with supporting documentation to demonstrate that it meets the
mileage criterion). Rather, such a hospital would only be required to
send written verification that it continues to meet the distance
criterion that is received by the MAC by the proposed notification
deadline. This written verification could be a brief letter to the MAC
stating that the hospital continues to meet the low-volume hospital
distance criterion as documented in a prior low-volume hospital status
request. We proposed this abridged notification requirement for
hospitals that qualified for the low-volume payment adjustment in FY
2014 because we believe compliance with the statutory low-volume
hospital criteria should be monitored while recognizing that it is not
necessary to have such hospitals resubmit a low-volume hospital request
with the necessary documentation. In addition, if we were to consider
no longer requiring verification for hospitals that qualified for the
low-volume hospital payment adjustment in the prior year, we may also
want to develop alternative policies for monitoring compliance with the
statutory low-volume hospital qualifying criteria. Therefore, we are
not adopting the commenter's suggestion regarding hospitals that
qualified for the low-volume hospital payment adjustment in FY 2014.
However, should the temporary changes to the low-volume hospital
adjustment be extended beyond March 31, 2015, by subsequent
legislation, we may consider modifying the verification process in
conjunction with developing an alternative compliance policy.
In this final rule, we are adopting our policy as proposed without
modification. Therefore, in order to receive a low-volume hospital
payment adjustment under Sec. 412.101, a hospital must notify and
provide documentation to its MAC that it meets the discharge and
distance requirements under revised Sec. 412.101(b)(2)(ii) for FY 2015
discharges occurring before April 1, 2015, and under revised Sec.
412.101(b)(2)(i) for FY 2015 discharges occurring on or after April 1,
2015, if also applicable. The MAC will determine, based on the most
recent data available, if the hospital qualifies as a low-volume
hospital, so that the hospital would know in advance whether or not it
will receive a payment adjustment. The MAC and CMS may review available
data, in addition to the data the hospital submits with its request for
low-volume hospital status, in order to determine whether or not the
hospital meets the qualifying criteria. Consistent with our previously
established procedure, for FY 2015, a hospital must make a written
request for low-volume hospital status that is received by its MAC no
later than September 1, 2014, in order for the applicable low-volume
hospital payment adjustment to be applied to payments for its
discharges occurring on or after October 1, 2014, and through March 31,
2015, under revised Sec. 412.101(b)(2)(ii) or through September 30,
2015, for hospitals that also qualify under revised Sec.
412.101(b)(2)(i). A hospital that qualified for the low-volume payment
adjustment in FY 2014 may continue to receive a low-volume payment
adjustment for FY 2015 discharges occurring before April l, 2015,
without reapplying if it continues to meet the Medicare discharge
criterion established for FY 2015 (shown in Table 14 of this final
rule, which is available via the Internet on the CMS Web site) and the
distance criterion. However, the hospital must send written
verification that is received by its MAC no later than September 1,
2014, that it continues to be more than 15 miles from any other
``subsection (d)'' hospital. This written verification could be a brief
letter to the MAC stating that the hospital continues to meet the low-
volume hospital distance criterion as documented in a prior low-volume
hospital status request.
If a hospital's written request for low-volume hospital status for
FY 2015 is received after September 1, 2014, and if the MAC determines
that the hospital meets the criteria to qualify as a low-volume
hospital under revised Sec. 412.101(b)(2)(ii), the MAC will apply the
applicable low-volume hospital payment adjustment to determine the
payment for the hospital's FY 2015 discharges, effective prospectively
within 30 days of the date of its low-volume hospital status
determination through discharges occurring on or before March 31, 2015.
If the hospital also qualifies under revised Sec. 412.101(b)(2)(i),
the MAC will apply the 25-percent low-volume hospital payment
adjustment to determine the payment for the hospital's FY 2015
discharges occurring on or after April 1, 2015. If a hospital's written
request for low-volume hospital status for FY 2015 is received on a
later date such that the prospective effective date would be on or
after April 1, 2015, and the hospital qualifies under revised Sec.
412.101(b)(2)(i), the MAC will apply the 25-percent low-volume hospital
payment adjustment to determine the payment for the hospital's FY 2015
discharges occurring from the prospective effective date through
September 30, 2015. (For additional details on our established process
for the low-volume hospital payment adjustment, we refer readers to the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).)

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

1. IME Adjustment Factor for FY 2015
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B) of the Act states that, for discharges occurring during
FY 2008 and fiscal years thereafter, the IME formula multiplier is
1.35. Accordingly, for discharges occurring during FY 2015, the formula
multiplier is 1.35. We estimate that application of this formula
multiplier for the FY 2015 IME adjustment will result in an increase in
IPPS payment of 5.5 percent for every approximately 10 percent increase
in the hospital's resident to bed ratio.
Comment: One commenter stated it has a longstanding commitment to
graduate medical education, the practice of academic medicine, and
successful training of surgical residents. The commenter expressed
appreciation of Federal support of IME payments. The commenter stated
these payments are an important part of ensuring a strong general
surgery workforce, which is currently experiencing a growing shortage.
Response: We acknowledge the commenter's support. We note that the
IME formula multiplier is set by Congress. We are specifying in this
final rule that the IME formula multiplier for FY 2015 is set at 1.35.
2. IME Medicare Part C Add-On Payments to Sole Community Hospitals
(SCHs) That Are Paid According to Their Hospital-Specific Rates and
Change in Methodology in Determining Payment to SCHs
Section 1886(d)(11) of the Act provides for an additional payment

[[Page 50002]]

amount to a subsection (d) teaching hospital that has an approved
medical residency training program for each applicable discharge of any
individual who is enrolled under Medicare Managed Care under Part C.
The amount of such payment is specified in section 1886(d)(11)(C) of
the Act and ``shall be equal to the applicable percentage (as defined
in subsection (h)(3)(D)(ii)) of the estimated average per discharge
amount that would otherwise have been paid under paragraph (5)(B) if
the individuals had not been enrolled as described in subparagraph
(B).''
Under section 1886(d)(5)(D) of the Act, sole community hospitals
(SCHs) are paid based on their hospital-specific rate from specified
base years or the IPPS Federal rate, whichever yields the greatest
aggregate payment for the hospital's cost reporting period. Payments
based on the Federal rate are based on the IPPS standardized amount and
include all applicable IPPS add-on payments, such as outliers, DSH, and
IME, while payments based on the hospital-specific rate include no add-
on payments. Under CMS' current payment system, both the IME add-on
payment for Medicare Part A patient discharges under section
1886(d)(5)(B) of the Act and the IME add-on payment for Medicare Part C
patient discharges under section 1886(d)(11) of the Act are included as
part of the Federal rate payment, whereas neither of these add-on
payments are included as part of the hospital-specific rate payment. We
note that SCHs that are paid based on their hospital-specific rate do
not receive a separate IME add-on payment for Medicare Part A patient
discharges because, generally, the hospital-specific rate already
reflects the additional costs that a teaching hospital incurs for its
Medicare Part A patients. In the case of Medicare Part C patients,
there is no component of the hospital-specific rate that already
accounts for the additional costs that SCHs incur for their Medicare
Part C patients, and there is currently no payment mechanism for SCHs
paid based on their hospital-specific rate to receive the IME add-on
payment for Medicare Part C patients.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28092), for the
reasons specified below, effective for discharges occurring in cost
reporting periods beginning on or after October 1, 2014, we proposed:
(1) To provide all SCHs that are subsection (d) teaching hospitals IME
add-on payments for applicable discharges of Medicare Part C patients
in accordance with section 1886(d)(11) of the Act, regardless of
whether the SCH is paid based on the Federal rate or its hospital-
specific rate; and (2) that, for purposes of the comparison of payments
based on the Federal rate (hereinafter also referred to as the
``Federal rate payment'') and payments based on the hospital-specific
rate (hereinafter also referred to as the ``hospital-specific rate
payment'') under section 1886(d)(5)(D) of the Act, IME payments under
section 1886(d)(11) of the Act for Medicare Part C patients will no
longer be included as part of the Federal rate payment. After the
higher of the Federal rate payment amount or the hospital-specific rate
payment amount is determined, any IME add-on payments under section
1886(d)(11) of the Act for Medicare Part C patient discharges would be
added to that payment for purposes of determining the hospital's total
payment amount.
As noted above, under section 1886(d)(5)(D) of the Act, SCHs are
paid based on their hospital-specific rate or the Federal rate,
whichever yields the higher payment for the hospital's cost reporting
period. For each cost reporting period, the MAC determines which of the
payment options will yield the higher aggregate payment. Interim
payments are automatically made on a claim-by-claim basis at the higher
rate using the best data available at the time the MAC makes the
payment determination for each discharge. However, it may not be
possible for the MAC to determine in advance precisely which of the
rates will yield the higher aggregate payment by year's end. In many
cases, it is not possible to forecast outlier payments or the final
amount of the DSH payment adjustment or the IME adjustment until cost
report settlement. As noted above, these adjustment amounts are
included only as part of the payments based on the Federal rate but not
payments based on the hospital-specific rate. The MAC makes a final
adjustment at cost report settlement after it determines precisely
which of the two payment rates would yield the higher aggregate payment
to the hospital for its cost reporting period. This payment methodology
makes SCHs unique because SCH payments can change on a yearly basis
from payments based on the hospital-specific rate to payments based on
the Federal rate, or vice versa.
As we stated earlier, section 1886(d)(11) of the Act provides for
an additional payment for each applicable discharge of any subsection
(d) teaching hospital for treating Medicare Part C patients. Section
1886(d)(11)(C) of the Act specifies that the amount of the payment
``shall be equal to the applicable percentage (as defined in subsection
(h)(3)(D)(ii)) of the estimated average per discharge amount that would
otherwise have been paid under paragraph (5)(B) if the individuals had
not been enrolled as described in subparagraph (B)'' (emphasis added).
Because an SCH that is paid based on its hospital-specific rate does
not receive any IME add-on payment for Medicare Part A patients as
provided under section 1886(d)(5)(B) of the Act, CMS has interpreted
section 1886(d)(11)(C) of the Act to mean that an SCH that is paid
based on its hospital-specific rate also is not entitled to receive
payment for discharges of Medicare Part C patients under section
1886(d)(11) of the Act.
After further consideration of the language at section 1886(d)(11)
of the Act, we believe that the statute would allow an SCH that is paid
based on its hospital-specific rate to receive IME add-on payments for
its Medicare Part C patient discharges. Section 1886(d)(11)(A) of the
Act provides for an additional payment amount for each applicable
discharge of a Medicare Part C patient of a subsection (d) hospital
that has an approved medical residency training program. Section
1886(d)(11)(C) of the Act sets forth the amount of this additional
payment, by reference to the amount that would otherwise have been paid
under section 1886(d)(5)(B) of the Act. We believe that section
1886(d)(11)(C) of the Act can be interpreted as simply establishing the
methodology for calculating the amount of the add-on payment, without
limiting the applicability of the add-on payment to those SCHs that are
paid based on the Federal rate.
As noted earlier, currently, in making the comparison of SCH
payments under the Federal rate and the hospital-specific rate under
section 1886(d)(5)(D) of the Act, the aggregate Federal rate payments
are based on the IPPS standardized amount and include IME add-on
payments for both Medicare Part A and Medicare Part C patient
discharges. Payments based on the hospital-specific rate do not include
the Medicare Part A IME add-on payment under section 1886(d)(5)(B) of
the Act, under the rationale that, generally, the hospital-specific
rate already reflects the additional costs that a teaching hospital
incurs for its Medicare Part A patients. Payments based on the
hospital-specific rate do not include the IME add-on payment for
Medicare Part C patient discharges under section 1886(d)(11) of the
Act. As a result, under the current methodology, if an SCH that is a
teaching hospital is paid based on its hospital-specific rate, it
receives no IPPS payment that reflects or accounts for the additional
costs that a teaching

[[Page 50003]]

hospital incurs for its Medicare Part C patients.
In conjunction with our proposal to provide IME add-on payments
under section 1886(d)(11) of the Act to SCHs, regardless of whether the
SCH is paid based on the Federal rate or its hospital-specific rate, we
also believe that, for purposes of the comparison of payments based on
the Federal rate and the hospital-specific rate, it would be
appropriate for IME add-on payments under section 1886(d)(11) of the
Act to no longer be included as part of the Federal rate payment.
Therefore, we proposed to no longer include these payments in the
comparison in order to more accurately reflect comparable payments for
Medicare Part A patient discharges. In addition, because the IME add-on
payment for Medicare Part C patient discharges for a given provider
would be the same, regardless of whether it is paid based on the
Federal rate or its hospital-specific rate, there would be no need to
include the IME add-on payment for Medicare Part C patient discharges
in the comparison. This is because the Part C IME adjustment is always
multiplied by the Federal rate that is used under section 1886(d)(5)(B)
of the Act, regardless of whether the hospital-specific rate is higher,
in accordance with section 1886(d)(11) of the Act, which states that
the IME Part C add-on amount ``shall be equal to the applicable
percentage . . . of the estimated average per discharge amount that
would otherwise have been paid under paragraph (5)(B).''
We invited public comments on both of these proposals and any
alternatives that we should consider.
Comment: Several commenters supported CMS' proposal to make IME
add-on payments for Medicare Part C discharges to SCHs paid based on
the hospital-specific rate. Some of these commenters also supported the
proposal to change the methodology in determining whether an SCH is
paid based on the Federal rate or the hospital-specific rate by
excluding the IME add-on amount for Medicare Part C discharges from the
comparison.
Although commenters supported the proposal to make IME add-on
payments for Medicare Part C discharges to SCHs that are paid based on
the hospital-specific rate, several commenters objected to the proposal
to make a corresponding change to the methodology for determining
whether an SCH is paid based on the Federal rate or the hospital-
specific rate by excluding the IME add-on amount for Medicare Part C
discharges from the comparison. The commenters claimed that this change
would have the unintended consequence of precluding hospitals from
receiving DSH and uncompensated care payments, which would disadvantage
a subset of SCHs that receive payment based on the hospital-specific
rate. They recommended making no changes to the comparison.
Response: We appreciate the commenters' support of our proposal to
make IME add-on payments for Medicare Part C discharges to SCHs that
are paid based on the hospital-specific rate. While we agree that a
provider that receives payment based on the hospital-specific rate
would not be eligible for DSH or uncompensated care payments, we do not
agree that exclusion of the IME add-on payment for Medicare Part C
discharges from the comparison of the Federal rate payments to the
hospital-specific rate payments would disadvantage a given hospital.
Our proposal does not preclude a provider from receiving payment based
on the Federal rate (which includes DSH and uncompensated care payments
as applicable), if the Federal rate payment is higher than the
hospital-specific rate payment. However, it is true that a provider
that receives payment based on the hospital-specific rate would not be
eligible for DSH or uncompensated care payments.
As we stated in the proposed rule, we believe that the proposed
methodology more accurately reflects the comparable payments for
Medicare Part A discharges for SCHs. Generally the hospital-specific
rate payment already reflects the additional costs that a teaching
hospital incurs for its Medicare Part A patients. However, because the
costs associated with Medicare Part C patient discharges are not
reflected in the hospital-specific rate, we believe that excluding
these amounts from the Federal rate payment provides for a more
accurate comparison of payments for Medicare Part A discharges. The
commenters did not provide any explanation in support of maintaining
our current methodology of comparing the Federal rate payment with the
IME add-on amount for Medicare Part C discharges to the hospital-
specific rate payment. Moreover, these commenters did not include any
explanation of how our proposal to exclude the IME add-on payments for
Medicare Part C discharges from both sides of the comparison would
specifically disadvantage a given provider by precluding it from
receiving DSH and uncompensated care payments. For these reasons, we
are not adopting the commenters' suggestion to maintain the current
comparison methodology.
Comment: One commenter urged CMS to extend the same payment IME
add-on for Part C patients to MDHs because they also are paid the
higher of the Federal rate payment or ``the blended rate incorporating
a hospital-specific rate.''
Response: Unlike SCHs, an MDH receives the higher of the Federal
rate or the Federal rate payment plus 75 percent of the amount by which
the Federal rate payment is exceeded by its hospital-specific rate
payments (that is, payment based on the highest of its hospital-
specific rates based on costs in one of its base years). Because
payment, whether in whole or in part to an MDH, is always based on the
Federal rate, an MDH that is a teaching hospital receives IME add-on
payments for Medicare Part A patient discharges under section
1886(d)(5)(B) of the Act, and, therefore, under our historical
interpretation of section 1886(d)(11)(C) of the Act, is entitled to
receive IME add-on payments for Medicare Part C patient discharges.
Consequently, there is no need to ``extend'' this payment add-on to
MDHs that are teaching hospitals because they are already receiving IME
add-on payments for Medicare Part C discharges. We also note that, as
explained elsewhere, the Federal rate payment used in the MDH payment
methodology is the same Federal rate payment that is used in the SCH
payment methodology (79 FR 28096). This means that, under the proposed
change to the comparison methodology to exclude IME add-on payments for
Medicare Part C discharges from the Federal rate payment, the Federal
rate payment used for the purpose of the MDH payment methodology, that
is, to calculate the 75 percent of the amount by which the Federal rate
payment is exceeded by the highest of its hospital-specific rate
payments based on costs in one of the MDH's base years, would likewise
exclude the IME add-on payment for Medicare Part C discharges. After
determining the higher of the Federal rate payment or the Federal rate
payment plus 75 percent of the amount by which the Federal rate payment
is exceeded by the hospital-specific rate payment, any add-on payments
under section 1886(d)(11) of the Act for Medicare Part C patient
discharges will be added to that payment for purposes of determining
the hospital's total payment amount.
Comment: One commenter addressed the general payment methodology
for SCHs and the limited number of specified years upon which the
hospital-specific rate is based. The commenter stated that the proposal
to make additional IME Part C add-on

[[Page 50004]]

payments to SCHs does not cover IME costs for SCHs that did not have a
teaching program during or prior to FY 2006. The commenter suggested
allowing rural hospitals to rebase their hospital-specific rate in the
fiscal year following the start of a new residency program.
Response: We consider this comment to be outside of the scope of
the proposals described above. We also note that the fiscal years upon
which the hospital-specific rates are based are specified in the
statute. CMS does not have authority to authorize a rebasing of
hospital-specific rates absent additional legislation.
After consideration of the public comments we received, we are
adopting our proposals without modification. In summary, effective with
discharges occurring in cost reporting periods beginning on or after
October 1, 2014, our final policies are: (1) To provide all SCHs that
are subsection (d) teaching hospitals IME add-on payments for Medicare
Part C patient discharges in accordance with section 1886(d)(11) of the
Act; and (2) for purposes of the comparison of payments based on the
Federal rate and the hospital-specific rate for SCHs under section
1886(d)(5)(D) of the Act, IME add-on payments under section 1886(d)(11)
of the Act for Medicare Part C patient discharges will no longer be
included in the aggregate payment based on the Federal rate. After the
higher of the Federal rate payment or the hospital-specific rate
payment under section 1886(d)(5)(D) of the Act is determined, the Part
C IME adjustment factor is multiplied by the Federal rate to determine
the add-on payment amount under section 1886(d)(11) of the Act, and
then any IME add-on payments under section 1886(d)(11) of the Act are
added to the payment amount under section 1886(d)(5)(D) of the Act for
purposes of determining the hospital's total payment amount.
3. Other Policy Changes Affecting IME
In section IV.K. of the preamble of this final rule, we present
other policy changes relating to GME payments, which may also apply to
IME payments. We refer readers to that section of the preamble of this
proposed rule where we present these policies.

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

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

[[Page 50005]]

adopting the revisions to the regulation at Sec. 412.102 to remove
references to the urban and rural standardized amounts.
The provisions of Sec. 412.102 will continue to apply with respect
to the calculation of the DSH payments to hospitals that are currently
located in urban counties that will become rural under our adoption of
the new OMB delineations as described in section III.B.2. of the
preamble to this final rule. Specifically, the regulations state that,
in the first year after a hospital loses urban status, the hospital
will receive an additional payment that equals two-thirds of the
difference between disproportionate share payments as applicable to the
hospital before its redesignation from urban to rural and the
disproportionate share payments otherwise applicable to the hospital
subsequent to its redesignation from urban to rural. In the second year
after a hospital loses urban status, the hospital will receive an
additional payment that equals one-third of the difference between the
disproportionate share payments applicable to the hospital before its
redesignation from urban to rural and the disproportionate share
payments otherwise applicable to the hospital subsequent to its
redesignation from urban to rural.
For the purposes of ratesetting, calculating budget neutrality, and
modeling payment impacts for this final rule, any hospital that was
previously urban but will change to rural status in FY 2015 as a result
of the adoption of the new OMB labor market area delineations will have
its DSH payments modeled such that the payment equals the amount of the
rural disproportionate share payments plus two-thirds of the difference
between the urban disproportionate share payments and the rural
disproportionate share payments.
3. Payment Adjustment Methodology for Medicare Disproportionate Share
Hospitals (DSHs) Under Section 3133 of the Affordable Care Act (Sec.
412.106)
a. General Discussion
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a new
section 1886(r) to the Act that modifies the methodology for computing
the Medicare DSH payment adjustment beginning in FY 2014. For purposes
of this proposed rule, we refer to these provisions collectively as
section 3133 of the Affordable Care Act.
Medicare DSH adjustment payments are calculated under a statutory
formula that considers the hospital's Medicare utilization attributable
to beneficiaries who also receive Supplemental Security Income (SSI)
benefits and the hospital's Medicaid utilization. Beginning with
discharges in FY 2014, hospitals that qualify for Medicare DSH payments
under section 1886(d)(5)(F) of the Act receive 25 percent of the amount
they previously would have received under the statutory formula for
Medicare DSH payments. This provision applies equally to hospitals that
qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act
and those hospitals that qualify under the Pickle method under section
1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals under age 65 who are
uninsured, is available to make additional payments to each hospital
that qualifies for Medicare DSH payments and that has uncompensated
care. The payments to each hospital for a fiscal year are based on the
hospital's amount of uncompensated care for a given time period
relative to the total amount of uncompensated care for that same time
period reported by all hospitals that receive Medicare DSH payments for
that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for FY 2014 and each subsequent
fiscal year, a ``subsection (d) hospital'' that would otherwise receive
a ``disproportionate share hospital payment . . . made under subsection
(d)(5)(F)'' receives two separately calculated payments. Specifically,
section 1886(r)(1) of the Act provides that the Secretary shall pay to
such a subsection (d) hospital (including a Pickle hospital) 25 percent
of the amount the hospital would have received under section
1886(d)(5)(F) of the Act for disproportionate share hospital payments,
which represents ``the empirically justified amount for such payment,
as determined by the Medicare Payment Advisory Commission in its March
2007 Report to the Congress.'' We refer to this payment as the
``empirically justified Medicare DSH payment.''
In addition to this payment, section 1886(r)(2) of the Act provides
that, for FY 2014 and each subsequent fiscal year, the Secretary shall
pay to ``such subsection (d) hospital an additional amount equal to the
product of'' three factors. The first factor is the difference between
``the aggregate amount of payments that would be made to subsection (d)
hospitals under subsection (d)(5)(F) if this subsection did not apply''
and ``the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1)'' for each fiscal year. Therefore, this
factor amounts to 75 percent of the payments that would otherwise be
made under section 1886(d)(5)(F) of the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who are uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), minus 0.1
percentage points for FY 2014, and minus 0.2 percentage points for FYs
2015 through 2017. For FYs 2014 through 2017, the baseline for the
estimate of the change in uninsurance is fixed by the most recent
estimate of the Congressional Budget Office before the final vote on
the Health Care and Education Reconciliation Act of 2010, which is
contained in a March 20, 2010 letter from the Director of the
Congressional Budget Office to the Speaker of the House. (A link to
this letter is included in section IV.F.3.d.(2) of the preamble of this
final rule.)
For FY 2018 and subsequent years, the second factor is 1 minus the
percent change in the percent of individuals who are uninsured, as
determined by comparing the percent of individuals ``who are uninsured
in 2013 (as estimated by the Secretary, based on data from the Census
Bureau or other sources the Secretary determines appropriate, and
certified by the Chief Actuary'' of CMS, and the percent of individuals
``who are uninsured in the most recent period for which data is
available (as so estimated and certified), minus 0.2 percentage points
for FYs 2018 and 2019.'' Therefore, for FY 2018 and subsequent years,
the statute provides some greater flexibility in the choice of the data
sources to be used for the estimate of the change in the percent of
uninsured individuals.
The third factor is a percent that, for each subsection (d)
hospital, ``represents the quotient of . . . the amount of
uncompensated care for such hospital for a period selected by the
Secretary (as

[[Page 50006]]

estimated by the Secretary, based on appropriate data . . .),''
including the use of alternative data ``where the Secretary determines
that alternative data is available which is a better proxy for the
costs of subsection (d) hospitals for . . . treating the uninsured,''
and ``the aggregate amount of uncompensated care for all subsection (d)
hospitals that receive a payment under this subsection.'' Therefore,
this third factor represents a hospital's uncompensated care amount for
a given time period relative to the uncompensated care amount for that
same time period for all hospitals that receive Medicare DSH payments
in that fiscal year, expressed as a percent. For each hospital, the
product of these three factors represents its additional payment for
uncompensated care for the applicable fiscal year. We refer to the
additional payment determined by these factors as the ``uncompensated
care payment.''
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies for
implementing the required changes to the DSH payment methodology made
by section 3133 of the Affordable Care Act for FY 2014. In those rules,
we noted that, because section 1886(r) of the Act modifies the payment
required under section 1886(d)(5)(F) of the Act, it affects only the
DSH payment under the operating IPPS. It does not revise or replace the
capital IPPS DSH payment provided under the regulations at 42 CFR Part
412, Subpart M, which were established through the exercise of the
Secretary's discretion in implementing the capital IPPS under section
1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
``no administrative or judicial review under section 1869, section
1878, or otherwise'' of ``any estimate of the Secretary for purposes of
determining the factors described in paragraph (2),'' or of ``any
period selected by the Secretary'' for the purpose of determining those
factors. Therefore, there is no administrative or judicial review of
the estimates developed for purposes of applying the three factors used
to determine uncompensated care payments, or the periods selected in
order to develop such estimates.
b. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As indicated earlier, the payment methodology under section 3133 of
the Affordable Care Act applies to ``subsection (d) hospitals'' that
would otherwise receive a ``disproportionate share hospital payment . .
. made under subsection (d)(5)(F).'' Therefore, eligibility for
empirically justified Medicare DSH payments is unchanged under section
3133 of the Affordable Care Act. Consistent with the law, hospitals
must receive empirically justified Medicare DSH payments in a fiscal
year to receive an additional Medicare uncompensated care payment for
that year. Specifically, section 1886(r)(2) of the Act states that
``[i]n addition to the payment made to a subsection (d) hospital under
paragraph (1) . . . the Secretary shall pay to such subsection (d)
hospital an additional amount . . .'' (emphasis supplied). Because
paragraph (1) refers to empirically justified Medicare DSH payments,
the additional payment under section 1886(r)(2) of the Act therefore,
is limited to hospitals that receive empirically justified Medicare DSH
payments in accordance with section 1886(r)(1) of the Act for the
applicable fiscal year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
provided that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). We indicated that our final determination on the
hospital's eligibility for uncompensated care payments would be based
on the hospital's actual DSH status on the cost report for that payment
year.
In the FY 2014 IPPS/LTCH PPS final rule, we also considered whether
several specific classes of hospitals are included within the scope of
section 1886(r) of the Act. As we specified in that final rule (78 FR
50623), subsection (d) Puerto Rico hospitals that are eligible for DSH
payments also are eligible to receive empirically justified Medicare
DSH payments and uncompensated care payments under the new payment
methodology.
Comment: Several commenters representing the hospital community of
Puerto Rico stated that the DSH payment methodology has historically
disadvantaged hospitals in Puerto Rico because U.S. citizens residing
in Puerto Rico are not entitled to SSI benefits. Because the formula
prior to the enactment section 3133 of the Affordable Care Act relied
so heavily on SSI and because SSI is statutorily excluded for citizens
residing on Puerto Rico, these commenters asserted that DSH payments to
Puerto Rico hospitals were disproportionately depressed in comparison
to payments to hospitals in the 50 States. The commenters acknowledged
that the new DSH payment formula implemented in FY 2014 represents an
improvement because it significantly reduces the value of SSI
enrollment in calculating DSH payments. However, the commenters also
contended that the continued reliance under the new formula upon SSI
enrollment means that payments remain unintentionally and unfairly
lowered for hospitals in Puerto Rico. In particular, the commenters
noted that one of the three factors in determining the uncompensated
care payment is intended to account for a hospital's specific portion
of uncompensated care as a percent of uncompensated care by all
hospitals. They stated that although CMS has adopted a policy of
measuring uncompensated care as the sum of insured low-income Medicaid
patient days and SSI days, the use SSI days in determining
uncompensated care is not required by statute. Rather, they noted that
the statute (section1886(r)(2)(C) of the Act) states only that the
Secretary determine uncompensated care ``as estimated by the Secretary,
based on appropriate data.'' Therefore, the commenters pointed out that
CMS has the discretion to consider other data in place of SSI days to
determine uncompensated care. The commenters maintained that the
Secretary is obligated to identify a substitute data source for Puerto
Rico because section 1886(d)(9)(D) requires the Secretary to ensure
that Medicare DSH payments made to Puerto Rico hospitals are made ``in
the same manner and to the extent as they apply'' to PPS hospitals in
the United States. The commenters believed that the revised DSH formula
fails to make payments to Puerto Rico hospitals ``in the same manner''
because it factors in and is based upon an indicator that is not even
available in Puerto Rico. Therefore, the commenters believed that DSH
payments are applied in a disproportionately reduced manner to Puerto
Rico hospitals based upon the inclusion of SSI data. The commenters

[[Page 50007]]

believed that this outcome is illogical because the main purpose of the
DSH payment is to compensate hospitals for the higher costs of treating
low-income Medicare patients.
Response: As we discussed in the proposed rule, we believe that SSI
data combined with Medicaid data are the best data currently available
for estimating hospitals' uncompensated care burdens. Accordingly, we
proposed to use both SSI and Medicaid data in our estimates of
uncompensated care for all hospitals. We employ the same payment
methodology for hospitals in Puerto Rico and the 50 States, and
therefore, consistent with section 1886(d)(9)(D) of the Act, Medicare
DSH payments are made to subsection (d) Puerto Rico hospitals ``in the
same manner and to the extent as they apply'' elsewhere. Accordingly,
we do not agree with the commenters that the statute requires us to
develop an alternative methodology for making uncompensated care
payments to hospitals in Puerto Rico. Nevertheless, we will consider
the issues posed by the commenters for future rulemaking. We would also
point out that hospitals in Puerto Rico experienced a significant
increase in Medicare DSH payments under the new uncompensated care
provision. For example, the impact statement in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 51009) showed that Puerto Rico hospitals were
expected to experience a 41.3 percent increase in payments from the
implementation of the new Medicare DSH payment methodology under
section 3133 of the Affordable Care Act.
In addition, in the FY 2014 IPPS/LTCH PPS final rule, we considered
whether Maryland hospitals that were paid under section 1814(b)(3) of
the Act would be eligible to receive uncompensated care payments. We
explained that, under section 1814(b) of the Act, hospitals in the
State of Maryland were subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. Because
Maryland waiver hospitals were not paid under the IPPS (section 1886(d)
of the Act), in the FY 2014 IPPS/LTCH PPS final rule, we determined
that Maryland hospitals that operated under a waiver under section
1814(b)(3) of the Act were not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act (78 FR 50623). As
stated in section IV.H. of the preamble of this final rule, effective
January 1, 2014, the State of Maryland elected to no longer have
Medicare pay Maryland hospitals in accordance with section 1814(b)(3)
of the Act and entered into an agreement with CMS that Maryland
hospitals will be paid under the Maryland All-Payer Model. However,
under the Maryland All-Payer Model, Maryland hospitals still are not
paid under the IPPS. Therefore, they remain ineligible to receive
empirically justified Medicare DSH payments or the uncompensated care
payments under section 1886(r) of the Act.
SCHs are paid based on their hospital-specific rate from certain
specified base years or the IPPS Federal rate, whichever yields the
greater aggregate payment for the hospital's cost reporting period. If
an SCH is paid under its hospital-specific rate, it is not eligible for
Medicare DSH payments. In order to implement the provisions of section
1886(r) of the Act, in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50624), we specified that we will continue to determine interim
payments for SCHs based on what we estimate and project their DSH
status to be prior to the beginning of the Federal fiscal year (based
on the best available data at that time), subject to settlement through
the cost report. We also specified that SCHs that receive interim
empirically justified Medicare DSH payments in a fiscal year would
receive interim uncompensated care payments for that fiscal year on a
per discharge basis, subject as well to settlement through the cost
report. Final eligibility determinations will be made at the end of the
cost reporting period at settlement, and both interim empirically
justified Medicare DSH payments and uncompensated care payments will be
adjusted accordingly. Therefore, we follow the same processes of
interim and final payments for SCHs that we follow for eligible IPPS
DSH hospitals generally.
Comment: One commenter stated that the uncompensated care payment
amount should be excluded from the payment under the Federal rate when
being compared to payments under the hospital-specific rate in order to
determine which payment rate an SCH receives. The commenter stated that
the hospital-specific rate does not include the cost of care for
indigent patients and, therefore, the uncompensated care payment amount
should not be part of the comparison of the Federal payment and the
hospital-specific payment. The commenter also stated that the
uncompensated care payment should be given to a qualifying SCH,
regardless of whether the SCH is paid under the hospital-specific rate
or the Federal rate.
Response: We addressed a similar comment in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50624) where we stated that we did not agree that
an SCH that is paid under the hospital-specific rate should also
receive an uncompensated care payment. We found that section 1886(r)(2)
of the Act specifies that the uncompensated care payment amount is made
in addition to the empirically justified Medicare DSH payment under
section 1886(r)(1) of the Act. Therefore, in order to receive an
uncompensated care payment, a hospital must receive an empirically
justified Medicare DSH payment and if an SCH is paid under the
hospital-specific rate, it does not receive an empirically justified
Medicare DSH payment. Furthermore, for the reasons that we discussed in
the FY 2014 IPPS/LTCH PPS final rule, we believe it is appropriate to
include the uncompensated care payment amount in the payment under the
Federal rate for purposes of making the comparison to the hospital-
specific payment rate.
MDHs are paid based on the IPPS Federal rate or, if higher, the
IPPS Federal rate plus 75 percent of the amount by which the Federal
rate is exceeded by the updated hospital-specific rate from certain
specified base years (76 FR 51684). The IPPS Federal rate used in the
MDH payment methodology is the same IPPS Federal rate that is used in
the SCH payment methodology. Uncompensated care payments to MDHs were
not explicitly addressed in the FY 2014 IPPS/LTCH PPS final rule
because, at the time of the publication of the final rule, the MDH
program was set to expire at the end of FY 2013. Since the publication
of the FY 2014 IPPS/LTCH PPS final rule, the MDH program was extended
from October 1, 2013, to March 31, 2014, under the Pathway for SGR
Reform Act (Pub. L. 113-67) and was further extended an additional year
from April 1, 2014, to March 31, 2015, by the Protecting Access to
Medicare Act of 2014 (Pub. L. 113-93). Because MDHs are paid under the
IPPS Federal rate and, therefore, are eligible to receive Medicare DSH
payments if their disproportionate patient percentage is at least 15
percent, we apply the same process to determine eligibility for
Medicare DSH and the uncompensated care payment as we do for all other
IPPS hospitals. That is, we make a determination concerning eligibility
for interim uncompensated care payments based on each hospital's
estimated DSH status for the applicable fiscal year (using the most
recent data that are available) and our final determination on the
hospital's eligibility for uncompensated care payments would be based
on the hospital's actual DSH

[[Page 50008]]

status on the cost report for that payment year. In addition, as we do
for all IPPS hospitals, we would calculate a numerator for Factor 3 for
all MDHs, regardless of whether they are projected to be eligible for
DSH during the fiscal year, but the denominator for Factor 3 would be
based on the uncompensated care data from the hospitals that we have
projected to be eligible for DSH during the fiscal year.
Furthermore, in the FY 2014 IPPS interim final rule with comment
period (79 FR 15027), which addressed MDH payments for the first 6
months of FY 2014, we established a policy of including a pro rata
share of the uncompensated care payment amount for that period as part
of the Federal rate payment in the comparison of payments under the
hospital-specific rate and the Federal rate. Consistent with that
policy, for MDH payments for the first 6 months of FY 2015, a pro rata
share of the uncompensated care payment amount for that period will be
included as part of the Federal rate payment in the comparison of
payments under the hospital-specific rate and the Federal rate. That
is, in making this comparison at cost report settlement, we will
include the pro rata share of the uncompensated care payment amount
that reflects the period of time the hospital was paid under the MDH
program for its discharges occurring on or after October 1, 2014, and
before April 1, 2015. Consistent with the policy for hospitals with
Medicare cost reporting periods that span more than 1 Federal fiscal
year, this pro rata share will be determined based on the proportion of
the applicable Federal fiscal year that is included in that cost
reporting period (78 FR 61192 through 61194). As noted previously,
section 106 of Public Law 113-93 provides for an extension of the MDH
program through March 31, 2015, only. Therefore, beginning April 1,
2015, all hospitals that previously qualified for MDH status will no
longer have MDH status under current law.
IPPS hospitals that have elected to participate in the Bundled
Payments for Care Improvement initiative receive a payment that links
multiple services furnished to a patient during an episode of care. We
have stated in previous rulemaking that those hospitals continue to be
paid under the IPPS (77 FR 53342). Hospitals that elect to participate
in the initiative can still receive DSH payments while participating in
the initiative, if they otherwise meet the requirements for receiving
such payments. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50625),
we specified that we will apply the new DSH payment methodology to the
hospitals participating in this initiative, so that eligible hospitals
will receive empirically justified Medicare DSH payments and
uncompensated care payments.
Section 410A of the Medicare Modernization Act established the
Rural Community Hospital Demonstration Program. After the initial 5-
year period, the demonstration was extended for an additional 5-year
period by sections 3123 and 10313 of the Affordable Care Act. There are
23 hospitals currently participating in the demonstration. Under the
payment methodology provided in section 410A, participating hospitals
receive payment for Medicare inpatient services on the basis of a cost
methodology. Specifically, for discharges occurring in the hospitals'
first cost reporting period of the initial 5-year demonstration or the
first cost reporting period of the 5-year extension, the hospitals
participating in the demonstration receive payments for the reasonable
cost of providing such services. For discharges occurring in subsequent
cost reporting periods during the applicable 5-year period, hospitals
receive the lesser of the current year's reasonable cost-based amount,
or the previous year's amount updated by the percentage increase in the
IPPS market basket (the target amount). The instructions (Change
Request 5020 (April 14, 2006) and Change Request 7505 (July 22, 2011))
for the demonstration require that the MAC not pay Medicare DSH
payments in addition to the amount received under the reasonable cost-
based payment methodology. Because hospitals participating in the
demonstration do not receive DSH payments, we determined in the FY 2014
IPPS/LTCH PPS final rule that these hospitals also are excluded from
receiving empirically justified Medicare DSH payments and uncompensated
care payments under the new payment methodology (78 FR 50625).
c. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the DSH
payment that would otherwise be made under subsection (d)(5)(F) to a
subsection (d) hospital. Because section 1886(r)(1) of the Act merely
requires the program to pay a designated percentage of these payments,
without revising the criteria governing eligibility for DSH payments or
the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH
PPS final rule that we did not believe that it is necessary to develop
any new operational mechanisms for making such payments. Therefore, in
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this
provision simply by revising the claims payment methodologies to adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. We also made corresponding changes to the
hospital cost report so that these empirically justified Medicare DSH
payments can be settled at the appropriate level at the time of cost
report settlement. We provided more detailed operational instructions
and cost report instructions following issuance of the final rule that
can be found on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
d. Uncompensated Care Payments
As we have discussed earlier, section 1886(r)(2) of the Act
provides that, for each eligible hospital in FY 2014 and subsequent
years, the new uncompensated care payment is the product of three
factors. These three factors represent our estimate of 75 percent of
the amount of Medicare DSH payments that would otherwise have been
paid, an adjustment to this amount for the percent change in the
national rate of uninsurance compared to the rate of uninsurance in
2013, and each eligible hospital's estimated uncompensated care amount
relative to the estimated uncompensated care amount for all eligible
hospitals. Below we review the data sources and methodologies for
computing each of these factors, our final policies for FY 2014, and
our proposed and final policies for FY 2015.
(1) Calculation of Factor 1 for FY 2015
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that it is a factor ``equal to the difference between
(i) the aggregate amount of payments that would be made to subsection
(d) hospitals under subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the Secretary); and (ii)
the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1) for such fiscal year (as so estimated).''
Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated
Medicare DSH payment that would have been made under section
1886(d)(5)(F) if section 1886(r) of the Act did not apply for such
fiscal year.

[[Page 50009]]

Under a prospective payment system, we would not know the precise
aggregate Medicare DSH payment amount that would be paid for a Federal
fiscal year until cost report settlement for all IPPS hospitals is
completed, which occurs several years after the end of the Federal
fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides
authority to estimate this amount, by specifying that, for each fiscal
year to which the provision applies, such amount is to be ``estimated
by the Secretary.'' Similarly, section 1886(r)(2)(A)(ii) of the Act
represents the estimated empirically justified Medicare DSH payments to
be made in a fiscal year, as prescribed under section 1886(r)(1) of the
Act. Again, section 1886(r)(2)(A)(ii) of the Act provides authority to
estimate this amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for the
fiscal year, in the absence of the new payment provision; and (2) the
amount of empirically justified Medicare DSH payments that are made for
the fiscal year, which takes into account the requirement to pay 25
percent of what would have otherwise been paid under section
1886(d)(5)(F) of the Act. In other words, this factor represents our
estimate of 75 percent (100 percent minus 25 percent) of our estimate
of Medicare DSH payments that would otherwise be made, in the absence
of section 1886(r) of the Act, for the fiscal year.
In order to determine Factor 1 in the uncompensated care payment
formula, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through
50630) and in the FY 2014 IPPS interim final rule with comment period
(78 FR 61194), we adopted a policy under which we develop final
estimates of both the aggregate amount of Medicare DSH payments that
would be made in the absence of section 1886(r)(1) of the Act and the
aggregate amount of empirically justified Medicare DSH payments to
hospitals under section 1886(r)(1) of the Act prior to each fiscal year
to which the new provision applies. These estimates are not revised or
updated after we know the final Medicare DSH payments for the fiscal
year. Specifically, in order to determine the two elements of Factor 1
(Medicare DSH payments prior to the application of section 1886(r)(1)
of the Act, and empirically justified Medicare DSH payments after
application of section 1886(r)(1) of the Act), we use the most recently
available projections of Medicare DSH payments for the fiscal year, as
calculated by CMS' Office of the Actuary. The Office of the Actuary
projects Medicare DSH payments on a biannual basis, typically in
February of each year (based on data from December of the previous
year) as part of the President's Budget, and in July (based on data
from June) as part of the Midsession Review. The estimates are based on
the most recently filed Medicare hospital cost report with Medicare DSH
payment information, cost report data provided by Indian Health Service
(IHS) hospitals to CMS, and the most recent Medicare DSH patient
percentages and Medicare DSH payment adjustments provided in the IPPS
Impact File.
Therefore, for the Office of the Actuary's February 2014 estimate,
the data were based on the December 2013 update of the Medicare
Hospital Cost Report Information System (HCRIS), cost report data
provided by IHS hospitals to CMS as of December 2013 and the FY 2014
IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction
with the publication of the FY 2014 IPPS/LTCH PPS final rule. For the
July 2014 estimate, the data are based on the March 2014 update of the
HCRIS data, cost report data provided by IHS hospitals to CMS as of
March 2014, and the FY 2015 IPPS Proposed Rule Impact File, published
in conjunction with the FY 2015 IPPS/LTCH PPS proposed rule (and which
is available via the Internet on the CMS Web site). For purposes of the
proposed rule, we used the February 2014 Medicare DSH estimates to
calculate Factor 1 and to model the proposed impact of this provision.
For this final rule, we use the July 2014 Medicare DSH estimates to
determine Factor 1 and to model the impact of this provision. In
addition, because SCHs paid under their hospital-specific payment rate
are excluded from the application of section 1886(r) of the Act, we
also exclude SCHs that are projected to be paid under their hospital-
specific rate from our Medicare DSH estimates. Similarly, because
Maryland hospitals participating in the Maryland All-Payer Model and
hospitals participating in the Rural Community Hospital Demonstration
do not receive DSH payments, we also exclude these hospitals from our
Medicare DSH estimates.
Using the data sources discussed above, the Office of the Actuary
uses the most recently submitted Medicare cost report data to identify
current Medicare DSH payments, cost report data provided by IHS
hospitals to CMS, and the most recent DSH payment adjustments provided
in the IPPS Impact File, and applies inflation updates and assumptions
for future changes in utilization and case-mix to estimate Medicare DSH
payments for the upcoming fiscal year. The February 2014 Office of the
Actuary estimate for Medicare DSH payments for FY 2015, without regard
to the application of section 1886(r)(1) of the Act, was $14.205
billion. This estimate excludes Maryland hospitals participating in the
Maryland All-Payer Model, SCHs paid under their hospital-specific
payment rate, and hospitals participating in the Rural Community
Hospital Demonstration as discussed above. Therefore, based on this
estimate, the estimate for empirically justified Medicare DSH payments
for FY 2015, with the application of section 1886(r)(1) of the Act, was
$14.205 billion (25 percent of the total amount estimated). Under Sec.
412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between
these two estimates of the Office of the Actuary. Therefore, for the
purpose of modeling Factor 1, we proposed that Factor 1 for FY 2015
would be $10.654 billion ($14.205 billion minus $3.551 billion). We
invited public comment on our proposed calculation of Factor 1 for FY
2015.
Comment: A number of commenters supported CMS' methodology for
determining Factor 1 and/or the proposed Factor 1 for FY 2015. However,
other commenters complained that CMS did not provide enough information
in the proposed rule regarding the methodologies, calculations, and
data sources used to develop this and other estimates to provide a
sufficient basis for comment. With regard to the estimate of Factor 1
in particular, these commenters contend:
The estimated DSH payments do not account for the impact
of Allina v. Sebelius, by excluding Medicare Advantage days from the
SSI ratio and including dual-eligible Medicare Advantage days in the
Medicaid fraction, thus understating Factor 1 DSH estimate.
The 2012 estimated DSH payments of $11.720 billion figure
is understated because the 2012 ``update'' factor (provided for in the
FY 2015 IPPS Proposed Rule DSH Supplemental Data File that displays the
Office of the Actuary's assumptions in determining the Medicare DSH
estimate) is understated. Specifically, a 1.1 percent increase in light
of the Cape Cod litigation result was not applied. As a result, instead
of a -0.1 percent update factor, the projection should use a +1.0
percent update factor. Therefore the

[[Page 50010]]

2012 estimated DSH amount should be $11.732 billion.
The estimate of DSH payments for FY 2015 of $14.205
billion is understated because the 2015 update factor is understated.
Specifically, the productivity adjustment should be 0.4 percent (as
projected in the FY 2015 IPPS/LTCH PPS proposed rule), not 0.5 percent.
As a result, instead of a 1.2 percent update factor, the projection
should use a 1.3 percent update factor. Therefore, including the 2012
correction and the cumulative impact, the 2015 estimated DSH amount
should be $14.234 billion.
The summary analysis of the DSH estimate includes an
adjustment factor for discharges. However, CMS has not provided the
detail supporting the discharge factor used. In addition, the footnote
to the discharge column states that all inpatient hospitals were used,
not just IPPS hospitals. Because the purpose of the projection is to
estimate the amount of DSH that will go to a subset of all inpatient
hospitals, it would seem appropriate that factors that drive the
estimate likewise would include only the hospitals projected to share
in the payments.
The DSH estimate is subject to 100 percent of any
documentation and coding adjustments due to MS-DRGs. The FY 2015 IPPS/
LTCH PPS proposed rule refers to a recoupment adjustment of ``$11
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017.'' CMS
should model the impact of such adjustments to the DSH and
uncompensated care payments before subjecting the DSH estimate to
dramatic adjustments.
The ``Other'' column from the Factor 1 source file is
supposed to contain the DSH payment impact factor: The ``Other'' column
includes impact of only IPPS discharges and impact of DSH payments
increasing or decreasing at a different rate than other IPPS payments.
This single input should at least reflect the changes in DSH payments,
which will be significantly impacted by the effects of Medicaid/CHIP
expansion. According to the February 2014 CBO report, an additional 12
million people are projected to enroll in Medicaid/CHIP during 2014 and
2015. That represents a 35-percent increase in Medicaid/CHIP
population. Yet, the latest FY 2014 and 2015 ``Other'' factor only
applied a 3.28 percent and a 2.92 percent increase, respectively. Even
the pre-Affordable Care Act FY 2012 and 2013 ``Other'' factor reflected
4.45 percent and 1.56 percent increases, and that was prior to
widespread Medicaid expansion.
In the light of these and other concerns about data sources and
methods, the commenters insisted that CMS adopt a process of
reconciling the initial estimates of Factor 1 with actual data for the
payment year in conjunction with the final settlement of hospital cost
reports.
Response: Below we present the Office of the Actuary's updated
estimate of Factor 1. In order to satisfy the commenters' request for
additional information, we also provide additional information
regarding the data sources, assumptions, and methods employed by the
actuaries. We acknowledge that commenters have requested that we
establish a reconciliation procedure for Factor 1. However, we continue
to believe that applying our best estimates prospectively would be most
conducive to administrative efficiency, finality, and predictability in
payments (78 FR 50628). As we noted in the FY 2014 IPPS/LTCH PPS final
rule, we do not know the aggregate Medicare DSH payment amount that
would be paid for each Federal fiscal year until the time of cost
report settlements, which occur several years after the end of the
fiscal year. Furthermore, because the statute provides that Factor 1
shall be determined based on estimates of the aggregate amount of DSH
payments that would be made in the absence of section 1886(r) of the
Act and the aggregate amount of empirically justified DSH payments that
are made under section 1886(r)(1) of the Act, we do not agree with
commenters that we should establish such a reconciliation process at
this time. However, we note the following about the Office of the
Actuary's estimates. Factor 1 is an estimate of the expected DSH
payments under the previous DSH payment methodology under section
1886(d)(5)(F) of the Act. We believe it is reasonable that an estimate
should represent a 50-percent chance of being too high and a 50-percent
chance being too low in comparison to actual experience. In reviewing,
the Office of the Actuary's prior estimates for DSH payments compared
to actual experience, from FY 2005 to FY 2015, the original estimates
have been higher than actual experience for 7 of the 11 years, and
lower than actual experience in only 4 years. This result is reasonably
consistent with the expectation that an estimate has a 50-percent
chance of being too high and a 50-percent chance of being too low.
As indicated above, using the data sources discussed above, the
Office of the Actuary uses the most recently submitted Medicare cost
report data to identify current Medicare DSH payments, cost report data
provided by IHS hospitals to CMS, and the most recent DSH payment
adjustments provided in the IPPS Impact File, and applies inflation
updates and assumptions for future changes in utilization and case-mix
to estimate Medicare DSH payments for the upcoming fiscal year. The
July 2014 Medicare DSH estimate for FY 2015, without regard to the
application of section 1886(r)(1) of the Act, is $13,383,462,195.71.
This estimate excludes Maryland hospitals participating in the Maryland
All-Payer Model, SCHs paid under their hospital-specific payment rate,
and hospitals participating in the Rural Community Hospital
Demonstration as discussed above. Therefore, based on this estimate,
the estimate for empirically justified Medicare DSH payments for FY
2015, with the application of section 1886(r)(1) of the Act, is
$3,345,865,548.93 (25 percent of the total amount estimated). Under
Sec. 412.l06(g)(1)(i) of the regulations, Factor 1 is the difference
between these two estimates of the Office of the Actuary. Therefore, in
this final rule, we are providing that Factor 1 for FY 2015 is
$10,037,596,646.78 ($13,383,462,195.71 minus $3,345,865,548.93). Below
we provide additional detail regarding the development of this estimate
in response to the commenters.
The Office of the Actuary's estimates begins with a baseline of
$11.499 billion in Medicare DSH expenditures for FY 2011. The following
table shows the factors applied to update this baseline through the
current estimate for FY 2015:

Increases From 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY Update Discharge Case-mix Other Total DSH
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012.................................................... 0.999 0.9701 1.007 1.0447 1.019537 11724
2013.................................................... 1.028 0.9799 1.014 1.0132 1.034923 12133
2014.................................................... 1.009 0.9855 1.005 1.0355 1.034818 12556

[[Page 50011]]

2015.................................................... 1.014 1.0116 1.005 1.034 1.065942 13383
--------------------------------------------------------------------------------------------------------------------------------------------------------

In this table, the discharge column shows the increase in the
number of Medicare inpatient hospital discharges. The figures for FYs
2012 and 2013 are based on Medicare claims data which have been
adjusted by a completion factor. The discharge figure for FY 2014 is
based on preliminary data for 2014. The discharge figure for FY 2015 is
an assumption based on recent trends recovering back to the long-term
trend and assumptions related to how many beneficiaries will be
enrolled in Medicare Advantage (MA) plans. The case-mix column shows
the increase in case-mix for IPPS hospitals. The case-mix figures for
FYs 2012 and 2013 are based on actual data adjusted by a completion
factor. The FY 2014 and FY 2015 increases are based on the
recommendation of the 2010-2011 Medicare Technical Review Panel. The
``other'' column shows the increase in other factors which contribute
to the Medicare DSH estimates. These factors include the difference
between the total inpatient hospital discharges and the IPPS
discharges, various adjustments to the payment rates which have been
included over the years but are not reflected in the other columns
(such as the increase in rates for the Cape Cod litigation and the
reduction in rates for the 2-midnight policy). In addition, this column
includes a factor for the Medicaid expansion due to the Affordable Care
Act. However, the increase due to the Medicaid expansion is not as
large as commenters contended due to the actuarial assumption that the
new enrollees are healthier than the average Medicaid recipient and,
therefore, use fewer hospital services. We have included the impact of
the Medicaid expansion in the FY 2015 DSH estimate and note that it was
also included in the FY 2014 DSH estimate. Our estimates are as
follows:

------------------------------------------------------------------------
FY 2014 FY 2015
------------------------------------------------------------------------
Medicaid enrollment pre-ACA (in 56.0 55.9
millions)..............................
Medicaid enrollment post-ACA (in 64.7 69.8
millions)..............................
Under 65 pre-ACA enrollment (in 50.6 50.4
millions)..............................
Under 65 post-ACA enrollment (in 59.3 64.3
millions)..............................
Increase in Medicare DSH................ 4.9% 3.4%
------------------------------------------------------------------------

As can be seen in the table above, there is assumed to be a 4.9
percent increase in Medicare DSH due to the Medicaid expansion in FY
2014, and an additional 3.4 percent increase in Medicare DSH in FY
2015. This results in approximately an 8.5 percent increase due to the
Medicaid expansion by FY 2015. This estimate is lower than the
commenters may have expected due to the assumption that the expansion
population is healthier than the rest of the Medicaid population and
will utilize fewer hospital services. This factor in the estimate is
included in the ``other'' column of the breakdown.
The next table below shows the factors that are included in the
``update'' column of the above table:

----------------------------------------------------------------------------------------------------------------
Affordable
Care Act Documentation
FY Market basket payment Productivity and coding Total
reductions
----------------------------------------------------------------------------------------------------------------
2012......................... 3 0.1 1 -2 -0.1
2013......................... 2.6 0.1 0.7 1 2.8
2014......................... 2.5 0.3 0.5 -0.8 0.9
2015......................... 2.9 0.2 0.5 -0.8 1.4
----------------------------------------------------------------------------------------------------------------

In this table, all numbers are based on mid-session review of FY
2015 Budget projections.
With regard to the assumed update factor for FY 2012, the
commenters are correct that the update to the Federal standardized
amount due to the Cape Cod litigation should be reflected in our DSH
estimate. However, we have included it in the DSH estimate and the 1.1
percent increase is reflected in the ``other ``column. We consider it
not to be part of the update and that is consistent with our treatment
of the 0.2 percent reduction to the rate in FY 2014 for the 2-midnight
policy finalized in the FY 2014 IPPS/LTCH PPS final rule, which is also
included in the ``other'' column.
We agree with the commenters that the update for FY 2015 should
include the productivity adjustment finalized for FY 2015 in our FY
2015 Medicare DSH estimates. Accordingly, we have revised our FY 2015
Medicare DSH estimates to reflect this final productivity adjustment.
We also agree with the commenters that the DSH estimates are only
affected by IPPS discharges. However, the discharge figures reflect all
inpatient hospitals, and we adjust the Medicare DSH estimates to take
into account the difference between the increase in discharges for all
inpatient hospitals and the IPPS hospital discharge increase in the
``other'' column. If the ``discharge'' column was limited to IPPS
hospitals, the ``discharge'' column would be lower and the ``other''
column would be higher, and the increase reflected in the ``total''
column would be the same.
The commenters also are correct that the documentation and coding
numbers for future years could be more than a 0.8 percent reduction to
comply with the $11 billion requirement, but those figures have not yet
been determined. The reason for the higher possibility is

[[Page 50012]]

that the number of discharges has decreased significantly.
Lastly, we do not believe that the decision in Allina v. Sebelius
is relevant to our estimate of Factor 1 for FY 2015. The decision in
Allina did not address the FY 2014 IPPS/LTCH PPS final rule (78 FR
50614 through 50620) in which we readopted the policy of counting
Medicare Advantage days in the SSI ratio for FY 2014 and all subsequent
fiscal years. Accordingly, consistent with that policy, our estimate of
Factor 1 for FY 2015 appropriately accounts for Medicare Advantage days
by including them in the SSI ratio.
(2) Calculation of Factor 2 for FY 2015
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides: ``For each of fiscal years 2014,
2015, 2016, and 2017, a factor equal to 1 minus the percent change in
the percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (I) who are
uninsured in 2013, the last year before coverage expansion under the
Patient Protection and Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment);
and (II) who are uninsured in the most recent period for which data is
available (as so calculated), minus 0.1 percentage points for fiscal
year 2014 and minus 0.2 percentage points for each of fiscal years
2015, 2016, and 2017.''
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of individuals under 65 without insurance in 2013 must be the
percent of such individuals ``who are uninsured in 2013, the last year
before coverage expansion under the Patient Protection and Affordable
Care Act (as calculated by the Secretary based on the most recent
estimates available from the Director of the Congressional Budget
Office before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 that, if determined in the affirmative,
would clear such Act for enrollment).'' The Health Care and Education
Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It
was passed in the House of Representatives on March 21, 2010, and by
the Senate on March 25, 2010. Because the House of Representatives was
the first House to vote on the Health Care and Education Reconciliation
Act of 2010 on March 21, 2010, we have determined that the most recent
estimate available from the Director of the Congressional Budget Office
``before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 . . .'' (emphasis added) appeared in a March
20, 2010 letter from the director of the CBO to the Speaker of the
House. Therefore, we believe that only the estimates in this March 20,
2010 letter meet the statutory requirement under section
1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we
refer readers to the Web site at: https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
In its March 20, 2010 letter to the Speaker of the House of
Representatives, the CBO provided two estimates of the ``post-policy
uninsured population.'' The first estimate is of the ``Insured Share of
the Nonelderly Population Including All Residents'' (82 percent) and
the second estimate is of the ``Insured Share of the Nonelderly
Population Excluding Unauthorized Immigrants'' (83 percent). In the FY
2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate
that includes all residents, including unauthorized immigrants. We
stated that we believe this estimate is most consistent with the
statute which requires us to measure ``the percent of individuals under
the age of 65 who are uninsured,'' and provides no exclusions except
for individuals over the age of 65. In addition, we stated that we
believe that this estimate more fully reflects the levels of
uninsurance in the United States that influence uncompensated care for
hospitals than the estimate that reflects only legal residents. The
March 20, 2010 CBO letter reports these figures as the estimated
percentage of individuals with insurance. However, because section
1886(r)(2)(B)(i) of the Act requires that we compare the percent of
individuals who are uninsured in the applicable year with the percent
of individuals who were uninsured in 2013, in the FY 2014 IPPS/LTCH PPS
final rule, we used the CBO insurance rate figure and subtracted that
amount from 100 percent (that is the total population without regard to
insurance status) to estimate the 2013 baseline percent of individuals
without insurance. Therefore, for FYs 2014 through 2017, our estimate
of the uninsurance percentage for 2013 is 18 percent.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals ``who are
uninsured in the most recent period for which data is available (as so
calculated).'' In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634),
we used the same data source, CBO estimates, to calculate this percent
of individuals without insurance. In response to public comments, we
also agreed that we should normalize the CBO estimates, which are based
on the calendar year, for the Federal fiscal years for which each
calculation of Factor 2 is made (78 FR 50633). Therefore, in the FY
2014 IPPS/LTCH PPS final rule, we employed the most recently available
estimate, specifically CBO's May 2013 estimates of the effects of the
Affordable Care Act on health insurance coverage (which are available
at: https://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf) as amended by
CBO's July 2013 estimates of changes in estimates of the effects of
insurance coverage provisions in the Affordable Care Act issued in
conjunction with a memo regarding ``Analysis of the Administration's
Announced Delay of Certain Requirements Under the Affordable Care
Act,'' which are available at: https://www.cbo.gov/sites/default/files/cbofiles/attachments/44465-ACA.pdf. The CBO's May 2013 estimate of the
rate of insurance for CY 2013 was 80 percent, and for CY 2014 was 84
percent. Therefore, the calculation of Factor 2 for FY 2014, employing
a weighted average of the CBO projections for CY 2013 and CY 2014, was
as follows:
CY 2013 rate of insurance coverage (May 2013 CBO
estimate): 80 percent.
CY 2014 rate of insurance coverage (May 2013 CBO estimate,
updated with July 2013 CBO estimate): 84 percent.
FY 2014 rate of insurance coverage: (80 percent * .25) +
(84 percent * .75) = 83 percent.
Percent of individuals without insurance for 2013 (March
2010 CBO estimate): 18 percent.
Percent of individuals without insurance for FY 2014
(weighted average): 17 percent.

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

Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we adopted
0.943 as the final determination of Factor 2 for FY 2014. In
conjunction with this determination, we also determined in the FY 2014
IPPS/LTCH PPS final rule

[[Page 50013]]

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

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

Therefore, we proposed that Factor 2 for FY 2015 would be 0.8036.
We indicated that our proposal for Factor 2 was subject to change if
more recent CBO estimates of the insurance rate became available at the
time of the preparation of the final rule. We invited public comments
on our proposed calculation of Factor 2 for FY 2015.
Comment: A number of commenters supported the use of the CBO
estimates for determining Factor 2. However, other commenters objected
to CMS' proposed calculation of Factor 2. Some commenters found that
the calculation of Factor 2 appeared arbitrary. For example, some of
the commenters complained that a 2-percent decrease in the percentage
of uninsured does not seem reasonable based on current economic
conditions. Other commenters asserted that, in their views, the
Affordable Care Act was not implemented until January 1, 2014, so that
such a large decrease in uninsured is very speculative and without
historical data. Commenters requested additional information on how the
CBO calculates its insurance estimates, including the assumptions in
its estimates. Commenters also requested reconciliation of the Factor 2
estimates with actual data at the time of cost report settlements.
While these commenters understood that estimates must be used for
interim payments, they believed that more accurate numbers based on
actual experience should be available for purposes of determining final
payments at the time of cost report settlement.
Response: We note that, in the FY 2014 IPPS/LTCH PPS final rule, we
finalized a policy to employ the most recent CBO estimates of the rates
of uninsurance in the calculation of Factor 2 for FY 2014 and
subsequent years, and did not adopt any policy for reconciling those
estimates. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50632), we
stated that we believe that employing actual data as the basis for
reconciling the projections employed to determine Factor 2 would impose
an unacceptable delay in the final determination of uncompensated care
payments. Actual data on the rates of insurance and uninsurance would
not become available until several years after the payment year, and
the initial data for the year would continue to be adjusted for several
years after that as further data become available.
In its April 2014 report,\22\ the CBO and the Joint Committee on
Taxation (JCT) estimated that the Affordable Care Act would result in
insurance coverage for 12 million more nonelderly individuals in FY
2014 than in the absence of the Affordable Care Act. The coverage
projections included the changes arising from participation in the
health insurance exchanges, Medicaid and CHIP enrollment, and changes
in employer-sponsored, nongroup and other insurance coverage. Included
in the uninsured population are undocumented immigrants who are not
eligible for Medicaid and exchange coverage and low-income residents of
States not participating in the Medicaid expansion. In addition, other
individuals will choose to remain uninsured, despite being eligible for
Medicaid or having access through an employer, the exchange, or from an
insurer.
---------------------------------------------------------------------------

\22\ Congressional Budget Office. Updated Estimates of the
Insurance Coverage Provisions of the Affordable Care Act, April 2014
(April 2014). https://www.cbo.gov/sites/default/files/cbofiles/attachments/45231-ACA_Estimates_OneColumn.pdf.
---------------------------------------------------------------------------

The CBO and JCT estimate of the increase in insurance coverage
represents the number of people who are expected to be insured this
year under current law minus the number who would have been insured
this year in the absence of the Affordable Care Act. More people are
expected to obtain insurance through the exchanges over time due to
subsidies and penalties for noncoverage. CBO and JCT expected more
people to obtain insurance through Medicaid and CHIP because of
increased eligibility due to the Medicaid expansion and more
enrollments among those who were previously eligible for Medicaid or
CHIP but would not have enrolled in the absence of the Affordable Care
Act. Overall, the net coverage effect is a large decrease in the
uninsured population.
Because not all States have expanded their Medicaid programs, the
CBO and JCT revised their estimates for changes in the insured
population due to Medicaid expansion. The table below presents the
updated estimates of the change in insurance coverage under Medicaid
and CHIP under the Affordable Care Act. The CBO and JCT revised their
estimates to indicate a decrease in the number of insured individuals
in CYs 2014 and 2015. In addition, CBO and JCT did not rely on State
predictions about the Medicaid expansion under the Affordable Care
Act.\23\ Instead, they projected the approximate shares of the affected
population residing in States that will fall into different broad
categories. The broad categories range from States that did not expand
their Medicaid program to States that choose Medicaid expansion. Due to
the uncertainty of States' actions, estimates by the CBO and JCT
reflected an assessment of the different outcome probabilities and the
middle of the distribution of all possible

[[Page 50014]]

outcomes. For instance, the CBO's and JCT's estimates considered
multiple factors that are associated with a State's choice on whether
to expand Medicaid eligibility: Overall budgetary situation; current
thresholds for Medicaid eligibility; the amounts that States and local
governments spend to provide health care to the uninsured or to pay
providers for uncompensated care; the number of people likely to enroll
in the program after expansion; the Federal contributions toward the
cost of their care, and other factors.
---------------------------------------------------------------------------

\23\ Congressional Budget Office. Estimates for the Insurance
Coverage Provisions of the Affordable Care Act Updated for the
Recent Supreme Court Decision (July 2012). https://www.cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf.

Estimates of the Increase in Insurance Coverage Due to Medicaid and CHIP Under the Affordable Care Act *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Last updated date 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
July 2012................................. 1 7 9 10 10 11 11 11 11 11
February 2013............................. 1 8 11 11 11 11 11 12 12 12
May 2013.................................. 1 9 12 12 12 12 12 13 13 13
February 2014............................. ......... 8 12 12 12 12 12 13 13 13
April 2014................................ ......... 7 11 12 12 13 13 13 13 13
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CBO reports on effects of the Affordable Care Act on health insurance coverage (July 2012-April 2014) https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf.
* Millions of nonelderly people, by calendar year.

In their April 2014 report, CBO and JCT estimated that an average
of 6 million people will be covered by insurance obtained through the
exchanges by the end of CY 2014. The estimate was determined at the
national level instead of at the level of individual States. Although
CBO and JCT did not account for the variations of success in obtaining
health insurance through the exchanges by State, they did account for
the possibility of individuals moving in and out of insurance coverage
over time due to changes in employment, family circumstances, and other
factors.
The CBO and JCT estimates therefore do take into account some
uncertainties and risks under the Affordable Care Act, including the
probabilities of different outcomes of Medicaid expansions and changes
in insurance coverage status over time.
For the FY 2015 final rule, we use the CBO's April 2014 estimates
of the effects of the Affordable Care Act on health insurance coverage
(which are available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf). The CBO's April
2014 estimate of individuals under the age of 65 with insurance in CY
2014 is 84 percent. Therefore, the CBO's most recent estimate of the
rate of uninsurance in CY 2014 is 16 percent (that is, 100 percent
minus 84 percent.) Similarly, the CBO's April 2014 estimate of
individuals under the age of 65 with insurance in CY 2015 is 87
percent. Therefore, the CBO's most recent estimate of the rate of
uninsurance in CY 2015 available for this final rule is 13 percent
(that is, 100 percent minus 87 percent.)
The calculation of the final Factor 2 for FY 2015, employing a
weighted average of the CBO projections for CY 2014 and CY 2015, is as
follows:
CY 2014 rate of insurance coverage (April 2014 CBO
estimate): 84 percent.
CY 2015 rate of insurance coverage (April 2014 CBO
estimate): 87 percent.
FY 2015 rate of insurance coverage: (84 percent * .25) +
(87 percent * .75) = 86.25 percent.
Percent of individuals without insurance for 2013 (March
2010 CBO estimate): 18 percent.
Percent of individuals without insurance for FY 2015
(weighted average): 13.75 percent.

1 - [bond]((0.1375 - 0.18)/0.18)[bond] = 1 - 0.2361 = .7639 (76.39
percent)
0.7639 (76.39 percent) - .002 (0.2 percentage points for FY 2015 under
section 1886(r)(2)(B)(i) of the Act) = 0.7619 or 76.19 percent
0.7619 = Factor 2

Therefore, the final Factor 2 for FY 2015 is 76.19 percent.
The FY 2015 Final Uncompensated Care Amount is: $10,037,596,646.78
x 0.7619 = $7,647,644,885.18.
FY 2015 Final Uncompensated Care Total Available--
$7,647,644,885.18.
(3) Calculation of Factor 3 for FY 2015
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is
``equal to the percent, for each subsection (d) hospital, that
represents the quotient of (i) the amount of uncompensated care for
such hospital for a period selected by the Secretary (as estimated by
the Secretary, based on appropriate data (including, in the case where
the Secretary determines alternative data is available which is a
better proxy for the costs of subsection (d) hospitals for treating the
uninsured, the use of such alternative data)); and (ii) the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under this subsection for such period (as so
estimated, based on such data).''
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive DSH payments relative to the estimated
uncompensated care amount for all hospitals estimated to receive DSH
payments in the fiscal year for which the uncompensated care payment is
to be made. Factor 3 is applied to the product of Factor 1 and Factor 2
to determine the amount of the uncompensated care payment that each
eligible hospital will receive for FY 2014 and subsequent fiscal years.
In order to implement the statutory requirements for this factor of the
uncompensated care payment formula, it was necessary to determine: (1)
The definition of uncompensated care or, in other words, the specific
items that are to be included in the numerator (that is, the estimated
uncompensated care amount for an individual hospital) and denominator
(that is, the estimated uncompensated care amount for all hospitals
estimated to receive DSH payments in the applicable fiscal year); (2)
the data source(s) for the estimated uncompensated care amount; and (3)
the timing and manner of computing the quotient for each hospital
estimated to receive DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period ``based on
appropriate data.'' In addition, we note that the statute permits the
Secretary to use alternative data ``in the case where the Secretary
determines that alternative data is available,'' which is a better
proxy for the costs of subsection (d) hospitals for treating uninsured
individuals.

[[Page 50015]]

In the course of considering how to determine Factor 3 during the
rulemaking process for FY 2014, we considered defining the amount
uncompensated care for a hospital as the uncompensated care costs of
each hospital and considered potential data sources for those costs.
For purposes of selecting an appropriate data source for this possible
definition of uncompensated care costs, we reviewed the literature and
available data sources and determined that Worksheet S-10 of the
Medicare cost report could potentially provide the most complete data
for Medicare hospitals. (We refer readers to the report ``Improvements
to Medicare Disproportionate Share (DSH) Payments'' for a full
discussion and evaluation of the available data sources. The report is
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.) However, we noted
that Worksheet S-10 is a relatively new data source that has been used
for specific payment purposes only in relatively restricted ways (for
example, to provide a source of charity care charges in the computation
of EHR incentive payments (75 FR 44456)). We also noted that some
stakeholders have expressed concern that hospitals have not had enough
time to learn how to submit accurate and consistent data through this
reporting mechanism. Other stakeholders have maintained that some
instructions for Worksheet S-10 still require clarification in order to
ensure standardized and consistent reporting by hospitals. At the same
time, we noted that Worksheet S-10 is the only national data source
that includes data for all Medicare hospitals and is designed to elicit
data on uncompensated care costs. We discussed the possible use of data
reported on Worksheet S-10 to determine uncompensated care costs in
more detail in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27586).
Because of concerns regarding variations in the data reported on
Worksheet S-10 of the Medicare cost report and the completeness of
these data, we did not propose to use data from the Worksheet S-10 to
determine the amount of uncompensated care. However, we stated our
belief that Worksheet S-10 of the Medicare cost report would otherwise
be an appropriate data source to determine uncompensated care costs. In
particular, we noted that Worksheet S-10 was developed specifically to
collect information on uncompensated care costs in response to interest
by MedPAC and other stakeholders regarding the topic (for example,
MedPAC's March 2007 Report to Congress) and that it is not unreasonable
to expect information on the cost report to be used for payment
purposes. Furthermore, hospitals attest to the accuracy and
completeness of the information reported in the cost report at the time
of submission. We indicated that we expect reporting on Worksheet S-10
to improve over time, particularly in the area of charity care which is
already being used and audited for payment determinations related to
the EHR Incentive Program, and that we will continue to monitor these
data. Accordingly, we stated that we may proceed with a proposal to use
data on the Worksheet S-10 to determine uncompensated care costs in the
future, once hospitals are submitting accurate and consistent data
through this reporting mechanism.
As a result of our concerns regarding the data reported on
Worksheet S-10 of the Medicare cost report, we believed it was
appropriate to consider the use of alternative data, at least in FY
2014, the first year that this provision is in effect, and possibly for
additional years until hospitals have adequate experience reporting all
of the data elements on Worksheet S-10. We noted that this approach is
consistent with input we received from some stakeholders in response to
the CMS National Provider Call in January 2013, who stated their belief
that existing FY 2010 and FY 2011 data from the Worksheet S-10 should
not be used for implementation of section 1886(r) of the Act and who
requested the opportunity to resubmit the data once more specific
instructions were issued by CMS. Accordingly, we examined alternative
data sources that could be used to allow time for hospitals to gain
experience with and to improve the accuracy of their reporting on
Worksheet S-10 of the Medicare cost report. We stated in the FY 2014
IPPS/LTCH PPS final rule that we believe that data on utilization for
insured low-income patients can be a reasonable proxy for the treatment
costs of uninsured patients. Moreover, due to the concerns regarding
the accuracy and consistency of the data reported on the Worksheet S-
10, we also determined that these alternative data, which are currently
reported on the Medicare cost report, would be a better proxy for the
amount of uncompensated care provided by hospitals. Accordingly, in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we adopted the policy
of employing the utilization of insured low-income patients defined as
inpatient days of Medicaid patients plus inpatient days of Medicare SSI
patients as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i),
respectively, to determine Factor 3. We also indicated that we remained
convinced that the Worksheet S-10 could ultimately serve as an
appropriate source of more direct data regarding uncompensated care
costs for purposes of determining Factor 3 once hospitals are
submitting more accurate and consistent data through this reporting
mechanism. In the interim, we indicated that we would take steps such
as revising and clarifying cost report instructions, as appropriate. We
stated that it is our intention to propose introducing the use of the
Worksheet S-10 data for purposes of determining Factor 3 within a
reasonable amount of time.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have continued to evaluate and assess the comments we have received
from stakeholders about Worksheet S-10 as well as to evaluate what
changes might need to be made to the instructions to make the data
hospitals submit more accurate and consistent across hospitals.
Although we have not yet developed revisions to the Worksheet S-10
instructions at this time, we remain committed to making improvements
to Worksheet S-10. For that reason, we believe it would be premature to
propose the use of Worksheet S-10 data for purposes of determining
Factor 3 for FY 2015. Therefore, in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28101), we proposed to continue to employ the utilization
of insured low-income patients defined as inpatient days of Medicaid
patients plus inpatient days of Medicare SSI patients, as defined in
Sec. 412.106(b)(4) and Sec. 412.106(b)(2)(i), respectively, to
determine Factor 3 for FY 2015. Accordingly, we proposed to revise the
regulations at 42 CFR 412.106(g)(1)(iii)(C) to state that, for FY 2015,
CMS will base its estimates of the amount of hospital uncompensated
care on the most recent available data on utilization for Medicaid and
Medicare SSI patients, as determined by CMS in accordance with
paragraphs (b)(2)(i) and (b)(4) of that section of the regulations. We
invited public comments on this proposal and indicated that we will
continue to work with the hospital community and others to develop the
appropriate clarifications and revisions to Worksheet S-10 of the
Medicare cost report for reporting uncompensated care data. In
particular, we invited public comments on what would be a reasonable
timeline for adopting Worksheet S-10 of the Medicare cost

[[Page 50016]]

report as the data source for determining Factor 3.
As we did for the FY 2014 IPPS/LTCH PPS proposed rule, for the FY
2015 IPPS/LTCH PPS proposed rule, we published on the CMS Web site a
table listing Factor 3 for all hospitals that we estimate would receive
empirically justified Medicare DSH payments in a fiscal year (that is,
hospitals that we project would receive interim uncompensated care
payments during the fiscal year), and for the remaining subsection (d)
and subsection (d) Puerto Rico hospitals that have the potential of
receiving a DSH payment in the event that they receive an empirically
justified Medicare DSH payment for the fiscal year as determined at
cost report settlement. Hospitals had 60 days from the date of public
display of the FY 2015 IPPS/LTCH PPS proposed rule to review these
tables and notify CMS in writing of a change in a hospital's subsection
(d) hospital status, such as if a hospital has closed or converted to a
CAH.
Comment: Most commenters agreed that the Worksheet S-10 data are
not yet sufficiently consistent and reliable to be employed for
purposes of determining each hospital's share of uncompensated care
payments. The commenters therefore supported the proposal to continue
employing SSI days and Medicaid days for this purpose in FY 2015. Some
of these commenters did express support for eventually employing the
Worksheet S-10 data for this purpose, once cost reporting instructions
have been appropriately revised and the hospital community has been
adequately instructed to render those data sufficiently consistent and
reliable. Some commenters also requested a more specific timetable for
adopting the Worksheet S-10 data. However, MedPAC and a few other
commenters supported the use of the Worksheet S-10 data for FY 2015.
MedPAC expressed disagreement with CMS' statement that the data on
utilization for insured low-income patients can serve as a reasonable
proxy for the treatment costs of uninsured patients. MedPAC
specifically cited its 2007 analysis of data from the GAO and data from
the American Hospital Association (AHA), which suggests that Medicaid
days and low-income Medicare days are not a good proxy for
uncompensated care costs. Given its prior findings that the Medicaid
and SSI shares were poor predictors of uncompensated care costs, MedPAC
argued that there is a need to transition to new measures. MedPAC
therefore supported Worksheet S-10 in the Medicare cost report as an
appropriate measure of uncompensated care that could begin to replace
the reliance on Medicaid and SSI shares. Specifically, it recommended
employing charity care for the uninsured, which is reported on the
Worksheet S-10 (line 23, column 1) as a reasonable proxy for the costs
of treating the uninsured. In response to concerns about whether the
quality of the data reported on Worksheet S-10 is adequate for use in
distributing uncompensated care payments, MedPAC argued that it is
already better than using Medicaid and SSI days as a proxy for
uncompensated care costs, and that the data on Worksheet S-10 will
improve over time as they are actually used in making payments. MedPAC
also expressed its view that the Worksheet S-10 data currently
available should only establish an interim allocation of uncompensated
care payments; the final allocation of payments to each hospital should
be determined based on the Worksheet S-10 data available at year-end
settlement. To prevent financial shocks to hospitals, some commenters
suggested that CMS could transition to use of the Worksheet S-10 data
over 3 years.
Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule, we
believe that data on utilization for insured low-income patients can be
a reasonable proxy for the treatment costs of uninsured patients.
Moreover, due to the concerns that continue to be expressed by a large
majority of commenters regarding the accuracy and consistency of the
data reported on the Worksheet S-10, we continue to believe that these
alternative data on utilization for insured low-income patients, which
are currently reported on the Medicare cost report, remain a better
proxy for the amount of uncompensated care provided by hospitals.
Accordingly, in this final rule, we are finalizing for FY 2015 the
policy that we originally adopted in the FY 2014 IPPS/LTCH PPS final
rule, of employing the utilization of insured low-income patients
defined as inpatient days of Medicaid patients plus inpatient days of
Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and
412.106(b)(2)(i), respectively, to determine Factor 3. However, we also
remain convinced that Worksheet S-10 could ultimately serve as an
appropriate source of more direct data regarding uncompensated care
costs for purposes of determining Factor 3 once hospitals are
submitting more accurate and consistent data through this reporting
mechanism. In the interim, we will continue to take steps to revise and
clarify cost report instructions, as appropriate. We also are
undertaking benchmarking analyses to compare available Worksheet S-10
data to other data sources on uncompensated care, such as on
uncompensated care costs reported to the IRS on Form 990 by not-for-
profit hospitals. Because the data submitted through Form 990 are
audited and come from an external source, they represent a suitable
standard of comparison. It remains our intention to propose introducing
the use of the Worksheet S-10 data for purposes of determining Factor 3
within a reasonable amount of time.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we
considered public comments which recommended that we use the wage index
to adjust insured low-income days in determining Factor 3 in order to
account for the differences in ``purchasing power'' in different
regions of the country. With respect to these public comments, we
agreed that there may be regional variation in uncompensated care costs
due to regional variations in the costs of care generally. However, we
stated that we did not believe that there was sufficient basis for
believing that the wage index reflects the variations in uncompensated
care costs well enough to adopt it as the basis for adjusting Factor 3.
The wage index reflects the relative hospital wage level in the
geographic area of the hospital compared to the national average
hospital wage level. In computing the wage index, we derive an average
hourly wage for each labor market area (total wage costs divided by
total hours for all hospitals in the geographic area) and a national
average hourly wage (total wage costs divided by total hours for all
hospitals surveyed in the nation). A labor market area's wage index
value is the ratio of the area's average hourly wage to the national
average hourly wage. We note that, for FY 2014, 69.6 percent of the
standardized amount is considered to be the labor-related share and,
therefore, adjusted by the wage index. However, in addition to the
labor-related share of the standardized amount being adjusted by the
wage index, the entire standardized amount is also adjusted for the
relative weight of the MS-DRG for each individual patient. In other
words, the wage index only adjusts for a portion of the variation in
costs, and does not address variations in resource use and patient
severity. Therefore, we stated that we did not believe that there was
sufficient basis for believing that adjusting low-income patient days
by the wage index would better reflect variations in uncompensated care
costs.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have

[[Page 50017]]

continued to consider whether to propose employing the wage index to
adjust insured low-income days in determining Factor 3. After this
consideration, we continue to believe that a wage index adjustment to
insured low-income days is not an appropriate measure to account for
variations in the costs of uncompensated care among hospitals. The
intensity of such care, and therefore the costs, may vary by hospital,
but we still lack convincing evidence that the wage index data are an
accurate measure of that intensity. Therefore, in the FY 2015 IPPS/LTCH
PPS proposed rule, we did not propose to adopt such an adjustment to
low-income days for purposes of calculating Factor 3 in FY 2015.
Comment: Several commenters agreed that applying the wage index to
Factor 3 is not an appropriate measure of variations in uncompensated
care costs. One commenter stated that CMS should apply a wage and case-
mix adjustment to the Medicaid and SSI days using the hospital area
wage index and hospital-specific case mix index. The commenter believed
that this information is readily available, well-understood, and is
appropriate for measuring cost variation among hospitals.
Response: We appreciate the comments and continue to believe it is
not appropriate to adopt a wage index adjustment to low-income days to
calculate Factor 3 for FY 2015. Although wage index information is
readily available, for the reasons discussed in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50639), we continue to believe that is it not an
accurate measure of the intensity of uncompensated care costs and would
not serve as an appropriate basis for making adjustments to Factor 3.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we also
considered public comments that requested that we include insured low-
income days from exempt units (specifically, inpatient rehabilitation
units paid under the IRF PPS and inpatient psychiatric units paid under
the IPF PPS) of the hospital in the computation of Factor 3, in order
to better capture the treatment costs of the uninsured by the hospital.
In response to those public comments, we stated our belief that there
may be some merit to including insured low-income days from exempt
units of the hospital in order to better capture the full costs of the
treatment of the uninsured by the hospital insofar as those data may be
publicly available, subject to audit, and used for payment purposes. We
also indicated that we believed it would be prudent to consider the
degree to which these data meet these conditions before adopting this
recommendation. Therefore, we stated that we would consider including
this recommendation among our proposals in future rulemaking.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have conducted an analysis of the impact of adopting this
recommendation. That analysis has indicated that the inclusion of
Medicaid and Medicare-SSI days for exempt inpatient units does not
significantly change the distribution of uncompensated care payments to
hospitals, with the exception of a few hospitals with high utilization
associated with those exempt units that would see increases in their
uncompensated care payments. Furthermore, Medicaid and SSI days for
inpatient rehabilitation units have been audited and are used for
payment purposes under the IRF PPS; specifically, these data are used
to calculate the low-income payment (LIP) adjustment under the IRF PPS.
However, the data for inpatient psychiatric units are not generally
audited and have not been used previously for payment purposes.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not
propose to include those days in the calculation of a hospital's share
of uncompensated care payments for FY 2015. As we indicated earlier, we
believe it would be appropriate to include such data in the calculation
of uncompensated care payments only insofar as those data may be
publicly available, subject to audit, and used for payment purposes.
The use of data for inpatient psychiatric units would fail the second
and third conditions. At the same time, we do not believe that
including only inpatient rehabilitation unit days without inpatient
psychiatric unit days would improve the accuracy of the uncompensated
care payment calculation. We also observe, as we have previously noted,
that the statutory references under section 1886(d)(5)(F) of the Act to
``days'' apply only to hospital acute care inpatient days. Section
412.106(a)(1)(ii) of the regulations therefore provides that, for
purposes of DSH payments, ``the number of patient days in the hospital
includes only those days attributable to units or wards of the hospital
providing acute care services generally payable under the prospective
payment system and excludes'' other days. In the absence of compelling
reasons to do otherwise, we believe it is preferable to maintain
consistency with this longstanding precedent in the context of this
temporary method for determining uncompensated care payments. However,
we invited public comments on this issue.
Comment: Several commenters supported the proposal to not include
Medicaid and SSI days from excluded units in the calculation. One
commenter believed it would be inconsistent to distribute uncompensated
care payments based on non-IPPS days and unfair to providers that do
not have exempt units. Some commenters supported including Medicaid and
SSI days from excluded units in our calculation of Factor 3. One
commenter stated that the inclusion of days for psychiatric and
rehabilitation units that are exempt from IPPS would improve the
accuracy of these data, as IPPS days and exempt unit days combined
would function as a proxy for total hospital uncompensated care
services.
Response: We thank the commenters for their feedback and continue
to believe that we should finalize our proposal to calculate Factor 3
based on a DSH hospital's share of their Medicaid and SSI days
associated with their acute care units. We believe that it would be
inappropriate to include Medicaid and SSI days from psychiatric units,
as those days are not audited for payment purposes, and we do not
believe that including only inpatient rehabilitation unit days without
inpatient psychiatric unit days would improve the accuracy of the
uncompensated care payment calculation.
The statute also allows the Secretary the discretion to determine
the time periods from which we will derive the data to estimate the
numerator and the denominator of the Factor 3 quotient. Specifically,
section 1886(r)(2)(C)(i) of the Act defines the numerator of the
quotient as ``the amount of uncompensated care for such hospital for a
period selected by the Secretary. . . .'' (emphasis added). Section
1886(r)(2)(C)(ii) of the Act defines the denominator as ``the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under this subsection for such period'' (emphasis
added). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we
adopted a process of making interim payments with final cost report
settlement for both the empirically justified Medicare DSH payments and
the uncompensated care payments required by section 3133 of the
Affordable Care Act. Consistent with that process, we also determined
the time period from which to calculate the numerator and denominator
of the Factor 3 quotient in a way that would be consistent with making
interim and final payments. Specifically, we must have Factor 3 values
available for

[[Page 50018]]

hospitals that we estimate will qualify for Medicare DSH payments using
the most recently available historical data and for those hospitals
that we do not estimate will qualify for Medicare DSH payments but that
may ultimately qualify for Medicare DSH payments at the time of cost
report settlement.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), therefore,
we adopted the policy to calculate the numerator and the denominator of
Factor 3 for hospitals based on the most recently available full year
of Medicare cost report data (including the most recently available
data that may be used to update the SSI ratios) with respect to a
Federal fiscal year. In other words, we use data from the most recently
available full year cost report for the Medicaid days and the most
recently available SSI ratios (that is, latest available SSI ratios
before the beginning of the Federal fiscal year) for the Medicare SSI
days. We noted that these data are publicly available, subject to
audit, and used for payment purposes. While we recognized that older
data also meet these criteria, we often use the most recently available
data for payment determinations. The data used are located in the HCRIS
database for most hospitals, but the data for IHS hospitals are not
included in that database. Accordingly, in the FY 2014 IPPS interim
final rule with comment period (78 FR 61195), we revised our policy to
also include cost report data submitted to CMS by IHS hospitals in
order allow their Medicaid days to be used to calculate Factor 3.
Therefore, for FY 2014, we used data from the most recently
available full year cost report for the Medicaid days and the most
recently available SSI ratios, which meant data from the 2010/2011 cost
reports (that is, cost reports that have cost reporting periods that
begin in either FY 2010 or FY 2011) for the Medicaid days taken from
the March 2013 update of the HCRIS database, 2011 cost report data
submitted to CMS by IHS hospitals by March 2013, and the FY 2011 SSI
ratios for the Medicare SSI days to estimate Factor 3 for FY 2014. In
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28102), for FY 2015, we
again proposed to use data from the most recently available full year
cost report for the Medicaid days (that is, we proposed to use the 2012
cost report, unless that cost report is unavailable or reflects less
than a full 12-month year; in the event the 2012 cost report is for
less than 12 months, we proposed to use the cost report from 2012 or
2011 that is closest to being a full 12-month cost report), cost report
data submitted to CMS by IHS hospitals and the most recently available
SSI ratios. For purposes of the proposed rule, we used data from the
2011/2012 Medicare cost reports (that is, from cost reports that have
cost reporting periods that begin in either FY 2011 or FY 2012) taken
from the December 2013 update of the HCRIS database for the Medicaid
days and the FY 2011 SSI ratios for the Medicare SSI days. Consistent
with our FY 2014 IPPS interim final rule with comment period (78 FR
61195), for FY 2015, we also used supplemental cost report data
provided by IHS hospitals to CMS as of December 2013 in order to
calculate the proposed Factor 3. We indicated that, for the FY 2015
IPPS/LTCH PPS final rule, we intended to use the March 2014 update of
the HCRIS database for the 2011/2012 Medicare cost reports, cost report
data submitted to CMS by IHS hospitals as of March 2014, and the most
recently available SSI ratios (FY 2012 SSI ratios and, if not
available, the FY 2011 SSI ratios) to calculate Factor 3. We stated
that we believed the March update to the Medicare cost reports would be
the most recently available data to calculate Factor 3 at the time of
publication of the FY 2015 IPPS final rule. We also indicated that this
proposal is consistent with CMS' historical policy to use the best
available data when setting the payment rates and factors in both the
proposed and final rules. Furthermore, we noted that this approach is
consistent with our approach in other areas of IPPS, where we
historically use the March update of cost report data and MedPAR claims
data to calculate IPPS relative weights, budget neutrality factors, the
outlier threshold, and the standardized amount for the IPPS final rule.
If we were to wait for a later update of the cost report data to become
available, this would cause delay of the publication of the IPPS final
rule.
Comment: Several commenters questioned the data used to calculate
the hospitals' Factor 3. Several commenters stated that their Medicaid
days were understated. Furthermore, commenters stated that they
submitted their updated cost report to be included in the March 2014
update of the Medicare cost report data but the contractor had not yet
uploaded the information in the HCRIS database. In addition, some
commenters indicated that they had updated Medicaid days and had
submitted their cost report to their contractors after the March 2014
update of the Medicare hospital cost report data and wanted their
updated data included. Some commenters requested use of the June update
of cost report data to obtain Medicaid days to calculate Factor 3. Some
commenters sought clarification of why some hospitals have their
Medicaid days based on Worksheet S-2 and some hospitals have their
Medicaid days based on Worksheet S-3. Some commenters stated that their
Medicaid days were based on a 6-month cost report and they should be
based on a 12-month cost report either by combining cost reports or
annualizing the data. Some commenters questioned their DSH eligibility,
stating that their hospitals had been listed as not being eligible for
DSH for FY 2015, when they had previously received DSH on their cost
report. Other commenters submitted corrections because their hospitals
had been identified as SCHs, but were actually operating as MDHs.
Finally, several commenters requested additional time after the
publication of the final rule to review the data used to calculate
Factor 3 and submit corrections.
Response: We are finalizing our proposal to use the most recently
available full year cost report for the Medicaid days (that is, our
proposal to use the 2012 cost report, unless that cost report is
unavailable or reflects less than a full 12-month year; in the event
the 2012 cost report is for less than 12 months, we will use the cost
report from 2012 or 2011 that is closest to being a full 12-month cost
report) and the most recently available SSI ratios. For this FY 2015
final rule, we are using the March 2014 update of the hospital cost
report data in the HCRIS database and cost report data submitted to CMS
by IHS hospitals as of March 2014 to obtain the Medicaid days to
calculate Factor 3. In addition, we are using the FY 2012 SSI ratios
published on the CMS Web site to calculate Factor 3 (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html).
We note that we are unable to use a later update of the cost report
data, like the June update, and still calculate the final Factor 3 in
time for publication of the IPPS final rule. Any delay in the
publication of the final rule would prevent changes and updates to
payments under the IPPS from taking effect on October 1, the first day
of the fiscal year. We are not able to accept supplemental data for
hospitals, as we are not able to validate the information included in
that supplemental data. We note that hospitals have ample time after
the close of their fiscal year to submit the data that are used in this
calculation. Specifically, Chapter I, section 104 of the Provider
Reimbursement Manual, Part 2, generally allows a hospital 5 months
after the close of its cost reporting

[[Page 50019]]

period to file its cost report. In addition, CMS allows hospitals to
request amendments of their cost report submissions before CMS issues a
Notice of Program Reimbursement. In response to the commenters that
indicated they had submitted their updated cost reports, but that the
MAC had not yet uploaded the information, we note that MACs follow
guidelines to upload revised cost report information. In accordance
with Medicare Financial Management Manual, Chapter 8, Section 10.4--
Submission of Cost Report Data to CMS, the MACs are required to submit
an extract of the following Medicare cost reports to CMS in accordance
with the HCRIS specifications within 210 days of the cost reporting
period ending date or 60 days after receipt of the cost report,
whichever is later.
With respect to the comments requesting clarification on whether
Worksheet S-2 or Worksheet S-3 is used to obtain Medicaid days, we
addressed this concern in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50642) and reiterate that we use the Medicaid days reported on
Worksheet S-2 of the Medicare Hospital Cost Report version 2552-10 for
hospitals projected to receive Medicare DSH because the Medicaid days
reported on Worksheet S-2 are used in the computation of the Medicaid
fraction for Medicare DSH payments. Therefore, because they are used
for payment of Medicare DSH, we believe that these data are more
reliable than data not used for payment purposes. Hospitals that were
not eligible to receive Medicare DSH payments on that cost report were
unable to report Medicaid days on Worksheet S-2, but could report their
Medicaid days on Worksheet S-3. Therefore, for hospitals that we
project to not be eligible for Medicare DSH payments, we are using the
Medicaid days reported on Worksheet S-3 to calculate their Factor 3. A
transmittal has been issued to allow for hospitals that are not
receiving DSH to report their Medicaid days on Worksheet S-2, and we
hope to rely only on the data reported on that Worksheet S-2 in the
future, if we continue to use this data on low-income insured days in
the future.
With regard to the comments from hospitals that found that their
Factor 3 was calculated using a cost report that was less than 12
months, we are finalizing our proposal to use the 2012 cost report,
unless that cost report is unavailable or reflects less than a full 12-
month year. In the event the 2012 cost report is for less than 12
months, we would use the cost report from 2012 or 2011 that is closest
to being a full 12-month cost report. In the case where a less than 12-
month cost report was used to calculate a hospital's Factor 3, this
would indicate that both the 2012 and 2011 cost reports were less than
12 months. In such a case, we would use the longer of the two cost
reports to calculate a hospital's Factor 3. We did not make a proposal
to annualize or combine cost reports to calculate Factor 3. We note
that section 1886(r)(2)(c) of the Act specifies that Factor 3 is equal
to the percent that represents ``the amount of uncompensated care for
such hospital for a period selected by the Secretary (as estimated by
the Secretary, based on appropriate data . . .'' divided by ``the
aggregate amount of uncompensated care for all subsection (d) hospitals
that receive a payment under this subsection for such period (as so
estimated . . .'' In implementing this provision, as we did through
rulemaking in FY 2014, we believe it is appropriate to first select the
period--in this case, the period for which we have the most recently
available data--and then to select the data from a cost report that
aligns best with that period. However, we acknowledge that the
situations presented by commenters, where a hospital remains in
operation in both Federal fiscal years for which we analyze cost report
data but submits cost reports for both Federal fiscal years that
reflect substantially less than a full year of data, pose unique
challenges in the context of estimating Factor 3. As a result, this is
an issue that we intend to consider further and may address in future
rulemaking.
With regards to the comments from hospitals stating that their DSH
eligibility is inaccurate, we note that we used the FY 2012 SSI ratios
and the Medicaid fraction listed in the March 2014 update of the
Provider Specific File in order to identify which hospitals are
projected to receive DSH for FY 2015, and thus are eligible to receive
uncompensated care payments and interim uncompensated care payments for
FY 2015. We did not use historical cost report data to make this
determination. We believe that the FY 2012 SSI ratios and the Medicaid
fraction in the March 2014 update of Provider Specific File are the
most recently available information regarding whether a hospital is
currently being paid Medicare DSH on an interim basis, and therefore,
we believe they are an appropriate data source to make our
determination of which hospitals are projected to receive DSH for FY
2015, and thus are eligible to receive uncompensated care payments, as
presented in Table 18. As we have stated previously, final
determination of DSH eligibility and uncompensated care payments are
made at cost report settlement.
In making our DSH projections for FY 2015, we also identify which
hospitals are SCHs that we estimate will be paid the hospital-specific
rate and not the Federal rate and, therefore, will not receive a
Medicare DSH payment and will be ineligible to receive the
uncompensated care payment. In the FY 2015 IPPS/LTCH PPS proposed rule,
we inadvertently identified several MDHs as SCHs in our projections and
have updated our list of SCHs for the final rule accordingly.
Finally, we accept the recommendation of many commenters to provide
the public with an additional 30 days subsequent to the publication of
the final rule in order to review and submit comments limited to
whether any hospitals should be added to the list of hospitals eligible
to receive interim empirically justified DSH payments and uncompensated
care payments or if any hospitals should be removed from the list based
on changes in their subsection(d) status, as we did in the FY 2014
IPPS/LTCH PPS final rule. Commenters can submit their comments to our
inbox at Section3133DSH@cms.hhs.gov. After receiving and reviewing
comments, if we make any changes to the list, we will post on the Web
site a revised table showing the final Factor 3 for each hospital prior
to October 1, 2014. This timetable will give MACs sufficient time in
order to enter the final data into the provider specific file and make
timely payments for discharges occurring on or after October 1, 2014.
Comment: Several commenters asked whether the Medicaid days used to
calculate Factor 3 can be reconciled based on audit by the Medicare
contractor and whether any recouped uncompensated care payments would
be redistributed to the providers receiving an uncompensated care
payment at cost report settlement.
Response: As we discussed in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50645), at this time, we do not intend to reconcile Factor 3
because we believe the statute provides the authority to make
uncompensated care payments on the basis of estimates of Factors 1, 2,
and 3 and that it is preferable to do so in order to avoid unacceptable
delays in the final determination of uncompensated care payments.
Comment: One commenter objected to the proposal to calculate Factor
3 based on a hospital's share of total Medicaid days and Medicare SSI
days as a proxy for measuring a hospital's share of uncompensated care.
The commenter believed that this proxy does not

[[Page 50020]]

appropriately target hospitals with the highest burden of uncompensated
care costs and instead rewards hospitals in states where Medicaid has
expanded.
Response: For the reasons discussed in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50639), we continue to believe that our methodology
to calculate Factor 3 based on a hospital's share of Medicaid days and
SSI days does not inappropriately reward States that expand Medicaid
coverage. Furthermore, as discussed above and in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50634 through 50639), we believe that using the
low-income insured days as a proxy for uncompensated care costs
provides a reasonable basis to determine Factor 3 on a temporary basis
as we work to improve Worksheet S-10 to accurately and consistently
capture uncompensated care costs.
Comment: Several commenters requested that hospitals have the
opportunity to request to have the SSI days recalculated on the basis
of their cost reporting period, not Federal fiscal year, as part of
their Factor 3 calculation.
Response: We do not believe that this would improve our estimates
for Factor 3. For the DSH calculation, CMS generally issues SSI ratios
based on a Federal fiscal year to be used to determine a hospital's
Medicare DSH payments at cost report settlement. For the purpose of the
Medicare DSH payment, a provider may request a realignment under Sec.
412.106(b)(3) such that its SSI ratio is recalculated based on the
hospital's specific cost-reporting period. The choice to request a
realignment and the timing of this choice may vary. Therefore, a
hospital's decision whether to have its SSI ratio calculated on the
basis of its cost reporting period may not have been made at the time
we determine Factor 3 for a specific Federal fiscal year. Furthermore,
we do not believe that allowing hospitals the option of having their
SSI days calculated on the basis of their cost reporting period would
improve our estimates of Factor 3. Therefore, to preserve consistency
and administrative efficiency, we continue to believe it is appropriate
to use SSI ratios based on the Federal fiscal year.
Comment: Several commenters asked how the decision in Allina v.
Sebelius would affect the calculation of Factor 3. Commenters stated
that the SSI days should exclude MA days, and MA dual-eligible days
should be included as Medicaid days in the calculation of Factor 3 for
FY 2015 and that CMS should reconcile the FY 2014 Factor 3 estimates
based on the decision in Allina v. Sebelius.
Response: Similar to what we stated earlier in this final rule, we
do not believe the Allina decision has any bearing on our estimate of
Factor 3 for either FY 2014 or FY 2015. The decision in Allina did not
address our decision to readopt the policy of counting Medicare
Advantage days in the SSI ratio for FY 2014 and subsequent fiscal
years. Nor did the decision address the issue of how patient days
should be counted for purposes of estimating uncompensated care.
Moreover, section 1886(r)(2)(C) of the Act provides discretion for the
Secretary to determine how to estimate uncompensated care costs, and
for FY 2015, we are finalizing our proposal to continue to apply the
methodology adopted in the FY 2014 IPPS/LTCH PPS final rule to define
uncompensated care based on the proxy of utilization by low-income
insured patients. Specifically, Factor 3 will be based on a hospital's
share of total Medicaid days and SSI days. Consistent with the policy
that we finalized in the FY 2014 IPPS/LTCH PPS final rule regarding the
counting of SSI days, we believe that, for purposes of determining
uncompensated care payments, SSI days should include both MA and FFS
SSI days.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50642), we discussed
several specific issues concerning the use of cost report data to
determine Factor 3. One issue concerned the process and data to be
employed in determining Factor 3 in the case of hospital mergers.
Specifically, two hospitals that merged in 2011 with one surviving
provider number requested that we account for the merger by including
data from both hospitals' cost reports immediately prior to the merger
in the calculation of the Factor 3 amount. In that final rule, we had
calculated Factor 3 using only the surviving hospital's cost report
data and SSI ratio data. In the final rule (78 FR 50602), we responded
to the public comment that Factor 3 would be calculated based on the
low-income insured patient days (that is, Medicaid days and SSI days)
under the surviving CCN, based on the most recent available data for
that CCN (for FY 2014, from the cost report for 2011 or 2010). We noted
that this was consistent with the treatment of other IPPS payment
factors, where data used to calculate a hospital's Medicare DSH payment
adjustment, CCRs for outlier payments, and wage index values are tied
to a hospital's CCN. Data associated with a CCN that is no longer in
use are not used to determine those IPPS hospital payments under the
surviving CCN.
Since the publication of the FY 2014 IPPS/LTCH PPS final rule, we
have received additional input from hospitals that have undergone
mergers that suggest using only the surviving CCN produces an estimate
of the surviving hospital's uncompensated care burden that is lower
than warranted. For FY 2015, for example, Factor 3 of the uncompensated
care payment calculation would be determined using 2011/2012 cost
reports. As a result, for any mergers occurring between FY 2011 and FY
2015, Factor 3 of the uncompensated care payment for FY 2015 would
reflect only the data of the hospital with the surviving CCN, not the
combination of the data from the two hospitals that merged. We believe
that revising our methodology to incorporate data from both of the
hospitals that merged could improve our estimate of the uncompensated
care burden of the merged hospital. Accordingly, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28103 through 28104), we proposed to
revise our methodology for determining Factor 3 to incorporate data
from both merged hospitals until data for the merged hospitals become
available under the surviving CCN.
In addition, because the data systems used to calculate Factor 3 do
not identify hospitals that have merged, we also proposed to establish
a process to identify hospitals that have merged after the period of
the historical data that are being used to calculate Factor 3, up to a
point in time during ratesetting for that Federal fiscal year. Under
this approach, we would combine the data for the merged hospitals to
calculate Factor 3 of the uncompensated care payment. Specifically, we
proposed that we would identify the hospitals that merged after the
period from which data are being used to calculate Factor 3 (for FY
2015, 2012 and 2011) but before the publication of each year's final
rule. For purposes of the proposal, we defined a merger to be an
acquisition where the Medicare provider agreement of one hospital is
subsumed into the provider agreement of the surviving provider. We
would not consider an acquisition where the new owner voluntarily
terminates the Medicare provider agreement of the hospital it purchased
by rejecting assignment of the previous owner's provider agreement to
be a merger. We believe it is appropriate to combine data to calculate
Factor 3 for a merged hospital where the Medicare provider agreement of
one hospital is subsumed into the provider agreement of the surviving
provider because, in this type of acquisition as described in the
September 6, 2013 Survey &

[[Page 50021]]

Certification Memorandum S&C: 13-60-ALL (https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-60.pdf), the buyer is subject to
all applicable statutes and regulations and to the terms and conditions
under which the assigned agreement was originally issued. These
include, but are not limited to, Medicare requirements to adjust
payments to account for prior overpayments and underpayments, even if
they relate to a pre-acquisition period (successor liability), and to
adjust payments to collect civil monetary penalties. Therefore, we
believe it is appropriate to also retain the data of the subsumed
hospital to calculate the uncompensated care payment for the merged
hospital. Conversely, by rejecting assignment of the Medicare provider
agreement of the subsumed hospital, the surviving provider has
voluntarily terminated the Medicare provider agreement and is precluded
from having successor liability for Medicare overpayments or
underpayments that would have otherwise been made to the subsumed
provider. Furthermore, when the surviving hospital rejects automatic
assignment of the existing provider agreement, but wishes to
participate in the Medicare program, the merged hospital is considered
an initial applicant to the Medicare program. In an instance in which
the surviving provider has rejected assignment of the Medicare provider
agreement of the subsumed provider, it would not seem appropriate to
use data from the subsumed provider for purposes of Medicare payment,
including for the calculation of a hospital's uncompensated care
payment.
For FY 2015, we proposed to identify mergers by querying the
Medicare contractors. We believe it is appropriate to obtain merger
information from the Medicare contractors, as a copy of each final
sales agreement/transaction indicating the effective date of the
acquisition is generally submitted to the Medicare contractors once an
acquisition is finalized. For the purpose of the proposed rule, we
requested that the Medicare contractors provide us with a list of
mergers that occurred between October 1, 2010 (the first day of FY
2011, which is the earliest date that would be included in any 2011
cost report data that are used to calculate a hospital's Factor 3)
through January 2014 (when we started preparing for the FY 2015 IPPS/
LTCH PPS proposed rule). On the basis of this information, we would
then combine the data elements of any hospitals that had merged to
calculate the uncompensated care payment for the merged hospital.
Specifically, we proposed to combine the Medicaid days from the most
recently available full year cost reports and the SSI days from the
most recently available SSI ratios tied to the two CCNs prior to the
merger to calculate the merged hospital's Factor 3. For FY 2015, we
proposed to combine the Medicaid days from either the 2011 or 2012 cost
reports and would use the most recently available SSI ratios available
at the time the final rule is developed.
In order to confirm these mergers and the accuracy of the data used
to determine each merged hospital's uncompensated care payment, we
proposed to publish a table on the CMS Web site, in conjunction with
the issuance of the proposed and final rules for a fiscal year,
containing a list of the mergers that we are aware of and the computed
uncompensated care payment for each merged hospital. A copy of this
table was published on the CMS Web site in conjunction with the
issuance of the FY 2015 proposed rule. The affected hospitals had the
opportunity to comment during the public comment period on the accuracy
of this information.
We proposed to treat hospitals that merge after the development of
the final rule similar to new hospitals. For these newly merged
hospitals, we would not have data currently available to calculate a
Factor 3 amount that accounts for the merged hospital's uncompensated
care burden. In addition, we would not have data to determine if the
newly merged hospital is eligible for Medicare DSH payment and,
therefore, eligible for uncompensated care payments for the applicable
fiscal year because the only data we would have to make this
determination are those for the surviving CCN. Accordingly, we proposed
to treat newly merged hospitals in a similar manner as new hospitals,
such that the newly merged hospital's final uncompensated care payment
would be determined at cost report settlement where the numerator of
the newly merged hospital's Factor 3 would be based on the Medicaid
days and SSI days reported on the cost report used for the applicable
fiscal year. We proposed that the interim uncompensated care payments
for the newly merged hospitals would be based on only the data of the
surviving hospital's CCN at the time of the preparation of the final
rule for the applicable fiscal year. In other words, for newly merged
hospitals, eligibility to receive interim uncompensated care payments
and the amount of any interim uncompensated care payments would be
based on the Medicaid days from either the 2011 or 2012 cost reports
and the most recently available SSI ratios available at the time the
final rule is developed for only the surviving CCN. However, at cost
report settlement, we would determine the newly merged hospital's final
uncompensated care payments based on the Medicaid days and SSI days
reported on the cost report used for the applicable fiscal year. That
is, we would revise the numerator of Factor 3 for the newly merged
hospital to reflect the Medicaid and SSI days reported on the cost
report for the applicable fiscal year. We invited public comment on our
proposed change to the treatment of hospital mergers in the calculation
of a hospital's uncompensated care payment.
Comment: Commenters uniformly supported the proposal to establish a
process to identify the hospitals that have merged so CMS can calculate
the merged hospital's share of the total uncompensated care amount
available using the low-income patient days from all hospitals that
existed prior to the merger. Several commenters identified additional
hospitals that had undergone a merger that were not included on the
list of mergers identified in the FY 2015 IPPS/LTCH PPS proposed rule.
A number of commenters requested that the public have additional time
after the publication of the final rule to review and submit
corrections to CMS' list of identified mergers. One commenter asked CMS
to clarify that, under the proposal, CMS would recalculate the
hospital's uncompensated care payments by combining the Medicaid days
and SSI days published with the final rule from the applicable ``data
year'' for the surviving CCN, as well as for any acquired CCNs that
were retired through the merger process.
Response: We appreciate the commenters' support and are finalizing
our proposal as proposed. We have updated our list of mergers based on
information submitted by the Medicare contractor as of June 2014. In
addition, we have reviewed the commenters' submissions of mergers not
previously identified in the proposed rule and have updated our list
accordingly. In response to the request from one commenter, for the
hospitals that we have listed as undergoing a merger, we are confirming
that we would recalculate the hospital's uncompensated care payments by
combining the Medicaid days and SSI days published with the final rule
from the applicable ``data year'' for the surviving CCN, as well as for
any acquired CCNs that were retired through

[[Page 50022]]

the merger process. For example, to calculate the FY 2015 Factor 3
using the FY 2012 SSI ratio and the full year cost report from 2012 or
2011, we would combine the FY 2012 SSI days and Medicaid days from the
2012 or 2011 cost report from the surviving and retiring providers. We
would not update the merged hospital's Factor 3 after that. For a newly
merged hospital, defined for the purpose of this policy as a hospital
that we do not identify as undergoing a merger until after the public
comment period and additional review period after the final rule or
that undergoes a merger during the fiscal year, the final Factor 3
would be recalculated based on the Medicaid days and SSI days reported
on the cost report used for the applicable fiscal year since the Factor
3 that we are publishing in this final rule would not reflect the
merger. For example, for a newly merged hospital that merged in FY
2015, the numerator of its Factor 3 would be recalculated based on the
FY 2015 SSI days and the Medicaid days reported on its 2015 cost
report. Finally, in response to the comments seeking additional review
of CMS' list of identified mergers, we are providing an additional 30
days after the publication of this final rule for hospitals to review
and submit comments on the accuracy of the list of mergers that we have
identified in this final rule. Comments can be submitted to our inbox
at Section3133DSH@cms.hhs.gov and any changes to Factor 3 will be
posted on the CMS Web site prior to October 1, 2014.
Comment: One commenter expressed concern about the process of
requesting that MACs provide information to CMS on mergers/
acquisitions. The commenter noted that the MACs may not have the most
up-to-date information on mergers to provide to CMS because
documentation of the merger, such as tie-in or tie-out notices, can be
delayed in getting to a contractor.
Response: We appreciate the commenters' concerns. We believe that
we have implemented several safeguards in the event that a merger is
not identified by the MACs, including allowing opportunity for comment
on the accuracy of the mergers that we have identified during the
comment period for the proposed rule and after the publication of the
final rule. In addition, as described earlier, for any newly merged
hospital or for a hospital that we do not identify as having undergone
a merger, we will recalculate the merged hospital's Factor 3 at the end
of the applicable fiscal year based on the Medicaid days and SSI days
reported on the cost report used for the applicable fiscal year since
the Factor 3 published in the final rule would not reflect the merger.
Comment: MedPAC and one other commenter expressed concern about our
policy of distributing the uncompensated care payments as a per-
discharge add-on. They believed this policy is problematic because the
per-discharge add-on varies widely from hospital to hospital. The
variability of the add-on payments in turn distorts the MS-DRG prices
and creates problematic incentives for ACOs and MA plans. Therefore,
MedPAC and the other commenter believed that it would be better to
provide a common interim add-on payment for all DSH hospitals in a
county. Any underpayments or overpayments to an individual hospital
could be corrected at year-end settlement or on an interim basis during
the year (as is already necessary under the current system). One
commenter also suggested applying a growth factor based on CBO
projections to CMS' historical discharge data to calculate the interim
per-discharge uncompensated care payments to mitigate overpayments and
stabilize cash flow. Another commenter opposed MedPAC's recommendation
and supported CMS' current methodology to calculate interim
uncompensated care payments, stating that MedPAC's recommendation could
cause cash-flow problems for providers.
Response: We consider these comments to be outside the scope of the
proposed rule, as we did not propose any revision in our method of
making interim payments for uncompensated care. However, we would like
to make two preliminary reactions to this recommendation. The first
observation is that we have received very few comments from the
hospital industry indicating that the problem cited by these two
commenters actually exists. We would expect that, if hospitals were
truly disadvantaged in the manner cited by these commenters by our
methodology for making interim payment uncompensated care payments, we
would have received many more comments to that effect. The second
preliminary reaction is that adopting the recommendation may pose, for
some hospitals, serious problems that may conceivably exceed the
problem that the recommendation is designed to solve. For example,
reducing the interim uncompensated care payments of high DSH hospitals
to a county-wide average payment may cause serious cash flow problems
during the period before the interim payments can be adjusted or
settled. Similarly, low DSH hospitals may receive significantly higher
interim payments than would be warranted by their actual uncompensated
care data. As a result, these hospitals would have to take financial
management steps to ensure that they are capable of making significant
repayments when interim payments are adjusted or settled.
Comment: Commenters suggested that CMS implement a stop-loss and
stop-gain policy to limit the amount by which a hospital's DSH payment
could change in a single year.
Response: As we previously stated in a response to a similar
comment in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622), we do
not believe that the statute provides authority for adopting a stop-
loss and stop-gain policy designed to limit changes in DSH payments.
Comment: Commenters expressed concern that there shall be no
administrative or judicial review of the uncompensated care factors.
Response: Section 1886(r)(3) of the Act provides that there will be
no administrative or judicial review under section 1869 of the Act,
section 1878 of the Act, or otherwise of any of the following:
Any estimate of the Secretary for purposes of determining
the factors described in paragraph (2) of section 1886(r) of the Act.
Any period selected by the Secretary for such purposes.
The regulation at Sec. 412.106(g)(2), which was finalized in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50643), is consistent with
these statutory limitations on review.

G. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108) and Sole Community Hospitals (SCHs) (Sec. 412.92)

1. Background for MDH Program
Section 1886(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684).) As we discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684), section 3124 of the Affordable
Care Act extended the expiration of the MDH program from the end of FY
2011 (that is, for discharges occurring before October 1, 2011) to the
end of FY 2012 (that is, for discharges occurring before October 1,
2012). Under prior law, as specified in section 5003(a) of Public Law
109-171 (DRA 2005), the MDH program was to be in effect through the end
of FY 2011 only.

[[Page 50023]]

Since the extension of the MDH program through FY 2012 provided by
section 3124 of the Affordable Care Act, the MDH program has been
further extended multiple times. First, section 606 of the ATRA (Pub.
L. 112-240) extended the MDH program through FY 2013 (that is, for
discharges occurring before October 1, 2013). Second, section 1106 of
the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) extended the
MDH program through the first half of FY 2014 (that is, for discharges
occurring before April 1, 2014). In the interim final rule with comment
period (IFC) that appeared in the Federal Register on March 18, 2014
(the ``March 2014 IFC'') (79 FR 15025 through 15027), we discussed the
expiration of the MDH program on March 31, 2014. (In section IV.P. of
the preamble of this final rule, we are responding to any public
comments we received on the March 2014 IFC and are stating our
finalized policy for the extension of the MDH program for the first
half of FY 2014, through March 31, 2014, under the Pathway for SGR
Reform Act of 2013.) In the March 2014 IFC, we explained how providers
may be affected by the 6-month extension of the MDH program under the
Pathway for SGR Reform Act of 2013 and described the steps to reapply
for MDH status for FY 2014, as applicable. Generally, a provider that
was classified as an MDH as of September 30, 2013, was reinstated as an
MDH effective October 1, 2013, with no need to reapply for MDH
classification. However, if the MDH had classified as an SCH or
cancelled its rural classification under Sec. 412.103(g) effective on
or after October 1, 2013, the effective date of MDH status may not be
retroactive to October 1, 2013. In the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50647 through 50649) and the March 2014 IFC (79 FR 15025 through
15027), we made conforming changes to the regulations at Sec.
412.108(a)(1) and (c)(2)(iii) to reflect the extensions of the MDH
program provided for by the ATRA and Pathway for SGR Reform Act of
2013, respectively. Lastly, under current law, section 106 of the PAMA
(Pub. L. 113-93) provides for a 1-year extension of the MDH program
effective from April 1, 2014 through March 31, 2015. Specifically,
section 106 of the PAMA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act by striking ``April 1, 2014'' and
inserting ``April 1, 2015''. Section 106 of the PAMA also made
conforming amendments to sections 1886(b)(3)(D)(i) and
1886(b)(3)(D)(iv) of the Act.
We addressed the extension of the MDH program for the second half
of FY 2014 (that is, from April 1, 2014 through September 30, 2014)
under the PAMA in a notice that appeared in the Federal Register on
June 17, 2014 (79 FR 34446 through 344449). For additional information
on the extensions of the MDH program after FY 2012, we refer readers to
the following: the FY 2013 IPPS/LTCH PPS final rule that appeared in
the Federal Register on August 31, 2012 (77 FR 53404 through 53405 and
53413 through 53414); the FY 2013 IPPS notice that appeared in the
Federal Register on March 7, 2013 (78 FR 14689); the FY 2014 IPPS/LTCH
PPS final rule that appeared in the Federal Register on August 19, 2013
(78 FR 50647 through 50649); the FY 2014 interim final rule with
comment period that appeared in the Federal Register on March 18, 2014
(the ``March 2014 IFC'') (79 FR 15025 through 15027); and the FY 2014
notice that appeared in the Federal Register on June 17, 2014 (79 FR
34446 through 34449).
2. PAMA Provisions for FY 2015 for MDHs
Prior to the enactment of the PAMA, under section 1106 of the
Pathway for SGR Reform Act of 2013, the MDH program authorized by
section 1886(d)(5)(G) of the Act was set to expire midway through FY
2014. Section 106 of the PAMA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year
extension of the MDH program, effective from April 1, 2014 through
March 31, 2015. Section 106 of the PAMA also made conforming amendments
to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28104), we
proposed to make conforming changes to the regulations at Sec. Sec.
412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the
MDH program for the first 6 months of FY 2015 made by section 106 of
the PAMA.
We did not receive any public comments on our proposed conforming
changes to the existing regulations text at Sec. Sec. 412.108(a)(1)
and (c)(2)(iii) to reflect the statutory extension of the MDH program
through the first half of FY 2015 (that is, through March 31, 2015) in
accordance with section 106 of the PAMA. Therefore, in this final rule,
we are adopting our proposed revisions to the regulations at Sec. Sec.
412.108(a)(1) and (c)(2)(iii) as final without modification. We note
that these regulatory provisions supersede the conforming changes to
Sec. Sec. 412.108(a)(1) and (c)(2)(iii) made in the March 2014 IFC to
reflect the extension of the MDH program through March 31, 2014, under
the Pathway for SGR Reform Act, as discussed in section IV.P. of the
preamble of this final rule.
3. Expiration of the MDH Program
Because section 106 of the PAMA extends the MDH program through the
first half of FY 2015 only, beginning April 1, 2015, the MDH program
will no longer be in effect. Because the MDH program is not authorized
by statute beyond March 31, 2015, beginning April 1, 2015, all
hospitals that previously qualified for MDH status will no longer have
MDH status.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through
53405), we revised our SCH policies to allow MDHs to apply for SCH
status and be paid as such under certain conditions, following
expiration of the MDH program at the end of FY 2012. We codified these
changes in the regulations at Sec. 412.92(b)(2)(i) and Sec.
412.92(b)(2)(v). For additional information, we refer readers to the FY
2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We
note that those same conditions apply to MDHs that intend to apply for
SCH status with the expiration of the MDH program on March 31, 2015.
Specifically, the existing regulations at Sec. 412.92(b)(2)(i) and
(b)(2)(v) allow for an effective date of approval of SCH status that is
the day following the expiration date of the MDH program. In accordance
with these regulations, in order for an MDH to receive SCH status
effective April 1, 2015, it must apply for SCH status at least 30 days
before the end of the MDH program; that is, the MDH must apply for SCH
status by March 1, 2015. The MDH also must request that, if approved as
an SCH, the SCH status be effective with the expiration of the MDH
program provision; that is, the MDH must request that the SCH status,
if approved, be effective April 1, 2015, immediately after its MDH
status expires with the expiration of the MDH program on March 31,
2015. We note that an MDH that applies for SCH status in anticipation
of the expiration of the MDH program would not qualify for the April 1,
2015 effective date upon approval if it does not apply by the March 1,
2015 deadline. The provider would instead be subject to the usual
effective date for SCH classification, that is, 30 days after the date
of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).
Although we made no proposals related to the expiration of the MDH
program, we received the following comments.
Comment: A few commenters expressed concern about the financial

[[Page 50024]]

impact of the expiration of the MDH program. Some of these commenters
urged CMS to continue the MDH program permanently, while other
commenters urged CMS to support legislative efforts to extend these
provisions beyond the current March 31, 2015 statutory expiration date.
Some commenters urged CMS to work with Congress to extend the MDH
provision because these hospitals are vitally needed in serving elderly
persons with health care needs. Other commenters stated that the MDH
program provides needed funding for hospitals with Medicare as their
predominant payor. The commenters stated that many of these hospitals
provide primarily outpatient services, and the low Medicare OPPS rates,
which pay less than cost, threaten the financial viability of these
hospitals without the added funding that Medicare dependent status
provides. In order to maintain access to care for Medicare
beneficiaries and others in many rural communities, the commenters urge
CMS to continue the MDH program permanently.
Response: While we appreciate the commenters' concerns about the
expiration of the MDH program, CMS does not have the authority under
current law to extend the MDH program beyond the March 31, 2015
statutory expiration date. These comments are similar to comments we
received previously, prior to the statutory extensions of the MDH
program for FYs 2013 and 2014 provided by subsequent legislation, and
discussed in both the FY 2013 IPPS/LTCH PPS final rule (77 FR 53413
through 53414) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647
through 50649.
Therefore, under current law, beginning April 1, 2015, all
hospitals that previously qualified for MDH status will no longer have
MDH status.
4. Effect on MDHs of Adoption of New OMB Delineations
We received some comments regarding the effect of the
implementation of the new OMB delineations (discussed in section
III.H.5. of the preamble of this final rule) on MDHs, including
requests for a transition period for MDHs to adapt to the changes that
would result from the new OMB delineations; in particular, changes from
rural to urban status. We refer readers to section III.H.5. (Update of
Application of Urban to Rural Classification Criteria) of the preamble
of this final rule for our summary of public comments received and our
responses to those comments.
5. Effect on SCHs of Adoption of New OMB Delineations and 2-Year
Transition for CAHs
Section 1886(d)(5)(D)(iii) of the Act defines a sole community
hospital (SCH) generally as a hospital that is located more than 35
road miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of inpatient hospital services reasonably available to Medicare
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria
that a hospital must meet to be classified as a SCH. For more
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS
final rule (74 FR 43894 through 43897).
In connection with the implementation of the new OMB delineations
for urban and rural areas, as discussed in section III.H.5. of the
preamble of this final rule, we received public comments requesting a
transition period for SCHs affected by implementation of the new OMB
delineations, similar to the 2-year transition period for affected
CAHs, as discussed in section VI.D.2. of the preamble of this final
rule, during which the CAH must reclassify as rural in order to retain
its CAH status after the 2-year transition period ends. We refer
readers to section III.H.5. of the preamble of this final rule for the
discussion of and responses to those public comments.
We also were asked to clarify the status of a CAH during the 2-year
transition period and its effect on SCHs.
Comment: One commenter requested that CMS clarify that a hospital's
SCH status would not be affected by a CAH that is now located in an
urban area as a result of a new OMB delineation while that CAH is in
its 2-year transition period to reclassify as rural.
Response: We are clarifying that during an affected CAH's 2-year
transition period, the facility will continue to be considered a CAH
and, therefore, would not fall under the definition of ``like
hospital'' at Sec. 412.92(c)(2). Therefore, an affected CAH will not
impact the status of an SCH during that CAH's 2-year transition period.
For purposes of determining whether an SCH is located near a CAH
affected by the most recent change in OMB delineations implemented in
this final rule effective October 1, 2014, we plan to post on the CMS
Web site, a list of the affected CAHs. We refer readers to section
VI.D.2. of the preamble of this final rule for a discussion related to
the CAH 2-year transition period.

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

1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new section 1886(q) to the
Act. Section 1886(q) of the Act establishes the ``Hospital Readmissions
Reduction Program,'' effective for discharges from an ``applicable
hospital'' beginning on or after October 1, 2012, under which payments
to those applicable hospitals may be reduced to account for certain
excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. In accordance with section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by a
hospital-specific adjustment factor that accounts for the hospital's
excess readmissions. Section 1886(q)(2) of the Act defines the base
operating DRG payment amount as ``the payment amount that would
otherwise be made under subsection (d) (determined without regard to
subsection (o) [the Hospital VBP Program]) for a discharge if this
subsection did not apply; reduced by . . . any portion of such payment
amount that is attributable to payments under paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d).'' Paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments,
IME payments, DSH adjustment payments, and add-on payments for low-
volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals, including policies for
SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53374), we finalized policies to implement the statutory
provisions related to the definition of ``base operating DRG payment
amount'' with respect to those hospitals.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as

[[Page 50025]]

equal to the greater of ``(i) the ratio described in subparagraph (B)
for the hospital for the applicable period (as defined in paragraph
(5)(D)) for such fiscal year; or (ii) the floor adjustment factor
specified in subparagraph (C).'' Section 1886(q)(3)(B) of the Act, in
turn, describes the ratio used to calculate the adjustment factor. It
states that the ratio is ``equal to 1 minus the ratio of--(i) the
aggregate payments for excess readmissions . . . and (ii) the aggregate
payments for all discharges. . . .'' Section 1886(q)(3)(C) of the Act
establishes the floor adjustment factor, which is set at 0.99 for FY
2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal
years.
Section 1886(q)(4) of the Act defines the terms ``aggregate
payments for excess readmissions'' and ``aggregate payments for all
discharges'' for an applicable hospital for the applicable period. The
term ``aggregate payments for excess readmissions'' is defined in
section 1886(q)(4)(A) of the Act as ``the sum, for applicable
conditions . . . of the product, for each applicable condition, of (i)
the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the excess readmissions ratio . . . for such hospital for such
applicable period minus 1.'' The ``excess readmissions ratio'' is a
hospital-specific ratio based on each applicable condition.
Specifically, section 1886(q)(4)(C) of the Act defines the excess
readmissions ratio as the ratio of actual-over-expected readmissions;
specifically, the ratio of ``risk-adjusted readmissions based on actual
readmissions'' for an applicable hospital for each applicable
condition, to the ``risk-adjusted expected readmissions'' for the
applicable hospital for the applicable condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition'' (which is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666)) is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) Readmissions .
. . represent conditions or procedures that are high volume or high
expenditures . . . and (ii) measures of such readmissions . . . have
been endorsed by the entity with a contract under section 1890(a) [of
the Act] . . . and such endorsed measures have exclusions for
readmissions that are unrelated to the prior discharge (such as a
planned readmission or transfer to another applicable hospital).''
Section 1886(q)(5)(B) of the Act also requires the Secretary, beginning
in FY 2015, ``to the extent practicable, [to] expand the applicable
conditions beyond the 3 conditions for which measures have been
endorsed . . . to the additional 4 conditions that have been identified
by the Medicare Payment Advisory Commission in its report to Congress
in June 2007 and to other conditions and procedures as determined
appropriate by the Secretary.''
Section 1886(q)(5)(C) of the Act defines ``applicable hospital,''
that is, a hospital subject to the Hospital Readmissions Reduction
Program, as a ``subsection (d) hospital or a hospital that is paid
under section 1814(b)(3) [of the Act], as the case may be.'' The term
``applicable period,'' as defined under section 1886(q)(5)(D) of the
Act, ``means, with respect to a fiscal year, such period as the
Secretary shall specify.'' As explained in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51671), the ``applicable period'' is the period
during which data are collected in order to calculate various ratios
and payment adjustments under the Hospital Readmissions Reduction
Program.
Section 1886(q)(6) of the Act sets forth the public reporting
requirements for hospital-specific readmission rates. Section
1886(q)(7) of the Act limits administrative and judicial review of
certain determinations made pursuant to section 1886(q) of the Act.
Finally, section 1886(q)(8) of the Act requires the Secretary to
collect data on readmission rates for all hospital inpatients (not just
Medicare patients) for a broad range of both subsection (d) and non-
subsection(d) hospitals, in order to calculate the hospital--specific
readmission rates for all such hospital inpatients and to publicly
report these ``all-patient'' readmission rates.
2. Regulatory Background
The payment adjustment factor set forth in section 1886(q) of the
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51660 through 51676), we addressed the issues of
the selection of readmission measures and the calculation of the excess
readmissions ratio, which will be used, in part, to calculate the
readmissions adjustment factor. Specifically, in that final rule, we
finalized policies that relate to the portions of section 1886(q) of
the Act that address the selection of and measures for the applicable
conditions, the definitions of ``readmission'' and ``applicable
period,'' and the methodology for calculating the excess readmissions
ratio. We also established policies with respect to measures for
readmission for the applicable conditions and our methodology for
calculating the excess readmissions ratio.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized policies that relate to the portions of section
1886(q) of the Act that address the calculation of the hospital
readmission payment adjustment factor and the process by which
hospitals can review and correct their data. Specifically, in that
final rule, we addressed the base operating DRG payment amount,
aggregate payments for excess readmissions and aggregate payments for
all discharges, the adjustment factor, applicable hospital, limitations
on review, and reporting of hospital-specific information, including
the process for hospitals to review readmission information and submit
corrections. We also established a new Subpart I under 42 CFR Part 412
(Sec. Sec. 412.150 through 412.154) to codify rules for implementing
the Hospital Readmissions Reduction Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through
50676), we finalized our policies that relate to refinement of the
readmissions measures and related methodology for the current
applicable conditions, expansion of the ``applicable conditions''
beginning for FY 2015, and clarification of the process for reporting
hospital--specific information, including the opportunity to review and
submit corrections. We also established policies related to the
calculation of the adjustment factor for FY 2014.
3. Overview of Policies for the FY 2015 Hospital Readmissions Reduction
Program
In this final rule, we are--
Making refinements to the readmissions measures and
related methodology for FY 2015 and subsequent years (section IV.H.4.
of the preamble of this final rule);
Expanding the scope of ``applicable conditions'' for FY
2017 to include coronary artery bypass graft (CABG) (section IV.H.6. of
the preamble of this final rule);
Discussing the maintenance of technical specifications for
quality measures (section IV.H.7. of the preamble of this final rule);
Describing a waiver from the Hospital Readmissions
Reduction Program for hospitals formerly paid

[[Page 50026]]

under section 1814(b)(3) of the Act (Sec. 412.154(d)) (section IV.H.8.
of the preamble of this final rule);
Specifying the adjustment factor floor for FY 2015
(section IV.H.9. of the preamble of this final rule);
Specifying the applicable period for FY 2015 (section
IV.H.10. of the preamble of this final rule);
Making changes to the calculation of the aggregate
payments for excess readmissions to include two additional readmissions
measures (chronic obstructive pulmonary disease (COPD) and THA/TKA))
(section IV.H.11. of the preamble of this final rule); and
Discussing whether to establish an exceptions process to
address hospitals with extraordinary circumstances (section IV.H.12. of
the preamble of this final rule).
4. Refinement of the Readmission Measures and Related Methodology for
FY 2015 and Subsequent Years Payment Determinations
We note that, during the comment period following the proposed
rule, we received comments that were not related to our specific
proposals and considered out of scope for the Hospital Readmissions
Reduction Program in the FY 2015 IPPS/LTCH PPS proposed rule. Some of
the out-of-scope comments were related to a wide range of aspects of
the Hospital Readmissions Reduction Program and its readmission
measures. For example, there were recommendations for statutory changes
to the program payment structure and previously finalized program
definitions, changes to the program goals, frequency of assessing and
reporting performance on measures, and changes to the 30-day window of
measuring readmissions. Notably, there were many comments on risk
adjustment for socioeconomic status (SES) at the patient- and hospital-
level. While we appreciate the commenters' feedback, these topics are
out of scope of this rule, and we will not be specifically addressing
them, with the exception of risk-adjustment for SES.
Among the out-of-scope topics, we are addressing the risk-
adjustment for SES because of the volume of comments and the importance
of this topic for outcome measures in payment programs. All other out-
of-scope topics not specifically addressed in this rule will be taken
into consideration when developing policies and program requirements
for future years.
Comment: Many of the commenters on CMS quality programs and those
specifically commenting on the Hospital Readmissions Reduction Program
expressed concern that these programs do not risk-adjust for SES. Many
commenters expressed concern that the lack of risk adjustment for SES
leads to the unintended consequences of unfair payment adjustments
which: (1) Disproportionately penalize hospitals serving high
proportions of low-SES patients; (2) penalize hospitals for patient
characteristics outside of their control; and (3) decrease financial
resources of the hospitals most likely to serve low-SES patients which
would lead to lower quality of care for these patients. Many commenters
outlined specific SES characteristics that are not adjusted for in the
current readmission measures, including Medicare dual-eligible status,
life circumstances, access to health care post-discharge, literacy,
education level, community factors, language, income, poverty level,
living conditions and support in the home (that is, post-discharge
support structure), complex medical histories, and having chronic
conditions.
One commenter noted that claims data cannot be used to identify
SES, making it difficult for the commenter to support the Hospital
Readmissions Reduction Program, which uses claims-based measures. Other
commenters believed that risk adjustment for SES ``levels the playing
field'' among all hospitals while still illuminating disparities.
Response: We appreciate the commenters' concerns and note that
these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule
(79 FR 50653 through 50654; 50673 through 50674). As described in prior
rulemaking, we do not currently risk-adjust for SES in the Hospital
Readmissions Reduction Program. However, we do risk-adjust for
comorbidities (that is, correlated illnesses) and other factors to
ensure that hospitals are not penalized for serving populations that
are sicker or have higher incidences of chronic disease.
We are aware that there are differing opinions regarding this
approach. We appreciate the commenters' suggestions on the importance
of addressing SES in the Hospital Readmissions Reduction Program. We
have continued to consider and evaluate stakeholder concerns regarding
the influence of patient SES status on readmission rates.
Comment: One commenter noted that the purpose of the Hospital
Readmissions Reduction Program is to transform the Medicare payment and
delivery system. Other commenters supported this belief and urged CMS
not to adjust the readmission measures for SES.
Response: We appreciate the feedback and support not to adjust the
readmissions measures for SES.
Comment: Some commenters urged that CMS not risk-adjust the
readmission measures with SES until it is proven that the program is
biased against low-SES hospitals. These commenters noted that the
Hospital Readmissions Reduction Program is designed to provide
incentives for changes that also enhance the quality of health care and
that the same care protocols that work with a different population of
patients who are not low-SES may also work with low-SES patients.
Response: We appreciate support of the Hospital Readmissions
Reduction Program's goal to encourage improved health care through this
program. Like the commenters, we continue to believe that the same care
protocols and processes that are successful in caring for nonlow-SES
patient populations may also be successful in caring for low-SES
patient populations.
Comment: Many commenters provided recommendations on how to risk-
adjust for SES and specifically recommended adopting the
recommendations of the draft report issued by NQF's Expert Panel on
Risk-Adjustment for Sociodemographic Factors (Draft Report available
at: https://www.qualityforum.org/Risk_Adjustment_SES.aspx). A few
commenters supported risk adjustment for SES as recently proposed in
two bills in the 113th Congress (S. 2501, ``The Hospital Readmissions
Program Accuracy and Accountability Act,'' and H.R.4188, the
``Establishing Beneficiary Equity in the Hospital Readmission Program
Act''). Both bills attempt to address the potential disproportionate
impact of payment penalties on hospitals that serve high proportions of
low-SES patients.
Response: We appreciate these comments and the importance of the
role that SES plays in the care of patients. We are aware that there
are differing opinions regarding our current approach in risk-adjusting
measures in the Hospital Readmissions Reduction Program for SES. We
note that the readmission measures aim to reveal differences related to
the quality of care provided. We believe that quality of care received
by patients of lower SES contributes at least in part to the observed
association between SES status and the readmissions rate. We continue
to have concerns about holding hospitals to different standards for the
outcomes of their patients of low SES--we do not want to mask potential
disparities or minimize incentives to

[[Page 50027]]

improve the outcomes of disadvantaged populations.
We routinely monitor the impact of SES on hospitals' results. To
date, we have found that hospitals that care for large proportions of
patients of low SES are capable of performing well on our measures (we
refer readers to the 2013 Medicare Hospital Quality Chart Book on pages
46 through 53 at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf). Previous analyses
presented at the NQF during endorsement proceedings of the Hospital-
Wide All-Cause Unplanned Readmission Measure (available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70813) also show that adding SES
to the risk-adjustment has a negligible impact on hospitals' risk-
standardized rates. The risk adjustment for clinical factors likely
captures much of the variation due to SES, therefore resulting in an
attenuation of the impact of SES factors on hospitals' results.
We continue to monitor related activities at NQF, such as the July
23, 2014 decision by the NQF Board in which the Board approved a trial
period to test the impact of sociodemographic factor risk adjustment of
performance measures (available at: https://www.qualityforum.org/Press_Release/2014/NQF_Board_Approves_Trial_Risk_Adjustment.aspx), and
in Congress. As we stated in the past, we are committed to working with
the NQF and other stakeholder communities to continuously refine our
measures and to address the concerns associated with SES and risk
adjustment. We believe that continued collaboration with the
stakeholder communities will enable us to identify feasible ways to
appropriately address any unintended consequences for providers serving
high proportions of low-SES patients.
Comment: Many commenters provided recommendations on how to risk-
adjust for SES and specifically referenced MedPAC's recommendation to
use ``peer group stratification,'' that is, stratifying hospitals by
the hospital's proportion of low-SES patients, as a method to correlate
readmission rates and penalties with patient income. These commenters
also recognized that this new method would require legislative changes
because the current payment adjustment formula used to compute the
readmission penalty is set in law.
Response: We appreciate the suggestion for risk-adjustment by
``peer group stratification'' as a method to address SES. We will take
MedPAC's recommendations into consideration for the Hospital
Readmissions Reduction Program, but also note that MedPAC recognizes
that statutory changes would be required for us to adopt this
recommendation because the current payment adjustment formula used to
compute the readmission penalty is established by statute.
Comment: A few commenters supported the use of an unplanned
hospital-wide readmission measure (some of these commenters
specifically asked CMS to consider adding the Hospital-Wide All-Cause
Readmission Measure (NQF 1789)) as this type of measure would
capture a global perspective on hospital performance and urged CMS to
consider these measures instead of CABG.
Response: We thank the commenters for this input and will continue
to take the recommendation into consideration, as we stated previously
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50658). We developed the
Hospital-Wide All-Cause Readmission Measure (NQF 1789) (HWR
measure) that has been implemented in the Hospital IQR Program. The HWR
measure estimates the hospital-level, risk-standardized rate of all-
cause, unplanned readmission within 30 days of hospital discharge with
any eligible condition. The measure reports a single composite risk-
standardized readmission rate (RSRR), derived from the volume-weighted
results of five different models, one for each of the following
specialty cohorts (groups of related discharge condition categories or
procedure categories): surgery/gynecology; general medicine;
cardiorespiratory; cardiovascular; and neurology.
While we appreciate the commenters' recommendations to consider
this measure for the Hospital Readmissions Reduction Program, we
believe that section 1886(q)(5)(A) of the Act (defining ``applicable
condition'') prohibits us from adopting the many categories of
diagnoses and procedures comprising the HWR measure as a single
``condition.'' Based on the limitations of the current statutory
provisions for the Hospital Readmissions Reduction Program, we have not
implemented the HWR measure in the Hospital Readmissions Reduction
Program.
Comment: One commenter opposed the addition of the 30-day Ischemic
stroke readmission measure in the Hospital Readmissions Reduction
Program because it is not risk-adjusted using the National Institutes
Stroke Severity Scale.
Response: We thank the commenter for this feedback and note that we
did not propose this measure for the Hospital Readmissions Reduction
Program. We note that, in the FY 2014 IPPS/LTCH PPS final rule, we
discussed this issue with respect to the Hospital IQR Program (79 FR
50801). At that time we stated that we appreciated the concerns of the
stakeholders on this issue. We also stated that not only are we
committed to working with the stakeholder communities and to
continuously refine our measures, which for the stroke outcome measures
includes risk-adjusted patient severity, but also committed to working
with the stroke communities and other stakeholders to seek feasible
ways to incorporate additional severity adjustment as suggested.
Finally, we highlighted that stroke is the fifth leading cause of adult
mortality in the United States, and therefore we believe it would be a
disservice to patients to delay inclusion of these current stroke
outcome measures in quality reporting and quality improvement
initiatives. We are committed to making these measures better and
working with stakeholders to do so, and will take these comments into
consideration.
Comment: A few commenters noted that heart failure readmission
rates are inversely related to heart failure mortality rates.
Response: We appreciate the commenters' concerns and note that this
issue was addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50650).
Comment: A few commenters recommended that the Hospital
Readmissions Reduction Program be improved by excluding admissions that
are part of the natural disease or treatment progression, in order to
fairly assess hospitals and avoid unintended consequences for patients
and their families. One commenter specifically highlighted readmissions
due to ongoing care for patients suffering traumatic injury and
requiring staged operative therapies should also be excluded.
Response: We appreciate these suggestions and agree that admissions
that are part of planned management to address disease progression
should not be counted in the outcome. We identify and do not count in
the measure results and the readmission outcomes those admissions that
are planned readmissions for ongoing care management. For example,
ongoing treatments such as maintenance chemotherapy for cancer or
cardiac device placement for cardiovascular disease patients are
excluded from the

[[Page 50028]]

calculation of the measure result for readmission rates.
Comment: Many commenters requested that CMS be more transparent and
collaborative in its approach to all measures in the Hospital
Readmissions Reduction Program.
Response: We appreciate this feedback regarding our proposed
changes to the planned readmission algorithm and the proposed
refinements to the measure cohort in the Elective Primary Total Hip
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) All-Cause
Unplanned 30-Day Risk-Standardized Readmission Measure. We strive to
collaborate with stakeholders, as well as be transparent about the
direction of the Hospital Readmissions Reduction Program and the
measures proposed for the program. We previously discussed in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50657 through 50658) that we use
multiple methods to communicate with stakeholders; for example, through
press releases, open door forums, as well as through the Federal
rulemaking process. We also post all measure methodology documents
online for broad public access at our Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
In addition, during measure development, we seek public comments on
various stages of development, and also have the measures undergo the
NQF's endorsement processes and measure maintenance reviews. We also
adhere to the Affordable Care Act's provision that requires all
measures that will be proposed in future rulemaking be reviewed by
NQF's MAP as part of the pre-rulemaking process. All of these processes
are open to the public for comment. While we believe all of these
processes help to inform the public of our plans for and decisions
regarding the Hospital Readmissions Reduction Program, we will strive
to collaborate with all of our stakeholders to identify more effective
ways of communicating our plans and decisions.
a. Refinement of Planned Readmission Algorithm for Acute Myocardial
Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic
Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and
Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50651 through
50655), we finalized for 2014 and subsequent years' payment
determinations the use of the CMS Planned Readmission Algorithm Version
2.1 in the AMI, HF, PN, COPD, and THA/TKA readmission measures. The
algorithm identifies readmissions that are planned and occur within 30
days of discharge from the hospital. A complete description of the CMS
Planned Readmission Algorithm Version 2.1, which includes lists of
planned diagnoses and procedures, can be found on our Web site
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
NQF has endorsed the use of the algorithm for these measures.
Last year's stakeholder comments supported the incorporation of the
CMS Planned Readmission Algorithm Version 2.1 and suggested that we
update it on a regular basis. In the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50652), we agreed to continually review the CMS Planned
Readmission Algorithm and make updates as needed. In the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28106 through 28108) we proposed to use a
revised version, the CMS Planned Readmission Algorithm Version 3.0, for
the AMI, HF, PN, COPD, and THA/TKA readmission measures for FY 2015 and
subsequent payment determinations. We also proposed to use this
algorithm for the CABG readmission measure proposed for inclusion in
the Hospital Readmissions Reduction Program starting in FY 2017.
Version 3.0 incorporates improvements that were made based on a
validation study of the algorithm. Researchers reviewed 634 patients'
charts at 7 hospitals, classified readmission as planned or unplanned
based on the chart review, and compared the results to the claims-based
algorithm's classification of the readmissions. The findings suggested
the algorithm was working well but could be refined.
Specifically, the study suggested the need to make small changes to
the tables of procedures and conditions used in the algorithm to
classify readmission as planned or unplanned. The algorithm uses the
Agency for Healthcare Research and Quality's (AHRQ's) Clinical
Classification Software (CCS) to group thousands of procedure and
diagnosis codes into fewer categories of related procedures or
diagnoses. The algorithm then uses four tables of procedures and
diagnoses categories and a flow diagram to classify tables as planned
or unplanned. For all measures, the first table lists procedures that,
if present in a readmission, classify the readmission as planned. The
second table identifies primary discharge diagnoses that always
classify readmissions as planned. Because almost all planned admissions
are for procedures or surgeries, a third table identifies procedures
for which patients are typically admitted; if any of these procedures
are coded in the readmission, we classify a readmission as planned as
long as that readmission does not have an acute (unplanned) primary
discharge diagnosis. The fourth table lists the acute (unplanned)
primary discharge diagnoses that disqualify readmissions that include
one or more of the potentially planned procedure in the third table as
planned. These tables are structured the same across all measures but
the specific procedure and conditions they contain vary slightly for
certain measures based on clinical considerations for each cohort. The
final proposed tables for each measure can be found on our Web site
under the Measure Methodology reports (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
Version 3.0 modifies two of these tables by removing or adding
procedures or conditions to improve the accuracy of the algorithm.
First, a validation study revealed that the algorithm could be improved
by removing two procedure CCS categories from the third table, the
potentially planned procedure table: CCS 211--Therapeutic Radiation and
CCS 224--Cancer Chemotherapy. Typically, patients do not require
admission for scheduled Therapeutic Radiation treatments (CCS 211). The
study found that readmissions that were classified as planned because
they included Therapeutic Radiation were largely unplanned.
The algorithm was also more accurate when CCS 224--Cancer
Chemotherapy was removed from the potentially planned procedure table.
The second table of the algorithm classifies all readmissions with a
principal diagnosis of Maintenance Chemotherapy as planned. Most
patients who receive cancer chemotherapy have both a code for Cancer
Chemotherapy (CCS 224) and a principal discharge diagnosis of
Maintenance Chemotherapy (CCS 45). In the validation study, the
readmissions for patients who received Cancer Chemotherapy (CCS 224)
but who did not have a principal diagnosis of Maintenance Chemotherapy
were largely unplanned; therefore, removing CCS 224 from the
potentially planned procedure table improved the algorithm's accuracy.
Therefore, Version 3.0 removes CCS 211 and CCS 224 from the list of
potentially planned

[[Page 50029]]

procedures to improve the accuracy of the algorithm.
As noted above, the algorithm uses a table of acute principal
discharge diagnoses to help identify unplanned readmissions.
Readmissions that have a principal diagnosis listed in the table are
classified as unplanned, regardless of whether they include a procedure
in the potentially planned procedure table. The validation study
identified one diagnosis CCS that should be added to the table of acute
diagnoses to more accurately identify truly unplanned admissions as
unplanned: Hypertension with Complications (CCS 99). Hypertension with
Complications is a diagnosis that is rarely associated with planned
readmissions.
In addition, the validation study identified a subset of ICD-9-CM
diagnosis codes within two CCS diagnosis categories that should be
added to the acute diagnosis table to improve the algorithm. CCS 149,
Pancreatic Disorders, includes the code for acute pancreatitis;
clinically, there is no situation in which a patient with this acute
condition would be admitted for a planned procedure. Therefore, Version
3.0 adds the ICD-9-CM code for acute pancreatitis, 577.0, to the acute
primary diagnosis table to better identify unplanned readmissions.
Finally, CCS 149, Biliary Tract Disease, is a mix of acute and nonacute
diagnoses. Adding the subset of ICD-9-CM codes within this CCS group
that are for acute diagnoses to the list of acute conditions improves
the accuracy of the algorithm for these acute conditions while still
ensuring that readmissions for planned procedures, like
cholecystectomies, are counted accurately as planned. For more detailed
information on how the algorithm is structured and the use of tables to
identify planned procedures and diagnoses, we refer readers to
discussion of the CMS Planned Readmission Algorithm Version 2.1 in our
reports (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). As noted above, readers can find the specific
Version 3.0 tables for each measure in the measure updates and
specifications reports at the above link.
We invited public comment on these proposals.
Comment: Several commenters specifically supported all of the
proposed modifications to the planned readmissions algorithm. Some
commenters supported the use of the algorithm in general and others
specifically supported the inclusion of the algorithm in the Hospital-
Level 30-Day Readmission Following Admission for an Acute Exacerbation
of Chronic Obstructive Pulmonary Disease.
Response: We appreciate the support for the inclusion of the
planned readmission algorithm in the Hospital Readmissions Reductions
Program measures.
Comment: Several commenters support the periodic update to the
Hospital Readmissions Reduction Program's planned readmission algorithm
to ensure its lists of inclusions and exclusions are accurate.
Response: We appreciate the comment and, as discussed in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28106), we have revised the
planned readmission algorithm based on a validation study conducted at
7 hospitals. During the revision of the algorithm, we also collaborated
with technical and medical experts.
Comment: Several commenters commended CMS for including the planned
readmission algorithm updates in the FY 2015 IPPS/LTCH PPS proposed
rule updates specifically related to the proposed exclusions. They also
suggested CMS exclude unrelated readmissions.
Response: We appreciate the commenters' support and the support to
remove the two procedure Clinical Classification Software (CCS)
categories of Therapeutic Radiation (CCS 211) and Cancer Chemotherapy
(CCS 224) as we strive to be transparent with the stakeholders. We note
that we addressed the concern for exclusion of unrelated readmissions
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50654). We indicated
last year that unrelated readmissions are addressed through the planned
readmission algorithm and, in coordination with medical experts, we
expanded the list of conditions considered planned. Generally, planned
readmissions are not a signal of quality of care. Therefore, we have
worked with experts in the medical community, as well as other
stakeholders, to carefully identify procedures and treatments that
should be considered ``planned'' and, therefore, not counted as
readmissions.
Comment: Several commenters were concerned with the exclusion of
two cancer related Clinical Classification Software (CCS) groups. Some
commenters were specifically concerned that removal of Clinical
Classification Software (CCS) groups CCS 211--Therapeutic Radiation and
CCS 224--Cancer Chemotherapy from the potentially planned procedure
table of the planned readmission algorithm will have the unintended
consequences of discouraging needed cancer care. These commenters
requested that CMS therefore initiate an ad hoc review of this change.
One commenter was unconvinced that the validation study findings for
Maintenance Chemotherapy holds true for all hospitals and therefore
hospitals that deliver a large amount of cancer services could be
affected by this change.
Response: We note that removal of CCS 211 would be appropriate
because patients are not typically admitted for therapeutic radiation,
and admissions with this treatment were noted in general to be
unplanned. In addition, we removed CCS 224 because the validation study
showed admissions for individuals who receive cancer chemotherapy but
do not have a principal diagnosis of maintenance chemotherapy are
typically unplanned admissions. All admissions for patients with a
principal diagnosis of Maintenance Chemotherapy (that is, CCS 45) will
continue to be considered planned and will not be counted in the
measure outcome. Therefore, we expect removal of CCS 211 and CCS 224 to
improve the accuracy of the planned readmission algorithm and do not
anticipate it will have the unintended consequence of discouraging
needed cancer care. We appreciate the concern that the validation study
findings may not apply to all hospitals and will consider further
evaluation of this concern.
Comment: One commenter noted that he/she was aware of the
methodologies that separate preventable versus nonpreventable
readmissions while measures in the Hospital Readmissions Reduction
Program continue to penalize hospitals for circumstances outside of
their control. The commenter asserted that ``well researched and
documented methodologies'' exist to separate potentially preventable
versus nonpreventable readmissions.
Response: We note that it is difficult, and can be subjective, to
categorize a readmission as preventable or unpreventable. The
difficulty, and risk for being subjective, occurs because a readmission
cannot be determined as being preventable or unpreventable based on the
reason or diagnoses for the admission alone. For this reason, we have
not chosen to categorize readmissions as preventable or unpreventable,
but rather planned or unplanned. The planned readmission algorithm
identifies those diagnoses codes, identified by medical experts in
multiple specialties, as those frequently and most likely to be
associated with planned reasons for a readmission. By categorizing
readmissions as planned, we are trying to remove the subjective

[[Page 50030]]

nature of deeming readmissions as preventable or unpreventable.
Finally, we are not aware of any publicly known NQF-approved
methodology for identifying preventable versus unpreventable
readmissions. The goal of the Hospital Readmissions Reduction Program
is to lower the risk of all types of admissions through the most
appropriate care and care transitions. We believe this goal can best be
achieved through measuring and reporting a risk-standardized metric of
excess readmissions that reflects how well hospitals are doing in
decreasing unplanned readmissions relative to hospitals with similar
patients.
Comment: One commenter believed that CMS' measures would benefit
from refinement, including exclusion of planned readmissions and
unrelated readmissions. Other commenters were disappointed that CMS did
not propose a process for excluding readmissions unrelated to the
initial reason for admission in calculating the measures, which they
characterize as being mandated by the Affordable Care Act. Several
commenters continued to urge CMS to exclude from the Hospital
Readmissions Reduction Program admissions unrelated to the prior
hospital stay, including, for example, admissions for chemotherapy,
trauma, burns, end-stage renal disease, maternity, and substance abuse,
because, the commenters stated, by their nature, they are not
preventable readmissions.
Response: We note that we have been responsive to stakeholder
suggestions to not include planned readmissions in the calculations, as
discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50654), and as
evidenced by multiple versions of the planned readmission algorithm
since 2012. As with other aspects of any measure, we continue to review
and revise the area of unrelated readmissions through our refinement of
the planned readmissions algorithm. Regarding other types of unrelated
readmissions, we currently do not seek to differentiate between related
and unrelated readmissions because readmissions not directly related to
the index condition may still be a result of the care received during
the index hospitalization. For example, a patient hospitalized for COPD
who develops a hospital associated infection may ultimately be
readmitted for sepsis. It would be inappropriate to treat this
readmission as unrelated to the care the patient received during the
index hospitalization.
Furthermore, the range of potentially avoidable readmissions also
includes those not directly related to the initial hospitalization,
such as those resulting from poor communication at discharge or
inadequate follow-up. Therefore, we believe that creating a
comprehensive list of potential complications related to the index
hospitalization would be arbitrary, incomplete, and, ultimately,
extremely difficult to implement. However, in coordination with medical
experts, we created a planned readmission algorithm to determine which
conditions and therefore, readmissions, that are generally considered
planned. Generally, planned readmissions are not indicative of an
inferior quality of care, therefore are not counted as readmissions.
Regarding the suggestion to remove ``extreme circumstances [such
as] chemotherapy, trauma, burns, end stage renal disease, maternity,
and substance abuse because, by their nature, they are not preventable
readmissions,'' we addressed this comment in the FY 2013 IPPS/LTCH PPS
final rule. In that rule and the current rulemaking, the commenters
requested that circumstances like those listed in the above comment be
excluded from the index hospitalizations. In FY 2013 IPPS/LTCH PPS
final rule, (77 FR 53377), we stated that ``we appreciate the concern
expressed by some commenters that patients of these `extreme
circumstances' clinically could be sicker and more likely to be
readmitted. The measures address clinical differences in hospitals'
case-mix through risk adjustment rather than through excluding patients
from the measure as suggested by the commenter. The goal in developing
outcomes measures is to create a clinically cohesive cohort that
includes as many patients as possible admitted with the given
condition. Greatly expanding our list of exclusions would result in a
measure that was less useful and meaningful because it would reflect
the care of fewer patients. In addition, we believe that, by excluding
patients with significant comorbidities, the measure would not assess
of the quality of care for those patients. To fairly profile hospitals'
performance, it is critical to place hospitals on a level playing field
and account for their differences in the patients that present for
care. This is accomplished through adequate risk-adjustment for
patients' clinical presentation rather than exclusion of patients.''
Comment: One commenter urged CMS to work with the physician and
hospital communities to identify other planned readmissions that should
be excluded.
Response: We will continue to involve all stakeholders in the
process of measure development and measure maintenance. We also
collaborate with various medical specialty societies and associations
whenever feasible and appropriate to ensure that their input and
feedback are considered in real-time during measure development and
maintenance, which also include input from expert panels, and public
comment periods. We will consider the comment in future revisions to
the algorithm.
Comment: Many commenters believe that CMS should have had the
proposed Planned Readmission Algorithm Version 3.0 changes reviewed by
NQF before finalizing and using in the readmission measures. One
commenter believed the changes to be substantive and did not support
adopting changes for measures to incorporate the Planned Readmission
Algorithm Version 3.0 until the revised measures have been recommended
by the MAP. One commenter stated that the size of the validation study
for the Planned Readmission Algorithm Version 3.0 was limited, and
making recommendations based on this information, without external
review from NQF, could create unintended consequences.
Response: We note that the NQF has reviewed the Planned Readmission
Algorithm Version 3.0 multiple times over the past 6 to 8 months as it
was submitted for review as part of the NQF's annual measure
maintenance review for re-endorsement of the Hospital-Level 30-Day
Readmission Following Admission for Heart Failure, Pneumonia, Chronic
Obstruction Pulmonary Disease, and Total Hip Arthroplasty/Total Knee
Arthroplasty measures. As of July 2014, all of these measures are still
under review by NQF. NQF also reviewed the Planned Readmission
Algorithm Version 3.0 with the Coronary Artery Bypass Surgery
readmission measure during its endorsement proceedings of this measure,
which led to the measure being recommended for endorsement. We will
consider the comment in future revisions to the algorithm.
Comment: Several commenters requested that CMS clarify what is a
``related'' readmission or a ``planned'' readmission, while others
noted the measures fail to distinguish between a planned and unplanned
readmission. Other commenters expressed appreciation for the proposed
exclusions for certain readmissions, but requested exclusion of
unrelated readmissions.
Response: We note that the issue of excluding unrelated
readmissions from the Hospital Readmissions Reduction Program was
addressed in FY 2014 IPPS/LTCH PPS final rule (78 FR 50654 through
50655). Regarding clarification

[[Page 50031]]

of what is a planned readmission, we refer readers to the technical
reports for each measure that define specifically how planned
readmissions are defined for the measure. The technical reports can be
found in the planned readmission algorithm at the following Web site:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Finally, we
continue to review and revise our algorithm for planned readmissions to
improve its accuracy.
Comment: One commenter emphasized the need to continuously improve
and evaluate the accuracy of a signal provided by a specific
readmission measure.
Response: We thank the commenter for this feedback. We believe that
unplanned readmissions, in general, are a signal of the quality of care
that hospitals provide to their patients. The commenter is concerned
with the accuracy of the readmission measures; we note that these
measures have been NQF-endorsed and widely vetted by technical experts
during measure development and annual measure maintenance. We will
continue to monitor and update the measures to ensure their accuracy.
Comment: Some commenters recommended that CMS create a system to
monitor unintended consequences related to planned readmissions and
implement an audit function that will accurately account for true
planned readmissions.
Response: We note that we have been concerned about the unintended
consequence of hospitals' increased use of observation stays and
emergency department visits to avoid counting a patient as having been
readmitted, and we are tracking these incidences in the Medicare
Hospital Quality Chartbook available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf. Regarding the recommendation to create an audit function that
will accurately account for ``true planned readmissions,'' we
understand this to mean that the commenter is concerned about the
validity of the planned readmission algorithm. We note that, during
development and maintenance of the planned readmission algorithm, there
have been several iterations of the algorithm as a result of review by
medical experts and other stakeholders like the NQF. We believe that
the constant review and update of the algorithm by medical experts and
other stakeholders provide a planned readmissions algorithm that
accurately identifies truly planned readmissions.
After consideration of the public comments we received, we are
finalizing our proposal to update the planned readmission algorithm. We
believe the updated Planned Readmission Algorithm Version 3.0 continues
to fulfill statutory requirements to remove planned readmissions, as
well as addresses stakeholder recommendations to continually refine and
adjust the algorithm.
b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty
(THA/TKA) 30-Day Readmission Measure Cohort
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28107), for FY
2015 and subsequent years, we proposed to refine the measure cohort for
the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee
Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-Standardized
Readmission Measure.
Currently, the THA/TKA Readmission Measure adopted for the Hospital
Readmissions Reduction Program is intended to only include patients who
have an elective THA or TKA. Therefore, this measure excludes patients
who have a principal discharge diagnosis of femur, hip, or pelvic
fracture on their index admission because hip replacement for hip
fracture is not an elective procedure. However, after hospitals
reviewed their hospital-specific THA/TKA Readmission Measure data
during the national dry run conducted during September and October
2012, we learned that hospitals code hip fractures that occur during
the same admission as a THA as either a principal or secondary
diagnosis. According to feedback received from hospitals participating
in the dry run, the measure methodology failed to identify and
therefore appropriately exclude a small number of patients (that is,
0.42 percent of patients in 2009-2010 data) with hip fracture who had
nonelective total hip arthroplasty.
To ensure that all such hip fracture patients are excluded from the
measure, we proposed to refine the measure to exclude patients with hip
fracture coded as either principal or secondary diagnosis during the
index admission. We believe this refinement is responsive to comments
from hospitals and will allow us to accurately exclude patients who
were initially admitted for a hip fracture and then underwent total hip
arthroplasty, making their procedure nonelective.
Comment: Several commenters supported the refinements to the Total
Hip Arthroplasty and Total Knee Arthroplasty 30-day readmission cohort.
Response: We appreciate support of these refinements to this
measure cohort.
Comment: Several commenters acknowledged that the change to the
THA/TKA measure is likely appropriate, but recommended that CMS submit
the proposal to NQF in an ad hoc review of updates to the planned
readmission algorithm and this measure cohort, before finalizing this
proposal.
Response: We appreciate this feedback, especially acknowledgement
that the change to the THA/TKA measure is likely to be appropriate. We
appreciate the suggestion for an ad hoc NQF review of this change to
the THA/TKA measure cohort. We also understand the importance of
seeking broad stakeholder review during routine measure maintenance and
note that this measure was submitted to NQF for annual maintenance
review in June 2014. We note that the proposed changes to the cohort
were the result of feedback from hospitals that had participated in the
dry run of this measure and noted that the prior measure methodology
failed to identify, and therefore appropriately exclude, a small number
of patients (that, is 0.42 percent of patients in the 2009-2010 data)
with hip fracture who had nonelective total hip arthroplasty. The
recommendations resulting from the hospitals participating in the dry
run were also reviewed by a group of medical experts working with our
measure developer.
Notwithstanding this expert medical opinion, we realize that
broader stakeholder review is necessary as we continue to strive for
transparency with management of the Hospital Readmissions Reduction
Program. We will work towards improving and broadening stakeholder
review of measure updates; we will take this recommendation under
consideration.
Comment: One commenter encouraged CMS to continue to work with
appropriate clinicians and stakeholder groups (for example, the
American Association of Hip and Knee Surgeons and the American Academy
of Orthopaedic Surgeons) to identify planned readmissions that may
occur within 30 days of discharge from the hospital that are unrelated
to the quality of care received during the initial admission.
Response: We continually work towards improving and broadening
stakeholder review of measure updates.

[[Page 50032]]

Comment: One commenter encouraged CMS to work with the Yale-New
Haven Hospital Health Services Corporation, Center for Outcomes
Research and Evaluation (YNHHSC/CORE) to determine the most appropriate
method for excluding or risk-adjusting for cases that involve
conversion of previous hip surgery to total hip arthroplasty
(represented by CPT code 27132).
Response: We note that the commenter's concerns focused on having
us revise our Elective Primary Total Hip Arthroplasty (THA) and/or
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure to exclude additional specific groups
of patients with prior hip surgeries that place them at a significantly
increased risk of complications, including revision procedures and
those requiring removal of implanted devices from the femur (ICD-9-CM
codes 78.65). We will continue to work closely with the YNHHSC/CORE to
determine the most appropriate method for exclusions or risk-adjustment
for these cases \24\ for this measure.
---------------------------------------------------------------------------

\24\ Suter L.G., Parzynski C.S., Searfoss R., Dorsey K.B., Grady
J.N., Keenan M., Okai M., Nwosu M., Ngo C., Lin Z., Bhat K.R.,
Krumholz H.M., Bernheim S.M. 2014 Procedure-Specific Readmission
Measures Updates and Specifications Report: Report prepared for the
Centers for Medicare & Medicaid Services. 2014.
---------------------------------------------------------------------------

After consideration of the public comments we received, we are
finalizing our proposal to the refinements to the THA/TKA readmission
measure cohort.
c. Anticipated Effect of Proposed Refinements on Measures
The proposed refinement of the CMS Planned Readmission Algorithm
Version 2.1 to Version 3.0 would have had the following effects on the
measures based on our analyses of discharges between July 2009 and June
2012, if these changes had been applied for FY 2014. We note that these
statistics are for illustrative purposes only, and we did not propose
to revise the measure calculations for the FY 2014 payment
determination. Rather, we proposed to apply these changes to the
readmission measures for the FY 2015 payment determination and
subsequent years.
Among hospitals that were subject to the Hospital Readmissions
Reduction Program in FY 2014 (Table IV.H.1), the number of eligible
discharges based on the July 2009 through June 2012 data were 494,121
discharges for AMI; 1,165,606 discharges for HF; 954,033 discharges for
PN; 926,433 discharges for COPD; and 858,266 discharges for hip/knee
(as shown in Table IV.H.1. below).
The proposed 30-day readmission rate (excluding the planned
readmissions) would remain constant for AMI and COPD; increase by 0.1
percentage points for HF and PN; and increase by 0.4 percentage points
for hip/knee.
The new national readmission (unplanned) rate for each condition
would have been 17.9 percent for AMI; 23.0 percent for HF; 17.7 percent
for PN; 21.1 percent for COPD; and 5.27 percent for hip/knee.
The number of readmissions considered planned (and, therefore, not
counted as a readmission) would decrease by 319 for AMI; 1,313 for HF;
866 for PN, 547 for COPD; and 298 for hip/knee.
The proposed modification of the hip/knee measure cohort would have
had the following effects on the measure: The measure cohort would have
been reduced by 0.37 percent; the crude readmission rate would have
been reduced by 0.02 absolute percentage points; and the mean RSRR
would have been reduced by 0.03 absolute percentage points.

Table IV.H.1.--Comparison of Planned Readmission Algorithms V 2.1 and 3.0 for AMI/HF/PN/COPD/THA/TKA Readmission Measures
[Based on 2009-2012 discharges from 3025 hospitals]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMI HF PN COPD THA/TKA
---------------------------------------------------------------------------------------------------------------------------------
V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1 V 3.0 V 2.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Discharges.......................................... 494,121 494,121 1,165,606 1,165,606 954,033 954,033 926,433 926,433 858,266 858,266
Number of Unplanned Readmissions.............................. 88,567 88,248 268,072 266,759 169,213 168,347 195,595 195,048 45,205 44,907
Readmission Rate.............................................. 17.9% 17.9% 23.0% 22.9% 17.7% 17.6% 21.1% 21.1% 5.27% 5.23%
Number of Planned Readmissions................................ 11,577 11,896 15,293 16,606 5,867 6,733 5,858 6,405 2,283 2,581
Planned Readmission Rate...................................... 2.3% 2.4% 1.3% 1.4% 0.6% 0.7% 0.6% 0.7% 0.3% 0.3%
% of Readmissions that are Planned............................ 11.6% 11.9% 5.4% 5.9% 3.4% 3.8% 2.9% 3.2% 4.8% 5.4%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. No Expansion of the Applicable Conditions for FY 2016
In FY 2014 IPPS/LTCH PPS final rule, we finalized for FY 2015 two
new condition specific readmission measures: (1) Hospital-level 30-day
all-cause risk-standardized readmission rate following elective total
hip arthroplasty (THA) and total knee arthroplasty (TKA) (NQF
1551); and (2) Hospital-level 30-day all-cause risk-
standardized readmission rate following chronic obstructive pulmonary
disease (COPD) (NQF 1891). This brought the total number of
finalized applicable conditions to five over the past 2 years of
implementation. We also noted in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50657) that commenters requested that we delay adding other
condition-specific measures. In view of these requests and our belief
that it is reasonable to allow more time for hospitals to become
familiar with these five applicable conditions before adding other
applicable conditions in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28108), we did not propose any new applicable conditions for FY 2016.
Comment: Several commenters encouraged CMS to strengthen the
Hospital Readmissions Reduction Program through the inclusion of new

[[Page 50033]]

measures for FY 2016 and FY 2017 so that momentum of recent successes
in the reduction of readmission rates is not lost. Other commenters not
only supported CMS' decision not to expand measures in FY 2016 for the
Hospital Readmissions Program, but also recommended that CMS delay
expanding the program in FY 2017.
Response: We agree that it is important for the nation's hospitals
to continue to be successful in the reduction of readmission rates and
to utilize this momentum to implement other condition specific
readmission measures. However, we noticed over the past 2 years a
persistent dichotomy in stakeholder recommendations where some
recommended expansion of the program with new measures each fiscal year
and others recommended not expanding the program in FY 2016 and FY
2017.
In response to last year's proposed rule (78 FR 50657),
stakeholders requested that they be given time to become familiar with
the measures and the program. For this reason, we did not propose
expanding the program in FY 2016. However, we proposed to expand the
program in FY 2017 with the Hospital-Level, 30-Day, All-Cause,
Unplanned Readmission Following Coronary Artery Bypass Graft (CABG)
Surgery measure. We will continue to review condition-specific
readmission rate performance gaps in conjunction with our Quality
Improvement Strategy (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html) and the
availability of robust risk-adjusted readmission measures. As we
indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657), we
will continue to ensure that hospitals are aware of future proposed
program expansion through press releases, open door forums, as well as
through the Federal rulemaking process. We also continue to strive to
ensure our measure selection process for the Hospital Readmissions
Reduction Program is transparent and allows the public several
opportunities to comment on measures being selected for the Hospital
Readmissions Reduction Program.
Comment: Several commenters suggested expanding the Hospital
Readmissions Reduction Program by adding the Society of Thoracic
Surgeons' (STS) Risk-Adjusted Coronary Artery Bypass Graft (CABG)
Readmission Rate measure (NQF 2514) in conjunction with CMS'
Hospital 30-DayDay, All-Cause, Unplanned, Risk-Standardized Readmission
Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery
measure (NQF 2515). These commenters believed that having the
STS registry-based measure in addition to CMS' claims-based measure
would help providers and patients fully understand CABG care. Others
commenters not only recommended including the Hospital 30-Day Risk--
Standardized Readmission Rates following Percutaneous Coronary
Intervention (PCI) measure (NQF 0695), believing it would
drive improvements in quality and patient outcomes while simultaneously
realizing significant cost savings for Medicare, but also implementing
the Hospital 30-Day Risk-Standardized Readmission Rates following
Percutaneous Coronary Intervention (PCI) measure (NQF 0695) no
later than FY 2017.
Response: We note that both the STS and the CMS Coronary Artery
Bypass Graft (CABG) Readmission measures (NQF 2514 and 2515
respectively) were both recommended for endorsement by NQF in May 2014,
and a final decision on the endorsement status will be forthcoming in
the third quarter of 2014. We note that both measures are fully
harmonized, despite using different data sources. The STS' Risk-
Adjusted Coronary Artery Bypass Graft (CABG) Readmission Rate measure
(NQF 2514) uses the STS National Database, while CMS' Hospital
30-DayDay, All-Cause, Unplanned, Risk-Standardized Readmission Rate
(RSRR) following Coronary Artery Bypass Graft (CABG) Surgery measure
(NQF 2515) uses administrative claims. We believe having two
measures that are fully harmonized using two different data sources
provides the greatest flexibility for stakeholders to identify which
measure best fits their current capabilities for data collection and
submission.
We also note that we believe the use of the administrative claims-
based measure would be less burdensome for participating hospitals in
the Hospital Readmissions Reduction Program. Regarding the
recommendation to expand the program in FY 2017 with the Hospital 30-
Day Risk-Standardized Readmission Rates following Percutaneous Coronary
Intervention (PCI) measure (NQF 0695), we note that this issue
was addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50657). We
stated that the addition of measures for the other vascular and PCI
conditions are not feasible for two reasons: (1) Inpatient admissions
for PCI and other vascular conditions appear to be decreasing; and (2)
the hospitals are increasingly performing procedures relating to these
conditions in outpatient departments. For these reasons, addition of
these measures in the Hospital Readmissions Reduction Program is not
practical.
After consideration of the public comments we received, we are
finalizing our proposal not to expand the applicable conditions in the
Hospital Readmissions Reduction Program in FY 2016.
6. Expansion of the Applicable Conditions for FY 2017 To Include the
Patients Readmitted Following Coronary Artery Bypass Graft (CABG)
Surgery Measure
a. Background
Under section 1886(q)(5)(B) of the Act, ``[b]eginning with FY 2015,
the Secretary shall, to the extent practicable, expand the applicable
conditions beyond the 3 conditions for which measures have been
endorsed as described in subparagraph (A)(ii)(I) . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission [MedPAC] in its report to Congress in June
2007, and to other conditions and procedures as determined appropriate
by the Secretary.'' The four conditions and procedures recommended by
MedPAC are: (1) Coronary artery bypass graft (CABG) surgery; (2)
chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary
intervention (PCI); and (4) other vascular conditions. Section
1886(q)(5)(A)(i) of the Act directs the Secretary, in selecting an
``applicable condition,'' to choose from among readmissions ``that
represent conditions or procedures that are high volume or high
expenditures under this title (or other criteria specified by the
Secretary).''
In accordance with section 1886(q)(5)(A) of the Act, effective for
the calculation of the readmissions payment adjustment factors in FY
2017, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28108 through
28111), we proposed to expand the scope of applicable conditions and
procedures to include patients readmitted following CABG surgery. This
proposal is consistent with the prior FY 2014 IPPS/LTCH PPS final rule
(78 FR 50657) where we indicated our intent to explore quality measures
that address CABG readmission rates. We describe this measure in detail
below.
We proposed the inclusion of the condition of CABG readmissions to
the Hospital Readmissions Reduction Program based on MedPAC's
recommendations. For this condition, we developed a Hospital-Level 30-
Day

[[Page 50034]]

All-Cause Unplanned Readmission Following Coronary Artery Bypass Graft
(CABG) Surgery measure. The National Quality Forum (NQF) Measure
Applications Partnership (MAP) Hospital workgroup conditionally
supported this measure for use in the Hospital Readmissions Reduction
Program. The condition for support is based on attainment of NQF
endorsement. On February 5, 2014, we submitted the Hospital-Level 30-
Day All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft (CABG) Surgery measure to NQF for endorsement.
The rationale for expanding the applicable conditions and the
measures used to estimate the excess readmissions ratio is described in
detail below.
b. Overview of the CABG Readmissions Measure: Hospital-Level, 30-Day,
All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft
(CABG) Surgery
Among the seven conditions MedPAC identified in its 2007 Report to
Congress as having the highest potentially preventable readmission
rate, CABG had the highest rate of readmissions within 15 days
following discharge (13.5 percent) and second highest average Medicare
payment per readmission ($8,136).\25\ The annual cost to Medicare for
potentially preventable CABG readmissions was estimated at $151
million.\26\
---------------------------------------------------------------------------

\25\ Medicare Payment Advisory Committee. Report to the
Congress: Promoting Greater Efficiency in Medicare, 2007.
\26\ Ibid.
---------------------------------------------------------------------------

Evidence also shows variation in readmissions rates for patients
with CABG surgery, supporting the finding that opportunities exist for
improving care. The median, 30-day, risk-standardized readmission rate
among Medicare fee-for-service patients aged 65 or older hospitalized
for CABG in 2009 was 17.2 percent, and ranged from 13.9 percent to 22.1
percent across 1,160 hospitals.\27\ Although data documenting
readmission reductions in CABG are limited, there are data that support
CABG readmission as an important quality metric.\28\ Studying
readmission rates after CABG surgery in New York, Hannan, et al. found:
(1) Wide variation in readmission rates; (2) the most common cause of
readmission after CABG is complication related to the surgery; and (3)
that hospital-level variables such as use of cardiac rehabilitation and
length of stay influenced readmission rates.\29\ The authors also noted
that readmission rates were not closely correlated to mortality rates
and thus measuring readmission rates likely offers a complementary
metric intended to assess a different domain of quality. Mortality
measures are more likely to encourage improvements in clinical quality,
including rapid triage, effective safety practices, and early
intervention and coordination in the hospital. Readmission measures
place an increased emphasis on aspects of quality related to effective
transitions to the outpatient setting, clear communication with
patients and caregivers, and collaboration across communities and
providers. Together, these data suggest that reducing readmission rates
following CABG surgery is an important target for quality improvement.
In addition, inclusion of this measure in the Hospital Readmissions
Reduction Program aligns with CMS' Quality Strategy objectives to
promote successful transitions of care for patients from the acute care
setting to the outpatient setting, and to reduce short-term readmission
rates. In its final recommendations for rulemaking, the MAP
conditionally supported the inclusion of the proposed CABG measure
pending NQF endorsement and implementation. In order to address this
concern, we submitted the CABG readmission measure to NQF for
endorsement on February 5, 2014.
---------------------------------------------------------------------------

\27\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-Level 30-Day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
\28\ Rumsfield J, Allen L. Reducing Readmission Rates: Does
Coronary Artery Bypass Graft Surgery Provide Clarity? JACC
Cardiovasc Interv. May 2011;4(5):2.
\29\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

We believe the proposed Hospital-Level, 30-Day, All-Cause,
Unplanned Readmission Measure Following CABG Surgery measure warrants
inclusion in the Hospital Readmissions Reduction Program for FY 2017
because it meets the criteria in section 1886(q)(5)(A) of the Act, as a
high cost, high volume condition that was recognized by MedPAC Report
to Congress in 2007 as a specific medical condition to focus on for
improving readmission rates. As with other readmission measures, this
measure also excludes such unrelated readmissions as planned
readmissions and transfers to other hospitals. For these reasons, we
believe this measure is appropriate for the Hospital Readmissions
Reduction Program.
We invited public comments on this proposal.
Comment: Many commenters supported the use of the Hospital-Level,
30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery (NQF 2515) measure unconditionally, while other
commenters only supported the use of the measure if it was endorsed by
the NQF. Some commenters supported the measure because it will add more
conditions and procedures to the Hospital Readmissions Reduction
Program. Other commenters supported the measure but encouraged CMS to
implement the measure in FY 2016 instead FY 2017 because the measure
will be NQF-endorsed by FY 2016 and the MAP conditionally recommended
the measure upon endorsement.
Response: We appreciate the commenters' support for the inclusion
of the Hospital-Level, 30-DayDay All-Cause Unplanned Readmission
Following Coronary Artery Bypass Graft Surgery measure (NQF
2515) in the Hospital Readmissions Reduction Program. We also
appreciate the recommendation to expand the program by another
condition-specific measure a year earlier than proposed. We note that,
in last year's final rule, we stated we would allow the stakeholders
time to become familiar with the current finalized measures, and for
this reason, we proposed to implement the measure in FY 2017 rather
than FY 2016.
Finally, on May 5-6, 2014, both the STS Risk-Adjusted Coronary
Artery Bypass Graft (CABG) Readmission Rate measure (NQF 2514)
and the CMS Hospital 30-DayDay, All-Cause, Unplanned, Risk Standardized
Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG)
Surgery measure (NQF 2515) were recommended for endorsement by
the NQF (Draft Report for Commenting at: https://www.qualityforum.org/ProjectMaterials.aspx?projectID=73619).
Comment: Many commenters did not support the use of the CMS
Hospital 30-DayDay, All-Cause, Unplanned, Risk Standardized Readmission
Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery
measure (NQF 2515) for the Hospital Readmissions Reduction
Program. Some of the reasons commenters gave for not supporting the
CABG readmission measure (NQF 2515) included:
Not being given enough time to establish their quality
improvement program before having to incorporate additional medical
conditions into its program. These commenters indicated that expansion
of the Hospital Readmissions Reduction Program

[[Page 50035]]

through additional conditions (that is, readmission measures) and
penalties while these hospital programs are being established will
place additional strain on hospitals before they are given a chance to
succeed in reducing their readmission rates;
Not being given time to become familiar with the CABG
readmission measure (NQF 2515) through the Hospital IQR
Program;
CMS not addressing Hospital Readmissions Reduction Program
policies related to a lack of risk-adjustment for SES and excessive
payment penalties for a single readmission;
Belief that there is the potential negative consequence of
unfairly targeting hospitals that do perform CABG surgical procedures,
when CABG is not a universally performed procedure; and
Belief that there is the potential negative unintended
consequence of reducing access for high-risk, older patients to CABG
procedures due to their increased potential for complications and
readmissions. This commenter asked that CMS monitor CABG utilization in
high-risk, older patients to ensure these patients are offered
medically indicated care.
Finally, one commenter did not support the CABG readmission measure
(NQF 2515) until concerns over the limitations of the
readmissions exclusions, risk adjustment, and access to information on
hospital performance on the readmission measures were resolved.
Response: We acknowledge that there is a balance between allowing
time for stakeholders to initiate and establish programs to improve
readmission rates and expanding the Hospital Readmissions Reduction
Program to narrow the performance gaps noted throughout the nation with
various medical conditions. We take into account many factors when we
decide how and when to expand the readmission measure set, and believe
that addition of the CABG readmission measure (NQF 2515) for
FY 2017 is reasonable, especially considering that we had signaled in
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27597) that we were
considering how to expand the Hospital Readmissions Reduction Program
based on the recommendations in MedPAC's June 2007 report (available
at: https://www.medpac.gov/documents/jun07_entirereport.pdf) which
included CABG surgical procedures. We understand that hospitals prefer
time to become familiar with new measures and, for this reason, we had
posted the CABG readmission measure (NQF 2515) measure
methodology reports in April 2014 the CMS Web site (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html), as well as alerted the
public of these reports documents in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28109). We also have intermittently performed dry runs for
certain measures and may consider plans to have a dry run for the CABG
readmission measure (NQF 2515) in order to allow hospitals and
other stakeholders to become more familiar with the measure.
We also provide the opportunity for hospitals to review and correct
their readmissions data relating to these measures prior to its release
to the public on the Hospital Compare Web site. We anticipate the
review and correction period to be in late July 2014. Because we have
instituted a sequential pattern of implementing a readmission measure
in the Hospital IQR Program before implementing it in the Hospital
Readmission Reduction Program, we believe that stakeholders have
sufficient time to become familiar with this measure because it will
not be implemented until FY 2017. We also note suggestions we received
from some commenters that we take advantage of the readmissions'
improvement momentum, as evidenced by nationwide reductions in the rate
of hospital readmissions, by expanding the Hospital Readmission
Reduction Program measure set beginning in FY 2016 instead of FY 2017.
We will continue to take into consideration comments regarding
expansion of the Hospital Readmission Reduction Program during future
deliberations on when to expand the readmission measure set.
Regarding the concern for a lack of SES risk-adjustment SES in the
CABG readmission measure (NQF 2515), we refer readers to
section IV.H.4 of this preamble of this final rule for our discussion
of SES.
We note the commenter's views that CMS imposes excessive payment
penalties for a single readmission. We recognize that not all hospitals
perform CABG procedures. However, we also note that in the January
2009-September 2011 Medicare FFS data, there were over 150,000 CABG
procedures eligible for inclusion in this measure, and that there was a
broad range of hospital-level risk-standardized readmission rates after
CABG surgical procedures among hospitals ranges from 12.0 percent to
23.1 percent.\30\ We also note in MedPAC's June 2007 report (available
at: https://www.medpac.gov/documents/jun07_entirereport.pdf) that CABG
has the highest potentially preventable readmission rate within 15 days
following discharge (13.5 percent) and the second highest average
Medicare payment per readmission ($8,136). For these reasons, and
because of the physical and emotional burden of readmissions on
patients themselves, we seek to ensure readmission rates following
these common, costly, and preventable procedures are adequately
monitored and hospitals are provided with performance data to allow
quality improvement.
---------------------------------------------------------------------------

\30\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

Finally, regarding the concern for a potential negative unintended
consequence of reducing access for high-risk, older patients to CABG
procedures due to such patients' increased potential for complications
and readmissions, we note that the readmission measures take into
account the care of older patients in the risk-adjustment model in
order not to create disincentives to care for older patients. We also
note that the goal of the readmissions measures is not to have
readmission rates of zero, but rather to evaluate hospitals relative to
hospitals with similar patients for excess readmissions. We will
consider ways to monitor for this unintended consequence as well.
Comment: Many commenters stated that the CMS Hospital 30-DayDay,
All-Cause, Unplanned, Risk Standardized Readmission Rate (RSRR)
Following Coronary Artery Bypass Graft (CABG) Surgery measure (NQF
2515) is unreliable due to a small number of CABG surgeries
performed during the measurement period. One commenter suggested that
hospitals may be unfairly penalized because of variation in readmission
rates that results from a small number of cases during the measurement
period.
Response: We appreciate the commenters' feedback, and note that
reliability is related to sample size. We do not agree that the CABG
readmission measure is unreliable. We note that the same statistical
approach to reliability for the CMS Hospital 30-Day, All-Cause,
Unplanned, Risk Standardized Readmission Rate (RSRR) Following Coronary
Artery Bypass Graft (CABG) Surgery measure (NQF 2515) is used
and established for all other CMS NQF-

[[Page 50036]]

approved, hospital risk-adjusted outcome measures, including the
mortality and readmissions measures. We adopted a risk adjustment
modeling methodology for our outcome measures that takes into account
sample size.
We note that this issue was raised and responded to in part in the
FY 2013 and FY 2014 IPPS/LTCH PPS final rules (77 FR 53379 and 78 FR
50659, respectively) in our discussion of the readmission measures for
the Hospital Readmissions Reduction Program. In the former rule, we
stated that ``[w]e determined the 25-case threshold for public
reporting based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model [we refer readers to
pages 14 through 17 of the document ``PulmonaryAdditionalComment.pdf''
which can be retrieved at: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CB0QFjAA&url=https%3A%2F%2Fwww.qualityforum.org%2FWorkArea%2Flinkit.aspx%3FLinkIdentifier%3Did%26ItemID%3D71385&ei=CRDYU4D6BYPhsASm4oDACA&usg=AFQjCNEvsLpiX23smKpBINVSv-91IAsXGA&sig2=UMJeMe1LdVq3lP69ks-1Hg&bvm=bv.71778758,d.cWc&cad=rja]. We
are maintaining the minimum 25-case threshold that we adopted through
rulemaking last year.''
We acknowledge that smaller hospitals typically have less certain
estimates because they have fewer cases for use in assessing quality.
Our approach to modeling addresses the concern that small hospitals
will be penalized due to random variation, and this challenge is
inherent in outcome measurements. However, one advantage of the
statistical model used for the CMS outcome measures is that it allows
for the inclusion of small hospitals while characterizing the certainty
of their estimates. The hierarchical logistic regression model that we
use to calculate the risk-standardized outcome measures allows the
inclusion of hospitals with relatively few observations, but takes into
account the uncertainty associated with sample size in estimating their
risk-standardized outcome rates. The model takes into account the
uncertainty in the estimate of outcome rates for low-volume hospitals
by assuming that each hospital is a typically performing hospital. It
weighs that assumption along with the outcomes for the particular
hospital in calculating the outcome rate. Therefore, the estimated
outcome rates for smaller hospitals will likely be closer to the
national rate because the limited number of eligible cases in the
hospital indicated little about that hospital's true outcome rate.
c. Methodology for the CABG Measure: Hospital-Level, 30-Day, All-Cause,
Unplanned Readmission Following Coronary Artery Bypass Graft (CABG)
Surgery
The proposed CABG readmission measure assesses hospitals' 30-day,
all-cause risk-standardized rate of unplanned readmission following
admission for a CABG procedure. In general, the measure uses the same
approach to risk-adjustment and hierarchical logistic modeling (HLM)
methodology that is specified for the AMI, HF, PN, COPD, and THA/TKA
readmission measures that we previously adopted for this program.
Information on how the measure employs HLM can be found in the 2012
CABG Readmission Measure Methodology Report (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). This
approach appropriately accounts for the types of patients a hospital
treats (that is, hospital case-mix), the number of patients it treats,
and the quality of care it provides. The HLM methodology is an
appropriate statistical approach to measuring quality based on patient
outcomes when the patients are clustered within hospitals (and,
therefore, the patients' outcomes are not statistically independent)
and sample sizes vary across hospitals. The measure methodology defines
hospital case-mix based on the clinical diagnoses provided in the
hospitals' claims for the hospitals' patient inpatient and outpatient
visits for the 12 months prior to the hospitalization for CABG, as well
as those present in the claims for care at admission. However, the
methodology specifically does not account for diagnoses present in the
index admission that may indicate complications rather than patient
comorbidities.
Comment: One commenter supported the minimum case size and believed
that hospitals that are included in this measure will far exceed the
minimum case volume, which will result in better measurement of a
predicted readmission rate.
Response: We appreciate the commenter's support.
Comment: One commenter believed that, for the CABG measure, there
should be areas for accountability on both the index and discharge
hospitals. For example, if the discharge hospital does not perform
accurate medication reconciliation, an error resulting in readmission
should not reasonably be attributed to the index hospital.
Response: We acknowledge that, unlike our other readmission
measures in the Hospital Readmissions Reduction Program, the CABG
readmission measure (NQF 2515) attributes the readmission
outcome to the hospital that performed the initial CABG procedure, even
if that hospital was not responsible for discharging the patient home
or to a postacute setting for care. We took this approach for CABG
readmission measure (NQF 2515) because, unlike for medical
conditions, transfer to another acute care facility following CABG
surgery is most likely due to a complication of the initial CABG
procedure or the peri-operative care the patient received.\31\
Therefore, the care provided by the hospital performing the CABG
procedure likely dominates readmission risk, even among transferred
patients. We believe that the transferring hospital has control over
the hospital to which they transfer their CABG patients and will be
encouraged by this measure to work closely with the institutions they
transfer patients to, to provide optimal continuity of care for their
patients. We note that this approach is supported by the high
proportion of CABG readmissions for diagnoses such as heart failure,
pleural effusion, and pneumonia and is endorsed by clinical experts
from the Society of Thoracic Surgeons and the nationally convened
Technical Expert Panel members who helped develop this measure.\32\
---------------------------------------------------------------------------

\31\ Hannan EL, Racz MJ, Walford G, Ryan TJ, Isom OW, Bennett E,
Jones RH. Predictors of Readmission for Complications of Coronary
Artery Bypass Graft Surgery. JAMA. 2003;290:773-780.
\32\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

We discuss the measure methodology below.
(1) Data Sources
The proposed CABG readmission measure is based on data derived from
administrative claims. It uses Medicare administrative data from
hospitalizations for Medicare FFS beneficiaries hospitalized for a CABG
procedure.
(2) Definition of Outcome
The proposed CABG readmission measure defines 30-day, all-cause
readmission as an unplanned subsequent inpatient admission to any
applicable acute care facility for any cause within 30 days of the date
of discharge from the index

[[Page 50037]]

hospitalization. A number of studies demonstrate that improvements in
care at the time of discharge can reduce 30-day readmission
rates.^{33 34} Thirty days is a meaningful timeframe for
hospitals because readmissions are more likely attributable to care
received within the index hospitalization and during the transition to
the outpatient setting.
---------------------------------------------------------------------------

\33\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\34\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------

The proposed CABG readmission measure assesses all-cause unplanned
readmissions (excluding planned readmissions) rather than readmissions
for CABG only. We include all unplanned readmissions for several
reasons. First, from the patient perspective, a readmission for any
reason is likely to be an undesirable outcome of care, even though not
all readmissions are preventable. Second, limiting the measure to CABG-
related readmissions may focus quality improvement efforts too narrowly
rather than encouraging broader initiatives aimed at improving the
overall care within the hospital and care transitions from the hospital
setting. Moreover, it is often hard to exclude quality issues and
accountability for a readmission based on the documented cause of
readmission. For example, a patient who underwent a CABG surgery and
developed a hospital associated infection might ultimately be
readmitted for sepsis. It would be inappropriate to consider such a
readmission to be unrelated to the care the patient received for their
CABG surgery. Finally, while the measure does not presume that each
readmission is preventable, quality improvement interventions generally
have shown reductions in all types of readmissions.
The proposed measure does not count planned readmissions as
readmissions. Planned readmissions are identified in claims data using
the CMS Planned Readmission Algorithm Version 3.0 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. Version 2.1 of the algorithm was finalized for use in the
Hospital Readmissions Reduction Program in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50651 through 50655). We have since updated the
algorithm to Version 3.0 as part of yearly measure maintenance. The
proposed CABG readmission measure uses the planned readmission
algorithm, tailored for CABG patients. We adapted the algorithm for
this group of patients with input from cardiothoracic surgeons and
other experts, narrowing the types of readmissions considered planned
because planned readmissions following CABG are less common and less
varied than among patients discharged from the hospital following a
medical admission. More detailed information on how the proposed CABG
readmission measure incorporates the CMS Planned Readmission Algorithm
Version 3.0 can be found in the 2012 CABG Readmission Measure
Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). For the
proposed CABG readmission measure, unplanned readmissions that fall
within the 30-day post-discharge timeframe from the index admission
would not be counted as readmissions for the index admission if they
were preceded by a planned readmission.
(3) Cohort of Patients
In order to include a clinically coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and noncardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures; that is, CABG procedures performed without concomitant
high-risk cardiac and noncardiac procedures.\35\ Limiting the measure
cohort to ``isolated'' CABG patients is consistent with published
reports of CABG outcomes. Therefore, the proposed measure cohort
considers only patients undergoing isolated CABG as eligible for
inclusion in the measure. We defined isolated CABG patients as those
undergoing CABG procedures without concomitant valve or other major
cardiac, vascular or thoracic procedures. In addition, our clinical
experts, consultants, and Technical Expert Panel (TEP) members agreed
that an isolated CABG cohort is a clinically coherent cohort suitable
for a risk-adjusted outcome measure. For detailed information on the
cohort definition, we refer readers to the 2012 CABG Readmission
Measure Methodology Report on the CMS Web site (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
---------------------------------------------------------------------------

\35\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

Comment: One commenter supported focusing on isolated CABG cases
for the measure because it reflects a much more cohesive clinical
population.
Response: We appreciate the commenter's support.
(4) Inclusion and Exclusion Criteria
The proposed CABG readmission measure includes hospitalizations for
patients who are 65 years of age or older at the time of index
admission and for whom there was a complete 12 months of Medicare FFS
enrollment to allow for adequate data for risk adjustment. The measure
excludes the following admissions from the measure cohort: (1)
Admissions for patients who are discharged against medical advice
(excluded because providers do not have the opportunity to deliver full
care and prepare the patient for discharge); (2) admissions for
patients who die during the initial hospitalization (these patients are
not eligible for readmission); (3) admissions for patients with
subsequent qualifying CABG procedures during the measurement period (a
repeat CABG procedure during the measurement period very likely
represents a complication of the original CABG procedure and is a
clinically more complex and higher risk surgery; therefore, we select
the first CABG admission for inclusion in the measure and exclude
subsequent CABG admissions from the cohort); and (4) admissions for
patients without at least 30 days post-discharge enrollment in Medicare
FFS (excluded because the 30-day readmission outcome cannot be assessed
in this group).
Comment: One commenter did not support the CABG measure because it
does not exclude readmissions unrelated to the initial reason for
admission.
Response: We addressed a similar comment in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50654). We continue to review and revise the area
of unrelated readmissions through our expansion of planned
readmissions. Regarding other types of unrelated readmissions, we
currently do not seek to differentiate between related and unrelated
readmissions because readmissions not directly related to the index
condition may still be a result of the care received during the index
hospitalization. For example, a patient hospitalized for CABG who
develops a hospital associated infection may ultimately be readmitted
for sepsis. It would be inappropriate to treat this readmission as
unrelated to the care the

[[Page 50038]]

patient received during the index hospitalization. Furthermore, the
range of potentially avoidable readmissions also includes those not
directly related to the initial hospitalization, such as those
resulting from poor communication at discharge or inadequate follow-up.
Therefore, we believe that creating a comprehensive list of potential
complications related to the index hospitalization would be arbitrary,
incomplete, and, ultimately, extremely difficult to implement. However,
in coordination with medical experts, we created a planned readmission
algorithm to determine conditions considered planned. Generally,
planned readmissions are not a signal of quality of care. Therefore, we
have worked with experts in the medical community, as well as other
stakeholders, to carefully identify procedures and treatments that
should be considered ``planned'' and, therefore, not counted as
readmissions.
(5) Transferred Patients and Attribution of Readmission Outcome
Among medical conditions, such as AMI, heart failure, and
pneumonia, transfers between acute care facilities can occur for a
variety of different reasons and it is likely that the discharging
hospital has the most influence over a patient's risk of readmission
and therefore the readmission outcome is appropriately assigned to the
hospital that discharges the patient. For that reason, the currently
publicly reported AMI, HF, and PN readmission measures attribute the
readmission outcome to the hospital discharging the patient, even if
that is not the hospital that initially admitted the patient.
In contrast, following CABG surgery, transfer to another acute care
facility after CABG is most likely due to a complication of the CABG
procedure or the peri-operative care the patient received. Therefore,
the care provided by the hospital performing the CABG procedure likely
dominates readmission risk, even among transferred patients. This
viewpoint is supported by the high proportion of CABG readmissions for
diagnoses such as heart failure, pleural effusion, and pneumonia and
endorsed by the clinical experts on YNHHSC/CORE, and the STS CABG
readmission measure development working groups and our TEP. Therefore,
for this measure, the readmission outcome is attributed to the hospital
performing the first (``index'') CABG, even if this is not the
discharging hospital. For example, a patient may be admitted to
hospital A for a CABG that qualifies the patient for inclusion in the
measure and is then transferred to hospital B. The initial admission to
hospital A and the admission to hospital B are considered one acute
episode of care, made up of two inpatient admissions. The measure
identifies transferred patients as those who are admitted to an acute
care hospital on the same day or following day of discharge from an
eligible admission.
Comment: One commenter supported attributing the readmission
following a CABG procedure to the hospital performing the first CABG
procedure.
Response: We appreciate the commenter's support.
(6) Risk-Adjustment
The proposed CABG readmission measure adjusts for differences
across hospitals in the level of risk their patients have for
readmission relative to patients cared for by other hospitals. The
measure uses administrative claims data to identify patient clinical
conditions and comorbidities to adjust patient risk for readmission
across hospitals, but does not adjust for potential complications of
care. We refer readers to section IV.H.4 of the preamble of this final
rule for further discussion of risk-adjustment for socioeconomic
factors.
Comment: One commenter was concerned with the CABG readmission
measure's predictive ability, but the commenter did not provide
additional details of its concern.
Response: We believe the commenter's primary concern is with the c-
statistic of the measure, and would like to clarify the important
difference between predictive models intended for patient-level risk-
stratification versus models used to profile hospital performance.
First, in a patient-level predictive model, the objective is to predict
patient outcomes and the risk-adjustment variables as a means to best
predict these outcomes. As an example, a patient who has a serious
complication of care may be at higher risk of mortality and
readmission, and therefore complications might be useful to include in
a model used for patient-level prediction. Second, and in contrast, the
role of risk-adjustment in hospital profiling models is to level the
playing field for hospitals in measures that assess hospitals on their
relative performance--that is, on how well a hospital is doing compared
to other hospitals with similar patients. The risk-adjustment variables
should only include those that are inherent to the patient and are
present at the start of the time period. Although risk-adjusting for
complications of care could increase the statistical power of a
profiling model, it would not make sense to risk-adjust for
complications because it could lead hospitals with high rates of
complications to appear to be performing better than hospitals that
admitted similar patients even though the quality of care is worse. We
note that, in addition to this clarification, the CABG readmission
measure (NQF 2515) risk model has been validated using
registry data from the STS' Adult Cardiac Surgery Database and produced
nearly identical c-statistics in a matched set of patients with
correlation coefficients between 0.92 and 0.96, depending upon the
statistic used.\36\
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\36\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

Comment: One commenter encouraged CMS to ensure measures risk-
adjust for comorbidities and preexisting conditions for vascular
patients as these are major determinants of patient outcomes.
Response: We agree with the commenter that vascular comorbidities
and preexisting conditions for vascular patients are important
determinants of CABG patient outcomes. The CABG readmission measure
adjusts for a range of preexisting comorbidities, including vascular
and circulatory conditions, stroke and cerebrovascular disease, and
other cardiac disorders such as congestive heart failure and
arrhythmias, as well as comorbidities that place patients at risk for
these conditions, such as diabetes and end-stage renal disease.\37\
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\37\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
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(7) Calculating the Excess Readmissions Ratio
The proposed CABG readmission measure uses the same methodology and
statistical modeling approach as the other Hospital Readmissions
Reduction Program measures. We published a detailed description of how
the readmission measures estimate the excess readmissions ratio in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381).
In summary, we proposed to adopt the Hospital-Level, 30-Day, All-
Cause, Unplanned Readmission Following Coronary Artery Bypass Graft
(CABG) Surgery measure in the Hospital Readmissions Reduction Program
beginning in FY 2017.

[[Page 50039]]

We note that the set of hospitals for which this measure is
calculated for the Hospital Readmissions Reduction Program differs from
the set of hospitals used in calculations for the Hospital IQR Program.
The Hospital Readmissions Reduction Program includes only subsection
(d) hospitals as defined in 1886(d)(1)(B) of the Act, while the
Hospital IQR Program calculations include non-IPPS hospitals such as
CAHs, cancer hospitals, and hospitals located in the Territories of the
United States. However, we believe that the CABG readmissions measure
is appropriate for use in both programs.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the Hospital-Level, 30-Day, All-Cause,
Unplanned Readmission Measure Following CABG Surgery measure for
inclusion in the Hospital Readmissions Reduction Program for FY 2017.
7. Maintenance of Technical Specifications for Quality Measures
Technical specification of the readmission measures are provided at
our Web site in the Measure Methodology Reports (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). Additional
resources about the Hospital Readmissions Reduction Program and measure
technical specifications and methodology are on the QualityNet Web site
on the Resources Web page (available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228
772412995).
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF endorsed. As part of its regular
maintenance process for NQF-endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes
with NQF on an annual basis. NQF solicits information from measure
stewards for annual reviews, and it reviews measures for continued
endorsement in a specific 3-year cycle.
We note that NQF's annual or triennial maintenance processes for
endorsed measures may result in the NQF requiring updates to the
measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates required by
the NQF into the measure specifications we have adopted for the
Hospital Readmissions Program so that these measures remain up-to-date.
The NQF regularly maintains its endorsed measures through annual and
triennial reviews, which may result in the NQF requiring updates to the
measures. We note that, for this calendar year, the AMI readmission
measure is undergoing the NQF maintenance endorsement process.
For the Hospital Readmissions Reduction Program, in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28111), we proposed to follow the
finalized processes outlined for addressing changes to adopted measures
in the Hospital IQR Program ``Maintenance of Technical Specifications
for Quality Measures'' section found in section IX.A.1.b. of the
preamble of the proposed rule.
We believe this proposal adequately balances our need to
incorporate NQF updates to NQF-endorsed Hospital Readmissions Reduction
Program measures in the most expeditious manner possible while
preserving the public's ability to comment on updates that so
fundamentally change an endorsed measure that it is no longer the same
measure that we originally adopted. We invited public comment on this
proposal.
Comment: One commenter commended the proposal to follow the
finalized processes outlined for addressing changes to adopted measures
in the Hospital IQR Program ``Maintenance of Technical Specifications
for Quality Measures'' section found in section IX.A.1.b. of the
preamble of the proposed rule (79 FR 28218). The commenter noted that
this policy of handling substantive and nonsubstantive changes to
measures that arise through measure maintenance processes allows CMS
two mechanisms to address measure updates: (1) The use of future
proposed rules and review periods for substantive changes; (2)
subregulatory processes for nonsubstantive changes which also preserves
CMS' autonomy and flexibility to rapidly implement nonsubstantive
updates to measures.
No commenters opposed or recommended changes to the proposal.
Response: We appreciate the commenter's support.
Comment: One commenter indicated that any changes to a measure
developed for adults but now include those <18 years of age should not
be considered nonsubstantive.
Response: We appreciate this comment and note that this concern was
addressed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50776).
After consideration of the public comments we received, we are
finalizing the proposed maintenance of technical specifications for
quality measures for the Hospital Readmissions Reduction Program.
8. Waiver From the Hospital Readmissions Reduction Program for
Hospitals Formerly Paid Under Section 1814(b)(3) of the Act (Sec.
412.152 and Sec. 412.154(d))
The definition of ``applicable hospital'' under section
1886(q)(5)(C) of the Act also includes hospitals paid under section
1814(b)(3) of the Act. Section 1886(q)(2)(B)(ii) of the Act, however,
allows the Secretary to exempt such hospitals from the Hospital
Readmissions Reduction Program, provided that the State submit an
annual report to the Secretary describing how a similar program to
reduce hospital readmissions in that State achieves or surpasses the
measured results in terms of health outcomes and cost savings
established by Congress for the program as applied to ``subsection (d)
hospitals.''
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Act, as added by section 3021 of the Affordable
Care Act, which authorizes the testing of innovative payment and
service delivery models, including models that allow States to ``test
and evaluate systems of all-payer payment reform for the medical care
of residents of the State, including dual-eligible individuals.''
Section 1115A of the Act authorizes the Secretary to waive such
requirements of titles XI and XVIII of the Act as may be necessary
solely for purposes of carrying out section 1115A of the Act with
respect to testing models.
As part of this agreement, Medicare will no longer pay Maryland
hospitals in accordance with section 1814(b)(3) of the Act. Therefore,
section 1886(q)(2)(B)(ii) of the Act is no longer applicable to
Maryland hospitals. The effect of Maryland hospitals no longer being
paid under 1814(b)(3) of the Act is that they are not entitled to be
exempted from the Hospital Readmissions Reduction Program under section
1886(q)(2)(B)(ii) of the Act but, for the model, would be included in
the Hospital Readmissions Reduction Program. In other words, the
exemption

[[Page 50040]]

from the Hospital Readmissions Reduction Program under section
1814(b)(3) of the Act no longer applies. However Maryland hospitals
will not be participating in the Hospital Readmissions Reduction
Program because section 1886(q) of the Act and its implementing
regulations have been waived for purposes of the model, under the terms
of the agreement.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28111 through
28112), we proposed to make conforming changes to the implementing
regulations to reflect this change. Under Sec. 412.152, we proposed to
delete from the definition of an ``applicable hospital'' the following
language: ``or a hospital in Maryland that is paid under section
1814(b)(3) of the Act and that, absent the waiver specified by section
1814(b)(3) of the Act, would have been paid under the hospital
inpatient prospective payment system.'' Under Sec. 412.154, we
proposed to delete Sec. 412.154(d) in its entirety.
We invited public comment on these proposals.
Comment: Several commenters supported CMS' proposal to continue to
exempt Maryland hospitals, now being paid under the Maryland All-Payer
Model, from the Hospital Readmissions Reduction Program and the
proposed conforming changes to the Hospital Readmissions Reduction
Program regulations.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing the changes to the Hospital Readmissions Reduction Program
regulations as proposed without modification. Specifically, we are
finalizing our proposal to make conforming changes to our regulations
at Sec. 412.152 and Sec. 412.154(d) to reflect that Maryland elected
to no longer have Medicare pay Maryland hospitals in accordance with
section 1814(b)(3) of the Act.
9. Floor Adjustment Factor for FY 2015 (Sec. 412.154(c)(2))
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. Specifically, it states that
the ratio is ``equal to 1 minus the ratio of--(i) the aggregate
payments for excess readmissions . . . and (ii) the aggregate payments
for all discharges . . . .'' The calculation of this ratio is codified
at Sec. 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the
Act specifies the floor adjustment factor, which is set at 0.99 for FY
2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal
years. We codified the floor adjustment factor at Sec. 412.154(c)(2)
of the regulations (77 FR 53386).
Consistent with 1886(q)(3) of the Act, codified at Sec.
412.154(c)(2), the adjustment factor is either the greater of the ratio
or, for FY 2015 and subsequent fiscal years, a floor adjustment factor
of 0.97. Under our established policy, the ratio is rounded to the
fourth decimal place. In other words, for FY 2015 and subsequent fiscal
years, a hospital subject to the Hospital Readmissions Reduction
Program will have an adjustment factor that is between 1.0 (no
reduction) and 0.9700 (greatest possible reduction).
Comment: One commenter expressed concern that the maximum reduction
has been raised from 2 percent to 3 percent and that, in conjunction
with adding two new measures to the program, this change will only
increase harm to safety net hospitals.
Response: We recognize the commenter's concern regarding the
magnitude of the maximum payment reduction for FY 2015 provided under
the statute. Section 1886(q)(3) of the Act requires that, effective for
discharges occurring in FY 2015 and beyond, the maximum readmissions
payment adjustment factor or the floor adjustment factor to be 0.97 or
a 3 percent reduction, applied to a hospital's base operating DRG
payment amount. We note that we estimate that only 39 hospitals will be
subject to the maximum reduction for FY 2015.
After consideration of the public comments we received, we are
finalizing our proposal that the floor adjustment factor be 0.97 for FY
2015, consistent with section 1886(q)(3) of the Act, as codified at
Sec. 412.154(c)(2).
10. Applicable Period for FY 2015
Under section 1886(q)(5)(D) of the Act, the Secretary has the
authority to specify the applicable period with respect to a fiscal
year under the Hospital Readmissions Reduction Program. We finalized
our policy to use 3 years of claims data to calculate the readmission
measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the
definition of ``applicable period'' in the regulations at 42 CFR
412.152 as the 3-year period from which data are collected in order to
calculate excess readmissions ratios and adjustments for the fiscal
year, which includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment.
Consistent with the definition at Sec. 412.152, we established
that the applicable period for FY 2014 under the Hospital Readmissions
Reduction Program is the 3-year period from July 1, 2009, to June 30,
2012. That is, we determined the excess readmissions ratios and
calculate the payment adjustment (including aggregate payments for
excess readmissions and aggregate payments for all discharges) for FY
2014 using data from the 3-year time period of July 1, 2009 to June 30,
2012, as this was the most recent available 3-year period of data upon
which to base these calculations (78 FR 50669).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28112), for FY
2015, consistent with the definition at Sec. 412.152, we proposed an
``applicable period'' for the Hospital Readmissions Reduction Program
to be the 3-year period from July 1, 2010 to June 30, 2013. In other
words, we proposed that the excess readmissions ratios and the payment
adjustment (including aggregate payments for excess readmissions and
aggregate payments for all discharges) for FY 2015 would be calculated
based on data from the 3-year time period of July 1, 2010 to June 30,
2013. We invited public comment on these proposals.
Comment: Several commenters requested that CMS make real-time
reporting of readmission rates accessible to hospitals, while other
commenters suggested that CMS monitor reported data for correlation and
trends to identify if hospitals are making unacceptable trade-offs by
reducing readmissions at the expense of increasing post discharge
mortality.
Response: We note that these requests are considered out of scope
for the Hospital Readmissions Reduction Program in the FY 2015 IPPS/
LTCH PPS proposed rule and will take these requests under consideration
during future rulemaking.
Comment: Several commenters requested that CMS revise the
applicable time period to only include the most recent year. One
commenter believed that it is unfair to penalize hospitals for
performance from 2 or 3 years ago, especially if they have improved in
the most recent year.
Response: We note that we addressed this concern in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53380), and that

[[Page 50041]]

we use a 3-year period of index admissions to increase the number of
cases per hospital used for measure calculation, which improves the
precision of each hospital's readmission estimate. Although this
approach utilizes older data, it also identifies more variation in
hospital performance and still allows for improvement from one year of
reporting to the next.
After consideration of the public comments we received, we are
finalizing as proposed the applicable period of the 3-year time period
of July 1, 2010 to June 30, 2013 to calculate the excess readmission
ratios and the readmission payment adjustment factors for FY 2015.
11. Inclusion of THA/TKA and COPD Readmissions Measures To Calculate
Aggregate Payments for Excess Readmissions Beginning in FY 2015
Under the Hospital Readmissions Reduction Program the ``base
operating DRG payment amount'' defined at Sec. 412.152 is used both to
determine the readmission adjustment factor that accounts for excess
readmissions under section 1886(q)(3) of the Act and to determine which
payment amounts will be adjusted to account for excess readmissions
under section 1886(q) of the Act. Consistent with section 1886(q)(2) of
the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53383), under the regulations at Sec. 412.152, we define the ``base
operating DRG payment amount'' and specify that it does not include
adjustments or add-on payments for IME, DSH, outliers and low-volume
hospitals as required by section 1886(q)(2) of the Act. Furthermore,
consistent with section 1886(q)(2)(B)(i) of the Act, for SCHs and for
MDHs for FY 2013, the definition of ``base operating DRG payment
amount'' at Sec. 412.152 excludes the difference between the
hospital's applicable hospital-specific payment rate and the Federal
payment rate.
For FY 2015 and subsequent years, for purposes of calculating the
payment adjustment factors and applying the payment methodology, in the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28112 through 282117), we
proposed that the base operating DRG payment amount for MDHs includes
the difference between the hospital-specific payment rate and the
Federal payment rate (as applicable).
Section 1886(q)(3)(B) of the Act specifies the ratio used to
calculate the adjustment factor under the Hospital Readmissions
Reduction Program. It states that the ratio is ``equal to 1 minus the
ratio of--(i) the aggregate payments for excess readmissions . . . and
(ii) the aggregate payments for all discharges. . . .'' The definition
of ``aggregate payments for excess readmissions'' and ``aggregate
payments for all discharges,'' as well as a methodology for calculating
the numerator of the ratio (aggregate payments for excess readmissions)
and the denominator of the ratio (aggregate payments for all
discharges) are codified at Sec. 412.154(c)(2) of the regulations (77
FR 53387).
Section 1886(q)(4) of the Act sets forth the definitions of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' for an applicable hospital for the applicable
period. The term ``aggregate payments for excess readmissions'' is
defined in section 1886(q)(4)(A) of the Act as ``for a hospital for an
applicable period, the sum, for applicable conditions . . . of the
product, for each applicable condition, of (i) the base operating DRG
payment amount for such hospital for such applicable period for such
condition; (ii) the number of admissions for such condition for such
hospital for such applicable period; and (iii) the excess readmissions
ratio . . . for such hospital for such applicable period minus 1.'' We
codified this definition of ``aggregate payments for excess
readmissions'' under the regulations at Sec. 412.152 as the product,
for each applicable condition, of: (1) The base operating DRG payment
amount for the hospital for the applicable period for such condition;
(2) the number of admissions for such condition for the hospital for
the applicable period; and (3) the excess readmissions ratio for the
hospital for the applicable period minus 1 (77 FR 53675).
The excess readmissions ratio is a hospital-specific ratio
calculated for each applicable condition. Specifically, section
1886(q)(4)(C) of the Act defines the excess readmissions ratio as the
ratio of ``risk-adjusted readmissions based on actual readmissions''
for an applicable hospital for each applicable condition, to the
``risk-adjusted expected readmissions'' for the applicable hospital for
the applicable condition. The methodology for the calculation of the
excess readmissions ratio was finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51673). ``Aggregate payments for excess
readmissions'' is the numerator of the ratio used to calculate the
adjustment factor under the Hospital Readmissions Reduction Program (as
described in further detail later in this section).
The term ``aggregate payments for all discharges'' is defined at
section 1886(q)(4)(B) of the Act as ``for a hospital for an applicable
period, the sum of the base operating DRG payment amounts for all
discharges for all conditions from such hospital for such applicable
period.'' ``Aggregate payments for all discharges'' is the denominator
of the ratio used to calculate the adjustment factor under the Hospital
Readmissions Reduction Program. We codified this definition of
``aggregate payments for all discharges'' under the regulations at
Sec. 412.152 (77 FR 53387).
We finalized the inclusion of two additional applicable conditions,
COPD and THA/TKA, to the Hospital Readmissions Reduction Program
beginning for FY 2015 in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50657 through 50664). In section IV.H.11. of the preamble of the
proposed rule, we discussed the proposed methodology to include these
two additional measures in the calculation of the readmissions payment
adjustment for FY 2015. Specifically, we proposed how the addition of
COPD and THA/TKA applicable conditions would be included in the
calculation of the aggregate payments for excess readmissions, which is
the numerator of the readmissions payment adjustment. We note that this
proposal does not alter our established methodology for calculating
aggregate payments for all discharges, that is, the denominator of the
ratio (77 FR 53387).
As discussed above, when calculating the numerator (aggregate
payments for excess readmissions), we determine the base operating DRG
payments for the applicable period. ``Aggregate payments for excess
readmissions'' (the numerator) is defined as ``the sum, for applicable
conditions . . . of the product, for each applicable condition, of (i)
the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the excess readmissions ratio . . . for such hospital for such
applicable period minus 1.''
When determining the base operating DRG payment amount for an
individual hospital for such applicable period for such condition, we
use Medicare inpatient claims from the MedPAR file with discharge dates
that are within the same applicable period to calculate the excess
readmissions ratio. We use MedPAR claims data as our data source for
determining aggregate payments for excess readmissions and aggregate
payments for all discharges, as this data source is consistent with the
claims data source used in IPPS rulemaking to determine IPPS rates.
For FY 2015, we proposed to use MedPAR claims with discharge dates

[[Page 50042]]

that are on or after July 1, 2010, and no later than June 30, 2013.
Under our established methodology we use the update of the MedPAR file
for each Federal fiscal year, which is updated 6 months after the end
of each Federal fiscal year within the applicable period, as our data
source (that is, the March updates of the respective Federal fiscal
year MedPAR files) for the final rules.
The FY 2010 through FY 2013 MedPAR data files can be purchased from
CMS. Use of these files allows the public to verify the readmissions
adjustment factors. Interested individuals may order these files
through the CMS Web site at: https://www.cms.hhs.gov/LimitedDataSets/ by
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web
page describes the files and provides directions and further detailed
instructions for how to order the data sets. Persons placing an order
must send the following: A Letter of Request, the LDS Data Use
Agreement and Research Protocol (refer to the Web site for further
instructions), the LDS Form, and a check for $3,655 to:
If using the U.S. Postal Service: Centers for Medicare and
Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
If using express mail: Centers for Medicare and Medicaid
Services, OFM/Division of Accounting-RDDC, Mailstop C07-11,
7500 Security Boulevard, Baltimore, MD 21244-1850.
In the proposed rule, we proposed to determine aggregate payments
for excess readmissions and aggregate payments for all discharges using
data from MedPAR claims with discharge dates that are on or after July
1, 2010, and no later than June 30, 2013. However, we note that, for
the purpose of modeling the proposed FY 2015 readmissions payment
adjustment factors for the proposed rule, we used excess readmissions
ratios for applicable hospitals from the FY 2014 Hospital Readmissions
Reduction Program applicable period. For the final rule, applicable
hospitals will have had the opportunity to review and correct data from
the proposed FY 2015 applicable period of July 1, 2010 to June 30,
2013, before they are made public under our policy regarding the
reporting of hospital-specific information, which is discussed later in
this section.
In the proposed rule, for FY 2015, we proposed to use MedPAR data
from July 1, 2010 through June 30, 2013. Specifically, in the proposed
rule, we used the March 2011 update of the FY 2010 MedPAR file to
identify claims within FY 2010 with discharges dates that are on or
after July 1, 2010, the March 2012 update of the FY 2011 MedPAR file to
identify claims within FY 2011, the March 2013 update of the FY 2012
MedPAR file to identify claims within FY 2012, and the December 2013
update of the FY 2013 MedPAR file to identify claims within FY 2013
with discharge dates no later than June 30, 2013. For the final rule,
we proposed to use the same MedPAR files as listed above for claims
within FY 2010, FY 2011 and FY 2012. For claims within FY 2013, we
proposed to use in the final rule the March 2014 update of the FY 2013
MedPAR file.
In order to identify the admissions for each condition, including
the two additional conditions THA/TKA and COPD, to calculate the
aggregate payments for excess readmissions for an individual hospital,
for FY 2015, we proposed to identify each applicable condition using
the ICD-9-CM codes used to identify applicable conditions to calculate
the excess readmissions ratios. Under our existing policy, we identify
eligible hospitalizations and readmissions of Medicare patients
discharged from an applicable hospital having a principal diagnosis for
the measured condition in an applicable period (76 FR 51669). The
discharge diagnoses for each applicable condition are based on a list
of specific ICD-9-CM codes for that condition. These codes are posted
on the QualityNet Web site at: https://www.QualityNet.org > Hospital-
Inpatient > Claims-Based Measures > Readmission Measures > Measure
Methodology.
In order to identify the applicable conditions to calculate the
aggregate payments for excess readmissions, for FY 2015, we proposed to
identify the claim as an applicable condition consistent with the
methodology to identify conditions to calculate the excess readmissions
ratio. In other words, the applicable conditions of AMI, HF and PN are
identified for the calculation of aggregate payments for excess
readmissions if the ICD-9-CM code for that condition is listed as the
principal diagnosis on the claim.
In order to identify claims with the applicable condition of THA/
TKA, we proposed that any claim that has the procedure codes for THA/
TKA listed in any diagnosis/procedure field of the claim would be
included in the calculation of aggregate payments for readmissions,
consistent with the methodology to calculate the excess readmissions
ratio for THA/TKA. In order to identify claims with the applicable
condition of COPD, we proposed to identify claims that either have the
ICD-9-CM code for that condition is listed as the principal diagnosis
on the claim or has a principal diagnosis of some respiratory failure
along with secondary diagnosis of COPD.
Under our established methodology for calculating aggregate
payments for readmissions, admissions that are not considered index
admissions for the purpose of the readmissions measures are excluded
from the calculation of the excess readmissions ratio, and therefore
also are not considered admissions for the purposes of determining a
hospital's aggregate payments for excess readmissions (78 FR 50670
through 50876). With the addition of THA/TKA and COPD as applicable
conditions beginning in FY 2015, we proposed to modify our current
methodology to identify the admissions included in the calculation of
``aggregate payments for excess readmissions'' for THA/TKA and COPD in
the same manner as the original applicable conditions (AMI, HF and PN).
That is, THA/TKA and COPD admissions that would not considered index
admissions in the readmissions measures also would not considered
admissions for the purposes of calculation a hospital's aggregate
payments for excess readmissions.
In the proposed rule, for FY 2015, we proposed to continue to apply
the same exclusions to the claims in the MedPAR file as we applied for
FY 2014 (78 FR 50670 through 50673), and we proposed to apply those
exclusions for the two additional applicable conditions, THA/TKA and
COPD. For FY 2015, in order to have the same types of admissions to
calculate aggregate payments for excess readmissions as is used to
calculate the excess readmissions ratio, we proposed to identify
admissions for all five applicable conditions, AMI, HF, PN, THA/TKA and
COPD, for the purposes of calculating aggregate payments for excess
readmissions as follows:
We would exclude admissions that are identified as an
applicable condition if the patient died in the hospital, as identified
by the discharge status code on the MedPAR claim.
We would exclude admissions identified as an applicable
condition for which the patient was transferred to another provider
that provides acute care hospital services (that is, a CAH or an IPPS
hospital), as identified through examination of contiguous stays in
MedPAR at other hospitals.
We would exclude admissions identified as an applicable
condition for patients who are under the age of 65, as identified by
linking the claim information to the information provided in the
Medicare Enrollment Database.

[[Page 50043]]

For conditions identified as AMI, we would exclude claims
that are same day discharges, as identified by the admission date and
discharge date on the MedPAR claim.
We would exclude admissions for patients who did not have
Medicare Parts A and B FFS enrollment in the 12 months prior to the
index admission, based on the information provided in the Medicare
Enrollment Database.
We would exclude admissions for patients without at least
30 days post-discharge enrollment in Medicare Parts A and B fee-for-
service, based on the information provided in the Medicare Enrollment
Database.
We would exclude all multiple admissions within 30 days of
a prior index admission's discharge date, as identified in the MedPAR
file, consistent with how multiple admissions within 30 days of an
index admission are excluded from the calculation of the excess
readmissions ratio.
These exclusions are consistent with our current methodology, which
was established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50671).
In addition to the exclusions described above for all five
applicable conditions, for FY 2015, we proposed the following steps to
identify admissions specifically for THA/TKA for the purposes of
calculating aggregate payments for excess readmissions:
We proposed to exclude admissions for THA/TKA for all
transfer cases regardless of whether the discharge was a transfer to
another hospital or from another hospital, consistent with the
calculation of the excess readmissions ratio for THA/TKA.
We proposed to exclude admissions for THA/TKA for cases
where the discharge includes a femur, hip, or pelvic fracture coded in
the principal or secondary diagnosis fields, consistent with the
calculation of the excess readmissions ratio for THA/TKA.
We proposed to exclude admissions for THA/TKA for cases
where the discharge includes a mechanical complication coded in the
principal diagnosis field, consistent with the calculation of the
excess readmissions ratio for THA/TKA.
We proposed to exclude admissions for THA/TKA for cases
where the discharge includes a malignant neoplasm of the pelvis,
sacrum, coccyx, lower limbs, or bone/bone marrow or a disseminated
malignant neoplasm coded in the principal diagnosis field, consistent
with the calculation of the excess readmissions ratio for THA/TKA.
We proposed to exclude admissions for THA/TKA for cases
where the discharge includes more than two hip/knee procedures.
We proposed to exclude admissions for THA/TKA for cases
that meet either any of the following conditions or following
procedures concurrent with THA/TKA: Revision procedures; partial hip
arthroplasty (PHA) procedures; resurfacing procedures; and removal of
implanted devices/prostheses.
Furthermore, we proposed to only identify Medicare FFS claims that
meet the criteria (that is, claims paid for under Medicare Part C
(Medicare Advantage) would not be included in this calculation),
consistent with the methodology to calculate excess readmissions ratios
based solely on admissions and readmissions for Medicare FFS patients.
Therefore, consistent with our established methodology, for FY 2015, we
would exclude admissions for patients enrolled in Medicare Advantage as
identified in the Medicare Enrollment Database. This proposal is
consistent with how admissions for Medicare Advantage patients are
identified in the calculation of the excess readmissions ratios under
our established methodology. The tables below list the ICD-9-CM codes
we proposed to use to identify each applicable condition to calculate
the aggregate payments for excess readmissions under this proposal for
FY 2015. The tables include the ICD-9-CM codes we proposed to use to
identify the two conditions, THA/TKA and COPD, added to the Hospital
Readmissions Reduction Program beginning for FY 2015. These ICD-9-CM
codes also would be used to identify the applicable conditions to
calculate the excess readmissions ratios, consistent with our
established policy (76 FR 51673 through 51676).

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

[[Page 50044]]

486......................................... Pneumonia organism unspecified.
487.0....................................... Influenza with pneumonia.
488.11...................................... Influenza due to identified novel H1N1 influenza virus with
pneumonia.
----------------------------------------------------------------------------------------------------------------

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

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

ICD-9-CM Codes To Identify Chronic Obstructive Pulmonary Disease (COPD) Cases
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Code Description of code
----------------------------------------------------------------------------------------------------------------
491.21...................................... Obstructive chronic bronchitis; With (acute) exacerbation; acute
exacerbation of COPD, decompensated COPD, decompensated COPD with
exacerbation.
491.22...................................... Obstructive chronic bronchitis; with acute bronchitis.
491.8....................................... Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis.
491.9....................................... Unspecified chronic bronchitis.
492.8....................................... Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar,
centrilobular, obstructive, panacinar, panlobular, unilateral,
vesicular. MacLeod's syndrome; Swyer-James syndrome; unilateral
hyperlucent lung.
493.20...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, unspecified.
493.21...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, with status asthmaticus.
493.22...................................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic
bronchitis, with (acute) exacerbation.
496......................................... Chronic: nonspecific lung disease, obstructive lung disease,
obstructive pulmonary disease (COPD) NOS. NOTE: This code is not
to be used with any code from categories 491-493.
518.81*..................................... Other diseases of lung; acute respiratory failure; respiratory
failure NOS.

[[Page 50045]]

518.82*..................................... Other diseases of lung; acute respiratory failure; other pulmonary
insufficiency, acute respiratory distress.
518.84*..................................... Other diseases of lung; acute respiratory failure; acute and
chronic respiratory failure.
799.1*...................................... Other ill-defined and unknown causes of morbidity and mortality;
respiratory arrest, cardiorespiratory failure.
----------------------------------------------------------------------------------------------------------------
*Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22)

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

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

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

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

We invited public comment on these proposals.
Comment: Several commenters supported the inclusion of the Elective
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty
(TKA) All-Cause Unplanned 30-Day Risk-Standardized Readmission and the
Hospital-level 30-day Readmission Following Admission for an Acute
Exacerbation of Chronic Obstructive Pulmonary Disease measures. Others
commenters supported the modified exclusions for both of these
measures, as well as the payment adjustment factor and calculation of
aggregate payments.
Response: We thank the commenters for support of the exclusions,
payment adjustment factor, and calculation of aggregate payments for
the Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee
Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-Standardized
Readmission and the Hospital-Level 30-day Readmission Following
Admission for an Acute Exacerbation of Chronic Obstructive Pulmonary
Disease measures, and the support to expand the Hospital Readmissions
Reduction Program with this measures.
Comment: On CMS' proposed methodology to identify THA/TKA
admissions to include in the calculation of Aggregate Payments for
Excess Readmissions, one commenter recommended that CMSCMS expand the
list of exclusions to specifically exclude conversion of previous hip
surgery to total hip arthroplasty (represented by CPT code 27132). The
commenter noted that, while the current granularity of the ICD-9-CM
coding framework may complicate isolating these cases, the commenter
believed that the previous surgery of the hip is a specific risk factor
for complications (for example, infection, fracture), and therefore
these cases should be identified for purposes of the readmission
measure.
Response: As discussed earlier in this final rule, in order to
calculate aggregate payments for excess readmissions, consistent with
our existing policy, we proposed to identify each applicable condition
using the ICD-9-CM codes used to identify applicable conditions to
calculate the excess readmissions ratios. We do not believe it would be
appropriate to apply an exclusion to the set of admissions used to
calculate the aggregate payments that is not applied in the measure
cohort definition that is calculation of the excess readmission ratio.
The current measure for THA/

[[Page 50046]]

TKA excludes specific groups of patients with prior hip surgeries that
place them at a significantly increased risk of complications,
including revision procedures and those requiring removal of implanted
devices from the femur (ICD-9-CM codes 78.65). We are currently
exploring the specificity of ICD-9-CM versus CPT codes for prior hip
surgery to assess whether the measure cohort definition could be
further refined by including CPT codes. If we determine that any
changes to the measure cohort may be appropriate, we would propose such
changes through future rulemaking.
Comment: Several commenters recommended changes to the methodology
to calculate the readmission payment adjustment factors. Several
commenters stated that the proposed calculation of the readmission
payment adjustment factor creates excessive payment reductions.
Commenters noted that the calculation of the readmissions payment
adjustment factors is flawed because the excess readmission ratio
should be applied to the number of a hospital's readmissions, not
admissions, in order to determine the hospital's excess payments for
readmissions.
Furthermore, these commenters asserted that CMS has the authority
through rulemaking to apply the excess readmission ratio to a
hospital's readmissions to determine a hospital's excess payments for
readmissions, which they believed would be consistent with
Congressional intent. Commenters noted that CMS' estimated savings
exceed the Congressional Budget Office (CBO) score for the provision,
which commenters believed demonstrates that CMS' literal reading of the
statute is not consistent with Congressional intent. Commenters also
suggested that CMS could determine the magnitude of the readmission
reduction using the 25th percentile of hospital performance on the
readmission measures rather than assuming average hospital performance,
which is the assumption of the current methodology used to determine
the number of expected readmissions.
Response: We received a similar comment in response to the FY 2013
IPPS/LTCH PPS proposed rule (77 FR 53393) and to the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 50673). We continue to believe that the
statute is prescriptive with respect to the calculation of ``aggregate
payments for excess readmissions'' where the statute specifies that the
``aggregate payments for excess readmissions'' is the sum for each
condition of the product of ``the operating DRG payment amount for such
hospital for such applicable period for such condition'' and ``the
number of admissions for such condition'' and ``the excess readmission
ratio'' minus one. We believe that section 1886(q)(4)(A) of the Act
requires us to include all admissions for a condition in the
calculation of ``aggregate payments for excess readmissions.'' We do
not believe we have the discretionary authority to implement an
alternative methodology under the existing the statute. We continue to
believe that we are implementing the provision as required by law.
Comment: Several commenters stated that the Hospital Readmissions
Reduction Program does not account for improvement in readmission
rates. One commenter asserted that there is no incentive for
improvement under the Hospital Readmissions Reduction Program as there
is in the Hospital VBP Program and stated that penalties under this
program are due to issues out of the control of the hospital. One
commenter suggested that the penalty should equal the cost of excess
readmissions over a fixed target level of readmissions, as opposed to a
hospital being measured against the national average.
Response: We appreciate the comments on various ways to change the
calculations of the readmissions payment adjustment factors and
readmissions measures to account for improvement in readmission rates
or provide incentives for readmissions, as opposed to penalties. We
received similar comments in responses in previous rulemaking (77 FR
53394 and 78 FR 50673). The Hospital Readmissions Reduction Program
under section 1886(q) of the Act is structured to compare a hospital's
performance for certain conditions compared to the average hospital. If
a hospital can improve over time and those improvements result in a
performance on readmissions for the applicable conditions that is
better than the average hospital, the hospital has the potential to
reduce its penalty or not be subject to a penalty at all. As we have
stated in previous rules, the statute does not provide us with the
authority to reward hospitals for improvement, which is allowed under
section 1886 (p) of the Act for the Hospital VBP Program.
Comment: MedPAC provided several recommendations to change the
Hospital Readmissions Reduction Program related to the calculation of
the readmissions payment adjustment factor, which MedPAC acknowledged
would require statutory changes. Specifically, MedPAC stated that the
readmission penalty formula is flawed because aggregate penalties
remain constant even as national readmission rates decline. In
addition, MedPAC pointed out that the condition-specific penalty per
excess readmission is higher for conditions with low readmission rates,
which becomes more important with the inclusion of elective total hip
and total knee arthroplasty (relatively low readmission rate
conditions) to the Hospital Readmissions Reduction Program. Lastly,
MedPAC believed the readmissions multiplier should be removed from the
formula and replaced with a penalty that roughly equals the cost of
excess readmissions over a fixed target level of readmissions. Given a
fixed target, under this approach penalties would decline if hospitals'
collective performance improves.
Response: We appreciate the comments and suggestions made by
MedPAC. We note that these comments are similar to comments submitted
year for the FY 2014 IPPS/LTCH PPS final rule (78 FR 50674), and we
agree that to implement these recommendations would require statutory
changes.
Comment: Several commenters requested that CMS clarify whether
admissions denied by the CMS Recovery Audit Contractor (RACs) are
excluded from either the numerator or the denominator in the
calculation of the excess readmission ratios or in the calculation of
the readmissions payment adjustment factors. Commenters believed that
by including admissions denied by the CMS RACs, a hospital would be
penalized twice for the same admission--once by the RAC denial and a
second time by having the admission included in the readmission payment
penalty.
Response: As we explained in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50675), we use MedPAR claims data as our data source to
calculate readmissions payment adjustment factors, specifically the
excess payments for readmissions and payment for all discharges. In
this final rule, for FY 2015, we are finalizing a policy to use MedPAR
data for discharges from July 1, 2010 through June 30, 2013, consistent
with our historical practice. We also are finalizing the policy to use
the March 2011 update of the FY 2010 MedPAR file, the March 2012 update
of the FY 2011 MedPAR, the March 2013 update of the FY 2012 MedPAR file
and the March 2014 update of the FY 2013 MedPAR file to identify the
discharges occurring from July 1, 2010 through June 30, 2013. In
addition, the Standard Analytic File is the data source used to
calculate the excess readmission ratios. We use the June 2011 update of
the 2010 SAF file, the June 2012 update of the 2011 file, the June 2012
update of

[[Page 50047]]

the 2012 file, and the September 2013 update of the 2013 file.
RACs have up to 3 years to review claims to determine whether a
claim was inappropriately billed as inpatient when it should have been
an outpatient claim. If a claim is denied as an inpatient stay, the
claim is adjusted through the standard Medicare claims processing
systems, going through the CWF, SAF and MedPAR. However, given the
timing of the RAC audits and the updates of the SAF and MedPAR files
used to calculate the readmissions measures and readmissions payment
adjustment factors, it is not certain that all denied claims will be
reflected in our claims files at the time of our calculations. However,
we continue to believe that using these updates of the MedPAR and SAF
files is consistent with IPPS ratesetting and allows for transparency
for the public to obtain this dataset for replication. Furthermore,
inpatient stays that are denied payment under Medicare Part A typically
remain classified as inpatient stays, and can be billed to Medicare
Part B as an Medicare Part B inpatient stay. These inpatient stays that
are denied payment under Medicare Part A will typically continue to
count as a qualifying inpatient stay for other payment purposes such as
qualifying for SNF benefits and Medicare DSH patient days. Therefore,
we continue to believe that it is appropriate to include these
admissions in the Hospital Readmissions Reduction Program.
Comment: One commenter opposed the proposal that the base operating
DRG payment amount for MDHs include the difference between the
hospital-specific rate payment and the Federal rate payment in FY 2015,
noting that, for teaching MDHs, the hospital-specific rate add-on
payment is inclusive of costs associated with teaching and that the
inclusion of such payment would violate the Affordable Care Act. This
commenter requested that CMS maintain the current definition of ``base
operating DRG payment amount,'' which excludes this additional
hospital-specific payment rate amount.
Response: We disagree with the commenter. The ``base operating DRG
payment amount'' is generally defined as the wage-adjusted DRG
operating payment plus any applicable new technology add-on payments
(Sec. 412.152 and Sec. 412.160). For years prior to FY 2014, the
statutory provisions related to the definition of ``base operating DRG
payment amount'' under section 1886(q)(2)(B)(i) of the Act excluded the
difference between an MDH's applicable hospital-specific payment rate
and the Federal payment rate (referred to as the hospital-specific add-
on) from the definition of the base operating DRG payment amount. (MDHs
are paid based on the Federal rate or, if higher, the Federal rate plus
75 percent of the amount by which the Federal rate is exceeded by the
updated hospital-specific rate from certain specified base years.)
However, section 1886(q)(2)(B)(i) of the Act states that the exclusion
of the hospital-specific add-on from the base operating DRG payment
amount is only effective for MDHs with respect to discharges occurring
during FYs 2012 and 2013. Furthermore, section 1886(q)(2)(B)(ii) of the
Act requires that the definition of base operating DRG payment amount
exclude payments made under section 1886(d)(5)(B) of the Act (IME
payments). While a portion of the hospital-specific rate is related to
teaching services provided by teaching MDHs, we do not consider that
amount to be a payment under section 1886(d)(5)(B) of the Act. We
otherwise do not have authority to exclude the difference between the
hospital-specific payment rate for MDHs from the definition of base
operating DRG payment amount for discharges.
Therefore, in accordance with the statute, beginning in FY 2014,
the definition of ``base operating DRG payment amount'' includes the
difference between an MDH's applicable hospital-specific rate payment
and Federal rate payment (that is, the hospital-specific add-on). As a
result, in the calculation of the readmissions payment adjustment
factor, which is a ratio of a hospital's ``aggregate payments for
excess readmissions'' and a hospitals ``aggregate payments for all
discharges'', the base operating DRG payment amounts used in this
calculation for MDHs also includes the hospital-specific add-on, if
applicable. Furthermore, the statute specifies that the readmissions
payment adjustment factor is applied to the base operating DRG payment
amount for each Medicare FFS discharge in a Federal fiscal year.
Therefore, we are adopting our proposal as final, and for FY 2015,
the readmissions payment adjustment factor will be applied to the base
operating DRG payment amount, including the hospital-specific add on
for MDHs as applicable. This is consistent with the policy established
for the treatment of MDHs under the Hospital Readmissions Reduction
Program and the Hospital VBP Program for FY 2014 in the notice that
appeared in the Federal Register on June 17, 2014 (79 FR 34448 through
34449) that implemented the extension of the MDH program through
September 30, 2015, as provided by the PAMA. In that notice, we
explained that this change in the determination of base operating DRG
for MDHs consistent is with the section 1886(q)(2)(B)(i) of the Act,
and affects both the calculation of the readmission payment adjustment
factor and the payments reduced by the readmission payment adjustment
factor for MDHs that receive the hospital-specific add-on payment.
As noted previously, MDHs are paid the higher of the Federal rate
payment or Federal rate payment plus the hospital-specific add-on
payment on a per claim basis. At cost report settlement, the MAC
determines which of the payment options yields a higher aggregate
payment for an MDH, and also determines the final hospital-specific
add-on payment (if applicable) for that MDH for each cost reporting
period. Because a final payment determination for an MDH's cost
reporting period is not done until cost report settlement, if an MDH
ultimately receives the hospital-specific add-on (that is, its final
payment is determined to be the Federal rate payment plus 75 percent of
the amount by which the Federal rate payment is exceeded by the updated
hospital-specific rate payment), then additional adjustments under the
Hospital Readmissions Reduction Program will be made during cost report
settlement and not on the claim. If at cost report settlement an MDH
ultimately does not receive a hospital-specific add-on for the cost
reporting period (that is, its final payment is determined to be the
Federal rate payment only), then no additional adjustment (if otherwise
applicable) under the Hospital Readmissions Reduction Program will be
made.
Comment: Some commenters supported the proposed series of changes
to calculate the aggregate payments for excess readmissions for FY 2015
including the two additional conditions of COPD and TKA/THA.
Specifically, some commenters supported CMS' exclusions of admissions
to calculate aggregate payments for excess readmissions, most of which
conformed to the calculation exclusions of the individual measures.
Commenters supported CMS' proposals where index admissions that are not
considered readmissions for the purpose of the readmissions measures
and are excluded from the calculation of the excess readmission ratio,
would also be excluded from the admissions used to determine a
hospital's aggregate payments for excess readmissions, such as
exclusions for admissions for patients who did not have Medicare Part A
and B for 12 months prior to the admission or 3030 days after the
admission, as identified by linking MedPAR claims

[[Page 50048]]

files to the Medicare Enrollment Database (EDB). Some commenters
supported CMS' proposal to use of MedPAR data to calculate the
readmissions payment adjustment factors.
Response: We thank the commenters for their support of our proposed
methodology to calculate the readmission payment adjustment factors
with the inclusion of two additional readmissions measures of THA/TKA
and COPD, and we are finalizing the policies as proposed. The MedPAR
data we are finalizing to use to calculate the readmissions payment
adjustment factors for FY 2015 is specified above.
We note that we stated in the proposed rule (79 FR 28113) that, for
the final rule, applicable hospitals will have had the opportunity to
review and correct data from the proposed FY 2015 applicable period of
July 1, 2010 to June 30, 2013 before they are made public under our
policy regarding the reporting of hospital-specific information. In
previous years, the review and correction period occurred prior to the
publication of the final rule, and we published the final excess
readmission ratios and readmission payment adjustment factors on the
CMS IPPS Web site and the final readmission payment adjustment factors
in Table 15 in conjunction with the issuance of the final rule. Since
the publication of the proposed rule, we experienced unexpected delays
in the production of the excess readmission ratios, which has resulted
in a later than expected start to the 30-day review and corrections
period. For the data from the FY 2015 applicable period, the review and
corrections period will still be ongoing through August 19, 2014, which
extends beyond the issuance of this FY 2015 IPPS/LTCH PPS final rule.
As a result, in Table 15A listed in the Addendum of this final rule
(which is available only via the Internet on the CMS Web site), we are
providing proxy FY 2015 readmission payment adjustment factors, and are
posting the corresponding proxy excess readmission ratios, which are
based on the FY 2015 application period of July 1, 2010 to June 30,
2013, on the CMS IPPS Web site. After the completion of the review and
corrections process, we will publish the final FY 2015 readmissions
payment adjustment factors in Table 15B that will be effective for
determining payments for discharges occurring on or after October 1,
2014, and the corresponding final excess readmission ratios on the CMS
IPPS Web site. We expect the final FY 2015 readmissions payment
adjustment factors in Table 15B and the corresponding final excess
readmission ratios to be posted on the CMS IPPS Web site prior to
October 1, 2014.
After consideration of the public comments we received, we are
finalizing without modification our proposals pertaining to the
inclusion of THA/TKA and COPD readmissions measures to calculate
aggregate payments for excess readmissions beginning in FY 2015.
12. Hospital Readmissions Reduction Program Extraordinary Circumstances
Exceptions
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676), we indicated
that commenters had requested a potential waiver or exemption process
for hospitals located in areas that experience disasters or other
extraordinary circumstances, even though we had not proposed an
extraordinary circumstance exceptions/exemptions (ECE) policy for the
Hospital Readmissions Reduction Program. We noted that there are
several policy and operational considerations in developing a disaster
exemption process for the Hospital Readmissions Reduction Program.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117) we
welcomed public comment on whether an exemption process should be
implemented, and the policy and operational considerations for a
potential Hospital Readmissions Reduction Program ECE policy.
Comment: A few commenters supported the creation of an
extraordinary circumstance exemption process. The commenters
recommended that an extraordinary circumstance exemption process should
be allowed for hospitals that experience a natural disaster and should
also be applied to the payment year in which the date of the disaster
occurs because the Hospital Readmissions Reduction Program uses 2 years
of performance data that also overlaps with subsequent payment years.
Two commenters specifically indicated that the extraordinary
circumstance exemption process should be similar to the existing
Hospital VBP Program exceptions process. Finally, a commenter suggested
establishing a 90-day period, beginning with the date of the disaster,
for hospitals to submit a request for an exemption from the Hospital
Readmissions Reduction Program for a specific fiscal year. No
commenters made other recommendations on how to operationalize an
extraordinary circumstance exemption policy and supporting processes.
Response: We appreciate the input from the commenters. We will take
into consideration these recommendations as we consider whether an
exemption process for the Hospital Readmissions Reduction Program
should be implemented.

I. Hospital Value-Based Purchasing (VBP) Program

1. Statutory Background
Section 1886(o) of the Act, as added by section 3001(a)(1) of the
Affordable Care Act, requires the Secretary to establish a hospital
value-based purchasing program (the Hospital Value-Based Purchasing
(VBP) Program) under which value-based incentive payments are made in a
fiscal year to hospitals that meet performance standards established
for a performance period for such fiscal year. Both the performance
standards and the performance period for a fiscal year are to be
established by the Secretary.
Section 1886(o)(1)(B) of the Act states that the Hospital VBP
Program applies to payments for hospital discharges occurring on or
after October 1, 2012. In accordance with section 1886(o)(6)(A) of the
Act, we are required to make value-based incentive payments under the
Hospital VBP Program to hospitals that meet or exceed performance
standards for a performance period for a fiscal year. As further
required by section 1886(o)(6)(C)(ii)(I) of the Act, we base each
hospital's value-based payment percentage on the hospital's Total
Performance Score (TPS) for a specified performance period. In
accordance with section 1886(o)(7) of the Act, the total amount
available for value-based incentive payments for a fiscal year will be
equal to the total amount of the payment reductions for all
participating hospitals for such fiscal year, as estimated by the
Secretary. For FY 2014, the available funding pool was equal to 1.25
percent of the base-operating DRG payments to all participating
hospitals, as estimated by the Secretary. The size of the applicable
percentage has increased to 1.50 percent for FY 2015 and will increase
to 1.75 percent for FY 2016, and to 2.0 percent for FY 2017 and
successive fiscal years.
Section 1886(o)(1)(C) of the Act generally defines the term
``hospital'' for purposes of the Hospital VBP Program as a subsection
(d) hospital (as that term is defined in section 1886(d)(1)(B) of the
Act), but excludes from the definition of the term ``hospital,'' with
respect to a fiscal year: (1) A hospital that is subject to the payment
reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital
IQR Program) for such fiscal

[[Page 50049]]

year; (2) a hospital for which, during the performance period for the
fiscal year, the Secretary has cited deficiencies that pose immediate
jeopardy to the health or safety of patients; and (3) a hospital for
which there are not a minimum number (as determined by the Secretary)
of measures that apply to the hospital for the performance period for
the fiscal year involved, or for which there are not a minimum number
(as determined by the Secretary) of cases for the measures that apply
to the hospital for the performance period for such fiscal year.
2. Overview of Previous Hospital VBP Program Rulemaking
We refer readers to the Hospital Inpatient VBP Program final rule
(76 FR 26490 through 26547), FY 2012 IPPS/LTCH PPS final rule (76 FR
51653 through 51660), CY 2012 OPPS/ASC final rule with comment period
(76 FR 74527 through 74547), FY 2013 IPPS/LTCH PPS final rule (77 FR
53567 through 53614), FY 2014 IPPS/LTCH PPS final rule (78 FR 50676
through 50707), and CY 2014 OPPS/ASC final rule with comment period (78
FR 75120 through 75121) for further descriptions of our policies for
the Hospital VBP Program.
We have also codified certain requirements for the Hospital VBP
Program at Title 42, Sections 412.160 through 412.167 of our
regulations.
3. FY 2015 Payment Details
a. Payment Adjustments
Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce
the base operating DRG payment amount for a hospital for each discharge
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A)
of the Act, the sum total of these reductions in a fiscal year must
equal the total amount available for value-based incentive payments for
all eligible hospitals for the fiscal year, as estimated by the
Secretary. We finalized details on how we would implement these
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573) and refer readers to that rule for further details.
Under section 1886(o)(7)(C)(iii) of the Act, the applicable percent
for the FY 2015 Hospital VBP Program is 1.50 percent. In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28117 through 28118), using the
methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53571 through 53573), we estimated that the total amount available for
value-based incentive payments for FY 2015 was $1.4 billion, based on
the December 2013 update of the FY 2013 MedPAR file. We stated that we
intended to update this estimate for the FY 2015 IPPS/LTCH PPS final
rule, using the March 2014 update of the FY 2013 MedPAR file. Based on
the March 2014 update of the FY 2013 MedPAR file, we continue to
estimate that the amount available for value-based incentive payments
for FY 2015 is $1.4 billion.
As finalized in the FY 2013 IPPS/LTCH PPS final rule, we will
utilize a linear exchange function to translate this estimated amount
available into a value-based incentive payment percentage for each
hospital, based on its TPS. We will then calculate a value-based
incentive payment adjustment factor that will be applied to the base
operating DRG payment amount for each discharge occurring in FY 2015,
on a per-claim basis. We noted in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28117-28118) that we were publishing proxy value-based
incentive payment adjustment factors in Table 16 of that proposed rule
(which is available via the Internet on the CMS Web site). The proxy
factors are based on the TPSs from the FY 2014 Hospital VBP Program.
These FY 2014 performance scores are the most recently available
performance scores that hospitals have been given the opportunity to
review and correct. The slope of the linear exchange function used to
calculate those proxy value-based incentive payment adjustment factors
was 2.0952951561. This slope, along with the estimated amount available
for value-based incentive payments, was also published in Table 16.
We stated that we intended to update this table as Table 16A in
this final rule (which will be available via the Internet on the CMS
Web site) to reflect changes based on the March 2014 update to the FY
2013 MedPAR file. We also stated that we intended to update the slope
of the linear exchange function used to calculate those updated proxy
value-based incentive payment adjustment factors. The slope of the
linear exchange function used to calculate those updated proxy value-
based incentive payment adjustment factors is 2.0950773214. The updated
proxy value-based incentive payment adjustment factors for FY 2015
continue to be based on historic FY 2014 Program TPSs because hospitals
will not have been given the opportunity to review and correct their
actual TPSs for the FY 2015 Hospital VBP Program until after this FY
2015 IPPS/LTCH PPS final rule is published. After hospitals have been
given an opportunity to review and correct their actual TPSs for FY
2015, we will add Table 16B (which will be available via the Internet
on the CMS Web site) to display the actual value-based incentive
payment adjustment factors, exchange function slope, and estimated
amount available for the FY 2015 Hospital VBP Program. We expect that
Table 16B will be posted on the CMS Web site in October 2014.
We received a number of public comments on our stated intention to
update Table 16 as Table 16A for the final rule:
Comment: Commenters found Table 16 misleading and urged CMS to
adopt a change in the process that would allow for a more meaningful
release of information in the proposed rule on Hospital VBP
performance. Specifically, commenters stated that Table 16 is not
useful to hospitals that attempt to assess their performance in
comparison to others when CMS has added or removed new measures and
changed the domain weights. As a result, commenters urged CMS to
calculate proxy factors using the updated measures and domain weights
finalized in last year's rule for FY 2015 so that hospitals are not
forced to rely on data provided to them from other entities, such as
State hospital associations that provide updated information to their
members.
Response: While we understand commenters' concerns with comparing
Hospital VBP performance information across program years, we make
these calculations using the most recently-available performance data
that hospitals have had the opportunity to review, which at the time of
the IPPS/LTCH PPS rule's publication does not include the scoring data
for the next fiscal year. We do not believe it would be useful to
publish proxy factors using domain weights finalized for the next
fiscal year without the corresponding performance scoring data from the
same program year because that action would mix policies between fiscal
years, which is why we have adopted the practice of calculating proxy
factors from the previous year. We believe that these calculations
represent the most accurate data available at the time of the final
rule's publication and appropriately reflect policies for a single
program year.
b. Base Operating DRG Payment Amount Definition for Medicare-Dependent,
Small Rural Hospitals (MDHs)
Section 106 of Public Law 113-93, the Protecting Access to Medicare
Act of 2014 (PAMA), extended the MDH program through March 31, 2015. We
note that that the special treatment for MDHs under section
1886(o)(7)(D)(ii)(I) of the Act, with regard to definition of base
operating DRG payment amount,

[[Page 50050]]

does not apply to discharges occurring after FY 2013.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28118), for FY
2015 and subsequent years, for purposes of calculating the payment
adjustment factors and applying the payment methodology, we proposed
that the base operating DRG payment amount for MDHs will include the
difference between the hospital-specific payment rate and the Federal
payment rate (as applicable). We also proposed to revise the definition
of ``base operating DRG payment amount'' in section 412.160 paragraph
(2) of our regulations to reflect this change. We welcomed comments on
this proposal.
Comment: One commenter opposed CMS' proposal to revise the
definition of base operating DRG payment amount for MDHs to include the
difference between the hospital-specific payment rate add-on payment
amount and the Federal payment rate, noting that for teaching MDHs, the
hospital-specific rate add-on payment amount is inclusive of costs
associated with teaching and that the inclusion of such payment would
violate the Affordable Care Act. This commenter requested that CMS
maintain the current definition of base operating DRG payment amount,
which excludes this additional hospital-specific payment rate amount.
Response: We disagree with this comment. Section
1886(o)(7)(D)(i)(II) of the Act requires that the definition of base
operating DRG payment amount exclude payments made under section
1886(d)(5)(B) of the Act. While a portion of the hospital-specific rate
is related to teaching services provided by teaching MDHs, we do not
consider that amount to be a payment under section 1885(d)(5)(B) of the
Act. We do not believe that we have authority to exclude the difference
between the hospital-specific payment rate and the Federal payment rate
for MDHs from the definition of base operating DRG payment amount for
discharges after FY 2013.
We did not receive any public comments on the corresponding
proposed regulatory revision at 42 CFR 412.160.
After consideration of the public comments we received, we are
finalizing our policy, as proposed, to revise the definition of ``base
operating DRG payment amount'' for MDH to include the difference
between the hospital-specific payment rate and the Federal payment rate
(as applicable). We also are finalizing the revision to the definition
of ``base operating DRG payment amount'' in section 412.160, paragraph
(2), of our regulations, as proposed.
We also received a number of general comments on the Hospital VBP
Program:
Comment: Commenters asked that CMS to clarify why CMS did not
address FY 2018 Hospital VBP Program requirements in the proposed rule.
Response: We adopted certain FY 2018 policies related to claims-
based measures that require a long performance period in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50692 through 50694 and 50698 through
50699). For the same reason, we are adopting certain policies related
to FY 2019 and FY 2020 measures in this final rule. We intend to
propose additional FY 2018 policies, including additional measures,
performance periods, performance standards, and other policies in
future rulemaking.
Comment: One commenter expressed concern about the instability and
changing requirements of the Hospital VBP Program. The commenter was
especially concerned that 60 percent of the measures are calculated
based on coding that could result in inaccurate measure rates. The
commenter suggested that there be some sort of validation for hospitals
performing well to assure that coding practices are being met.
Response: As discussed in the Hospital Inpatient VBP Program final
rule (76 FR 26537 through 26538), we have finalized a policy under
which we will use the validation process that we use for the Hospital
IQR Program to ensure that Hospital VBP data are accurate. As we
described in that final rule, we view the Hospital IQR Program's
validation processes as sufficient to ensure that Hospital VBP Program
data are accurate, and we intend to continue working with stakeholders
to develop additional validation processes as necessary to ensure data
accuracy for the Hospital VBP Program.
Comment: One commenter urged CMS to put measures in place prior to
affecting Medicare payments. The commenter suggested the best way to
improve patient care is to ``put into practice'' a measure and track it
over time. According to the commenter, if there is no improvement in
the results, the measure could then be included in the Hospital VBP
Program.
Response: We interpret the comment as suggesting that we adopt
measures for reporting purposes prior to adopting them under the
Hospital VBP Program. We note that we can only select measures for the
Hospital VBP Program that have been specified under the Hospital IQR
Program and publicly reported on the Hospital Compare Web site.
However, we appreciate the suggestion that we track measures over time
before adopting them for the Hospital VBP Program to ensure that these
measures will serve the goals of the program, and we will take the
suggestion into consideration as we develop future policies.
Comment: Commenters strongly supported CMS' removal of process
measures that use chart-abstracted data and supported the use of
outcomes measures.
Response: We thank the commenters for their support.
Comment: One commenter urged CMS to return a hospital's ``carve-
out'' if the hospital is deemed ineligible for the Hospital VBP Program
as a result of the policy by which CMS requires that hospitals submit a
minimum number of cases and measures across domains in order to receive
a Total Performance Score.
Response: Hospitals that are excluded from the Hospital VBP Program
for a fiscal year for any reason do not have the applicable percentage
withheld from their base operating DRG payment amounts.
Comment: Several commenters stated that they do not believe 2
percent of the amount of Medicare hospital payments is significant
enough to drive value-based change in the system. A few commenters
suggested that CMS consider alternative ways to align Medicare payments
with the policies developed in the Hospital VBP Program to promote more
change.
Response: The statute ultimately caps the Hospital VBP Program's
funding at 2 percent of base-operating DRG payment amounts, and we view
this amount as substantial enough to provide significant incentives to
hospitals to improve the quality of care they provide to Medicare
beneficiaries.
Comment: Several commenters supported CMS' efforts to align the
Hospital VBP Program with existing hospital and physician quality
reporting initiatives, including the Physician Value-Based Modifier
(VM) Program. One commenter stated that the programs should encourage
consistent quality throughout the continuum of care.
However, one commenter cautioned CMS in its goal of increasing
alignment between the Hospital VBP and physician quality reporting
initiatives because, despite generally supporting alignment between
Medicare reporting requirements to decrease the administrative burden
on providers, the commenter expressed concern that the Medicare
Spending per Beneficiary

[[Page 50051]]

(MSPB) measure is inappropriate for inclusion in the physician quality
reporting programs.
Response: We will consider possible policies aimed at aligning our
quality programs across different care settings in future rulemaking.
We disagree, however, that the MSPB measure is generally inappropriate
for inclusion in physician quality reporting programs. We view measures
of efficiency like MSPB as critical components of quality measurement
and pay-for-performance programs.
Comment: One commenter suggested that CMS adopt more specific
achievement thresholds and benchmarks to draw comparisons between
hospitals of similar size, with similar access to technology,
specialized staff, and patient populations.
Response: We do not believe that these types of specific
adjustments to Hospital VBP Program performance standards are feasible
at this time. To implement this change, we would need to incorporate
detailed adjustment methodologies in each of the measures that we have
adopted for the Hospital VBP Program. We do not believe we have
sufficient data on the various comparison points that the commenter
suggests to create separate Hospital VBP Program performance standards
for different types of hospitals at this time.
Moreover, the Hospital VBP Program's scoring methodology, based on
several years' research and policy development, is designed to provide
incentives to hospitals based on national performance metrics. As
discussed further below, we continue to believe that the scoring
methodology appropriately holds hospitals accountable based on
established and well-understood metrics. However, we may consider
adjustments of the type the commenter suggests in the future as more
data becomes available for analyses.
4. Measures for the FY 2017 Hospital VBP Program
a. Measures Previously Adopted
In the FY 2013 IPPS/LTCH PPS final rule, we finalized our proposal
to readopt measures from the prior program year for each successive
program year, unless proposed and finalized otherwise (for example,
because one or more of the measures is ``topped-out'' or for other
policy reasons). We stated our belief that this policy would facilitate
measure adoption for the Hospital VBP Program for future years, as well
as align the Hospital VBP Program with the Hospital IQR Program (77 FR
53592). The FY 2016 Hospital VBP Program includes the following
measures:

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

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

We received a number of comments on measures that we have
previously adopted for the Hospital VBP Program.
Comment: Several commenters urged CMS to consider updating and
researching the HCAHPS Survey as a whole because the measure has been
used for over a decade and the technology and tools have changed in
this period of time. Several commenters stated that less expensive
survey administration modes should be available to minimize survey
costs for participating hospitals. One commenter noted that the methods
for delivering the survey are outdated given today's Internet-based
society.
Response: While the HCAHPS Survey has been in use for nearly a
decade, we continually review the survey and, when warranted, make
changes to improve its content, implementation and data submission
processes, and public reporting of its results. For instance, in recent
years we added five new survey items, including the Care Transition
Measure, made the patient-mix adjustment for `language spoken at home'
more granular to account for differences among speakers of major
languages, investigated the suitability of new modes of survey
administration, and made survey results and analytical tools available
to the public via downloadable databases on CMS Web sites. We
continually examine and

[[Page 50052]]

refine HCAHPS protocols for survey implementation, oversight, and
public reporting to maintain the integrity of the survey and increase
the usefulness and accessibility of its results. We will continue to
asses, analyze and improve the HCAHPS Survey to increase its value to
consumers and hospitals.
With regard to comments urging us to update the HCAHPS tool, we
note that the HCAHPS Survey was purposely designed to accommodate, to
the degree possible, the variety of patient survey methodologies
hospitals employed prior to the introduction of HCAHPS. Thus, the
HCAHPS Survey was made available in four modes of survey administration
(mail only; telephone only; mail with telephone follow-up; and Active
Interactive Voice Response modes). Hospitals are given the option to
either self-administer the survey or engage an approved survey vendor,
of which several dozen are listed on the official HCAHPS On-Line Web
site, www.HCAHPSonline.org. In addition, hospitals are permitted to add
their own supplemental items to the survey.
We are sensitive to the costs of survey administration, especially
as patient experience surveys become a standard element of quality
improvement and public reporting programs for other types of healthcare
providers. In 2008, we conducted a large-scale mode experiment to test
the suitability of a Web-based mode of the HCAHPS Survey and concluded
that a number of factors, including unavailability of email addresses
for a substantial portion of the hospital patient population and low
response rates, preclude the adoption of a Web-based mode at this time.
We will continue to monitor and periodically evaluate the suitability
of alternative, electronic survey modes. We are continuing to look at
this issue. In particular, we are tracking access to the Internet among
the elderly and minority populations since currently access to the
Internet is lower for these critical populations that participate in
our surveys.\38\
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\38\ ``A Randomized Experiment Investigating the Suitability of
Speech-Enabled IVR and Web Modes for Publicly Reported Surveys of
Patients' Experience of Hospital Care.'' M.N. Elliott, J.A. Brown,
W.G. Lehrman, M.K. Beckett, K. Hambarsoomian, L.A. Giordano and E.
Goldstein. Medical Care Research and Review. 70: 165-184. 2013.
---------------------------------------------------------------------------

Comment: Several commenters expressed concerns about the
sufficiency of the risk adjustment of the HCAHPS composite measures.
One commenter pointed out that research shows that high-acuity patients
score their patient experience at a lower level, systematically
disadvantaging hospitals that take on complex and sicker patients, and
suggested that CMS incorporate additional adjustments to account for
patients' illness severity. One commenter urged CMS to further research
broad improvements to the HCAHPS survey delivery and adjustment
methodologies. A few commenters suggested that CMS exclude HCAHPS
scores from the Hospital VBP Program until risk-adjustments are updated
and its validity has been determined.
Response: Research on health care providers indicates that a number
of quality measures differ on a regional basis, which is indicative of
true differences that should not be obscured by data adjustment.
CMS and the HCAHPS Project Team are familiar with the studies
commenter cited. We also are aware of a number of studies published in
peer-reviewed journals that have found that patient experience of care,
as measured by the HCAHPS Survey, is strongly and positively related to
clinical process measures, outcomes, readmissions, and mortality. For
brief reviews of these findings, we refer readers to: ``The Patient
Experience and Health Outcomes'' \39\ and ``What does the patient know
about quality?'' \40\
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\39\ Matthew Manary, William Boulding, Richard Staelin, and Seth
Glickman. New England Journal of Medicine, 368 (3): 201-203. 2013.
\40\ Karen Luxford. International Journal for Quality in Health
Care. 24 (5): 439-440. 2012.
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With respect to the articles cited by the commenter, we note that
other researchers have cited flaws in the approach, data and
methodology employed in the Fenton, et al., study, which did not
directly examine the HCAHPS Survey. The study by Lyu, et al. is
premised upon the misunderstanding that we use patient experience as
the sole criterion for measuring and assessing hospital quality. In
addition, their findings, based on examination of 31 hospitals, may
insufficiently represent the over 3,000 hospitals that participate in
the Hospital VBP Program and the approximately 4,000 hospitals that
participate in the Hospital IQR Program.
In addition, a recent national study found a significant positive
relationship between patient experience of care and surgical quality,
which suggests that incentives to improve surgical patient experience
and surgical quality are aligned.\41\
---------------------------------------------------------------------------

\41\ Tsai, et al. ``Patient Satisfaction and Quality of Surgical
Care in US Hospitals.'' Annals of Surgery, 2014.
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Comment: One commenter suggested that CMS separate the Cleanliness
& Quietness dimension on the HCAHPS Survey, stating that it would be
more helpful for consumers to know which element is driving hospitals'
performance and improvement in those areas.
Response: ``Hospital Environment'' is one of eight equally-weighted
dimensions in the Patient Experience of Care Domain of the Hospital VBP
Program. The Hospital Environment dimension is itself composed of two
equally-weighted measures from the HCAHPS Survey: Percent of patients
who responded ``Always'' to the hospital cleanliness item, and percent
of patients who responded ``Always'' to the hospital quietness item.
Therefore, the Hospital Environment dimension assigns 5 points to each
of the environment measures. The Hospital Environment dimension is
given the same weight in Hospital VBP Program as other key HCAHPS
measures, such as Communication with Nurses, and Discharge Information
(``A Step-by-Step Guide to Calculating the Patient Experience of Care
Domain Score in the Hospital Value-Based Purchasing FY 2013 Actual
Percentage Payment Summary Report,'' available on HCAHPS On-Line Web
site at: https://www.hcahpsonline.org/HospitalVBP.aspx.) While the two
environment measures have been combined in the Hospital VBP Program,
consumers can see how hospitals perform on cleanliness and quietness
separately by examining the measure scores posted on the Hospital
Compare Web site.
Comment: One commenter urged CMS to reevaluate the validity of
questions used on the HCAHPS Survey related to pain management,
including whether the survey appropriately reflects patient
satisfaction and whether or not it may encourage inappropriate
treatment. The commenter expressed concern about the abuse of opioid
pain relievers in hospital settings. The commenter explained that the
HCAHPS Survey principally focuses on effective use of pharmacotherapy,
which may be consistent with the patient's wishes but is not always in
his or her best interest.
Response: The Pain Management domain is derived from three items on
the HCAHPS Survey. It is important to note that the HCAHPS Survey is
designed to capture and report patient experience of care at the
hospital level, not at the level of physician, and that only adult
inpatients are eligible for the HCAHPS Survey (emergency room patients
would be eligible for the survey only if they were subsequently
admitted as inpatients). The HCAHPS sampling protocol does not support
reliable measurement of performance at the physician level. Any use of
the

[[Page 50053]]

HCAHPS Survey to evaluate individual physicians is inconsistent with
our guidance.
We understand and share the commenter's concerns about the rising
level of abuse of opioid pain relievers in the United States. The
HCAHPS Survey includes three questions about pain control to measure
and publicly report patient experience with this common, yet critical,
aspect of hospitalization; and neither the patient nor the physician(s)
is identified in survey data submitted to CMS. Pain control is an
important part of patient care in a hospital and should be evaluated at
the hospital level. There are non-opioid options for pain control that
many hospitals use.
All items on the HCAHPS Survey have been carefully constructed and
tested, both in the field and in focus groups of patients and
caregivers.\42\ The statistical reliability of the Pain Management
domain was 0.80 in 2013.
---------------------------------------------------------------------------

\42\ Sofaer, et al., Health Services Research, 40: 6, 2018-2036.
2005.
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We share the commenter's commitment to reducing abuse of opioids
and will reach out to hospitals and physicians to help them more fully
understand the capacities and limits of the HCAHPS Survey in this
regard and will pursue further research on the wording of the pain
management items in the HCAHPS Survey.
Comment: One commenter proposed replacing the MSPB measure with the
NQF-endorsed Relative Resource Use (RRU) measure, or a measure designed
to track health care resource use by providers, health plans, or other
units for individuals having one of five chronic diseases (COPD,
cardiovascular disease, diabetes, asthma, and hypertension).
Response: We disagree that the MSPB should be replaced with an RRU
measure. We note that the MSPB measure is also NQF-endorsed. Inclusion
of an overall measure of cost is an essential complement to the
condition-specific measures included in the clinical process of care
and outcomes domains. Relying on condition-specific measures alone,
such as RRU measures, would disregard differences in overall cost. The
MSPB measure is reported as a ratio of the payment-standardized, risk-
adjusted MSPB amount for each hospital divided by the weighted median
MSPB amount across all hospitals. As discussed in section IV.I.6.b. of
the preamble of this final rule (Possible Future Efficiency and Cost
Reduction Domain Measure Topics), we are considering expansion of the
Efficiency and Cost Control domain to include six condition-specific
Medicare payment measures (three medical and three surgical condition-
specific episodes) in addition to the MSPB measure and would do so
through public notice and comment rulemaking.
Comment: Several commenters recommended that CMS refine its
policies on risk-adjustment in the MSPB and other measures to include
socioeconomic status because a patient's socioeconomic status affects
clinical outcomes.
Commenters explained that comorbidities, socioeconomic status, and
sociodemographic factors are major determinants of outcomes, and
penalizing physicians and hospitals for readmissions of the most
chronically ill patients without proper risk adjustment could provide
unintended negative consequences. Commenters stated that, without a
risk-adjustment factor, hospitals treating these patients become
subject to penalizations for readmissions not related to the care
provided as well as penalizations for extending an inpatient stay in
order to better optimize the patient's health status. Further,
commenters suggested that hospitals that serve a disproportionate share
of these patients could conceivably do the most to improve their health
status but are disproportionately penalized without a risk adjustment.
One commenter suggested that CMS examine NQF's Risk Adjustment for
Socioeconomic Status or Other Sociodemographic Factors Draft Report for
determining the appropriate risk adjustment methodology for the
Hospital VBP Program. (Draft Report available at: https://www.qualityforum.org/Risk_Adjustment_SES.aspx.) Another commenter
strongly supported the recommendations contained in the draft report
and urged CMS to accordingly modify its risk-adjustment methodology to
include such factors.
Response: We appreciate these comments and the importance of the
role that SES plays in the care of patients. With regard to the MSPB
measure's risk adjustment specifically, we note that the MSPB measure
was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51619
through 51627). In that rule, we addressed concerns about risk
adjustment. We are aware that there are differing opinions regarding
our current approach in risk-adjusting measures in the Hospital
Readmissions Reduction Program for SES. We note that the readmission
measures aim to reveal differences related to the quality of care
provided. We believe that quality of care received by patients of lower
SES contributes at least in part to the observed association between
SES status and the readmissions rate. We continue to have concerns
about holding hospitals to different standards for the outcomes of
their patients of low SES--we do not want to mask potential disparities
or minimize incentives to improve the outcomes of disadvantaged
populations.
We routinely monitor the impact of SES on hospitals' results. To
date, we have found that hospitals that care for large proportions of
patients of low SES are capable of performing well on our measures (see
the 2013 Medicare Hospital Quality Chart Book on pages 46 through 53
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf). Previous analyses presented at the NQF during
endorsement proceedings of the Hospital-Wide All-Cause Unplanned
Readmission Measure (available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70813) also show that
adding SES to the risk-adjustment has a negligible impact on hospitals'
risk-standardized rates. The risk adjustment for clinical factors
likely captures much of the variation due to SES, therefore resulting
in an attenuation of the impact of SES factors on hospitals' results.
We continue to monitor related activities at NQF, such as the July
23, 2014 decision by the NQF Board in which the Board approved a trial
period to test the impact of sociodemographic factor risk adjustment of
performance measures (available at: https://www.qualityforum.org/Press_Release/2014/NQF_Board_Approves_Trial_Risk_Adjustment.aspx), and
in Congress. As we stated in the past, we are committed to working with
the NQF and other stakeholder communities to continuously refine our
measures and to address the concerns associated with SES and risk
adjustment. We believe that continued collaboration with the
stakeholder communities will enable us to identify feasible ways to
appropriately address any unintended consequences for providers serving
high proportions of low-SES patients.
Comment: Some commenters expressed concern about the influence of
factors that are outside the hospital's control on the MSPB measure and
the lack of associated quality or outcome measures. One of these
commenters stated that any measures focusing exclusively on cost such
as the MSPB measure create incentives to reduce services in ways that
adversely affect patient outcomes and that such cost

[[Page 50054]]

measures also create disincentives to adopt new technologies.
One commenter expressed concern that the measure does not track the
frequency of hospitalization, noting that a community that reduces
avoidable hospitalizations may experience higher per-hospitalization
costs, even if overall costs go down.
Response: Regarding the commenters' concern with the degree of the
hospital's control over the MSPB measure, we continue to disagree that
care furnished to beneficiaries after they are discharged from an acute
care hospital is outside of the hospital's control. As we stated in the
FY 2012 IPPS/LTCH PPS final rule, we believe that hospitals that
provide quality inpatient care, conduct appropriate discharge planning,
and work with providers and suppliers on appropriate follow-up care can
achieve efficiencies and perform well on the measure (76 FR 51621).
Regarding the comment that the MSPB measure does not account for
quality, we continue to agree that it is beneficial to view a cost
measure in light of other quality measures. We do not believe that a
including measure of cost, independent of quality in the Hospital VBP
Program, would result in a reduction of needed services or in a
disincentive to develop new technologies, because as we stated in the
FY 2012 IPPS/LTCH PPS final rule, for purposes of the Hospital VBP
Program, we will weight and combine the Efficiency and Cost Control
domain with the other domain scores, in order to calculate each
hospital's TPS, ensuring that that MSPB and any other Efficiency and
Cost Control Domain measures we adopt make up only a portion of the TPS
and that the remainder is based on hospitals' performance on the other
quality measures (76 FR 51622). As we stated in the FY 2013 IPPS/LTCH
PPS final rule, section 1886(o)(2)(B)(ii) of the Act expressly requires
the inclusion of ``measures of Medicare spending per beneficiary'' in
the Hospital VBP Program. We do not believe that the MSPB measure
itself should assess both cost and quality. We believe that a inclusion
of a distinct measure of cost, independent of quality, as part of the
Hospital VBP Program enables us to identify hospitals involved in the
provision of high quality care at a lower cost to Medicare (77 FR
53586).
With regard to tracking the frequency of hospital admissions, we do
not believe that the measure would adversely affect communities
involved in minimizing hospitalizations because the risk adjustment
takes into account the severity of illness of hospitalized
beneficiaries so that hospitals admitting more complex patients would
have their Medicare spending compared to the expected spending for
similarly complex patients.
Comment: One commenter recommended that CMS delay any further
implementation of the MSPB measure until after the Physician VM Program
is implemented, stating that hospitals should not be expected to bear
the consequences of physicians' decisions.
Response: We agree that alignment of incentives across programs is
important. In the CY 2014 Physician Fee Schedule final rule (78 FR
74774 through 74780), we finalized the inclusion of the MSPB amount in
the cost composite portion of the physician value-based modifier (VM),
beginning with the 2016 VM. We do not believe that it would be
appropriate to suspend the further use of the MSPB measure until after
the VM is implemented.
We continue to believe, as we stated in the FY 2012 IPPS/LTCH PPS
final rule, that the MSPB measure is an important step in encouraging
hospitals to redesign and coordinate care with other providers and
suppliers of care, and that its timely implementation is critical to
incentivizing hospitals to provide the highest-quality, most efficient
care possible to Medicare beneficiaries (76 FR 51657).
Comment: One commenter expressed concern that the MSPB measure
overlaps conceptually with the Hospital Readmissions Reduction Program,
as hospitals are already being penalized for excessive readmissions
under that program. The commenter urged CMS to reevaluate the MSPB
measures so that CMS does not place disproportionate domain weighting
on spending outside of hospitals' control.
Response: We disagree that the MSPB measure inappropriately
overlaps with measures used in the Hospital Readmissions Reduction
Program. As we stated in the FY 2012 IPPS/LTCH PPS final rule, the MSPB
measure is not a measure of readmission rates, but rather it is a
measure of total Medicare spending per beneficiary, relative to a
hospital stay. A Medicare spending per beneficiary measure is required
by the section 1886(o)(2)(B)(ii) of the Act to be included in the
Hospital VBP Program, and therefore, in the Hospital IQR Program. We
also continue to believe that the Medicare payments made for
readmissions must be attributable to the index hospital stay, in order
to: fully capture Medicare spending relative to a hospital stay;
encourage the provision of comprehensive inpatient care, discharge
planning, and follow-up; and strengthen incentives to reduce
readmissions (76 FR 51621).
We further disagree, as we stated earlier, that the MSPB measure
represents services that are outside of the hospital's control. As we
stated above, and in the FY 2012 IPPS/LTCH PPS final rule, we believe
that hospitals that provide quality inpatient care, conduct appropriate
discharge planning, and work with providers and suppliers on
appropriate follow-up care can achieve efficiencies and perform well on
the measure (76 FR 51621).
We thank commenters for this feedback.
b. Changes Affecting ``Topped-Out'' Measures
(1) Removal of Six ``Topped-Out'' Measures
For the FY 2017 Hospital VBP Program measure set, we evaluated
whether any measures that we previously adopted are now ``topped-out''
by focusing on two criteria: (1) national measure data showing
statistically indistinguishable performance levels at the 75th and 90th
percentiles; and (2) national measure data showing a truncated
coefficient of variation (TCV) less than 0.10. We refer readers to the
Hospital Inpatient VBP Program final rule (76 FR 26496 through 26497)
for further discussion of these current ``topped-out'' criteria and to
our proposal below to modify the second criterion.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119), based on
our evaluation of the most recently available data, we stated our
belief that PN-6, SCIP-Card-2, SCIP-Inf-2, SCIP-Inf-3, SCIP-Inf-9, and
SCIP-VTE-2 are all now ``topped-out.'' Therefore, we proposed to remove
these six measures from the FY 2017 Hospital VBP measure set because
measuring hospital performance on these measures will have no
meaningful effect on a hospital's TPS. We believe that removing these
``topped-out'' measures will continue to ensure that we make valid
statistical comparisons through our finalized scoring methodology and
will reduce the reporting burden on participating hospitals.
We welcomed public comments on this proposal.
Comment: Many commenters supported CMS' proposal to remove
``topped-out'' measures, expressing appreciation for our efforts to
streamline the program.
Response: We thank the commenters for their support.
Comment: One commenter suggested that CMS flag additional measures
that

[[Page 50055]]

are approaching ``topped-out'' status in future rulemaking.
Response: We thank the commenter for this suggestion and will take
it into consideration in future rulemaking.
Comment: Commenters urged caution with CMS' proposed removal of
``topped-out'' measures, stating that several are only recently
``topped-out.'' Commenters also suggested that CMS consider adding more
measures to the Hospital VBP Program to make up for the proposed
removal of ``topped-out'' measures and to ensure that no single measure
has a disproportionate impact on hospital performance in more than one
program.
Response: We will consider new measures as they become eligible for
inclusion in the Hospital VBP Program.
Comment: One commenter suggested that identified ``topped-out''
measures remain available in other reporting programs because the
commenter believes that reporting these six specific measures has
contributed to recent increases and emphasis on improved healthcare
quality in hospitals, with a significant impact on local improvement
efforts.
Response: While we appreciate commenter's observation that quality
reporting has contributed to improved healthcare quality in hospitals,
we believe that topped-out measures should be assessed to supplement a
clinically-based assessment of the measure's impact on a clinical topic
or domain.
Comment: Commenters supported the removal of the ``topped-out''
measures but expressed confusion at why the measures will not be
removed sooner than 2017.
Response: We evaluate the Clinical Care--Process Domain measures
for ``topped-out'' status on an annual basis in order to propose
changes, if necessary, during the rulemaking process, and we do not
believe it would be helpful to participating hospitals to remove
measures that have been previously adopted for the Program in previous
rulemakings. We note that, for example, we are currently in the middle
of the Clinical Process of Care domain's performance period for the FY
2016 Hospital VBP Program, which was adopted as CY 2014. We do not
believe it would be helpful to hospitals to attempt to retire a measure
in the middle of their performance period, barring substantial
extenuating circumstances. We believe removing these measures for the
FY 2017 Hospital VBP Program, adopted with a CY 2015 performance
period, is most feasible.
Comment: Some commenters suggested that CMS retire measures when
their evidentiary basis has changed, when the collection and
measurement costs exceed their utility, or when measures have been
demonstrated to have minimal impact on health outcomes and status.
Response: We thank the commenters for their suggestions, and may
consider additional ``topped-out'' criteria in future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal to remove PN-6, SCIP-Card-2, SCIP-Inf-2, SCIP-
Inf-3, SCIP-Inf-9, and SCIP-VTE-2 from the FY 2017 measure set due to
their being ``topped-out.''
(2) Change to Truncated Coefficient of Variation Criterion to Determine
Whether a Measure is ``Topped-Out''
As stated above, we have adopted two criteria for determining the
``topped-out'' status of Hospital VBP Program measures:
Statistically indistinguishable performance at the 75th
and 90th percentiles; and
Truncated coefficient of variation < 0.10.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119), we
proposed to modify the second criterion to the following:
Truncated coefficient of variation <= 0.10.
The coefficient of variation (CV) is a common statistic that
expresses the standard deviation as a percentage of the sample mean in
a way that is independent of the units of observation. Applied to this
analysis, a large CV would indicate a broad distribution of individual
hospital scores, with large and presumably meaningful differences
between hospitals in relative performance. A small CV would indicate
that the distribution of individual hospital scores is clustered
tightly around the mean value, suggesting that it is not useful to draw
distinctions among individual hospitals' measure performance. By
proposing to change the truncated CV from ``less than'' to ``less than
or equal to'' 0.10 under our ``topped-out'' test, we will better be
able to distinguish measures with significant variation in performance
among hospitals and more accurately determine what measures are
``topped-out'' for purposes of the Program.
We welcomed public comments on this proposal.
Comment: Commenters agreed with the methodology regarding
calculations to determine whether a measure is topped-out, and agreed
with the proposal to alter the threshold from ``less than 0.10'' to
``less than or equal to 0.10.''
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing our modification to the truncated coefficient of variation
criterion for determining whether a measure is ``topped-out'' as
proposed.
c. New Measures for the FY 2017 Hospital VBP Program
We considered if we should adopt additional measures for the FY
2017 Hospital VBP Program. We considered which measures are eligible
for adoption based on the statutory requirements, including
specification under the Hospital IQR Program and posting dates on the
Hospital Compare Web site, and our priorities for quality improvement
as outlined in the National Quality Strategy (NQS) (available for
download at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28119 through
28121) we stated that we believe that the following three proposed
measures meet the statutory requirements for inclusion in the FY 2017
Hospital VBP Program. We also believe that these measures represent
important components of quality improvement in the acute inpatient
hospital setting.
We received a number of general comments on quality measures for
the Hospital VBP Program:
Comment: Many commenters supported CMS' proposals to adopt MRSA, C.
difficile Infection, and PC-01 for the FY 2017 Program. These
commenters believed that the measures are appropriate for the Program
and will have been publicly posted on Hospital Compare in accordance
with the Hospital VBP Program's statute.
Response: We agree and thank the commenters.
Comment: Commenters supported CMS' proposal to readopt the IMM-2
measure for FY 2017 and suggested that CMS consider adopting additional
immunization measures in the future.
Response: As with other suggested measure topics, we will consider
new measures as they become available to us under the statutory
requirements for the Hospital VBP Program.
Comment: A few commenters recommended that the Hospital VBP Program
should include a mix of measures, including measures that would test
adherence to evidence-based medical interventions.

[[Page 50056]]

Response: We agree, and we have attempted to introduce a variety of
quality measure types into the Hospital VBP Program, including measures
of processes, outcomes, and efficiency.
Comment: One commenter believed that all measures in the Hospital
IQR, HAC Reduction, and Hospital VBP Programs should be NQF-endorsed
before their adoption by CMS, because NQF-endorsement ensures that the
measures have been evaluated by a panel of experts in quality
measurement. The commenter therefore supported the removal of measures
that have lost NQF-endorsement.
Response: We note that the Hospital VBP Program relies on data
submitted under the Hospital IQR Program, and the Hospital IQR
Program's statute enables us to select measures that have not been
endorsed by NQF, as long as due consideration is given to measures that
have been endorsed or adopted by a consensus organization identified by
the Secretary. Our statistical and clinical assessment of the measures
chosen for adoption in the Hospital VBP Program supports our belief
that the measures are sufficiently valid and reliable. Each measure has
been used in the Hospital IQR Program for at least one year, and we
believe each measure we adopt will improve patient outcomes.
Comment: Commenters suggested that CMS consider exploring measures
related to sepsis mortality as an alternative to current proposals.
Commenters recommended that CMS prioritize the development of quality
measures that promote nutrition screening and assessment of nutrition
interventions. Additional commenters recommended that CMS consider
measures of advance care planning, malnutrition care, measures related
to diabetes, atrial fibrillation, COPD, and oncology, additional
process measures, immunization measures, and a measure of all-cause
readmission. Other commenters suggested that CMS consider PSI-4: Death
among surgical inpatients with serious treatable complications, COPD
30-day mortality, and AMI Payment per Episode for the Hospital VBP
Program.
Additional commenters suggested that CMS consider adopting STK-1
(venous thromboembolism (VTE) prophylaxis); STK-2 (discharged on
antithrombotic therapy); and STK-4 (percentage of eligible patients
receiving thrombolytic therapy within 0-3 hours of symptom onset). One
commenter specifically noted that the STK-4 measure in the Hospital VBP
Program as it is e-specified and has not been deemed ``topped-out.''
Response: We will consider new measures for the Hospital VBP
Program as they become eligible for inclusion in the measure set. We
note, however, that section 1886(o)(2)(A) of the Act specifically
excludes measures of readmissions from the Hospital VBP Program.
Comment: One commenter urged CMS to expand the Surgical Site
Infection list within the Outcomes domain to include Major Joint
Replacement Surgeries and Spine procedures so that surgical specialty
hospitals are able to participate in future Hospital VBP Programs.
Otherwise, the commenter believed, hospitals that qualify for the
Hospital VBP Program, and whose excellent performance records bolster
the overall quality and efficacy of the program, may be excluded
because the SSI list does not include these common procedures which
make up the majority of the procedures they perform.
Response: We thank the commenter for this suggestion. We are
continuously evaluating the program and working to identify new,
potentially suitable measures to fill measure gaps. We appreciate the
commenter's input for measure selection and will take this feedback
into consideration in future rulemaking. We note that CDC maintains
ongoing collaborations with a number of professional surgical
organizations and is currently in the process of developing additional
SSI metrics for higher volume surgical procedures. Once these measures
are finalized, we may consider them for future inclusion in our quality
reporting and pay for performance programs.
Comment: Many commenters expressed concern that measures in both
the Hospital VBP and HAC Reduction Programs overlap. Commenters pointed
to a wide variety of concerns, including: Multiple competing
benchmarks, various penalty calculation methodologies, wasting precious
resources, and the potential for confusion among hospitals and
beneficiaries.
Many commenters noted that using measures in both HAC Reduction and
the Hospital VBP Programs potentially penalizes participating hospitals
twice, or could result in instances where hospitals perform well in one
program and are penalized in the other. Another commenter stated that
the overlap inappropriately magnifies the impact and importance of the
measures.
Some commenters were concerned that the overlap between measures in
the HAC Reduction and Hospital VBP Programs may create a defeatist
attitude among certain hospitals that are disproportionately affected,
such as safety net hospitals. Commenters noted that such duplication
between quality programs could draw needed dollars away from the very
organizations that need to be focusing in this area.
Response: We acknowledge that there is some overlap in quality
measures between the Hospital VBP Program and the HAC Reduction
Program. While we are aware that commenters object to the possibility
of scoring hospitals on certain measures under both programs, we note
that these measures cover topics of critical importance to quality
improvement in the inpatient hospital setting, and to patient safety.
We selected these quality measures because we believe that HAC measures
comprise some of the most critical patient safety areas therefore
justifying the use measures in more than one program. The MRSA
Bacteremia and C. difficile Infection measures that we have proposed to
adopt track infections that could cause significant health risks to
Medicare patients, and we believe it is appropriate to provide
incentives for hospitals to avoid them under more than one program.
We further stress that the HAC Reduction Program and the Hospital
VBP Program are separate programs with different purposes and policy
goals. For example, the HAC Reduction Program is a program that reduces
payments to hospitals for excess HACs to increase patient safety in
hospitals. On the other hand, the Hospital VBP Program is an incentive
program that redistributes a portion of the Medicare payments made to
hospitals based on their performance on various measures. Therefore,
although the measures exist in more than one program, the measures are
used and calculated for very distinct purposes. Accordingly, as stated
above, we believe that the critical importance of these measures to
patient safety warrants their inclusion in both programs. We will, in
the future, monitor the HAC Reduction and Hospital VBP Programs and
analyze the impact of our measures selection, including any unintended
consequences with having a measure in more than one program, and will
revise the measure set in one or both programs if needed.
Comment: Many commenters stated that CMS' proposed measures for FY
2017, despite appearing to have the potential to be positive additions
to the program, have not been publicly reported on the Hospital Compare
Web site for 1 year as required by the Act.
Response: Section 1886(o)(2)(C)(i) of the Act requires that
measures must have been ``included on the Hospital Compare Internet Web
site for at least 1

[[Page 50057]]

year prior to the beginning of the performance period.'' As commenters
noted, we first reported these measures' data in December 2013, and
have proposed an FY 2017 performance period for these measures of CY
2015, which complies with the statutory requirement in section
1886(o)(2)(C)(i) of the Act. Accordingly, we believe that the three
proposed measures meet the statutory requirements for inclusion in the
FY 2017 Hospital VBP Program. We also believe that these measures
represent important components of quality improvement in the acute
inpatient hospital setting. However, to the extent that there remains
any question regarding our interpretation of section 1886(o)(2)(C)(i)
of the Act, we are finalizing that the effective date of the new FY
2017 measures, PC-01, MRSA Bacteremia, and C. difficile Infection, will
be January 1, 2015, consistent with the beginning of the performance
period for those measures.
Comment: One commenter believed that the AMI-7a measure is
inappropriate for the Hospital VBP Program because it does not apply to
most hospitals due to a low volume of cases.
Response: While we understand that many hospitals do not provide
services that would be measured by the AMI-7a measure, the finalized
Hospital VBP Program scoring methodology does not penalize hospitals
that do not have sufficient cases for that measure, or any measures
that we have adopted. Even if the measure will only apply to a small
number of hospitals, we believe that this measure accomplishes the
goals of the Hospital VBP Program and will improve patient outcomes in
the hospitals where the measure will apply. We will consider proposing
removal of this measure in future policy making.
Comment: Commenters expressed continued concern about the three 30-
day mortality measures that we have adopted and placed into the
Clinical Care--Outcomes domain. Commenters stated that the measures do
not meaningfully reflect hospital performance because they do not meet
the lower limit of moderate reliability identified by CMS' analytical
contractor in a 2012 report. Commenters expressed their appreciation
for our adoption of longer performance periods for these measures, but
noted that even at 24 months, the measures' reliability is
significantly less than we require for chart-abstracted measures.
Commenters suggested that we consider a plan to improve or replace the
mortality measures and consider reducing the domain weighting allocated
to the Clinical Care--Outcomes domain in the meantime.
Response: As we stated in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53591) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50693), we
believe that the mortality measures capture important quality data for
purposes of the Hospital VBP Program. We believe that the three 30-day
mortality measures are sufficiently reliable for inclusion in the
Hospital VBP Program, particularly in light of our finalized policies
to set a 25 case minimum and to extend the performance period's
duration for these measures over successive years to reach 36 months.
Comment: One commenter requested that CMS change the mortality
measures' populations to ensure that the same patient is not counted
under more than one measure. The commenter explained that its mortality
measure scores had been adversely affected by a patient that had been
counted under both pneumonia and AMI mortality.
Response: If a patient was hospitalized for AMI and Pneumonia on a
different date and died within 30 days from the first hospitalization
in the three-year time frame we used to calculate the mortality
measures, the patient could be included in both AMI and Pneumonia
mortality measures. However, cohorts of mortality are determined by the
principle diagnosis on the index hospitalization claims (that is, the
denominator is defined as discharges/admissions not patients). There is
only one principal diagnosis on each claim, therefore it is not likely
that a specific patient's claim or admission would be in both AMI and
Pneumonia measures.
(1) Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF
1716)
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia (NQF
1716) is a risk-adjusted outcome measure monitoring hospital
onset of MRSA Bacteremia bloodstream infection events using the
standardized infection ratio (MRSA Bacteremia SIR) among all inpatients
in the facility. The MRSA Bacteremia SIR is reported via the Center for
Disease Control and Prevention's (CDC) National Healthcare Safety
Network (NHSN). We adopted this measure beginning with the FY 2015
payment determination under the Hospital IQR Program in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51630). Initial measure data were
posted on Hospital Compare in December 2013.
We remain concerned about the persistent public health threat
presented by MRSA Bacteremia infections. According to a 2013 study
available at the National Institute of Health's Web site, MRSA
Bacteremia ``results in longer hospitalization, increased expenses, and
poorer patient prognosis'' and ``has been swiftly increasing worldwide
over the past several decades.'' \43\ As we noted in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51630), invasive MRSA Bacteremia infections
may cause about 18,000 deaths during a hospital stay a year.\44\
---------------------------------------------------------------------------

\43\ Tatokoro et al. BMC Urology 2013, 13:35. Available at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3720197/pdf/1471-2490-13-35.pdf
\44\ Catherine Liu, Arnold Bayer, et al., Clinical practice
Guidelines for the treatment of Methicillin-Resistant Staphylococcus
aureus Infections in Adult and Children. Infectious Disease Society
of America 2011; 52:e18.
---------------------------------------------------------------------------

The Measure Application Partnership (MAP) supported the direction
of the MRSA Bacteremia measure for inclusion in the Hospital VBP
Program in the MAP Pre-Rulemaking Report: 2013 Recommendations on
Measures Under Consideration by HHS found at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. The MAP noted that the
measure addresses an NQS priority not adequately addressed in the
program measure set, the measure should be applied following public
reporting on Hospital Compare, and the most recent version of the NQF-
endorsed measure should be applied.
We believe that this measure is eligible for the Hospital VBP
Program based on the MAP recommendation, our adoption of the most
recent NQF-endorsed version under the Hospital IQR Program, and our
posting of measure data on Hospital Compare. Based on the continued
danger that MRSA Bacteremia infections present to patients and to
public health, we further believe that this measure is appropriate for
the Hospital VBP Program. Therefore, we proposed to adopt the MRSA
Bacteremia measure for the FY 2017 Hospital VBP Program, and we
proposed to place the measure into the Safety domain.
We invited public comment on this proposal.
Comment: Commenters supported CMS' proposal to adopt MRSA
Bacteremia and C. difficile infection measures for the FY 2017 Program,
stating that the measures will provide incentives for hospitals to
employ appropriate infection control and prevention and antimicrobial
stewardship programs. (CMS discusses C. difficile infection in more
detail in the next section). Another commenter noted that the measure
is a first step towards encouraging hospitals to focus

[[Page 50058]]

on prevention and appropriate treatment of these infections.
One commenter noted that quality measures implemented in the U.K.
had a positive effect on C. difficile infections and treatments and
that appropriate treatment of C. difficile infections have important
implications for patient outcomes, society, and the reduction of
healthcare expenditures. Another commenter noted that MRSA Bacteremia
and C. difficile infections are both largely preventable diseases.
Another commenter expressed specific support for CMS' proposal to adopt
the C. difficile Infection measure, stating that stoma care management
is necessary at all clinical stages to avoid life threatening and
costly infections.
Response: We thank the commenters for their support.
Comment: One commenter urged CMS to delay use of the MRSA
Bacteremia and C. difficile measures until FY 2018 because, while the
measures are NQF-endorsed, the MAP did not fully support them for the
Hospital VBP Program. The commenter stated that the MAP voted to
``support direction'' and noted that the measure should be publicly
reported for a sufficient amount of time prior to being added to the
Hospital VBP Program.
Response: We disagree. We view the MRSA Bacteremia and C. difficile
Infection measures as important quality measures to be added to the
Safety domain because they track infections that present significant
danger to patients. We believe that tracking hospitals on these
measures--and providing incentives for better performance--will result
in reduced harm to patients, better health care quality, and an
improved health care system.
Comment: One commenter urged caution with the C. difficile
infection and MRSA Bacteremia measures, and argued that they must track
to hospital onset-infections. Commenters suggested that many infections
emerge in the community, meaning hospitals are not at fault for the
origination of the infection. One commenter noted that infections
caused by MRSA Bacteremia vary widely geographically, and there has
been a rise in the frequency of community-associated MRSA Bacteremia
skin/soft tissue infections, many of which are likely best treated with
direct interventions at the site of infection and do not require
antibiotics. The commenter believed that as the proportion of
community-associated strains become predominant, hospitals will have
less ability to have any appreciable impact on their frequency.
A few commenters requested that the MRSA Bacteremia and C.
difficile Infection measures control for known regional variation in
the infection rates so that hospitals that care for high-risk
populations are not inadvertently targeted or encouraged to limit
access to care by such high-risk patients. Some commenters suggested
that a better way to track MRSA Bacteremia and C. difficile infections
is to include measures that focus on best practices and guidelines for
patients who contract MRSA Bacteremia or C. difficile infections.
One commenter also asked CMS to consider that C. difficile
infections are higher in surgical patients, rather than non-surgical
patients, and are particularly high in gastrointestinal surgery
patients. Therefore, the commenter believed that hospitals that perform
a greater number of colorectal procedures will have higher rates of C.
difficile infections in their patients, even if they are perfectly
compliant with all the applicable guidelines and practices.
Response: The MRSA and C. difficile measures differentiate between
community-acquired and hospital-onset events based on a patient's date
of admission and date(s) of specimen collection, and includes an
adjustment for many risk factors specifically facility size, medical
teaching hospital affiliation, prevalence of community-onset infection,
and for CDI test type. Therefore, we do not believe the measures need
to be revised to account for these factors because the current approach
already addresses many of the commenters' concerns. However, we will
collaborate with CDC to evaluate whether there is a need to consider
additional risk adjustment factors, such as occurrence of
gastrointestinal surgeries, suggested by the commenters for future
policy development. While we are willing to consider other risk
factors, the additional adjustment gained must be weighed against the
extra burden added to collected more required data elements. The issue
of the same measures being included in multiple programs is addressed
further below.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the MRSA Bacteremia measure for the FY
2017 Hospital VBP Program.
(2) Clostridium difficile (C. difficile) Infection (NQF 1717)
C. difficile Infection (NQF 1717) is a risk-adjusted
outcome measure monitoring hospital onset of C. difficile Infection
events using the standardized infection ratio (C. difficile SIR) among
all inpatients in the facility. The C. difficile SIR is reported via
CDC's NHSN. We adopted this measure beginning with the FY 2015 payment
determination under the Hospital IQR Program in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51630 through 51631). Initial measure data were
posted on Hospital Compare in December 2013.
As with MRSA Bacteremia infections, we are concerned about the
seriousness of C. difficile infections. According to a 2012 study,
``infection with Clostridium difficile is associated with poor outcomes
for patients. Previous work has determined that, regardless of baseline
risk of death, for every 10 patients that acquire C. difficile in the
hospital, 1 patient will die. Clostridium difficile is also associated
with increased health care costs. One of the primary mechanisms by
which C. difficile increases costs is by increasing the length of time
patients spend in hospital.'' \45\
---------------------------------------------------------------------------

\45\ Forster et al. ``The effect of hospital-acquired infection
with Clostridium difficile on length of stay in hospital.'' Canadian
Medical Association Journal, January 10, 2012. Available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3255231/pdf/1840037.pdf.
---------------------------------------------------------------------------

As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51630
through 51631), C. difficile infections have become more frequent, more
severe, and more difficult to treat in recent years. Each year, tens of
thousands of people in the United States get sick from C. difficile,
including some otherwise healthy people who are not hospitalized or
taking antibiotics.
The MAP noted that the measure addresses an NQS priority not
adequately addressed in the program measure set, the measure should be
applied following public reporting on Hospital Compare, and that the
most recent version of the NQF-endorsed measure should be applied.
We believe that this measure is eligible for the Hospital VBP
Program based on the MAP recommendation, our adoption of the most
recent NQF-endorsed version under the Hospital IQR Program, and our
posting of measure data on Hospital Compare, as well as the continued
danger that C. difficile infections present to patients and the public
health. Therefore, we proposed to adopt the C. difficile SIR measure
for the FY 2017 Hospital VBP Program, and we proposed to place the
measure into the Safety domain.
We invited public comment on this proposal.
Comment: One commenter urged CMS to delay use of the C. difficile
Infection measure until FY 2018

[[Page 50059]]

because C. difficile infections have diverse sources and are not
associated with symptomatic cases for which infection control
interventions are primarily targeted. Further, the commenter had
concerns about current lab identification definitions used for public
reporting because (1) asymptomatic cases with positive lab
identification events are included, (2) recurrences are counted as new
cases if tested again after two weeks, and (3) patients may be
asymptomatically colonized prior to admission and develop the disease,
resulting in attribution of a healthcare associated infection,
regardless of any hospital's infection prevention strategies. Finally,
the commenter noted that there is no standard strategy for testing
patients for C. difficile infections.
Response: The CDC Web site includes posted information for
appropriate clinical practice, testing, and identification of C.
difficile infections at: https://www.cdc.gov/HAI/organisms/cdiff/Cdiff_clinicians.html. These practices are strongly suggested when tracking
C. difficile cases for reporting to NHSN, and include guidance to only
perform the test for C. difficile and its toxins on diarrheal
(unformed) stool from symptomatic patients, unless ileus due to C.
difficile is suspected, and to avoid testing stool from asymptomatic
patients, for routine identification of asymptomatic carriers, or as a
test of cure. Following this guidance as a standard of practice will
avoid reporting of asymptomatic, colonized patients, who are not to be
reported per NHSN protocol. Recurrent cases are counted separately from
incident cases and are not included in the hospital-onset, incident C.
difficile metric reported to CMS. Per published research and the NHSN
protocol, a recurrent C. difficile LabID Event is defined as a specimen
obtained >2 weeks (>= 2 weeks is a duplicate and not reported) and <=8
weeks after the most recent CDI LabID Event for that patient. Incident
cases are defined and counted as specimens obtained >8 weeks after the
most recent CDI LabID Event for that patient (McDonald LC, et al.
Infect Control Hosp Epidemiol 2007; 28:140-145).
Comment: One commenter cautioned that the C. difficile Infection
measure may result in discouraging healthcare professionals from
screening for or attempting to diagnose mild cases of CDI because the
measure focuses on rates of infection rather than screening. The
commenter suggested that CMS consider rewarding hospitals for limiting
prolonged periods of multiple antibiotic use among patients, for
optimizing antimicrobial therapy, and for instituting CDI prevention
programs.
Response: We will consider this feedback; however we do not think
that this measure will discourage healthcare professionals from testing
for C. difficile when clinically indicated, particularly given the
potential for serious harm that C. difficile infections present to
patients. Though healthcare professionals may have incentives to avoid
diagnostic testing, they also have incentives to treat with
confirmation of the diagnosis, in part because of the danger of
overprescribing antibiotics and its associated complications for
patients. We will consider the commenter's suggestions in the future.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the C. difficile infection measure for
the FY 2017 Hospital VBP Program.
(3) PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF
0469)
PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation (NQF
0469) is a chart-abstracted measure that we adopted beginning
with the FY 2015 payment determination for the Hospital IQR Program in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53530).
Initial measure data were posted on Hospital Compare in December 2013.
Although this is a chart-abstracted measure, we finalized our policy in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 53529) that
this measure would be collected in aggregated numerator, denominator,
and exclusion counts per hospital via a Web-based tool, instead of
collecting patient-level data from hospitals.
As we described in the FY 2013 IPPS/LTCH PPS final rule referenced
above, the Strong Start Initiative (https://www.innovation.cms.gov/initiatives/strong-start/) was launched to help reduce early elective
births. At launch, the HHS Secretary stated that more than half a
million infants are born prematurely in America each year. Fortunately,
the early elective birth rate has steadily decreased. In 2012, the
number of early elective births had decreased to approximately 456,000
or 11.55 percent of the total number of births.\46\ Early elective
births may require additional medical attention and early intervention
services. Research indicates that elective deliveries before 39 weeks
increase the risk of significant complications for mother and baby, as
well as long-term health problems.^{47 48 49 50} Early elective
births are a public health problem that has significant consequences
for families well into a child's life.
---------------------------------------------------------------------------

\46\ Martin, JA, Hamilton, BE, Osterman, MJK, Curtin, SC,
Mathews, TJ. (2013). Births: Final data for 2012. Natl Vital Stat
Rpt. 62(9). Retrieved from https://www.cdc.gov/nchs/data/nvsr/nvsr62/nvsr62_09.pdf.
\47\ Glantz, J. (Apr. 2005). Elective induction vs. spontaneous
labor associations and outcomes. J Reprod Med. 50(4):235-40.
\48\ Vardo, J., Thornburg, L., Glantz J., (2011). Maternal and
neonatal morbidity among nulliparous women undergoing elective
induction of labor. J. report med. 56(1-2): 25-30.
\49\ Tita, A., Landon, M., Spong, C., Lai, Y., Leveno, K.,
Varner, M., et al. (2009). Timing of elective repeat cesarean
delivery at term and neonatal outcomes. [Electronic Version]. NEJM.
360:2, 111-120.
\50\ Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., &
Meyers, J. (2009). Neonatal and maternal outcomes associated with
elective delivery. [Electronic Version]. Am J Obstet Gynecol.
200:156.e1-156.e4.
---------------------------------------------------------------------------

As a public campaign to reduce early elective births, the Strong
Start Initiative's objective is to test ways to reverse this trend by
helping provide expectant mothers with the care they need for a healthy
delivery and a healthy baby, and by focusing on reducing early elective
deliveries, which can lead to a variety of health problems for mothers
and infants. The Strong Start Initiative cuts across many agencies
within HHS and involves external organizations including the March of
Dimes and the American College of Obstetricians and Gynecologists
(ACOG). We believe that a reduction in the number of nonmedically
indicated elective deliveries at >=37 to <39 weeks gestation will
result in a substantial decrease in neonatal morbidity and mortality,
as well as a significant savings in health care costs. In addition, the
rate of cesarean sections should decrease with fewer elective
inductions, resulting in decreased length of stay and health care
costs.
The MAP supported adoption of the PC-01 Elective Delivery measure
for inclusion in the Hospital VBP Program in the MAP Pre-Rulemaking
Report: 2013 Recommendations on Measures Under Consideration by HHS
found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. The MAP noted that the
measure addresses an NQS priority not adequately addressed in the
program measure set.
We proposed to adopt this measure for the Hospital VBP Program and
we proposed to place the measure into the Clinical Care--Process domain
because we believe this measure furthers the NQS's three-part aim of
better healthcare for individuals, better health for populations, and
lower costs of healthcare. In addition, although the

[[Page 50060]]

PC-01 Elective Delivery measure captures data from all applicable
patients, we also believe that the measure is specifically relevant to
the nearly 2 million Medicare beneficiaries who are aged 44 and under,
most of whom are dual eligible beneficiaries, who have the potential to
be impacted by early elective births. In 2011, Medicare paid for
roughly 14,000 births.
We welcomed public comment on this proposal.
Comment: Many commenters supported CMS' proposal to include the PC-
01 measure in the Hospital VBP Program, noting that many hospitals
continue to have rates of early elective delivery in excess of 15
percent despite the American College of Obstetricians and Gynecologists
recommendations that no elective delivery be performed before the
gestational age of 39 weeks without a medical indication. One commenter
believed that this measure will reduce costs and also have the
potential to greatly improve newborn outcomes of care.
Response: We thank the commenters for their support.
Comment: Several commenters expressed opposition to the PC-01
measure for the FY 2017 Hospital VBP Program because the measure is
Web-based, and there has not been any chart validation for accuracy and
consistency of data collection across hospitals. Some commenters
specifically opposed using any data that are not validated under the
Hospital VBP Program, stating that PC-01 should therefore not be
finalized for the program based on data accuracy concerns. Commenters
stated that, while hospitals are working diligently to collect accurate
data for this measure, it is possible that hospitals collecting the
most accurate data will have the lowest scores.
Commenters stated that the benchmark of 0 percent is not realistic
considering that justifications for Elective Delivery are based off of
ICD-9-CM codes and The Joint Commission (TJC) has stated that not all
the justifications for an elective delivery are included on the ICD-9-
CM Justification Table. Further, commenters noted that TJC has stated
that the purpose of this measure is to enable hospitals to establish a
baseline for their performance, which in turn serves as a determinant
of whether improvement efforts are effective over time.
One commenter suggested that CMS wait to adopt this type of measure
until the electronic clinical quality measure version is available. One
commenter did not support the recommendation to add the PC-01 measure
to the Clinical Care--Process domain because the measure algorithm
exclusions are applied prior to denominator selection. The commenter
stated that these exclusions make the quarterly denominators very low,
even for a large facility, and that, therefore, the measure does not
truly assess the quality of care provided.
Response: We disagree with the concept that this measure may be
inherently invalid because not all justifications for an elective
delivery are included in the ICD-9-CM Justification Table, or invalid
because of the volume of exclusions. All NQF-endorsed measures must
meet strict reliability and validity criteria to gain endorsement. PC-
01 is NQF-endorsed therefore the measure as defined is clinically
valid. Regarding the accuracy of the submitted data, hospitals are
required to acknowledge the accuracy of the data submitted through the
Hospital IQR Program's Data Accuracy and Completeness Acknowledgment
statement on an annual basis. To validate the accuracy of submitted
data, we employ logic checks as we do for other measures. For example,
the number of cases entered in the numerator cannot be greater than the
number of cases entered in the denominator.
As explained in section IX.A.11 of this preamble, because the PC-01
data are collected in aggregate instead of for individual patients, we
cannot use the same mechanism to assess reliability of PC-01 as we use
for chart-abstracted clinical process of care measures reported at the
patient level. The approach for other clinical process of care measures
involves sampling, whereas the analogous approach for aggregate data
would involve collecting all data from a hospital. We believe that the
benefits of validating aggregate data in this way are outweighed by the
burden to hospitals in submitting potentially hundreds of records to
validate one measure, and also believe that this approach would be
cost-prohibitive for CMS.
However, we are exploring different options to assess the general
validity of PC-01 data more robustly. For the reasons outlined in the
proposed rule, we continue to believe this measure is appropriate for
the Hospital VBP Program. We have adopted the e-CQM version of this
measure under our voluntary electronic reporting option for the
Hospital IQR Program.
Comment: Some commenters opposed CMS' proposed adoption of the PC-
01 measure, stating that CMS should first determine that there is
sufficient room for making additional substantive improvements that
would result in better patient care.
Response: The NQF notes that pre-term births are a rapidly
escalating public health problem, and that early elective delivery
contributes to this problem.\51\ As stated above, many commenters have
noted that many hospitals continue to have rates of early elective
delivery in excess of 15 percent despite the American College of
Obstetricians and Gynecologists recommendations that no elective
delivery be performed before the gestational age of 39 weeks without a
medical indication. Therefore, we believe that hospitals have the
opportunity to improve upon a detrimental practice that was until very
recently rapidly expanding.\52\
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\51\ https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746.
\52\ Osterman MJK, Martin JA. Changes in cesarean delivery rates
by gestational age: United States, 1996-2011. NCHS data brief, no
124. Hyattsville, MD: National Center for Health Statistics. 2013.
---------------------------------------------------------------------------

Comment: Commenters expressed concerns about CMS' proposal to adopt
the PC-01 measure, noting that many hospitals do not provide perinatal
care services and stating that the volume of Medicare births is not
high enough to justify this measure's placement into the Hospital VBP
Program. Commenters suggested that CMS remove PC-01 from the proposed
measure set.
Response: We continue to believe this measure is appropriate for
the Hospital VBP Program, as we described in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28120). The measure is NQF-endorsed and was
supported for the Hospital VBP Program by the MAP, and addresses an NQS
priority not adequately addressed in the Program's measure set to date.
In addition, as we noted, nearly 2 million Medicare beneficiaries are
aged 44 and under, and in 2011, Medicare paid for roughly 14,000
births.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the PC-01 measure for the FY 2017
Hospital VBP Program.
d. Adoption of the Current Central Line-Associated Bloodstream
Infection (CLABSI) Measure (NQF 0139) for the FY 2017 Hospital
VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50682 and 50686), we
adopted the CLABSI measure for the FY 2016 Hospital VBP Program. We
stated our belief that adopting the current CLABSI measure is
consistent with the MAP's recommendation in the MAP Pre-Rulemaking
Report: 2013 Recommendations on Measures Under

[[Page 50061]]

Consideration by HHS found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746, to use the standardized
infection ratio version of the measure until the reliability-adjusted
CLABSI measure is NQF-endorsed. We have stated our intent to consider
adopting the reliability-adjusted CLABSI measure in future rulemaking.
The reliability-adjusted standardized infection ratio (SIR) is an
outcome measure that summarizes the healthcare-associated infection
experience by type of infection (for example, central-line associated
bloodstream infection, surgical site infection) for individual
hospitals. The reliability-adjusted measure enables more meaningful
statistical differentiation between hospitals by accounting for
differences in patient case-mix, exposures to medical devices or
procedures (for example, central line days, surgical procedure volume),
and unmeasured factors that are not reflected in the unadjusted SIR and
that cause variation in outcomes between hospitals. Accounting for
these sources of variability enables better measure discrimination
between hospitals and leads to more reliable quality measurements.
However, in the absence of NQF endorsement of the reliability-
adjusted CLABSI measure or any additional MAP recommendations, and
unless and until the Hospital IQR Program adopts the reliability
adjustments, we believe we may only consider the current version of the
CLABSI measure for adoption under the Hospital VBP Program. We continue
to believe that the CLABSI measure encourages hospitals to minimize
infection events that present significant health risks to patients.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28120
through 28121), we proposed to adopt the current version of the CLABSI
measure for the FY 2017 Hospital VBP Program and subsequent years. If a
reliability-adjusted version of the measure becomes available to us in
the future, we will consider adopting it.
We welcomed public comment on this proposal.
Comment: Commenters requested that CMS clarify whether the CLABSI
and CAUTI measures will include non-ICU locations. Commenters also
requested that CMS clarify whether hospitals that report CLABSI and
CAUTI to NHSN as Mixed Acuity Units instead of ICUs will receive SIRs
for the Hospital VBP Program, or if the measures will not be applicable
for hospitals that do not report for ICUs.
Response: For the CLABSI and CAUTI measures, we will score
hospitals using adult, pediatric, and neonatal ICU data only for the FY
2017 and FY 2018 Hospital VBP Programs, because the baseline periods
for FY 2017 and FY 2018 are CY 2013 and 2014 respectively. These
baseline periods are prior to the Hospital IQR Program requirement that
hospitals report data on selected non-ICU locations (78 FR 50787).
Therefore, we will have no data on non-ICU locations to use for
performance or improvement benchmarks for these program years.
Beginning with the FY 2019 Program, we intend to publicly report
the CLABSI and CAUTI SIR data reported to the Hospital IQR Program on
selected non-ICU locations (that is, adult or pediatric medical ward,
surgical ward, and medical/surgical ward). We will consider inclusion
of these locations in the Hospital VBP Program as soon as applicable
reliable baseline data are available.
Mixed acuity units do not meet NHSN definitions for the six select
non-ICU locations, and therefore are not required to be reported for
Hospital IQR Program purposes, so we will not use data from those units
for the Hospital VBP Program for any of the baseline or performance
periods. We refer readers to the NHSN Helpdesk Mailbox (nhsn@cdc.gov)
with any specific questions about correctly defining and mapping
patient care locations into NHSN.
Comment: One commenter supported the continued inclusion of the
existing risk-adjusted, rate-based ICU-only NHSN CLABSI measure in the
FY 2017 Hospital VBP Program. The commenter also urged CMS to calculate
the CLABSI measure using the ICU-only specifications until the
facility-wide measure is available for both the baseline and
performance periods of the Hospital VBP Program. The commenter was
unaware of how CMS will deal with the CLABSI measure once it
transitions to a facility-wide measure and expressed concern that CMS
might dispense with the improvement score when the baseline and
performance periods do not match. The commenter noted that the CDC has
sufficiently granular data to continue reporting ICU-only results to
CMS despite the collection moving to facility wide.
Response: We agree that improvement scores are an important part of
the Hospital VBP Program. We refer readers to our response to the
previous commenter, in which we explain our intention to follow the
commenter's suggestion, and provide the timelines for transitioning
from the ICU-only measure to the broader measure of CLABSI in ICU and
select non-ICU locations.
Comment: One commenter urged CMS to rapidly incorporate a
reliability-adjusted Standardized Infection Ration (SIR) calculation
for the CLABSI measure because it provides a more robust calculation to
identify differences among hospital rates.
Response: We continue to believe that the CLABSI measure encourages
hospitals to minimize infection events that present significant health
risks to patients. However, in the absence of NQF-endorsement of the
reliability-adjusted measure and any additional MAP recommendations,
and unless we decide to adopt the reliability adjustments in the
Hospital IQR Program, we believe we may only consider the current
version of the CLABSI measure for adoption under the Hospital VBP
Program. If a reliability-adjusted version of the measure becomes
available to us in the future, we will consider adopting it.
Comment: One commenter stated that CMS should not finalize the
CLABSI measure and should wait until the reliability-adjusted version
of the measure is endorsed by NQF. The commenter explained that many
hospitals are having difficulty reporting the current measure,
resulting in deviations in accuracy that may create profound
differences in hospital performance.
Response: We will consider adopting the new version of the measure
if it is endorsed by NQF. However, reliability adjustment is a
methodology designed to address hospitals with small numerators and
denominators. The methodology is not designed to assist hospitals in
reporting CLABSI data accurately. To assist hospitals in accurately
reporting CLABSI, CMS and CDC have been working collaboratively to
clarify NHSN protocol specifications and to educate hospitals on these
protocols.
Comment: One commenter was pleased with CMS' proposal to adopt the
CLABSI measure, stating that it measures important safety outcomes for
consumers and purchasers.
Response: We agree and thank the commenter.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the current CLABSI measure for the FY
2017 Hospital VBP Program.
e. Summary of Previously Adopted and New Measures for the FY 2017
Hospital VBP Program
The following table outlines the measures for the FY 2017 Hospital
VBP Program, including those that we are readopting and those measures
we are

[[Page 50062]]

adopting for the first time. As discussed further below, this table
also includes the FY 2017 domains into which we are placing the
readopted measures, as well as the domains into which we are placing
the newly adopted measures.

Previously Adopted and New Measures for the FY 2017 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Measure Description Domain
----------------------------------------------------------------------------------------------------------------
CAUTI *............................ Catheter-Associated Urinary Tract Safety.
Infection (NQF 0138).
CLABSI **.......................... Central Line-Associated Blood Stream Safety.
Infection (NQF 0139).
C. difficile ***................... Clostridium difficile Infection (NQF Safety.
1717).
MRSA ***........................... Methicillin-Resistant Staphylococcus Safety.
aureus Bacteremia (NQF 1716).
PSI-90 *........................... Complication/patient safety for selected Safety.
indicators (composite) (NQF 0531).
SSI *.............................. Surgical Site Infection: (NQF 0753).
Colon...........................
Abdominal Hysterectomy..........
MORT-30-AMI *...................... Acute Myocardial Infarction (AMI) 30-day Clinical Care--Outcomes.
mortality rate (NQF 0230).
MORT-30-HF *....................... Heart Failure (HF) 30-day mortality rate Clinical Care--Outcomes.
(NQF 0229).
MORT-30-PN *....................... Pneumonia (PN) 30-day mortality rate (NQF Clinical Care--Outcomes.
0468).
AMI-7a *........................... Fibrinolytic Therapy Received Within 30 Clinical Care--Process.
Minutes of Hospital Arrival (NQF 0164).
IMM-2 *............................ Influenza Immunization (NQF 1659).
PC-01 ***.......................... Elective Delivery Prior to 39 Completed Clinical Care--Process.
Weeks Gestation (NQF 0469).
MSPB-1 *........................... Medicare Spending per Beneficiary (NQF Efficiency and Cost Reduction.
2158).
HCAHPS *........................... Hospital Consumer Assessment of Patient and Caregiver Centered
Healthcare Providers and Systems Survey Experience of Care/Care
(NQF 0166). Coordination.
----------------------------------------------------------------------------------------------------------------
* Measures readopted for the FY 2017 Hospital VBP Program.
** Measure adopted for the FY 2017 Hospital VBP Program that were not previously subject to automatic
readoption.
*** Measures newly adopted for the FY 2017 Hospital VBP Program in this final rule.

5. Additional Measures for the FY 2019 Hospital VBP Program
a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following
Elective Primary Total Hip Arthroplasty (THA) and Total Knee
Arthroplasty (TKA)
Hospital-level Risk-Standardized Complication Rate (RSCR) Following
Elective Primary Total Hip Arthroplasty (THA) and Total Knee
Arthroplasty (TKA) (NQF 1550) is an outcome measure that we
adopted beginning with the FY 2015 payment determination under the
Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53516 through 53518). The measure assesses complications occurring
after THA and TKA surgery from the date of the index admission to 90
days post date of the index admission. The outcome is one or more of
the following complications: Acute myocardial infarction, pneumonia, or
sepsis/septicemia within 7 days of admission; surgical site bleeding,
pulmonary embolism or death within 30 days of admission; or mechanical
complications, periprosthetic joint infection or wound infection within
90 days of admission. We posted THA/TKA measure data on the Hospital
Compare Web site in December 2013. We refer readers to the FY 2013
IPPS/LTCH PPS final rule and to the THA/TKA complication methodology
report (https://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890067881&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DTHK_CmpMsrUpdtSpecs_080113.pdf&blobcol=urldata&blobtable=MungoBlobs) for
additional details on the THA/TKA measure.
We continue to believe that measuring and reporting risk-
standardized complication rates will inform health care providers about
opportunities to improve care, strengthen incentives for quality
improvement, and promote improvements in the quality of care received
by patients and in the outcomes they experience. We believe that THA/
TKA is an important measure of clinical outcomes, and, in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28121 through 28122), we proposed to
adopt it for the FY 2019 Hospital VBP Program and subsequent years. The
MAP supported the adoption of the measure for inclusion in the Hospital
VBP Program in its MAP Pre-Rulemaking Report: 2013 Recommendations on
Measures Under Consideration by HHS found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746, noting it addresses a high-
volume elective procedure with variation in performance. We proposed to
adopt this measure for FY 2019 now based on the length of the measure's
reporting period and the time necessary to complete scoring
calculations. Because it is an outcome measure, we proposed to place it
in the Clinical Care--Outcomes domain.
We welcomed public comments on this proposal.
Comment: Several commenters supported CMS' proposal to adopt THA/
TKA for the FY 2019 Program, stating that the measure will further
drive hospitals to boost their care quality initiatives focused on this
procedure. Some commenters urged CMS to consider adopting it as early
as FY 2018.
Response: We believe that the time periods necessary to collect
sufficiently reliable performance data on this measure preclude us from
adopting the measure sooner than FY 2019.
Comment: Several commenters opposed adoption of the THA/TKA
measure, stating that it has not met the one-year public reporting
requirement outlined in the Hospital VBP Program statute.

[[Page 50063]]

Response: As described above with respect to measures proposed for
FY 2017, section 1886(o)(2)(C)(i) of the Act requires that measures
must have been ``included on the Hospital Compare Internet for at least
1 year prior to the beginning of the performance period.'' As
commenters noted, we reported these measures' data in December 2013,
and have proposed an FY 2017 performance period for these measures of
CY 2015, which complies with the statutory requirement in section
1886(o)(2)(C)(i) of the Act. We believe that this measure meets the
statutory requirements for inclusion in the FY 2019 Hospital VBP
Program. We also believe that this measure represents an important
component of quality improvement in the acute inpatient hospital
setting. However, to the extent that there remains any question
regarding our interpretation of section 1886(o)(2)(C)(i) of the Act, we
are finalizing that the effective date of the THA/TKA measure will be
July 1, 2015, consistent with the beginning of the performance period
for that measure.
Comment: One commenter supported the addition of the THA/TKA
quality measure because it is MAP-approved and will further drive
hospitals to boost their quality of care initiatives around these high-
volume procedures that reduce pain and increase mobility for hundreds
of thousands of Medicare beneficiaries each year. The commenter noted
that this measure is particularly important because it captures
multiple complications and adverse events at various post-operative
time intervals and would give hospitals a common benchmark around which
to organize their quality improvement efforts.
Response: We agree and thank the commenter for its support.
Comment: One commenter expressed concern about the accuracy of the
administrative data sets that are the basis for the THA/TKA measure,
stating that the coding data have been known to underreport significant
comorbidities that may therefore skew quality measurement.
Response: We believe that the administrative claims data used for
the Hip/Knee Complication measure is sufficiently accurate for purposes
of Hospital VBP Program inclusion. We have validated the AMI, HF, and
pneumonia mortality measures by building comparable models using
medical record data for risk adjustment for heart failure patients
(National Heart Failure data), AMI patients (Cooperative Cardiovascular
Project data), and pneumonia patients (National Pneumonia Project
dataset). When the medical record-based models were applied to the
corresponding patient population, the hospital risk-standardized rates
estimated using the claims-based risk adjustment models had a high
level of agreement with the results based on the medical record model,
thus supporting the use of the claims-based models for public
reporting.
Regarding the commenter's concern about underreporting significant
comorbidities, during measure development, we also conducted a medical
record validation study of the THA/TKA complications measure. The goal
of that study was to determine the overall agreement between
arthroplasty patients identified as having a complication (or no
complication) in the claims-based measure and those who had a
complication (or no complication) also documented in the medical
record. Overall measure agreement was 93 percent (598/644 patients)
before any changes were made to the model specifications. After the
measure specifications were changed based upon both the results of this
validation study, the measure agreement between claims data and the
medical record was 99 percent (635/644).
Comment: Some commenters opposed the proposed adoption of the THA/
TKA measure, stating that CMS should verify that the measure is
properly risk-adjusted across patient populations to ensure that
hospitals are not deterred from performing these surgeries for older,
high-risk beneficiaries. One commenter opposed the adoption of the THA/
TKA measure because it uses the same hierarchical logical modeling
methodology that is specified for the mortality measures included in
the Hospital VBP Program, and the commenter continued to have concerns
about the ability of this model to accurately distinguish between
hospitals' performance. The commenter suggested instead that the model
should include an adjustment for socioeconomic status, which commenter
believes is an important predictor of complication rates. The commenter
believes the measure is insufficient for inclusion in payment policies,
for these reasons. Another commenter expressed support for the proposed
THA/TKA measure, conditioned on CMS' adoption of a sociodemographic
adjustment to the measure.
Response: We refer readers to our earlier discussion of risk
adjustment based on socioeconomic status with respect to the MSPB
measure in section IV.I.4. of the preamble of this final rule, which
also is relevant for this measure. As discussed in the previous
section, we believe that the THA/TKA measure's risk adjustment
methodology appropriately considers and adjusts for clinical factors.
After consideration of the public comments we received, we are
finalizing the THA/TKA measure for the FY 2019 Hospital VBP Program and
subsequent years.
b. PSI-90 Measure
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698), we declined
to finalize the PSI-90 measure for the FY 2019 Hospital VBP Program in
order to adopt a more recent baseline period than would have been
possible at that time. However, we did not intend to signal that we
would not adopt the PSI-90 measure for FY 2019 and subsequent years. We
continue to believe that adopting this Agency for Healthcare Research
and Quality (AHRQ) Patient Safety Indicator (PSI) composite measure
provides strong incentives for hospitals to ensure that patients are
not harmed by the medical care they receive, which is a critical
consideration in quality improvement. In order to clarify the measure's
status under the Hospital VBP Program and ensure that there is no
confusion about our intent, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28122), we proposed to readopt the PSI-90 measure for FY 2019
Hospital VBP Program and subsequent years.
We welcomed public comments on this proposal.
Comment: Several commenters supported CMS' proposal to adopt the
PSI-90 measure for the FY 2019 Program. One commenter noted that the
measure captures important patient safety outcomes for consumers and
purchasers.
Response: We thank the commenters for their support.
Comment: Several commenters suggested that CMS publish hospitals'
performance on both the full composite measure and its individual
indicators. One commenter suggested that CMS consider separate patient
safety indicators for the Hospital VBP Program rather than the
composite.
Response: With respect to commenters' suggestions that we publish
hospitals' performance on individual indicators, we may consider doing
so in the future. However, since we have adopted the composite measure
for the Hospital VBP Program, we believe it is appropriate to publish
hospitals' performance on that measure, rather than its components, as
a reflection of performance measured and scored under the Program. The
composite measure is the basis for awarding achievement and

[[Page 50064]]

improvement points under the Hospital VBP Program, not its underlying
indicators, and we believe it is appropriate to focus the Program's
public reporting on the measures that receive points under the Program.
Comment: Some commenters urged CMS to remove the PSI-90 measure
from the Hospital VBP, Hospital IQR, and HAC Reduction Programs
immediately based on NQF's recent report on patient safety measures.
Several commenters noted that the NQF's Patient Safety Standing
Committee did not recommend the measure for endorsement during
maintenance review.
Commenters also noted that the PSI-90 measure is undergoing
maintenance review by the NQF. One commenter stated that AHRQ's
proposed changes to the measure to regain NQF's endorsement may be
significant and suggested that CMS consider whether it should continue
to adopt the measure for the Hospital VBP, HAC Reduction, and Hospital
IQR Programs.
Response: We would like to clarify the status of the PSI-90 measure
with regard to NQF endorsement. As part of the routine NQF measure
maintenance process, the Patient Safety Committee expressed concerns
about the weighting of the PSI-90 component measures and requested to
see additional measure information related to re-weighting of PSI-90
with three additional components (PSI-9, PSI 10 and PSI-11 before
deciding if it would recommend continued endorsement of the measure.
AHRQ has submitted the requested data for the NQF Patient Safety
Committee's consideration.
If, during the NQF review process, significant changes are made to
the measure, we will evaluate those changes, including whether the
measure remains appropriate for the Hospital VBP Program.
Comment: Several commenters stated that the PSI-90 measure lacks
robust risk-adjustment and tends to penalize hospitals with larger case
volumes. Several commenters argued that the measure relies on
inadequately validated claims data. Commenters stated that claims-based
measures are not necessarily reliable for Hospital VBP Program
purposes. Commenters argued that the measure's basis in administrative
claims data presents significant limitations and that using
administrative claims data is a less accurate method of identifying
patient severity than clinical data abstracted from medical records.
Another commenter was opposed to further adoption of the PSI-90
measure for the Hospital VBP Program, stating that composite measures
calculated using retrospective claims data create many problems for
quality improvement activities, as the commenter believes claims-based
data create inherent difficulties that are not present in non-claims
data. The commenter was also opposed to rebalancing the PSI-90 measure
by adding new metrics or shifting weighting to better measures in the
composite, and stated that non-claims data should be considered for
future composites when feasible.
Response: Each of the PSI-90 composite component measures includes
detailed risk-adjustment for clinical factors (for example, modified
diagnostic related groupings, major diagnostic categories,
comorbidities), age, and gender that influence the risk for
experiencing a patient safety event during hospitalization. AHRQ's
Quality Indicator program continually updates and refines the
indicators to capture the best possible quality indicators for the
measure.
We also note that there are previously conducted validation studies
examining the relationship between billing or claims data and medical
records.
In addition, AHRQ has advised us that the NQF-convened a group of
experts to determine what criteria should be used for evaluating the
indicators in the PSI-90 measure. The Technical Expert Panel provided
clear guidance on the relationship between the individual component
indicators and the composite in the Composite Performance Measure
Evaluation Guidance document (NQF, April 2013), available at https://www.qualityforum.org/Publications/2013/04/Composite_Performance_Measure_Evaluation_Guidance.aspx. Specifically, individual component
measures that are included in the composite performance measure: (1)
Should be justified based on the clinical evidence; (2) do not need to
be NQF endorsed; (3) generally should demonstrate a gap in performance;
and (4) may not be sufficiently reliable independently, but contribute
to the reliability of the composite performance measure.
AHRQ convened a Composite Measure Workgroup of experts in the field
to determine the best weighting strategy. The methodology of the PSI-90
measure is detailed in the original technical report by the AHRQ
Composite: https://qualityindicators.ahrq.gov/Downloads/Modules/PSI/PSI_Composite_Development.pdf. Several alternative approaches were
discussed with the AHRQ Composite Measure Workgroup and the first NQF
Composite Measure Steering Committee. Factor analysis was considered as
one approach and was deemed to have no clear advantages over less
complex, more intuitively clear weighting schemes. In brief, numerator
weighting that is used in PSI-90 was preferred due to its greater
simplicity and clarity.
Comment: A few commenters strongly opposed the duplicative use of
PSI-90 in both the Hospital VBP and HAC Reduction Programs.
Response: As discussed further above, while we are aware that
commenters object to the possibility of scoring hospitals on certain
NHSN measures under both the Hospital VBP and HAC Reduction Programs,
we note that these measures cover topics of critical importance to
quality improvement in the inpatient hospital setting, and to patient
safety.
Comment: Some commenters opposed adoption of the PSI-90 composite
measure, stating that its component indicators have serious flaws.
Commenters stated that, for example, the PSI-15 indicator (accidental
puncture or laceration), does not clearly define what constitutes an
``accidental puncture.'' Commenters also stated that PSI-12
(postoperative PE/DVT rate) relies on risk adjustment criteria that
could lead to potential unintended consequences such as tagging every
LE thrombophlebitis, whether or not they are clinically significant.
One commenter stated that emergent cases and patients with a prior
history of PE or DVT should also be excluded from that measure.
Response: We continue to believe the PSI-90 measure is an important
measure of patient safety, and therefore warrants inclusion in the
Hospital VBP Program. PSI 15--accidental puncture and laceration and
PSI 12--Perioperative Pulmonary Embolism or Deep Vein Thrombosis Rate
are endorsed as valid and reliable measures (NQF 0345, NQF 0450,
respectively). Expert panels have felt that these are scientifically
sound measures.
Comment: One commenter expressed concern about the reliability and
reproducibility of the PSI-90 claims-based composite measure because of
generally poor agreement between these and NHSN-based surveillance
criteria, with the exception of surgical site infection (SSI). The
commenter encouraged AHRQ and other independent researchers to examine
the value, validity, reliability, and reproducibility of PSI-90 by
comparing it to epidemiologic measures within NHSN's domain. The
commenter recommended that CMS study how these measures correlate with
SSI and NHSN-based surveillance criteria.

[[Page 50065]]

Response: We agree with the commenter that studying the correlation
between PSI-90 and with SSI and NHSN-based surveillance criteria would
provide additional insights into PSI-90 measure validity, and will
consider this in the future. We note that we are finalizing a policy to
access certain NHSN data reported to the Hospital IQR Program which
would make it possible to conduct this type of alignment analysis
between the PSI-90 measure and the NHSN measures.
Comment: Commenters suggested that CMS consider removing the PSI-12
indicator from the PSI-90 composite for the FY 2015 Program until
stakeholder concerns with the indicator's validity have been resolved.
Response: We do not believe the PSI-12 indicator should be removed
from the PSI-90 composite measure because it is designed to improve
surveillance and awareness of post-operative deep vein thrombosis and
pulmonary embolism. We believe that monitoring these conditions is
important to protect patients from post-operative complications.
Comment: A few commenters asked CMS not to finalize several
proposed new measures for the FY 2019 Hospital VBP Program until they
are NQF-endorsed, recommended by the MAP, and hospitals have experience
in reporting and understanding the measures.
Response: We believe that we have complied with the Hospital VBP
Program's statutory requirements with respect to endorsement from NQF,
MAP recommendations, and reporting through the Hospital IQR Program
prior to adopting these measures under the Hospital VBP Program.
Further, for the reasons we described in the proposed rule and in our
responses to comments on that proposed rule, we continue to believe
that the proposed measures represent improvements to the Hospital VBP
Program's measure set by expanding to new clinical topics and
addressing public health concerns.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the PSI-90 composite measure for the
FY 2019 Hospital VBP Program.
6. Possible Measure Topics for Future Program Years
a. Care Transition Measure (CTM-3) Items for Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS) Survey
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122), we stated
that we are considering proposing to add the Care Transition Measure
(CTM) from the HCAHPS Survey to the Patient and Caregiver Centered
Experience of Care/Care Coordination (PEC/CC) domain of the FY 2018
Hospital VBP Program. We sought public comments on this topic.
The CTM was added to the HCAHPS Survey of hospital inpatients in
January 2013 (77 FR 53513 through 53516). Three items were added to the
HCAHPS Survey to create the new Care Transition Measure composite.
After collecting four quarters of data on these items (January 2013
through December 2013), we intend to publicly report CTM scores for the
first time on our Hospital Compare Web site in October 2014.
Once the CTM has been publicly reported on Hospital Compare for one
year, in accordance with the statutory requirements of the Hospital VBP
Program, we are considering proposing to adopt CTM as the ninth
dimension of the HCAHPS survey in the PEC/CC domain for the FY 2018
Hospital VBP Program. We intend to propose that the PEC/CC domain in
the FY 2018 Hospital VBP Program would have a baseline period of
January 1, 2014 through December 31, 2014, and a performance period of
January 1, 2016 through December 31, 2016.
Currently, the PEC/CC domain is comprised of eight dimensions of
the HCAHPS Survey. Scoring in this domain is based on two elements: The
HCAHPS Base Score and HCAHPS Consistency Points Score. For additional
information on the calculation of the PEC/CC domain score, we refer
readers to ``A Step-by-Step Guide to Calculating the Patient Experience
of Care Domain Score in the Hospital Value-Based Purchasing FY 2013
Actual Percentage Payment Summary Report,'' at: https://www.hcahpsonline.org/HospitalVBP.aspx.
We specifically sought public comments on how the new CTM dimension
should be included in the scoring methodology that we have adopted for
the PEC/CC domain. In accordance with the finalized Hospital VBP
Program scoring methodology for other domains, we are considering the
``normalization'' approach, which would introduce only minor changes to
the original scoring formula, as follows.
For purposes of the HCAHPS Base Score, the new CTM dimensions would
be calculated in the same manner as the eight existing HCAHPS
dimensions. For each of the nine dimensions, Achievement Points (0-10
points) and Improvement Points (0-9 points) would be calculated, the
larger of which would be summed across the nine dimensions to create a
pre-normalized HCAHPS Base Score (0-90 points, as compared to 0-80
points when only eight dimensions were included). The pre-normalized
HCAHPS Base Score would then be multiplied by 8/9 (0.88888) and rounded
according to standard rules (values of 0.5 and higher are rounded up,
values below 0.5 are rounded down) to create the normalized HCAHPS Base
Score. Each of the nine dimensions would be of equal weight, so that,
as before, the normalized HCAHPS Base Score would range from 0 to 80
points.
HCAHPS Consistency Points would then be calculated in the same
manner as before and would continue to range from 0 to 20 points. The
Consistency Points Score would now consider scores across all nine of
the PEC/CC domain dimensions, whereas before it considered only the
eight dimensions that preceded the CTM measure.
The final element of the scoring formula would be the sum of the
HCAHPS Base Score and the HCAHPS Consistency Points Score and would
range from 0 to 100 points, as before.
We welcomed public comments on this approach to including the CTM-3
dimensions in the PEC/CC domain score.
Comment: Many commenters supported incorporating the HCAHPS Care
Transition Measure (CTM-3) into the PEC/CC domain, given the critical
importance of the care transition for improving patient outcomes and
reducing patient suffering. Other commenters strongly supported the
addition and urged CMS to finalize it. Commenters also supported the
proposed methodology for scoring and weighting the measure within the
domain.
One commenter noted that the measure develops a ninth dimension of
the HCAHPS Survey in the PEC/CC domain for FY 2018. The commenter
stated that this measure is a significant first step in addressing
shared accountability and quality of care during transitions of care
periods and discharges from the health-system setting. The commenter
further agreed that the normalization approach should be used for this
care transition measure and calculation of total performance score.
One commenter commended CMS for considering adopting the CTM-3
items on the HCAHPS Survey, stating that effective management of care
transitions is essential to ensuring proper patient recoveries while
reducing readmissions and ensuring medication adherence. Another
commenter supported our plan to include the CTM-3 items on the HCAHPS
survey in the Hospital VBP Program in future years, noting that

[[Page 50066]]

providing incentivizes for hospitals to coordinate patient transitions
will aid significantly in decreasing readmissions and potentially
mortality among Medicare patients. Other commenters supported adoption
of the CTM-3 items on the HCAHPS Survey under the Hospital IQR Program
and offered to evaluate their inclusion under the Hospital VBP Program
once the items have been publicly reported. Other commenters noted that
their support because managing safe and effective transitions of care
is a critical competency in the health care system.
Response: We appreciate the comments in support of adding the Care
Transition Measure to the Hospital VBP Program and the proposed
methodology and weighting of this dimension in the PEC/CC domain.
Comment: Several commenters did not support the addition of the
three-question care transition measure as a ninth dimension to the
HCAHPS Hospital VBP Program scoring before evidence supporting its
validity and materiality to the Hospital VBP Program was released. One
commenter suggested that CMS exclude HCAHPS scores from the program or
adjust provider scores to account for demographic factors that have
been shown to impact survey results. One commenter requested additional
analysis of the measure results after its first year of implementation.
Response: Should we decide to formally propose the addition of the
HCAHPS Care Transition Measure to the Patient Experience of Care domain
of the Hospital VBP Program through the rulemaking process, we will
release additional information about the validity, reliability and
statistical properties of the CTM.
In order to achieve the goal of fair comparisons across all
hospitals that participate in HCAHPS, it is necessary to adjust for
factors that are not directly related to hospital performance but do
affect how patients answer HCAHPS survey items. The HCAHPS patient-mix
adjustment is intended to eliminate any advantage or disadvantage in
scores that might result from patient characteristics beyond a
hospital's control. We do not collect or adjust for patients'
socioeconomic status, however the HCAHPS patient-mix adjustment does
include patients' highest level of education, which can be related to
socioeconomic status. (HCAHPS On-Line Web site, Mode and Patient-mix
Adjustment: https://www.hcahpsonline.org/modeadjustment.aspx.)
Comment: One commenter pointed to an analysis by the Cleveland
Clinic that that shows that as patients' severity of illness worsens,
HCAHPS scores decline in a statistically significant manner. Further,
the commenter notes that the same relationship was observed when the
researchers examined the relationship between patients' symptoms of
depression and responses to HCAHPS--as symptoms of depression worsened,
HCAHPS scores declined. The commenter believed this trend also may
affect scores for other surveys in the CAHPS family. The commenter
encouraged CMS to conduct an analysis that assesses the extent of the
issue, and identifies potential mechanisms for enhancing how CAHPS
scores are adjusted for patient factors.
Response: Since its national implementation in 2006, the HCAHPS
Survey has included an item that asks for patients' assessment of their
overall health. We use this information in a transparent manner in the
standard patient-mix adjustment of HCAHPS scores, as explained on the
official HCAHPS On-Line Web site, www.HCAHPSonline.org, in our research
documents, in the patient-mix adjustment coefficients that are posted
on this Web site, and in published research.
Responding to comments about HCAHPS in previous IPPS/LTCH PPS
rulemaking, we added an item to the HCAHPS Survey in January 2013 that
asks patients to assess their overall mental or emotional health. We
have analyzed the impact of this item and found that its inclusion in
patient-mix adjustment does not explain more or improve the model in
which the `overall health' item also appears. Therefore we include only
the `overall health' item in the HCAHPS patient-mix adjustment, as this
adequately adjusts for patient severity.
With respect to a Cleveland Clinic analysis that is said to show a
greater than expected impact of severity of illness on HCAHPS scores,
we understand that this analysis does not examine associations between
patient characteristics and HCAHPS scores after the standard HCAHPS
patient-mix adjustment has been applied. The standard HCAHPS patient-
mix adjustment would be expected to remove most or all of the
association mentioned. We also understand that the Cleveland Clinic
analysis is not based on national data. In addition, recent research
found that using patients' clinical characteristics in adjustment
models had relatively little impact relative to survey questions about
patients' health and that adding such measures to the existing HCAHPS
case-mix adjustment model would have very little effect.\53\
---------------------------------------------------------------------------

\53\ Cleary, et al. Medical Care. 52: 619-625. 2014.
---------------------------------------------------------------------------

Comment: One commenter urged CMS to expedite the initiative to
include additional patient-centered palliative care measures into the
Hospital VBP Program because the HCAHPS Survey is currently the only
measure of patient experience, which misses all who die in the hospital
or who are too ill to fill out the survey. The commenter noted that
these individuals are most vulnerable due to the severity of their
illness and deserve to have their and their families' experiences
measured.
Response: The survey methodology and question wording at this point
cannot accommodate proxy respondents, so HCAHPS cannot measure the
experience of care of those who died in the hospital. However, as about
6.6 percent of hospice patients in 2012 died in a hospital setting,\54\
the new Hospice Experience of Care Survey, which is specifically
designed for proxy respondents, will be able to capture some
information about the experience in the hospital setting.
---------------------------------------------------------------------------

\54\ NHPCO's Facts and Figures: Hospice Care in America, 2013
Edition. National Hospice and Palliative Care Organization.
Available at https://www.nhpco.org/sites/default/files/public/Statistics_Research/2013_Facts_Figures.pdf.
---------------------------------------------------------------------------

b. Possible Future Efficiency and Cost Reduction Domain Measure Topics
In the interest of expanding the Efficiency and Cost Reduction
domain to include a more robust measure set, including measures that
supplement the MSPB measure with more condition and/or treatment
specific episodes, as well as facilitating alignment with the Physician
VM Program, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122
through 28224), we stated that we are considering proposing to add new
episode-based payment measures to the Hospital VBP Program through
future rulemaking. Expanding the Efficiency and Cost Reduction domain
to include such measures would create incentives for coordination
between hospitals and physicians to optimize the care they provide to
Medicare beneficiaries and would increase alignment between the
Hospital VBP and Physician VM Programs. Any future Hospital VBP Program
measures would first be finalized for inclusion in the Hospital IQR
Program and included on the Hospital Compare Web site for one year, as
required by section 1886(o)(2)(C) of the Act.
As we discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28123), the six episode-based standardized

[[Page 50067]]

payment measures we are considering are similar in many ways to the
NQF-endorsed MSPB measure already included in the Efficiency domain
and, like the MSPB measure, Medicare payments included in these
episode-based measures would be standardized according to the CMS
standardization methodology finalized for the MSPB measure in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51626). In the FY 2013 IPPS/LTCH
PPS proposed rule (79 FR 28123 through 28124), we also discussed
notable differences between these new measures under consideration and
the MSPB measure.
Most notably, we would only include Medicare payments for services
that are clinically related to the health conditions treated during the
hospital stay that triggered the episode. We stated that the aim of
including these episode-based payment measures in the Hospital VBP
Program would be to differentiate between hospitals that provide care
efficiently (that is, high quality care at a lower cost to Medicare).
We stated our belief that risk-adjusted standardized Medicare payments
are an appropriate indicator of efficiency as they allow us to compare
hospitals without regard to such factors as geography and teaching
status. This comparison is particularly important with clinically
coherent episodes because it distinguishes the degree to which practice
pattern variation influences the cost of care. We believe that creating
incentives for appropriately reducing practice pattern variation is an
important part of our aims to lower the cost of care appropriately and
create better coordinated care for Medicare beneficiaries.
We noted another difference between the episode-based measures we
are considering and the MSPB measure, which occurs when, during the 30
days following discharge from an index admission, a beneficiary is
readmitted for a condition that is clinically related to the index
admission and that also triggers an episode-based cost measure episode.
We provided details of which admissions would begin a new episode and
contribute to a preceding episode may be found at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-
purchasing.
We stated that we are considering three medical and three surgical
episodes for the potential inclusion in the initial expansion of the
Efficiency domain. The medical episodes would address the following
conditions: (1) Kidney/urinary tract infection; (2) cellulitis; and (3)
gastrointestinal hemorrhage. A medical episode would be `triggered' by
an inpatient claim with a specified MS-DRG. The surgical episodes
currently under consideration are (1) hip replacement/revision; (2)
knee replacement/revision; and (3) lumbar spine fusion/refusion. A
surgical episode would be triggered when an inpatient claim has one of
the specified MS-DRGs and at least one of the procedure codes specified
for that episode. We welcomed public comment on the three medical and
three surgical conditions that we are considering as new episode-based
measures for initial expansion of the Efficiency domain.
Comment: A few commenters expressed support for one or more
specific episodes, and some commenters suggested that CMS also consider
adding additional measures to the domain in the future. One commenter
supported the proposal to adopt a hip/knee replacement/revision measure
in the future efficiency domain, as the episode would encourage care
coordination. Some of those commenters who supported one or more of
these episodes also expressed concerns.
Many commenters did not support inclusion of the episode-based
standardized measures into the Hospital VBP Program. One commenter
stated that the DRG triggers for urinary tract infection and cellulitis
are often unrelated to an index inpatient admission. A few commenters
also requested additional information on the measures CMS is
considering.
Response: We appreciate the commenter's support of the hip and knee
replacement/revision condition-specific measures.
Regarding the comment on the kidney/urinary tract infection and
cellulitis episodes, we would like to clarify that these episode are
only triggered by the presence of a specific MS-DRG on an inpatient
claim. Thus, the episodes can only be initiated when the kidney/urinary
tract infection or cellulitis is the primary reason for inpatient
hospitalization.
With regard to the request for additional information, we note that
we provided detailed measure specifications at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/hospital-value-based-
purchasing, and we reiterate that would implement any future measures
for the Hospital VBP Program by first proposing and finalizing them for
inclusion in the Hospital IQR Program, through notice and comment
rulemaking.
We thank the commenters for the responses and we will consider them
as we develop future measures for the Hospital VBP Program.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28122 through
28123), we noted that there are a number of other types of episodes
that could also meet the episode selection criteria we describe below,
including those related to heart and lung (for example, heart failure
and pneumonia). We stated that we are exploring data related to
episodes for these types of conditions under the Physician VM Program.
We welcomed comment regarding the applicability of episode-based
measures for these or other conditions for future expansion of the
Efficiency domain.
Comment: One commenter applauded CMS' consideration of condition-
specific episode-based cost measures, and suggested that CMS consider
focusing on additional high-impact conditions such as heart failure,
stroke, and diabetes. The commenter also suggested that CMS attempt to
identify geographic areas and hospitals where volume may be unduly
high. Another commenter stated that, in FY 2017, CMS will be reporting
Cost per Episode for pneumonia and heart failure through the Hospital
IQR Program and was unclear why CMS is using different medical episodes
here. Another commenter recommended that CMS consider the development
and inclusion of additional measures outside of therapeutic areas
already represented in the Hospital VBP Program, including measuring
relating to diabetes, atrial fibrillation, COPD, and oncology. Several
commenters who supported the measures encouraged CMS to develop
additional episodes although these commenters did not identify specific
episode names.
Response: We thank the commenters for the support of the six
measures and the suggestions for additional high impact conditions and
will consider their suggestions in the future. Regarding the comment
that pneumonia and heart failure episodes were in the Hospital IQR
Program but not among the six measures among the proposed conditions
for potential inclusion in the Efficiency domain, the 6 measures were
selected for common conditions with the five criteria discussed below.
Other measures such as pneumonia and heart failure could be considered
among the medical episodes for potential inclusion in the future. As
stated earlier, we would first propose any future Hospital VBP Program
measures for the Hospital IQR Program, through notice and comment
rulemaking.

[[Page 50068]]

We thank the commenters for the responses and we will consider them
as we develop future measures for the Hospital VBP Program.
In selecting the six conditions around which we would develop
episode measures for future expansion of the Efficiency domain, we
considered the following five criteria: (1) The condition constitutes a
significant share of Medicare payments for hospitalized patients during
and surrounding the hospital stay; (2) the degree to which clinical
experts consulted for this project agree that standardized Medicare
payments for services provided during the episode can be linked to the
care provided during the hospitalization; (3) episodes of care for the
condition are comprised of a substantial proportion of payments for
post-acute care, indicating episode payment differences are driven by
utilization outside of the MS-DRG payment; (4) episodes of care for the
condition reflect high variation in post-discharge payments, enabling
differentiation between hospitals; and, (5) the medical condition is
managed by general medicine physicians or hospitalists and the surgical
conditions are managed by surgical subspecialists, enabling comparison
between similar practitioner types within each episode measure.
For analysis purposes, the five selection criteria were applied to
2012 Medicare acute inpatient hospital data in a hierarchical manner,
to prioritize the inpatient conditions. After the selection criteria
were applied, we narrowed the medical and surgical episodes to those
episodes that are less complex, in order to allow CMS and hospitals to
gain experience with this new measure type. Full details of the episode
selection criteria are available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/
hospital-value-based-purchasing. We welcomed public comments on the
episode selection criteria we utilized.
Comment: Some commenters expressed support for the criteria. One
commenter asked who is responsible for defining the episodes of care
for cost management purposes.
Response: We thank the commenters for the support of the criteria.
We have worked closely with clinicians and contractors experienced in
health services research to develop the episode measure selection
criteria and to define the episodes of care cost measures.
We thank the commenters for the responses and we will consider them
as we develop future measures for the Hospital VBP Program.
Complete episode specifications, including the MS-DRG and ICD-9-CM
procedure codes used to identify each of the episodes, details of
episode construction methodology, and information on the clinical
expert reviewers for this project are available on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/?redirect=/
hospital-value-based-purchasing. We welcomed public comments on these
specifications and the construction of the six episode-based payment
measures that we are considering.
Comment: A number of commenter expressed concern regarding the lack
of assessment of quality within the 6 cost measures or association with
existing quality measures, both among those who supported the measures
and those who did not. One commenter did not support the addition of
six episode-based payment measures to the Efficiency domain in addition
to the MSPB measure until a sufficient number of appropriate clinical
outcome or clinical process measures related to these therapeutic areas
are included in the program and have demonstrated high provider
performance, and noted that the inclusion of cost measures without
relevant quality measures could have the unintended consequence of
sacrificing quality of care for the sake of cost reduction.
Response: As we take incremental steps towards providing all
stakeholders with comprehensive metrics, we have selected condition-
specific cost measures for common conditions with evidence of large
variation in payments to encourage higher value care where there is the
most opportunity for improvement, the greatest number of patients to
benefit from improvements, and the largest sample size to ensure
reliability. Regarding the comment that the measures under
consideration do not account for quality, we continue to believe that
it is beneficial to view a cost measure in light of other quality
measures. As we stated in the FY 2012 IPPS/LTCH PPS final rule, for
purposes of the Hospital VBP Program, we would weight and combine the
Efficiency and Cost Control domain with the other domain scores, in
order to calculate each hospital's TPS. This ensures that any future
spending measures would make up only a portion of the TPS and that the
remainder would be based on hospitals' performance on the other quality
measures (76 FR 51622). We continue to believe that distant measures of
cost, independent of quality, enable us to identify hospitals involved
in the provision of high quality care at a lower cost to Medicare (77
FR 53586).
Comment: Several commenters expressed concern about the potentially
small number of episodes, which leads to more random variation. These
commenters expressed concern about the reliability of the proposed
condition-specific cost measures. One commenter noted that there would
be fewer observations for each condition than there would be for an
all-condition measure, such as the MSPB measure, and expressed concern
that this would result in more random variation without providing clear
additional information about the average costliness of the hospitals'
care. To ensure reliability, the commenter expressed the belief that it
is important that the cost measures used should be as broadly based as
possible. Another commenter expressed concern that CMS may not be able
to reliably and validly calculate Hospital VBP improvement scores and
recommended that CMS focus on achievement scores. This commenter
suggested that condition-specific cost measures will split efficiency
data into small pools of information that are more prone to random
variation and inconclusive results.
Response: As we take incremental steps towards providing all
stakeholders with comprehensive metrics, we have selected for potential
future inclusion in the Efficiency domain condition-specific cost
measures for common conditions with evidence of large variation in
payments to encourage higher value care where there is the most
opportunity for improvement, the greatest number of patients to benefit
from improvements, and the largest sample size to ensure reliability.
To further ensure reliability, inclusion of the condition-specific cost
measures for individual hospitals would require a minimum number of
cases, which would be based on statistical tests of reliability and
would be proposed through future rulemaking.
We also note that commenters have previously suggested that we
narrow the MSPB measure to condition-specific measures, and we
responded in the FY 2012 IPPS/LTCH PPS final rule that we would
consider adding condition-specific measures to the Efficiency domain
through future rulemaking (76 FR 51623). As we stated in the FY 2015
IPPS/LTCH PPS proposed rule, we believe that these condition-specific,
cost and-outcome-measure groupings would allow patients and payers to
make more fully informed comparisons

[[Page 50069]]

of hospitals' performance. Including condition-specific cost measures
would also provide hospitals with actionable feedback that would better
assist them in targeting resources for improvements than would an
overall cost-measure alone.
Comment: A number of commenters expressed their concern that the
episode measures, like the MSPB measure, include the cost of services
that they perceived to be beyond hospitals' control, including post-
acute care and readmissions. Commenters also expressed their concern
that including post-acute care may skew measure results, due to
including greater effects of patient comorbidities. Some commenters
suggested that the measures would be more appropriate for inclusion in
the Shared Savings Program or after they are implemented in the
Physician Value Modifier (VM). Some commenters also suggested that the
measures account for site of service choices made by beneficiaries.
Response: We disagree that Medicare payments for post-discharge
services are beyond the influence of hospitals, and we believe that
including post-acute care services in the episodes of care is important
because it ensure that these high-cost services, often with alternative
post-acute options with large variations in cost, are included in the
overall condition-specific episode costs. Patient comorbidities that
contribute to higher post-acute care costs are included in the risk
adjustment models to address the concerns raised.
We agree that it is important to align incentives across CMS
payment incentive programs. While these measures have not been proposed
for inclusion in the Shared Savings Program or the VBM at present, they
have been included in the Supplemental Quality and Resource Use Reports
distributed to groups of 100 or more EPs in the summer of 2014 and we
intend to continue to include them in these reports, as they are
disseminated to more groups of EPs, including solo practitioners, in
the future. We would also consider proposing them for inclusion in the
VM and MSSP programs through future rulemaking.
As we stated in the stated in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51625), we do not believe that site of service adjustments are
appropriate for spending measures, because such adjustments would
undermine the ability of the measures to meaningfully capture
differences in Medicare spending. However, we would consider the
potential inclusion of site of service choice as we further examine the
measure.
Comment: Some commenters suggested that CMS explore the Bundling
Payments for Care Improvement (BPCI) initiative before these six
potential measures are implemented. These commenters expressed concern
that the measure specifications and episode construction rules were not
aligned with the Bundled Payments for Care Improvement initiative,
resulting in confusion among hospitals, and suggested that CMS consider
this initiative before further pursuing these six episodes.
Response: We considered the BPCI methodology when we developed the
episode based payment measures we discuss in this rule. We believe the
episodes included in the Hospital VBP Program should be more specific
in their inclusion of clinically-related costs, because these measures
would be publicly reported and used to evaluate hospitals and adjust
their payments, based on performance for specific conditions.
The BPCI approach (model 2) includes the inpatient hospital stay
for the anchor MS-DRG and all related care covered under Medicare Part
A and Part B within 30, 60, or 90 days following discharge from the
acute care hospital. Unrelated services are not included in the BPCI
episode. These excluded services can be found at https://innovation.cms.gov/Files/x/BPCI2-4_PartA-B_Exclusion.pdf. In
contrast, the 6 condition-based episodes discussed in the proposed rule
include all costs from the index admission and only clinically-related
costs from Part A and B services occurring immediately before and after
the index admission. Service costs may only be included in the
condition-based episodes if they meet certain cost thresholds and are
billed with select procedures, services, and/or diagnoses. In other
words, the BPCI approach is designed to pay for an episode of care,
which includes all relevant services for a set period of time. The six
condition-based episodes proposed for potential future consideration
are designed to support more targeted assessments of hospital
performance by using the cost of major, clinically-related services in
the post-discharge period as an indicator of a hospital's success in
delivering clinically-relevant, high quality, and appropriate services
during the index hospital admission.
Comment: Many commenters stated that the 6 condition-based episode
measures under consideration did not risk adjust for sociodemographic
factors and encouraged CMS to review its risk adjustment models. One
commenter noted that lack of proper risk-adjustment for
sociodemographic status could result in unintended negative
consequences. Some commenters discussed the recent NQF draft report on
the subject that suggested that measures take these factors into
account.
Response: We refer readers to our earlier discussion of risk
adjustment based on socioeconomic status with respect to the MSPB
measure which also is relevant for these measures.
Comment: Many commenters stated that inclusion of the 6 measures
would mean double counting the services that are already included in
the MSPB measure, which is the only measure in the Efficiency domain.
Some commenters suggested that if these measures are adopted for
inclusion in the Efficiency domain, then they should replace, rather
than supplement the MSPB.
Response: We disagree that inclusion of additional condition-
specific measures in the Efficiency and Cost Control domain would
inappropriately double count payments for episodes attributed to
hospitals. Unlike the MSPB measure, the condition-specific cost
measures only include costs from services/procedures related to the
condition. These condition-specific, cost-and-outcome-measure groupings
would allow patients and payers to make more fully informed comparisons
of hospitals' performance.
Including condition-specific cost measures would also provide
hospitals with actionable feedback that will better equip them to
implement targeted improvements than an overall cost-measure alone.
Relying on condition-specific measures alone would disregard
differences in overall cost. The MSPB-1 measure is reported as a ratio
of payment-standardized, risk-adjusted MSPB amount for each hospital
divided by the weighted median MSPB amount across all hospitals. These
six clinical episode measures, if adopted in the future, are intended
to supplement the information provided by the MSPB. We note that, as
mentioned above, commenters have previously suggested that we narrow
the MSPB measure to condition-specific measures, and we responded in
the FY 2012 IPPS/LTCH PPS final rule that we would consider adding
condition-specific measures to the Efficiency domain through future
rulemaking (76 FR 51623).
Comment: Several commenters noted that CMS should follow the MAP
process and propose to include these measures in the Hospital IQR
Program first, prior to inclusion in the Hospital VBP Program.
Response: Any future Hospital VBP Program measures would first be

[[Page 50070]]

finalized for inclusion in the Hospital IQR Program and included on the
Hospital Compare Web site for one year, as required by section
1886(o)(2)(C)(i) of the Act.
Comment: Several commenters, including those who supported the
measure, requested additional information on the six measures. One
commenter expressed concern about the proposed cost measures and
recommended that the public have additional opportunity to review and
comment on this proposal before CMS moves ahead on a hip/knee surgical
episode under the Hospital VBP Program.
Response: The six episode cost measures have been designed
specifically for the Medicare program using transparent methodology
that is described in materials that are publicly available on the CMS
hospital value-based purchasing Web site: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/. There will be additional opportunity to
review and comment on this proposal before we would move ahead on any
of the six episodes under consideration.
Comment: One commenter stated that readmissions for a condition
clinically related to the index admission should not start a new index
admission because it would be holding hospitals accountable twice for
the care provided.
Response: The methodology of the condition-specific cost measures
assigns separate significance to a readmission that is grouped to a
related previous hospitalization and a second triggered episode for the
same condition. These admissions would not necessarily be attributed to
the same hospitals, and assigning one as a readmission to the previous
hospitalization and also allowing it to begin a second episode provides
an opportunity for both managing hospitals to be evaluated.
We will consider the suggestion that readmissions not trigger new
episodes, but we believe that it may be appropriate to begin a new
episode in these cases, because Medicare payments made for the care
provided during these subsequent hospitalizations represents a
significant cost that would otherwise not be captured. We also note
that the measures could be calculated similarly to the MSPB measure,
where the total cost per episode could be divided by the number of
episodes, so that the amount would represent an average of the episode
costs for multiple admissions.
Comment: One commenter suggested that CMS focus on the development
of a multi-dimensional patient-reported composite measure of maternity
care in the near-term, which could be collected six weeks after birth
to measure outcomes and identify common new-onset morbidities during a
post-partum visit. Another commenter recommended the adaption of the
generic Consumer Assessment of Healthcare Providers and Systems (CAHPS)
survey to measure the experience of care of childbearing women and
newborns.
Response: Patients admitted for maternity care are eligible for the
HCAHPS Survey and comprise a significant portion of patients who report
their experience of care. We are considering whether to extend the
HCAHPS Survey to encompass the pediatric population; currently the
HCAHPS Survey is oriented toward patients 18 years of age and older.
We thank the commenters for the responses and we will consider them
as we develop future measures for the Hospital VBP Program.
7. Previously Adopted and Newly Finalized Performance Periods and
Baseline Periods for the FY 2017 Hospital VBP Program
a. Background
Section 1886(o)(4) of the Act requires the Secretary to establish a
performance period for the Hospital VBP Program for a fiscal year that
begins and ends prior to the beginning of such fiscal year. We refer
readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689 through
50692) and the CY 2014 OPPS/ASC final rule with comment period (78 FR
75020 through 75021) for the performance periods and baseline periods
for the Clinical Care--Process, Patient Experience of Care, Clinical
Care--Outcomes, and Efficiency and Cost Reduction domains for the FY
2016 Hospital VBP Program.
As discussed further below, in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50702 through 50704), we adopted new NQS-based quality domains
for FY 2017, and in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28124 through 28125), we proposed to adopt performance and baseline
periods using those new domains for the FY 2017 Hospital VBP Program.
b. Previously Adopted Baseline and Performance Periods for the FY 2017
Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694
and 50698 through 50699), because of the time needed to process measure
data for the three 30-day mortality measures (Clinical Care--Outcomes
domain) and the PSI-90 measure (also referred to in previous rulemaking
as the AHRQ patient safety PSI-90 composite measure) (Safety domain),
and in consideration of our policy goal to collect enough data to
generate the most reliable scores possible, we adopted performance
periods and performance standards for the 30-day mortality measures for
FY 2017, FY 2018, and FY 2019, and for the PSI-90 measure for FY 2017
and FY 2018.
c. Clinical Care--Process Domain Performance Period and Baseline Period
for the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month
performance period for the FY 2016 Clinical Care--Process domain
measures of CY 2014 (January 1, 2014 through December 31, 2014). We
also adopted a corresponding 12-month baseline period of CY 2012
(January 1, 2012, through December 31, 2012), for purposes of
calculating improvement points and performance standards.
Based on our review of FY 2013 and FY 2014 Hospital VBP performance
period denominator data, we continue to believe that a 12-month
performance period provides us with reliable and sufficient data for
scoring Clinical Care--Process domain measures under the Hospital VBP
Program. These data are available for public review on our Hospital
Compare Web site. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28124), we proposed to adopt a 12-month performance period for
FY 2017 Clinical Care--Process domain measures (including the proposed
PC-01 measure) of CY 2015 (January 1, 2015, through December 31, 2015).
We also proposed to adopt a corresponding 12-month baseline period of
CY 2013 (January 1, 2013, through December 31, 2013) for purposes of
calculating improvement points and calculating performance standards.
We invited public comment on these proposals.
Comment: Many commenters supported CMS' proposed baseline and
performance periods for FY 2017 measures in the Safety, Clinical Care--
Process, and Efficiency and Cost Reduction domains.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing the FY 2017 Clinical Care--Process performance and baseline
periods as proposed.

[[Page 50071]]

d. PEC/CC Domain Performance Period and Baseline Period for the FY 2017
Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50689), we adopted a
12-month performance period for FY 2016 Patient Experience of Care
domain measures of CY 2014, or January 1, 2014 through December 31,
2014, for the FY 2016 Hospital VBP Program. We also adopted a
corresponding 12-month baseline period of CY 2012 (January 1, 2012
through December 31, 2012), for purposes of calculating improvement
points and calculating performance standards. We continue to believe
that a 12-month performance period provides us sufficient HCAHPS data
on which to score hospital performance, which is an important goal both
for CMS and for stakeholders.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124), we
proposed to adopt a 12-month performance period for the FY 2017 PEC/CC
domain of CY 2015 (January 1, 2015 through December 31, 2015). We also
proposed to adopt a corresponding 12-month baseline period of CY 2013
(January 1, 2013 through December 31, 2013) for purposes of calculating
improvement points and calculating performance standards.
We invited public comment on these proposals. However, we did not
receive specific comments on the PEC/CC domain's performance period for
FY 2017. Accordingly, we are finalizing the FY 2017 performance and
baseline periods for the PEC/CC domain as proposed.
e. Performance Period and Baseline Period for NHSN Measures in the
Safety Domain for the FY 2017 Hospital VBP Program
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
75121), for the three NHSN HAI measures that we have adopted for the FY
2016 Hospital VBP Program (Catheter-Associated Urinary Tract Infection
(CAUTI), CLABSI, and Surgical Site Infection (SSI)), we adopted an FY
2016 performance period of CY 2014 (January 1, 2014 through December
31, 2014), with a corresponding baseline period of CY 2012 (January 1,
2012 through December 31, 2012) for purposes of calculating improvement
points and calculating performance standards.
We continue to believe that a 12-month performance period provides
us with sufficient data on which to score hospital performance on NHSN
measures in the Safety domain. We also noted that 12-month performance
and baseline periods are consistent with the reporting periods used for
these measures under the Hospital IQR Program (78 FR 50689). Therefore,
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124) for the FY
2017 NHSN measures in the Safety domain (including the proposed CLABSI,
C. difficile Infection and MRSA Bacteremia measures), we proposed to
adopt a performance period of CY 2015 (January 1, 2015 through December
31, 2015), and a corresponding baseline period of CY 2013 (January 1,
2013 through December 31, 2013) for purposes of calculating improvement
points and calculating performance standards.
We invited public comment on these proposals.
Comment: One commenter supported the performance and baseline
periods for the FY 2017 NHSN measures in the Safety domain but
recommended collaboration with NHSN on limitations of SIR analysis,
especially for smaller size facilities or those with lower volumes of
use of devices such as central lines, urinary catheters, and surgical
procedures. The commenter also expressed concern that an SIR may not
calculate even for a 12-month block of time for some hospitals.
Response: We intend to continue working with CDC to ensure that
reliable SIRs are calculated for participating hospitals.
After consideration of the public comment we received, we are
finalizing the FY 2017 performance period and baseline periods for the
NHSN measures in the Safety domain as proposed.
f. Efficiency and Cost Reduction Domain Performance Period and Baseline
Period for the FY 2017 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a 12-month
performance period for the MSPB measure for the FY 2016 Hospital VBP
Program of CY 2014 (January 1, 2014, through December 31, 2014), with a
corresponding baseline period of CY 2012 (January 1, 2012, through
December 31, 2012). This performance and baseline period enable us to
collect sufficient measure data, while allowing time to calculate and
incorporate MSPB measure data into the Hospital VBP Program scores in a
timely manner.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28124 through
28125), we proposed to adopt a 12-month performance period for the FY
2017 Efficiency and Cost Reduction domain of CY 2015 (January 1, 2015
through December 31, 2015), with a corresponding baseline period of CY
2013 (January 1, 2013 through December 31, 2013). We noted that this
proposed performance and baseline period aligns with the performance
and baseline periods for Clinical Care--Process, PEC/CC, and certain
Safety measures under the new domain structure.
We invited public comments on these proposals.
Comment: Commenters supported CMS' proposed baseline and
performance periods for FY 2017 measures in the Safety, Clinical Care--
Process, and Efficiency and Cost Reduction domains.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing the FY 2017 performance and baseline periods for the
Efficiency and Cost Reduction domain as proposed.
g. Summary of Previously Adopted and Newly Finalized Performance
Periods and Baseline Periods for the FY 2017 Hospital VBP Program
The table below summarizes the newly finalized baseline and
performance periods for the FY 2017 Hospital VBP Program (with
previously adopted baseline and performance periods for the mortality
and AHRQ PSI composite (PSI-90) measures noted).

Previously Adopted and Newly Finalized Performance and Baseline Periods
for the FY 2017 Hospital VBP Program
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Safety:
PSI-90*........ October 1, October 1,
2010-June 30, 2012*. 2013-June 30,
January 1, 2015.*
2013-December 31,
2013.
NHSN (CAUTI, .................... January 1,
CLABSI, SSI, C. 2015-December 31,
difficile Infection, 2015.
MRSA Bacteremia).
Clinical Care--Outcomes:

[[Page 50072]]

Mortality* October 1, October 1,
(MORT-30-AMI, MORT-30- 2010-June 30, 2012*. 2013-June 30,
HF, MORT-30-PN). 2015.*
Clinical Care--Process
(AMI-7a, IMM-2, January 1, 2013- January 1, 2015-
PC-01). December 31, 2013. December 31, 2015.
Efficiency and Cost January 1, 2013- January 1, 2015-
Reduction (MSPB-1). December 31, 2013. December 31, 2015.
Patient and Caregiver- January 1, 2013- January 1, 2015-
Centered Experience of Care/ December 31, 2013. December 31, 2015.
Care Coordination (HCAHPS).
------------------------------------------------------------------------
* Previously adopted performance and baseline periods.

We note that we intend to propose additional baseline and
performance periods for the FY 2018 Hospital VBP Program in future
rulemaking.
8. Previously Adopted and Newly Finalized Performance Periods and
Baseline Periods for Certain Measures for the FY 2019 Hospital VBP
Program
a. Previously Adopted and Newly Finalized Performance Period and
Baseline Period for the FY 2019 Hospital VBP Program for Clinical
Care--Outcome Domain Measures
As described above, we have previously adopted the FY 2019
performance and baseline periods for the three 30-day mortality
measures that we have adopted for the former Outcome domain and that we
have since placed into the Clinical Care--Outcomes domain under the new
domain structure.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28121 through
28122), we proposed to adopt the THA/TKA measure for the FY 2019
Hospital VBP Program and to place that measure in the Clinical Care--
Outcomes domain. THA/TKA is reported to the Hospital IQR Program for
36-month time periods. However, we do not believe that we can feasibly
adopt a 36-month performance period for this measure and adopt it for
the FY 2019 Hospital VBP Program. Based on the time needed to complete
measure calculations and performance scoring, we believe that we must
conclude the performance period for this measure by June 30, 2017. We
believe that a 30-month performance period will result in sufficiently
reliable quality measure data for purposes of Hospital VBP Program
scoring, and our analysis of historic data supported our belief that
comparisons between a 36-month baseline period and a 30-month
performance period will not result in significant differences in
measure scores. Further, adopting this proposed performance period
would enable us to include the measure in the FY 2019 Hospital VBP
Program, which would ensure that hospitals continue focusing on
measures of outcomes under the Hospital VBP Program and that we
continue transitioning the Hospital VBP Program from its initial focus
on process measures to outcome measures.
We note that we have proposed below to adopt a 36-month performance
period for the THA/TKA measure for the FY 2020 Hospital VBP Program. We
have examined the correlation between hospitals' performance on the
THA/TKA measure for 30-month and 36-month periods, and we believe that
the 30-month period meets our standard for moderate reliability of
quality measure data during the specified time period. However, as with
the 30-day mortality and PSI-90 measures, we are attempting to align
performance periods under the Hospital VBP Program with reporting
periods under the Hospital IQR Program, while introducing measures
covering important clinical topics into the Hospital VBP Program as
quickly as possible. We believe that our proposal for a 30-month
performance period for this measure for the FY 2019 Hospital VBP
Program allows us to bring the measure into the program in FY 2019 and
to accomplish that alignment beginning with the FY 2020 Hospital VBP
Program.
Therefore, we proposed to adopt an FY 2019 performance period of
January 1, 2015 through June 30, 2017 for the THA/TKA measure. Further,
we proposed to adopt an FY 2019 baseline period for this measure of
July 1, 2010 to June 30, 2013 for purposes of calculating performance
standards and awarding improvement points.
We welcomed public comments on these proposals.
We did not receive any specific public comments on these proposals
and are finalizing the FY 2019 performance and baseline periods for the
THA/TKA measure as proposed.
b. Performance Period and Baseline Period for the PSI-90 Safety Domain
Measure for the FY 2019 Hospital VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through
50694), we adopted performance periods and baseline periods for the
PSI-90 measure for the FY 2017 and FY 2018 Hospital VBP Programs. We
adopted this policy in light of the time needed to process measure data
and our policy goal to collect enough data to generate the most
reliable measure scores possible. We stated our belief that aligning
the Hospital VBP Program performance periods with the Hospital IQR
Program reporting period duration would allow hospitals to review
Hospital Compare measure rates when they are updated and incorporate
this information into their quality improvement efforts, rather than
having to wait until the Hospital VBP Program provides its scoring
reports to hospitals. We stated our further belief that aligning the
Hospital IQR Program and the Hospital VBP Program in this manner will
minimize the burden on participating hospitals by aligning the time
periods during which they must monitor their performance on this
measure.
We did not finalize a baseline period and performance period for
the AHRQ PSI-90 measure for FY 2019 in that final rule (78 FR 50692
through 50694). We stated that, by declining to finalize the measure's
FY 2019 performance and baseline periods in that final rule, we would
be able to adopt a more recent baseline period than we initially
proposed. We stated that we intended to propose baseline and
performance periods for the AHRQ PSI measure for the FY 2019 Hospital
VBP Program in future rulemaking.
We continue to believe that we should adopt performance and
baseline periods of 24 months for the PSI-90 measure. Therefore, in the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28126) we proposed to adopt
an FY 2019 performance period for the PSI-90 measure of July 1, 2015
through June 30,

[[Page 50073]]

2017, with a corresponding 24-month baseline period of July 1, 2011
through June 30, 2013, for purposes of calculating performance
standards and awarding improvement points.
We welcomed public comments on these proposals. However, we did not
receive any specific public comments on this proposal and are
finalizing the FY 2019 performance and baseline periods for the PSI-90
measure as proposed.
c. Summary of Previously Adopted and Newly Finalized Performance
Periods and Baseline Periods for Certain Measures for the FY 2019
Hospital VBP Program
The following table summarizes previously adopted and proposed
performance and baseline periods for the FY 2019 Hospital VBP Program:

Previously Adopted and Newly Finalized Performance and Baseline Periods
for Certain Measures for the FY 2019 Hospital VBP Program
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Safety:
PSI-90......... July 1, July 1,
2011-June 30, 2013. 2015-June 30, 2017.
Clinical Care--Outcomes:
Mortality* July 1, July 1,
(MORT-30-AMI, MORT-30- 2009-June 30, 2012*. 2014-June 30,
HF, MORT-30-PN). 2017.*
THA/TKA........ July 1, January 1,
2010-June 30, 2013. 2015-June 30, 2017.
------------------------------------------------------------------------
* Previously adopted performance and baseline periods.

9. Performance Period and Baseline Period for the Clinical Care--
Outcomes Domain for the FY 2020 Hospital VBP Program
As described above with respect to the mortality measures, in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694), we
adopted performance periods and baseline periods for the three 30-day
mortality measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP
Programs. We adopted this policy in light of the time needed to process
measure data and to ensure that we collect enough measure data for
reliable performance scoring, as described further above. We continue
to believe that we should adopt 36-month performance and baseline
periods for the mortality measures when possible to accommodate those
durations.
We believe that a similar rationale applies to the new THA/TKA
measure that we proposed to adopt for the Clinical Care--Outcomes
domain for the FY 2019 Hospital VBP Program, and which, under our
policy of measure readoption, we generally would readopt for the FY
2020 Hospital VBP Program if finalized. As stated above, we have
examined the correlation between hospitals' performance on the THA/TKA
measure for 30-month and 36-month periods, and we believe that the 30-
month period meets our standard for moderate reliability of quality
measure data during the specified time period. However, as with the 30-
day mortality and PSI-90 measures, we are attempting to align
performance periods under the Hospital VBP Program with reporting
periods under the Hospital IQR Program, while introducing measures
covering important clinical topics into the program as quickly as
possible. We believe that our proposal for a 30-month performance
period for this measure for FY 2019 allows us to accomplish that
alignment beginning with the FY 2020 Program.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28126
through 28127) we proposed to adopt a 36-month performance period for
the measures in the Clinical Care--Outcomes domain in the FY 2020
Hospital VBP Program (including the proposed THA/TKA measure for FY
2020, if that measure is adopted for the FY 2020 Hospital VBP Program)
of July 1, 2015 through June 30, 2018, with a corresponding 36-month
baseline period of July 1, 2010 through June 30, 2013, for purposes of
calculating performance standards and awarding improvement points.
We welcomed public comment on these proposals.
We did not receive any specific public comments on this proposal
and are finalizing the FY 2020 performance and baseline periods for the
Clinical Care--Outcomes domain as proposed.
The following table summarizes the finalized performance and
baseline period for the Clinical Care--Outcomes domain for the FY 2020
Hospital VBP Program:

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

10. Performance Standards for the Hospital VBP Program
a. Background
Section 1886(o)(3)(A) of the Act requires the Secretary to
establish performance standards for the measures selected under the
Hospital VBP Program for a performance period for the applicable fiscal
year. The performance standards must include levels of achievement and
improvement, as required by section 1886(o)(3)(B) of the Act, and must
be established and announced not later than 60 days before the
beginning of the performance period for the fiscal year involved, as
required by section 1886(o)(3)(C) of the Act. We refer readers to the
Hospital Inpatient

[[Page 50074]]

VBP Program final rule (76 FR 26511 through 26513) for further
discussion of achievement and improvement standards under the Hospital
VBP Program.
In addition, when establishing the performance standards, section
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate
factors, such as: (1) practical experience with the measures, including
whether a significant proportion of hospitals failed to meet the
performance standard during previous performance periods; (2)
historical performance standards; (3) improvement rates; and (4) the
opportunity for continued improvement.
b. Performance Standards for the FY 2016 Hospital VBP Program
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through
53604), we adopted performance standards for FY 2015 and certain FY
2016 Hospital VBP Program measures. We also finalized our policy to
update performance periods and performance standards for future
Hospital VBP Program years via notice on the CMS Web site or another
publicly available Web site.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through
50698), we revised our regulatory definitions of ``achievement
threshold'' and ``benchmark'' at 42 CFR 412.160 and adopted performance
standards for additional FY 2016 Hospital VBP Program measures. We also
adopted an interpretation of ``achievement threshold'' and
``benchmark'' under section 412.160 to not include the numerical values
that result when the performance standards are calculated. We further
adopted a policy under which we may update a measure's performance
standards for a fiscal year once if we identify data issues,
calculation errors, or other problems that would significantly affect
the displayed performance standards. We refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50695 through 50698) for the complete
set of FY 2016 performance standards.
c. Previously Adopted Performance Standards for the FY 2017, FY 2018,
and FY 2019 Hospital VBP Programs
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50698 through
50699), we adopted performance standards for the three 30-day mortality
measures for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs
and for the PSI-90 measure for the FY 2017 and FY 2018 Hospital VBP
Programs. We refer readers to that final rule for those performance
standards.
d. Additional Performance Standards for the FY 2017 Hospital VBP
Program
In accordance with our finalized methodology for calculating
performance standards (discussed more fully in the Hospital Inpatient
VBP Program final rule (76 FR 26511 through 26513)), in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28127 through 28128) we proposed to
adopt the following additional performance standards for the FY 2017
Hospital VBP Program. We note that the numerical values for the
performance standards displayed below represent estimates based on the
most recently available data, and we intend to update the numerical
values in the FY 2015 IPPS/LTCH PPS final rule. We note further that
the MSPB measure's performance standards are based on performance
period data; therefore, we are unable to provide numerical equivalents
for the standards at this time.
We note further that the performance standards for the NHSN
measures (CAUTI, SSI, and proposed CLABSI, MRSA Bacteremia, and C.
difficile Infection), the PSI-90 measure, and the MSPB measure are
calculated with lower values representing better performance, in
contrast to other measures, on which higher values indicate better
performance. As discussed further in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50684), the performance standards for SSI are computed
separately for each measure stratum. We will award achievement and
improvement points to each stratum separately and then compute a
weighted average of the points awarded to each stratum by predicted
infections. We note that we misstated PC-01 measure's benchmark in the
proposed rule and have corrected that error in the table below.

Previously Adopted and Proposed Performance Standards for the FY 2017 Hospital VBP Program: Safety, Clinical
Care--Outcomes, Clinical Care--Process, and Efficiency and Cost Reduction Measures
----------------------------------------------------------------------------------------------------------------
Measure ID Description Achievement threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Safety Measures
----------------------------------------------------------------------------------------------------------------
CAUTI.......................... Catheter-Associated Urinary 0.8371................. 0.0000.
Tract Infection.
CLABSI......................... Central Line-Associated Blood 0.4483................. 0.0000.
Stream Infection.
C. difficile................... Clostridium difficile 0.7927................. 0.0000.
Infection.
MRSA Bacteremia................ Methicillin-Resistant 0.8613................. 0.0000.
Staphylococcus aureus
Bacteremia.
PSI-90*........................ Complication/patient safety *0.577321.............. *0.397051.
for selected indicators
(composite)*.
SSI............................ Surgical Site Infection......
Colon 0.7117........ 0.0000.
Abdominal 0.7509........ 0.0000.
Hysterectomy
----------------------------------------------------------------------------------------------------------------
Clinical Care--Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI*................... Acute Myocardial Infarction *0.851458.............. *0.871669.
(AMI) 30-day mortality rate*.
MORT-30-HF*.................... Heart Failure (HF) 30-day *0.881794.............. *0.903985.
mortality rate*.
MORT-30-PN*.................... Pneumonia (PN) 30-day *0.882986.............. *0.908124.
mortality rate*.
----------------------------------------------------------------------------------------------------------------
Clinical Care--Process Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a......................... Fibrinolytic Therapy Received 0.954545............... 1.000000.
Within 30 Minutes of
Hospital Arrival.
IMM-2.......................... Influenza Immunization....... 0.995882............... 1.000000.

[[Page 50075]]

PC-01.......................... Elective Delivery Prior to 39 0.031250............... 0.000000.
Completed Weeks Gestation.
----------------------------------------------------------------------------------------------------------------
Efficiency and Cost Reduction Measure
----------------------------------------------------------------------------------------------------------------
MSPB-1......................... Medicare Spending per Median Medicare Mean of the lowest
Beneficiary. Spending per decile Medicare
Beneficiary ratio Spending per
across all hospitals Beneficiary ratios
during the performance across all hospitals
period. during the performance
period.
----------------------------------------------------------------------------------------------------------------
*Previously adopted performance standards.

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

We note that we intend to propose additional performance standards
for the FY 2018 Hospital VBP Program in future rulemaking.
We welcomed public comments on these proposed performance
standards.
We did not receive any specific public comments on the proposed
performance standards. We are therefore finalizing the FY 2017
performance standards as outlined below.
Set out below are the updated the numerical values for the
performance standards. As with the NHSN measures and the PSI-90
measure, we note that better performance on the PC-01 measure is
represented by lower numerical values.

Previously Adopted and Newly Finalized Performance Standards for the FY 2017 Hospital VBP Program: Safety,
Clinical Care--Outcomes, Clinical Care--Process, and Efficiency and Cost Reduction Measures
----------------------------------------------------------------------------------------------------------------
Measure ID Description Achievement threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Safety Measures
----------------------------------------------------------------------------------------------------------------
CAUTI.......................... Catheter-Associated Urinary 0.845.................. 0.000.
Tract Infection.
CLABSI......................... Central Line-Associated Blood 0.457.................. 0.000.
Stream Infection.
C. difficile................... Clostridium difficile 0.750.................. 0.000.
Infection.
MRSA Bacteremia................ Methicillin-Resistant 0.799.................. 0.000.
Staphylococcus aureus
Bacteremia.
PSI-90*........................ Complication/patient safety *0.577321.............. *0.397051.
for selected indicators
(composite)*.
SSI............................ Surgical Site Infection......
Colon 0.751......... 0.000.
Abdominal 0.698......... 0.000.
Hysterectomy
----------------------------------------------------------------------------------------------------------------
Clinical Care--Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI*................... Acute Myocardial Infarction *0.851458.............. *0.871669.
(AMI) 30-day mortality rate*.
MORT-30-HF*.................... Heart Failure (HF) 30-day *0.881794.............. *0.903985.
mortality rate*.
MORT-30-PN*.................... Pneumonia (PN) 30-day *0.882986.............. *0.908124.
mortality rate*.
----------------------------------------------------------------------------------------------------------------
Clinical Care--Process Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a......................... Fibrinolytic Therapy Received 0.954545............... 1.000000.
Within 30 Minutes of
Hospital Arrival.
IMM-2.......................... Influenza Immunization....... 0.951607............... 0.997739.

[[Page 50076]]

Performance Standards for the FY 2017 Hospital VBP Program Patient and Caregiver-Centered Experience of Care/
Care Coordination Domain
----------------------------------------------------------------------------------------------------------------
Achievement
HCAHPS survey dimension Floor threshold Benchmark
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.................................... 58.14 78.19 86.61
Communication with Doctors................................... 63.58 80.51 88.80
Responsiveness of Hospital Staff............................. 37.29 65.05 80.01
Pain Management.............................................. 49.53 70.28 78.33
Communication about Medicines................................ 41.42 62.88 73.36
Hospital Cleanliness & Quietness............................. 44.32 65.30 79.39
Discharge Information........................................ 64.09 85.91 91.23
Overall Rating of Hospital................................... 35.99 70.02 84.60
----------------------------------------------------------------------------------------------------------------

e. Performance Standards for the FY 2019 and FY 2020 Hospital VBP
Programs
As discussed further above, we have adopted certain Safety and
Clinical Care--Outcomes domain measures for future program years in
order to ensure that we can adopt performance periods and baseline
periods of sufficient length for performance scoring purposes. In the
FY 2015 IPPS/LTCH PPS proposed rule, we also proposed to adopt the PSI-
90 measure in the Safety domain and the THA/TKA measure in the Clinical
Care--Outcomes domain for the FY 2019 Hospital VBP Program. We note
that, as described above with respect to the NHSN, PSI-90, and MSPB
measures, better performance is represented by lower values for the
THA/TKA measure. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28128 through 28129) we proposed to adopt the following
performance standards for the FY 2019 Hospital VBP Program:

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

We welcomed public comments on these proposed performance
standards.
We did not receive any specific public comments on this proposal
and are finalizing the FY 2019 performance standards as outlined below.
Set out below are the updated numerical values for the FY 2019
performance standards. We note that, as described above with respect to
the NHSN, PSI-90, and MSPB measures, better performance is represented
by lower values for the THA/TKA measure.

[[Page 50077]]

Previously Adopted and Newly Finalized Performance Standards for Certain Safety and Clinical Care--Outcomes
Domain Measures for the FY 2019 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI-90............................. Complication/patient safety for selected 0.840335 0.589462
indicators (composite).
----------------------------------------------------------------------------------------------------------------
Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI\*\..................... Acute Myocardial Infarction (AMI) 30-day *80.850671 *80.873263
mortality rate\*\.
MORT-30-HF\*\...................... Heart Failure (HF) 30-day mortality *80.883472 *80.908094
rate\*\.
MORT-30-PN\*\...................... Pneumonia (PN) 30-day mortality rate\*\.. *80.882334 *80.907906
THA/TKA............................ Hospital-level Risk-Standardized 0.032229 0.023178
Complication Rate Following Elective
Primary Total Hip Arthroplasty (THA) And/
Or Total Knee Arthroplasty (TKA).
----------------------------------------------------------------------------------------------------------------
\*\ Previously adopted performance standards.

We also proposed to adopt the following performance standards for
the FY 2020 Hospital VBP Program:

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

We welcomed public comments on these proposed performance
standards.
We did not receive any specific public comments on this proposal
and are finalizing the FY 2020 performance standards as outlined below.
Set out below are the updated the numerical values for the FY 2020
performance standards. We note that, as described above with respect to
the NHSN, PSI-90, and MSPB measures, better performance is represented
by lower values for the THA/TKA measure.

Performance Standards for Clinical Care--Outcomes Domain Measures for the FY 2020 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
Achievement
Measure ID Description threshold Benchmark
----------------------------------------------------------------------------------------------------------------
Clinical Care--Outcomes Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI........................ Acute Myocardial Infarction (AMI) 30-day 0.853715 0.875869
mortality rate.
MORT-30-HF......................... Heart Failure (HF) 30-day mortality rate. 0.881090 0.906068
MORT-30-PN......................... Pneumonia (PN) 30-day mortality rate..... 0.882266 0.909532
THA/TKA............................ Hospital-level Risk-Standardized 0.032229 0.023178
Complication Rate Following Elective
Primary Total Hip Arthroplasty (THA) And/
Or Total Knee Arthroplasty (TKA).
----------------------------------------------------------------------------------------------------------------

f. Technical Updates Policy for Performance Standards
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50694 through
50698), we revised our regulatory definitions of ``achievement
threshold'' and ``benchmark'' at 42 CFR 412.160 and adopted performance
standards for additional FY 2016 Hospital VBP Program measures. We also
adopted an interpretation of ``achievement threshold'' and
``benchmark'' under section 412.160 to not include the numerical values
that result when the performance standards are calculated. We further
adopted a policy under which we may update a measure's performance
standards for a fiscal year once if we identify data issues,
calculation errors, or other problems that would significantly change
the displayed performance standards.
Our historic practice has been to display Hospital VBP Program
performance standards' numerical values in rulemaking. We adopted this
practice for the convenience of the public. Although we have typically
expressed the performance standards for each Hospital VBP measure as a
numerical value prior to the start of the performance period for that
measure, we do not display numerical values for the

[[Page 50078]]

MSPB measure because the measure is constructed as a measure of costs
attributable to patient care during a specified episode of care during
the performance period itself (77 FR 53601). We have stated that with
respect to the MSPB measure, we do not believe it is helpful for
hospitals to be compared against performance standards constructed from
baseline period data given the potential changes in market forces and
utilization practices that occur over time.
Further, during the long interval between the time we first display
the performance standards for all measures but the MSPB measure and the
time that we calculate the achievement and improvement scores for those
measures based on actual hospital performance, one or more of those
measures might have been technically updated in a way that inhibits our
ability to ensure that we are making appropriate comparisons between
the baseline and performance period. For example, the software used to
calculate the PSI-90 measure is regularly updated to incorporate coding
changes, refinements based on the consensus development process, and
refinements to improve specificity and sensitivity. The statistical
modeling we use to adjust measure calculations for PSI-90 and HCAHPS
also needs to be periodically updated to incorporate coefficient
factors that more properly account for patient mix (both measures) and
the HCAHPS survey data collection mode (HCAHPS survey). These types of
technical updates do not substantively affect the measure rate
calculation methodology, but they do sometimes affect our ability to
make appropriate comparisons between the baseline and performance
period if, for example, the baseline performance standards are
tabulated using one version of the software and hospital performance
during subsequent performance periods is tabulated with another
version. We believe that in order to make the most accurate comparison
of hospital performance across time, we should use the most updated
version of the measure that is available at the time we calculate that
performance because the updated version will produce the most valid
measure rates.
Further, as part of its regular maintenance process for NQF-
endorsed performance measures, NQF requires measure stewards to submit
annual measure maintenance updates and undergo maintenance of
endorsement review every 3 years. In the measure maintenance process,
the measure steward (owner/developer) is responsible for updating and
maintaining the currency and relevance of the measure and will confirm
existing or minor specification changes with NQF on an annual basis.
NQF solicits information from measure stewards for annual reviews, and
it reviews measures for continued endorsement in a specific 3-year
cycle.
The NQF's annual or triennial maintenance processes for endorsed
measures may result in the NQF requiring updates to the measures in
order to maintain endorsement status. We believe that it is important
to incorporate nonsubstantive updates required by the NQF, as well as
nonsubstantive updates made to other measures, into the measure
specifications we have adopted for the Hospital VBP Program so that
these measures remain up-to-date and ensure that we make fair
comparisons between the performance and baseline periods that we adopt
under the program. We also recognize that some updates to measures are
substantive in nature and might not be appropriate for adoption without
further rulemaking.
With respect to what constitutes substantive versus nonsubstantive
changes to measures, we would make this determination on a case-by-case
basis. Examples of nonsubstantive changes to measures might include
updated diagnosis or procedure codes, medication updates for categories
of medications, broadening of age ranges, and exclusions for a measure
(such as the addition of a hospice exclusion to the 30-day mortality
measures). We believe that nonsubstantive changes may include updates
to measures based upon changes to guidelines upon which the measures
are based.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28129
through 28130) we proposed to amend the definition of ``performance
standards'' under section 412.160 to enable us to update performance
standards' numerical values to incorporate nonsubstantive technical
updates that are made to Hospital VBP Program measures between the time
that they are adopted for a particular program year and the time that
we actually calculate hospital performance on those measures after the
performance period for the program year has concluded. Further, we
proposed to inform hospitals of these technical updates through
postings on our Hospital VBP Program Web site, the QualityNet Web site,
other educational outreach efforts, and/or the scoring reports that we
provide for each program year. We noted that these proposals, if
finalized, may have the effect of superseding the performance standards
that we establish prior to the start of the performance period for the
affected measures, but we believe them to be necessary to ensure that
the performance standards in the Hospital VBP Program's scoring
calculations enable the fairest comparisons between performance
measured during the baseline period and performance period.
We would continue to use rulemaking to adopt substantive updates to
the measures we have adopted for the Hospital VBP Program. Examples of
changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure or when a standard of performance assessed by a measure
becomes more stringent (that is, changes in acceptable timing of
medication, procedure/process, or test administration). We also noted
that the NQF process incorporates an opportunity for public comment and
engagement in the measure maintenance process.
We also proposed to include in our revised definition of
``performance standards'' under section 412.160 of our regulations the
policy we adopted in the FY 2013 IPPS/LTCH PPS final rule to update the
performance standards once if we identify data issues, calculation
errors, or other problems that would significantly change the standards
(78 FR 50695). We proposed to make this change so that our policies
governing updates to the performance standards appear together.
We welcomed public comments on these proposals. We also
specifically sought public comments on what we should consider to be
substantive changes in measures' performance standards, including
whether or not we should consider certain changes in performance
standards as a result of technical or nonsubstantive updates to be
substantive.
Comment: Several commenters opposed CMS' proposal to adopt
technical updates for performance standards, stating that there is no
reason we cannot use the public notice and technical corrections
process to disseminate changes in performance standards to
stakeholders. Some commenters stated that not all stakeholders have
access to QualityNet to receive the updates that CMS proposed. One
commenter noted that changing performance standards targets with more
than annual frequency would undermine hospitals' ability to implement
performance improvement efforts. Commenters noted that the Hospital VBP
Program is designed to hold hospitals accountable for their performance
during a specified time period based on standards that are

[[Page 50079]]

published before that performance period begins.
One commenter recommended that CMS apply changes in the risk
adjustment system only when a new performance standard is published and
then use those same updates when performance is measured for the
performance period--if the changes are indeed ``nonsubstantive,'' as
the proposed regulatory text would specify, delaying the application of
such updates should not be detrimental to the Hospital VBP Program. The
commenter expressed concern that changes could be made resulting both
in different hospital performance and a different performance standard,
which would eliminate the usefulness of the minimal amount of
information currently available to hospitals on these measures.
Response: We disagree with the recommendation to have all measure
changes subject to notice-and-comment rulemaking. As previously noted
in FY 2014 IPPS/LTCH PPS final rule (78 FR 50776), we believe that the
maintenance of technical specifications for quality measure policy for
the Hospital IQR Program also is applicable to the Hospital VBP
Program. We believe this policy adequately balances our need to
incorporate nonsubstantive NQF updates to NQF-endorsed measures in the
most expeditious manner possible, while preserving the public's ability
to comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted. We
also note that the NQF process incorporates an opportunity for public
comment and engagement in the measure maintenance process. These
policies regarding what is considered substantive versus nonsubstantive
apply to all measures in the Hospital IQR Program and the Hospital VBP
Program, and we believe the same standard applies when determining what
should be considered substantive changes to performance standards.
We believe that it is of paramount importance that the performance
standards that we adopt accurately reflect hospitals' actual
performance during the baseline period. We view our Technical Updates
authority policy as a means to ensure that accuracy and to ensure that
the program scores hospitals based on performance standards that
reflect the actual provision of care in hospitals around the country.
With respect to commenters' concerns that we may update performance
standards more than annually, we are aware that updates may have
unintended consequences on hospitals' quality improvement efforts. We
do not intend to make updates to performance standards except to
improve the standards' accuracy and to ensure that the numerical values
that we display for hospitals accurately reflect hospitals' performance
during the baseline period, as applicable. In addition, with respect to
commenters' suggestion that delays to performance standards updates
would not be detrimental to the Hospital VBP Program, we disagree. We
believe that we must provide hospitals with as much accurate
information as is possible so that they may develop and implement
quality improvement policies. We do not believe it would be helpful to
hospitals for us to delay publishing a technical update on the basis
that the update will not significantly affect performance.
We note further that we do not intend to limit any updates made to
performance standards using this authority to QualityNet
accountholders. We intend to publish any changes made under this policy
on the public QualityNet Web site and through our Hospital VBP Program
listserv entitled, ``Hospital Inpatient Value-Based Purchasing (HVBP)
and Improvement,'' available under the notifications and discussions
link on our home page.
Comment: One commenter suggested that CMS should define in specific
terms what should constitute a ``substantive'' versus a
``nonsubstantive'' update to the Hospital VBP Program performance
standards before adopting the authority to make technical updates. The
commenter further stated that CMS should be as transparent with
stakeholders as possible about these changes, noting that midstream
updates could have profound impacts on hospitals' performance under
Hospital VBP Program.
Response: With respect to what constitutes substantive versus
nonsubstantive changes, we expect to make this determination on a case-
by-case basis. Examples of nonsubstantive changes to measures might
include updated diagnosis or procedure codes, medication updates for
categories of medications, broadening of age ranges, and exclusions for
a measure (such as the addition of a hospice exclusion to the 30-day
mortality measures). We believe that nonsubstantive changes may include
updates to NQF-endorsed measures based upon changes to guidelines upon
which the measures are based. However, as commenters have requested, we
intend to be as transparent as possible with stakeholders about any
technical updates that we would adopt, including the rationale for any
such updates and their effects on finalized performance standards.
We will continue to use rulemaking to adopt substantive updates
made to measures we have adopted for the Hospital IQR Program. Examples
of changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure, or when a standard of performance assessed by a measure
becomes more stringent, for example, changes in acceptable timing of
medication, procedure/process, or test administration. Another example
of a substantive change would be where the NQF has extended its
endorsement of a previously endorsed measure to a new setting, such as
extending a measure from the inpatient setting to hospice. These
policies regarding what is considered substantive versus nonsubstantive
would apply to all measures in the Hospital IQR Program.
After consideration of the public comments we received, we are
finalizing the technical updates policy for performance standards as
proposed. We are also finalizing our proposed revisions to the
definition of ``performance standards'' in section 412.160 of our
regulations.
g. Request for Public Comments on International Classification of
Diseases, Tenth Revision, Clinical Modification/Procedure Coding System
(ICD-10-CM/PCS) Transition
Beginning October 1, 2015, when the ICD-10-CM/PCS codes become the
required code set, we will collect non-electronic health record-based
quality measure data coded only in ICD-10-CM/PCS. Even though we expect
that the endorsement status of the measures we have adopted for the
Hospital VBP Program will remain the same, we are concerned that the
transition to a new coding system might have unintended consequences on
quality measure data denominators, statistical adjustment coefficients,
and measure rates. We are concerned about the possible impacts on the
Hospital VBP Program, and requested public comments on how we should
accommodate the transition.
Specifically, we requested comments on how, if at all, we should
adjust performance scoring under the Hospital VBP Program to
accommodate quality data coded under ICD-10-CM/PCS, or otherwise ensure
fair and accurate comparisons under the Hospital VBP Program once the
transition date has passed. For example, we could consider analyzing
the effects of the ICD-10-CM/PCS transition on hospitals' measured
performances and, if substantive

[[Page 50080]]

differences result, retrospectively adjust performance standards in
order to ensure that they accurately reflect the underlying
methodology. We could also consider performing similar adjustments to
hospitals' measure rates, measure scores, or TPSs once our analysis is
completed. We also might consider scoring hospitals only on achievement
if analysis indicates that we are unable to reliably and validly
calculate improvement scores when comparing International
Classification of Diseases, Ninth Revision, Clinical Modification (ICD-
9-CM) based baseline period data to ICD-10-CM/PCS based performance
period data. However, while we intend to analyze the effects of the
ICD-10-CM/PCS transition on hospitals' performance, we do not have the
necessary data for all hospitals at this time.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28130) we stated
that we intended to take two steps to analyze ICD-10-CM/PCS potential
impact before receiving ICD-10-CM/PCS-based fall 2015 discharge data in
May 2016. First, we stated that we will assess measure specifications
to qualitatively assess impact to measure denominators after CMS
releases ICD-10-CM/PCS-based measure specifications in the future.
Second, we stated that we intend to voluntarily solicit information
from no more than 9 hospitals before October 1, 2015 to estimate the
impact of ICD-10-CM/PCS on their Hospital VBP measure rates and
denominator counts. We intend to use this information to inform both
proposed and future Hospital VBP Program policy and measures.
We welcomed public comments on this topic.
Comment: One commenter supported CMS' implementation of ICD-10-CM/
PCS on October 1, 2015 without any further delays. The commenter also
warned that, while adoption is welcome and overdue, implementation of
the new system must be carefully orchestrated to minimize the
administrative burden on hospitals. The commenter noted their
appreciation of CMS' efforts to offer extensive educational
opportunities for hospitals and noted that extensive end-to-end testing
of both the electronic transaction and the adjudication of the claim by
Medicare contractors and State Medicaid agencies will be needed to
ensure a smooth transition from ICD-9-CM to ICD-10-CM/PCS.
Response: We thank the commenter for its support. We would like to
clarify that HHS has not yet finalized an ICD-10 implementation date
through rulemaking. We refer readers to the CMS Web page on ICD-10
(https://cms.hhs.gov/Medicare/Coding/ICD10/) and the Federal
Register for current information.
Comment: A few commenters recommended that CMS work with more than
nine hospitals, as well as other national hospital associations and
stakeholders interested in volunteering to participate in the ICD-10-
CM/PCS transition process, to gain a broader understanding of the
coding transition and its impact on CMS' quality reporting and pay-for-
performance programs.
Response: We believe an initial limited analysis will enable us to
better understand the impact of the ICD-10-CM/PCS transition on
hospitals' performance. We intend to continue discussing this topic
with stakeholders in the future.
Comment: One commenter supported CMS' suggested strategy for
analyzing Hospital VBP Program performance scores to accommodate the
ICD-10-CM/PCS transition, but requested that CMS make any adjustment
methodology public and continue to score hospitals on both achievement
and improvement.
Response: We intend to discuss publicly any adjustments that we
would subsequently propose through rulemaking for the Hospital VBP
Program.
Comment: Many commenters urged CMS not to adopt achievement-only
scoring as a result of the ICD-10-CM/PCS transition, stating that
improvement points are a balancing feature of the Hospital VBP Program
that provide incentives for progress. Some commenters stated that the
Hospital VBP Program statute requires that CMS score hospitals on both
achievement and improvement, and suggested that CMS ``waive''
hospitals' participation in the program until we have adequate data to
provide both elements of performance scoring.
Several commenters suggested that CMS remove measures from the
program for a year if we cannot calculate reliable improvement scores.
Other commenters requested that CMS allow sufficient time to analyze
the impact of the ICD-10-CM/PCS transition and address any potential
issues before penalizing hospitals in future Hospital VBP Program
years. One commenter suggested holding hospitals harmless if CMS cannot
accurately accept and calculate quality measures.
Response: We thank the commenters for this feedback and will take
it into consideration as we develop our policy on this issue.
Comment: Several commenters expressed concern that transitioning
the Hospital VBP Program to the ICD-10-CM/PCS system could
significantly alter how measures are scored between the baseline and
performance periods. The commenter opined that comparisons between the
ICD-9-CM and ICD-10-CM/PCS systems would be unfair, and suggested that
CMS score hospitals using ICD-9-CM data and an ICD-10-CM/PCS crosswalk.
Commenters suggested that CMS run both the baseline data and the
performance data using ICD-9-CM (using crosswalk software) and make the
results of the testing publicly available. A few commenters urged CMS
to formalize its ICD-10-CM/PCS testing plans to ensure that end-to-end
testing begins no later than January 2015 and is made available to all
hospitals.
Response: We thank the commenters for this feedback and will take
it into consideration as we develop our policy on this issue.
Comment: One commenter recommended that CMS update its quality
measures in order to best take advantage of the added granularity
offered by ICD-10-CM/PCS. The commenter does not believe that it will
be possible to accurately adjust performance standards retrospectively
in order to correct the substantive differences in ICD-9-CM and ICD-10-
CM/PCS quality data. The commenter suggested that evaluating quality
measures solely on achievement would minimize the administrative costs
associated with identifying the feasibility, validity, and reliability
of comparing quality measures based on dissimilar code sets, and would
also allow measure developers to freely update quality measures without
the fear of distorting comparisons between baseline and performance
period data coded in dissimilar formats.
Commenters agreed that the ICD-10-CM/PCS transition may have an
impact on quality measurement based on claims data, and encouraged CMS
to analyze those effects rigorously once data are available.
Response: We thank the commenters for this feedback and will take
it into consideration as we develop our policy on this issue.
We thank the commenters for these responses and we will consider
them as we plan for the ICD-10-CM/PCS transition under the Hospital VBP
Program.
11. FY 2017 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
In the Hospital Inpatient VBP Program final rule (76 FR 26514), we
adopted a

[[Page 50081]]

methodology for scoring clinical process of care, patient experience of
care, and outcome measures. As noted in that rule, this methodology
outlines an approach that we believe is well understood by patient
advocates, hospitals, and other stakeholders because it was developed
during a lengthy process that involved extensive stakeholder input, and
was based on a scoring methodology we presented in a report to
Congress. We also noted in that final rule that we had conducted
extensive additional research on a number of other important
methodology issues to ensure a high level of confidence in the scoring
methodology. In addition, we believe that, for reasons of simplicity,
transparency, and consistency, it is important to score hospitals using
the same general methodology each year, with appropriate modifications
to accommodate new domains and measures. We finalized a similar scoring
methodology for the MSPB measure in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51654 through 51656).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53604 through
53605), for the FY 2015 Hospital VBP Program, we finalized our proposal
to use these same general scoring methodologies to score hospital
performance for the FY 2015 Hospital VBP Program. In that rule, we
stated that we believe these scoring methodologies continue to
appropriately capture hospital quality as reflected by the finalized
quality measure sets. We also noted that readopting the finalized
scoring methodology from prior program years represents the simplest
and most consistent policy for hospitals and the public. In the FY 2014
IPPS/LTCH PPS final rule (78 FR 50699), we readopted the finalized
general scoring methodology adopted for the FY 2015 Hospital VBP
Program for the FY 2016 Hospital VBP Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through
50704), we adopted new quality domains based on the NQS for FY 2017 and
subsequent years.
We continue to agree with the reasoning for the scoring methodology
outlined in the FY 2013 IPPS/LTCH PPS final rule and summarized above.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28130
through 28131) we proposed to adopt the general scoring methodology
adopted for the FY 2016 Hospital VBP Program for the FY 2017 Hospital
VBP Program, with appropriate modifications to accommodate the new
quality domains that we have previously adopted. These proposed
modifications to our scoring methodology are limited to reclassified
quality domains, new placements for measures within those domains, and
domain weighting. We discuss below a proposal to revise the finalized
domain weighting for FY 2017.
We welcomed public comment on this proposal. We also received a
number of general comments on the Hospital VPB Program's scoring
methodology.
Comment: Several commenters stated that CMS should consider phasing
out improvement scoring for selected measures or the entire Hospital
VBP Program that have been included in the Hospital VBP Program for
several years in order to emphasize comparative performance on the
measures. Several commenters agreed that phasing out improvement
scoring after several years (one commenter suggested 3 years) would
emphasize comparative performance on the measures. While some
commenters noted that improvement at the outset of the program is very
important to encouraging historically poor-performing hospitals to
invest in improvement, those commenters believe that hospitals should
be compared and paid on their achievements and not merely for improving
on subpar performance after a period of time.
Several other commenters, on the other hand, expressed strong
support for pay-for-performance programs that assess multiple aspects
of care and recognize hospitals for achievement versus national
benchmarks and improvement versus baseline performance. Commenters
stated that this incentive structure can provide greater inducement for
hospitals to improve performance. Commenters believed this construct is
foundational for hospitals to improve performance in a rational and
predictable manner.
Response: We thank the commenters for this feedback. We will take
it under consideration as we develop Hospital VBP Program policies.
Comment: One commenter recommended that CMS consider comparing
``like'' hospitals--such as those of similar sizes, teaching status,
and case mix--under the Hospital VBP Program in order to avoid
inadvertently providing scoring advantages or disadvantages to
participating hospitals.
Response: We do not believe the quality measures that we have
adopted for the Hospital VBP Program incorporate the necessary data to
disaggregate hospitals' performance by size, teaching status, or case
mix any further than they already do through risk adjustment. We do
intend, however, to assess the feasibility of this suggestion through
our program monitoring and evaluation efforts.
After consideration of the public comments we received, we are
finalizing our proposal to adopt the general scoring methodology
adopted for the FY 2016 Hospital VBP Program for the FY 2017 Hospital
VBP Program, with appropriate modifications to accommodate the new
quality domains that we have previously adopted. These modifications to
our scoring methodology are limited to reclassified quality domains,
new placements for measures within those domains, and domain weighting.
b. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals
That Receive a Score on All Domains
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50702 through
50704), we adopted our proposal to align the Hospital VBP Program's
quality measurement domains with the NQS's quality priorities, with
certain modifications. We adopted this realignment beginning with the
FY 2017 Hospital VBP Program. We also adopted the following domains and
domain weights for the FY 2017 Hospital VBP Program for hospitals that
receive a score in all newly aligned domains.

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

[[Page 50082]]

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

However, as discussed in more detail above, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28119), we are finalizing our proposal to
remove six ``topped-out'' measures from the FY 2017 Clinical Care--
Process subdomain. This substantial reduction in the number of measures
adopted for the Clinical Care--Process subdomain warrants
reconsideration of the finalized domain weighting for FY 2017 that we
adopted in the FY 2014 IPPS/LTCH PPS final rule.
As described in more detail above, we are also finalizing our
proposal to re-adopt the CLABSI measure and to adopt two new measures
(MRSA Bacteremia and C. difficile Infection) for the Safety domain for
FY 2017 Hospital VBP Program and subsequent years, which raises the
total number of measures in this domain for FY 2017 to six. Because we
proposed to make changes in the number of measures in only two domains
(Safety and Clinical Care), we focused our proposed domain weighting
changes in the proposed rule on these domains only. Because we continue
to believe that hospitals should be provided strong incentives to
perform well on measures of patient safety, in view of the new measures
we proposed to add to that domain, we proposed to revise the previously
finalized domain weighting for the FY 2017 Hospital VBP Program for
hospitals receiving a score on all newly aligned domains as follows:

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

We welcomed public comments on the proposed revised domain weights.
Comment: Several commenters expressed broad support for CMS'
proposed revision to the domain weighting for FY 2017, agreeing that it
appropriately shifts the program's focus to the Safety domain and away
from Clinical Care--Process domain. One commenter commended CMS'
efforts to move the delivery system towards value-driven paradigms that
reward high quality and cost effective health care providers. A few
commenters noted that the Safety domain is largely comprised of well-
developed HAI outcome measures. One commenter noted that the domain
weights largely align with the National Quality Strategy's quality
priorities and places an increased focus on patient safety. Some
commenters specifically expressed support for maintaining the weight of
the Efficiency and Cost Reduction domain at 25 percent.
Response: We thank the commenters for their support.
Comment: Several commenters wanted CMS to maintain the Clinical
Care--Process domain weighting at 35 percent, and noted that measures
of clinical processes continue to play an important role in improving
the quality of care. One commenter suggested CMS not reduce the weight
for Clinical Care--Process measures to 5 percent because commenter
believed that these measures play a vital role in quality improvement
and should remain a significant component of the Hospital VBP Program.
The commenter also noted that a hospital's level of performance on
Clinical Care--Process measures reflects a hospital's overall
discipline and commitment to quality improvement that extends beyond
just the specific topics being measured.
Other commenters suggested that the final rule should increase the
weight for the Clinical Care--Process domain in order to ensure that
the Hospital VBP Program's focus is appropriately on improving patient
outcomes. A few commenters noted that measuring clinical processes
gives hospitals the data they need to improve performance and identify
good process measures that are not burdensome to collect. One commenter
stated that the Clinical Care--Outcomes and Safety domains already
reflect higher priority than Clinical Care--Process domain measures.
This commenter suggested that process measures may be used to identify
gaps that may not be readily apparent from outcome measures. One
commenter encouraged CMS to give the Clinical Care--Process measures
the greatest weight because of the limitations of the measures in the
other domains and because this domain provides hospitals with the most
actionable information on quality performance.
One commenter questioned the extent to which measures of clinical
process are necessary given the low domain weighting allocated to the
Clinical Care--Process domain. The commenter suggested that CMS
consider phasing the measures out of the program entirely.
Other commenters suggested additional measures that should be added
to the Clinical Care--Process Domain, including one commenter who
suggested the Medicare Service Utilization measure be added to the
Efficiency and Cost Reduction domain.
Response: Because we proposed to remove six ``topped-out'' measures
from the FY 2017 Clinical Care--Process subdomain, the number of
measures adopted for that subdomain will be significantly reduced. For
that reason, we reconsidered the finalized domain weighting for FY 2017
that we adopted in the FY 2014 IPPS/LTCH PPS final rule. We continue to
believe that hospitals should be provided strong incentives to perform
well on measures of patient safety, and we believe the

[[Page 50083]]

revised domain weighting appropriately reduces the relative weighting
allocated to the Clinical Care--Process domain, in accordance with the
substantially reduced number of measures adopted under that domain. As
we have stated in prior rulemaking, we believe that the Hospital VBP
Program should shift from its initial focus on measures of processes to
measures of outcomes and efficiency, and we believe that the proposed
domain weighting change appropriately continues that policy change.
Comment: One commenter urged that CMS ensure that the IMM-2 measure
is afforded sufficient weight in determining hospital value-based
payments, such as by including this measure in the Safety domain.
Response: We believe we have placed the IMM-2 measure appropriately
within the Clinical Care--Process domain, as it is a chart-abstracted
measure. We further believe that we have allocated sufficient domain
weighting to the Clinical Care--Process domain, and respond to
additional comments on the FY 2017 domain weighting in subsequent
sections below.
Comment: One commenter recommended that CMS decrease the weight of
the consistency score in the HCAHPS survey to 10 percent and weight the
HCAHPS measure total score with the new care transition measures at 90
percent. Alternatively, the commenter suggested that CMS revise the
methodology of the consistency score to more accurately measure
consistent performance and leave the weight of 20 percent in place.
Instead of using the HCAHPS floor values as the minimum range for
consistency, the commenter suggested that CMS use the 25th percentile
value so that consistency points would only be rewarding hospitals
maintaining a reasonable level of performance in each HCAHPS measure.
Response: We continue to believe that the HCAHPS survey is an
important and significant component of the Total Performance Score. We
further believe that Consistency Points appropriately encourage
hospitals to attempt to improve their scores on all dimensions of the
HCAHPS survey, and are therefore appropriately allotted 20 points
within the domain. While we may reexamine the HCAHPS survey's scoring
methodology if we adopt the CTM-3 items in the future, we do not
believe that it is appropriate at this time to reduce the Consistency
Points component of the PEC/CC domain to 10 percent.
Comment: Many commenters urged CMS to revise the MSPB measure to
include both quality and cost outcomes, which means achieving better
outcomes at lower total health costs, rather than simply and crudely
cutting costs. A few commenters stated that basing 25 percent of the
TPS on a measure of cost comparison with no quality component will
encourage hospitals to further cut costs beyond the incentives of the
DRG system, with uncertain checks on corresponding quality impacts.
Several commenters stated that because so much of the MSPB measure is
outside of the hospital's control, the domain should not be factor so
heavily into the TPS.
A few commenters urged CMS to consider removing the MSPB measure
entirely or dropping the Efficiency and Cost Reduction domain's
weighting to 5 percent because the commenters suggested that measures
aimed at improving efficiency should be grounded in current best
evidence, should evaluate clinical outcomes concurrently with resource
use, and should be interpretable based on outcomes achieved with
resources expended. Another commenter recommended lowering the weight
of the Efficiency domain when the new episode-based payment measures'
initial implementation begins to provide CMS and hospitals an
opportunity to gain experience with these measures. The commenter noted
that lowering the weight of the Efficiency domain provides a period of
time for the development of more accurate or relevant Efficiency
measures into the program.
However, several commenters suggested that CMS increase weighting
of the Efficiency and Cost Reduction domain. A few commenters suggested
that CMS consider incrementally increasing the Efficiency and Cost
Reduction domain's weight to 50 percent as more efficiency measures are
developed in the coming years. One commenter suggested that this change
should occur in six years.
Response: We believe we have appropriately balanced our desire to
provide strong incentives for hospitals to consider the cost and the
quality of the care that they provide to Medicare beneficiaries and to
all patients by assigning the Efficiency and Cost Reduction domain to
25 percent of the Total Performance Score. We note that the MSPB
measure is still relatively new to the Hospital VBP Program, and
represents the incorporation of efficiency metrics for the first time
in the program. We view that step as important, and we continue to
believe it merits significant domain weighting in order to ensure that
hospitals monitor the costs of the care they provide to Medicare
beneficiaries during the inpatient hospitalization and are involved in
the coordination of beneficiaries' care immediately prior to a
hospitalization and post-discharge.
However, we thank the commenters for their thoughts and intend to
continue examining domain weighting and will consider revisiting this
issue in the future.
Comment: A few commenters wanted to decrease the PEC/CC weight. One
commenter stated that anecdotal evidence shows significant variation in
HCAHPS survey scores due to differences in acuity level and region. The
commenter also noted that a recent study found that patient
satisfaction was independent of hospital compliance with surgical
processes and with hospitals' safety culture.
One commenter urged CMS to retain the PEC/CC domain's weighting at
25 percent, stating that the patient's experience is a critical
component of quality health care. The commenter stated that, if CMS
retains the Safety domain, CMS should not increase its allocated domain
weighting, and should leave the Clinical Care--Process domain's
weighting at 10 percent.
A few commenters suggested adding additional measures to the PEC/CC
domain, in order to strengthen those domains.
Response: We disagree with commenters that suggested that we
consider lower weighting for the PEC/CC domain. We continue to believe
that the patient's experience is an important component of high-quality
health care, and we believe that allocating significant domain
weighting to the PEC/CC domain reflects that priority appropriately. As
described further above, we also believe that the Consistency Points
are properly set at 20 points within the domain. We believe the PEC/CC
domain's weighting appropriately provides hospitals with strong
incentives to improve their patients' experience during acute care
hospitalizations.
Comment: A few commenters urged that CMS remove the Safety domain
from the Hospital VBP Program and consider the HAC Reduction Program as
its Safety domain, redistributing the weight to the other domains. In
the alternative, one commenter suggested that CMS leave the Clinical
Care--Process domain's weighting at 10 percent.
One commenter suggested that CMS increase the Safety or Clinical
Care--Outcomes domain weights.
Response: We consider measures of patient safety to be of critical

[[Page 50084]]

importance to the Hospital VBP Program, and we believe that their
inclusion in the program with significant domain weighting
appropriately provides hospitals with substantial incentives to protect
their patients during acute care episodes.
Comment: A few commenters suggested that CMS replace the Clinical
Care--Outcome measures or develop a plan to improve the measures'
reliability. One commenter expressed concern that three mortality
measures in the Clinical Care--Outcomes domain do not reliably assess
hospital performance and could have negative unintended consequences
for certain hospitals.
One commenter urged CMS to modify the domain weights so that more
emphasis is placed on achieving outcomes, providing quality clinical
processes, and improving patient experience. Commenters expressed
support for the goal of improving quality and cost outcomes within the
system, which means achieving better outcomes at lower total health
costs, rather than simply and crudely cutting costs.
Response: We believe that we have taken appropriate steps to
increase the reliability of the 30-day mortality measures that we have
placed into the Clinical Care--Outcomes domain by extending the
performance periods for those measures. We believe that the measures
appropriately receive substantial domain weighting in order to ensure
that hospitals focus quality improvement efforts on patients with these
harmful conditions. In addition, we believe that, our future measure
set should evolve to emphasizing outcomes, safety cost and efficiency,
population health, and patient experience of care as noted in the HHS
National Quality Strategy. We continue to evaluate measures that assess
these critical components of the HHS National Quality Strategy, and as
we add more measures in this area, we intend to increase the weight of
this domain.
We also believe that safety and the patient experience of care is
important in assessing quality. As we note above, because we are adding
two new measures to the Safety domain, we are increasing this domain's
weight by 5 percent, we believe that this increase appropriately
balances the importance of patient safety while balancing the need for
excellence in the remaining domains. Likewise, we believe that a 25
percent weight for the Patient and Caregiver Centered Experience of
Care/Care Coordination domain appropriately balances the need to
address the patient experience with the importance of stressing quality
clinical processes, outcomes, efficiency and safety.
After consideration of the public comments we received, we are
finalizing the revised domain weighting for the FY 2017 Hospital VBP
Program as proposed.
c. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals
Receiving Scores on Fewer than Four Domains
In prior program years, we finalized a policy that hospitals must
have received domain scores on all finalized domains in order to
receive a TPS. However, because the Hospital VBP Program has evolved
from its initial two domains to an expanded measure set with additional
domains, we considered whether it was appropriate to continue this
policy.
Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606
through 53607), we finalized our proposal that, for the FY 2015
Hospital VBP Program and subsequent years, hospitals with sufficient
data to receive at least two out of the four domain scores that existed
for the FY 2015 Hospital VBP Program (that is, sufficient cases and
measures to receive a domain score on at least two domains) will
receive a TPS. We also finalized our proposal that, for hospitals with
at least two domain scores, TPSs would be reweighted proportionately to
the scored domains to ensure that the TPS is still scored out of a
possible 100 points and that the relative weights for the scored
domains remain equivalent to the weighting which occurs when there are
scores in all four domains. We believe that this approach allows us to
include relatively more hospitals in the Hospital VBP Program while
continuing to focus on reliably scoring hospitals on their quality
measure performance.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through
50702), we continued this approach for the FY 2016 Hospital VBP Program
and subsequent fiscal years for purposes of eligibility for the program
even though, based on the NQS, we adopted four NQS-based domains for
the FY 2017 Hospital VBP Program (78 FR 50702 through 50704), which
include the subdivided Clinical Care domain.
In light of the four NQS-based domains we have adopted, we have
reconsidered the appropriate minimum number of domains (that is, the
number of domains on which hospitals must receive scores) in order to
receive a TPS. We are concerned that requiring just two out of the four
NQS-based domains in order to receive a TPS may be insufficient to
ensure robust quality measurement under the Hospital VBP Program.
Further, given the transition to NQS-based domains that we have
adopted, we believe an additional independent analysis of appropriate
minimum numbers of domains under the new domain structure is
appropriate. We commissioned that analysis from our Reports & Analytics
contractor for the Hospital VBP Program. The results of that analysis
informed our proposal below, and we stated that we intended to post a
summary of the reliability and minimum numbers analysis on the CMS Web
site during the public comment period. We believe that requiring three
out of the four NQS-based domains appropriately balances our desire to
be as inclusive as possible with Hospital VBP Program requirements
while ensuring that TPSs under the program are sufficiently reliable.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28132)
we proposed to require that, for the FY 2017 Hospital VBP Program and
subsequent years, hospitals must receive domain scores on at least
three quality domains in order to receive a TPS. For purposes of the
Clinical Care domain score, we proposed to consider either the Clinical
Care--Process or Clinical Care--Outcomes subdomains as one domain in
order to meet this proposed requirement. By adopting this policy, we
believe we will continue to allow as many hospitals as possible may
participate in the program while ensuring that reliable TPSs result.
However, we would only reweight hospitals' TPSs once and would
therefore not reallocate the Clinical Care--Process and Clinical Care--
Outcomes subdomains' weighting within the Clinical Care domain if a
hospital does not have sufficient data for one of the subdomains. For
example, a hospital receiving domain scores on all domains except the
Clinical Care--Process subdomain would not have the 5 percent weighting
from the Clinical Care--Process subdomain reallocated entirely to the
Clinical Care--Outcomes subdomain. Instead, the 5 percent weighting
from the Clinical Care--Process subdomain would be proportionately
reallocated across all domains.
We welcomed public comments on this proposal.
Comment: One commenter supported CMS' proposal to require hospitals
to have sufficient data on at least three domains in order to receive a
Total Performance Score in FY 2017.
Response: We thank the commenter for their support.
Comment: One commenter expressed concern that CMS' proposal would

[[Page 50085]]

result in lower participation rates in the program. The commenter
recommended that CMS retain the minimum number of domain scores at two.
Response: As described above, we are concerned that requiring just
two domains to receive a Total Performance Score for FY 2017 may
provide an insufficient basis in quality data for robust performance
scoring. We believe that the proposed requirement appropriately
balances our desire to include as many hospitals as possible in the
Hospital VBP Program while ensuring that Total Performance Scores are
based on reliable quality data.
After consideration of the public comments we received, we are
finalizing the requirement that hospitals have sufficient data on at
least three of the four domains for the FY 2017 Program as proposed. We
also are finalizing that hospitals with sufficient data on at least
three of four domains for FY 2017 will have their Total Performance
Scores proportionately reweighted, and for purposes of that
reweighting, we will not reallocate the Clinical Care--Process and
Clinical Care--Outcomes subdomains' weighting within the Clinical Care
domain if a hospital does not have sufficient data for one of the
subdomains.
12. Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017
Hospital VBP Program's Quality Domains
a. Previously Adopted Minimum Numbers of Cases and FY 2016 Minimum
Numbers of Cases
In the Hospital Inpatient VBP Program final rule (76 FR 26527
through 26531), we adopted minimum numbers of at least 10 cases on at
least 4 measures for hospitals to receive a Clinical Process of Care
domain score. In the same final rule, we adopted a minimum number of
100 HCAHPS surveys for a hospital to receive a Patient Experience of
Care domain score. In the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74532 through 74534), we adopted a minimum number of 10
cases for the mortality measures that we adopted for FY 2014. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a
new minimum number of 25 cases for the mortality measures for FY 2015.
In the same final rule, we adopted a minimum number of 25 cases for the
MSPB measure (77 FR 53609 through 53610), a minimum of three cases for
any underlying indicator for the PSI-90 measure based on AHRQ's measure
methodology (77 FR 53608 through 53609), and a minimum of one predicted
infection for NHSN-based surveillance measures based on CDC's minimum
case criteria (77 FR 53608 through 53609). However, we noted that we
adopted these case minimums for FY 2015 only, although we intended to
adopt them for FY 2015 and subsequent years. We continue to believe
that the finalized minimum numbers of cases described above are
appropriate and provide sufficiently reliable data for scoring purposes
under the Hospital VBP Program. Therefore, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28132), we proposed to adopt the specified case
minimums for the FY 2016 Hospital VBP Program and subsequent years.
We welcomed public comment on this proposal. We noted that we
proposed below to specify minimum numbers of measures for the FY 2017
Hospital VBP Program and subsequent years based on the new domain
structure.
We did not receive any specific public comments on this proposal.
Therefore, we are finalizing this policy as proposed.
b. Minimum Number of Measures--Safety Domain
As described in more detail above, we proposed to adopt six quality
measures in the Safety domain for the FY 2017 Hospital VBP Program. Of
these measures, five are NHSN-based surveillance measures and one is
the PSI-90 measure. After consideration of these measures and of
previous independent analyses of the necessary minimum number of
measures adopted for the Outcomes domain, whose measures formed the
basis for part of the new Safety domain, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28133) we proposed to adopt a minimum number of
three measures for the Safety domain for FY 2017 and subsequent years.
We believe this proposal balances our desire to be as inclusive as
possible with the Hospital VBP Program and the need for reliable
quality measurement data on which to base TPSs. We also clarified that
we will continue to score hospitals on NHSN measures if, as we
discussed with respect to the CLABSI measure (77 FR 53608) and the SSI
measure (78 FR 50684), the hospital has met CDC's minimum case criteria
of one predicted infection during the applicable period.
We welcomed public comment on this proposal.
We did not receive any specific public comments on this proposal,
and therefore are finalizing this policy as proposed.
c. Minimum Number of Measures--Clinical Care Domain
(1) Background
In the FY 2014 IPPS/LTCH PPS final rule, we adopted a new domain
structure for the FY 2017 Hospital VBP Program and subsequent years
based on the NQS. In that final rule, we adopted a Clinical Care domain
that was subdivided into the Clinical Care--Process and Clinical Care--
Outcome subdomains. We adopted these subdomains in order to ensure that
we place the appropriate domain weighting on measures of clinical
processes and measures of clinical outcomes. We believe the same
consideration is appropriate for determining minimum numbers of
measures for each subdomain, and, based on prior independent analyses
conducted of the appropriate minimum numbers for the Clinical Process
of Care and Outcomes domains whose measures formed the basis for the
new Clinical Care domain, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28133), we proposed separate minimum numbers for each of these
subdomains below. As described further above, we also attempted to
balance our desire to be as inclusive as possible with the Hospital VBP
Program and the need for reliable quality measurement data on which to
base TPSs.
(2) Clinical Care--Outcomes Subdomain
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707), we adopted a
minimum number of two measures in the former Outcome domain. We stated
our belief that this minimum number is appropriate for the expanded
Outcome domain that formed the basis for the Clinical Care--Outcomes
subdomain because adding measure scores beyond the minimum number of
measures has the effect of enhancing the domain score's reliability.
As noted above, the Clinical Care--Outcomes subdomain now contains
the three 30-day mortality measures, and based on previous independent
analysis of the appropriate minimum number of measures for the Outcomes
domain that formed the basis for the Clinical Care--Outcomes subdomain
(available on our Web site at: https://cms.hhs.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/Downloads/HVBP_Measure_Reliability-.pdf), we continue to
believe that a minimum number of two measures within the subdomain
appropriately balances scoring reliability with inclusiveness under the
program. As noted above, we stated our intent to post a summary of the

[[Page 50086]]

reliability and minimum numbers analysis on the CMS Web site during the
public comment period. Therefore, in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 281333), we proposed to adopt a minimum number of two
measures in the Clinical Care--Outcome subdomain for FY 2017 and
subsequent years.
We welcomed public comment on this proposal.
We did not receive any specific public comments on this proposal,
and therefore are finalizing this policy as proposed.
(3) Clinical Care--Process Subdomain
We have reconsidered the finalized minimum number of measures given
the significant reduction in Clinical Care--Process measures due to
``topped-out'' removals that we proposed in the proposed rule. We are
concerned that requiring hospitals to report on all three proposed
Clinical Care--Process measures for the FY 2017 Hospital VBP Program,
or even requiring two out of three measures, could prevent a
significant proportion of participating hospitals from receiving a
Clinical Care--Process subdomain score. We are aware that relatively
few hospitals report data for the AMI-7a measure, and the proposed PC-
01 measure will only include hospitals that provide maternity services.
In accordance with our preference for including as many hospitals as
possible in the Hospital VBP Program while ensuring the reliability of
the domain score, and based on a prior independent analysis that formed
the basis for the Clinical Care--Process domain, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28133) we proposed to require hospitals
to report a minimum of one measure in the Clinical Care--Process domain
for the FY 2017 Hospital VBP Program and subsequent years to receive a
domain score.
We welcomed public comment on this proposal.
We did not receive any specific public comments on this proposal,
and therefore are finalizing this policy as proposed.
d. Minimum Number of Measures--Efficiency and Cost Reduction Domain
Because the MSPB measure remains the only measure within the
Efficiency and Cost Reduction domain for FY 2017, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28133) we proposed to require that
hospitals receive a MSPB measure score in order to receive an
Efficiency and Cost Reduction domain score. If we adopt additional
measures for this domain in the future, we will consider if we should
revisit this policy.
We welcomed public comments on this proposal.
We did not receive any specific public comments on this proposal,
and therefore are finalizing this policy as proposed.
e. Minimum Number of Measures--PEC/CC Domain
As with the MSPB measure adopted for the Efficiency and Cost
Reduction domain described further above, we have not adopted
additional measures for the PEC/CC domain. Because the HCAHPS survey
measure remains the only measure within the PEC/CC domain for FY 2017,
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28133), we proposed
to require that hospitals receive an HCAHPS survey measure score in
order to receive a PEC/CC domain score. If we adopt additional measures
for this domain in the future, we will consider if we should revisit
this policy.
We welcomed public comments on this proposal.
We did not receive any specific public comments on this proposal,
and therefore are finalizing this policy as proposed.
13. Applicability of the Hospital VBP Program to Maryland Hospitals
Section 1886(o)(1)(C) of the Act specifies the hospitals for which
the Hospital VBP Program applies. Specifically, the term ``hospital''
is defined under section 1886(o)(1)(C)(i) of the Act as a ``subsection
(d) hospital (as defined in section 1886(d)(1)(B) [of the Act]).''
Section 1886(o)(1)(C)(ii) of the Act sets forth a list of exclusions to
the definition of the term ``hospital'' with respect to a fiscal year.
Section 1886(o)(1)(C)(iv) of the Act states that in the case of a
hospital that is paid under section 1814(b)(3) of the Act, the
Secretary may exempt the hospital from the Hospital VBP Program if the
State submits an annual report to the Secretary describing how a
similar program in the State for a participating hospital or hospitals
achieves or surpasses the measured results in terms of patient health
outcomes and cost savings established under the Hospital VBP Program.
We have interpreted the reference to section 1814(b)(3) of the Act to
mean those Maryland hospitals that were paid under section 1814(b)(3)
of the Act and that, absent the ``waiver'' provided by section
1814(b)(3) of the Act, would have been paid under the IPPS.
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Act, as added by section 3021 of the Affordable
Care Act, which authorizes the testing of innovative payment and
service delivery models, including models that allow States to ``test
and evaluate systems of all-payer payment reform for the medical care
of residents of the State, including dual-eligible individuals.''
Section 1115A of the Act authorizes the Secretary to waive such
requirements of Titles XI and XVIII of the Act as may be necessary
solely for purposes of carrying out section 1115A of the Act with
respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare pay Maryland hospitals in accordance with
section 1814(b)(3) of the Act. Maryland also represented that it is no
longer in continuous operation of a demonstration project reimbursement
system since July 1, 1977, as specified under section 1814(b)(3) of the
Act. Because Maryland hospitals are no longer paid under section
1814(b)(3) of the Act, they are no longer subject to those provisions
of the Act and related implementing regulations that are specific to
hospitals paid under section 1814(b)(3) of the Act, including but not
limited to section 1886(o)(1)(C)(iv) of the Act, which provides an
exemption for hospitals paid under section 1814(b)(3) of the Act from
the application of the Hospital VBP Program if the State which is paid
under that section meets certain requirements.
In order to implement the Maryland All-Payer Model, we have waived
certain provisions of the Act, and the corresponding implementing
regulations, as set forth in the agreement between CMS and Maryland and
subject to Maryland's compliance with the terms of the agreement. The
effect of Maryland hospitals no longer being paid under section
1814(b)(3) of the Act is that they are not entitled to be exempted from
the Hospital VBP Program under section 1886(o)(1)(C)(iv) of the Act
and, but for the model, would be included in the Hospital VBP Program.
In other words, although the exemption from the Hospital VBP Program no
longer applies, Maryland hospitals will not be participating in the
Hospital VBP Program because section 1886(o) of the Act and its
implementing regulations have been waived for purposes of the

[[Page 50087]]

model, subject to the terms of the agreement.
Accordingly, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28133 through 28134) we proposed to make conforming revisions to
section 412.160, in the definition of ``base-operating DRG payment
amount'' and to section 412.161, which describes the applicability of
the Hospital VBP Program. We proposed to delete references in these
regulations to hospitals paid under section 1814(b)(3) of the Act
because, at this time, there are no hospitals paid under that section.
We welcomed public comment on these proposals. After receiving no
specific public comment on these proposals, we are finalizing our
proposed regulation text changes to delete references in the regulation
text to hospitals paid under section 1814(b)(3) of the Act because no
hospitals are paid under that section.
14. Disaster/Extraordinary Circumstance Exception Under the Hospital
VBP Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50704 through
50706), we adopted a disaster/extraordinary circumstance exception. We
refer readers to that final rule for the policy's details.
We note that we are currently in the process of revising the
Extraordinary Circumstances/Disaster Extension or Waiver Request form,
previously approved under OMB control number 0938-1171.

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

1. Background
We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50707 through 50708) for a general overview of the
HAC Reduction Program.
2. Statutory Basis for the HAC Reduction Program
Section 3008 of the Affordable Care Act added section 1886(p) to
the Act to provide an incentive for certain hospitals to reduce the
incidence of HACs. Section 1886(p) of the Act requires the Secretary to
make an adjustment to payments to ``applicable hospitals'' effective
beginning on October 1, 2014 and for subsequent program years. Section
1886(p)(1) of the Act sets forth the requirements by which payments to
``applicable hospitals'' will be adjusted to account for HACs with
respect to discharges occurring during FY 2015 or later. For hospitals
with HAC scores in the worst performing quartile relative to other
applicable hospitals for a given fiscal year, the amount of Medicare
payment is reduced to 99 percent of the amount of payment that would
otherwise apply to discharges under section 1886(d) or 1814(b)(3) of
the Act, as applicable. Section 1886(p)(2)(A) of the Act defines
``applicable hospitals'' as subsection (d) hospitals that meet certain
criteria. Section 1886(p)(2)(B)(i) of the Act defines these criteria
and specifies that the payment adjustment would apply to an applicable
hospital that ranks in the top quartile (25 percent) of all subsection
(d) hospitals, relative to the national average, of conditions acquired
during the applicable period, as determined by the Secretary. Section
1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and
apply a risk-adjustment methodology in calculating HAC scores for each
hospital.
Sections 1886(p)(3) and (p)(4) of the Act define ``hospital-
acquired conditions'' and ``applicable period,'' respectively. The term
``hospital-acquired condition'' means ``a condition identified in
subsection 1886(d)(4)(D)(iv) of the Act and any other condition
determined appropriate by the Secretary that an individual acquires
during a stay in an applicable hospital, as determined by the
Secretary.'' The term ``applicable period'' means, with respect to a
fiscal year, a period specified by the Secretary.
Section 1886(p)(5) of the Act requires that, prior to FY 2015 and
each subsequent fiscal year, the Secretary provides confidential
reports to each applicable hospital with respect to the HAC Reduction
Program scores for the applicable period, to give the hospitals an
opportunity to review and correct the data. Section 1886(p)(6)(A) of
the Act sets forth the reporting requirements by which the Secretary
would make information available to the public regarding HACs for each
applicable hospital. Section 1886(p)(6)(B) of the Act requires the
Secretary to ensure that an applicable hospital has the opportunity to
review, and submit corrections for, the information to be made public
with respect to the HAC scores of the applicable hospital prior to such
information being made public. Section 1886(p)(6)(C) of the Act
requires that, once corrected, the HAC scores be posted on the Hospital
Compare Web site on the Internet in an easily understandable format.
Section 1886(p)(7) of the Act limits administrative and judicial
review of certain determinations made pursuant to section 1886(p) of
the Act. These determinations include: what qualifies as an applicable
hospital; the specifications of a HAC; the Secretary's determination of
the ``applicable period'; the provision of confidential reports
submitted to the applicable hospital; and the information publicly
reported on the Hospital Compare Web site.
3. Implementation of the HAC Reduction Program for FY 2015
a. Overview
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through
50729), we presented the general framework for implementation of the
HAC Reduction Program for the FY 2015 implementation. We included the
following provisions for the program: (a) The relevant definitions
applicable to the program; (b) the payment adjustment under the
program; (c) the measure selection and conditions for the program,
including a risk-adjustment and scoring methodology; (d) performance
scoring; (e) the process for making hospital-specific performance
information available to the public, including the opportunity for a
hospital to review the information and submit corrections; and (f)
limitation of administrative and judicial review.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967), we
established the rules governing the payment adjustment under the HAC
Reduction Program at Subpart I of 42 CFR Part 412 (Sec. Sec. 412.170
and 412.172). We also amended existing Sec. 412.150 (the section that
describes the basis and scope of Subpart I of Part 412, which contains
the regulations governing adjustments to the base operating DRG payment
amounts under the IPPS for inpatient operating costs) to incorporate
the basis and scope of Sec. Sec. 412.170 and 412.172 for the HAC
Reduction Program.
In accordance with the provisions of section 1886(p) of the Act, in
the FY 2014 IPPS/LTCH PPS final rule, we included, under Sec. 412.170,
definitions for the terms ``hospital-acquired condition,'' ``applicable
hospital,'' and ``applicable time period'' (78 FR 50967). In Sec.
412.170, we defined ``hospital-acquired condition'' as a condition as
described in section 1886(d)(4)(D)(iv) of the Act and any other
condition determined appropriate by the Secretary that an individual
acquires during a stay in an applicable hospital, as determined by the
Secretary. We defined an ``applicable hospital'' as ``a hospital
described in section 1886(d)(1)(B) of the Act (including a hospital in
Maryland that is paid under section 1814(b)(3) of the Act and that,
absent the waiver specified by section 1814(b)(3) of the Act, would
have been paid under the

[[Page 50088]]

hospital inpatient prospective payment system) as long as the hospital
meets the criteria specified under Sec. 412.172(e)'' (78 FR 50967). We
specified that this definition does not include hospitals and hospital
units excluded from the IPPS, such as LTCHs, cancer hospitals,
children's hospitals, IRFs, IPFs, CAHs, and Puerto Rico hospitals. We
defined the ``applicable period'' as, with respect to a fiscal year,
the 2-year period (as specified by the Secretary) from which data are
collected in order to calculate the Total HAC Score for the HAC
Reduction Program.
Comment: Commenters supported the HAC Reduction Program as a
mechanism to identify hospitals that underperform in preventing well-
identified, measurable, and preventable adverse events.
Response: We appreciate the commenters' support. We are committed
to reduce HACs, which are important markers of quality of care and
whose reduction can positively impact patient outcomes and the cost of
care.
Comment: Several commenters suggested changing the terminology of
``hospital-acquired conditions'' to ``hospital-acquired complications''
to signal more clearly the intent of the program is to focus on
complications that arise from inappropriate delivery of care.
Response: The name of the HAC Reduction Program is specified in
section 1886(d) of the Act. We believe that the name of the program
reflects Congress' intent in passing this provision of the Affordable
Care Act.
b. Payment Adjustment Under the HAC Reduction Program, Including
Exemptions
(1) Basic Payment Adjustment
Section 1886(p)(1) of the Act sets forth the requirements by which
payments to ``applicable hospitals'' are to be adjusted for hospitals
in the worst performing quartile relative to other applicable hospitals
beginning on October 1, 2014. Section 1886(p)(1) of the Act specifies
that the amount of payment shall be equal to 99 percent of the amount
of payment that would otherwise apply to such discharges under section
1886(d) or 1814(b)(3) of the Act, as applicable. As specified in the
statute, this payment adjustment is calculated and made after payment
adjustments under sections 1886(o) and 1886(q) of the Act, the Hospital
VBP Program and the Hospital Readmissions Reduction Program
respectively, are calculated and made. (We note that the Hospital VBP
Program is discussed in section IV.I. of the preamble of this final
rule and the Hospital Readmissions Reduction Program is discussed in
section IV.H. of the preamble of this final rule.) Section
1886(p)(2)(A) of the Act defines ``applicable hospitals'' as subsection
(d) hospitals that meet certain criteria. Section 1886(p)(2)(B)(i) of
the Act defines these criteria and specifies that the payment
adjustment would apply to an applicable hospital that ranks in the top
quartile (25 percent) of all subsection (d) hospitals, relative to the
national average of hospitals that report conditions acquired during
the applicable period, as determined by the Secretary.
Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967),
we specified in Sec. 412.172(b) of the regulations that, for
applicable hospitals, beginning with discharges occurring during FY
2015, the amount of payment under Sec. 412.172, or section 1814(b)(3)
of the Act, as applicable, for such discharges shall be equal to 99
percent of the amount of payment that would otherwise apply to such
discharges under Sec. 412.172, or section 1814(b)(3) of the Act. This
amount of payment will be determined after the application of the
payment adjustment under the Hospital Readmissions Reduction Program
under Sec. 412.154, and the adjustment made under the Hospital VBP
Program under Sec. 412.162, and section 1814(l)(4) of the Act but
without regard to this section 1886(p) of the Act.
Comment: Many commenters noted that the proposed 1-percent
reduction in payment for the top quartile of lower performing hospitals
will provide a stronger penalty than the current DRA HAC policy and has
the potential to stimulate improvements in safety. The commenters
supported CMS' efforts to reduce HACs by paying less to hospitals for
instances involving patients contracting HACs during a hospital stay.
These commenters noted that quality payment adjustments continue to
positively affect provider performance. Commenters further noted that
several commercial health plans have implemented similar actions,
processes, and guidelines to align their payment policies with CMS to
adjust payment for reasonably preventable errors made by hospitals and
health care facilities.
Response: We appreciate the commenters' support and agree that the
HAC Reduction Program, along with the other CMS quality initiatives set
forth under the Affordable Care Act (for example, the Hospital VBP and
Hospital Readmissions Reduction Programs), will lead to improvements in
patient care, safety and outcomes.
Comment: Some commenters indicated that it was not clear in the FY
2015 IPPS/LTCH PPS proposed rule how the HAC Reduction Program payment
adjustment would specifically be applied. The commenters stated that
the HAC Reduction Program penalty appears to apply to all hospital
payments (for example, outliers, DSH, uncompensated care, and IME) and
they questioned why the policy should apply to IME and DSH payments
that they asserted are not related to the underlying quality policy the
provision enforces.
These commenters urged CMS to use administrative authority under
section 1886(d)(5)(I)(i) of the Act to limit the HAC penalty to the
base operating DRG payment only, which they reported would be
consistent with Congressional intent and with the Hospital VBP and
Hospital Readmissions Reduction Programs. The commenters noted that by
restricting the penalty to the base operating DRG payment it could
ensure consistency across the programs and reduce any confusion because
under the Hospital VBP and Hospital Readmissions Reduction Programs the
payment adjustment applies to the base operating DRG payment, not the
base DRG rate and the additional add-on payments of outliers, DSH,
uncompensated care, and IME.
Response: We did not propose to change the application of the
payment adjustment that we finalized in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50711). As we discussed in that rule, the statutory
requirements for the HAC Reduction Program payment adjustment differ
from those for the Hospital VBP and Hospital Readmissions Reduction
Programs. In accordance with section 1886(q)(1) of the Act, the
Hospital Readmissions Reduction Program adjustment is applied to the
base operating DRG payment amount, which is defined at section
1886(q)(2) of the Act to exclude certain payments under subsection (d).
Similarly, in accordance with sections 1886(o)(7)(A) and 1886(o)(7)(B)
of the Act, the Hospital VBP Program applies adjustments to the base
operating DRG payment amount, which is defined at section 1886(o)(7)(D)
of the Act to exclude certain payments under subsection (d).
For the HAC Reduction Program, no such statutory exclusion exists
and section 1886(p)(1) of the Act states that the payment for
applicable hospitals ``shall be equal to 99 percent of the amount of
payment that would otherwise apply.'' Therefore, the HAC Reduction
Program payment adjustment will be applied after the application of the
other program adjustments

[[Page 50089]]

including add-on payments consisting of outliers, DSH, uncompensated
care, and IME.
As we have stated previously, our goal for the HAC Reduction
Program is to heighten the awareness of HACs and reduce the number of
incidences that occur through implementing the adjustments required by
section 1886(p) of the Act. We believe that our efforts in using
payment adjustments and our measurement authority will encourage
hospitals to eliminate the incidence of HACs that could be reasonably
prevented by applying evidence-based clinical guidelines. Given this
goal, and the statutory language in 1886(p) of the Act, we do not
believe this is an appropriate situation for us to exercise our
authority under 1886(d)(5)(I)(i) of the Act.
(2) Applicability to Maryland Hospitals
Section 1886(p)(2)(c) of the Act specifies that the Secretary may
exempt hospitals paid under 1814(b)(3) ``from the application of this
subsection if the State which is paid under such section submits an
annual report to the Secretary describing how a similar program in the
state for a participating hospital or hospitals achieves or surpasses
the measured results in terms of patient health outcomes and cost
savings established under this subsection.'' Accordingly, a program
established by the State of Maryland that could serve to exempt
hospitals in the State from the HAC Reduction Program would focus on
hospitals operating under the waiver provided by section 1814(b)(3) of
the Act, that is, those hospitals that would otherwise have been paid
by Medicare under the IPPS, absent this provision. As we stated in
section IV.J.3.b of the preamble of this final rule, because hospitals
paid under section 1814(b)(3) of the Act are subsection (d) hospitals,
unless the Secretary exempts these hospitals from the application of
payment adjustments under the HAC Reduction Program under the authority
of section 1886(p)(2)(C) of the Act, they are considered to be
``applicable hospitals'' (subject to the payment adjustments in the HAC
Reduction Program) under the HAC Reduction Program.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50967 through
50968), we established criteria for evaluation to determine whether
Maryland would be exempted from the application of the payment
adjustments under the HAC Reduction Program for a given fiscal year,
under Sec. 412.172(c). Pursuant to our rule, if the State submitted an
annual report to the Secretary describing how a similar program to
reduce hospital acquired conditions in that State achieves or surpasses
the measured results in terms of health outcomes and cost savings for
the HAC Reduction Program as applied to hospitals described in section
1886(d)(1)(B) of the Act, the State would be exempt from the HAC
Reduction Program. We specified in the regulations that ``CMS will
establish criteria for evaluation of Maryland's annual report to the
Secretary to determine whether Maryland will be exempted from the
application of payment adjustments under this program for a given
fiscal year.'' We also specified that Maryland's annual report to the
Secretary and request for exemption from the HAC Reduction Program must
be resubmitted and reconsidered annually. We provided that, for FY
2015, Maryland must submit a preliminary report to us by January 15,
2014 and a final report to us by June 1, 2014.
We noted that our criteria to evaluate Maryland's program is for FY
2015, the first year of the payment adjustment under the HAC Reduction
Program, and that our evaluation criteria may change through notice and
comment rulemaking as this program evolves.
The State of Maryland entered into an agreement with CMS, effective
January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a
5-year hospital payment model. This model is being implemented under
section 1115A of the Social Security Act (``Act''), as added by section
3021 of the Affordable Care Act, which authorizes the testing of
innovative payment and service delivery models, including models that
allow states to ``test and evaluate systems of all-payer payment reform
for the medical care of residents of the State, including dual eligible
individuals.'' Section 1115A of the Act authorizes the Secretary to
waive such requirements of titles XI and XVIII of the Act as may be
necessary solely for purposes of carrying out Section 1115A with
respect to testing models.
Under the agreement with CMS, Maryland will limit per capita total
hospital cost growth for all payers, including Medicare. In order to
implement the new model, effective January 1, 2014, Maryland elected to
no longer have Medicare reimburse Maryland hospitals in accordance with
section 1814(b)(3) of the Act. Maryland also stipulated that it is no
longer in continuous operation of a demonstration project reimbursement
system since July 1, 1977, as specified under Section 1814(b)(3) of the
Act. Because Maryland hospitals are no longer paid under section
1814(b)(3) of the Act, they are no longer subject to those provisions
of the Act and related implementing regulations that are specific to
section 1814(b)(3) hospitals, including but not limited to section
1886(p)(2)(C) of the Act, which provides exemptions for hospitals paid
under section 1814(b)(3) from the application of the HAC Reduction
Program.
However, in order to implement the Maryland All-Payer Model, CMS
has waived certain provisions of the Act for Maryland hospitals,
including section 1886(p), and the corresponding implementing
regulations, as set forth in the agreement between CMS and Maryland and
subject to Maryland's compliance with the terms of the agreement. In
other words, although section 1886(p)(2)(C) of the Act no longer
applies to Maryland hospitals, Maryland hospitals will not be
participating in the HAC Reduction Program because section 1886(p) of
the Act and its implementing regulations have been waived for purposes
of the model, subject to the terms of the agreement. Consequently, in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28135), we proposed that
the Total HAC Scores for Maryland hospitals would not be included when
identifying the top quartile of all hospitals with respect to their
Total HAC Score during the applicable period.
As a result of changes to the status of Maryland hospitals under
1814(b)(3) of the Act described above, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28136), we proposed conforming changes to these
regulations and sought public comment on this proposal. Specifically,
we proposed to remove the entire contents of paragraph (c) under Sec.
412.172 and reserve the paragraph (c) designation.
No commenters opposed our proposal to exclude the Total HAC Scores
for Maryland hospitals when identifying the top quartile of all
hospitals and no commenters opposed CMS' proposed changes to the
regulations regarding Maryland hospitals. Therefore, we are finalizing
our proposal to exclude the Total HAC Scores for Maryland hospitals
when identifying the top quartile of all hospitals and our proposed
changes to the regulations regarding Maryland hospitals.
c. Measure Selection and Conditions, Including Risk-Adjustment Scoring
Methodology
(1) General Selection of Measures
We did not propose any new measures for the HAC Reduction Program
in the FY 2015 IPPS/LTCH PPS proposed rule. Although we are not
required under section 1886(p) of the

[[Page 50090]]

Act to address specific measure scoring methodologies and domain
weights regarding the HAC Reduction Program in notice-and-comment
rulemaking, as required under the Hospital VBP program, we believe that
it is important to set forth such scoring methodologies for each
individual HAC measure, in order for the public to understand how the
measures adopted in previous rulemaking relate to the performance
methodology used to determine the applicable hospitals subject to the
payment adjustment under the HAC Reduction Program. Below we set forth
the specific measure scoring methodology and domain weights regarding
the HAC Reduction Program for FY 2015 as finalized in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50712 through 50719).
Comment: A few commenters thanked CMS for not adding any new
measures to the HAC program for FY 2015 and FY 2016. One commenter
encouraged CMS to fill measure gaps as soon as possible to ensure that
this program provides the greatest possible value for quality
improvement and consumer education. Several commenters suggested that
CMS identify new measures for the HAC Reduction Program that would
address a variety of quality and safety issues relevant to the broadest
possible range of hospitals and affect a greater number of patients, as
commenters asserted that this approach is more fair and would ensure
hospitals are not penalized for the type of patients they treat. In
addition, the commenters believed this approach would help improve the
ability of the program to identify the real poor performers. One
commenter recommended that these new measures should not be entirely
claims-based.
Commenters made additional recommendations for future new measures
including PSI-4: Death rate among surgical inpatients with serious,
treatable complications (NQF 0351), PSI-16: Transfusion
reaction count (NQF 0349), surgical site infections (SSIs)
following hip and knee arthroplasty and SSIs following high-volume
procedures such as caesarean section surgery. One commenter recommended
expanding the iatrogenic pneumothorax rate (PSI-6), which currently
addresses iatrogenic pneumothorax with venous catheterization, to also
include iatrogenic pneumothorax with paracentesis and thoracentesis.
One commenter recommended that new measures of infection be developed
that incorporate infection rates per thousand discharges in order to
inform patients of their likelihood of acquiring an infection at a
given hospital.
Response: We did not propose new measures in this rulemaking as we
intend to allow time for providers to gain experience with the
finalized measures. We are continuously evaluating the program and
working to identify new, potentially suitable measures to fill measure
gaps. We appreciate the commenters' input for measure selection and
will take this feedback into consideration in future rulemaking.
Comment: Many commenters suggested that all HAC Reduction Program
measures should be NQF-endorsed and, while recognizing it is not a
requirement for the HAC Reduction Program, commenters also recommended
that CMS use the formal pre-rulemaking process of the Measure
Applications Partnership (MAP) for any measures being considered for
the program.
Response: While we note that section 1886(p)(3) of the Act does not
require NQF endorsement for a measure to be considered for the HAC
Reduction Program, we are aware of the value of the NQF endorsement and
MAP processes in facilitating information exchange and agreement among
stakeholders. We also note that all of the measures adopted for the HAC
Reduction Program went through the pre-rulemaking process and were
either recommended for inclusion by the MAP, or represent 1 of the 12
HACs that have been identified by the Secretary and which are
referenced in section 1886(p) of the Act for the HAC Reduction Program.
(2) Updates on AHRQ PSI-90, and CDC NHSN CLABSI and CAUTI Measures
For FY 2015, we will keep the AHRQ PSI-90 composite measure (in
Domain 1) that we adopted in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50717) because it is currently endorsed by NQF. However, we note
that the AHRQ PSI-90 composite measure is currently undergoing NQF
maintenance review. The PSI-90 composite measure consists of eight
component indicators: PSI-3 Pressure ulcer rate; PSI-6 Iatrogenic
pneumothorax rate; PSI-7 Central venous catheter-related blood stream
infections rate; PSI-8 Postoperative hip fracture rate; PSI-12
Postoperative Pulmonary Embolism/Deep Vein Thrombosis rate; PSI-13
Postoperative sepsis rate; PSI-14 Wound dehiscence rate; and PSI-15
Accidental puncture & laceration rate. AHRQ is considering the addition
of PSI-9 (Perioperative hemorrhage rate), PSI-10 (Perioperative
physiologic metabolic derangement rate) and PSI-11 (Post-operative
respiratory failure rate) or a combination of these three measures into
the PSI-90 composite measure. We consider the inclusion of additional
component measures in the PSI-90 composite measure to be a significant
change to the PSI-90 composite measure that we finalized in the FY 2014
IPPS/LTCH PPS final rule. If the changes are significant, we will
engage in notice-and-comment rulemaking prior to requiring reporting of
this revised composite.
Similarly, the CDC NHSN Catheter-Associated Urinary Tract Infection
(CAUTI) and Central Line-Associated Blood Stream Infection (CLABSI)
measures in Domain 2 that we adopted in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50717) for FY 2015 also are currently undergoing NQF
maintenance review. If there are significant changes to these measures,
we will engage in notice-and-comment rulemaking prior to requiring
reporting of the changes made to CDCs NHSN CLABSI and CAUTI measures.
For FY 2015, we will keep CDC's NHSN CAUTI and CLABSI measures in
Domain 2 as they are currently endorsed.
Comment: Several commenters supported CMS' commitment to use the
notice-and-comment rulemaking process for any HAC measure with
significant changes made during the NQF review process.
One commenter specifically recommended that the AHRQ PSI-90 measure
and the CDC NHSN CLABSI and CAUTI measures currently undergoing NQF
maintenance review only be included for FY 2016 and beyond contingent
upon continued NQF endorsement and any updates recommended for
continued endorsement.
Response: We appreciate the commenters' support of our rulemaking
process. As for the comments regarding NQF endorsement of the measures,
we refer readers to our response in section IV.J.3.c. of the preamble
of this final rule.
(3) Measure Selection
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized
the following measures for selection: (i) the AHRQ PSI-90 composite
measure for Domain 1 and the CDC NHSN measures CAUTI and CLABSI for
Domain 2 for FY 2015; (ii) addition of the CDC NHSN Surgical Site
Infection (SSI) measure for FY 2016; and (iii) addition of the CDC NHSN
Methicillin-Resistant Staphylococcus aureus (MRSA) Bactremia and C.
difficile measures for FY 2017. Several of these measures are already
part of the Hospital IQR

[[Page 50091]]

Program and are reported on the Hospital Compare Web site.
Comment: One commenter supported the implementation schedule of
quality measures for the program, specifically stating that the AHRQ
PSI-90 composite measure and the CDC NSHN CLABSI and CAUTI measures are
sufficient starting points for the HAC Reduction Program. A few
commenters also supported the addition of the CDC NHSN SSI, MRSA and C.
difficile measures which they believed would address the increasing
incidence of these infections in hospital settings. A few commenters
supported the adoption of the NHSN SSI measure in Domain 2 for FY 2016.
Response: We thank the commenters for the recognition of the
significance of potential patient harms in hospitals as well as for
their support of our proposals for the implementation of the HAC
Reduction Program. We emphasize that patient safety is our primary
objective for the HAC Reduction Program.
Comment: A few commenters supported maintaining claims-based
measures such as the PSI-90 composite measure in quality reporting
programs because they are the least burdensome, least costly and most
widely accessible and available reporting method.
Response: We agree that claims-based measures have the advantages
of being minimally burdensome to providers while providing data
covering a large proportion of the Medicare population. We consider
several factors when selecting measures for quality programs, including
but not limited to measurement gap areas, opportunities for quality
improvement, and feasibility and burden for implementation. Claims-
based measures, including AHRQ PSIs, are collected and widely accepted
by States and other health care purchasers for payment purposes.
In addition to the claims-based measure in the FY 2015 HAC
Reduction Program, we also adopt chart-abstracted measures as
appropriate. There are currently two chart-abstracted measures in the
program and the number of chart-abstracted measures will increase in
subsequent years (three in FY2016 and five in FY 2017). We also are
exploring options for new measures, including electronically specified
measures, that could be incorporated into the HAC Reduction Program in
future years.
Comment: Many commenters believed that coding biases result in
unacceptable levels of reliability and validity for the PSI-90
composite measure and thus the measure fails to accurately and
meaningfully reflect hospital performance. A few commenters expressed
concerns that the PSI measures are not clinically validated against
medical records.
Response: We have previously addressed commenters' specific
concerns regarding validity and coding issues of PSI-90 composite
measure, and we refer readers to our responses to these comments in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50715). We also note that there
are validation studies examining the relationship between billing or
claims data and medical records.\55\
---------------------------------------------------------------------------

\55\ (1) Zrelak PA, Romano PS, Tancredi DJ, Geppert JJ, Utter
GH. Validity of the AHRQ Patient Safety Indicator for Postoperative
Physiologic and Metabolic Derangement based on a national sample of
medical records. Medical Care 2013; 51(9):806-11. (2) Utter GH,
Zrelak PA, Baron R, Tancredi DJ, Sadeghi B, Geppert JJ, Romano PS.
Detecting postoperative hemorrhage or hematoma from administrative
data: The performance of the AHRQ Patient Safety Indicator. Surgery
2013; 154(5):1117-25. (3) Borzecki AM, Cevasco M, Chen Q, Shin M,
Itani KM, Rosen AK. How valid is the AHRQ Patient Safety Indicator
``postoperative physiologic and metabolic derangement''? J Am Coll
Surg. 2011 Jun;212(6):968-976. (4) Borzecki AM, Kaafarani H, Cevasco
M, Hickson K, Macdonald S, Shin M, Itani KM, Rosen AK. How valid is
the AHRQ Patient Safety Indicator ``postoperative hemorrhage or
hematoma''? J Am Coll Surg. 2011 Jun;212(6):946-953.
---------------------------------------------------------------------------

Comment: Many commenters expressed a lack of confidence about the
PSI-90 composite measure due to recent discussions at the NQF Patient
Safety Standing Committee (``Patient Safety Committee'' or
``Committee''). Some commenters stated that the Patient Safety
Committee did not recommend the measure for endorsement and other
commenters noted that NQF Patient Safety Committee requested changes to
the weighting of the individual components in the composite measure to
better reflect their relative importance or preventability. One way the
Committee suggested this reweighting could be achieved is through
including three additional component measures (PSI-9--Perioperative
Hemorrhage or Hematoma Rate, PSI-10--Postoperative Physiologic and
Metabolic Derangement Rate and PSI-11--Postoperative Respiratory
Failure Rate) in the composite. A few commenters expressed support for
the potential inclusion of PSI-9, 10 and 11 in the PSI-90 composite
measure. However, one commenter did not support the addition of any new
components to the composite measure, while a few commenters opposed the
inclusion of PSI-9 and PSI-10 in particular because they claimed that
these components had a high false-positive rate due to lack of clarity
on the coding criteria.
In the event that the composite measure is not re-endorsed by NQF,
some commenters recommended that CMS not consider using individual PSI-
90 component measures that may still be endorsed. They also recommended
that additional testing for consistency between individual components
and the composite scores be undertaken and the results released. Other
commenters had concerns that several of the PSI-90 component measures
are not NQF-endorsed. Some commenters supported and understood that CMS
may need to retain the PSI-90 composite measure, regardless of NQF
endorsement status.
Response: We would like to clarify the status of the PSI-90 measure
with regard to NQF endorsement. As part of the routine NQF measure
maintenance process, the Patient Safety Committee expressed concerns
about the weighting of the PSI-90 component measures and requested to
see additional measure information related to re-weighting of PSI-90
with three additional components (PSI-9, PSI 10 and PSI 11) before
deciding if the measure would be recommended for continued endorsement.
AHRQ has submitted the requested data for the NQF Patient Safety
Committee's consideration in making their decision regarding continued
endorsement of the composite. As we stated earlier, if during the NQF
review process, substantive changes are made to the measure, we will go
through a notice-and-comment rulemaking process.
Regarding the concern for the claimed high false-positive rate of
some of the PSI-90 component measures, we conferred with AHRQ which
noted that most of the studies that examine positive predictive values
predate the use of Present on Admission (POA) coding that is now
integral to the PSIs. Detailed reviews of these studies indicate that
most of the false positives were due to events that were POA. POA
coding for IPPS hospitals was required by CMS beginning October 1, 2007
with a payment penalty beginning October 1, 2008. Studies that use data
prior to 2009 would not have captured POA information. Therefore, we
believe that proper coding will address the commenters' concerns.
In addition, AHRQ noted that the NQF convened a group of 12 experts
to determine what criteria should be used for evaluating composite
performance measurement for NQF endorsement. The Technical Expert Panel
provided clear guidance on the relationship between the individual
component indicators and the composite in the Composite Performance
Measure Evaluation Guidance document (NQF, April 2013). Specifically,
individual component measures that are included in the composite
performance measure:

[[Page 50092]]

(1) should be justified based on the clinical evidence; (2) do not need
to be NQF endorsed; (3) generally should demonstrate a gap in
performance; and (4) may not be sufficiently reliable independently,
but contribute to the reliability of the composite performance measure.
AHRQ convened a Composite Measure Workgroup of experts in the field
to determine the best weighting strategy. The methodology of the PSI-90
composite measure is detailed in the original technical report by the
AHRQ Composite Measure Workgroup: https://qualityindicators.ahrq.gov/Downloads/Modules/PSI/PSI_Composite_Development.pdf. Several
alternative approaches were discussed with the AHRQ Composite Measure
Workgroup and the first NQF Composite Measure Steering Committee.
Factor analysis was considered as one approach and was deemed to have
no clear advantages over less complex, more intuitively clear weighting
schemes. In brief, numerator weighting that is used in the PSI-90
composite measure was preferred due to its greater simplicity and
clarity.
Comment: A few commenters stated that many of the AHRQ PSI-90
composite component measures are rare events and do not meet the high-
volume requirement for the HAC Reduction Program.
Response: We note that section 1886(d)(4) (D)(iv) of the Act
defines a hospital-acquired condition for the HAC Reduction Program as
one that is high cost, high volume or both or any other conditions
determined appropriate by the Secretary. We believe the PSI-90
composite measure and its components meet the statutory requirement for
inclusion in the program.
Comment: Some commenters asserted that composite measures such as
PSI-90 do not provide actionable information to hospitals.
Response: We disagree and note that hospitals have access to their
results on the individual PSI-90 component measures and how they
compare to the national risk adjusted rate on their Hospital Specific
Reports which are issued during the review and corrections period. In
addition, the component measure scores are available to hospitals and
the public on our Web site at: https://www.medicare.gov/. Therefore,
hospitals can use the individual component measure results to identify
specific areas for improvement efforts.
Comment: Based on the belief that the PSI-90 composite measure has
significant flaws as described above, many commenters recommended
identifying alternatives to the PSI-90 composite measure and phasing it
out of the HAC Reduction Program as soon as possible. Some commenters
suggested that the alternative measure(s) be derived from the NQF
portfolio of safety measures.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27625
through 27626), we explained the rationale for including the PSI-90
composite measure in the HAC Reduction Program. We continue to believe
the PSI-90 is an appropriate tool for calculation of HAC scores.
Nonetheless, we will continue to explore options for new measures,
including electronically specified measures that could be incorporated
into the HAC Reduction Program to supplement or replace the PSI-90
composite measure. We also note that the PSI-90 is one of three
measures included in the Program for FY 2015. The other two measures
are chart-abstracted and we are increasing the number of chart-
abstracted measures in subsequent years of the program (three in FY
2016 and five in FY 2017).
Comment: One commenter suggested revisions to four of the PSI-90
composite component measures. For PSI-6, the commenter recommended
exclusion of high frequency outliers, such as iatrogenic pneumothorax
in patients with a lack of intravenous access; acuity; and cases where
iatrogenic pneumothorax is secondary to a life-saving procedure. The
commenter also recommended that CMS not apply this measure if
clinicians have used all available means of avoiding iatrogenic
pneumothorax, such as ultrasound guidance. For PSI-7, the commenter
recommended exclusions for trauma. For PSI-12, the commenter
recommended clear definition of the inclusion criteria in order to
avoid misclassification of providers and subsequent inappropriate
penalties. For PSI-14, the commenter requested adding exclusions for
trauma cases and patients in shock that require emergency procedures.
Another commenter recommended that PSI-7 be removed from the HAC
calculation because it is not as well-validated as the NSHN CLABSI
measure, the transition from ICD-9 to ICD-10 coding which some
hospitals have already undergone could compromise the validity of this
component and that, as it currently exists, some vascular catheter
infections might be double counted.
Response: AHRQ's Quality Indicator program continually updates and
refines measures to provide the best possible quality indicators to the
public. We conferred with AHRQ, which welcomed the commenters'
suggestions and will examine the feasibility of including these
exclusions. All of the AHRQ quality indicators go through a rigorous
testing process prior to changes being made to the indicators. It
should be noted that NQF policy and guidance generally has favored risk
adjustment approaches over exclusion of high-risk patients, when
possible, to optimize the generalizability and value of quality
measures. Suggestions regarding potential PSI measure revisions can be
made directly to QIsupport@ahrq.hhs.gov.
With regard to the commenter's specific suggestion for PSI-6--
Iatrogenic Pneumothorax Rate, it is impossible to identify patients who
lack peripheral intravenous access using ICD-9-CM coded data. However,
given exclusions for trauma and respiratory disease, it is assumed that
all patients who experienced this event had some type of procedure
(such as central venous catheter placement or thoracentesis) that
placed them at risk for iatrogenic (hospital-acquired) pneumothorax.
For PSI-7--Central Venous Catheter-Related Blood Stream Infection Rate,
ICD-10 implementation will take effect no sooner than October 1, 2015
and may be subject to additional delays. AHRQ will conduct extensive
testing on the ICD-10 specified measures to ensure events are not
double counted.
For PSI-12--Perioperative Pulmonary Embolism or Deep Vein
Thrombosis Rate, inclusion criteria are clearly defined and have been
narrowed as a result of changes in ICD-9-CM codes and user feedback.
For example, the numerator inclusion criteria no longer include upper
extremity or thoracic venous thrombosis, due to concern about the
uncertain preventability of these events among patients who require
long-term use of central venous catheters. The numerator inclusion
criteria also no longer include superficial venous thrombosis, due to
concern about the uncertain preventability of these events.
Comment: One commenter was concerned that several of the PSI
composite component measures in the HAC Reduction Program--including
PSI-6, PSI-12 and PSI-15--were finalized for removal from the Hospital
IQR Program after FY 2014 in the FY 2013 IPPS/LTCH PPS final rule. The
commenter contended that because these measures have been deemed unfit
for use in a public reporting application, they are equally unsuitable
for use in a payment penalty program.

[[Page 50093]]

Response: As we stated in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53507 through 53509), to avoid duplication, we removed PSI-6, PSI-12
and PSI-15 from Hospital IQR Program as these individual measures are
already included in the PSI-90 composite measure which is currently
part of the Hospital IQR Program measure set. The measures were not
deemed to be unfit, as characterized by the commenter.
Comment: One commenter described its experience with the AHRQ
Quality Indicator Software not allowing its organization to identify
specific patient encounters included in the measure components and not
always accurately reflecting POA. This commenter recommended that CMS
ask AHRQ to update the software outputs to provide accurate case level
patient information for patients in the numerator, to update the
software to define which ICD code triggers the measure, to include
simultaneous SAS and MonAHRQ releases and to include the PSI-90 outputs
in the AHRQ process the same way as other measures.
Response: AHRQ informed us that they are constantly improving the
AHRQ QI software and welcomes this and other suggestions for
improvements. The AHRQ QI software and the MonAHRQ software are under
different timelines for release for a variety of external reasons.
Additional suggestions for improvements can be made directly to
QIsupport@ahrq.hhs.gov.
Comment: One commenter recommended revisions to the CAUTI measure
to minimize the potential for the possible unintended consequence of
premature urinary catheter removal. The commenter's recommended
revisions included adding exclusions for bedridden elderly patients
whose urine output cannot be monitored otherwise, those who have had
complex pelvic surgery, and those with a history of urinary retention;
and inclusion of a data capture point for catheter reinsertion to
capture the rate of repeat instrumentation and infection risk for those
with early catheter removal.
Response: We refer readers to the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50716) for our discussion of the issue of potential unintended
consequences of the CAUTI measure. In regard to the addition of a data
capture point in the NHSN system, we conferred with CDC, which stated
that they weigh each datum piece that is required for NHSN surveillance
very carefully, considering the burden required to capture and collect
the information and the benefits of the data collected. Individuals
performing validation of CAUTI data have stated that locating insertion
documentation is very difficult, if not impossible in many cases. For
this reason, NHSN does not require the documentation of the date of
insertion of indwelling urinary catheters. The NHSN UTI data collection
form and system do allow for voluntary collection of this information
and NHSN encourages facilities to utilize these capabilities to inform
their CAUTI prevention efforts as they deem necessary. However, it is
not appropriate to require such documentation by all facilities.
Comment: Several commenters contended that the MRSA and C.
difficile measures do not adequately distinguish between community-
acquired and hospital-acquired infections and suggested the measures
not be included in the HAC Reduction Program for that reason. Another
commenter had the same concern and supported the inclusion of the MRSA
measure but not the C. difficile measure. A commenter noted that rates
of C. difficile are generally higher in patient with surgical
procedures (particularly with gastrointestinal surgical procedures)
versus non-surgical patients and that there are known regional
variations in MRSA and C. difficile infection rates. For these reasons,
this commenter recommended that process measures focusing on best
practices and guidelines for patients who contract MRSA or C. difficile
as inpatients would be more appropriate than outcome measures tracking
MRSA and C. difficile infection rates. A few commenters recommended
that the C. difficile measure be included in the Hospital VBP program,
and not in the HAC Reduction Program.
Response: With respect to some commenters' concerns about MRSA and
C. difficile measures, we note that these measures do enable
differentiation between community-acquired and health care-associated
events based on date of admission and date(s) of specimen collection.
Therefore, we do not believe the measures need to be revised. While we
appreciate the recommendations for process measures, we note that
process measures are not usually risk adjusted and current statute
requires risk-adjustment for the HAC Reduction Program. The issue of
the same measures being included in multiple programs is addressed
below.
Comment: Many commenters urged CMS to eliminate the overlap of
measures between the Hospital VBP and HAC Reduction Programs. The
commenters understood CMS' desire to align the programs in order to
draw more attention to these important patient safety issues and to
spur quicker and more meaningful change in patient care. However, the
commenters believed that this approach creates multiple operational
challenges, results in the potential for double payment penalties, and
sends conflicting signals about the true state of hospital performance
(a hospital could incur a penalty under the HAC Reduction Program but
receive an incentive under the Hospital VBP Program). Commenters
overwhelmingly recommended that the HAC Reduction Program measures
should only be included in either the HAC Reduction Program or the
Hospital VBP program but not in both programs. One commenter
recommended that either the HAC Reduction Program or the Hospital VBP
program be eliminated completely.
Response: We acknowledge that there is overlap in measures between
the Hospital VBP Program and the HAC Reduction Program and refer
readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50716) for our
discussion of the rationale for this overlap. As for elimination of
these programs, they are statutory requirements and eliminating them is
beyond the scope of the Secretary's authority.
Comment: Several commenters recommended that CMS consider a
comprehensive strategy in which measures are placed into pay-for-
performance programs using a staged approach: the Hospital IQR Program
would be the basis for selection into the pay-for-performance programs;
the Hospital VBP Program would be the next step and would include
measures covering important safety issues but ones for which it is
unclear if effective strategies exist to improve performance; and the
HAC Reduction Program would be the final stop and would include
measures that have generally good but not topped out performance with a
limited performance gap to close and a set of highly effective, proven
strategies that are widely implementable. Many commenters also
suggested that measures should be publicly reported for at least one
year before they are included in the HAC Reduction Program so that any
unintended consequences of measurement and reporting can be addressed.
Response: We appreciate the commenters' feedback and will consider
these suggestions in future rulemaking.
(4) Measure Risk-Adjustment Methodology
In the FY 2014 IPPS/LTCH PPS final rule, we established that we
would use the existing measure-level risk-adjustment that is already
part of the risk-adjustment methodology for the

[[Page 50094]]

individual measures in Domains 1 and 2 in order to fulfill this
requirement (78 FR 50719). We codified the use of this methodology
under Sec. 412.172(d) of the regulations. The AHRQ PSI-90 composite
measure and the CDC NHSN measures selected for the program are risk-
adjusted and reliability-adjusted. Links to the measure specification
documents can be found in section IV.J.4. of the preamble of this final
rule. Specifically, risk factors such as the patient's age, gender,
comorbidities, and complications will be considered in the calculation
of the measure rates so that hospitals serving a large proportion of
sicker patients are not unfairly penalized. We noted that the risk-
adjustment methodology for these measures meets current NQF endorsement
criteria. We believe that such risk-adjustment is appropriate, pursuant
to section 1886(p) of the Act.
We will continue to examine the impact of the additional measures
in the program, and propose refinements to the program if necessary.
Should changes to the risk-adjustment models for the measures be
adopted during NQF endorsement maintenance processes, we will propose
adopting these changes as soon as possible through rulemaking.
Comment: Many commenters had concerns about the PSI-90 risk-
adjustment methodology. Most commenters believed that inadequate risk-
adjustment results in a disproportionate impact on teaching hospitals
or hospitals that treat many sick and vulnerable patients, perform a
high volume of emergency trauma and burn care, and perform a large
number of surgical procedures. Another commenter expressed the opposite
concern--that small hospitals might have artificially inflated HAC
scores as a result of the risk-adjustment methodology algorithm, which
gives hospitals with poor data reliability a low reliability weight
therefore skewing their rates closer to the national mean.
Response: Each of the PSI-90 composite measure component measures
includes detailed risk-adjustment for clinical factors (for example,
modified diagnostic related groupings, major diagnostic categories,
comorbidities), age, and gender that influence the risk for
experiencing a patient safety event during hospitalization. The three
risk factors mentioned explicitly above--trauma, burns, and surgical
discharges--are accounted for in the PSI risk-adjustment models. For
example, acknowledging that some hospitals do more transplants and
trauma care than others, the models account for this heterogeneity of
risk. AHRQ's Quality Indicator program continually updates and refines
measures to provide the best possible quality indicators to the public.
Comment: Several commenters expressed concerns that the HAC
Reduction Program does not contain adequate adjustment for
socioeconomic (SES) factors that influence HAC rates. Commenters
recommended comparing providers to their peers, adjusting provider
penalties based on SES of patients served, incorporating a provider's
annual improvement into performance calculations, and adopting new
measures that better adjust for socioeconomic factors. One commenter
specifically recommended complying with the recommendations of the
NQF's Expert Panel on Risk-Adjustment for Sociodemographic Factors
(Draft Report available at: https://www.qualityforum.org/Risk_Adjustment_SES.aspx).
Response: We appreciate the commenters' suggestions on the
importance of addressing socioeconomic status in the HAC Reduction
Program and have continued to consider and evaluate these stakeholder
concerns. We also note that these concerns were addressed in the FY
2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673 through
50674) and again in section IV.H.4. of the preamble of this final rule.
While these discussions in section IV.H.4. of the preamble of this
final rule are in response to comments regarding the Hospital
Readmissions Reduction Program, we have received similar comments with
respect to other quality reporting programs and our responses address
considerations which also apply to the HAC Reduction Program.
To the extent that these commenters were requesting that CMS
mitigate the HAC Reduction Program payment adjustment despite a
hospital being in the top quartile, section 1886(p) of the Act
specifies that the amount of payment for such a hospital ``shall be
equal to 99 percent of the amount of payment that would otherwise
apply'' and we refer readers to the earlier discussion of the payment
adjustment in section IV.J.3.b. of the preamble of this final rule.
(5) Measure Calculations
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717 through
50719), we established that we will perform measure calculations for
the AHRQ PSI-90 composite measure under Domain 1 and the CDC NHSN
measures under Domain 2. We stated that measure calculations for the
AHRQ PSI-90 composite measure included using ICD-9-CM diagnosis and/or
procedure codes and, for the principal and secondary diagnoses, a
present on admission (POA) indicator value associated with all
diagnoses on the claim. As noted in section IV.J.3.b. of the preamble
of this final rule, in order to implement the new Maryland All-Payer
Model, Maryland elected to no longer have Medicare payment made to
Maryland hospitals in accordance with section 1814(b)(3) of the Act,
effective January 1, 2014. Although CMS has waived certain provisions
of the Act for Maryland hospitals as set forth in the agreement between
CMS and Maryland and subject to Maryland's compliance with the terms of
the agreement, CMS has not waived the POA indicator reporting
requirement. In other words, the changes to the status of Maryland
hospitals under section 1814(b)(3) of the Act as described above do not
in any way change the POA indicator reporting requirement for Maryland
hospitals. We also finalized that the same rules under the Hospital IQR
Program be applied to determine how the AHRQ PSI-90 composite measure
and CDC NHSN measures are applied and calculated.
(6) Applicable Time Period
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we adopted a
2-year applicable period to collect data that would be used to
calculate the Total HAC Score for FY 2015. For Domain 1 (AHRQ PSI-90
composite measure), we established a 2-year data period to calculate
the measures based on recommendations from AHRQ, the measure developer,
as we believed that the 24-month data period will provide hospitals and
the general public the most current data available. The 24-month data
period also will allow time to complete the complex calculation process
for these measures, to perform comprehensive quality assurance to
enhance the accuracy of measure results, and to disseminate
confidential reports on hospital-level results to individual hospitals.
As such, for FY 2015, we will use the 24-month period from July 1,
2011 through June 30, 2013 as the applicable time period for the AHRQ
PSI-90 composite measure. The claims for all Medicare FFS beneficiaries
discharged during this period will be included in the calculation of
measure results for FY 2015. This includes claims data from the 2011,
2012, and 2013 Inpatient Standard Analytic Files (SAFs).
The CDC NHSN measures, CAUTI and CLABSI, are currently collected
and calculated on a quarterly basis. However, for the purpose of the
HAC Reduction Program, we will use 2 years of data to calculate the
Domain 2 score. For FY 2015, we will use calendar years

[[Page 50095]]

2012 and 2013 for the HAC Reduction Program. As noted above, we
codified the definition of ``applicable time period'' in the FY 2014
IPPS/LTCH PPS final rule at Sec. 412.170.
Comment: One commenter supported use of the 2-year applicable time
periods for the collection of Domain 1 and 2 measures for FY 2015. A
few commenters suggested aligning the duration of performance periods
for Hospital VBP and the HAC Reduction Programs, in particular
suggesting using 1 year of data for the CDC NHSN measures. A few
additional commenters had concerns that the data are retrospective and
therefore do not provide actionable information.
One commenter disagreed with the finalized 2-year data collection
period for the CDC measures for CAUTI and CLABSI and requested that CMS
reconsider quarterly collection and calculation of these measures for
Domain 2. The commenter stated that quarterly data would be more useful
for providers in addressing areas in which they would like to improve,
and would also allow consumers and purchasers to have timely
information regarding areas of care that are meaningful and important
to them.
Response: We refer readers to our response to the applicable time
period comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717).
We understand that hospitals might find quarterly data more useful and
for that purpose, we refer stakeholders to Hospital Compare that
includes quarterly updates of the measures included in the HAC
Reduction Program.
d. Criteria for Applicable Hospitals and Performance Scoring Policy
The HAC Reduction Program does not contain specific statutory
directives on scoring methods, as found with other programs. Therefore,
our main concern when establishing scoring methods for the HAC
Reduction Program was to align with existing scoring methodologies in
similar hospital programs. Accordingly, in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50721), we finalized a scoring methodology that
aligns with the achievement scoring methodology currently used under
the Hospital VBP Program (78 FR 27629). We believe aligning the scoring
methodologies reduces confusion associated with multiple scoring
methodologies. In addition, we note that alignment benefits the
hospital stakeholders who have prior experience with the Hospital VBP
Program.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27629), we
proposed to implement a methodology for assessing the top quartile of
applicable hospitals for HACs based on performance standards, where we
would score each hospital based on whether they fall in the top
quartile for each applicable measure and where in the top quartile they
fall. In addition, we proposed to calculate a Total HAC Score for each
hospital by summing the hospital's performance score on each measure
within a domain to determine a score for each domain, then multiplying
each domain score by a proposed weight (Domain 1--AHRQ Patient Safety
Indicators 50 percent, Domain 2--CDC NHSN Measures 50 percent), and
adding together the weighted domain scores to determine the Total HAC
Score.
We reviewed the public input on the proposed 75th percentile
benchmark. Several commenters requested that a change to the proposed
minimum benchmark for scoring each measure be made. We agreed with
these commenters, and in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50722), we modified our proposal and established that the scoring will
begin at the minimum value for each measure rather than the 75th
percentile. The methodology finalized in the FY 2014 IPPS/LTCH PPS
final rule will assess the top quartile of applicable hospitals for
HACs based on the Total HAC Score. The support for Domain 2 measures in
general, coupled with multiple recommendations, and specifically those
from MedPAC, to provide more weight to Domain 2 measures led us to
conclude that such scoring changes were necessary. Therefore, we
finalized a different weight for each Domain than originally proposed
(78 FR 50721).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722), we further
specified that we will calculate a Total HAC Score for each hospital by
using the hospital's performance score on each measure within a domain
to determine a score for each domain, then multiply each domain score
by the following weights: Domain 1--(AHRQ PSI-90 composite measure), 35
percent; and Domain 2--(CDC NHSN measures), 65 percent; and combine the
weighted domain scores to determine the Total HAC Score (Sec.
412.172(e)(3)). We use each hospital's Total HAC Score to determine the
top quartile of subsection (d) hospitals (applicable hospitals) that
are subject to the payment adjustment beginning with discharges on or
after October 1, 2014. With respect to a subsection (d) hospital, we
identify the top quartile of all hospitals that are subsection (d)
hospitals with respect to their rate of HACs during the applicable
period (Sec. 412.172(e)(1)). We use a Total HAC Score to identify
applicable hospitals and identify the 25 percent of hospitals with the
highest Total HAC Scores as applicable hospitals (Sec. 412.172(e)(2)).
We finalized the PSI-90 composite measure for Domain 1. Because
hospitals may not have complete data for every AHRQ indicator in the
composite measure for this Domain 1 measure, we finalized the same
methodology used for the Hospital VBP Program to determine the minimum
number of indicators with complete data to be included in the
calculation of the Domain measure.
In addition, we finalized the following rules to determine the
number of AHRQ indicators to be included in the calculation for a
hospital's Domain 1 score. In this discussion, ``complete data'' refers
to whether a hospital has enough eligible discharges to calculate a
rate for a measure. Complete data for the AHRQ PSI-90 composite measure
means the hospital has three or more eligible discharges for at least
one component indicator. Specifically--
If a hospital does not have ``complete data'' for the PSI-90
composite measure, we will not calculate a Domain 1 score for that
hospital.
If a hospital has ``complete data'' for at least one indicator for
the AHRQ PSI-90 composite measure, we will calculate a Domain 1 score.
The calculation of the SIR for the CDC measures requires that the
facility have a >= 1 predicted HAI event. The predicted number of
events is calculated using the national HAI rate and the denominator
counts (that is, number of device days, procedure days, or patient days
depending on the HAI). In the event the SIR cannot be calculated for
any domain 2 measures because the facility has < 1 predicted infection
for each measure, Domain 1 scores exclusively will be used to calculate
a HAC score. In other words, we will exclude from the overall HAC score
calculation any measure for which an SIR cannot be calculated for the
reason set out above.
Because of the differences among the measures for the HAC Reduction
Program and the distribution of measure results, simply adding up the
measure results to calculate the domain or Total HAC Score will make
the scores less meaningful to hospitals and the general public. As a
result, as we indicated in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50720 through 50725), points will be assigned to hospitals' performance
for each measure. This approach aligns with the Hospital VBP Program
for measuring hospital

[[Page 50096]]

achievement. In particular, the Hospital VBP Program assigns up to 10
points for each measure based on a hospital's performance result for
that measure for a given time period. We note that, for the HAC
Reduction Program, unlike the Hospital VBP Program where a higher score
means better performance, the more points a hospital receives on a
measure corresponds with a poorer score performance. For the HAC
Reduction Program, we finalized use of a slightly different methodology
for scoring points, depending on the specific measure (Table C in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included
below). Specifically--
For the AHRQ Patient Safety for Selected Condition (PSI-
90) composite in Domain 1, point assignment will be based on a
hospital's score for the composite measure.
For the PSI-90 composite measure, 1 to 10 points will be
assigned to the hospital.
For the CDC NHSN measures in Domain 2, point assignment
for each measure will be based on the SIR for that measure.
For each SIR, 1 to 10 points will be assigned to the
hospital for each measure (CAUTI and CLABSI for FY 2015).
The Domain 2 score will consist of the average of points
assigned to the SIR (CAUTI and CLABSI for FY 2015).

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

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

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

For Domain 2, we will obtain measure results that hospitals
submitted to the CDC NHSN for the Hospital IQR Program. The CDC NHSN
HAI measures capture adverse events that occurred within intensive care
units (ICUs), including pediatric and neonatal units. For the Hospital
IQR Program, hospitals that elected to participate in the reporting
program (that is, have an active IQR pledge), but do not have an ICU,
can apply for ICU waivers so that the hospitals will not be subject to
the 2-percent payment reduction for nonsubmission of quality reporting
data.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we noted in
the second quarter of 2012, among the 3,321 IPPS hospitals with active
IQR pledges for data submission, 377 (or 10.1 percent) applied and
received an ICU waiver. At the same time, 2,939 hospitals (88.5
percent) of the IPPS hospitals did not have an ICU waiver and submitted
data for the CDC HAI CLABSI measure, while 4 hospitals (0.1 percent)
that had no ICU waiver failed to submit data to the NHSN. For the same
quarter, of the 3,321 IPPS hospitals with active IQR pledges, 2,935
(88.4 percent) that did not have an ICU waiver submitted data for the
CDC HAI CAUTI measure, whereas 8 hospitals (0.2 percent) did not submit
data. Because data availability for the two CDC HAI measures impact the
score for Domain 2 and eventually the Total HAC Score, we aim to
encourage hospitals with an ICU that did not submit data to begin data
submission, and to encourage hospitals that have already submitted data
to continue data submission for all the CDC HAI measures. To this end,
we finalized the following rules (Figure B in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50724), which is included below):
If a hospital has an ICU waiver for the CDC HAI measures,
we will use only the Domain 1 score to calculate its Total HAC Score.
If a hospital does not have an ICU waiver for a CDC HAI
measure:
[cir] If the hospital does not submit data for the CDC HAI
measures, we will assign 10 points to that measure for that hospital.
[cir] If the hospital does submit data for at least one CDC NHSN
measure:
[ssquf] If there are ``complete data'' (that is, enough adverse
events to calculate the SIR) for at least one measure, we will use
those data to calculate a Domain 2 score and use the hospital's Domain
1 and Domain 2 scores to calculate the Total HAC Score.
[ssquf] If there are not enough adverse events to calculate the SIR
for any of the measures, we will use only the hospital's Domain 1 score
to calculate its Total HAC Score.

[[Page 50097]]

[GRAPHIC] [TIFF OMITTED] TR22AU14.001

Comment: Several commenters supported the use of a scoring
methodology for the HAC Reduction Program that aligns with the
achievement methodology of the Hospital VBP Program and agreed that
this scoring alignment reduces confusion.
Response: We appreciate the commenters' support.
Comment: A few commenters stated that CMS implemented as reasonable
a scoring methodology as was permitted by statute. A few commenters
expressed support for the creation of two domains of measures using
measures that are risk adjusted at the patient, unit and hospital
levels and expressed support for the weighted contributions of Domain 1
and Domain 2 measures to the Total HAC score. Another commenter found
the scoring to be very complex and detailed, making it difficult for
hospitals to replicate.
Response: We acknowledge that the scoring methodology is complex.
The scoring methodology was described in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50719 through 50725) and is clarified later in the
preamble to this final rule. During the review and correction period
that will occur prior to assessment of the HAC Reduction Program
penalty or posting of the data on Hospital Compare, hospitals will be
given access to their HAC Reduction Program measure scores, domain
scores and total HAC score accompanied by a document that describes how
the scores were calculated.
Comment: One commenter questioned whether the HAC Reduction Program
scores reflect meaningful differences in quality between hospitals. The
commenter specifically stated that the HAC scoring methodology makes
distinctions between hospitals whose performance is not statistically
different from one another which results in payment adjustments being
levied on hospitals whose performance is not statistically different
from the national benchmarks. The commenter also believed that there
will be inconsistencies between results for the CMS programs using the
same measures but different scoring methodologies.
Response: We note that HAC Reduction Program does not have national
benchmarks in the current scoring methodology. We also recognize the
possibility for inconsistencies between our programs when measures like
the AHRQ PSI-90 composite measure and the CDC NHSN HAI measures are
used in multiple programs; we refer readers to the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50728)

[[Page 50098]]

where we addressed this issue. We note that different CMS programs have
different purposes and thus it is not unexpected that programs use
different approaches to score hospitals' performance. For example, the
Hospital IQR Program, which publicly reports measure performance on
Hospital Compare, is intended to provide consumers with the information
needed to allow them to make informed decisions about hospital quality
when seeking care.
The HAC Reduction Program is intended to motivate hospitals to
reduce the incidence of HACs. We will continue to monitor the HAC
Reduction Program and take the commenter's concerns under consideration
as we strive to improve the program.
Comment: A few commenters supported using the same method of
determining if a hospital has enough data to calculate a PSI-90 score
in both the Hospital VBP and HAC Reduction Programs and the same
inclusion criteria for the CDC NHSN measures as is used in the Hospital
IQR Program.
Response: We appreciate the commenters' support. This alignment was
described in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50722).
Comment: One commenter requested the posting of more HAC Reduction
Program measure thresholds and benchmark data in advance as has been
accomplished with the Hospital VBP Program.
Response: We note that the HAC Reporting Program is not required by
law to create measure thresholds and benchmarks, as is the Hospital VBP
Program. By statute, the payment adjustments for the HAC Reporting
Program are applied to hospitals with a Total HAC score in the 75th
percentile. Based on the differing statutory approaches, we do not
believe that the commenter's requests are applicable to this program.
(1) Clarification of Finalized Measure Result Scoring for FY 2015 and
Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723), we finalized
for the HAC Reduction Program a scoring methodology that divides the
measure results into percentiles in increments of 10 and assigns points
(1 to 10) in accordance with the percentile into which the hospital's
measure result falls. Our preliminary analysis of the measures showed
that multiple hospitals had the same measure results, and that in
certain instances, the number of hospitals with the same measure
results exceeded the number of hospitals for their appropriate
percentile. Consequently a few hospitals with the same measure results
fall into the next higher percentile. In these instances, we will
assign the same point for all hospitals with the same measure results,
and that point will be based on the prior or the lowest appropriate
percentile.
For example, if, for the CAUTI measure, 13 percent of hospitals
have an SIR of 0, we will assign a point of 1 to all 13 percent of
hospitals, even though, arguably, 10 percent of them fall into the
first percentile, and 3 percent of the 13 percent fall into the second
percentile. Because each percentile range ideally represents 10 percent
of hospitals, we will assign a point of 2 to the remaining 7 percent of
hospitals in the second percentile because their SIR is larger than 0.
We believe this is the most favorable method for scoring measure
results for hospitals. We note that randomly assigning some hospitals
with the same SIR a higher (for example, less favorable) score would be
both arbitrary and capricious, which are prohibited by the
Administrative Procedure Act.
Comment: A few commenters applauded CMS for clarifying the process
by which measure scores will be assigned in the case of hospitals with
tied measure results spanning multiple deciles.
Response: We appreciate the commenters' support for the clarified
process and believe it makes clear that we are applying the scoring
criteria in a manner that is most equitable to hospitals.
(2) Clarification of FY 2015 Finalized Narrative of Rules to Calculate
the Total HAC Score
In the FY 2014 IPPS/LTCH PPS final rule, we finalized a series of
rules to determine how to calculate the Domain 2 score and ultimately
the Total HAC Score when there were waivers for the collection of CDC
NHSN HAI measures (78 FR 50723). We also illustrated and finalized
these rules in Figure B of the final rule (78 FR 50724). In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28141), we proposed to clarify that
the narrative for Figure B should also include ``other waivers'' that
waive hospitals from collecting CDC HAI measure data. The clarified
rules that we proposed are as follows for the collection of CDC HAI
measures:
If a hospital has an ICU waiver or other waiver for the
CDC NHSN HAI measures, we will use only the Domain 1 score to calculate
its Total HAC Score.
If a hospital does not have an ICU waiver or other waiver
for the CDC HAI measures:
[cir] If the hospital does not submit data for the CDC HAI
measures, we will assign 10 points to that measure for that hospital.
[cir] If the hospital does submit data for at least one CDC NHSN
measure:
[squf] If there are ``complete data'' (that is, enough adverse
events to calculate the SIR) for at least one measure, we will use
those data to calculate a Domain 2 score and use the hospital's Domain
1 and Domain 2 scores to calculate the Total HAC Score.
[squf] If there are not enough adverse events to calculate the SIR
for any of the measures, we will use only the hospital's Domain 1 score
to calculate its Total HAC Score.
As discussed earlier, if a hospital has enough data to calculate
the PSI-90 composite measure score for Domain 1 and ``complete data''
for at least one measure in Domain 2, the scores of the two domains
will contribute to the Total HAC Score at 35 percent for Domain 1 and
65 percent for Domain 2. However, if a hospital does not have enough
data to calculate the PSI-90 composite measure score for Domain 1 but
it has ``complete data'' for at least one measure in Domain 2, its
Total HAC Score will depend entirely on its Domain 2 score. Similarly,
if a hospital has ``complete data'' to calculate the PSI-90 composite
measure score in Domain 1 but none of the measures in Domain 2, its
Total HAC Score will be based entirely on its Domain 1 score. If the
hospital does not have ``complete data'' to calculate the PSI-90
composite measure score for Domain 1 or any of the measures in Domain
2, we will not calculate a Total HAC Score for this hospital.
Comment: A few commenters were concerned that a hospital without
any Domain 2 measure scores would have their Total HAC score based
entirely on Domain 1, which comprises claims-based data. Because this
situation could happen when a hospital does not have enough data to
reliably calculate an SIR for the CDC NHSN HAI measures, one commenter
recommended that CMS collaborate with CDC to determine if there are
analytic approaches besides the SIR that would allow more hospitals to
meet the minimum data criteria for reliable measure results for the CDC
NHSN HAI measures.
Response: We understand the commenters' concern and point out that
the intention of the scoring rules described above for calculating a
Total HAC score is to make use of the available data for each hospital
and encourage hospitals to report HAI data to CDC NHSN, even if they do
not have enough data to reliably calculate an SIR for the CDC NHSN HAI
measures in

[[Page 50099]]

Domain 2. In section IV.J.3.c. of the preamble of this final rule, we
address stakeholders concerns about using claims data in general and
the PSI-90 measure in particular, for the HAC Reduction Program.
We conferred with CDC, which indicated that they continuously
evaluate the data reported to NHSN and consider the best measures for
monitoring and comparative purposes. Currently the SIR is the best
measure to allow for risk adjustment and production of a facility-level
and/or CCN-level metric that can be used for comparison across similar
facility types. This provides the opportunity to most accurately
represent a facility's success. If the data are insufficient (for
example, too few device days) to produce the SIR, CDC indicated that
any calculation produced from such low numbers would be imprecise. CDC
continues to review the data and evaluate options for metric
development, including situations where facilities have low denominator
volume and/or few infections.
After consideration of the public comments we received, we are
finalizing the scoring clarifications for the HAC Reduction Program as
proposed.
e. Reporting Hospital-Specific Information, Including the Review and
Correction of Information
(1) Confidential Reports to Applicable Hospitals
Section 1886(p)(5) of the Act requires the Secretary to provide
confidential reports to the applicable hospitals with respect to HACs.
To meet the requirements under section 1886(p)(5) of the Act, in the FY
2014 IPPS/LTCH PPS final rule, we finalized the provision of
confidential reports for the HAC Reduction Program to include
information related to claims-based measure data for the PSI measures,
the measure scores, the domain score for each domain, and the Total HAC
Score (78 FR 50725). We noted that we use chart-abstracted measures in
the HAC Reduction Program, and such information will be contained in
the reports hospitals currently receive as part of the Hospital IQR
Program and can be reviewed and corrected through the process specified
for that program. We stated that we believe that this method would
reduce the burden on hospitals, by alleviating the need to correct data
present in two different programs.
(2) Availability of Information to the Public
Section 1886(p)(6)(A) of the Act requires the Secretary to ``make
information available to the public regarding HAC rates of each
subsection (d) hospital'' under the HAC Reduction Program. Section
1886(p)(6)(C) of the Act requires the Secretary to post the HAC
information for each applicable hospital on the Hospital Compare Web
site in an easily understood format. Section 1886(p)(6)(B) of the Act
also requires the Secretary to ``ensure that an applicable hospital has
the opportunity to review, and submit corrections for, the HAC
information to be made public for each hospital.''
To meet the requirements under section 1886(p)(6)(C) of the Act, in
the FY 2014 IPPS/LTCH PPS final rule, we finalized policies that the
following information will be made public on the Hospital Compare Web
site relating to the HAC Reduction Program: (1) hospital scores with
respect to each measure; (2) each hospital's domain specific scores;
and (3) the hospital's Total HAC Score (78 FR 50725).
Comment: One commenter supported the public availability of
facility-specific data on HACs. The commenter was concerned that these
data had previously been available on Hospital Compare but were no
longer posted there and urged that CMS repost these data. One commenter
recommended that, at a minimum, in spite of the absence of measures for
some HACs, CMS should make the raw counts of HACs publicly available on
Hospital Compare or https://data.medicare.gov/.
Response: We appreciate the commenter's recognition of the
importance of having facility level HAC data available publicly.
Although the commenter did not specify which data were being
referenced, we interpret this comment to refer to the eight HAC
measures that were removed from the Hospital IQR Program (Air Embolism,
Blood Incompatibility, CAUTI, Falls and Trauma, Foreign Object Retained
After Surgery, Manifestation of Poor Glycemic Control, Pressure Ulcer
Stages III or IV, and Vascular Catheter Associated Infections). The
rationale for removing these measures from the Hospital IQR Program can
be found in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53506 through
53507). The measures included in the HAC Reduction Program (PSI-90
composite, CLABSI and CAUTI) have been available on Hospital Compare
since December 2010, January 2012 and January 2013, respectively. The
HAC Reduction Program scores will also be publicly available later this
year.
(3) Review and Correction of Information
Section 1886(p)(6)(B) of the Act requires the Secretary to ensure
that each hospital has the opportunity to review and submit corrections
for the information to be made available to the public with respect to
each hospital under section 1886(p)(6)(A) of the Act prior to such
information being made available to the public.
In the FY 2014 IPPS/LTCH PPS final rule, we codified our regulation
regarding the reporting of hospital-specific information at Sec.
412.172(f) (78 FR 50968). CMS will make information available to the
public regarding HAC rates of all hospitals described in section
1886(d)(1)(B) of the Act, including hospitals in Maryland previously
paid under section 1814(b)(3) of the Act, under the HAC Reduction
Program (paragraph (f)). As noted in section IV.J.3.b. of the preamble
of this final rule, in order to implement the new Maryland All-Payer
Model, Maryland elected to no longer have Medicare pay Maryland
hospitals in accordance with section 1814(b)(3) of the Act, effective
January 1, 2014.
In summary, we established that CMS will provide each hospital with
confidential hospital-specific reports and discharge level information
used in the calculation of its Total HAC Score (paragraph (f)(1) of
Sec. 412.172). Hospitals will have a period of 30 days after receipt
of the information provided under paragraph (f)(1) to review and submit
corrections for the HACs measure scores, domain scores, and the Total
HAC Score for the fiscal year. The administrative claims data used to
calculate a hospital's Total HAC Score for those conditions for a
fiscal year will not be subject to review and correction (paragraph
(f)(2)). CMS will post the HAC Reduction Program scores for the
applicable conditions for a fiscal year for each applicable hospital on
the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50725 through 50728) for detailed
discussions of the above provisions.
CMS provided hospitals with their confidential hospital-specific
reports and discharge level information used in the calculation of
their Total HAC Score in late July 2014 on the Quality Net Web site. In
order to have access to their hospital-specific report, hospitals must
register for a Quality Net Secure Portal account. Hospitals have a
period of 30 days after the information is posted on Quality Net to
review and submit corrections for the calculation of their

[[Page 50100]]

HACs measure scores, domain scores, and Total HAC Score for the fiscal
year.
(4) Preliminary Analysis of the HAC Reduction Program
In order to model estimated payment changes for the FY 2015 IPPS/
LTCH PPS proposed rule, we conducted a preliminary analysis of the HAC
Reduction Program using currently available historical data as a proxy
for the actual data that will be used to determine hospital performance
under the program. The results of this preliminary analysis can be
found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/ under the FY 2015
IPPS/LTCH PPS proposed rule Home Page link as Table 17.--FY 2015
Preliminary Analysis of the Hospital-Acquired Condition Reduction
Program. We stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28142) that when the actual data for the performance periods finalized
in the FY 2014 IPPS/LTCH PPS final rule for each measure are available,
hospitals will have an opportunity to review and submit corrections as
discussed in section IV.J.3.e. of the preamble of the proposed rule and
this final rule.
Comment: One commenter objected to CMS making Table 17--FY 2015
Preliminary Analysis of the Hospital-Acquired Condition Reduction
Program, publicly available via the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/
under the FY 2015 IPPS/LTCH PPS proposed rule Home Page link. This
commenter stated that the data had not yet been reviewed and its
sources auditable and in compliance with the requirements of the law.
The commenter stated that the Table did not provide insight into how
the Composite Score was developed. The commenter acknowledged that
there was a methodology included in the proposed rule preamble,
however, also noted that any attempts to recalculate and confirm the
scores in the Table with other information available to the public
(such as CMS' Hospital Compare Web site) were not possible. Lastly, the
commenter stated that the reporting periods used to calculate the Score
in Table 17 (both for Domain 1 (Patient Safety) and Domain 2 (CLASBI
and CAUTI) are not those that are set in law.
Response: We acknowledge the commenter's objection and point out
that as stated in the FY 2015 IPPS/LTCH PPS proposed rule, we conducted
a preliminary analysis of the HAC Reduction Program using currently
available historical data as a proxy for the actual data that will be
used to determine hospital performance under the program to model
estimated payments. In addition, as stated earlier in this section, we
established that we will provide each hospital with confidential
hospital-specific reports and discharge level information used in the
calculation of its Total HAC Score (paragraph (f)(1) of Sec. 412.172).
Hospitals will have a period of 30 days after receipt of the
information provided under paragraph (f)(1) to review and submit
corrections for the HACs measure scores, domain scores, and Total HAC
Score for the fiscal year. The administrative claims data used to
calculate a hospital's Total HAC Score for those conditions for a
fiscal year will not be subject to review and correction (paragraph
(f)(2)). CMS will post the HAC Reduction Program scores for the
applicable conditions for a fiscal year for each applicable hospital on
the Hospital Compare Web site. We refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50725 through 50728) for detailed
discussions of the above provisions.
Providing a preliminary analysis of the HAC Reduction Program using
currently available historical data as a proxy for the actual data is
consistent with the law. We clearly indicated that these were not the
final data. However, because this is the first year of the HAC
Reduction Program, we wish to gain some initial experience under the
review and correction process discussed in section IV.J.3.e. of the
preamble of this final rule and determine to what extent the review and
corrections process in this first year changes the preliminary hospital
level data we provided in Table 17 of the proposed rule before
providing updated hospital level data. Updated hospital level data will
be made publicly available following the review and corrections
process.
f. Limitation on Administrative and Judicial Review
Section 1886(p)(7) of the Act provides that there will be no
administrative or judicial review under Section 1869 of the Act, under
Section 1878 of the Act, or otherwise for any of the following:
The criteria describing an applicable hospital under
section 1886(p)(2)(A) of the Act.
The specification of hospital acquired conditions under
section 1886(p)(3) of the Act.
The specification of the applicable period under section
1886(p)(4) of the Act.
The provision of reports to applicable hospitals under
section 1886(p)(5) of the Act.
The information made available to the public under section
1886(p)(6) of the Act.
In the FY 2014 IPPS/LTCH PPS final rule, we included these
statutory provisions under Sec. 412.172(g) of the regulations (78 FR
50729 and 50968). We note that section 1886(p)(6) of the Act requires
the Secretary to make information available to the public regarding HAC
scores of each applicable hospital under the HAC Reduction Program.
Section 1886(p)(6)(B) of the Act also requires the Secretary to ensure
that an applicable hospital has the opportunity to review, and submit
corrections for, the information to be made available to the public,
prior to that information being made public. We believe that the review
and correction process explained above in section IV.J.3.e. of the
preamble of this final rule will provide hospitals with the opportunity
to correct data prior to its release on the Hospital Compare Web site.
4. Maintenance of Technical Specifications for Quality Measures
Technical specifications of the HAC measures for the Agency for
Health Research and Quality (AHRQ) Patient Safety Indicator 90 (PSI-90)
in Domain 1 can be found at AHRQ's Web site at: https://qualityindicators.ahrq.gov/Modules/PSI_TechSpec.aspx. Technical
specifications for the CDC NHSN's HAI measures in Domain 2 can be found
at CDC's NHSN Web site at: https://www.cdc.gov/nhsn/acute-care-hospital/. Both Web sites provide measure updates and other
information necessary to guide hospitals participating in the
collection of HAC Reduction Program data.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are NQF-endorsed. As part of its regular
maintenance process for NQF-endorsed performance measures, the NQF
requires measure stewards to submit annual measure maintenance updates
and undergo maintenance of endorsement review every 3 years. In the
measure maintenance process, the measure steward (owner/developer) is
responsible for updating and maintaining the currency and relevance of
the measure and will confirm existing or minor specification changes
with NQF on an annual basis. NQF solicits information from measure
stewards for annual reviews, and it reviews measures for continued
endorsement in a specific 3-year cycle.

[[Page 50101]]

We note that NQF's annual or triennial maintenance processes for
endorsed measures may result in the NQF requiring updates to the
measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates required by
the NQF into the measure specifications we have adopted for the HAC
Reduction Program, so that these measures remain up-to-date.
For the HAC Reduction Program, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28142), we proposed to follow the finalized
processes outlined for addressing changes to adopted measures in the
Hospital IQR Program ``Maintenance of Technical Specifications for
Quality Measures'' section found in section IX.A.1.b. of the preamble
of this final rule.
We believe this proposal adequately balances our need to
incorporate updates to HAC Reduction Program measures in the most
expeditious manner possible while preserving the public's ability to
comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted. We
invited public comments on this proposal.
Comment: One commenter supported the proposed method of maintaining
and updating the technical specifications for the quality measures,
including adoption of a subregulatory process for nonsubstantive
changes released by measure developers.
Response: We appreciate the commenter's support.
Comment: A few commenters believed that nonsubstantive changes
identified during routine measure maintenance processes and during NQF
measure maintenance review should all be subject to the annual notice-
and-comment rulemaking process.
Response: We disagree with the recommendation to have all measure
changes subject to notice-and-comment rulemaking. As previously noted
in FY 2014 IPPS/LTCH PPS final rule (78 FR 50776) we believe that the
maintenance of technical specifications for quality measure policy for
the Hospital IQR Program also is applicable to the HAC Reduction
Program. We believe this policy adequately balances our need to
incorporate nonsubstantive NQF updates to NQF-endorsed measures in the
most expeditious manner possible, while preserving the public's ability
to comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted. We
also note that the NQF process incorporates an opportunity for public
comment and engagement in the measure maintenance process. These
policies regarding what is considered substantive versus nonsubstantive
apply to all measures in the Hospital IQR Program and the HAC
Reductions Program.
Comment: One commenter indicated that any changes to a measure
developed for adults but now including those less than 18 years of age
should be considered nonsubstantive.
Response: We refer the reader to our response to a similar
suggestion in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50776). We
will make a decision as to whether such changes constitute substantive
changes on a case-by-case basis.
After consideration of the public comments we received, we are
finalizing the maintenance of technical specifications for quality
measures in the HAC Reduction Program as proposed.
5. Extraordinary Circumstances Exceptions/Exemptions
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50711), we indicated
that we had received public comments requesting a potential waiver or
exemption process for hospitals located in areas that experience
disasters or other extraordinary circumstances (EC), even though we did
not propose an extraordinary circumstance exceptions/exemptions (ECE)
policy for the HAC Reduction Program. We stated in the FY 2014 IPPS/
LTCH PPS final rule that we were reviewing this issue and might
consider such a proposal in future rulemaking. We also noted that
should we consider a policy we intend to focus on several policy and
operational considerations in developing a disaster exemption process
for the HAC Reduction Program. In the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28142), we welcomed public comments on whether an exemption
process should be implemented and the policy and operational
considerations for a potential HAC Reduction Program ECE policy.
Comment: Many commenters supported the creation of an extraordinary
circumstance exemption process for hospitals that experience a natural
disaster. Some commenters recommended that CMS consider adopting
several aspects of the Hospital VBP waiver process for the HAC
Reduction Program, including allowing hospitals to have 60 days from
the occurrence of the extraordinary circumstance to file for an
exemption. The commenters believed this would ensure that hospitals do
not seek an advantage on their HAC scores long after a disaster period
has ended. Other commenters recommended that hospitals be given 90
calendar days from the date of the disaster to request an exemption and
that the exemption apply for at least 2 payment years because the HAC
Reduction Program currently uses a 2-year performance period.
Response. We appreciate the commenters' support. We will take into
consideration these recommendations as we consider whether an exemption
process for the HAC Reduction Program should be implemented.
6. Implementation of the HAC Reduction Program for FY 2016
a. Measure Selection and Conditions, Including Risk-Adjustment Scoring
Methodology
(1) General Selection of Measures
In the FY 2014 IPPS/LTCH PPS final rule, we finalized measures for
FY 2015 and onwards, but only finalized a scoring methodology for FY
2015 for the HAC Reduction Program (78 FR 50712 through 50713). In the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28143), we did not propose
any new additional measures for the HAC Reduction Program for FY 2016.
We note that AHRQ's PSI-90 composite measure and CDC's NHSN CLABSI (NQF
0138) and CAUTI (NQF 0139) measures were submitted in
January 2014 and December 2013, respectively, as part of the NQF
maintenance endorsement process. As noted in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50719), should changes to the risk-adjustment models
for the measures be adopted during NQF endorsement maintenance
processes, CMS will adopt these changes as soon as possible. Finally,
as we stated in the FY 2015 IPPS/LTCH PPS proposed rule, although we
are not required under section 1886(p) of the Act to address specific
measure scoring methodologies regarding the HAC Reduction Program in
notice-and-comment rulemaking, as required under the Hospital VBP
Program, we believe that it is important to set forth such scoring
methodologies for each individual HAC measure, in order for the public
to understand how the measures discussed and finalized in this FY 2015
IPPS/LTCH PPS final rule relate to the performance methodology used to
determine the applicable hospitals subject to the payment adjustment
under the HAC Reduction Program.

[[Page 50102]]

(2) Measure Selection and Scoring Methodology for FY 2016
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized
for FY 2016 and onwards CDC's NHSN Surgical Site Infection (SSI)
measure (NQF 0753) and its measure methodology. The SSI and
other measure specifications are available at: https://www.qualityforum.org/QPS/QPSTool.aspx. To locate a specific measure,
search by the NQF number: (1) for the SSI measure use NQF
0753; (2) for the CLABSI measure use NQF 0139; and
(3) for the CAUTI measure use NQF 0138. For SSI updates
related to CMS programs and the use of CDC's NHSN measures, we refer
readers to the Web site at: https://www.cdc.gov/nhsn/acute-care-hospital/ssi. The SSI measure explanation of SIR in the NHSN e-
newsletter is available at: https://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
CDC's SSI measure was finalized as a Domain 2 measure in the
calculation of the Total HAC Score (78 FR 50717). In the FY 2015 IPPS/
LTCH PPS proposed rule, we did not propose to change CDC's measure
methodology for the SSI measure.
b. Measure Risk-Adjustment
In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure
risk-adjustment for AHRQ's PSI-90 composite measure for Domain 1 and
the risk-adjustment for CDC's NHSN measures for Domain 2 (78 FR 50718
through 50719). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28143), we did not propose any risk-adjustment changes for any of the
measures finalized in the FY 2014 IPPS/LTCH PPS final rule.
c. Measure Calculations
In the FY 2014 IPPS/LTCH PPS final rule, we finalized the measure
calculations for AHRQ's PSI-90 composite measure for Domain 1 and the
measure calculations for CDC's NHSN measures for Domain 2 (78 FR 50718
through 50719). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28143), we did not propose any measure calculation changes for any of
the measures finalized in the FY 2014 IPPS/LTCH PPS final rule.
d. Applicable Time Period
In the FY 2014 IPPS/LTCH PPS final rule, we finalized and codified
policy at Sec. 412.170 that there will be a 2-year applicable time
period to collect data used to calculate the Total HAC Score (78 FR
50717).
For the Domain 1 AHRQ PSI-90 composite measure, in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28143), we proposed for FY 2016 a
24-month period from July 1, 2012 through June 30, 2014 as the
applicable time period. The claims for all Medicare FFS beneficiaries
discharged during this period would be included in the calculation of
measure results for FY 2016. This includes claims data from the 2012,
2013, and 2014 Inpatient Standard Analytic Files (SAFs).
The Domain 2 CDC NHSN measures (CAUTI, CLABSI, and SSI) are
currently collected and calculated on a quarterly basis. However, for
the purpose of the HAC Reduction Program, we finalized in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50717) that we will use 2 years of data
to calculate the Domain 2 score for FY 2015 for the CAUTI and CLABSI
measures. For FY 2016, in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28143), we proposed to use calendar years 2013 and 2014 for all
three Domain 2 measures in the HAC Reduction Program.
e. Criteria for Applicable Hospitals and Performance Scoring
For FY 2016, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28143), we proposed a change to the scoring methodology of the Total
HAC Score. This proposal, which is discussed below, was intended to
address the implementation of CDC's NHSN SSI measure in Domain 2
finalized for implementation in FY 2016.
(1) Finalized Scoring Methodology for Domains 1 and 2 for FY 2015
We finalized a scoring methodology for the Total HAC Score in the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50722). This finalized scoring
methodology is similar to the achievement scoring methodology currently
used under the Hospital VBP Program. With respect to an applicable
hospital, we finalized that CMS will identify the top quartile of all
hospitals with respect to their Total HAC Score during the applicable
period (Sec. 412.170). In addition, we finalized that the Total HAC
Score will be determined by the following three steps: (1) each measure
result will be scored as outlined in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50723); (2) domain scores will be determined by the scores
assigned to the measures within the domain; and (3) the Total HAC Score
will be determined by the sum of the weighted domain scores. For FY
2015, the Total HAC Score is the sum of the Domain 1 score multiplied
by 35 percent plus the Domain 2 score multiplied by 65 percent. For
further details of the general scoring methodology finalized for the
HAC Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50719 through 50725).
(2) Scoring Methodology of Domain 2 and New Weighting of Domains 1 and
2 for FY 2016
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28143), we
proposed to adjust the scoring methodology of Domain 2 and the
weighting of Domains 1 and 2 beginning in FY 2016 due to the addition
of CDC's NHSN SSI measure. We would like to clarify that the scoring
methodology for Domain 1 in FY2016 is unchanged from the scoring
methodology for Domain 1 in FY 2015. This methodology is described
above under our discussion of Criteria for Applicable Hospitals and
Performance Scoring Policy. For the scoring of CDC's NHSN SSI measure,
we proposed an identical process of assigning points to the SSI measure
results. We note that the SSI measure, reported via CDC's NHSN, is
currently specified under the Hospital IQR program and is restricted to
colon procedures (including incision, resection or anastomosis of the
large intestine and large-to-small and small-to-large bowel
anastomosis), and abdominal hysterectomy procedures including those
performed by laparoscope. The SSI measure assesses SSIs based on the
type of surgery procedures (that is, the SSI measure is stratified into
infections that occur with colonic procedures and those that occur in
abdominal hysterectomy procedures). We also note that patient age and a
preoperative health score are risk factors taken into account using the
Standardized Infection Ratio (SIR) (78 FR 20625). Use of an SIR is
consistent with CDC's NHSN CLABSI and CAUTI measures that also report
SIRs. In order to calculate an SSI measure score for Domain 2, we
proposed to calculate an abdominal hysterectomy procedure SSI SIR and a
colonic procedure SSI SIR and pool both SIRs for each hospital. We
proposed pooling the abdominal hysterectomy SSI SIR and colonic
procedure SSI SIR as this would provide a single SSI SIR, which is
consistent with reporting a single SSI SIR as meant by design of the
NQF endorsed measure (NQF 0753), and would allow a risk-
adjusted weighting of the surgical volume among the two procedures. We
proposed that a pooled SSI SIR for an applicable hospital is the sum of
all observed infections among abdominal hysterectomy and colonic
procedures divided by the sum of all predicted infections among
abdominal hysterectomy and colonic procedures performed at the
applicable hospital.

[[Page 50103]]

The pooled SSI SIR would be scored in the same manner as all measures
finalized for the HAC Reduction Program (refer to Figure A in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50723), which is also included
above in this final rule). To determine a Domain 2 score, we proposed
taking the average of the three CDC HAI SIR scores. We noted in the FY
2014 IPPS/LTCH PPS final rule that there will be instances in which
applicable hospitals may not have data on all four measures and
therefore a set of rules was finalized to determine how to score each
Domain. We proposed to follow the same finalized rules used to
determine scoring of Domains 1 and 2 (FY 2014 IPPS/LTCH PPS final rule
(78 FR 50723 through 50725)), and the proposed changes in section
IV.J.6.e. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28144), which are included in section IV.J.6.e. of the preamble
of this final rule. We invited public comments on this proposal.
In addition, for FY 2016 we proposed to weight Domain 1 at 25
percent and Domain 2 at 75 percent. We proposed to decrease the weight
of Domain 1 from 35 percent to 25 percent for two reasons. First, with
the implementation of CDC's SSI measure, we believed the weighting of
both domains needed to be adjusted to reflect the addition of a fourth
measure; and second, in keeping with public comments from the FY 2014
IPPS/LTCH PPS final rule, MedPAC and others stated that Domain 2 should
be weighted more than Domain 1. Finally, we proposed for FY 2016 that
the Total HAC Score for applicable hospitals would be the sum of the
weighted scores from Domain 1 (weighted at 25 percent) and Domain 2
(weighted at 75 percent). We invited public comments on this proposal.
Comment: Several commenters supported the proposed approach of
creating a pooled SIR for the SSI measure that includes colon surgeries
and abdominal hysterectomy surgeries because this is consistent with
how CDC currently reports the measure. A few commenters noted that this
approach allows for risk adjusted weighting of the surgical volume
between the two procedures. One commenter recommended that CMS
collaborate with NHSN leadership and professional organization
representing surgeons to develop a profile of surgical procedures that
are high volume across the spectrum of acute care hospitals that might
be added to the existing procedures in the SSI measure. The commenters
suggested that an expansion of the number of procedures may increase
the likelihood that the SSI SIR is reliable.
Response: We appreciate the commenters' support for the approach of
creating a pooled SIR for the SSI measure. We note that CDC maintains
ongoing collaborations with a number of professional surgical
organizations and is currently in process of developing additional SSI
metrics for higher volume surgical procedures. Once these measures are
finalized, we may consider them for future rulemaking.
Comment: A few commenters suggested that CMS and CDC monitor the
impact of the consolidated SIR for hospitals that perform a higher
volume of hysterectomies. The commenters pointed out that based on
Hospital Compare data, where the SSI rates for the two procedures are
reported separately, hysterectomies have a higher infection rate
compared to colon surgeries, and fewer hospitals have a reported
hysterectomy SIR. Commenters recommended that when the consolidated SIR
adversely impacts hospitals that perform more hysterectomies, then the
SIR should be modified to account for the different mix of services.
One commenter recommended CMS weigh each individual SSI metric
separately as they believe the combined SIR is a complicated,
burdensome composite metric.
Response: We will consider these suggestions in future rulemaking.
Comment: A few commenters were concerned that adding the SSI
measure to Domain 2 could lead to an average score that lacks
specificity in determining a hospital's true HAI scores. In addition,
one commenter stated that adding the MRSA bacteremia and C. difficile
measures to Domain 2 score would further dilute the domain. The
commenters suggested assigning each CDC NHSN HAI measure a separate
percentage to total the domain weight versus averaging all HAIs in
Domain 2. A few commenters stated that, with only two procedures in the
SSI measure, it is reasonable to continue equally weighting the
measures in Domain 2. However, if more procedures are added to the SSI
measure, the commenters recommended that CMS consider providing a
higher weight to the SSI measure.
Response: We note that the purpose of the domain scores is to
provide a summary of a hospital's performance with regard to patient
safety (Domain 1) and HAI (Domain 2) measures. A hospital's performance
with regard to the individual measures is available on Hospital Compare
and is updated quarterly for hospitals that participate in the Hospital
IQR Program. We appreciate the suggestion for weighting the CDC NHSN
HAI measures separately and will take this into consideration in future
rulemaking.
Comment: One commenter recommended that the weighting of measures
in the Total HAC Score correspond to the relative amounts of harm found
in the patient population based on what is reported in peer-reviewed
literature.
Response: We will take this feedback into consideration as we add
more measures to the program and evaluate if changes to the scoring
methodology are needed.
Comment: Many commenters supported the CMS proposal to increase the
weight given to Domain 2 and decrease the weight given to Domain 1
because Domain 2 includes the chart abstracted NHSN measures which the
commenters believed to be more reliable and actionable than the claims-
based PSI-90 composite measure in Domain 1. One commenter recommended
that CMS continue to decrease the Domain 1 weight in future years. A
few commenters believed that the overlap of measures between the
Hospital VBP Program and the HAC Reduction Program should be
eliminated, but expressed their support for the domain weight change if
CMS retained all measures that overlap despite the commenters'
objections.
Response: We agree that an increase in the Domain 2 weight is
warranted, given that the number of measures in the domain is
increasing.
Comment: A few commenters did not support the proposal to change
the weight of Domain 1 to 25 percent from 35 percent and Domain 2 to 75
percent from 65 percent. One commenter stated that this approach would
promote an overly narrow definition of HACs that places too much
emphasis on infections alone and not enough on other patient safety
risks. The commenter added that CMS should take a more balanced
approach to weighting the existing domains in order to place a high bar
for hospitals to avoid both infections and harmful complications that
can be prevented, and seek and develop measures for hospital safety
problems that have the most prevalence and impact.
Response: We agree that both patient safety events and infections
are important components of the HAC Reduction Program. In the FY 2014
IPPS/LTCH PPS proposed rule (79 FR 28143 through 29144), we explain the
rationale for assigning a higher weight to Domain 2. We believe that
the AHRQ PSI-90 measure plays a vital role in

[[Page 50104]]

patient safety and it continues to comprise an integral part of the HAC
Reduction Program with a weight of 25 percent of the Total HAC Score.
After consideration of the public comments we received, we are
finalizing the scoring methodology of Domain 2 and new weighting of
Domains 1 and 2 for FY 2016 as proposed.
f. Rules To Calculate the Total HAC Score for FY 2016
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28141, 28144),
and in section IV.J.3.d. of the preamble of this final rule, we discuss
our proposal to adopt the ``Clarification of FY 2015 Finalized
Narrative of Rules to Calculate the Total HAC Score.'' We invited
public comments on this proposal.
After consideration of the public comments we received, we
finalized the proposed clarification of the FY 2015 rules to calculate
the Total HAC Score. We received no public comments on this specific
proposal for FY 2016; therefore, we are finalizing the clarification
for FY 2016 as well.
7. Future Considerations for the Use of Electronically Specified
Measures
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data submitted to CMS for the Hospital
IQR Program. CMS has become aware of some hospitals and health systems
that have developed or adopted a methodology to identify and measure
all-cause harm through their electronic health record (EHR) systems.
Some hospitals and health systems are able to use the results of these
electronic measures to address adverse events at the point of care and
to track improvement over time. Many of these measures capture a broad
range of common hospital-acquired conditions that may not be captured
by existing national measures (examples include measures of adverse
drug events and hypoglycemia). Given that these measures are captured
using clinical data from EHR systems, collection of HAC data will allow
CMS to align measures across multiple settings.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28144), we sought
comment as to whether the use of a standardized electronic composite
measure of all-cause harm should be used in the HAC Reduction Program
in future years in addition to, or in place of, claims-based measures
assessing HACs. We welcomed any suggestions of specific all-cause harm
electronic measures, including detailed measure specifications.
Specifically, we invited public comments on the feasibility and the
perceived value of such a measure, and what would be the most
appropriate weighting of this measure in the Total HAC Score. In
addition, we requested suggestions on the timeframe for which such a
standardized electronic composite measure of all-cause harm should be
proposed.
We intend for the future direction of electronic quality measure
reporting to significantly enhance the tracking of HACs under the HAC
Reduction Program. We stated in the FY 2015 IPPS/LTCH PPS proposed rule
that we will continue to work with measure stewards and developers to
develop new measure concepts, and conduct pilot, reliability and
validity testing as part of efforts to promote the adoption of
Certified Electronic Health Record Technology in hospitals.
Comment: Many commenters supported leveraging electronic technology
to capture, calculate, and submit data. Commenters recommended that
ultimately electronic measures could replace claims-based measures and
could provide information in a timelier manner. Several commenters
cautioned that electronic measures must undergo careful testing and
that implementation occur in a phased manner and not mandated until
technically feasible for all hospitals to comply. One commenter
recommended that an e-measure related to antimicrobial stewardship be
considered. One commenter recommended that, beginning in FY 2015,
hospitals be given a waiver from complying with existing Domain 1
requirements, provided that they demonstrate transition toward or
current use of an approach utilizing electronic measures in a manner
supported by the peer reviewed literature.
Response: We appreciate the commenters' feedback and support for
the use of electronic measures in general. We will take the suggestions
into account in future rulemaking.
Comment: Many commenters supported the development of an all-cause
harm measure derived from electronic health records. Some commenters
believed that all-cause harm measures could capture information on
never events, adverse drug events, ventilator-associated events,
diagnostic errors, hypoglycemia, transfusion reactions, and medication
reconciliation (unintentional medication discrepancies per patient (NQF
2456)). Another commenter encouraged innovative approaches and
collaboration with organizations, hospitals and the CMS Innovation
Center when developing all-cause patient harm measures derived from
electronic health records. One commenter recommended an all cause harm
measure be incorporated as a third domain.
Several other commenters expressed concern about use of composite
measures in general stating that they do not provide actionable data
and that inappropriate weighting of measure components may skew
results. If a composite measure is used, commenters recommended that
data on the component measures and the weighting methodology also be
reported.
Response: We thank commenters for their viewpoints on the use of an
electronic all-cause harm measure for inclusion in the HAC Reduction
Program and will take them into consideration in future rule making.
Comment: One commenter requested more insight into what CMS
envisions for the measure and how the measure will be reported through
the EHR system, in order to provide feedback to CMS.
Response: At this time, we do not have a specific measure in mind
but rather are soliciting feedback on the feasibility and perceived
value of a standardized electronic composite measure of all-cause harm
in the HAC Reduction Program. As we develop a more specific plan we
will share that information in future rulemaking.

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

1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and as currently implemented in the regulations at 42 CFR
413.75 through 413.83, establishes a methodology for determining
payments to hospitals for the direct costs of approved graduate medical
education (GME) programs. Section 1886(h)(2) of the Act sets forth a
methodology for the determination of a hospital-specific base-period
per resident amount (PRA) that is calculated by dividing a hospital's
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is,
for most hospitals, the hospital's cost reporting period

[[Page 50105]]

beginning in FY 1984 (that is, October 1, 1983 through September 30,
1984). The base year PRA is updated annually for inflation. In general,
Medicare direct GME payments are calculated by multiplying the
hospital's updated PRA by the weighted number of FTE residents working
in all areas of the hospital complex (and at nonprovider sites, when
applicable), and the hospital's Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment
known as the indirect medical education (IME) adjustment under the
hospital inpatient prospective payment system (IPPS) for hospitals that
have residents in an approved GME program, in order to account for the
higher indirect patient care costs of teaching hospitals relative to
nonteaching hospitals. The regulations regarding the calculation of
this additional payment are located at 42 CFR 412.105. The hospital's
IME adjustment applied to the DRG payments is calculated based on the
ratio of the hospital's number of FTE residents training in either the
inpatient or outpatient departments of the IPPS hospital to the number
of inpatient hospital beds.
The calculation of both direct GME and IME payments is affected by
the number of FTE residents that a hospital is allowed to count.
Generally, the greater the number of FTE residents a hospital counts,
the greater the amount of Medicare direct GME and IME payments the
hospital will receive. Therefore, Congress, through the Balanced Budget
Act of 1997 (Pub. L. 105-33), established a limit on the number of
allopathic and osteopathic residents that a hospital may include in its
FTE resident count for direct GME and IME payment purposes. Under
section 1886(h)(4)(F) of the Act, for cost reporting periods beginning
on or after October 1, 1997, a hospital's unweighted FTE count of
residents for purposes of direct GME may not exceed the hospital's
unweighted FTE count for direct GME in its most recent cost reporting
period ending on or before December 31, 1996. Under section
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for
IME during that cost reporting period is applied effective for
discharges occurring on or after October 1, 1997. Dental and podiatric
residents are not included in this statutorily mandated cap.
The Affordable Care Act made a number of statutory changes relating
to the determination of a hospital's FTE resident count for direct GME
and IME payment purposes and the manner in which FTE resident limits
are calculated and applied to hospitals under certain circumstances.
Regulations implementing these changes are discussed in the November
24, 2010 final rule (75 FR 72133) and the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53416).
2. Changes in the Effective Date of the FTE Resident Cap, 3-Year
Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for
New Programs in Teaching Hospitals
Section 1886(h)(4)(H)(i) of the Act requires the Secretary to
establish rules for calculating the direct GME caps for new teaching
hospitals that are training residents in new medical residency training
programs established on or after January 1, 1995. Under section
1886(d)(5)(B)(viii) of the Act, such rules also apply to the
establishment of a hospital's IME cap on the number of FTE residents
training in new programs. We implemented these statutory requirements
in rules published in the August 29, 1997 Federal Register (62 FR 46002
through 46008) and in the May 12, 1998 Federal Register (63 FR 26323
through 26325 and 26327 through 26336). Generally, under existing
regulations at 42 CFR 413.79(e)(1) (for direct GME) and 42 CFR
412.105(f)(1)(vii) (for IME), if a hospital did not train any
allopathic or osteopathic residents in its most recent cost reporting
period ending on or before December 31, 1996, and it begins to
participate in training residents in a new medical residency training
program (allopathic or osteopathic) on or after January 1, 1995, the
hospital's unweighted FTE resident cap (which would otherwise be zero)
may be adjusted based on the sum of the product of the highest number
of FTE residents in any program year during the third year of the first
new program's existence, for each new residency training program
established during that 3-year period, and the minimum accredited
length for each type of program. The number of FTE resident cap slots
that a teaching hospital receives for each new program may not exceed
the number of accredited slots that are available for each new program.
Once a hospital's FTE resident cap is established, no subsequent cap
adjustments may be made for new programs, unless the teaching hospital
is a rural hospital. A rural hospital's FTE resident caps may be
adjusted for participation in subsequent new residency training
programs. A hospital that did not train any allopathic or osteopathic
residents in its most recent cost reporting period ending on or before
December 31, 1996, may only receive a permanent FTE resident cap
adjustment for training residents in a truly ``new'' residency training
program; no permanent cap adjustment would be given for training
residents associated with an existing program. That is, if a hospital
that did not train any allopathic or osteopathic residents in its most
recent cost reporting period ending on or before December 31, 1996,
serves as a training site for residents in a program that exists or
existed previously at another teaching hospital that remains open, that
``new'' teaching hospital does not receive a ``new program'' cap
adjustment because it is not participating in training residents in a
truly ``new'' program. However, it may be possible for that ``new''
teaching hospital to receive a temporary cap adjustment if it enters
into a Medicare GME affiliation agreement with the existing teaching
hospital as specified at Sec. 413.79(f) (for direct GME) and Sec.
412.105(f)(1)(vi) (for IME). (For a detailed discussion of the
distinctions between a new medical residency training program and an
existing medical residency training program, we refer readers to the
August 27, 2009 final rule (74 FR 43908 through 43920). For a detailed
discussion regarding participation in Medicare GME affiliation
agreements, we refer readers to 74 FR 43574.)
For new programs started prior to October 1, 2012, hospitals that
did not yet have an FTE resident cap established had a ``3-year
window'' in which to participate in and ``grow'' new programs, before
the FTE resident caps for IME and direct GME were permanently set for
the hospital beginning with the fourth program year of the first new
program started. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415
through 53425), we revised the regulations at Sec. 413.79(e) to
increase the cap-building period for new programs from 3 years to 5
years. That is, for a hospital that did not yet have an FTE resident
cap established, the hospital's FTE resident cap is effective beginning
with the sixth program year of the first new program's existence. This
revised policy is effective for urban hospitals that first begin to
participate in training residents in their first new program on or
after October 1, 2012, and for rural hospitals that start a new program
on or after October 1, 2012. In that final rule, we also finalized a
methodology used to calculate a cap adjustment for an individual
hospital if residents in a new program rotate to more than one hospital
(or hospitals). The methodology is based on the sum

[[Page 50106]]

of the products of the following three factors: (1) the highest total
number of FTE residents trained in any program year, during the fifth
year of the first new program's existence at all of the hospitals to
which the residents in that program rotate; (2) the number of years in
which residents are expected to complete the program, based on the
minimum accredited length for each type of program; and (3) the ratio
of the number of FTE residents in the new program that trained at the
hospital over the entire 5-year period to the total number of FTE
residents that trained at all hospitals over the entire 5-year period.
Finally, we made minor revisions to the regulation text at Sec. Sec.
413.79(e)(2) through (e)(4) for purposes of maintaining consistency
throughout Sec. 413.79(e). We refer readers to the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53415 through 53425) for further details
regarding the methodology for calculating the FTE resident caps.
While the FY 2013 IPPS/LTCH PPS final rule discussed the
methodology for calculating the FTE resident caps to be effective
beginning with the sixth program year of the first new program's
existence, for hospitals that do not yet have FTE resident caps
established, that final rule did not discuss when the 3-year rolling
average for IME and direct GME or the intern- and resident-to-bed (IRB)
ratio cap for IME is effective for FTE residents training in new
programs. The regulations regarding the 3-year rolling average and the
IRB ratio cap with respect to new medical residency training programs
were established in the following Federal Register rules: the FY 1998
IPPS final rule with comment period (62 FR 46002 through 46008); the
May 12, 1998 final rule (63 FR 26323 through 26325 and 26327 through
26336); FY 2000 IPPS final rule (64 FR 41518 through 41523); and the FY
2002 IPPS final rule (66 FR 39878 through 39883). Specifically, the
regulations at Sec. 412.105(f)(1)(v) regarding the 3-year rolling
average and new medical residency training programs for IME states that
if a hospital qualified for an adjustment to the limit established
under paragraph (f)(1)(iv) of the section for new medical residency
programs created under paragraph (f)(1)(vii) of the section, the count
of residents participating in new medical residency training programs
above the number included in the hospital's FTE count for the cost
reporting period ending during calendar year 1996 is added after
applying the averaging rules in paragraph (f)(l)(v) for a period of
years. Residents participating in new medical residency training
programs are included in the hospital's FTE count before applying the
averaging rules after the period of years has expired. For purposes of
this paragraph, for each new program started, the period of years
equals the minimum accredited length for each new program. The period
of years for each new program begins when the first resident begins
training in each new program. In addition, the regulations for the
interaction of the IRB ratio cap and new medical residency training
programs for IME at Sec. 412.105(a)(1)(ii) states that the exception
for new programs described in paragraph (f)(1)(vii) of the section
applies to each new program individually for which the full-time
equivalent cap may be adjusted based on the period of years equal to
the minimum accredited length of each new program.
The regulations at Sec. 413.79(d)(5) regarding the interplay of
the 3-year rolling average with new medical residency training programs
for direct GME similarly states that if a hospital qualifies for an
adjustment to the limit established under paragraph (c)(2) of the
section for new medical residency programs created under paragraph (e)
of the section, the count of the residents participating in new medical
residency training programs above the number included in the hospital's
FTE count for the cost reporting period ending during calendar year
1996 is added after applying the averaging rules in paragraph (d), for
a period of years. Residents participating in new medical residency
training programs are included in the hospital's FTE count before
applying the averaging rules after the period of years has expired. For
purposes of paragraph (d), for each new program started, the period of
years equals the minimum accredited length for each new program. The
period of years begins when the first resident begins training in each
new program.
Therefore, the FTE resident caps for IME and direct GME are always
effective beginning with the start of the sixth program year of the
first new program started for urban hospitals that do not yet have FTE
resident caps established (Sec. 413.79(e)(1)(iii)), and for rural
hospitals, beginning with the start of the sixth program year of each
new individual program started (Sec. 413.79(e)(3)), regardless of the
fact that other new programs may have started after the start of the
first new program. However, the timing of when the 3-year rolling
average for IME and direct GME and the IRB ratio cap for IME are first
applied is dependent upon the minimum accredited length of each new
program started within the 5-year window. For example, new teaching
Hospital A participates in training residents in new medical residency
training programs for the first time beginning on July 1, 2013. On July
1, 2013, Hospital A participates in training residents in a new family
medicine program (minimum accredited length is 3 years), on July 1,
2014, it also participates in training residents in a new sports
medicine fellowship (minimum accredited length is 1 year), and on July
1, 2015, it also participates in training residents in a new general
surgery program (minimum accredited length is 5 years). For the purpose
of establishing Hospital A's FTE resident caps, the 5-year growth
window for Hospital A closes on June 30, 2018, and the IME and direct
GME FTE resident caps for Hospital A are effective on July 1, 2018, the
beginning of the sixth program year of the first new program's
existence; that is, family medicine. However, the 3-year rolling
average and the IRB ratio cap are effective at different points in
time. Because the family medicine residency is 3 years in length, FTE
residents in the new family medicine program are subject to the 3-year
rolling average and the IRB ratio cap beginning on July 1, 2016.
Because the sports medicine fellowship is a 1-year program, and it
started on July 1, 2014, the number of sports medicine FTE residents
must be included in the 3-year rolling average and is subject to the
IRB ratio cap effective on July 1, 2015. Lastly, the FTE residents in
the new general surgery program would only be subject to the rolling
average and the IRB ratio cap effective July 1, 2020. The Medicare cost
report worksheets on CMS Form 2552-10 for IME (Worksheet E, Part A) and
for direct GME (Worksheet E-4) currently can accommodate reporting of
FTE residents separately based on whether those FTE residents are in
new medical residency training programs and are not subject to the FTE
resident cap (line 16 of Worksheet E, Part A, and line 15 of Worksheet
E-4). However, these cost report worksheets are not designed to
accommodate reporting of FTE residents that are exempt from the FTE
resident cap, but are subject to the rolling average and IRB ratio cap,
because the ``period of years'' equal to the minimum accredited length
of each new program started has already expired. The reverse also may
occur, as in the example above with the new general surgery program
started by Hospital A, where the FTE resident caps are effective July
1, 2018, but the number of FTE residents in the general surgery program
would not be

[[Page 50107]]

subject to the rolling average or the IRB ratio cap until July 1, 2020.
Complicating matters further is the fact that, while the effective
dates of these policies associated with new medical residency training
program FTE residents are effective on a program year basis (that is,
July 1), many teaching hospitals do not have a fiscal year that begins
on July 1. Therefore, under the existing policy, the number of FTE
residents needs to be prorated, and special accommodations need to be
made to calculate the portion of FTE residents that are subject to the
FTE resident cap, the 3-year rolling average, and the IRB ratio cap for
the respective portions of the hospital's cost reporting period
occurring on and after July 1. Integrating the rolling average, the IRB
ratio cap, and the FTE resident caps for residents in new medical
residency training programs in an accurate manner on the Medicare cost
report has proved challenging to the point where we have had to deal
with each instance brought to our attention by the new teaching
hospital or by a Medicare contractor on an individual and manual basis
(in order to ensure application of a consistent methodology). In fact,
the Medicare cost report instructions direct the hospital to do the
following: for CMS Form 2552-10, Worksheet E, Part A, line 10--``. . .
Contact your contractor for instructions on how to complete this line
if you have a new program for which the period of years is less than or
more than three years. . . .''; for CMS Form 2552-10, Worksheet E-4,
line 6--``. . . Contact your contractor for instructions on how to
complete this line if you have a new program for which the period of
years is less than or greater than 3 years. . . .''
The MACs, in turn, have been instructed to contact CMS for
instructions on how to report the number of FTE residents that are
still within the ``period of years'' of the new program. The ``three
years'' referenced in the Form 2552-10 cost report instructions are
based on the 3-year growth window for new medical residency training
programs that is in effect for new programs started prior to October 1,
2012, when, within the 3-year growth window, new teaching hospitals
also may have started new medical residency training programs with
different minimum accredited lengths. (We note that while the previous
Form 2552-96 cost report did not include the same instructions, CMS did
deal with the reporting of the number of FTE residents in new medical
residency training programs on an individual basis when requests for
assistance were brought to its attention.) However, these instructions
also apply for new medical residency training programs started with
different minimum accredited lengths on and after October 1, 2012.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28147), we
proposed to simplify and streamline the timing of when FTE residents in
new medical residency training programs are subject to the FTE resident
cap, the 3-year rolling average, and the IRB ratio cap, both for urban
teaching hospitals that have not yet had FTE resident caps established
under Sec. 413.79(e)(1) and for rural teaching hospitals that may or
may not have FTE resident caps established under Sec. 413.79(e)(3).
That is, we proposed that the methodology for calculating the FTE
resident caps for hospitals that participate in training residents in
new medical residency training programs would continue to be the same
methodology instituted in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53415 through 53425) for new medical residency training programs
started on or after October 1, 2012, specified at Sec. 413.79(e)(1).
However, once the FTE resident caps are calculated, we proposed to
change the timing of when the FTE resident caps would be effective, to
synchronize the effective dates and the application of the 3-year
rolling average and the IRB ratio cap with each applicable hospital's
fiscal year begin date. Specifically, we proposed that the FTE resident
caps would continue to be calculated as finalized in the FY 2013 IPPS/
LTCH PPS final rule--the methodology is based on the sum of the
products of the following three factors: (1) the highest total number
of FTE residents trained in any program year, during the fifth year of
the first new program's existence at all of the hospitals to which the
residents in that program rotate; (2) the number of years in which
residents are expected to complete the program, based on the minimum
accredited length for each type of program; and (3) the ratio of the
number of FTE residents in the new program that trained at the hospital
over the entire 5-year period to the total number of FTE residents that
trained at all hospitals over the entire 5-year period. However, once
calculated in this manner, we proposed that, instead of the FTE
resident caps being effective beginning with the sixth program year of
the first new program started, those FTE resident caps, the 3-year
rolling average, and the IRB ratio cap would be effective beginning
with the applicable hospital's cost reporting period that precedes the
start of the sixth program year of the first new program started. Using
the example of Hospital A that we presented earlier, assume Hospital A
has a January 1 to December 31 cost reporting year. The first new
program started, family medicine, was started on July 1, 2013. A sports
medicine fellowship and a general surgery program also were started
timely within the 5-year growth window. Hospital A has 5 program years
to grow its FTE resident caps, from July 1, 2013 through June 30, 2018.
The FTE resident caps would be calculated based on the 5 program years
in accordance with the methodology established at Sec. 413.79(e)(1) in
the FY 2013 IPPS/LTCH PPS final rule; therefore, the hospital would
wait until after June 30, 2018 to obtain the FTE counts to calculate
the FTE resident caps. However, we proposed that those IME and direct
GME FTE resident caps, once calculated after June 30, 2018, instead of
being effective on July 1, 2018, would be effective at the beginning of
Hospital A's cost reporting period that precedes July 1, 2018; that is,
the FTE resident caps for Hospital A would be effective permanently on
January 1, 2018, the start of Hospital A's cost reporting period that
precedes the start of the sixth program year of the first new program
started. The hospital could file its fiscal year end December 31, 2018
cost report including the FTE resident caps applicable to the entire
cost reporting period accordingly.
As noted earlier, we proposed that, for all new medical residency
training programs in which the hospital participates during the 5-year
growth window, the FTEs in those new programs also would be subject to
the 3-year rolling average and the IRB ratio cap simultaneously with
the effective date of the FTE resident caps, at the beginning of the
applicable hospital's cost reporting period that precedes the beginning
of the sixth program year of the first new program started. Again,
using the example of Hospital A that we presented earlier, the FTE
residents in the family medicine program, the sports medicine
fellowship, and the general surgery program would all be subject to the
3-year rolling average and IRB ratio cap beginning on January 1, 2018.
With regard to reporting on the Medicare cost report, for Hospital A's
fiscal year end dates of December 31, 2013 through and including
December 31, 2017, we proposed that the number of FTE residents in the
family medicine program, the sports medicine fellowship, and the
general surgery program would be reported so as not to be included in
the IME rolling average

[[Page 50108]]

or the IRB ratio cap, and so as not to be included in the direct GME
rolling average. (On the CMS Form 2552-10, for Hospital A's fiscal year
end dates of December 31, 2013 through and including December 31, 2017,
this means that the number of FTE residents in the family medicine
program, the sports medicine fellowship, and the general surgery
program would be reported on Worksheet E, Part A, line 16, and on
Worksheet E-4, line 15). However, on Hospital A's cost report for
fiscal year ending December 31, 2018, the number of FTE residents in
these three programs would be subject to the FTE resident cap, the 3-
year rolling average, and the IRB ratio cap and would be reported
accordingly. (On the CMS Form 2552-10, for Hospital A's cost report for
fiscal year ending December 31, 2018, this means that none of the FTE
residents in these three programs would be reported on Worksheet E,
Part A, line 16 for IME, and Worksheet E-4, line 15 for direct GME.
Instead, all of the FTE residents would be reported on Worksheet E,
Part A, line 10 for IME, and Worksheet E-4, line 6 for direct GME, in
order to be subject to the FTE resident cap, the 3-year rolling
average, and the IRB ratio cap.) We note that once the 3-year rolling
average is effective in that cost reporting period that includes the
sixth program year of the first new program started, the number of FTE
residents in the new programs also must be reported both as part of the
prior year FTE resident counts and the penultimate FTE resident counts,
in order to effectuate the 3-year rolling average calculation on the
IME Worksheet E, Part A, and the direct GME Worksheet E-4,
respectively.
In the example that we presented earlier, Hospital A has a fiscal
year that begins on January 1. If Hospital A's fiscal year begin date
would have been October 1, then, while the sixth program year of the
first new program started would still be July 1, 2018, the FTE
residents caps, the 3-year rolling average, and the IRB ratio cap would
be effective on October 1, 2017, the fiscal year begin date that
precedes July 1, 2018, the sixth program year. If Hospital A's fiscal
year begin date would have been July 1, the FTE residents caps, the 3-
year rolling average, and the IRB ratio cap would instead be effective
on July 1, 2017, the fiscal year begin date that precedes July 1, 2018,
the sixth program year.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148), we stated
that we understood that this proposal, if finalized, would reduce the
amount of time that the new medical residency training programs would
be exempt from the FTE resident caps. However, even though we proposed
to make the effective date of the FTE resident caps earlier than under
current policy, because we also proposed that the calculation of the
FTE resident caps would still be based on the highest total number of
FTE residents trained in any program year, during the fifth year of the
first new program's existence at all of the hospitals to which the
residents in that program rotate, a new teaching hospital would still
have the full 5 program years to grow its program(s), and its FTE
resident caps would reflect a full 5 years of growth. Therefore,
because, by the fifth program year, a program should, in most typical
circumstances, have grown to its full capacity, barring unusual
circumstances, the FTE resident caps that would take effect under the
proposed policy at the beginning of the fiscal year that precedes the
sixth program year should accommodate the FTE resident count training
in the fifth and subsequent program years. Therefore, we stated in the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148) that we believe that
this proposal to streamline and synchronize the effective dates of the
FTE resident caps, the 3-year rolling average, and the IRB ratio cap
not only is easier to comprehend and to implement, but also is
reasonable and equitable in its effect on the IME and direct GME
payments of hospitals establishing FTE resident caps. Specifically, we
indicated that if the proposal is finalized, there would no longer be a
need for CMS Form 2552-10, Worksheet E, Part A, line 10 and Worksheet
E-4, line 6 to instruct hospitals to contact their MACs for
instructions on how to complete those lines, as both hospitals and MACs
would understand how to report the number of FTE residents in new
programs, even when those programs have different accredited lengths.
Instead, hospitals and MACs would follow the methodology instituted in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53415 through 53425) to
calculate the FTE resident caps for new medical residency training
programs started on or after October 1, 2012, and once the FTE resident
caps are calculated, hospitals and MACs would implement the FTE
resident caps, the 3-year rolling average, and the IRB ratio cap
effective beginning with the applicable hospital's cost reporting
period that precedes the start of the sixth program year of the first
new program started. Under the proposed methodology, FTE residents and
FTE resident caps would no longer need to be prorated, and we would no
longer need to make special accommodations to calculate the portion of
FTE residents that are subject to the FTE resident cap, the 3-year
rolling average, and the IRB ratio cap for the respective portions of
the hospital's cost reporting period occurring on and after July 1. The
existing CMS Form 2552-10 already accommodates the proposed
methodology, unlike the complicated process currently in place.
Therefore, clarity, efficiency, and payment accuracy would be improved
for hospitals, MACs, and CMS.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28148), we stated
that with regard to rural hospitals that, under Sec. 413.79(e)(3) of
the regulations, may receive FTE resident cap adjustments at any time
for participating in training residents in new programs, we proposed a
similar policy, with modifications reflecting the fact that each new
program in which the rural hospital participates receives its own 5-
year growth window before the rural hospital's FTE resident cap is
adjusted based on that new program. That is, we proposed that, for
rural hospitals, the FTE resident caps, the 3-year rolling average, and
the IRB ratio cap for each new program started would be effective
beginning with the applicable hospital's cost reporting period that
precedes the start of the sixth program year of each new program
started. For example, rural Hospital B has a fiscal year that begins on
January 1. It starts a family medicine program on July 1, 2013, and a
general surgery program on July 1, 2016. The sixth program year for the
family medicine program begins on July 1, 2018. The sixth program year
for the general surgery program begins on July 1, 2021. With regard to
Medicare cost reporting, during Hospital B's fiscal year end dates of
December 31, 2013 through and including December 31, 2017, the number
of family medicine FTE residents would be reported so as not to be
included in the IME 3-year rolling average or the IRB ratio cap, and so
as not to be included in the direct GME 3-year rolling average. (This
means that on CMS Form 2552-10, during Hospital B's fiscal year end
dates of December 31, 2013 through and including December 31, 2017, the
number of family medicine FTE residents would be reported on Worksheet
E, Part A, line 16 for IME, and on Worksheet E-4, line 15, for direct
GME. Instead, the number of family medicine FTE residents would be
reported on Worksheet E, Part A, line 16, and Worksheet E-4, line 15.)
Then, beginning with Hospital B's cost report for fiscal year ending
December 31,

[[Page 50109]]

2018, the number of FTE residents in only the family medicine program
would be subject to the FTE residents caps, the 3-year rolling average,
and the IRB ratio cap, and would be reported accordingly in order to be
subject to the FTE resident cap, the 3-year rolling average, and the
IRB ratio cap. (This means that on CMS Form 2552-10, beginning with
Hospital B's cost report ending December 31, 2018, the number of family
medicine FTE residents would be reported on Worksheet E, Part A, line
10 for IME, and Worksheet E-4, line 6 for direct GME.) Because the
general surgery program started on July 1, 2016, for Hospital B's
fiscal year end dates of December 31, 2016 through and including fiscal
year end date of December 31, 2020, the number of general surgery FTE
residents would be reported (on Worksheet E, Part A, line 16) so as not
to be included in the IME 3-year rolling average or the IRB ratio cap,
and (on Worksheet E-4, line 15), so as not to be included in the direct
GME 3-year rolling average. Then, beginning with Hospital B's cost
report for fiscal year ending December 31, 2021, the number of FTE
residents in the general surgery program would be subject to the FTE
resident caps, the 3-year rolling average, and the IRB ratio cap, and
would be reported accordingly (on Worksheet E, Part A, line 10 for IME,
and Worksheet E-4, line 6 for direct GME), in order to be subject to
the FTE resident cap, the 3-year rolling average, and the IRB ratio
cap. We note that once the 3-year rolling average is effective in that
cost reporting period that includes the sixth program year of each new
program started, the number of FTE residents in the new programs also
must be reported as part of the prior year FTE resident counts, and the
penultimate FTE resident counts, in order to effectuate the 3-year
rolling average calculation on the IME Worksheet E, Part A, and the
direct GME Worksheet E-4, respectively.
We proposed that this policy regarding the effective dates of the
FTE residency caps, the 3-year rolling average, and the IRB ratio cap
for FTE residents in new medical residency training programs would be
consistent with the methodology for calculation of the FTE resident
caps as described in the FY 2013 IPPS/LTCH PPS final rule, and
implemented in the regulations at Sec. Sec. 413.79(e)(1) and (e)(3).
That is, because the policy providing a 5-year growth period for
establishing the FTE resident caps (Sec. Sec. 413.79(e)(1) and (e)(3))
is effective for new programs started on or after October 1, 2012, this
proposal would be effective for urban hospitals that first begin to
participate in training residents in their first new medical residency
training program, and for rural hospitals, on or after October 1, 2012.
We also proposed to revise the regulations for IME and direct GME,
respectively, at Sec. 412.105(a)(1)(ii) for the IME IRB ratio cap, at
Sec. 412.105(f)(1)(v) for the IME 3-year rolling average, and at Sec.
413.79(d)(5) for the direct GME 3-year rolling average to reflect that
the exception from the IRB ratio cap and the 3-year rolling average for
new programs applies to each new program individually during the cost
reporting periods prior to the beginning of the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the first new program started, for hospitals for which the FTE cap
may be adjusted in accordance with Sec. 413.79(e)(1), and prior to the
beginning of the applicable hospital's cost reporting period that
precedes the start of the sixth program year of each individual new
program started, for hospitals for which the FTE cap may be adjusted in
accordance with Sec. 413.79(e)(3). After the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the first new program started for hospitals for which the FTE cap
may be adjusted in accordance with Sec. 413.79(e)(1), and after the
applicable hospital's cost reporting period that precedes the start of
the sixth program year of each individual new program started for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e)(3), FTE residents participating in new medical
residency training programs are included in the hospital's IRB ratio
cap and the 3-year rolling average.
Comment: Many commenters supported CMS' proposal to simplify and
synchronize the timing of when FTE residents in new medical residency
training programs are subject to the FTE resident caps, the 3-year
rolling average, and the IRB ratio cap. However, the commenters
believed that the specific part of the proposal related to making the
FTE resident caps effective beginning with the applicable hospital's
cost reporting period that precedes the start of the sixth program year
of the first new program started would result in premature application
of the FTE resident cap while the hospital would still be within the 5-
year cap building window, thereby reducing the number of FTEs to which
the new teaching hospital would otherwise be entitled to payment. The
commenters disputed CMS' suggestion in the proposed rule that the
effect on a hospital's payment would be inconsequential or nonexistent
``in most typical circumstances.'' The commenters provided examples of
where they believed CMS' proposal would result in the loss of payment
for new teaching hospitals establishing an FTE resident cap. The
commenters acknowledged CMS' statement in the proposed rule that a new
teaching hospital could experience a payment benefit from the proposed
changes related to the synchronized implementation of the 3-year
rolling average and the IRB ratio cap. However, the commenters did not
believe this ``benefit justifies an imposition of the FTE resident cap
within the 5-year cap building window.'' The commenters urged CMS to
finalize an alternative effective date that would be the start of the
hospital's cost reporting period that follows the start of the sixth
program year of the start of the first new program. The commenters
believed this alternative would achieve the simplicity that CMS seeks
in its proposal, yet would also permit new teaching hospitals to retain
the payments they are ``entitled'' to receive for at least a full 5
program years under existing regulations.
Response: We appreciate the commenters' support of the proposal,
and the commenters' concern that, by proposing that the effective date
would be the applicable hospital's cost reporting period that precedes
the start of the sixth program year of the first new program started,
this earlier application of the FTE resident cap might result in
reduced payment because some amount of FTE residents would be in excess
of the hospital's newly calculated FTE resident caps. We also agree
that the streamlining and simplification that we are seeking would be
achieved by revising the proposal to instead take effect, as the
commenters suggested, with the beginning of the hospital's cost
reporting period that follows the start of the sixth program year of
the first new program started. Therefore, in this final rule, we are
modifying our proposal as follows, both for urban teaching hospitals
that have not yet had FTE resident caps established under Sec.
413.79(e)(1), and for rural teaching hospitals that may or may not have
FTE resident caps established under Sec. 413.79(e)(3). That is, the
FTE resident caps would continue to be calculated as finalized in the
FY 2013 IPPS/LTCH PPS final rule--the methodology is based on the sum
of the products of the following three factors: (1) the highest total
number of FTE residents trained in any program year, during the fifth
year

[[Page 50110]]

of the first new program's existence at all of the hospitals to which
the residents in that program rotate; (2) the number of years in which
residents are expected to complete the program, based on the minimum
accredited length for each type of program; and (3) the ratio of the
number of FTE residents in the new program that trained at the hospital
over the entire 5-year period to the total number of FTE residents that
trained at all hospitals over the entire 5-year period. However, once
calculated in this manner, we are finalizing a policy that, instead of
the FTE resident caps being effective beginning with the sixth program
year of the first new program started, those FTE resident caps, the 3-
year rolling average, and the IRB ratio cap would be effective
beginning with the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of the
first new program started. (We are specifying ``that coincides with or
follows'' the start of the sixth program year of the first new program
started, rather than only specifying ``that follows'' the start of the
sixth program year of the first new program started as the commenters
suggested, in consideration of hospitals that have a fiscal year begin
date of July 1, for whom the cost reporting period that starts after
completion of the 5-year cap building window coincides with the
beginning of the sixth program year of the first new program started.
Under this finalized policy, hospitals with a fiscal year begin date of
July 1 would not wait an entire 12 months after completion of their 5-
year cap building window for their next cost reporting period to start
in order for the FTE resident caps, the 3-year rolling average, and the
IRB ratio cap to take effect. Rather, for hospitals with a fiscal year
begin date of July 1, the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap would be effective beginning with the
applicable hospital's cost reporting period that coincides with the
start of the sixth program year of the first new program started.)
Using the example of Hospital A that we presented in the proposed
rule, assume Hospital A has a January 1 to December 31 cost reporting
year. The first new program started, family medicine, was started on
July 1, 2013. A sports medicine fellowship and a general surgery
program also were started timely within the 5-year growth window.
Hospital A has 5 program years to grow its FTE resident caps, from July
1, 2013 through June 30, 2018. The FTE resident caps would be
calculated based on the 5 program years in accordance with the
methodology established at Sec. 413.79(e)(1) in the FY 2013 IPPS/LTCH
PPS final rule. Therefore, the hospital would wait until after June 30,
2018, to obtain the FTE counts to calculate the FTE resident caps.
However, those IME and direct GME FTE resident caps, once calculated
after June 30, 2018, instead of being effective on July 1, 2018, would
be effective at the beginning of Hospital A's cost reporting period
that follows July 1, 2018; that is, the FTE resident caps for Hospital
A would be effective permanently on January 1, 2019, the start of
Hospital A's cost reporting period that follows the start of the sixth
program year of the first new program started. The hospital would file
its fiscal year end December 31, 2019 cost report including the FTE
resident caps applicable to the entire cost reporting period
accordingly.
Regarding the application of the 3-year rolling average and the IRB
ratio cap, using the example of Hospital A, the FTE residents in the
family medicine program, the sports medicine fellowship, and the
general surgery program would all be subject to the 3-year rolling
average and the IRB ratio cap beginning on January 1, 2019. With regard
to reporting on the Medicare cost report, for Hospital A's fiscal year
end dates of December 31, 2013 through and including December 31, 2018,
the number of FTE residents in the family medicine program, the sports
medicine fellowship, and the general surgery program would be reported
so as not to be included in the IME rolling average or the IRB ratio
cap, and so as not to be included in the direct GME rolling average.
(On the CMS Form 2552-10, for Hospital A's fiscal year end dates of
December 31, 2013 through and including December 31, 2018, this means
that the number of FTE residents in the family medicine program, the
sports medicine fellowship, and the general surgery program would be
reported on Worksheet E, Part A, line 16, and on Worksheet E-4, line
15.) However, on Hospital A's cost report for fiscal year ending
December 31, 2019, the number of FTE residents in these three programs
would be subject to the FTE resident caps, the 3-year rolling average,
and the IRB ratio cap, and would be reported accordingly. (On the CMS
Form 2552-10, for Hospital A's cost report for fiscal year ending
December 31, 2019, this means that none of the FTE residents in these
three programs would be reported on Worksheet E, Part A, line 16 for
IME, and Worksheet E-4, line 15 for direct GME. Instead, all of the FTE
residents would be reported on Worksheet E, Part A, line 10 for IME,
and Worksheet E-4, line 6 for direct GME, in order to be subject to the
FTE resident caps, the 3-year rolling average, and the IRB ratio cap.)
We note that once the 3-year rolling average is effective, the number
of FTE residents in the new programs also must be reported both as part
of the prior year FTE resident counts and the penultimate FTE resident
counts, in order to effectuate the 3-year rolling average calculation
on the IME Worksheet E, Part A, and the direct GME Worksheet E-4,
respectively.
In the example that we presented earlier, Hospital A has a fiscal
year that begins on January 1. If Hospital A's fiscal year begin date
would have been October 1, while the sixth program year of the first
new program started would still be July 1, 2018, the FTE residents
caps, the 3-year rolling average, and the IRB ratio cap would be
effective on October 1, 2018, the fiscal year begin date that follows
July 1, 2018, the sixth program year. If Hospital A's fiscal year begin
date would have been July 1, the FTE residents caps, the 3-year rolling
average, and the IRB ratio cap would be effective on July 1, 2018, the
fiscal year begin date that follows completion of the fifth program
year, and coincides with July 1, 2018, the sixth program year.
With regard to rural hospitals that, under Sec. 413.79(e)(3) of
the regulations, may receive FTE resident cap adjustments at any time
for participating in training residents in new programs, we are
finalizing a similar policy, with modifications reflecting the fact
that each new program in which the rural hospital participates receives
its own 5-year growth window before the rural hospital's FTE resident
cap is adjusted based on that new program. That is, we are finalizing
that, for rural hospitals, the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap for each new program started would be
effective beginning with the applicable hospital's cost reporting
period that coincides with or follows the start of the sixth program
year of each new program started. For example, rural Hospital B has a
fiscal year that begins on January 1. It starts a family medicine
program on July 1, 2013, and a general surgery program on July 1, 2016.
The sixth program year for the family medicine program begins on July
1, 2018. The sixth program year for the general surgery program begins
on July 1, 2021. With regard to Medicare cost reporting, during
Hospital B's fiscal year end dates of December 31, 2013 through and
including December 31, 2018, the number of family medicine FTE
residents would be reported so as

[[Page 50111]]

not to be included in the IME 3-year rolling average or the IRB ratio
cap, and so as not to be included in the direct GME 3-year rolling
average. (This means that on CMS Form 2552-10, during Hospital B's
fiscal year end dates of December 31, 2013 through and including
December 31, 2018, the number of family medicine FTE residents would be
reported on Worksheet E, Part A, line 16 for IME, and on Worksheet E-4,
line 15, for direct GME.) Beginning with Hospital B's cost report for
fiscal year ending December 31, 2019, the number of FTE residents in
only the family medicine program would be subject to the FTE residents
caps, the 3-year rolling average, and the IRB ratio cap, and would be
reported accordingly in order to be subject to the FTE resident caps,
the 3-year rolling average, and the IRB ratio cap. (This means that on
CMS Form 2552-10, beginning with Hospital B's cost report ending
December 31, 2019, the number of family medicine FTE residents would be
reported on Worksheet E, Part A, line 10 for IME, and Worksheet E-4,
line 6 for direct GME.) Because the general surgery program started on
July 1, 2016, for Hospital B's fiscal year end dates of December 31,
2016 through and including fiscal year end date of December 31, 2021,
the number of general surgery FTE residents would be reported on
Worksheet E, Part A, line 16 so as not to be included in the IME 3-year
rolling average or the IRB ratio cap, and on Worksheet E-4, line 15, so
as not to be included in the direct GME 3-year rolling average.
Beginning with Hospital B's cost report for fiscal year ending December
31, 2022, the number of FTE residents in the general surgery program
would be subject to the FTE resident caps, the 3-year rolling average,
and the IRB ratio cap, and would be reported accordingly (on Worksheet
E, Part A, line 10 for IME, and Worksheet E-4, line 6 for direct GME),
in order to be subject to the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap. We note that once the 3-year rolling
average is effective, the number of FTE residents in the new programs
also must be reported as part of the prior year FTE resident counts,
and the penultimate FTE resident counts, in order to effectuate the 3-
year rolling average calculation on the IME Worksheet E, Part A, and
the direct GME Worksheet E-4, respectively.
After consideration of the public comments we received, we are
finalizing our proposal with certain modifications. Specifically, the
policy regarding the effective dates of the FTE residency caps, the 3-
year rolling average, and the IRB ratio cap for FTE residents in new
medical residency training programs will be consistent with the
methodology for calculation of the FTE resident caps as described in
the FY 2013 IPPS/LTCH PPS final rule, and implemented in the
regulations at Sec. Sec. 413.79(e)(1) and (e)(3). That is, because the
policy providing a 5-year growth period for establishing the FTE
resident caps (Sec. Sec. 413.79(e)(1) and (e)(3)) is effective for new
programs started on or after October 1, 2012, this policy will be
effective for urban hospitals that first begin to participate in
training residents in their first new medical residency training
program, and for rural hospitals, on or after October 1, 2012. We also
are revising the regulations for IME and direct GME, respectively, at
Sec. 412.105(a)(1)(ii) for the IME IRB ratio cap, at Sec.
412.105(f)(1)(v) for the IME 3-year rolling average, and at Sec.
413.79(d)(5) for the direct GME 3-year rolling average, to reflect that
the exception from the IRB ratio cap and the 3-year rolling average for
new programs applies to each new program individually during the cost
reporting periods prior to the beginning of the applicable hospital's
cost reporting period that coincides with or follows the start of the
sixth program year of the first new program started, for hospitals for
which the FTE cap may be adjusted in accordance with Sec.
413.79(e)(1), and prior to the beginning of the applicable hospital's
cost reporting period that coincides with or follows the start of the
sixth program year of each individual new program started, for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e)(3). Beginning with the applicable hospital's cost
reporting period that coincides with or follows the start of the sixth
program year of the first new program started for hospitals for which
the FTE cap may be adjusted in accordance with Sec. 413.79(e)(1), and
beginning with the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of each
individual new program started for hospitals for which the FTE cap may
be adjusted in accordance with Sec. 413.79(e)(3), FTE residents
participating in new medical residency training programs are included
in the hospital's IRB ratio cap and the 3-year rolling average.
3. Changes to IME and Direct GME Policies as a Result of New OMB Labor
Market Area Delineations
a. New Program FTE Resident Cap Adjustment for Rural Hospitals
Redesignated as Urban
As stated earlier in this final rule, under existing regulations, a
new teaching hospital that starts training residents for the first time
on or after October 1, 2012, has 5 years from when it first begins
training residents in its first new program to build its FTE resident
cap. If the teaching hospital is a rural teaching hospital, it can
continue to receive permanent cap adjustments for training residents in
new programs after the initial 5-year cap-building period that applies
to new teaching hospitals ends. (We refer readers to section IV.K.2. of
the preamble of this final rule for a discussion of our proposal and
final policy to change the effective dates for when the FTE resident
cap, the 3-year rolling average, and the IRB ratio cap are applied to
new teaching hospitals and to new programs at rural teaching
hospitals.)
In section III.B. of the preamble of this final rule, we discuss
the final policies we are implementing as a result of the new OMB labor
market area delineations announced in the February 28, 2013 OMB
Bulletin No. 13-01. As a result of the new OMB delineations, some
teaching hospitals may be redesignated from being located in a rural
area to an urban area, thereby losing their ability to increase their
FTE resident caps for new programs started after their initial 5-year
cap-building period ends. We have been asked whether a rural teaching
hospital that already has a cap and is redesignated as urban while it
is in the process of establishing another new program(s) can still
receive a permanent cap adjustment for that new program(s). We believe
that because the hospital had already started training residents in the
new program(s) while it was rural, the former rural hospital should be
permitted to continue building its new program(s) and receive a
permanent FTE resident cap adjustment for that new program(s).
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28149
through 28150), we proposed to revise the regulations to allow a
hospital that was rural as of the time it started training residents in
a new program(s) and is redesignated as urban for Medicare payment
purposes during its cap-building period for that program(s) to be able
to continue building that program(s) for the remainder of the cap-
building period and receive a permanent FTE resident cap adjustment

[[Page 50112]]

for that new program(s). Once the cap-building period for the new
program(s) that was started while the hospital was still rural expires,
the teaching hospital that has been redesignated as urban would no
longer be able to receive any additional permanent cap adjustments. We
proposed that the teaching hospital must be actively training residents
in the new program while it is still rural, that is, prior to the
redesignation taking effect, in order for the hospital to continue
receiving a cap adjustment for the new program. For example, if a rural
hospital begins training residents in a new internal medicine program
on July 1, 2013, and begins training residents in a new general surgery
program on July 1, 2014, and the rural hospital is redesignated as
urban effective on October 1, 2014, the teaching hospital would be able
to continue receiving a cap adjustment for both the new internal
medicine program and the new general surgery program after it has been
redesignated as urban. However, if the rural hospital is redesignated
as urban effective on October 1, 2014, and started training residents
in a new internal medicine program on July 1, 2013, but did not start
training residents in a new general surgery program while it was still
rural, that is, prior to October 1, 2014, the teaching hospital would
receive a permanent cap adjustment for the new internal medicine
program, but would not receive a cap adjustment for the new general
surgery program. We proposed to revise the regulations at Sec.
412.105(f)(1)(iv)(D) for IME and Sec. 413.79(c)(6) for direct GME to
implement this proposed change. We proposed that these regulatory
revisions be effective for cost reporting periods beginning on or after
October 1, 2014.
Comment: Commenters supported the proposal to allow a rural
hospital that was training residents in a new program when it was
redesignated as urban due to the most recent OMB delineations, to be
able to continue with the cap-building period for that new program and
receive a permanent cap adjustment for that new program. Commenters
stated that rural hospitals develop and build their new programs with
the expectation that they will have a 5-year cap building period in
which to grow these new programs. Commenters stated that the proposal
is fair and equitable and helps address physician shortages in rural
areas by promoting residency training in these areas. However, several
commenters requested that CMS take the proposal one step further. These
commenters stated that if a rural hospital has received a letter of
accreditation for a new program prior to the hospital being
redesignated as urban, the hospital should be able to receive a
permanent cap adjustment for that new program. One commenter stated
that there are substantial resources and upfront costs that go into
starting a new family medicine program. The commenter noted it may take
some time for the program to begin training residents because the
hospital must receive an initial letter of accreditation and then the
program may have to wait for up to a year until it can participate in
the match for residents to begin the following July 1.
Response: We thank the commenters for their support of our
proposal. We appreciate that significant resources go into developing a
brand new residency training program and that there may be a lag
between when a program is accredited and when residents begin training
in that program. We are persuaded by these comments and, therefore, we
are finalizing our proposed policy with a modification, such that a
rural hospital that has been redesignated as urban can receive a
permanent cap adjustment for a new program (after a 5-year cap building
period for that new program), if it received a letter of accreditation
for the new program, and/or started training residents in the new
program, prior to being redesignated as urban. Expanding upon the
example that was included in the proposed rule, if a rural hospital is
redesignated as urban effective on October 1, 2014, and started
training residents in a new internal medicine program on July 1, 2013,
but did not start training residents in a new general surgery program
while it was still rural, that is, prior to October 1, 2014, but did
receive a letter of accreditation for the general surgery program prior
to October 1, 2014, the rural hospital would receive a permanent cap
adjustment for the new internal medicine program, and would receive a
permanent cap adjustment for the new general surgery program. We are
amending the regulations at Sec. 412.105(f)(1)(iv)(D) and Sec.
413.79(c)(6) to implement this policy. Consistent with the effective
date of the implementation of the new OMB delineations, we are making
this final policy effective October 1, 2014.
Comment: Several commenters requested that CMS propose a policy
through an interim final rule that would permit hospitals that remain
rural referral centers (RRCs), even if they are no longer in a labor
market designated as rural, to receive a cap increase for residents
training in new programs. The commenters stated that RRCs are high-
volume hospitals that treat complex cases, which may be referred to
them from significant geographic distances. The commenters stated that
RRCs meet important health care needs of rural communities because
residency programs in RRCs train physicians who are equipped to deal
with rural populations. The commenters requested that CMS specify that
grandfathered RRCs are able to increase their caps for new programs so
long as during the current Federal fiscal year, they continue to meet
all RRC requirements other than being located in a rural area.
Response: Section 1886(h)(4)(H)(i) of the Act states in part,
``[i]n promulgating such rules for purposes of subparagraph (F), the
Secretary shall give special consideration to facilities that meet the
needs of underserved rural areas.'' Subparagraph (F) refers to the
establishment of a hospital's FTE resident cap. We read this statutory
language as providing special consideration only to rural hospitals for
purposes of establishing their FTE resident caps, not that special
consideration be provided to hospitals that are either not physically
located in rural areas or have not reclassified as rural facilities
(for IME payment purposes). Therefore, we are not making any special
exceptions specific to RRCs that are no longer in rural areas in this
final rule. As we have stated above for other hospitals that lose their
rural status due to the new OMB delineations, an RRC that has been
redesignated as urban may receive a permanent cap adjustment for a new
program (after a 5-year cap building period for that new program), if
it received a letter of accreditation for the new program, and/or
started training residents in the new program, prior to being
redesignated as urban. We note that if the redesignated RRC
subsequently reclassified back to rural, it would be able to receive
additional adjustments to its IME FTE resident cap for training
residents in new programs.
Comment: One commenter stated that it operates a rural teaching
hospital that received the 30-percent cap increase applicable to rural
teaching hospitals. The commenter stated that, due to the most recent
OMB delineations proposed to be implemented, the hospital will be
located in an urban area. The commenter asked whether the 30-percent
cap increase would carry over with the hospital's urban status.
Response: The regulations at Sec. 412.105(f)(1)(iv)(D) and Sec.
413.79(c)(6) implemented in this final rule state in part that
effective October 1, 2014, if a rural hospital is redesignated as urban
due to the most recent OMB standards for delineating statistical areas
adopted

[[Page 50113]]

by CMS, the redesignated urban hospital may retain any existing
increases to its FTE resident cap that it had received prior to when
the redesignation became effective. Therefore, in the situation the
commenter described, the hospital that is redesignated from rural to
urban may retain the 30-percent cap increase it received while it was
still rural.
After consideration of the public comments we received, we are
finalizing the proposed policy with a modification, such that a rural
hospital that has been redesignated as urban can receive a permanent
cap adjustment for a new program (after a 5-year cap building period
for that new program), if it received a letter of accreditation for the
new program, and/or started training residents in the new program,
prior to being redesignated as urban. The finalized regulations at
Sec. 412.105(f)(1)(iv)(D) state the following:
A rural hospital redesignated as urban after September 30,
2004, as a result of the most recent census data and implementation of
the new labor market area definitions announced by OMB on June 6, 2003,
may retain the increases to its full-time equivalent resident cap that
it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of the
section while it was located in a rural area.
Effective October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, the redesignated urban
hospital may retain any existing increases to its FTE resident cap that
it had received prior to when the redesignation became effective.
Effective October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, the redesignated urban
hospital may receive an increase to its FTE resident cap for a new
program, in accordance with paragraph (e) of the section, if it
received a letter of accreditation for the new program and/or started
training residents in the new program, prior to the redesignation
becoming effective.
The finalized regulations at Sec. 413.79(c)(6) state the
following:
A rural hospital redesignated as urban after September 30,
2004, as a result of the most recent census data and implementation of
the new MSA definitions announced by OMB on June 6, 2003, may retain
the increases to its FTE resident cap that it received under paragraphs
(c)(2)(i), (e)(1)(iii), and (e)(3) of the section while it was located
in a rural area.
Effective October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, the redesignated urban
hospital may retain any existing increases to its FTE resident cap that
it had received prior to when the redesignation became effective.
Effective October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, the redesignated urban
hospital may receive an increase to its FTE resident cap for a new
program, in accordance with paragraph (e) of the section, if it
received a letter of accreditation for the new program and/or started
training residents in the new program prior to the redesignation
becoming effective.
b. Participation of Redesignated Hospital in Rural Training Track
To encourage the training of residents in rural areas, section
407(c) of Public Law 106-113 amended section1886(h)(4)(H) of the Act to
add a provision (subsection (iv)) that, in the case of a hospital that
is not located in a rural area (an urban hospital) that establishes
separately accredited approved medical residency training programs (or
rural tracks) in a rural area or has an accredited training program
with an integrated rural track, the Secretary shall adjust the urban
hospital's cap on the number of FTE residents under subparagraph (F),
in an appropriate manner in order to encourage training of physicians
in rural areas. Section 407(c) of Public Law 106-113 was made effective
for direct GME payments to hospitals for cost reporting periods
beginning on or after April 1, 2000, and for IME payments applicable to
discharges occurring on or after April 1, 2000. We refer readers to the
August 1, 2000 interim final rule with comment period (65 FR 47033
through 47037) and the FY 2002 IPPS final rule (66 FR 39902 through
39909) where we implemented section 407(c) of Public Law 106-113.
The regulations at Sec. 413.79(k) specify that, subject to certain
criteria, an urban hospital may count the FTE residents in the rural
track in addition to those FTE residents subject to its cap up to a
``rural track FTE limitation'' for that hospital. In the FY 2006 IPPS
final rule, we revised the regulations at Sec. 413.79(k) to add a new
paragraph (7) to state that if an urban hospital had established a
rural track program with a rural hospital and that hospital
subsequently becomes urban due to the implementation of the new labor
market area definitions announced by OMB on June 6, 2003, the urban
hospital may continue to adjust its FTE resident limit for rural track
programs established before the implementation of the new labor market
area definitions. We also stated that, in order for the urban hospital
to receive a cap adjustment for a new rural track program, the urban
hospital must establish a rural track program with hospitals that are
designated rural based on the most recent geographical location
designations adopted by CMS (70 FR 47456; 47489).
As discussed earlier in this section, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28054), we proposed to implement, effective
October 1, 2014, the new OMB labor market area delineations announced
in the February 28, 2013 OMB Bulletin No. 13-01. As a result of the new
delineations, certain areas are redesignated from urban to rural or
from rural to urban, which may, in turn, affect GME policies that
require the participation of rural teaching hospitals. For example, as
noted above, in order for an urban teaching hospital to receive a FTE
resident cap adjustment for training residents in a rural track, the
residents must rotate for more than one-half of the duration of the
program to a rural hospital(s) or rural nonprovider(s) site. We have
received a question as to what happens to a rural track when a rural
hospital that is participating as the rural site is redesignated as
urban, while the rural track for the urban hospital is in the process
of being established. That is, what happens to the rural track when the
rural hospital is redesignated as urban during the period that is used
to establish the urban hospital's rural track FTE limitation, prior to
the effective date of the urban hospital's rural track FTE limitation
being established?
Existing regulations at Sec. 413.79(k)(7) address the scenario
where a rural hospital that is participating as the rural site is
redesignated as urban, after the rural track FTE limitation for the
urban hospital has already become effective. Specifically, the
regulations at Sec. 413.79(k)(7) state that if an urban hospital had
established a rural track with a hospital located in a rural area and
that rural area subsequently becomes an urban area due to the most
recent census data and implementation of new labor market area
definitions announced by OMB June 6, 2003, the urban hospital may
continue to adjust its FTE resident limit for the rural track programs
established prior to the adoption of the new labor market area
definitions. Therefore, consistent with the existing regulations at
Sec. 413.79(k)(7) and with our proposal to allow rural hospitals
redesignated as urban to

[[Page 50114]]

continue receiving a FTE resident cap adjustment for new programs that
started while the redesignated hospital was still rural, we proposed to
revise the existing regulations applicable to urban hospitals
generally. Specifically, we proposed to address the status of the
``original'' urban hospital's (throughout this preamble, ``original''
urban hospital refers to the hospital that is the urban participant in
the rural track program) rural track FTE limitation, in the situation
where a rural hospital that is participating in the original urban
hospital's rural track is located in an area redesignated by OMB as
urban during the 3-year period that is used to calculate the
``original'' urban hospital's rural track FTE limitation. We proposed
that, in these situations, the ``original'' urban hospital's
opportunity to receive a rural track FTE limitation would not be
negatively impacted by the fact that the rural hospital with which it
has partnered to be the rural site for its rural training track is
located in an area redesignated by OMB as urban during the 3-year
period that is used to calculate the ``original'' urban hospital's
rural track FTE limitation. That is, we proposed that the ``original''
urban hospital may receive a rural track FTE limitation for that new
rural track program.
With regard to the status of the rural hospital that is partnered
with the ``original'' urban hospital to serve as a rural training site
for the rural training track program, as mentioned earlier, existing
regulations at Sec. 413.79(k)(7) address the scenario where a rural
hospital that is participating as the rural site is redesignated as
urban, after the rural track FTE limitation for the ``original'' urban
hospital has already become effective. (We note that we proposed to
apply the existing policy at Sec. 413.79(k)(7), which applies to
redesignations that occurred on June 6, 2003, in a similar manner, to
redesignations announced by OMB after June 6, 2003, as well.) In
addition, we proposed that once the rural hospital is redesignated as
located in an urban area due to the implementation of the new OMB labor
market area delineations, regardless of whether that redesignation
occurs during the 3-year period that is used to establish the rural
track FTE limitation for the ``original'' urban hospital, or after the
3-year period that is used to establish the rural track FTE limitation
for the ``original'' urban hospital, the redesignated urban hospital
can no longer qualify as the rural site and the ``original'' urban
hospital would not be able to count those residents under its rural
track FTE limitation if it continues to use the redesignated urban
hospital as the rural site for purposes of the rural track. However,
because the redesignated urban hospital was rural when residents
started training in the rural track, we proposed to provide for a 2-
year transition period during which either of the following two
conditions must be met in order for the ``original'' urban hospital to
be able to count the residents under its rural track FTE limitation
when the 2-year transition period ends: (1) The redesignated newly
urban hospital must reclassify back to rural under Sec. 412.103 of the
regulations; or (2) the ``original'' urban hospital must find a new
geographically rural site to participate as the rural site for purposes
of the rural track. We note that we proposed to apply these two
criteria both in the case where the rural hospital is redesignated as
urban after the ``original'' urban hospital already has its rural track
FTE limit established, and also in the case where the rural hospital is
redesignated as urban during the 3-year period when the rural track
program is still growing, prior to the rural track FTE limit being
established. This 2-year transition period would begin when new OMB
labor market area delineations take effect for Medicare payment
purposes and would end exactly 2 years from that date. During this 2-
year transition period, we would hold the ``original'' urban hospital
harmless and would pay the ``original'' urban hospital for the FTE
residents in the rural track. At the end of the 2-year transition
period, in order for the ``original'' urban hospital to receive payment
for a rural track program under Sec. 413.79(k)(1) or (k)(2), either
the redesignated urban hospital must be granted reclassification as
rural under Sec. 412.103 or the ``original'' urban hospital must
already be training FTE residents at a geographically rural site. We
note that, because the rural reclassification provision of Sec.
412.103 only applies to IPPS hospitals and for purposes of section
1886(d) of the Act, it only applies to IPPS hospitals for IME payment
purposes and not for direct GME payment purposes because direct GME is
authorized under section 1886(h) of the Act. Therefore, if the
redesignated hospital reclassifies as rural under Sec. 412.103, the
``original'' urban hospital would only be able to count FTE residents
towards its rural track FTE limitation for IME payment purposes, but
not for direct GME payment purposes. In addition, we note that this
discussion has centered on the scenario where a rural hospital that is
the rural site for purposes of the rural track has been redesignated as
urban. Under such a scenario, the redesignated urban hospital does have
an option to reclassify as rural. However, as noted above, the
reclassification only applies to IPPS hospitals for IME payment
purposes. If a nonprovider site is functioning as the rural site under
Sec. 413.79(k)(2) for purposes of the rural track and the area where
that nonprovider site is located is redesignated as urban, the
nonprovider site would not have the option of reclassifying as rural
and, therefore, the ``original'' urban hospital would be required to
find a new geographically rural site within the 2-year transition
period in order for the ``original'' urban hospital to receive payment
for a rural track program under Sec. 413.79(k)(1) or (k)(2).
The following examples illustrate how the proposed policy would be
applied to a rural track in which the rural site is a hospital and the
rural hospital has been redesignated as urban:
An urban teaching hospital and a rural teaching hospital
are participating in training residents in a new rural track program
that begins July 1, 2014. Effective October 1, 2014, the rural hospital
is redesignated as urban. We proposed that the timeframe for the
``original'' urban hospital to build the rural track program for
purposes of calculating its rural track FTE limitation would continue
to be through June 30, 2017. During the time period of October 1, 2014
to September 30, 2016, the redesignated urban hospital would continue
participating as a rural hospital and the ``original'' urban hospital
would count FTE residents it is training that are in the rural track
for IME and direct GME. However, in order for the ``original'' urban
hospital to continue to get paid for its rural track program after
September 30, 2016, then, by September 30, 2016, the redesignated urban
hospital must either reclassify as rural under Sec. 412.103 of the
regulations for purposes of IME payment only, or the ``original'' urban
hospital must find a new geographically rural hospital or nonprovider
site to train the residents in the rural track for more than one-half
of their training. If neither of these conditions is met, by September
30, 2016, the ``original'' urban hospital would not able to receive
payment for that specific program as a rural training track under Sec.
413.79(k)(1) or (k)(2) because it would no longer meet the requirement
that more than one-half of the training must be provided in a rural
setting.
Another scenario could be one in which the rural hospital
is redesignated as urban after the 3-year cap-building

[[Page 50115]]

period for the rural track has passed. For example, the rural track
program began July 1, 2007, but effective October 1, 2014, the rural
hospital is redesignated as urban. We proposed in this scenario that,
by September 30, 2016, either the redesignated urban hospital must
reclassify to rural under Sec. 412.103 for purposes of IME payment
only, or the ``original'' urban hospital must find a new geographically
rural site that can participate as the rural site for purposes of the
rural track. If neither of these conditions is met by September 30,
2016, the ``original'' urban hospital would not be able to receive
payment for that specific program as a rural track under Sec.
413.79(k)(1) or (k)(2) because it would no longer meet the requirement
that more than one-half of the training must be provided in a rural
setting.
We noted that if the ``original'' urban hospital was not able to
meet one of the two proposed conditions noted earlier in this section
by the end of the 2-year transition period, but at some point later is
able to meet one of the two proposed conditions, we proposed that the
``original'' urban hospital would be able to ``revive'' and use its
already established rural track FTE limitation from that point forward.
In the instance where the ``original'' urban hospital's rural track FTE
limitation was not set because the hospital was not able to meet one of
the two proposed conditions by the end of the 2-year transition period,
which fell within the 3-year cap-building timeframe, but at some point
later is able to meet one of the two proposed conditions, we proposed
that the ``original'' urban hospital would be able to have a rural
track FTE limitation calculated and established based on the highest
number of FTE residents in any program year training in the rural track
in the third year of the program, even if during the third year of the
program, the ``original'' urban hospital was not in compliance with the
two proposed conditions. Consistent with similar policy discussed in
the FY 2002 IPPS final rule (66 FR 39905), it would be the
responsibility of the hospitals involved to provide the necessary
information regarding the rotations of the residents in the third
program year to the MAC in order for the calculation to be completed
and the rural track FTE limit to be set.
In summary, we proposed that any time a rural hospital
participating in a rural track is in an area redesignated by OMB as
urban after residents started training in the rural track and during
the 3-year period that is used to calculate the ``original'' urban
hospital's rural track FTE limitation, the ``original'' urban hospital
may receive a cap adjustment for that rural track after the rural
hospital has been redesignated as urban. Furthermore, we proposed that,
regardless of whether the redesignation of the rural hospital occurs
during the 3-year period that is used to calculate the urban hospital's
rural track FTE limitation, or after the 3-year period used to
calculate the ``original'' urban hospital's rural track FTE limitation,
the redesignated urban hospital can continue to be considered a rural
hospital for purposes of the rural track for up to 2 years. However, by
the end of those 2 years, either the redesignated urban hospital must
reclassify as rural under Sec. 412.103 for purposes of IME payment
only (in addition, this reclassification option only applies to IPPS
hospitals, not nonprovider sites) or the ``original'' urban hospital
must have found a new site in a geographically rural area that will
serve as the rural site for purposes of the rural track in order for
the ``original'' urban hospital to receive payment under Sec.
413.79(k)(1) or (k)(2).
We proposed to revise the regulations at Sec. 413.79(k)(7) to
implement these provisions and to establish that these changes would be
effective for cost reporting periods beginning on or after October 1,
2014.
Comment: In general, commenters supported the rural track
proposals. Some commenters requested that, instead of providing for a
2-year transition period, CMS provide a 3-year transition period for
the original urban hospital to find a new rural site. Commenters stated
that it usually takes 3 years of financial and operational planning in
order to develop a new training site and that it may take more time in
rural areas where staffing is limited. Commenters stated that the
program would also need time to request approval from the ACGME or the
AOA to move its training site.
Response: We appreciate the commenters' support of our proposals
related to rural track programs. As a result of commenters' concerns
that 2 years is not a sufficient transition period to allow the
``original'' urban hospital to find another rural hospital to
participate as the rural site for purposes of the rural track, we are
finalizing a policy providing for an alternative transition period. The
transition period will begin effective with the date of the
implementation of the new OMB delineations and extend through the end
of the second residency training year following the implementation date
of the new OMB delineations. For example, if as a result of the OMB
delineations implemented effective October 1, 2014, the rural hospital
participating in a rural track program is redesignated as urban, the
transition period for the ``original'' urban hospital to find a new
rural site or for the redesignated hospital to reclassify back to rural
for IME payment purposes, would last from October 1, 2014 through June
30, 2017. In addition, consistent with the effective date of the new
OMB delineations, we are making these final policies effective October
1, 2014. We are revising the regulations at Sec. 413.79(k)(7) to
implement this change.
The following examples illustrate how the policy finalized in this
rule would be applied to an urban hospital that is training residents
as part of a rural track program in the case where the rural hospital
participating in the rural track program is redesignated as urban.
In this scenario, the rural hospital is redesignated as
urban during the cap-building period for the urban hospital's rural
track FTE limitation. The urban hospital (referred to as the
``original'' urban hospital) and the rural hospital are participating
in training residents in a rural track program that begins July 1,
2014. Effective October 1, 2014, the rural hospital is redesignated as
urban. Because urban teaching hospitals have a 3-year cap-building
period in which to grow their rural track FTE limitation, the timeframe
for the ``original'' urban hospital to build the rural track program
for purposes of calculating its rural track FTE limitation will be July
1, 2014 (when the program begins) through June 30, 2017. In addition,
for purposes of meeting the requirement that residents in a rural track
program spend more than one-half of their time training at a rural
site, the ``original'' urban hospital will have a transition period
that lasts from October 1, 2014 (the implementation date of the new OMB
delineations) through June 30, 2017 (the end of the second residency
training year following the implementation date of the new OMB
delineations, instead of September 30, 2016, as proposed). During the
time period of October 1, 2014 through June 30, 2017, the redesignated
urban hospital would continue participating as a rural hospital and the
``original'' urban hospital would count FTE residents it is training
that are in the rural track for IME and direct GME. However, in order
for the ``original'' urban hospital to receive a rural track FTE
limitation effective July 1, 2017, and to continue to get paid for its
rural track program after June 30, 2017, by June 30, 2017, the
redesignated urban hospital must either reclassify as rural under Sec.
412.103 of the regulations for purposes of IME payment only, or the
``original'' urban

[[Page 50116]]

hospital must find a new geographically rural hospital or nonprovider
site to train the residents in the rural track for more than one-half
of their training. If neither of these conditions is met, by June 30,
2017, the ``original'' urban hospital would not able to receive payment
for that specific program as a rural training track under Sec.
413.79(k)(1) or (k)(2) because it would no longer meet the requirement
that more than one-half of the training be provided in a rural setting.
If at some point later, the ``original'' urban hospital is able to find
a new rural site to participate in the rural track program, the
``original'' urban hospital would be able to receive a rural track FTE
limitation based on the training that occurred from July 1, 2014
through June 30, 2017, and be paid for residents training in the rural
track.
Another scenario could be one in which the rural hospital
is redesignated as urban after the 3-year cap-building period for the
``original'' urban hospital's rural track FTE limitation has passed.
For example, the rural track program began July 1, 2007, but effective
October 1, 2014, the rural hospital is redesignated as urban. Again, in
this example, the ``original'' urban teaching hospital has a transition
period that runs from October 1, 2014 through June 30, 2017 (instead of
September 30, 2016, as proposed). In this scenario, by June 30, 2017,
either the redesignated urban hospital must reclassify to rural under
Sec. 412.103 for purposes of receiving IME payment only, or the
``original'' urban hospital must find a new geographically rural site
that can participate as the rural site for purposes of the rural track.
If neither of these conditions is met by June 30, 2017, the
``original'' urban hospital would not be able to receive payment for
that specific program as a rural track under Sec. 413.79(k)(1) or
(k)(2) because it would no longer meet the requirement that more than
one-half of the training must be provided in a rural setting. If at
some point later, the ``original'' urban hospital is able to find a new
rural site to participate in the rural track program, the ``original''
urban hospital would be able to use its rural track FTE limitation and
be paid for residents training in the rural track.
Comment: Several commenters had concerns regarding rural tracks in
general and concerns about what they believed would be unintended
consequences resulting from the proposed policies. Commenters
recommended that changes to OMB delineations be carefully managed with
respect to rural track programs. Commenters stated that rural track
programs are one of the best ways to expose residents to practicing in
rural areas which, in turn, helps to address physician shortages in
those areas. Commenters stated that if a rural hospital is the rural
site for a rural track program and that rural hospital is subsequently
redesignated as urban, it may not want to reclassify back to rural for
a variety of reasons. Commenters stated that if the newly redesignated
urban hospital does not want to reclassify back to rural and the
``original'' urban hospital wants to train residents in another rural
area, the ``original'' urban hospital does not have any means by which
to grow its cap. Commenters stated that even if the rural track program
would be able to find and move to a different rural site, because the
program would usually have the same staff and program director, CMS'
policies would consider the program to be an existing program rather
than a new program, and therefore, a rural hospital that is a new site
for purposes of the rural track program would not be able to receive a
cap adjustment for training residents in that program. Commenters
stated that it is within CMS' purview to address this problem by
changing the definition of a ``new'' program through the authority
provided to the Secretary under section 1886(h)(4)(H)(i) of the Act,
which states, ``[in] promulgating such rules for purposes of
subparagraph (F), the Secretary shall give special consideration to
facilities that meet the needs of underserved rural areas.'' Commenters
believed CMS could use this authority to allow rural hospitals that are
new rural track participants to receive a cap adjustment for training
residents in the existing rural track program.
One commenter expressed concern that CMS, in its rulemaking, has
not provided enough consideration to the promoting of physician
training in rural areas. The commenter referred to a study by Candice
Chen, MD, et al, in Academic Medicine, which ``reports that only 4.8%
of all graduates of 759 sponsoring institutions practiced in rural
areas and 198 of those 759 institutions produced no rural physicians.
This percentage compares extremely unfavorably to the 19.3% of the
population classified as rural by the 2010 census.'' The commenter
stated that it expects that hospitals that have been reclassified as
urban will still have a focus on training residents to practice in
rural areas. The commenter stated that CMS should realize that the
training these hospitals provide is more important than the location of
these hospitals, and therefore, CMS should give special consideration
to residents training in programs at these hospitals by changing its
definition of ``new'' programs. The commenter included comments it
previously submitted on the clarification of the definition of new
residency training programs in the rule in the May 22, 2009 Federal
Register.
Response: We appreciate the commenters' support of residency
training in rural areas, and we may consider their general concerns
regarding CMS' policies related to new programs and training in rural
areas for future rulemaking. However, because we did not specifically
propose any changes to our existing policy regarding what constitutes a
``new'' versus an ``existing'' program, we are not addressing those
comments at this time. Instead, we wish to focus on several of the
commenters' concerns specifically related to our proposals in the FY
2015 IPPS/LTCH PPS proposed rule.
In response to the commenters' concerns that if the ``original''
urban hospital wishes to establish training in another rural area,
there is no way for the ``original'' urban hospital to grow its cap, we
believe that the commenters have misunderstood our proposal. We
proposed that if the ``original'' urban hospital does find a new rural
hospital for its existing rural track program, the original urban
hospital would be able to apply its existing rural track FTE limitation
to the residents that train at its hospital as part of that rural
track. In addition, if the ``original'' urban hospital was not able to
receive a rural track FTE limitation because either the redesignated
urban hospital did not reclassify back to rural for IME payment
purposes during the transition period or the ``original'' urban
hospital was not able to find a new rural site during the transition
period, but either of these conditions is met in the future, the
``original'' urban hospital would receive a rural track FTE limitation
at that time, based on the training that occurred during the 3-year
cap-building period for the rural track FTE limitation. We also point
out that if the ``original'' urban hospital moves the rural portion of
its training to a nonprovider site that is located in a geographically
rural area, under existing regulations at 42 CFR 413.79(k)(2), the
``original urban'' hospital may continue to count the FTE residents
training in the rural nonprovider site for more than one-half the
duration of the program up to its own existing rural track FTE
limitation. In addition, if in the future, the ``original'' urban
hospital would want to develop a rural track program in a different
specialty, it would be able to receive a separate rural track FTE

[[Page 50117]]

limitation for that rural track program in a different specialty.
In terms of any potential cap adjustment for a rural hospital that
trains residents as part of the rural track, if the rural track is
considered a new program for Medicare payment purposes, and if at the
time that the ``original'' urban hospital moves the program to the new
rural hospital, the new rural training track is still within its cap-
building period, any rural hospital that trains residents in that new
program during the cap-building period for that new program will
receive a permanent cap adjustment. Therefore, if the ``original''
urban hospital is able to find a new rural hospital to participate in
the rural track during the cap-building period for the new rural track
program, that new rural hospital will, in fact, also be able to receive
a cap adjustment and receive direct GME and IME payments for training
residents in the new rural track program.
After consideration of the public comments we received, we are
finalizing a policy that if a rural hospital is training residents in a
rural training track and is in an area redesignated by OMB as urban
during the 3-year period that is used to calculate the ``original''
urban hospital's rural track FTE limitation, the ``original'' urban
hospital may receive a cap adjustment for that rural track after the
rural hospital has been redesignated as urban. However, regardless of
whether the redesignation of the rural hospital occurs during the 3-
year period that is used to calculate the ``original'' urban hospital's
rural track FTE limitation, or even after the 3-year period used to
calculate the ``original'' urban hospital's rural track FTE limitation,
the redesignated urban hospital may continue to be considered a rural
hospital for purposes of the rural track for the term of a transition
period. That transition period begins effective with the date the new
OMB delineations are implemented by CMS and lasts through the end of
the second residency training year following the implementation date of
the new OMB delineations. By the end of the transition period, either
the redesignated urban hospital must reclassify as rural under Sec.
412.103 for purposes of IME payment only (in addition, this
reclassification option only applies to IPPS hospitals, not nonprovider
sites), or the ``original'' urban hospital must have found a new site
in a geographically rural area that will serve as the rural site for
purposes of the rural track in order for the ``original'' urban
hospital to receive payment under Sec. 413.79(k)(1) or (k)(2). The
finalized regulations at Sec. 413.79(k)(7) state the following:
Effective prior to October 1, 2014, if an urban hospital
had established a rural track training program under the provisions of
paragraph (k) with a hospital located in a rural area and that rural
area subsequently becomes an urban area due to the most recent census
data and implementation of the new labor market area definitions
announced by OMB on June 6, 2003, the urban hospital may continue to
adjust its FTE resident limit in accordance with paragraph (k) for the
rural track programs established prior to the adoption of such new
labor market area definitions. In order to receive an adjustment to its
FTE resident cap for a new rural track residency program, the urban
hospital must establish a rural track program with hospitals that are
designated rural based on the most recent geographical location
designations adopted by CMS.
Effective October 1, 2014, if an urban hospital started a
rural track training program under the provisions of paragraph (k) with
a hospital located in a rural area and, during the 3-year period that
is used to calculate the urban hospital's rural track FTE limit, that
rural area subsequently becomes an urban area due to the most recent
OMB standards for delineating statistical areas adopted by CMS and the
most recent Census Bureau data, the urban hospital may continue to
adjust its FTE resident limit in accordance with paragraph (k) and
subject to paragraph (k)(7)(iii) for the rural track programs started
prior to the adoption of such new OMB standards for delineating
statistical areas.
Effective October 1, 2014, if an urban hospital started a
rural track training program under the provisions of paragraph (k) with
a hospital located in a rural area and that rural area subsequently
becomes an urban area due to the most recent OMB standards for
delineating statistical areas adopted by CMS and the most recent Census
Bureau data, regardless of whether the redesignation of the rural
hospital occurs during the 3-year period that is used to calculate the
urban hospital's rural track FTE limit, or after the 3-year period used
to calculate the urban hospital's rural track FTE limit, the urban
hospital may continue to adjust its FTE resident limit in accordance
with paragraph (k) based on the rural track programs started prior to
the change in the hospital's geographic designation. In order for the
urban hospital to receive or use the adjustment to its FTE resident cap
for training FTE residents in the rural track residency program that
was started prior to the most recent OMB standards for delineating
statistical areas adopted by CMS, one of the following two conditions
must be met by the end of a period that begins when the most recent OMB
standards for delineating statistical areas are adopted by CMS and
continues through the end of the second residency training year
following the date the most recent OMB delineations are adopted by CMS:
the hospital that has been redesignated from rural to urban must
reclassify as rural under Sec. 412.103, for purposes of IME only; or
the urban hospital must find a new site that is geographically rural
consistent with the most recent geographical location delineations
adopted by CMS. In order to receive an adjustment to its FTE resident
cap for an additional new rural track residency program, the urban
hospital must participate in a rural track program with sites that are
geographically rural based on the most recent geographical location
delineations adopted by CMS.
We also have determined that there is an outdated, incorrect
reference included in the definition of ``Rural track FTE limitation''
under Sec. 413.75(b). The reference included in the definition is
``Sec. 413.79(l)''. The correct reference is ``Sec. 413.79(k)''.
Therefore, as we proposed, we are making a technical correction to the
definition of ``Rural track FTE limitation'' so that it means the
maximum number of residents (as specified in Sec. 413.79(k)) training
in a rural track residency program that an urban hospital may include
in its FTE count and that is in addition to the number of FTE residents
already included in the hospital's FTE cap.
4. Clarification of Policies on Counting Resident Time in Nonprovider
Settings Under Section 5504 of the Affordable Care Act
In the November 24, 2010 final rule with comment period (75 FR
71808, 72134 through 72141, and 72153), we implemented section 5504 of
the Affordable Care Act regarding counting resident time in nonprovider
settings. We also mentioned the scope of section 5504 of the Affordable
Care Act in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27638) and
final rule (78 FR 50735). Section 5504(a) of the Affordable Care Act
made changes to section 1886(h)(4)(E) of the Act to reduce the costs
that hospitals must incur for residents training in nonprovider sites
in order to count the FTE residents for purposes of Medicare direct GME
payments, but did so only on a prospective basis in connection with
certain specified cost reporting

[[Page 50118]]

periods. Notably and more specifically, section 5504(a)(3) of the
Affordable Care Act amended the Act effective only for ``cost reporting
periods beginning on or after July 1, 2010,'' for direct GME, to permit
hospitals to count the time that a resident trains in activities
related to patient care in a nonprovider site in its FTE count if the
hospital incurs the costs of the residents' salaries and fringe
benefits for the time that the resident spends training in the
nonprovider site. Section 5504(b)(2) of the Affordable Care Act made
similar changes to section 1886(d)(5)(B)(iv) of the Act for IME payment
purposes, with the provision being effective only for discharges
occurring on or after July 1, 2010, for IME. In connection with those
periods and discharges, if more than one hospital incurs the residency
training costs in a nonprovider setting, under certain circumstances,
sections 5504(a)(3) and (b)(2) of the Affordable Care Act allow each
hospital to count a proportional share of the training time that a
resident spends training in that setting, as determined by a written
agreement between the hospitals. When Congress enacted section 5504 of
the Affordable Care Act, it retained the statutory language which
provides that a hospital can only count the time so spent by a resident
under an approved medical residency training program in its FTE count
if that one single hospital by itself ``incurs all, or substantially
all, of the costs for the training program in that setting.'' In doing
so, Congress also revised the statutory language in sections 5504(a)(1)
and (b)(1) to explicitly make this longstanding substantive standard
and requirement applicable to ``cost reporting periods beginning before
July 1, 2010'' for direct GME, and to ``discharges occurring on or
after October 1, 1997, and before July 1, 2010,'' for IME (sections
1886(d)(5)(B)(iv)(I) and 1886(h)(4)(E)(i) of the Act). Beginning at
least as early as 1988, the Secretary consistently noted in the
preamble of various rules that the statute only allowed a hospital to
count the time that its residents spent training in a nonprovider site
in the FTE resident count for direct GME and IME purposes if that
single hospital incurred ``all of substantially all'' of the costs of
the training program in that setting. Indeed, in Borgess Medical Center
v. Sebelius (966 F.Supp.2d at *6-*7 (D.D.C. 2013)), a court noted that
CMS had done so in 1998, 2003, and 2007 preambles of rules. For a full
discussion of the longstanding substantive standard and requirement
that a hospital can only count residents training if that one single
hospital incurs all or substantially all of the costs for the training,
we refer readers to the discussion in the November 24, 2010 final rule
with comment period (75 FR 72134 through 72141), the May 11, 2007 final
rule (72 FR 26953 and 26969), the August 1, 2003 final rule (68 FR
45439), the July 31, 1998 final rule (63 FR 40954 and 40995), the
September 29, 1989 final rule (54 FR 40286 and 40288), and the
September 21, 1988 proposed rule (53 FR 36589 and 36591).
Section 5504(c) of the Affordable Care Act specifies that the
amendments made by the provisions of sections 5504(a) and (b) ``shall
not be applied in a manner that requires reopening of any settled
hospital cost reports as to which there is not a jurisdictionally
proper appeal pending as of the date of the enactment of this Act on
the issue of payment for indirect costs of medical education . . . or
for direct graduate medical education costs. . . .'' The date of
enactment of the Affordable Care Act was March 23, 2010.
In the November 24, 2010 final rule with comment period, we revised
the regulations at Sec. 412.105(f)(1)(ii)(E) for IME and Sec. Sec.
413.78(f) and (g) for direct GME to reflect the changes made by section
5504 of the Affordable Care Act. Section 413.78(g) is the implementing
regulation that corresponds to the statutory amendments set forth in
sections 5504(a)(3) and (b)(2) of the Affordable Care Act. The
introductory regulatory language of Sec. 413.78(g) explicitly states
that paragraph (g) governs only ``cost reporting periods beginning on
or after July 1, 2010.'' Paragraph (g)(5) of Sec. 413.78 also
expressly states that the paragraph is limited to ``cost reporting
periods beginning on or after July 1, 2010.'' Accordingly, we have
repeatedly stated, and we believe that the existing regulation makes
plain, that paragraph (g) of Sec. 413.78 ``is explicitly made
applicable only to `cost reporting periods beginning on or after July
1, 2010,' whereas earlier cost reporting periods are governed by other
preceding paragraphs of Sec. 413.78'' (78 FR 50735). In addition, we
also revised the definition of ``all or substantially all of the costs
for the training program in the nonhospital setting'' in the
regulations at Sec. 413.75(b) to reflect that both the statute and
regulations require that, for cost reporting periods beginning on and
after July 1, 2007 and before July 1, 2010, one hospital must by itself
incur ``all or substantially all of the costs'' of the residents
training in the nonprovider site in order for the hospital to receive
Medicare IME and direct GME payment for that training. Finally, we also
revised the IME regulations at Sec. 412.105 to reflect these statutory
amendments, by incorporating by reference Sec. 413.78(g).
Despite the fact that sections 5504(a) and (b) of the Affordable
Care Act provide clear effective dates with respect to the amendments
provided therein to sections 1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the
Act, and that the preamble discussion of the implementation of these
provisions and further discussion of the statutory amendments in the
November 24, 2010 final rule with comment period and in the August 19,
2013 final rule provide further explanation that, specifically, nothing
in section 5504(c) overrides those effective date (75 FR 72136), we
have received questions about the applicability of section 5504(c) and
the associated regulation text at Sec. 413.78(g)(6). Specifically,
questions have been raised with respect to the applicability of
sections 5504(c) of the Affordable Care Act and Sec. 413.78(g)(6) of
the regulations to periods prior to July 1, 2010, particularly if a
hospital had, as of March 23, 2010, appealed an IME or direct GME issue
for a settled cost reporting period occurring prior to July 1, 2010. As
noted earlier, section 5504(c) of the Affordable Care Act provides that
the amendments made by the provisions of sections 5504(a) and (b)
``shall not be applied in a manner that requires reopening of any
settled hospital cost reports as to which there is not a
jurisdictionally proper appeal pending as of . . . [March 23, 2010] on
the issue of payment for indirect costs of medical education . . . or
for direct graduate medical education costs. . . .''
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28153), we stated
that upon revisiting the existing regulation text, we determined that
Sec. 413.78(g)(6) was not written in a manner that is as consistent
with section 5504(c) of the Affordable Care Act and reflective of our
reading of section 5504 and our policy as it could be. Specifically,
Sec. 413.78(g)(6) states that the provisions of paragraphs (g)(1)(ii),
(g)(2), (g)(3), and (g)(5) of the section cannot be applied in a manner
that would require the reopening of settled cost reports, except those
cost reports on which there is a jurisdictionally proper appeal pending
on direct GME or IME payments as of March 23, 2010. In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28152 through 28154 and 28307), we
reiterated our existing interpretation of the statutory amendments made
by sections 5504(a), (b), and (c) of the Affordable Care Act and also
proposed to clarify the regulation text implementing these provisions
by revising the language at Sec. 413.78(g)(6) to

[[Page 50119]]

read more consistently with our reading of section 5504 and the
language in section 5504(c) of the Affordable Care Act and to ensure no
further confusion with respect to the applicability of section 5504(c)
of the Affordable Care Act and Sec. 413.78(g)(6) of the regulations.
We believe that sections 5504(a) and (b) of the Affordable Care Act
contained three primary directives (a fourth regarding recordkeeping
requirement is tangential to this discussion): (1) under sections
5504(a)(1) and (b)(1) of the Affordable Care Act (sections
1886(h)(4)(E)(i) and 1886(d)(5)(B)(iv)(I) of the Act), for ``cost
reporting periods beginning before July 1, 2010'' for direct GME, and
for ``discharges occurring on or after October 1, 1997, and before July
1, 2010'' for IME, these sections explicitly retained the statutory
language that provides that a hospital can only count the time so spent
by a resident under an approved medical residency training program in
its FTE count if a hospital by itself ``incurs all, or substantially
all, of the costs for the training program in that setting''; (2) under
sections 5504(a)(3) and (b)(2) of the Affordable Care Act (sections
1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for ``cost
reporting periods beginning on or after July 1, 2010'' for direct GME,
and for ``discharges occurring on or after July 1, 2010'' for IME,
these sections eliminated the ``all or substantially all'' requirement,
instead requiring a hospital to incur the residents' salaries and
fringe benefits for the time spent at the nonprovider site; and (3)
under sections 5504(a)(3) and (b)(2) of the Affordable Care Act
(sections 1886(h)(4)(E)(ii) and 1886(d)(5)(B)(iv)(II) of the Act), for
``cost reporting periods beginning on or after July 1, 2010'' for
direct GME, and for ``discharges occurring on or after July 1, 2010''
for IME, these sections created a new provision with regard to allowing
more than one hospital to share the costs of residents training in a
nonprovider setting under certain circumstances, in order for each
hospital to count a proportional share of the FTE training time in the
nonprovider setting.
Separately from sections 5504(a) and (b) of the Affordable Care
Act, section 5504(c) of the Affordable Care Act, as mentioned earlier,
specifies that the amendments made by the provisions of sections
5504(a) and (b) ``shall not be applied in a manner that requires
reopening of any settled hospital cost reports as to which there is not
a jurisdictionally proper appeal pending as of'' March 23, 2010, the
date of the enactment of the Affordable Care Act, on the issue of
payment for IME and direct GME. When we proposed to implement section
5504(c) in the August 3, 2010 proposed rule (75 FR 46385) and when we
implemented section 5504(c) in the November 24, 2010 final rule with
comment period (75 FR 72136), we had to consider what new meaning it
was adding to sections 5504(a) and (b) of the Affordable Care Act
because unlike, for example, section 5505 of the Affordable Care Act
which has an effective date prior to enactment of the Affordable Care
Act and, therefore, would apply to prior cost reporting periods,
section 5504's applicable effective date for the new standards it
creates was July 1, 2010, a date that came after enactment of the
Affordable Care Act and was fully prospective. As we stated in the
November 24, 2010 final rule with comment period (75 FR 72136),
``Section 5504 is fully prospective with an explicit effective date of
July 1, 2010, for the new standards it creates. Nothing in section
5504(c) overrides that effective date. Section 5504(c) merely notes
that the usual discretionary authority of Medicare contractors to
reopen cost reports is not changed by the provisions of section 5504;
it simply makes clear that Medicare contractors are not required by
reason of section 5504 to reopen any settled cost report as to which a
provider does not have a jurisdictionally proper appeal pending. It
does not require reopening in any circumstance; and the new substantive
standard is, in any event, explicitly prospective. We believe if
Congress had wanted to require such action or to apply the new
standards to cost years or discharges prior to July 1, 2010, it would
have done so in far more explicit terms.'' We also noted in that rule
(75 FR 72139) that ``[the] statute does not provide CMS discretion to
allow the counting of resident time spent in shared nonprovider site
rotations for cost reporting periods beginning prior to July 1, 2010.''
We continue to believe that Congress was clear in amending sections
1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to provide for new
standards to be applied only prospectively, effective for cost
reporting periods beginning on or after, and discharges occurring on or
after, July 1, 2010. We also continue to believe that the plain meaning
of section 5504(c) of the Affordable Care Act is that the Secretary is
not required to reopen a cost report when there is no jurisdictionally
proper appeal pending as of March 23, 2010, the date of the enactment
of the Affordable Care Act, on the issue of payment for IME and direct
GME. Therefore, we believe that section 5504(c) of the Affordable Care
Act is merely a confirmation of the Secretary's existing discretionary
authority in one particular context, and that sections 5504(a) and (b)
of the Affordable Care Act and their effective dates become all the
more prominent, and are not affected by section 5504(c).
As noted earlier, we revised the regulations at Sec.
412.105(f)(1)(ii)(E) for IME, and Sec. 413.78(g) for direct GME, to
reflect the changes made by section 5504 of the Affordable Care Act in
the November 24, 2010 final rule with comment period. We reiterate here
that the introductory language of Sec. 413.78(g) explicitly states
that paragraph (g) governs only ``cost reporting periods beginning on
or after July 1, 2010'' and paragraph (g)(5) also expressly states that
the paragraph is limited to ``cost reporting periods beginning on or
after July 1, 2010'' (78 FR 50735 and 78 FR 27639). As we noted before,
we believe that the paragraphs of the regulations which precede
paragraph (g), particularly paragraphs (c) through (f), consistent with
the statute, make clear that a hospital may only count the time so
spent by a resident under an approved medical residency training
program in its FTE count, in connection with its pre-July 1, 2010 cost
reporting periods and pre-July 1, 2010 patient discharges, if that one
single hospital by itself ``incurs all, or substantially all, of the
costs for the training program in that setting.'' Separately, we
believe that the new standards set forth in sections 5504(a)(3) and
(b)(2) of the Affordable Care Act and implemented by regulation at
Sec. Sec. 413.78(g) and 412.105(f)(1)(ii)(E), allowing cost sharing
under certain circumstances do not ever apply to pre-July 1, 2010 cost
reporting periods and pre-July 1, 2010 patient discharges. Moreover, we
continue to believe the language in paragraph (g)(6) (along with the
remainder of paragraph (g)) only applies to cost reporting periods
beginning on or after July 1, 2010 and does not apply retroactively to
cost reporting periods beginning before July 1, 2010. We had intended
that the language under Sec. 413.78(g)(6) do no more than simply
paraphrase the language in section 5504(c) of the Affordable Care Act.
Accordingly, we believe that it is apparent that the provisions of
sections 5504(a)(3) and (b)(2) of the Affordable Care Act are not to be
applied prior to July 1, 2010, irrespectively of whether a hospital may
have had a jurisdictionally proper appeal pending as of March 23, 2010,
on an IME or direct GME issue from a cost reporting period occurring
prior to July 1, 2010.

[[Page 50120]]

In the FY 2015 IPPS/LTCH PPS proposed rule, we reiterated our
existing interpretation of the statutory amendments made by sections
5504(a) and (b) of the Affordable Care Act and also proposed to clarify
the regulatory text that implements these provisions by revising the
Sec. 413.78(g)(6) to be more consistent with the language at section
5504(c) of the Affordable Care Act. We proposed to revise the
regulatory language to read as follows: ``The provisions of paragraphs
(g)(1)(ii), (g)(2), (g)(3), and (g)(5) of this section shall not be
applied in a manner that requires reopening of any settled cost reports
as to which there is a jurisdictionally proper appeal pending as of
March 23, 2010, on direct GME or IME payments. Cost reporting periods
beginning before July 1, 2010 are not governed by paragraph (g) of this
section.'' The IME regulation at Sec. 412.105(f)(1)(ii)(E) includes a
reference to Sec. 413.78(g)(6); therefore, no proposed change was
needed to this section.
Comment: One commenter supported CMS' proposed changes with regard
to implementation of section 5504 of the Affordable Care Act. Other
commenters objected to CMS' interpretation that section 5504 is fully
prospective with an effective date of July 1, 2010, and that CMS'
proposed revision of Sec. 413.78(g)(6) would be with a ``retroactive
effective date.'' The commenters asserted that CMS' interpretation is
contrary to the plain meaning of the statute because Congress expected
that cost reports that were settled prior to 2010 would not be
reopened, thereby explicitly adding under section 5504(c) that if the
cost report was not settled, and if there was a jurisdictionally proper
appeal pending as of the date of the enactment of the Affordable Care
Act, the provisions of section 5504 would apply. One commenter noted
that an interpretation must ``give effect, if possible, to every clause
and word of the statute'' (United States v. Menasche, 348 U.S. 528,
538-39 (1955)). The commenter therefore believed that subsection (c)
would be superfluous if section 5504 were only prospective,
particularly considering that Congress had no need to instruct the
Secretary not to do something that she would not have done anyway (that
is, reopen cost reports without a statutory mandate). The commenters
asserted that CMS, in the August 3, 2010 proposed rule (75 FR 46385),
initially interpreted section 5504(c) to effectively override the
directives in sections 5504(a) and (b) and to require reopening and
application of the new standards set forth in section 5504(a)(3) and
section 5504(b)(2) to pre-July 1, 2010 cost reporting periods and
patient discharges whenever a hospital had a pending, jurisdictionally
proper appeal pending on a direct GME or IME issue as of March 23,
2010. The commenters also did not believe it is appropriate for CMS to
contend that section 5504 is strictly prospective but, at the same
time, propose to clarify an amendment to the regulations at Sec.
413.78(g)(6) ``with retroactive effect to 2010.'' One commenter argued
that a final rule must be a ``logical outgrowth'' of the proposed rule,
and the final regulation implemented in the November 24, 2010 final
rule with comment period was the same as that proposed. The commenter
surmised that CMS ``likely did not revise the final codified regulation
in order to avoid a challenge that the final rule was not the `logical
outgrowth' of the proposed rule,'' and asserted that CMS' proposed
clarification of Sec. 413.78(g)(6) in the FY 2015 IPPS/LTCH PPS
proposed rule cannot be applied prior to October 1, 2014. The
commenters suggested that the Secretary and CMS reconsider its proposal
to change Sec. 413.78(g)(6), and acknowledge that, as promulgated in
the November 24, 2010 final rule with comment period, Sec.
413.78(g)(6) required reopening of a hospital cost report for which a
jurisdictionally proper appeal was pending regarding GME and/or IME as
of the date of enactment of the Affordable Care Act.
Response: We agree with the commenters that some meaning must be
attributed to the statutory language at section 5504(c) of the
Affordable Care Act that the amendments made by the provisions of
sections 5504(a) and (b) ``shall not be applied in a manner that
requires reopening of any settled hospital cost reports as to which
there is not a jurisdictionally proper appeal pending as of the date of
the enactment of this Act on the issue of payment for indirect costs of
medical education . . . or for direct graduate medical education costs.
. . .'' Congress knows how to explicitly provide for retroactive
application or apply new standards to pending appeals when it so
desires. Indeed, the same statute at issue here, the Affordable Care
Act, contains numerous sections that, unlike section 5504 of the
Affordable Care Act, are either explicitly retroactive or expressly
apply new standards to pending appeals. For example, section 5505 of
the Affordable Care Act (unlike section 5504) contains explicitly
retroactive language. Section 5505 (c)(1) of the Affordable Care Act
states, ``[e]xcept as otherwise provided, the Secretary . . . shall
implement the amendments made by this section in a manner so as to
apply to cost reporting periods beginning on or after January 1,
1983''; section 5505(c)(2) instructs that a subsection ``shall apply to
cost reporting periods beginning on or after July 1, 2009''); section
5505(c)(3) instructs that another subsection ``shall apply to cost
reporting periods beginning on or after October 1, 2001''. Section 5504
has nothing comparable to the express retroactive language which is to
be found in section 5505. As another example, section 1556(c) is
explicitly retroactively and expressly applies a standard to pending
appeals, unlike section 5504 of the Affordable Care Act. Section
1556(c) of the Affordable Care Act states, ``[t]he amendments made by
this section shall apply with respect to claims filed under [a 1976
statute] after January 1, 2005, that are pending on or after the date
of enactment of this Act''. The fact that Congress was explicit when it
intended for particular provisions of the Affordable Care Act to apply
retroactively and/or to apply to pending proceedings, but section 5504
of the Affordable Care Act contains no such statements, suggests that
Congress did not intend for the new substantive standards set forth in
sections 5504(a)(3) and (b)(2) of the Affordable Care Act to apply to
earlier periods and discharges and/or to pending appeals. Instead, we
can presume that Congress acted intentionally and purposely by omitting
such language in section 5504 of the Affordable Care Act. As we
explained in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28152
through 28154), when we proposed to implement section 5504(c) in the
August 3, 2010 proposed rule (75 FR 46385), and when we implemented
section 5504(c) in the November 24, 2010 final rule with comment period
(75 FR 72136), we had to consider what new meaning it was adding to
sections 5504(a) and (b) of the Affordable Care Act because unlike, for
example, section 5505 of the Affordable Care Act, which has an
effective date prior to enactment of the Affordable Care Act and,
therefore, would apply to prior cost reporting periods, section 5504's
applicable effective date for the new standards it creates was July 1,
2010, a date that came after enactment of the Affordable Care Act and
was fully prospective (the new standards being that hospitals would be
permitted to count the time that a resident trains in activities
related to patient care in a nonprovider site in its FTE count if the
hospital incurs the costs of the residents' salaries and fringe
benefits for the time that the resident spends training in the
nonprovider site, and if

[[Page 50121]]

more than one hospital incurs the residency training costs in a
nonprovider setting, under certain circumstances, each hospital could
count a proportional share of the training time that a resident spends
training in that setting). As we stated in the November 24, 2010 final
rule with comment period (75 FR 72136), ``Section 5504 is fully
prospective with an explicit effective date of July 1, 2010, for the
new standards it creates. Nothing in section 5504(c) overrides that
effective date. Section 5504(c) merely notes that the usual
discretionary authority of Medicare contractors to reopen cost reports
is not changed by the provisions of section 5504; it simply makes clear
that Medicare contractors [MACs] are not required by reason of section
5504 to reopen any settled cost report as to which a provider does not
have a jurisdictionally proper appeal pending. It does not require
reopening in any circumstance; and the new substantive standard is, in
any event, explicitly prospective. We believe if Congress had wanted to
require such action or to apply the new standards to cost years or
discharges prior to July 1, 2010, it would have done so in far more
explicit terms.''
Therefore, we believe we were clear in the November 24, 2010 final
rule with comment period that we did not interpret section 5504(c) to
override the clear directives in sections 5504(a) and (b) concerning
the substantive standards that would apply to pre- and post-July 1,
2010 cost reporting periods and discharges. We rejected the notion
there that section 5504(c) requires reopening and application of the
new, more generous standard (which sections 5504(a)(3) and (b)(2)
created and expressly made ``effective'' only for cost reporting
periods beginning and discharges occurring ``on or after July 1,
2010'') to earlier periods and discharges whenever a hospital had a
jurisdictionally proper appeal pending on direct or indirect GME as of
the Affordable Care Act's enactment. Since that time, we have
maintained our position that the new, more generous standard set forth
in sections 5504(a)(3) and (b)(2) only apply to cost reporting periods
beginning, and discharges occurring, ``on or after July 1, 2010.'' We
have at the same time noted that Congress chose in sections 5504(a) and
(b) to explicitly and pointedly retain the longstanding statutory
substantive standard (that requires a single hospital to incur ``all,
or substantially all'' of the costs of the nonprovider residency
training before it may receive Medicare direct GME and IME payment for
that training), and make it applicable to pre-July 1, 2010 cost
reporting periods and discharges, while creating a new, more generous
standard which it directed would apply to later periods and discharges.
It is Congress who decided that the July 1, 2010 date would be
significant, and we are honoring the choice Congress made. Therefore,
we disagree with the commenters that it is inappropriate for CMS to
propose to clarify an amendment to the regulations at Sec.
413.78(g)(6) ``with retroactive effect to 2010.'' Moreover, we have
consistently expressed our position that the new substantive standards
which sections 5504(a)(3) and (b)(2) added to the Medicare statute
apply only to cost reporting periods beginning, and discharges
occurring, on or after July 1, 2010 (75 FR 46385) and 75 FR 72136).
Accordingly, our proposed clarification of Sec. 413.78(g)(6)
reiterating our existing interpretation of the statutory amendments
made by sections 5504(a) and (b) of the Affordable Care Act is
appropriate.
Commenters argued that CMS' statements in the August 3, 2010
proposed rule initially interpreted section 5504(c) to mean that
section 5504 could be applied retroactively to hospitals that indeed
had a pending, jurisdictionally proper appeal pending on a direct GME
or IME issue as of March 23, 2010. However, the commenters
misapprehended the position we took in the August 3, 2010 proposed
rule. While it is true that the proposed rule defined the meaning of
the term ``pending, jurisdictionally proper appeal'' that appears in
section 5504(c) of the Affordable Care (75 FR 46385), it did not state
that reopening was required when a hospital had such an appeal pending
as of the date of enactment or in other circumstances. In addition, it
never stated that the new standard set forth in sections 5504(a) and
(b) could ever apply to a cost reporting period beginning prior to July
1, 2010 for direct GME purposes, or to a discharge occurring before
July 1, 2010 for IME purposes. Quite to the contrary, the proposed rule
noted that ``[f]or direct GME payments, [section 5504] is effective for
cost reporting periods beginning on or after July 1, 2010; for IME
payments, the provision is effective for discharges occurring on or
after July 1, 2010'' (75 FR 46385 and 46386 (along similar lines)), and
advised that: ``We are proposing to revise our regulation at Sec.
413.75(b) accordingly to conform to these new statutory requirements
[in section 5504 of the Affordable Care Act]. Specifically, we are
proposing to revise the existing definition of ``all or substantially
all of the costs for the training program in the nonhospital setting''
to be effective for cost reporting periods beginning on or after July
1, 2007, and before July 1, 2010. We also are proposing to add a new
Sec. 413.78(g) that details how hospitals should count residents that
train in nonhospital sites for cost reporting periods beginning on or
after July 1, 2010.''
Therefore, the August 3, 2010 proposed rule recognized that section
5504 required pre-July 1, 2010 cost reporting periods and discharges to
be subject to the longstanding requirement that a single hospital incur
all or substantially all of the costs of residents training in a
nonprovider site, not the new, more generous standard set forth in
section 5504(a) and (b) of the Affordable Care Act. As noted, in the
November 24, 2010 final rule, in response to comments, the Secretary
only made it even more explicit that she did not read section 5504(c)
to require her to retroactively apply the new substantive standard in
sections 5504(a) and (b) to pre-July 1, 2010 cost reporting periods and
discharges (75 FR 72136 and 72153).
At least one court has held that our reading of section 5504 and
the implementing regulation is reasonable and has rejected many of the
arguments that the commenters made. The Eastern District of Michigan
has recognized that ``while section 5504(c) [of the Affordable Care
Act] establishes that if there was not a pending appeal concerning a
final cost report when the Affordable Care Act was enacted, that cost
report will not be reopened, section 5504(c) does not establish that if
there was a pending appeal concerning a final cost report when the
Affordable Care Act was enacted, that cost report must be reopened; on
this point the statute is silent,'' and ``Congress expressly indicated
in the statute itself what standards apply to what cost periods'' in
sections 5504(a) and (b) of the Affordable Care Act (Covenant Medical
Center v. Sebelius, No. 12-12901, 2014 WL 340247, at *8-*10 (E.D. Mich.
Jan. 30, 2014)). The district court also noted that our reading of
section 5504 gives effect to every clause and word of the provision as
it honors the effective dates and standards prescribed in sections
5504(a) and (b). The court further noted that the current version of 42
CFR 413.78(g)(6) is ``almost identical to section 5504(c)'' and held
that CMS' ``interpretation of Sec. 5504(c) is not undermined by her
identical conclusion regarding section 413.78(g)(6)'' (Covenant Medical
Center v. Sebelius, No. 12-12901, 2014 WL 340247, at *11-12 (E.D. Mich.
Jan. 30, 2014)). Therefore,

[[Page 50122]]

we disagree with the commenter that surmised that, in the November 24,
2010 final rule with comment period, CMS ``likely did not revise the
final codified regulation in order to avoid a challenge that the final
rule was not the `logical outgrowth' of the proposed rule.'' Rather, as
the court noted, the current version of 42 CFR 413.78(g)(6) is ``almost
identical to section 5504(c)'' and held that CMS' ``interpretation of
Sec. 5504(c) is not undermined by her identical conclusion regarding
section 413.78(g)(6)'' (Covenant Medical Center v. Sebelius, No. 12-
12901, 2014 WL 340247, at *11-12 (E.D. Mich. Jan. 30, 2014)). We had
intended that the language under Sec. 413.78(g)(6) do no more than
simply paraphrase the language in section 5504(c) of the Affordable
Care Act. Accordingly, we did not believe that it was necessary to
revise the final regulation in the November 24, 2010 final rule with
comment period. Nevertheless, as stated in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28153), because we have received questions about
the applicability of section 5504(c) and the associated regulation text
at Sec. 413.78(g)(6), we took the opportunity to revisit the
regulations and clarify them so that they would be even more consistent
with the language at section 5504(c).
Comment: One commenter asked that CMS clarify that section 5504
``filled a gap in the law'' regarding funding of residency training
occurring in a nonprovider setting ``by establishing for the first time
the definitive law regarding Medicare payment for medical education to
hospitals jointly funding training in a nonprovider setting,'' and that
section 5504 applies to hospitals with jurisdictionally proper appeals
regarding that issue that were pending as of the date of the enactment
of the Affordable Care Act.
Response: We do not agree with the commenter that section 5504
``filled a gap in the law'' regarding more than one hospital incurring
the costs of training residents in a nonprovider setting. Beginning at
least as early as 1988, the Secretary has consistently noted in the
preamble of various rules that the statute only allowed a hospital to
count the time that its residents spent training in a nonprovider site
in the FTE resident count for direct GME and IME purposes if that
single hospital incurred ``all of substantially all'' of the costs of
the training program in that setting. Indeed, in Borgess Medical Center
v. Sebelius (966 F.Supp.2d 1 at *6-*7 (D.D.C. 2013)), a court noted
that CMS had done so in 1998, 2003, and 2007 preambles of rules. For a
full discussion of the longstanding substantive standard and
requirement that a hospital can only count residents training if that
one single hospital incurs all or substantially all of the costs for
the training, we refer readers to the discussion in the November 24,
2010 final rule with comment period (75 FR 72134 through 72141), the
May 11, 2007 final rule (72 FR 26953 and 26969), the August 1, 2003
final rule (68 FR 45439), the July 31, 1998 final rule (63 FR 40954 and
40995), the September 29, 1989 final rule (54 FR 40286 and 40288), and
the September 21, 1988 proposed rule (53 FR 36589 and 36591). We
continue to believe that Congress was clear in amending sections
1886(h)(4)(E) and 1886(d)(5)(B)(iv) of the Act to provide for new
standards to be applied only prospectively, effective for cost
reporting periods beginning on or after, and discharges occurring on or
after, July 1, 2010. Moreover, we continue to believe the language in
paragraph (g)(6) of Sec. 413.78 (along with the remainder of paragraph
(g)) only applies to cost reporting periods beginning on or after July
1, 2010, and does not apply retroactively to cost reporting periods
beginning before July 1, 2010. We believe that the new standards set
forth in sections 5504(a)(3) and (b)(2) of the Affordable Care Act and
implemented by regulation at Sec. Sec. 413.78(g) and
412.105(f)(1)(ii)(E), allowing cost sharing under certain
circumstances, do not ever apply to pre-July 1, 2010 cost reporting
periods and pre-July 1, 2010 patient discharges. We had intended that
the language under Sec. 413.78(g)(6) do no more than simply paraphrase
the language in section 5504(c) of the Affordable Care Act.
Accordingly, after consideration of the comments we received, we
are not making any changes to our proposed clarification to the
regulatory language at Sec. 413.78(g)(6). The regulatory language at
Sec. 413.78(g)(6) states that the provisions of paragraphs (g)(1)(ii),
(g)(2), (g)(3), and (g)(5) of the section shall not be applied in a
manner that requires reopening of any settled cost reports as to which
there is not a jurisdictionally proper appeal pending as of March 23,
2010, on direct GME or IME payments. Cost reporting periods beginning
before July 1, 2010 are not governed by paragraph (g) of the section.
The IME regulations at Sec. 412.105(f)(1)(ii)(E) include a reference
to Sec. 413.78(g)(6); therefore, no change is needed to this section
of the IME regulations.
5. Changes to the Review and Award Process for Resident Slots Under
Section 5506 of the Affordable Care Act
In the past, if a teaching hospital closed, its direct GME and IME
FTE resident cap slots would be ``lost'' because those cap slots are
associated with a specific hospital's Medicare provider agreement,
which would be retired upon the hospital's closure. Under existing
regulations at Sec. 413.79(h) for direct GME and Sec.
412.105(f)(1)(ix) for IME, a hospital that is training FTE residents at
or in excess of its FTE resident caps and takes in residents displaced
by the closure of another teaching hospital may receive a temporary
increase to its FTE resident caps so that it may receive direct GME and
IME payment associated with those displaced FTE residents. However,
those temporary FTE resident caps are tied to those specific displaced
FTE residents, and the temporary caps expire when those displaced
residents complete their training program.
Section 5506 of the Affordable Care Act amended section
1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the
Secretary to establish a process by regulation under which, in the
event a teaching hospital closes, the Secretary will permanently
increase the FTE resident caps for hospitals that meet certain criteria
up to the number of the closed hospital's FTE resident caps. The
Secretary is directed to ensure that the aggregate number of FTE
resident cap slots distributed shall be equal to the aggregate number
of slots in the closed hospital's direct GME and IME FTE resident caps,
respectively. For a detailed discussion of the regulations implementing
section 5506 of the Affordable Care Act, we refer readers to the
November 24, 2010 final rule with comment period (75 FR 72212 through
72238) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through
53448).
a. Effective Date of Slots Awarded Under Section 5506 of the Affordable
Care Act
In distributing slots permanently under the provisions of section
5506 of the Affordable Care Act, section 5506(d) provides that ``the
Secretary shall give consideration to the effect of the amendments made
by this section on any temporary adjustment to a hospital's FTE cap
under Sec. 413.79(h) . . . (as in effect on the date of enactment of
this Act) in order to ensure that there is no duplication of FTE slots
. . .'' In consideration of this statutory language, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53437), we stated that in distributing
slots permanently

[[Page 50123]]

under section 5506, we would be cognizant of the number of FTE
residents for whom a temporary FTE cap adjustment was provided under
existing regulations at Sec. 413.79(h), and when those residents will
complete their training, at which point the temporary slots associated
with those displaced residents would then be available for permanent
redistribution. Therefore, in initially developing ranking criteria and
application materials that we would use to award available slots, we
considered how to interpret this statutory language at section 5506(d)
of the Affordable Care Act within the context of our existing GME
regulations and section 5506's amendment to section 1886(h) of the Act
generally.
In the November 24, 2010 final rule with comment period and the FY
2013 IPPS/LTCH PPS final rule (75 FR 72216 and 77 FR 53436,
respectively), we discussed the various ranking criteria that we would
use for hospitals applying for slots from closed hospitals. Currently,
if after distributing the slots from a closed hospital to increase the
FTE caps for applying hospitals that fall within Ranking Criteria One,
Two, and Three, there are still excess slots available and any of those
excess slots are associated with displaced residents for whom temporary
cap adjustments under Sec. 413.79(h) are in place, any slots awarded
to hospitals that fall within Ranking Criteria Four through Eight are
permanently assigned only once the displaced residents have completed
their training and the temporary cap adjustments associated with those
residents have expired. That is, in applying the requirement for ``no
duplication of FTE slots'' set forth in section 5506(d), we currently
consider all temporary cap adjustments received by hospitals on a
national basis and not specifically the hospital that is applying for
cap slots under section 5506, when deciding the effective date for
slots permanently awarded to hospitals applying under Ranking Criteria
Four through Eight. Specifically, in the November 24, 2010 final rule
with comment period, we stated that we believe the ``no duplication of
FTE slots'' requirement applies across all hospitals. Therefore,
although a hospital may not have received a temporary cap adjustment
under Sec. 413.79(h), other hospitals may have taken in residents and
received temporary cap adjustments for the same program, and we
believed that the appropriate policy was to delay the slots associated
with that program from being permanently distributed until it is known
that any and all temporary cap adjustments for those slots have expired
(75 FR 72227) Applying this policy to an example, if Hospital A is
training displaced residents and is receiving a temporary cap
adjustment under Sec. 413.79(h) for training those residents and
Hospital B, which is not receiving a temporary cap adjustment for
training any displaced residents, has applied under Ranking Criterion
Five to expand its internal medicine program, as explained in the
November 24, 2010 final rule with comment period, we would only award
permanent slots under section 5506 to Hospital B on a flow basis; that
is, effective after each displaced resident completes his/her training,
and, therefore, the temporary cap adjustments associated with that
resident expire at Hospital A.
However, the policy of applying the ``no duplication of FTE slot''
requirement at section 5506(d) of the Affordable Care Act to all
hospitals rather than simply to each specific hospital that is applying
for slots has thus far proven to be a very complex process due to the
number of displaced residents and the timing of multiple graduation
dates which must be tracked and considered when awarding slots on a
permanent basis. We believe this practice has delayed the awarding of
slots and is also unnecessarily burdensome for hospitals applying under
Ranking Criteria Four through Eight that are not receiving any cap
adjustments for training displaced residents under Sec. 413.79(h). We
believe the current policy that we apply for ``no duplication of FTE
slots'' is unnecessarily burdensome for these hospitals because,
instead of receiving their permanent slots under section 5506 as soon
as possible, the hospitals may receive their section 5506 awards with
staggered effective dates due to the graduation dates of displaced FTE
residents training at other hospitals that did receive temporary
adjustments under Sec. 413.79(h). While we believe that awarding
permanent slots to a hospital that is simultaneously receiving a
temporary cap adjustment for training displaced FTE residents under
Sec. 413.79(h) would clearly be a duplication of FTE slots and
contrary to the statutory directive, we believe there is flexibility in
interpreting this statutory language and that the statute does not
require such a policy to be applied to hospitals that are not receiving
temporary cap adjustments under Sec. 413.79(h). Furthermore, in
considering the specific statutory language regarding ``no duplication
of FTE slots,'' section 5506(d) in part provides that ``The Secretary
of Health and Human Services shall give consideration to the effect of
the amendments made by this section on any temporary adjustment to a
hospital's FTE cap under section 413.79(h) of title 42, Code of Federal
Regulations (as in effect on the date of enactment of this Act) in
order to ensure that there is no duplication of FTE slots.'' Because
this language refers to ``a hospital,'' we believe the statute provides
us with the flexibility to apply the ``no duplication of FTE slots''
requirement on a hospital-specific basis, considering separately
whether each hospital did or did not receive a temporary cap adjustment
under Sec. 413.79(h), rather than on a national all-hospital basis.
Bearing in mind the statutory language and our experience to date in
awarding slots as well as the unnecessary burden placed on hospitals
that are receiving section 5506 slots, but are not receiving temporary
cap adjustments under Sec. 413.79(h), we stated in the FY 2015 IPPS/
LTCH PPS proposed rule our belief that it was appropriate to propose a
policy that would provide for a more efficient and faster method for
awarding of slots to hospitals applying under Ranking Criteria Four
through Eight. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28155), we proposed that, effective for section 5506 application
rounds announced on or after October 1, 2014, for purposes of applying
the requirement for ``no duplication of FTE slots,'' we would only
require that there be no duplication of FTE slots on a hospital-
specific basis. That is, in determining the effective date for slots
awarded permanently under section 5506, we would only be concerned with
whether the hospital that is applying for slots is also receiving a
temporary cap adjustment under Sec. 413.79(h) for training displaced
residents. When awarding slots to the applying hospital, we would not
be concerned whether any other hospital is receiving a temporary cap
adjustment for training displaced residents under Sec. 413.79(h). For
example, if Hospital A is receiving a temporary cap adjustment under
Sec. 413.79(h) for training displaced residents in its general surgery
program but is applying under Ranking Criterion Five to start a
pediatrics program and Hospital B is not receiving a temporary cap
adjustment for training displaced residents and is applying under
Ranking Criterion Eight to expand a cardiology program, in awarding
section 5506 slots, we would only allow Hospital A to receive a
permanent adjustment to its FTE cap for training residents in its

[[Page 50124]]

pediatrics program once its temporary adjustments for the displaced
residents training in the general surgery program have expired. We
would not consider displaced residents when awarding section 5506 slots
to Hospital B.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28156), we stated
that, in conjunction with our proposal to interpret the ``no
duplication of FTE slots'' requirement to apply on a hospital-specific
basis to hospitals that are receiving temporary cap adjustments under
Sec. 413.79(h), we proposed to amend the effective dates of section
5506 slots received under Ranking Criteria Four through Eight for those
hospitals that are not receiving temporary cap adjustments under Sec.
413.79(h). (We refer readers to section IV.K.5.c. of the preamble of
this final rule where we discuss our proposal and final policy to amend
Ranking Criteria Seven and Eight.) Existing policy requires that slots
awarded under Ranking Criteria Four through Eight for expanding an
existing residency training program or starting a new residency
training program are effective the later of when a hospital can
demonstrate to the MAC that the slots associated with a new program or
program expansion are actually filled and, therefore, are needed as of
a particular date (usually July 1, possibly retroactive), or the July 1
after displaced residents complete their training. If a hospital is
awarded slots under Ranking Criterion Eight for cap relief, slots are
effective the date of CMS' award announcement, or the July 1 after
displaced residents complete their training, whichever is later.
However, because we proposed an alternative approach to interpreting
section 5506(d) that would permit us to apply the ``no duplication of
FTE slots'' requirement on a hospital-specific basis, we proposed to
change the effective date for slots received under Ranking Criteria
Four through Eight so that if a hospital is not receiving a temporary
cap adjustment under Sec. 413.79(h), the slots awarded under section
5506 would be effective when the hospital can demonstrate to its MAC
that the slots needed for a new program or program expansion are
actually filled and, therefore, are needed as of a particular date
(usually July 1, possibly retroactive). If a hospital is awarded slots
under Ranking Criteria Four through Eight and is receiving a temporary
cap adjustment to train displaced residents under Sec. 413.79(h), the
existing policy would apply such that the slots are awarded on a
permanent basis, the later of when a hospital can demonstrate to the
MAC that the slots associated with a new program or program expansion
are actually filled and, therefore, are needed as of a particular date
(usually July 1, possibly retroactive), or the July 1 after an
equivalent amount of displaced FTE residents complete their training.
In the proposed rule (79 FR 28156), we stated that, assume in a
hypothetical situation that there is a closed teaching hospital and
that another hospital takes in two displaced FTE residents for which
the hospital is receiving a temporary cap adjustment under Sec.
413.79(h). One resident is graduating on June 30, 2016, and the second
resident is graduating on June 30, 2018. Assume that when the section
5506 Round is announced, the hospital also applies for two slots to
expand an internal medicine program under Ranking Criterion Five. In
January 2017, CMS awards two permanent slots to the hospital under
Ranking Criterion Five. For the program year starting July 1, 2017, the
hospital successfully demonstrates to the MAC that it filled the two
additional internal medicine positions. Because one displaced FTE
resident already graduated on June 30, 2016, the MAC may approve one
slot on a permanent basis effective July 1, 2017. However, the hospital
would have to wait until July 1, 2018, to receive from the MAC the
permanent slot for the second displaced internal medicine resident
because the second displaced FTE resident is not graduating until June
30, 2018.
Comment: Several commenters supported the proposal and agreed that
applying the ``no duplication of slots'' policy on a national level, as
opposed to a hospital-specific level, results in a very complex and
unnecessarily burdensome review process which further delays the
permanent distribution of slots from a closed hospital.
Response: We appreciate the commenters' support.
Comment: Two commenters opposed the proposal because they believed
it added an unnecessary restriction to the effective dates of permanent
section 5506 awards received under Ranking Criteria Four through Eight
for hospitals that have temporary cap adjustments under Sec. 413.79(h)
and are training displaced residents from the closed hospital. The
commenters noted that the proposal would require a hospital that has a
temporary cap adjustment and is training a displaced resident from the
closed hospital and is awarded slots under Ranking Criteria Four
through Eight to wait until the displaced resident graduates in order
to receive the permanent cap slot. On the other hand, if a hospital
does not have a temporary cap adjustment and is awarded slots under
Ranking Criteria Four through Eight, those slots would be effective
when the hospital can demonstrate to its MAC that the slots needed for
a new program or program expansion are actually filled without
consideration of any temporary cap adjustment at another hospital. The
commenters asserted that only Ranking Criteria One and Three are
specifically tied to the training of displaced residents, and if a
hospital applies under Ranking Criteria Four through Eight, they are,
in fact, acknowledging that they do not qualify under Ranking Criterion
One or Three and therefore should not be subject to limitations of the
effective date of its award related to a temporary cap adjustment
associated with a displaced resident. The commenters suggested that the
revised effective date of slots awarded under Ranking Criteria Four
through Eight apply for all hospitals and award slots, regardless of
whether the hospitals received a temporary cap adjustment under Sec.
413.79(h), and that the ``no duplication of slots'' policy should not
apply when section 5506 slots are being awarded for a completely
different program or purpose than the program for which the hospital
was awarded a temporary cap adjustment.
Response: We appreciates the commenters' concerns and suggestions
regarding our application of the ``no duplication of slots'' policy as
it applies to the effective dates for Ranking Criterion Four through
Eight. However, we continue to believe that allowing a hospital to
receive a permanent cap slot under section 5506 while at the same time
receiving a temporary cap adjustment under Sec. 413.79(h) would be
contrary to the statutory directive of the ``no duplication of slots''
policy because as long as the displaced resident is still training and
the hospital has a temporary cap adjustment for that resident and is
receiving IME and direct GME payments, that slot is still in use by the
hospital. Section 5506(d) in part provides that ``The Secretary of
Health and Human Services shall give consideration to the effect of the
amendments made by this section on any temporary adjustment to a
hospital's FTE cap under section 413.79(h) of title 42, Code of Federal
Regulations (as in effect on the date of enactment of this Act) in
order to ensure that there is no duplication of FTE slots'' (emphasis
added). Thus, we disagree with the commenters' overly broad
interpretation of the statutory

[[Page 50125]]

language, and continue to believe that the statute does not allow for
duplication of slots within a hospital overall, even when those slots
are awarded for completely different programs or purposes. In addition,
prior to our proposal, our existing policy regarding effective dates
for slots awarded under Ranking Criteria Four through Eight has been
that where a temporary cap adjustment was in effect for displaced
residents from a closed hospital, the effective dates for awards under
Ranking Criteria Four through Eight are tied to the graduation dates of
the displaced residents because as long as a hospital was awarded a
temporary cap adjustment for a particular displaced resident, the slot
associated with that resident is not yet available, regardless of the
ranking criteria or the program or purpose for which the permanent
section 5506 FTE cap slot was awarded. We believe that our proposed
policy strikes the necessary balance of avoiding unnecessary complexity
in the review of section 5506 applications and maintaining a policy
that conforms to the statutory requirement for ``no duplication of
slots'' under section 5506.
Consistent with policy implemented in subregulatory guidance in
Change Request 7746, Transmittal 1171 (issued January 31, 2013; https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R1171OTN.pdf) where we stated that slots awarded under a given round
may only replace temporary FTE cap adjustments associated with
residents displaced from that same round, we would like to clarify that
our proposed application of the ``no duplication of slots'' policy
would only apply for temporary cap adjustments and permanent section
5506 FTE cap slots associated with the same closed hospital (Sec.
413.79(h)). In addition, we note that, as we stated in the proposed
rule (79 FR 28156), if a hospital is awarded slots under Ranking
Criteria Four through Eight and is receiving a temporary cap adjustment
to train displaced residents under Sec. 413.79(h), the existing policy
would apply such that the slots are awarded on a permanent basis, the
later of when a hospital can demonstrate to the MAC that the slots
associated with a new program or program expansion are actually filled
and, therefore, are needed as of a particular date (usually July 1,
possibly retroactive), or the July 1 after an equivalent amount of
displaced FTE residents complete their training. That is, so long as a
hospital continues to receive a temporary cap adjustment under Sec.
413.79(h) for residents displaced from a specific closed hospital, that
hospital's section 5506 award under Ranking Criteria Four through Eight
associated with that specific closed hospital would also not be fully
effective. Stating it simply, if a hospital has a temporary FTE cap
adjustment of three FTEs due to the closure of Hospital Z, and the
hospital is also awarded three permanent FTE cap slots under the
section 5506 Round associated with Hospital Z, this hospital's
permanent FTE cap adjustment of three would not take full effect until
all three displaced FTEs from Hospital Z graduate, when the hospital's
temporary FTE cap would go down to zero (Sec. 413.79(h)). When
determining the effective dates of section 5506 FTE cap slots awarded
under Ranking Criteria Four through Eight for a given Round of section
5506 from a given closed hospital, the hospital receiving the section
5506 slots would consider (1) whether it has a temporary cap adjustment
associated with residents displaced from the closed hospital associated
with that Round of section 5506, and (2) the difference (if any)
between its section 5506 FTE cap slot award from that closed hospital,
and the temporary cap adjustment associated with the same closed
hospital. If a hospital is receiving a temporary cap adjustment for
training displaced residents and its section 5506 award is less than or
equal to the temporary cap adjustment, the section 5506 slots would
become effective the later of when the hospital can demonstrate to the
MAC that the slots associated with a new program or program expansion
are actually filled and, therefore, are needed, or the July 1 after
displaced residents complete their training. If a hospital is receiving
a temporary cap adjustment for training displaced residents and its
section 5506 award is greater than the temporary cap adjustment, the
number of slots by which the section 5506 award exceeds the temporary
cap adjustment would be available for use when the hospital can
demonstrate to its MAC that the slots associated with the new program
or program expansion are filled and, therefore, are needed as of a
particular date (usually July 1, possibly retroactive). The effective
dates for those slots in excess of the hospital's temporary cap
adjustment in a given round would not hinge on whether a displaced
resident has completed his/her training and, therefore, the temporary
cap adjustment associated with that resident expires because there
would be no duplication of slots for that hospital with respect to the
slots awarded in excess of the hospital's temporary cap adjustment.
However, the portion of the hospital's section 5506 award that is equal
to or less than its temporary cap adjustment for displaced residents
associated with the closed hospital from the same round would be
subject to the ``no duplication of FTE slots'' requirement, and those
section 5506 slot awards would become available only as an equivalent
amount of temporary cap adjustment expires. The following examples
illustrate the interplay between section 5506 slots awarded and
temporary cap adjustments under Sec. 413.79(h) associated with the
same closed hospital:

Example 1: Hospital A takes in two displaced FTE residents from
a closed teaching hospital for which the hospital is receiving a
temporary cap adjustment of 2.0 FTEs under Sec. 413.79(h). One
resident is graduating on June 30, 2016, and the second resident is
graduating on June 30, 2018. When the section 5506 Round is
announced, Hospital A also applies for two slots to expand an
internal medicine program under Ranking Criterion Five. In January
2017, CMS awards two permanent slots to the hospital under Ranking
Criterion Five. Hospital A would consider (1) whether it has a
temporary cap adjustment associated with residents displaced from
the closed hospital associated with that Round of section 5506 (yes,
2.0 FTEs), and (2) the difference (if any) between its section 5506
FTE cap slot award from that closed hospital, and the temporary cap
adjustment associated with the same closed hospital (2.0 temporary
cap--2.0 section 5506 award = 0, no difference). Because Hospital
A's section 5506 award is (less than or) equal to the temporary cap
adjustment, the section 5506 slots would become effective on a flow
basis; that is, effective after each displaced resident completes
his/her training, and as the temporary cap adjustment associated
with that resident expires. For the program year starting July 1,
2017, Hospital A successfully demonstrates to the MAC that it filled
the two additional internal medicine positions. Because one
displaced FTE resident already graduated on June 30, 2016, the MAC
may approve one slot on a permanent basis effective July 1, 2017.
However, Hospital A would have to wait until July 1, 2018, to
receive from the MAC the permanent slot for the second displaced
internal medicine resident because the second displaced FTE resident
is not graduating until June 30, 2018.
Example 2: Hospital B takes in two displaced FTE residents from
a closed teaching hospital for which Hospital B is receiving a
temporary cap adjustment of 2.0 FTEs under Sec. 413.79(h). One
resident is graduating on June 30, 2018, and the second resident is
graduating on June 30, 2019. When the section 5506 Round is
announced, Hospital B applies for five slots to expand a geriatrics
program under Ranking Criterion Four. In January 2017, CMS awards
five permanent slots to Hospital B under Ranking Criterion Four.
Hospital B would consider (1) whether it has a temporary cap
adjustment

[[Page 50126]]

associated with residents displaced from the closed hospital
associated with that Round of section 5506 (yes, 2.0 FTEs), and (2)
the difference (if any) between its section 5506 FTE cap slot award
from that closed hospital, and the temporary cap adjustment
associated with the same closed hospital (2.0 temporary cap--5.0
section 5506 award = 3, absolute value). Because Hospital B's
section 5506 award is greater than the temporary cap adjustment,
then the number of slots by which the section 5506 award exceeds the
temporary cap adjustment would be available for use when the
hospital can demonstrate to its MAC that the slots associated with
the new program or program expansion are filled and, therefore, are
needed. For the program year starting July 1, 2017, Hospital B
successfully demonstrates to the MAC that it filled all five
additional geriatrics positions. Even though the displaced residents
did not yet graduate, the MAC may approve three slots on a permanent
basis effective July 1, 2016 because Hospital B's section 5506 award
exceeds its temporary cap adjustment and Hospital B can use up to
three of its five slots while the displaced residents are still
training. However, Hospital B would have to wait until July 1, 2018,
to receive from the MAC the fourth slot for the geriatrics program
because the first displaced FTE resident is not graduating until
June 30, 2018, and would then have to wait until July 1, 2019, to
receive from the MAC the fifth slot for the geriatrics program
because the second displaced resident is not graduating until June
30, 2019.
Example 3: Hospital C does not take in any displaced residents
and does not receive a temporary cap adjustment under Sec.
413.79(h). When the section 5506 Round is announced, Hospital C
applies for five slots to expand geriatrics program under Ranking
Criterion Four. In January 2017, CMS awards five permanent slots to
Hospital C under Ranking Criterion Four. For the program year
starting July 1, 2017, Hospital C successfully demonstrates to the
MAC that it filled all five additional geriatrics positions. Because
Hospital C did not receive a temporary cap adjustment, there would
be no need to consider displaced residents at other hospitals when
awarding permanent slots and determining effective dates under
section 5506 for Hospital C. Therefore, Hospital C could receive a
permanent adjustment of five FTEs to its cap for training residents
in its geriatrics program effective July 1, 2017.
With regard to a hospital that is training displaced FTE
residents, has a temporary cap adjustment under Sec. 413.79(h), and
also applies both under Ranking Criteria One or Three, and under
Ranking Criteria Four through Eight, the current policy with regard
to the effective date of slots awarded under Ranking Criteria One
and Three would still apply, and would not impact the policy
described above for Ranking Criteria Four through Eight. That is, as
stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53443), slots
awarded under Ranking Criteria One or Three would continue to become
permanent (or effective) on a flow basis as displaced FTEs finish
their training programs. If a hospital has a temporary cap
adjustment under Sec. 413.79(h) and is awarded slots under Ranking
Criteria One or Three for training those displaced residents, then
as the displaced FTE residents graduate, an equivalent amount of
permanent section 5506 slots can become effective under Ranking
Criterion One or Three (thereby avoiding duplication of FTE cap
slots). If the amount of section 5506 slots awarded under Ranking
Criterion One or Three is equal to the amount of the temporary cap
adjustment, there would be no concern of duplication of FTE slots
with respect to a hospital's other awards under Ranking Criteria
Four through Eight because ``no duplication'' would already be
addressed with regard to slots awarded within Ranking Criterion One
or Three. Accordingly, other slots that the hospital is awarded
under Ranking Criteria Four through Eight would not depend on
whether a displaced resident has completed his/her training and,
therefore, would be made available for use when the hospital can
demonstrate to its MAC that the slots associated with the new
program or program expansion are filled and, therefore, are needed.
The following example illustrates this policy:
Example Four: Hospital D takes in two displaced FTE residents
from a closed teaching hospital for which Hospital D is receiving a
temporary cap adjustment of 2.0 FTEs under Sec. 413.79(h). One
resident is graduating on June 30, 2018, and the second resident is
graduating on June 30, 2019. When the section 5506 Round is
announced, Hospital D applies for two slots under Ranking Criterion
Three, and also applies for five slots to expand a geriatrics
program under Ranking Criterion Four. In January 2017, CMS awards to
Hospital D two permanent slots under Ranking Criterion Three, and
five permanent slots under Ranking Criterion Four. With regard to
the effective dates of the slots awarded under Ranking Criteria Four
through Eight, Hospital D would consider (1) whether it has a
temporary cap adjustment associated with residents displaced from
the closed hospital associated with that Round of section 5506 (yes,
2.0 FTEs), and (2) the difference (if any) between its section 5506
FTE cap slot award from that closed hospital, and the temporary cap
adjustment associated with the same closed hospital (2.0 temporary
cap--7.0 section 5506 award = 5, absolute value). Because Hospital
D's section 5506 award is greater than the temporary cap adjustment,
the number of slots by which the section 5506 award exceeds the
temporary cap adjustment (5 slots) would be available for use when
Hospital D can demonstrate to its MAC that the slots associated with
the new program or program expansion are filled and, therefore, are
needed. For the program year starting July 1, 2017, Hospital D
successfully demonstrates to the MAC that it filled all five
additional geriatrics positions. Even though the displaced residents
did not yet graduate, the MAC may approve all five slots on a
permanent basis effective July 1, 2017, because Hospital D's section
5506 award exceeds its temporary cap adjustment by five slots and
the amount of section 5506 slots awarded under Ranking Criterion
Three is equal to the amount of the temporary cap adjustment.
Therefore, ``no duplication'' is already addressed with regard to
slots awarded within Ranking Criterion Three. On July 1, 2018, one
displaced FTE graduated, and if Hospital D can demonstrate to the
MAC that it filled a slot to replace the displaced resident under
Ranking Criterion Three, Hospital D may receive from the MAC one
permanent slot awarded under Ranking Criterion Three effective on
that date. Similarly, on July 1, 2019, when the second displaced
resident graduates, and Hospital D's temporary cap adjustment goes
down to zero, if Hospital D recruits an additional resident to
replace that second displaced resident, Hospital D may receive from
the MAC its final permanent slot awarded under Ranking Criterion
Three effective on that date.

However, if a hospital's number of permanent slots awarded under
section 5506 Ranking Criterion One or Three is less than its temporary
cap adjustment, and the hospital is also awarded slots under Ranking
Criteria Four through Eight, the amount of the section 5506 slots
awarded under Ranking Criterion Four through Eight that is equal to the
remaining portion of the temporary cap adjustment would become
effective the later of when the hospital can demonstrate to the MAC
that the slots associated with a new program or program expansion are
actually filled and, therefore, are needed on the July 1 after the
appropriate amount of displaced residents complete their training.
After consideration of the public comments we received, we are
finalizing, as proposed, the policy that effective for section 5506
application rounds announced on or after October 1, 2014, the statutory
provision at section 5506(d) requiring the Secretary when awarding
slots under section 5506 to consider any temporary cap adjustment to a
hospital's FTE cap under Sec. 413.79(h) to ensure no duplication of
FTE slots, be interpreted in a manner such that the requirement for
``no duplication of FTE slots'' is applied on a hospital-specific basis
rather than across all hospitals receiving temporary cap adjustments
under Sec. 413.79(h). Consistent with this change, we are finalizing
our proposal to amend the effective date for slots received under
Ranking Criteria Four through Eight so that if a hospital is not
receiving a temporary cap adjustment under Sec. 413.79(h), the slots
awarded under section 5506 would be effective when the hospital can
demonstrate to its MAC that the slots needed for a new program or
program expansion are actually filled and, therefore, are needed as of
a particular date (usually July 1, possibly retroactive). However, if a
hospital is receiving a temporary cap adjustment under Sec. 413.79(h),
we would consider

[[Page 50127]]

the number of displaced residents in determining the effective date of
the slots awarded under section 5506 such that as long as a hospital
continues to receive a temporary cap adjustment under Sec. 413.79(h)
for residents displaced from a specific closed hospital, that
hospital's section 5506 award under Ranking Criteria Four through Eight
associated with that specific closed hospital would also not be fully
effective. When determining the effective date of section 5506 FTE cap
slots awarded under Ranking Criteria Four through Eight for a given
round of section 5506 from a given closed hospital, the hospital
receiving the section 5506 slots would consider (1) whether it has a
temporary cap adjustment associated with residents displaced from the
closed hospital associated with that round of section 5506, and (2) the
difference (if any) between its section 5506 FTE cap slot award from
that closed hospital, and the temporary cap adjustment associated with
the same closed hospital. If a hospital is receiving a temporary cap
adjustment for training displaced residents and its section 5506 award
is less than or equal to the temporary cap adjustment, the section 5506
slots would become effective the later of when the hospital can
demonstrate to the MAC that the slots associated with a new program or
program expansion are actually filled and, therefore, are needed or the
July 1 after displaced residents complete their training. If a hospital
is receiving a temporary cap adjustment for training displaced
residents, and its section 5506 award is greater than the temporary cap
adjustment, the number of slots by which the section 5506 award exceeds
the temporary cap adjustment would be available for use when the
hospital can demonstrate to its MAC that the slots associated with the
new program or program expansion are filled and, therefore, are needed
as of a particular date (usually July 1, possibly retroactive). The
effective dates for those slots in excess of the hospital's section
5506 award in a given round would not depend on whether a displaced
resident has completed his/her training. However, the portion of the
hospital's section 5506 award that is equal to or less than its
temporary cap adjustment for displaced residents associated with the
closed hospital from the same round would continue to be subject the
``no duplication of FTE slots'' requirement, and the section 5506 slots
would become available only as an equivalent amount of temporary cap
adjustment expires.
We did not propose any changes to the effective date for slots
awarded under Ranking Criterion One, Ranking Criterion Two, or Ranking
Criterion Three. Consistent with existing policy, if a hospital is
applying under Ranking Criterion One or Ranking Criterion Three and is
not receiving a temporary cap adjustment for training displaced
residents under Sec. 413.79(h), the effective date of the section 5506
slots is the date of the hospital closure. If a hospital is applying
under Ranking Criterion One or Ranking Criterion Three and is receiving
a temporary cap for training displaced residents under Sec. 413.79(h),
the effective date of the section 5506 slots is after the displaced
resident(s) graduate. If a hospital is receiving a temporary cap for
training displaced residents under Sec. 413.79(h), and is applying
under Ranking Criterion One or Ranking Criterion Three and is also
separately applying under Ranking Criterion Four or subsequent Ranking
Criteria, for slots awarded under Ranking Criteria One or Three, the
effective date of the section 5506 slots is after the displaced
resident(s) graduate. For slots awarded under Ranking Criteria Four or
subsequent Ranking Criteria, the slots are awarded the later of when a
hospital can demonstrate to the MAC that the slots associated with a
new program or program expansion are actually filled and, therefore,
are needed as of a particular date (usually July 1, possibly
retroactive), or the July 1 after an equivalent amount of a displaced
FTE resident(s) at the hospital complete their training. Therefore, for
such a hospital, the effective dates of slots awarded under Ranking
Criteria One/Three, and Ranking Criteria Four through Eight might
coincide. Also, consistent with existing policy, if a hospital is
applying under Ranking Criterion Two, the effective date of the
permanent award of section 5506 slots is the date of the hospital
closure. We discuss these existing policies in greater detail in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53437 through 53445).
b. Removal of Seamless Requirement
Under current policy, if a hospital is applying under Ranking
Criterion One or Three, the hospital must show that it is seamlessly
replacing displaced FTE residents with new FTE residents once the
displaced residents graduate (75 FR 72219 and 72221 through 72222). We
have stated that in instances where a hospital seamlessly operates an
entire program or part of a program from the closed hospital (or takes
over an entire program prior to the hospital's closure), such a
hospital is demonstrating a strong commitment to maintain GME programs
in the community for the long term and should be awarded slots under
higher ranking criteria (75 FR 72216). Therefore, we required that, in
order to receive slots under Ranking Criterion One and Three, the
applying hospital must demonstrate that upon graduation of the
displaced FTE residents that it is training, the slots held by those
displaced FTEs are seamlessly replaced with new FTE residents (75 FR
72219 and 72221 through 72222). In the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53441), in response to concerns associated with the seamless
requirement and timeline used by the National Resident Match Program
and other resident match services, we revised the seamless requirement.
We stated that, in the instance where a teaching hospital closed after
December 31 of an academic year, in order for a hospital to qualify
under Ranking Criterion One or Three for cap slots associated with
displaced FTE residents who will graduate June 30 of the academic year
in which the applying hospital took in the displaced FTE residents, the
applying hospital must be able to demonstrate that it will fill slots
vacated by displaced FTE residents by July 1 of the second academic
year following the hospital closure. However, in the instance where a
teaching hospital closed before December 31 of an academic year, in
order for a hospital to qualify under Ranking Criterion One or Three
for cap slots associated with displaced FTE residents who will graduate
June 30 of the academic year in which the applying hospital took in the
displaced FTE residents, the applying hospital must be able to
demonstrate that it will seamlessly fill slots vacated by displaced FTE
residents by that July 1; that is, the day immediately after the June
30 that the displaced FTE residents graduate (77 FR 53441 through
53442). We also revised the CMS Application Form to instruct a hospital
applying under Ranking Criterion One or Three to list the names and
graduation dates of specific displaced residents who, upon their
graduation, have been or will be seamlessly replaced by new residents
(77 FR 53446). Because Ranking Criteria One and Three fall under
Demonstrated Likelihood Criterion 2, the hospital is taking over all of
part of an existing residency program from the closed hospital, or
expanding an existing residency training program, the requirement to
include a list with the names and graduation dates of specific
displaced residents who have been or will be seamlessly replaced was
added

[[Page 50128]]

under Demonstrated Likelihood Criterion 2 on the CMS Application Form.
In addition to the match deadlines associated with the National
Resident Matching Program and match deadlines associated with matching
into osteopathic programs, we have recently been made aware of other
match deadlines associated with certain fellowship programs. From the
experience we have had so far in reviewing section 5506 applications,
where we have observed the complexity of tracking various match
deadlines as well as the intersection between these deadlines and when
the section 5506 awards are announced by CMS, in the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28158), we proposed to remove the seamless
requirement for slots awarded under Ranking Criterion One and Three
effective for section 5506 application rounds announced on or after
October 1, 2014. We did not propose to make any other additional
changes to Ranking Criterion One or Three; that is, the hospital must
still be training displaced residents and must either take over or have
taken over an entire program from the closed hospital and continue
operating that program in the same manner in which it was operated by
the closed hospital or the hospital must take over part of a closed
hospital's program and permanently expand its own program as a result
of training displaced residents. Hospitals would continue to be
required to submit supporting documentation when applying under Ranking
Criterion One or Three that indicates that they have made a commitment
to take over the closed hospital's program or that they have made the
commitment to permanently expand their own residency training program
resulting from taking over part of a closed hospital's program.
In determining the effective date of slots awarded under Ranking
Criterion One or Three where the hospital has been training residents
that were displaced by the closed hospital and receiving a temporary
cap adjustment under Sec. 413.79(h), the hospital would work with its
MAC to determine when it could be permanently awarded the slots based
on the graduation dates of the displaced residents it is training.
Consistent with our proposal, we proposed to remove the following
requirement under Demonstrated Likelihood Criterion 2 on the CMS
Application Form: ``Hospitals applying for slots under option (a) which
correlates to Ranking Criterion 1 or (b) which correlates to Ranking
Criterion 3 must list the names and graduation dates of specific
displaced residents who, upon their graduation, have been or will be
seamlessly replaced by new residents. The list may be added as an
attachment to this application.'' We proposed to replace this
requirement with the following requirement under Demonstrated
Likelihood Criteria 1 and 2'' ``Please indicate Y or N: As of the time
of submitting this application, are you receiving a temporary cap
adjustment for IME and/or direct GME under 42 CFR 413.79(h) for
residents displaced by the closure of the hospital subject to this
Round of section 5506? (Y/N)'' so that we are aware which hospitals are
receiving temporary cap adjustments for training displaced residents
under Sec. 413.79(h), and when we award slots, we would know which
hospitals to instruct to work with their MACs to determine when the
slots could be permanently awarded to them based on the graduation
dates of the displaced residents they are training.
In summary, we proposed to remove the seamless requirement
currently included as part of Ranking Criterion One or Three. We also
proposed to remove from the CMS Application Form, the following
requirement: ``Hospitals applying for slots under option a) which
correlates to Ranking Criterion 1 or b) which correlates to Ranking
Criterion 3 must list the names and graduation dates of specific
displaced residents who, upon their graduation, have been or will be
seamlessly replaced by new residents. This list may be added as an
attachment to this application.''
Comment: Commenters supported the proposal to remove the seamless
requirement for slots awarded under Ranking Criteria One and Three
effective for section 5506 application rounds announced on or after
October 1, 2014. One commenter stated that, in addition to complicating
the CMS review process of section 5506 applications, the seamless
requirement created an administrative burden for hospitals applying
under Ranking Criteria One and Three. Another commenter stated it
supported removing the seamless requirement because it has become very
complicated and burdensome for hospitals that legitimately plan to
continue training residents in a program once the displaced residents
training in that program graduate. However, commenters requested that
CMS ``provide clear and consistent guidance'' to explain the type of
documentation that would meet the requirement that a hospital has made
a commitment to take over the closed hospital's program or has made the
commitment to permanently expand their own residency training program
resulting from taking over part of a closed hospital's program.
Response: We thank the commenters for their support of our proposed
policy to remove the seamless requirement under Ranking Criteria One
and Three. We are finalizing the policy as proposed. Effective for
section 5506 rounds announced on or after October 1, 2014, we are
removing the seamless requirement previously required as part of
Ranking Criterion One and Three. We are removing from the CMS
Application Form the following language: ``Hospitals applying for slots
under option a) which correlates to Ranking Criterion 1 or b) which
correlates to Ranking Criterion 3 must list the names and graduation
dates of specific displaced residents who, upon their graduation, have
been or will be seamlessly replaced by new residents. This list may be
added as an attachment to this application.'' We are adding to the CMS
Application Form the following language under Demonstrated Likelihood
Criteria 1 and 2 ``Please indicate Y or N: As of the time of submitting
this application, are you receiving a temporary cap adjustment for IME
and/or direct GME under 42 CFR 413.79(h) for residents displaced by the
closure of the hospital subject to this Round of section 5506? (Y/N).''
In response to the commenters' request that CMS ``provide clear and
consistent guidance'' to explain the type of documentation that would
meet the requirement under Ranking Criterion One or Three, commenters
should submit documentation as part of their application which
indicates a commitment to take over the closed hospital's program or
permanently expand their own residency training program resulting from
taking over part of a closed hospital's program. We believe that the
documentation that the hospital submits to demonstrate the likelihood
that it would fill the requested slots under Demonstrated Likelihood
Criterion 2 is sufficient. Demonstrated Likelihood Criterion 2 is for
taking over all or part of an existing residency program from the
closed hospital, or expanding an existing residency program. Applicants
should refer to the description of documentation included on the CMS
Application Form under ``Demonstrated Likelihood Criterion 2: Taking
Over All or Part of an Existing Residency Program from the Closed
Hospital, or Expanding an Existing Residency Program,'' for examples of
acceptable documentation. For example, if a hospital is applying under
Ranking Criterion Three because it is

[[Page 50129]]

permanently expanding its surgery program as a result of training
residents displaced from a closed hospital's surgery program and it has
submitted documentation to the accrediting body requesting approval of
additional positions, or it has already received approval from the
accrediting body for the expansion, such documentation would meet the
requirement that a hospital applying under Ranking Criterion Three has
made the commitment to permanently expand its own surgery program as a
result of training displaced residents.
c. Revisions to Ranking Criteria One, Seven, and Eight for Applications
under Section 5506
In the November 24, 2010 final rule with comment period (75 FR
72223), we finalized the Ranking Criteria within each of the three
first statutory priority categories (that is, same or contiguous CBSAs,
same State, and same region) to be used to rank applications for
assignment of slots under section 5506 of the Affordable Care Act. For
each application, we assigned slots based on Ranking Criteria, with
Ranking Criterion One being the highest ranking and Ranking Criterion
Seven being the lowest. For a detailed discussion of the ranking
categories, we refer readers to the November 24, 2010 final rule with
comment period (75 FR 72212 through 72240).
After reviewing applications submitted during the first section
5506 application process (those applications that were due to CMS on
April 1, 2011), we observed that the overwhelming majority of
applications fell under Ranking Criterion Seven; that is, the applying
hospital seeks the slots for purposes that do not fit into any of
Ranking Criterion One through Ranking Criterion Six. These applications
included applications from hospitals that applied for FTE cap slots for
both primary care and/or general surgery and for nonprimary care
specialties as well as applications for general cap relief. The sheer
number of applications we received under Ranking Criterion Seven
indicated a need to further prioritize among the applicants that would
have qualified under Ranking Criterion Seven. Therefore, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53434 through 53437), we finalized
changes to the Ranking Criteria, replacing Ranking Criterion Seven with
two separate Ranking Criteria (Ranking Criterion Seven and Ranking
Criterion Eight) resulting in a total of eight Ranking Criteria. Under
the Ranking Criteria, as modified by the FY 2013 IPPS/LTCH PPS final
rule, a hospital that is applying both for the purpose of establishing
or expanding primary care or general surgery programs, and in addition
is requesting slots for the purpose of establishing or expanding
nonprimary care or nongeneral surgery programs and/or for cap relief
must submit an application requesting additional FTE slots for its
primary care or general surgery programs under Ranking Criterion Seven.
The hospital's request for additional FTE slots to establish or expand
a nonprimary care or nongeneral surgery program and/or for additional
FTE slots for cap relief would then be made under Ranking Criterion
Eight. Prior to this change, if a hospital applied for additional FTE
slots to establish or expand both a primary care or general surgery
program in addition to a nonprimary care or nongeneral surgery program
and/or for additional FTE slots for cap relief, all of its applications
(with the exception of Ranking Criteria One through Three) would fall
under Ranking Criteria Seven. For a complete list of the Ranking
Criteria, we refer readers to section IV.K.5.a. of the preamble of this
final rule, which discusses the background for preservation of resident
cap positions from closed hospitals under section 5506 of the
Affordable Care Act.
After reviewing applications and making awards under several more
rounds of section 5506 applications, we have observed that, as hospital
closings continue to occur, there has been a significant increase in
the time between a hospital's closure and the announcement of section
5506 awards by CMS. We believe that this delay is partly due to the
administratively burdensome task of processing, reviewing, and
responding to such a large number of applications for each hospital
closure, or each round of section 5506 awards. When implementing
section 5506 in the November 24, 2010 final rule with comment period
(75 FR 72212 through 72249), we initially envisioned the reviewing of
applications and awarding of section 5506 FTE slots as being a more
streamlined and expedient process. However, as a practical matter, we
have found that the process has been much more resource and time
intensive than we had originally anticipated. This is partly due to the
time and resources needed to properly apply the process established by
CMS in reviewing section 5506 applications and awarding FTE cap slots.
Since the initial implementation of section 5506, we have attempted to
be responsive to these unexpected delays by refining the ranking
criteria to make the review process less administratively burdensome.
However, these changes did not alleviate the process to the desired
extent. Furthermore, we have observed that, while many of the
applications submitted to CMS are applications requesting FTE slots for
purposes of general cap relief, we have more often than not awarded no
slots at all for cap relief. This is due in large part to the limited
number of slots available (many of the closed teaching hospitals did
not have large FTE resident caps) and an overwhelming demand for those
slots from applicants who apply for FTE slots for reasons other than
cap relief. Since we finalized the modified Ranking Criterion Seven and
added Ranking Criterion Eight in the FY 2013 IPPS/LTCH PPS final rule,
and as of the issuance of the FY 2015 IPPS/LTCH PPS proposed rule, we
had announced three new rounds of section 5506 applications due to the
closures of six hospitals. We have received a total of 424 applications
from hospitals seeking cap relief. Of those 424 applications, only 6
applications were ultimately awarded FTE slots, which is only 1.42
percent of the total cap relief applications. We believe that the ratio
of cap relief awardees to cap relief applications does not warrant the
administrative burden and the delay in announcements of section 5506
awards that result from the large number of cap relief applications
submitted to CMS that are invariably denied. Therefore, in an effort to
streamline the review process and to facilitate publishing section 5506
awards in a more timely manner, in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28159 through 28160), we proposed to modify Ranking
Criterion Eight so that Ranking Criterion Eight would only apply to
hospitals seeking FTE slots to establish or expand a nonprimary care or
nongeneral surgery program. Ranking Criterion Eight would no longer be
applicable to hospitals seeking FTE cap slots for cap relief. Our
proposal to eliminate section 5506 awards of FTE slots for cap relief
is consistent with current policy goals to increase training in primary
care and general surgery. By proposing to eliminate awarding of FTE
slots for residents that are already being trained by a hospital, there
will be more FTE resident slots available to award to other hospitals
seeking to establish or expand a primary care or general surgery
program under Ranking Criteria Four through Seven.
Accordingly, we proposed to revise Ranking Criterion Eight so that
it reads as follows:

[[Page 50130]]

Proposed Ranking Criterion Eight: The program does not meet Ranking
Criteria 1 through 7, and the applying hospital will use additional
slots to establish or expand a nonprimary care or a nongeneral surgery
program. In light of the modifications we proposed to Ranking Criterion
Eight, we believe it is also necessary to modify the language of
proposed Ranking Criterion Seven to specify the types of applications
that would properly be made under this Ranking Criterion; that is, we
proposed to remove the reference to cap relief from Ranking Criterion
Seven so that it read as follows:
Proposed Ranking Criterion Seven: The applying hospital will use
additional slots to establish or expand a primary care or general
surgery program, but the program does not meet Ranking Criterion 5 or 6
because the hospital is also separately applying under Ranking
Criterion 8 for slots to establish or expand a nonprimary care or
nongeneral surgery program.
Comment: One commenter supported CMS' proposal to eliminate
awarding of FTE slots for cap relief because doing so would increase
the chance for a rural hospital that is located near very few teaching
hospitals in the same or contiguous CBSA to apply under Level Priority
Category One, to be awarded slots from a closed teaching hospital in
the same state or region. One commenter supported the proposal because
it would make more FTE resident slots available to award to other
hospitals seeking to establish or expand a primary care or general
surgery program.
Many commenters opposed CMS' proposal to eliminate awarding of FTE
slots for cap relief. They asserted that hospitals are, in fact, being
awarded slots under Ranking Criterion Eight for cap relief, albeit
sparingly, and therefore CMS should not remove hospitals' one and only
opportunity to receive funding for training residents above their caps.
Several commenters offered suggestions and alternate ways to modify
Ranking Criterion Eight in order to ease CMS' administrative burden.
One commenter noted that under section 5506, the only requirement that
Congress mandated was that hospitals need to demonstrate the likelihood
of filling the slots within 3 years, and that hospitals applying for
cap relief meet this requirement.
Response: We appreciate the commenters' support and the numerous
comments and suggestions regarding the awarding of FTE slots under
section 5506 for cap relief. One of the objectives behind our proposal
to eliminate awarding of slots for cap relief was to find a way to
reduce the number of applications submitted to CMS, most of which are
not approved for awards due to the limited number of slots available
for redistribution. By eliminating the possibility of applying for cap
relief, the volume of applications that CMS would receive, process, and
review would be reduced, allowing CMS to award slots in a more timely
fashion.
While we appreciate that hospitals are training residents above
their caps and that being awarded section 5506 slots for general cap
relief would be a welcome opportunity to receive some funding for these
positions, we believe that general cap relief is inconsistent with the
intent of section 5506 and incompatible with the underlying principles
of section 5506. We continue to believe that Congress intended that
section 5506 be used to maintain the level of residents training in the
area after the closure of a hospital by awarding permanent FTE cap
slots to the hospital that take in and continue to train displaced
residents from the closed hospital. In addition, the regulations
promulgated under section 5506 are consistent with current policy goals
to focus on increasing training in primary care and general surgery. By
eliminating cap relief for residents that are already being trained by
a hospital, more slots would be available to award to other hospitals
in the same State as the closed hospital seeking to establish or expand
a primary care or general surgery program. Moreover, we believe
awarding slots for cap relief is contrary to the historical premise of
Medicare GME payments, as it allows hospitals to shift costs borne by
other means to the Medicare Trust Fund. Furthermore, we continue to
believe that Congress did not intend for section 5506 awards to be used
to pay hospitals for residents that they were already training,
possibly even before the closure of the hospital whose slots are being
redistributed.
For the reasons mentioned above, coupled with our efforts to
streamline the review process and facilitate publishing section 5506
awards in a more timely manner, we are finalizing our proposal to
modify Ranking Criterion Eight so that Ranking Criterion Eight would
only apply to hospitals seeking FTE slots to establish or expand a
nonprimary care or nongeneral surgery program, and would no longer be
applicable to hospitals seeking cap slots for cap relief. In light of
the modifications to Ranking Criterion Eight, we also are finalizing
our proposed change to Ranking Criteria Seven to correctly specify the
types of applications that would properly be made under this Ranking
Criterion by removing the reference to cap relief from Ranking
Criterion Seven.
Accordingly, we are finalizing Ranking Criterion Seven and Ranking
Criterion Eight as follows:
Ranking Criterion Seven: The applying hospital will use additional
slots to establish or expand a primary care or general surgery program,
but the program does not meet Ranking Criterion 5 or 6 because the
hospital is also separately applying under Ranking Criterion 8 for
slots to establish or expand a nonprimary care or nongeneral surgery
program.
Ranking Criterion Eight: The program does not meet Ranking Criteria
1 through 7, and the applying hospital will use additional slots to
establish or expand a nonprimary care or a nongeneral surgery program.
We are making changes to the Section 5506 Application Form to
remove language associated with cap relief, including removal of the
existing Demonstrated Likelihood Criterin 3, which was for cap relief.
Separately, we also proposed a change related to Ranking Criterion
One. Current ranking Criterion One is for an applying hospital that
assumed an entire program or programs from the hospital that closed. We
proposed to revise Ranking Criterion One to provide priority to
hospitals in one scenario. Section 5503 of the Affordable Care Act
amended section 1886(h) of the Act by adding new paragraph (8), which
provided for the permanent reduction and distribution of residency
slots. Section 1886(h)(8)(A)(ii) of the Act provides specific
exceptions to the application of the reduction at section
1886(h)(8)(A)(i) of the Act, and expressly states: ``Exceptions--This
subparagraph shall not apply to (I) a hospital located in a rural area
(as defined in subsection (d)(2)(D)(ii)) with fewer than 250 acute care
inpatient beds.'' The November 24, 2010 final rule with comment period
(75 FR 72147) describes the agency's interpretation of this statutory
provision. As of the time that the proposed rule was posted on the CMS
Web site, we were aware of one instance in which CMS erroneously
reduced a hospital's FTE resident cap contrary to this statutory
exception. We proposed to amend Ranking Criterion One under section
5506 to provide priority to a hospital which had FTE resident cap slots
erroneously removed under section 5503 contrary to the statutory
exception at section 1886(h)(8)(A)(ii)(I) of the Act. We proposed to
revise Ranking Criterion One as follows:
[square] Ranking Criterion One. The applying hospital is requesting
the

[[Page 50131]]

increase in its FTE resident cap(s) because it is assuming (or assumed)
an entire program (or programs) from the hospital that closed, and the
applying hospital is continuing to operate the program(s) exactly as it
had been operated by the hospital that closed (that is, same residents,
possibly the same program director, and possibly the same (or many of
the same) teaching staff). The applying hospital's FTE resident caps
were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of the
Act, contrary to the statutory exception at section
1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware
of the error prior to posting of the FY 2015 IPPS proposed rule on the
CMS Web site.
Comment: One commenter asked that CMS clarify that this
modification to Ranking Criterion One does not override the statutory
priority of the categories included in the text of section 5506. The
commenter suggested that CMS clarify this by indicating that the
applying hospitals located within or contiguous to the same CBSA as the
closed hospital would be eligible to receive cap slots, regardless of
their ranking criteria before an applying hospital that meets the new
second clause included within Ranking Criterion One but is not located
within the same or contiguous CBSA as the closed hospital.
Response: We are clarifying, as the commenter requested, that the
applying hospitals located within or contiguous to the same CBSA as the
closed hospital would be eligible to receive cap slots, regardless of
their ranking criteria, before an applying hospital that meets the new
second clause included within Ranking Criterion One but is not located
within the same or contiguous CBSA as the closed hospital.
Comment: One commenter expressed concern that the proposed change
to Ranking Criterion One does not ensure that a hospital that is
located more than 70 miles from any other medical education program,
and whose FTE resident caps were erroneously reduced by CMS under
section 1886(h)(8)(A)(i) of the Act, can regain its lost slots when a
teaching hospital closes in another part of its State. The commenter
noted that CMS must follow the statutory categories in distributing
slots under section 5506, and that, generally, the number of slots
requested under the first priority category (same or contiguous CBSA as
the closed hospital) far exceeds the number of slots available from the
closed hospital, leaving no slots available for hospitals in the second
or other priority category levels. The commenter cautioned that unless
CMS takes steps to ensure that slots are awarded not only to hospitals
in the first priority category, but also to hospitals in the second
(same state) or third (same region) priority categories, the proposed
change to Ranking Criterion One will not help a hospital that is
located more than 70 miles from the nearest medical education program.
The commenter stated that ``CMS has several options in the FY 2015 IPPS
final rule to ensure that hospitals located in the same State, and not
just the same or contiguous CBSA as the closed hospital, have an
opportunity to add new resident slots under section 5506.'' The
commenter made the following recommendations for CMS to finalize:
(1) In addition to finalizing the proposal to eliminate cap relief
from Ranking Criterion Eight, CMS could further revise Ranking Criteria
Seven and Eight so that even fewer hospitals located in the same or
contiguous CBSA can satisfy either criterion. CMS could further narrow
its Demonstrated Likelihood Criteria to achieve the same result.
(2) CMS could construe the language at section
1886(h)(4)(H)(vi)(II) of the Act to require the agency to follow the
statutory priority categories, but to do so in a manner that at least
some slots are awarded to hospitals within each of the first three
priority categories, such as making a large proportion of slots
available for the first priority category, and then successively
smaller proportions of the slots available for the second and third
priority categories.
(3) CMS could balance the competing statutory importance expressed
within the statutory priority categories with the need to maintain and
grow primary care residency programs in rural and underserved areas and
maintain an adequate distribution of physicians, in general. CMS could
conclude that one way to recognize this balance is to ensure that a
hospital that had less than 250 beds and that was located in a rural
area and had its FTE resident cap erroneously reduced by CMS would be
awarded some of those slots after another teaching hospital in its
State closes, even if the closed hospital is not located in the same or
contiguous CBSA as such a hospital.
(4) CMS could conclude that section 1886(h)(4)(H)(vi)(II) of the
Act did not contemplate the exact scenario where a hospital's FTE
resident caps were erroneously reduced by CMS under section
1886(h)(8)(A)(i) of the Act, and that the hospital's remote location
means it almost certainly will never be in the first priority level
category.
Response: We regret that the commenter believes that CMS' proposed
revision to Ranking Criterion One is not sufficient to rectify the
scenario where a hospital's FTE resident caps were erroneously reduced
by CMS under section 1886(h)(8)(A)(i) of the Act. We do not agree with
the commenter's options because each of the options that the commenter
recommended would have an impact on other hospitals and stakeholders
with an interest in how CMS implements section 5506. That is, the
commenter's suggestions could potentially reduce the amount of slots
available to other stakeholders. Moreover, accepting any such suggested
options would require notice-and-comment rulemaking on each
recommendation, respectively. We continue to believe that it is
appropriate to provide priority to a hospital which had FTE resident
cap slots erroneously removed under section 5503 contrary to the
statutory exception at section 1886(h)(8)(A)(ii)(I) of the Act, and for
which CMS CentralOffice was made aware of the error prior to posting of
the FY 2015 IPPS/LTCH PPS proposed rule on the CMS Web site. Therefore,
we are finalizing this policy, as proposed, in this final rule.
Comment: One commenter stated that the proposed language revising
Ranking Criterion One could lead one to believe that a hospital must
satisfy both conditions to qualify under this criterion. To clarify
that this is not the case, the commenter recommended that CMS modify
the language within Ranking Criterion One by adding an ``or'' as
follows:
Ranking Criterion One. The applying hospital is requesting the
increase in its FTE resident cap(s) because it is assuming (or assumed)
an entire program (or programs) from the hospital that closed, and the
applying hospital is continuing to operate the program(s) exactly as it
had been operated by the hospital that closed (that is, same residents,
possibly the same program director, and possibly the same (or many of
the same) teaching staff); or, the applying hospital's FTE resident
caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of
the Act, contrary to the statutory exception at section
1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware
of the error prior to posting of the FY 2015 IPPS/LTCH PPS proposed
rule on the CMS Web site.
Response: We agree with the commenter that the conditions in the
revised Ranking Criterion One are separate and distinct, and a hospital
applying for slots under Ranking Criterion One would need to satisfy
only one of the requirements, not both. Therefore, we are adopting the

[[Page 50132]]

commenter's suggestion of adding ``or'' between the two conditions, and
we are modifying the language of Ranking Criterion One in the CMS
Application Form as well.
After consideration of the public comments we received, we are
finalizing the following change to the text of Ranking Criterion One:
Ranking Criterion One. The applying hospital is requesting the
increase in its FTE resident cap(s) because it is assuming (or assumed)
an entire program (or programs) from the hospital that closed, and the
applying hospital is continuing to operate the program(s) exactly as it
had been operated by the hospital that closed (that is, same residents,
possibly the same program director, and possibly the same (or many of
the same) teaching staff); OR, the applying hospital's FTE resident
caps were erroneously reduced by CMS under section 1886(h)(8)(A)(i) of
the Act, contrary to the statutory exception at section
1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was made aware
of the error prior to posting of the FY 2015 IPPS proposed rule on the
CMS Web site.
d. Clarification to Ranking Criterion Two Regarding Emergency Medicare
GME Affiliation Agreements
Ranking Criterion Two gives preference to applying hospitals that
received slots under the terms of a Medicare GME affiliation agreement
from the closed hospital. Under section 1886(h)(4)(H)(ii) of the Act,
hospitals may form a Medicare GME affiliated group and elect to
aggregate their respective FTE resident caps and apply them on an
aggregate basis. The regulations at 42 CFR 413.75(b) and 413.79(f)
implemented this statutory provision, providing specific rules for
sharing FTE resident cap slots among members of the Medicare GME
affiliated group, one such rule being that member hospitals must have a
``shared rotational arrangement.'' A ``shared rotational arrangement''
is defined at 42 CFR 413.75(b) as a residency training program under
which a resident(s) participates in training at two or more hospitals
in that program. Specifically, Ranking Criterion Two states the
following:
Ranking Criterion Two. The applying hospital was listed as a
participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
A question has been raised as to whether hospitals that were
members of an emergency Medicare GME affiliation agreement with the
closed hospital prior to its closure may be considered under Ranking
Criterion Two as well. The regulations at 42 CFR 413.79(f)(7) govern
emergency Medicare GME affiliation agreements, which are applicable in
the instance where a statutory section 1135 waiver is invoked. In this
situation, due to emergency conditions, the ``home'' hospital is unable
to continue to train its residents. Therefore, under the terms of the
emergency Medicare GME affiliation agreement, the ``home'' hospital may
agree to temporarily transfer FTE resident cap slots to ``host''
hospitals that would train the displaced residents during the emergency
period.
In the November 24, 2010 final rule with comment period (75 FR
72216), we stated that ``section 1886(h)(4)(H)(vi) of the Act, as added
by section 5506(a) of the Affordable Care Act, directs the Secretary to
give preference to hospitals that are members of the same affiliated
group as the hospital that closed. We believe that, generally, if the
applying hospital was affiliated to receive slots from the hospital
that closed, then the applying hospital was relying on that number of
FTE resident slots that it received in order to maintain its fair share
of the cross-training of the residents in the jointly operated
programs. In the absence of those slots received from the closed
hospital, the applying hospital may not be able to continue training
that number of FTE residents, and those same residents would not only
be displaced from the closed hospital, but might essentially become
`displaced' from the affiliated hospitals in which they were used to
doing a portion of their training. Accordingly, we proposed this
ranking criterion to allow hospitals that were affiliated with the
closed hospitals to at least maintain their fair share of the training
of the residents in the programs that they had jointly operated with
the closed hospital.''
In determining whether Ranking Criterion Two may encompass
emergency Medicare GME affiliation agreements, we considered the key
differences and similarities between regular Medicare GME affiliation
agreements and emergency Medicare GME affiliation agreements. Regarding
the differences, in the case of emergency affiliations, there may not
have been historical cross-training or jointly operated programs
between the applicant hospital and the hospital that closed.
Furthermore, after the natural disaster that precipitates the section
1135 waiver, the ``home'' hospital would be in no condition to train
its share of residents, which is why the ``shared rotational
arrangement'' requirements at 42 CFR 413.79(f)(2) for regular Medicare
GME affiliation agreements are waived for emergency Medicare GME
affiliation agreements. However, it is often true with emergency
affiliations that a hospital agrees to take over the training of the
hospital in need, ``receiving'' FTE cap slots and residents from the
``home'' hospital, thereby creating the training relationship. In the
event where, following the disaster that triggers the section 1135
waiver, a hospital should actually close, the ``host'' hospital that
accepted the residents perhaps might even continue to train its share
of the residents in the program after the hospital closes. Therefore,
emergency affiliation agreements are similar to regular affiliation
agreements in that the ``host'' hospital received FTE cap slots from
the ``home'' hospital to train the ``home'' hospital's residents.
Further, in the event that the ``home'' hospital closes, triggering a
Round of section 5506, the ``host'' hospital also would need those FTE
cap slots in order to continue training the share of its program for
which it had taken responsibility under the emergency Medicare GME
affiliation agreement before the ``home'' hospital closed.
As we stated in the November 24, 2010 final rule with comment
period (75 FR 72219 through 72220), ``we believe the intent of section
5506 is to promote continuity and limit disruption in residency
training. In that light, we believe it is logical to give preference to
a hospital that received slots under the terms of the Medicare GME
affiliation agreement so that the hospital could continue to train at
least the number of FTE residents it had trained under the

[[Page 50133]]

terms of the Medicare GME affiliation agreement, avoiding the
displacement of even more residents. . . .'' We further stated that we
``. . . are only giving preference to hospitals that received slots
from the closed hospital under the terms of the Medicare GME
affiliation agreement, so that the hospital could continue to train at
least the number of FTE residents it had trained under the terms of the
Medicare GME affiliation agreement. . . .'' Finally, we stated ``that
the hospital or hospitals that were most recently affiliated with and
received slots from the closed hospital would have the most immediate
need for those slots.''
While the circumstances may vary, we believe that ``host''
hospitals under emergency Medicare GME affiliation agreements could
fulfill much of the same role as hospitals that received slots from the
hospital that closed under regular Medicare GME affiliation agreements.
That is, continuity of training would be encouraged and disruption
would be mitigated, to the extent that the ``host'' hospital could
document to CMS that it would continue to ``train at least the number
of FTE residents it had trained under the terms of the'' emergency
Medicare GME affiliation agreement, and in doing so, would demonstrate
it has the ``most immediate need for those slots'' as compared to
another hospital. Given these similarities between regular Medicare GME
affiliation agreements and emergency Medicare GME affiliation
agreements, we believe that the existing Ranking Criterion Two may be
read to already encompass emergency Medicare GME affiliation
agreements. Accordingly, we are clarifying the existing Ranking
Criterion Two to include emergency Medicare GME affiliation agreements,
to read as follows:
[square] Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed, and under the terms of that Medicare GME
affiliation agreement or emergency Medicare GME affiliation agreement,
the applying hospital received slots from the hospital that closed, and
the applying hospital will use the additional slots to continue to
train at least the number of FTE residents it had trained under the
terms of the Medicare GME affiliation agreement, or emergency Medicare
GME affiliation agreement. If the most recent Medicare GME affiliation
agreement or emergency Medicare GME affiliation agreement of which the
closed hospital was a member before the hospital closed was with a
hospital that itself has closed or is closing, preference would be
given to an applying hospital that was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement.
We are making these changes to Ranking Criterion Two in the Section
5506 Application Form.
Comment: Commenters supported CMS' clarification that the existing
Ranking Criterion Two includes emergency Medicare GME affiliation
agreements.
Response: We thank the commenters for their support. The revised
description of Ranking Criterion Two on the CMS Application Form refers
to both Medicare GME affiliation agreements and emergency Medicare GME
affiliation agreements.
The following list includes the final ranking criteria along with
the final effective dates.
Ranking Criterion One: The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program(s)
exactly as it had been operated by the hospital that closed (that is,
same residents, possibly the same program director, and possibly the
same (or many of the same) teaching staff); OR, the applying hospital's
FTE resident caps were erroneously reduced by CMS under section
1886(h)(8)(A)(i) of the Act, contrary to the statutory exception at
section 1886(h)(8)(A)(ii)(I) of the Act, and CMS Central Office was
made aware of the error prior to posting of the FY 2015 IPPS/LTCH PPS
proposed rule on the CMS Web site. (This language reflects the
finalized modification of Ranking Criterion One. We refer readers to
section IV.K.5.c. of the preamble of this final rule where we discuss
this proposed modification.)
Effective Date: If the hospital is receiving a temporary
cap adjustment, slots are effective the day after the graduation
date(s) of actual displaced resident(s). If the hospital is not
receiving a temporary cap adjustment, slots are effective with the date
of the hospital closure.
Clarified Ranking Criterion Two: The applying hospital was
listed as a participant of a Medicare GME affiliated group on the most
recent Medicare GME affiliation agreement or emergency Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed, and under the terms of that Medicare GME
affiliation agreement or emergency Medicare GME affiliation agreement,
the applying hospital received slots from the hospital that closed, and
the applying hospital will use the additional slots to continue to
train at least the number of FTE residents it had trained under the
terms of the Medicare GME affiliation agreement, or emergency Medicare
GME affiliation agreement. If the most recent Medicare GME affiliation
agreement or emergency Medicare GME affiliation agreement of which the
closed hospital was a member before the hospital closed was with a
hospital that itself has closed or is closing, preference would be
given to an applying hospital that was listed as a participant in the
next most recent Medicare GME affiliation agreement or emergency
Medicare GME affiliation agreement (but not one which was entered into
more than 5 years prior to the hospital's closure) of which the first
closed hospital was a member before the hospital closed, and that
applying hospital received slots from the closed hospital under the
terms of that affiliation agreement.
(This language reflects our clarification in the proposed rule and
this final rule regarding inclusion of emergency Medicare GME
affiliation agreements in Ranking Criterion Two. We refer readers to
section IV.K.5.d. of the preamble of this final rule where we discuss
this clarification.)
Effective Date: Slots are effective with the date of the
hospital closure.
Ranking Criterion Three: The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs).
Effective Date: If the hospital is receiving temporary cap
adjustment, slots are effective the day after the graduation date(s) of
actual displaced resident(s). If the hospital is not receiving a
temporary cap adjustment, slots are effective with the date of the
hospital closure.
Ranking Criterion Four: The program does not meet Ranking
Criteria

[[Page 50134]]

1, 2, or 3, and the applying hospital will use additional slots to
establish a new or expand an existing geriatrics residency program.
Ranking Criterion Five: The program does not meet Ranking
Criteria 1 through 4, the applying hospital is located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
Ranking Criterion Six: The program does not meet Ranking
Criteria 1 through 5, and the applying hospital is not located in a
HPSA, and will use all the additional slots to establish or expand a
primary care or general surgery residency program.
Ranking Criterion Seven: The applying hospital will use
additional slots to establish or expand a primary care or general
surgery program, but the program does not meet Ranking Criterion 5 or 6
because the hospital is also separately applying under Ranking
Criterion 8 for slots to establish or expand a nonprimary care or
nongeneral surgery program.
(This language reflects our proposal in this proposed rule to
revise Ranking Criteria Seven and Eight. We refer readers to section
IV.K.5.c. of the preamble of this final rule where we discuss our
proposals and final policies to amend Ranking Criteria Seven and
Eight.)
Ranking Criterion Eight: The program does not meet Ranking
Criteria 1 through 7, and the applying hospital will use additional
slots to establish or expand a nonprimary care or a nongeneral surgery
program.
(This language reflects our proposal in the proposed rule to revise
Ranking Criterion Eight. We refer readers to section IV.K.5.c. of the
preamble of this final rule where we discuss our proposals and final
policies to amend Ranking Criterion Eight.)
[cir] Effective Date Policy for Ranking Criterion Four through
Ranking Criterion Eight: If the hospital is receiving a temporary cap
adjustment for training displaced residents and its section 5506 award
is less than or equal to the temporary cap adjustment, the section 5506
slots would become effective the later of when the hospital can
demonstrate to the MAC that the slots associated with a new program or
program expansion are actually filled, and therefore, are needed, or
the July 1 after displaced residents complete their training. If the
hospital is receiving a temporary cap adjustment for training displaced
residents and its section 5506 award is greater than the temporary cap
adjustment, the number of slots by which the section 5506 award exceeds
the temporary cap adjustment would be available for use when the
hospital can demonstrate to its MAC that the slots associated with the
new program or program expansion are filled and, therefore, are needed
as of a particular date (usually July 1, possibly retroactive). If the
hospital is not receiving a temporary cap adjustment, slots would
become effective when the hospital can demonstrate to the MAC that the
slots needed for a new program or program expansion are actually filled
and, therefore, are needed as of a particular date (usually July 1,
possibly retroactive).
At the end of this GME section, we are including a revised Section
5506 Application Form that reflects all of the final changes discussed
above.
Out of Scope GME Comments
We received several comments that were not related to the GME
proposals in the FY 2015 IPPS/LTCH PPS proposed rule. Some commenters
urged CMS to be more transparent and provide data on the effects of the
section 5503 and the section 5506 redistributions. One commenter asked
that CMS consider changing the calculation of the FTE cap for new
teaching hospitals so that it is based on the final 1-year period of
the 5-year growth window, as opposed to the entire 5 years. Another
commenter stated that policies to redirect funding from specialty to
primary care do not take into consideration the serious consequences of
a potential shortage of specialty physicians, and that Medicare GME
should fully fund the entire length of training required for initial
board certification for neurosurgery, which is 6 to 7 years. Several
commenters urged CMS to publish a clear statement that neither a
hospital's PRA nor its cap-building window is triggered by the presence
of a small number of residents performing brief rotations at the
hospital. Another commenter asserted that second-year pharmacy
residencies should receive Medicare pass-through reimbursement.
We appreciate these comments. However, because we did not propose
any changes related to these issues in the proposed rule, we consider
these comments to be outside the scope of the proposed rule and are not
addressing these comments at this time.

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6. Clarification and Policy Change Applicable to Direct GME Payments to
Federally Qualified Health Centers (FQHCs) and Rural Health Clinics
(RHCs) for Training Residents in Approved Programs
Under section 1886(k) of the Act, and as implemented in the
regulations at 42 CFR 405.2468(f), federally qualified health centers
(FQHCs) and rural health clinics (RHCs) may receive payment for the
costs of direct GME for training residents in an approved program under
certain circumstances. Specifically, the regulations at Sec.
405.2468(f)(1) state that effective for that portion of cost reporting
periods occurring on or after January 1, 1999, if an RHC or an FQHC
incurs ``all or substantially all'' of the costs for the training
program in the nonhospital setting as defined in Sec. 413.75(b), the
RHC or FQHC may receive direct graduate medical education payment for
those residents.

[[Page 50141]]

We refer readers to the July 31, 1998 final rule (63 FR 40986) for a
detailed discussion of this longstanding policy. As noted earlier, the
regulatory text of Sec. 405.2468(f)(1) incorporates the definition of
``all or substantially all of the costs for the training program in a
nonhospital setting'' that is defined at Sec. 413.75(b), as part of a
number of definitions applicable generally to hospital direct GME
payments and those regulations at Sec. 413.76 through Sec. 413.83.
Section 413.75(b) is based on the statutory provision at section
1886(h)(4)(E) of the Act, which establishes the requirements that
hospitals must meet in order to receive direct GME payment for
residents training in nonprovider settings.
The statutory use of the phrase ``all or substantially all of the
costs for the training program in that setting'' is located in section
1886(h)(4)(E) of the Act, as added by section 9314 of the Omnibus
Budget Reconciliation Act of 1986 (Pub. L. 99-509) (OBRA `86). For a
detailed discussion of the implementation of section 9314 of OBRA `86,
we refer readers to the September 29, 1989 final rule (54 FR 40292).
Section 1886(h)(4)(E) of the Act, as added by OBRA '86, established the
requirements that hospitals must meet in order to receive direct GME
payment for residents training in nonprovider settings. However,
section 5504(a) of the Affordable Care Act made changes to section
1886(h)(4)(E) of the Act to reduce the costs that hospitals must incur
for residents training in nonprovider sites in order to count the FTE
residents for purposes of direct GME payments. In making these changes
to section 1886(h)(4)(E) of the Act, section 5504(a) of the Affordable
Care Act amended the Act prospectively, effective with ``cost reporting
periods beginning on or after July 1, 2010'' for direct GME, by
removing the phrase ``all or substantially all of the costs for the
training program in that setting'' and instead permitting hospitals to
count the time that residents train in activities related to patient
care in a nonprovider site if the hospital incurs the costs of the
residents' salaries and fringe benefits for the time that the resident
spends training in the nonprovider site. In effect, this amendment
reduced the costs that hospitals must incur for residents training in
nonprovider settings.
Based on this statutory amendment, in the November 24, 2010 final
rule with comment period (75 FR 72134), we revised the regulations at
Sec. 412.105(f)(1)(ii)(E) for IME and Sec. Sec. 413.78(f) and (g) for
direct GME to reflect the changes made by section 5504(a) of the
Affordable Care Act. In addition, we revised the regulatory definition
of ``all or substantially all of the costs for the training program in
the nonhospital setting'' in order to implement the statutory amendment
and apply the effective date as set forth in the statute to cost
reporting periods beginning on or after July 1, 2010. Specifically, the
regulations at Sec. 413.75(b), which define ``all or substantially all
of the costs for the training program in the nonhospital setting'' were
revised to state:
Effective on or after January 1, 1999 and for cost
reporting periods beginning before July 1, 2007, the residents'
salaries and fringe benefits (including travel and lodging where
applicable) and the portion of the cost of teaching physicians'
salaries and fringe benefits attributable to direct graduate medical
education (GME); and
Effective for cost reporting periods beginning on or after
July 1, 2007 and before July 1, 2010, at least 90 percent of the total
of the costs of the residents' salaries and fringe benefits (including
travel and lodging where applicable) and the portion of the cost of
teaching physicians' salaries attributable to nonpatient care direct
GME activities.
Ultimately, with regard to the costs that hospitals must incur for
residents training in nonprovider sites in order to count the FTE
residents for purposes of direct GME payments, the phrase ``all or
substantially all of the costs for the training program in the
nonhospital setting'' no longer applies, effective for cost reporting
periods beginning on and after July 1, 2010.
In the November 24, 2010 final rule with comment period (75 FR
72134), we amended the regulations applicable to direct GME payments to
hospitals at Sec. Sec. 413.75(b) and 413.78(g) to reflect the changes
made by section 5504(a) of the Affordable Care Act. However, at that
time, we inadvertently did not make conforming changes to the
regulations at Sec. 405.2468(f)(1) to clarify the requirements that
FQHCs and RHCs must meet in order to receive direct GME payment for
training residents in their facilities. Therefore, in compliance with
our longstanding policy that FQHCs and RHCs must meet the same
requirements applicable to teaching hospitals for direct GME payments
with respect to training residents in nonprovider settings, as we did
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28164), we are
providing clarification that, based on statutory amendments discussed
earlier, the applicable policy cross-referenced in Sec. 405.2468(f)(1)
has changed for cost reporting periods beginning on or after July 1,
2010. In addition, to ensure statutory and regulatory consistency, we
proposed to revise the regulations at Sec. 405.2468(f)(1) to add a
sentence at the end of the paragraph that stated that in connection
with cost reporting periods for which ``all or substantially all of the
costs for the training program in the nonhospital setting'' is not
defined in Sec. 413.75(b), if an RHC or an FQHC incurs the salaries
and fringe benefits (including travel and lodging where applicable) of
residents training at the RHC or FQHC, the RHC or FQHC may receive
direct graduate medical education payment for those residents.
We did not receive any public comments regarding our proposed
clarification and policy change applicable to direct GME payments to
FQHCs and RHCs for training residents in approved programs. Therefore,
we are finalized this policy as proposed.

L. Rural Community Hospital Demonstration Program

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

[[Page 50142]]

Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and
Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the
United States: 2003).
CMS originally solicited applicants for the demonstration in May
2004; 13 hospitals began participation with cost reporting periods
beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals
withdrew from the program and converted to CAH status. This left nine
hospitals participating at that time. In 2008, we announced a
solicitation for up to six additional hospitals to participate in the
demonstration program. Four additional hospitals were selected to
participate under this solicitation. These four additional hospitals
began under the demonstration payment methodology with the hospital's
first cost reporting period starting on or after July 1, 2008. At that
time, 13 hospitals were participating in the demonstration.
Five hospitals (3 of the hospitals were among the 13 hospitals that
were original participants in the demonstration program and 2 of the
hospitals were among the 4 hospitals that began the demonstration
program in 2008) withdrew from the demonstration program during CYs
2009 and 2010. (Three of these hospitals indicated that they would be
paid more for Medicare inpatient hospital services under the rebasing
option allowed under the SCH methodology provided for under section 122
of the Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275). One hospital restructured to become a CAH, and one
hospital closed.) In CY 2011, one hospital that was among the original
set of hospitals that participated in the demonstration withdrew from
the demonstration. These actions left seven of the originally
participating hospitals (that is, hospitals that were selected to
participate in either 2004 or 2008) participating in the demonstration
program as of June 1, 2011.
Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148) amended section 410A of Public Law 108-173, which established the
rural community hospital demonstration program. Sections 3123 and 10313
of the Affordable Care Act changed the rural community hospital
demonstration program in several ways. First, the Secretary is required
to conduct the demonstration program for an additional 5-year period
that begins on the date immediately following the last day of the
initial 5-year period. Further, the Affordable Care Act requires, in
the case of a rural community hospital that is participating in the
demonstration program as of the last day of the initial 5-year period,
the Secretary to provide for the continued participation of such rural
hospital in the demonstration program during the 5-year extension,
unless the hospital makes an election, in such form and manner as the
Secretary may specify, to discontinue participation (section
410A(g)(4)(A) of Pub. L. 108-173, as added by section 3123(a) of the
Affordable Care Act and further amended by section 10313 of such Act).
In addition, the Affordable Care Act provides that, during the 5-
year extension period, the Secretary shall expand the number of States
with low population densities determined by the Secretary to 20
(section 410A(g)(2) of Public Law 108-173, as added by section 3123(a)
and amended by section 10313 of the Affordable Care Act). Further, the
Secretary is required to use the same criteria and data that the
Secretary used to determine the States under section 410A(a)(2) of
Public Law 108-173 for purposes of the initial 5-year period. The
Affordable Care Act also allows not more than 30 rural community
hospitals in such States to participate in the demonstration program
during the 5-year extension period (section 410A(g)(3) of Public Law
108-173, as added by section 3123(a) of the Affordable Care Act and as
further amended by section 10313 of such Act).
We published a solicitation for applications for additional
participants in the rural community hospital demonstration program in
the Federal Register on August 30, 2010 (75 FR 52960). Applications
were due on October 14, 2010. The 20 States with the lowest population
density that were eligible for the demonstration program are: Alaska,
Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census
Bureau, Statistical Abstract of the United States: 2003). We approved
19 new hospitals for participation in the demonstration program. We
determined that each of these new hospitals would begin participating
in the demonstration with its first cost reporting period beginning on
or after April 1, 2011.
Three of these 19 hospitals declined participation prior to the
start of the cost reporting periods for which they would have begun the
demonstration. In addition to the 7 hospitals that were selected in
either 2004 or 2008, the new selection led to a total of 23 hospitals
in the demonstration. During CY 2013, one additional hospital among the
set selected in 2011 withdrew from the demonstration, similarly citing
a relative financial advantage to returning to the customary SCH
payment methodology, which left 22 hospitals participating in the
demonstration.
In addition, section 410A(c)(2) of Public Law 108-173 required
that, ``[i]n conducting the demonstration program under this section,
the Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have paid
if the demonstration program under this section was not implemented.''
This requirement is commonly referred to as ``budget neutrality.''
Generally, when we implement a demonstration program on a budget
neutral basis, the demonstration program is budget neutral in its own
terms; in other words, the aggregate payments to the participating
hospitals do not exceed the amount that would be paid to those same
hospitals in the absence of the demonstration program. Typically, this
form of budget neutrality is viable when, by changing payments or
aligning incentives to improve overall efficiency, or both, a
demonstration program may reduce the use of some services or eliminate
the need for others, resulting in reduced expenditures for the
demonstration program's participants. These reduced expenditures offset
increased payments elsewhere under the demonstration program, thus
ensuring that the demonstration program as a whole is budget neutral or
yields savings. However, the small scale of this demonstration program,
in conjunction with the payment methodology, makes it extremely
unlikely that this demonstration program could be viable under the
usual form of budget neutrality.
Specifically, cost-based payments to participating small rural
hospitals are likely to increase Medicare outlays without producing any
offsetting reduction in Medicare expenditures elsewhere. Therefore, a
rural community hospital's participation in this demonstration program
is unlikely to yield benefits to the participant if budget neutrality
were to be implemented by reducing other payments for these same
hospitals.
In the past 10 IPPS final regulations, spanning the period for
which the demonstration program has been implemented, we have adjusted
the national inpatient PPS rates by an amount sufficient to account for
the added costs of this demonstration program, thus applying budget
neutrality across the payment system as a whole rather than merely
across the

[[Page 50143]]

participants in the demonstration program. As we discussed in the FYs
2005 through 2014 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR
48100; 72 FR 47392; 73 FR 48670; 74 FR 43922; 75 FR 50343; 76 FR 51698;
77 FR 53449; and 78 FR 50740; respectively), we believe that the
language of the statutory budget neutrality requirements permits the
agency to implement the budget neutrality provision in this manner. In
light of the statute's budget neutrality requirement, in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28166 through 28167), we proposed to
continue to use the methodology we finalized in FY 2013 to calculate a
budget neutrality adjustment factor to the FY 2015 national IPPS rates.
In general terms, in each of these previous years, we used
available cost reports for the participating hospitals to derive an
estimate of the additional costs attributable for the demonstration.
Prior to FY 2013, we used finalized, or settled, cost reports, as
available, and ``as submitted'' cost reports for hospitals for which
finalized cost reports were not available. Annual market basket
percentage increase amounts provided by the CMS Office of the Actuary
reflecting the growth in the prices of inputs for inpatient hospitals
were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53452), we used ``as submitted'' cost reports (for cost
reporting periods ending in CY 2010) for each hospital participating in
the demonstration in estimating the costs of the demonstration. In
addition, in FY 2013, we incorporated different update factors (the
market basket percentage increase and the applicable percentage
increase, as applicable, to several years of data as opposed to solely
using the market basket percentage increase) for the calculation of the
budget neutrality offset amount. Finally, in each of the previous
years, an annual update factor provided by the CMS Office of the
Actuary reflecting growth in the volume of inpatient operating services
was also applied. For the budget neutrality calculations in the IPPS
final rules for FYs 2005 through 2011, the annual volume adjustment
applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, and
2014, it was 3 percent. For a detailed discussion of our budget
neutrality offset calculations, we refer readers to the IPPS final rule
applicable to the fiscal year involved.
In general, for FYs 2005 through 2009, we based the budget
neutrality offset estimate on the estimated cost of the demonstration
in an earlier given year. For these periods, we derived that estimated
cost by subtracting the estimated amount that would otherwise be paid
without the demonstration in an earlier given year from the estimated
amount for the same year that would be paid under the demonstration
under the reasonable cost-based methodology authorized by section 410A
of Public Law 108-173. (We note that section 410A of Public Law 108-173
was later amended by the Affordable Care Act.) The reasonable cost-
based methodology authorized by section 410A of Public Law 108-173, as
amended, is hereafter referred to as the ``reasonable cost
methodology.'' (We ascertained the estimated amount that would be paid
in an earlier given year under the reasonable cost methodology and the
estimated amount that would otherwise be paid without the demonstration
in an earlier given year from ``as submitted'' cost reports that were
submitted by the hospitals prior to the inception of the
demonstration.) We then updated the estimated cost described above to
the current year by multiplying it by the market basket percentage
increases applicable to the years involved and the applicable annual
volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule,
data from finalized cost reports reflecting the participating
hospitals' experience under the demonstration were available.
Specifically, the finalized cost reports for the first 2 years of the
demonstration, that is, cost reports for cost reporting years beginning
in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These
data showed that the actual costs of the demonstration for these years
exceeded the amounts originally estimated in the respective final rules
for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we included in the budget neutrality offset amount an
amount in addition to the estimate of the demonstration costs in that
fiscal year. This additional amount was based on the amount that the
costs of the demonstration for FYs 2005 and 2006 exceeded the budget
neutrality offset amounts finalized in the IPPS rules applicable for
those years.
Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we
continued to propose and use a methodology for calculating the budget
neutrality offset amount to account for both the estimated
demonstration costs in the upcoming fiscal year and an amount by which
the actual demonstration costs corresponding to an earlier, given year
(which would be known once finalized cost reports became available for
that year) exceeded the budget neutrality offset amount finalized in
the corresponding year's IPPS final rule. However, we noted in the FYs
2011, 2012, and 2013 IPPS final rules that, because of a delay
affecting the settlement process for cost reports for IPPS hospitals
occurring on a larger scale than merely for the demonstration, we were
unable to finalize this component of the budget neutrality offset
amount accounting for the amount by which the actual demonstration
costs in a given year exceeded the budget neutrality offset amount
finalized in the corresponding year's IPPS final rule for cost reports
of demonstration hospitals dating to those beginning in FY 2007.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through
53453), we adopted changes to the methodology for calculating the
budget neutrality offset amount in an effort to further improve and
refine it. We noted that the revised methodology varied, in part, from
that finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51698
through 51705). Specifically, in adopting refinements to the
methodology, our objective was to simplify the calculation so that it
included as few steps as possible. In addition, we incorporated
different update factors (the market basket percentage increase and the
applicable percentage increase, as applicable, to several years of data
as opposed to solely using the market basket percentage increase) for
the calculation of the budget neutrality offset amount. We stated that
we believed this approach would maximize the precision of our
calculation because it would more closely replicate payments made with
and without the demonstration. We refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53449 through 53453) for a detailed
discussion of the methodology we used for FY 2013. We noted that,
although we were making changes to certain aspects of the budget
neutrality offset amount calculation for FY 2013, several core
components of the methodology would remain unchanged. For example, we
continued to include in the budget neutrality offset amount methodology
the estimate of the demonstration costs for the upcoming fiscal year
and the amount by which the actual demonstration costs corresponding to
an earlier year (which would be determined once we have finalized cost
reports for that year) exceeded the budget neutrality offset amount
finalized in the corresponding year's IPPS final rule. However,
finalized cost reports for the hospitals participating in the
demonstration were not available for FYs 2007, 2008, 2009, and 2010 at
the time of development of the FY 2013

[[Page 50144]]

IPPS/LTCH PPS final rule. Therefore, we were unable to finalize this
component of the budget neutrality offset calculation. We stated in the
final rule that we expected settled cost reports for all of the
demonstration hospitals that participated in the applicable fiscal year
(FYs 2007, 2008, 2009, and 2010) to be available prior to the FY 2014
IPPS/LTCH PPS proposed rule.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through
50744), we determined the final budget neutrality offset amount to be
applied to the FY 2014 IPPS rates to be $52,589,741. This amount was
comprised of two distinct components: (1) the final resulting
difference between the estimated reasonable cost amount to be paid
under the demonstration to the 22 participating hospitals in FY 2014
for covered inpatient hospital services and the estimated amount that
would otherwise be paid to such hospitals in FY 2014 without the
demonstration (this amount was $46,549,861); and (2) the amount by
which the actual costs of the demonstration for FY 2007, as shown in
the finalized cost reports for the hospitals that participated in the
demonstration during FY 2007, exceeded the budget neutrality offset
amount that was finalized in the FY 2007 IPPS final rule (this amount,
$6,039,880, was derived from finalized cost reports for cost reporting
periods beginning in FY 2007 for the 9 hospitals that participated in
the demonstration during that year).
2. FY 2015 Budget Neutrality Offset Amount
For the reasons discussed in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53449 through 53453), we proposed in the FY 2015 IPPS/LTCH PPS
proposed rule (78 FR 28167) to continue to use the methodology
finalized in the FY 2013 IPPS/LTCH PPS final rule to calculate a budget
neutrality adjustment factor to be applied to the FY 2015 national IPPS
payment rates. As we stated in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53451), we revised our methodology in that final rule to further
improve and refine the calculation of the budget neutrality offset
amount and to simplify the methodology so that it includes only a few
steps. Consistent with the methodology finalized in the FY 2013 IPPS/
LTCH PPS final rule, the methodology proposed for calculating the
estimated FY 2015 demonstration cost for the participating hospitals
was as follows:
Step 1: For each of the participating hospitals, we proposed to
identify the general reasonable cost amount calculated under the
reasonable cost methodology for covered inpatient hospital services (as
indicated on the ``as submitted'' cost report for the hospital's cost
reporting period ending in CY 2012). The general reasonable cost amount
calculated under the reasonable cost methodology is hereafter referred
to as the ``reasonable cost amount.'' As we explained in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53451), we believe that a way to
streamline our methodology for calculating the budget neutrality offset
amount would be to use cost reports with the same status and from the
same time period for all hospitals participating in the demonstration.
Because ``as submitted'' cost reports ending in CY 2012 are the most
recent available cost reports, we believe they would be an accurate
predictor of the costs of the demonstration in FY 2015 because they
give us a recent picture of the participating hospitals' costs.
Because section 410A of Public Law 108-173 stipulates swing-bed
services are to be included among the covered inpatient hospital
services for which the demonstration payment methodology applies, we
proposed to include the cost of these services, as reported on the cost
reports for the hospitals that provide swing-bed services, within the
general total estimated FY 2012 reasonable cost amount for covered
inpatient hospital services under the demonstration. As indicated
above, we proposed to use ``as submitted'' cost reports for the
hospital's cost reporting period ending in CY 2012 for this
calculation.
We proposed to sum the two above-referenced amounts to calculate
the general total estimated FY 2012 reasonable cost amount for covered
inpatient hospital services for all participating hospitals.
We proposed to multiply this sum (that is, the general total
estimated FY 2012 reasonable cost amount for covered inpatient hospital
services for all participating hospitals) by the FY 2013, FY 2014, and
FY 2015 IPPS market basket percentage increases, which are formulated
by the CMS Office of the Actuary. In this final rule, we are using the
current estimate of the FY 2015 IPPS market basket percentage increase
provided by the CMS Office of the Actuary as specified in section
IV.B.1. of the preamble of this final rule. We then multiply the
product of the general total estimated FY 2012 reasonable cost amount
for all participating hospitals and the market basket percentage
increases applicable to the years involved by a 3-percent annual volume
adjustment for FYs 2013 through 2015--the result is the general total
estimated FY 2015 reasonable cost amount for covered inpatient hospital
services for all participating hospitals.
We proposed to apply the IPPS market basket percentage increases
applicable for FYs 2013 through 2015 to the FY 2012 reasonable cost
amount described above to model the estimated FY 2015 reasonable cost
amount under the demonstration. We proposed to use the IPPS market
basket percentage increases because we believe that these update
factors appropriately indicate the trend of increase in inpatient
hospital operating costs under the reasonable cost methodology for the
years involved. The 3-percent annual volume adjustment was stipulated
by the CMS Office of the Actuary and is being used because it is
intended to accurately reflect the tendency of hospitals' inpatient
caseloads to increase. On account of the possibility that inpatient
caseloads for small hospitals may fluctuate, we are incorporating into
the estimate of demonstration costs a factor to allow for a potential
increase in inpatient hospital services.
Step 2: For each of the participating hospitals, we proposed to
identify the general estimated amount that would otherwise be paid in
FY 2012 under applicable Medicare payment methodologies for covered
inpatient hospital services (as indicated on the ``as submitted'' cost
report for cost reporting periods ending in CY 2012) if the
demonstration was not implemented. Similarly, as in Step 1, for the
hospitals that provide swing-bed services, we proposed to identify the
estimated amount that generally would otherwise be paid for these
services (as indicated on the ``as submitted'' cost report for cost
reporting periods ending in CY 2012) and include it in the total FY
2012 general estimated amount that would otherwise be paid for covered
inpatient hospital services without the demonstration. We proposed to
sum these two amounts in order to calculate the estimated FY 2012 total
payments that generally would otherwise be paid for covered inpatient
hospital services for all participating hospitals without the
demonstration.
We proposed to multiply the above amount (that is, the estimated FY
2012 total payments that generally would otherwise be paid for covered
inpatient hospital services for all participating hospitals without the
demonstration) by the FYs 2013 through 2015 IPPS applicable percentage
increases. For the proposed rule, the estimate of the FY 2015
applicable percentage increase was specified in section IV.B. of the
preamble. This methodology differs

[[Page 50145]]

from Step 1, in which we proposed to apply the market basket percentage
increases to the sum of the hospitals' general total FY 2012 estimated
reasonable cost amount for covered inpatient hospital services. We
believe that the IPPS applicable percentage increases are appropriate
factors to update the estimated amounts that generally would otherwise
be paid without the demonstration. This is because IPPS payments would
constitute the majority of payments that would otherwise be made
without the demonstration and the applicable percentage increase is the
factor used under the IPPS to update the inpatient hospital payment
rates. Hospitals participating in the demonstration would be
participating under the IPPS payment methodology if they were not in
the demonstration. Then we proposed to multiply the product of the
estimated FY 2012 total payments that generally would otherwise be made
without the demonstration and the applicable IPPS percentage increases
for the years involved by a 3-percent annual volume adjustment for FYs
2013 through 2015. The result represents the general total estimated FY
2015 costs that would otherwise be paid without the demonstration for
covered inpatient hospital services to the participating hospitals.
Step 3: We proposed to subtract the amount derived in Step 2
(representing the sum of estimated amounts that generally would
otherwise be paid to the participating hospitals for covered inpatient
hospital services for FY 2015 if the demonstration were not
implemented) from the amount derived in Step 1 (representing the sum of
the estimated reasonable cost amount that generally would be paid under
the demonstration to all participating hospitals for covered inpatient
hospital services for FY 2015). We proposed that the resulting
difference would be one component of the estimated amount for which an
adjustment to the national IPPS rates would be calculated (as further
discussed below).
For the proposed rule, the resulting difference was $53,673,008.
This estimated amount is based on the specific assumptions identified
regarding the data sources used, that is, ``as submitted'' recently
available cost reports.
We did not receive any public comments on our proposed budget
neutrality offset methodology, as discussed above. Therefore, we are
finalizing the budget neutrality offset methodology as proposed in the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28165 through 28168).
In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that if
updated data became available prior to the FY 2015 IPPS/LTCH PPS final
rule, we would use them to the extent appropriate to estimate the costs
of the demonstration program in FY 2015. Therefore, we noted that the
estimated budget neutrality offset amount might change in the final
rule, depending on the availability of updated data. In this final
rule, we have used the market basket update and applicable percentage
increase that have been finalized for FY 2015. Using these updated
data, the difference between the total estimated FY 2015 reasonable
cost amount to be paid under the demonstration to the 22 participating
hospitals for covered inpatient hospital services and the total
estimated amount that would otherwise be paid to the participating
hospitals in FY 2015 without the demonstration is $54,177,144.
In addition, similar to previous years, we proposed to include in
the budget neutrality offset amount the amount by which the actual
demonstration costs corresponding to an earlier given year (which would
be determined once we had finalized cost reports for that year)
exceeded the budget neutrality offset amount finalized in the
corresponding year's IPPS final rule. In the FY 2015 IPPS/LTCH PPS
proposed rule, we calculated the amount by which the actual costs of
the demonstration in FY 2008 (that is, the costs of the demonstration
for the 10 hospitals that participated in FY 2008, as shown in these
hospitals' finalized cost reports for the cost report period beginning
in that fiscal year), exceeded the budget neutrality offset amount that
was finalized in the FY 2008 IPPS final rule. The amount calculated for
the FY 2015 IPPS/LTCH PPS proposed rule, $10,389,771, remains unchanged
for this final rule. We did not receive any public comments on this
aspect of the proposed budget neutrality offset methodology, and
therefore, are finalizing this aspect of the methodology as proposed.
We continue to examine the cost report data for FY 2009, and to work
with the MACs that service the hospitals participating in the
demonstration to obtain finalized cost reports for FYs 2010, 2011, and
2012. We note that if settled cost reports for all of the demonstration
hospitals that participated in an applicable year (FYs 2009, 2010,
2011, or 2012) are available prior to the FY 2016 IPPS/LTCH PPS
proposed rule, we intend to adjust the budget neutrality offset amount
for FY 2016 for any amounts by which the final settled costs of the
demonstration for the year (FYs 2009, 2010, 2011, or 2012) differ from
the budget neutrality offset amount applicable to such year as
finalized in the respective year's IPPS final rule.
Therefore, the total budget neutrality offset amount that we are
applying to the FY 2015 IPPS rates is $64,566,915. This is the sum of
two separate components: (1) the difference between the total estimated
FY 2015 reasonable cost amount to be paid under the demonstration to
the 22 participating hospitals for covered inpatient hospital services
and the total estimated amount that would otherwise be paid to the
participating hospitals in FY 2015 without the demonstration
($54,177,144); and (2) the amount by which the actual costs of the
demonstration for FY 2008 (as shown in the finalized cost reports for
cost reporting periods beginning in FY 2008 for the hospitals that
participated in the demonstration during FY 2008) exceed the budget
neutrality offset amount that was finalized in the FY 2008 IPPS final
rule ($10,389,771)). In this final rule, we are adjusting the national
IPPS rates by this total amount ($64,566,915). We discuss the final
payment rate adjustment that is required to ensure the budget
neutrality of the demonstration program for FY 2015 (the budget
neutrality adjustment factor) in section II. of the Addendum to this
final rule.

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

1. Overview
Hospitals determine their charges for items and services provided
to patients and are responsible for those charges. While Medicare does
not pay billed charges, hospital reported charges are used in
determining Medicare's national payment rates (for example, billed
charges are adjusted to cost to determine how much to pay for one type
of case relative to another). Although the Medicare payment amount for
a discharge under the IPPS or a service furnished under the OPPS is not
based directly on the hospital's charges for the individual services
provided, we believe that hospital charges nevertheless remain an
important component of our healthcare system. For example, hospital
charges are often billed, in full, to uninsured patients who cannot
benefit from discounts negotiated by insurance companies. Hospital
charges also vary significantly by hospital, making it challenging for
patients to compare the cost of similar services across hospitals.

[[Page 50146]]

In 2013, we released data that demonstrated significant variation
across the country and within communities in what hospitals charge for
a number of common inpatient and outpatient services. These data also
showed that hospital charges for services furnished in both the
inpatient setting and the outpatient setting were, in general,
significantly higher than the amount paid by Medicare under the IPPS or
the OPPS. The data that we released are posted on the Web site at:
https://www/cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/. Our intent
in releasing these data was to enable the public to examine the
relationship between the amounts charged by individual hospitals for
comparable services and Medicare's payment for that inpatient or
outpatient care. We believe that providing charge data comparisons is
introducing both transparency and accountability to hospital pricing,
and we are continuing to pursue opportunities to report on hospital
charging practices.
2. Transparency Requirement Under the Affordable Care Act
The Affordable Care Act contains a provision that is consistent
with our effort to improve the transparency of hospital charges. As a
result of the Affordable Care Act, section 2718(e) of the Public Health
Service Act requires that ``[e]ach hospital operating within the United
States shall for each year establish (and update) and make public (in
accordance with guidelines developed by the Secretary) a list of the
hospital's standard charges for items and services provided by the
hospital, including for diagnosis-related groups established under
section 1886(d)(4) of the Social Security Act.''
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28169), we
reminded hospitals of their obligation to comply with the provisions of
section 2718(e) of the Public Health Service Act. We appreciate the
widespread public support we received for including the reminder in the
proposed rule. We reiterate that our guidelines for implementing
section 2718(e) of the Public Health Service Act are that hospitals
either make public a list of their standard charges (whether that be
the chargemaster itself or in another form of their choice), or their
policies for allowing the public to view a list of those charges in
response to an inquiry. MedPAC suggested that hospitals be required to
post the list on the Internet, and while we agree that this would be
one approach that would satisfy the guidelines, we believe hospitals
are in the best position to determine the exact manner and method by
which to make the list public in accordance with the guidelines.
We encourage hospitals to undertake efforts to engage in consumer
friendly communication of their charges to help patients understand
what their potential financial liability might be for services they
obtain at the hospital, and to enable patients to compare charges for
similar services across hospitals. We expect that hospitals will update
the information at least annually, or more often as appropriate, to
reflect current charges.
We are confident that hospital compliance with this statutory
transparency requirement will improve the public accessibility of
charge information. As hospitals continue to make data publicly
available in compliance with section 2718(e) of the Public Health
Service Act, we also will continue to review and post relevant charge
data in a consumer friendly way, as we previously have done by posting
on the CMS Web site the following hospital and physician charge
information: May and June 2013 hospital charge data releases; 2013
physician data requests for information; and the April 2014 physician
data releases and data provided on geographic variation in payments and
payments per beneficiary.

N. Medicare Payment for Short Inpatient Hospital Stays

As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28169), some members of the hospital community have expressed support
for the general concept of an alternative payment methodology under the
Medicare program for short inpatient hospital stays. We sought public
comments on such a payment methodology, specifically how it might be
designed. We outlined some specific questions and considerations that
we identified as critical for developing such a methodology. We noted
that this list of questions and considerations was not exhaustive, and
we welcomed additional questions, suggestions, and input from
stakeholders.
Defining short or low cost inpatient hospital stays:
One issue would be how to define a short inpatient hospital stay
for the purpose of determining the appropriate Medicare payment. For
instance, would a short inpatient hospital stay be one where the
average length of stay for the MS-DRG is short or would it be
atypically short or low cost cases relative to other cases within same
MS-DRG? There are significant differences in mean lengths of stay among
MS-DRGs. For example, many frequently billed MS-DRGs have historically
had mean lengths of stay of approximately 2 days, such as MS-DRG 313
(Chest Pain). Other MS-DRGs such as MS-DRG 871 (Septicemia or Severe
Sepsis without Mechanical Ventilation 96+ hours with MCC) have had
longer lengths of stay.
If we adopted a policy that paid less for atypically low-cost or
short-stay cases relative to the average case in the same MS-DRG, we
believe such a policy is more likely to affect an MS-DRG like MS-DRG
871 that has a longer average length of stay or higher average cost
associated with the typical patient. Such a policy is less likely to
apply to MS-DRG 313 because the typical case is already low cost or
short stay.
Determining appropriate payment for short inpatient
hospital stays:
Another issue would be how to determine the appropriate payment
once a short stay has been identified. Some have suggested a per diem
based payment amount, perhaps modelled on the existing transfer payment
policy. Again, such a policy is far more likely to affect payment for
an atypically short-stay or low-cost case in an MS-DRG with a longer
average length of stay. For short-stay cases in an MS-DRG where the
average length of stay for the MS-DRG is short, this methodology would
be unlikely to affect payment as the full IPPS payment would be made in
1 or 2 days.
For these types of short-stay cases, one relevant issue to address
may be that payment for the same case will be very different under the
OPPS and the IPPS depending upon whether the patient has been formally
admitted to the hospital as an inpatient, pursuant to a physician
order. Under what circumstances should the IPPS payment amount be
limited to the OPPS payment amount and under what circumstances might
it be appropriate for the payment amount to be higher? If it were
appropriate for the payment amount to be higher, how would the amount
of the additional payment be determined?
In the proposed rule, we welcomed input on these and other issues
related to an alternative payment methodology under the Medicare
program for short inpatient hospital stays.
Comment: Many commenters indicated that any short-stay policy
should adhere to certain general principles, specifically citing some
or all of the following: a short-stay policy should provide more
appropriate and adequate payment for medically necessary inpatient
services that span less than 2 midnights--payment should

[[Page 50147]]

be higher than the outpatient PPS rate for the service, but should not
exceed the full IPPS payment; a short-stay policy should not apply to
those procedures on the ``inpatient only'' list; a short-stay policy
should be budget neutral; hospitals should be eligible for all add-on
payments they would otherwise receive (for example, DSH and IME),
either in full or on a pro rata basis; beneficiaries requiring short
inpatient hospital stays paid under a short-stay policy should be
considered inpatients and cost-sharing obligations should be calculated
under Medicare Part A; a short-stay policy should be developed in a way
that would not increase administrative burden for hospitals,
physicians, or other medical providers; and CMS should provide clear
and consistent guidance and allow adequate time for hospitals to
implement the short-stay policy prior to its effective date.
Other commenters indicated that CMS could or should consider
approaches such as a per diem approach modeled after the existing
transfer policy, creating separate MS-DRG weights for short-stay cases
and nonshort-stay cases, or allowing the full MS-DRG payment on an
interim basis while the issue is studied further.
Some commenters also stated that the MS-DRG system is predicated on
the understanding that there will be a diversity of treatment patterns
and individual patient circumstances for any given clinical condition,
and that this diversity balances out--high-intensity cases are balanced
by low-intensity cases. These commenters contended that creating a new
category of ``short stays'' and paying for them differentially
undermines the MS-DRG system.
Many commenters stated that additional research and collaboration
were needed before a formal short-stay policy proposal could be made.
MedPAC indicated that it intended to explore alternative short-stay
policies in its upcoming work cycle.
Almost all commenters provided their comments on Medicare payment
for short hospital stays in the context of broader comments on the
current 2-midnight policy.
Response: We thank commenters for the many comments submitted on
this issue, and we will take these into account in any potential future
rulemaking. Although there was no consensus among the commenters, we
look forward to continuing to actively work with stakeholders to
address the complex question of how to further improve payment policy
for short inpatient hospital stays.

O. Suggested Exceptions to the 2-Midnight Benchmark

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through
50954), we modified and clarified CMS' longstanding policy on how
Medicare contractors review inpatient hospital and CAH admissions for
payment purposes. Under that final rule, we established a 2-midnight
benchmark for determining the appropriateness of an inpatient hospital
admission versus treatment on an outpatient basis. We provided in
regulations at Sec. 412.3(e)(1) that, in addition to services
designated as inpatient only, surgical procedures, diagnostic tests,
and other treatments are generally appropriate for inpatient hospital
admission and payment under Medicare Part A when the physician (1)
expects the beneficiary to require a medically necessary hospital stay
that crosses at least 2 midnights and (2) admits the beneficiary to the
hospital based upon that expectation. In the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50944), we stated that the medical judgment of the
physician and the physician's order for inpatient admission should be
based on the expectation of care surpassing 2 midnights, with both the
expectation of time and the determination of the underlying need for
medical care at the hospital supported by complex medical factors such
as history and comorbidities, the severity of signs and symptoms,
current medical needs, and the risk of an adverse event. We also
indicated that, in accordance with longstanding policy, factors that
may result in an inconvenience to a beneficiary or family would not
justify an inpatient hospital admission. The factors that lead a
physician to admit a particular beneficiary based on the physician's
clinical expectation are significant clinical considerations and must
be clearly and completely documented in the medical record. Medicare
review contractors consider complex medical factors that support a
reasonable expectation of the needed duration of the stay relative to
the 2-midnight benchmark. The FY 2014 policy responded to both hospital
calls for more guidance about when an inpatient admission and Part A
payment are appropriate, and beneficiaries' concerns about increasingly
long stays as outpatients due to hospital uncertainties about payment.
In the FY 2014 IPPS/LTCH PPS final rule, at Sec. 412.3(e)(2), we
recognized that if an unforeseen circumstance, such as a beneficiary's
death or transfer, results in a shorter beneficiary stay than the
physician's expectation of at least 2 midnights, the patient may be
considered to be appropriately treated on an inpatient basis and
hospital inpatient payment may be made under Medicare Part A. We also
clarified, in both the final rule and subsequent subregulatory
guidance, that the unforeseen circumstances specified at Sec.
412.3(e)(2) are not all-inclusive and could include additional
circumstances such as unexpected clinical improvement, election of
hospice care, or departure against medical advice.
The FY 2014 IPPS/LTCH PPS final rule also indicated that there are
exceptions to the 2-midnight benchmark. In other words, there will be
cases in which an admitting practitioner expects the beneficiary's
length of stay to last less than 2 midnights and yet inpatient
admission would still be appropriate. For example, we specified that
procedures on the OPPS inpatient only list are always appropriately
inpatient, regardless of the actual time expected at the hospital, so
long as the procedure is medically necessary and performed pursuant to
a physician order and formal admission.
In addition to procedures contained on the OPPS inpatient only
list, we noted in the FY 2014 IPPS/LTCH PPS final rule that there may
be other rare and unusual circumstances in which a hospital stay
expected to last less than 2 midnights would nonetheless be appropriate
for inpatient hospital admission and Part A payment. We indicated that
we would explore other potential exceptions to the generally applicable
benchmark and would detail any such rare and unusual circumstances in
subregulatory guidance. As part of this process, throughout the year,
we have accepted and considered suggestions from stakeholders on this
topic.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 280170), we
described the process for submitting suggestions regarding potential
additional exceptions to the 2-midnight benchmark. Such suggestions may
be sent to CMS via written correspondence or via email to
SuggestedExceptions@cms.hhs.gov. As noted in the proposed rule, CMS
will notify providers of any additional guidance regarding 2-midnight
exceptions through subregulatory means, such as postings on the CMS Web
site or manual instruction.
Although the FY 2015 IPPS/LTCH PPS proposed rule did not include
any proposed regulatory changes relating to the 2-midnight benchmark,
we nonetheless received a number of public comments regarding the
current regulation. Commenters opined on the

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usefulness of the 2-midnight benchmark for making inpatient admission
decisions and provided suggestions for improving the policy. During the
summer and fall of 2014, CMS plans to evaluate the results of the
``probe & educate'' process (a process by which MACs are reviewing a
prepayment, provider-specific probe sample of inpatient Part A claims
for appropriateness of inpatient admission under the revised 2-midnight
benchmark and providing provider-specific education, as necessary, to
correct improper payments) and issue additional subregulatory guidance
to our claim review contractors, if necessary, to ensure consistency in
application of the 2-midnight policy. We will consider all suggestions
as we develop this subregulatory guidance. We also will continue to
maintain open communication with stakeholders to ensure that the
inpatient classification and payment policies provide a uniform process
for beneficiary treatment and claim submission.

P. Finalization of Interim Final Rule With Comment Period on the
Extension of the Payment Adjustment for Low-Volume Hospitals and the
Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014
Discharges Through March 31, 2014

1. Background
In the interim final rule with comment period (IFC) that appeared
in the Federal Register on March 18, 2014 (79 FR 15022) (hereinafter
referred to as the March 2014 IFC), we implemented the extension of
temporary changes to the payment adjustment for low-volume hospitals
and the MDH program under the IPPS for FY 2014 discharges through March
31, 2014, in accordance with sections 1105 and 1106, respectively, of
the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) enacted on
December 26, 2013. In this final rule, we are providing a brief summary
of the provisions of that IFC, responding to the public comments we
received, and stating our final policy.
Section 1105 of the Pathway for SGR Reform Act extended changes to
the payment adjustment for low-volume hospitals for an additional 6
months, through March 31, 2014, of FY 2014. Section 1106 of the Pathway
for SGR Reform Act extended the MDH program for an additional 6 months,
through March 31, 2014, of FY 2014. (As discussed previously in
sections IV.D. and IV.G. of the preamble of this final rule, the
provisions of the PAMA, enacted on April 1, 2014, further extended
changes to the payment adjustment for low-volume hospitals and the MDH
program for an additional year, through March 31, 2015.)
2. Summary of the Provisions of the Interim Final Rule With Comment
Period
a. Extension of the Payment Adjustment for Low-Volume Hospitals
(1) Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. The regulations describing the payment adjustment for low-volume
hospitals are at 42 CFR 412.101.
Sections 3125 and 10314 of the Affordable Care Act provided for a
temporary change in the low-volume hospital payment policy for FYs 2011
and 2012. Section 605 of the American Taxpayer Relief Act of 2012
(ATRA) extended, for FY 2013, the temporary changes in the low-volume
hospital payment policy provided for in FYs 2011 and 2012 by the
Affordable Care Act. Prior to the enactment of the Pathway for SGR
Reform Act, for FY 2014 (and subsequent years), the low-volume hospital
qualifying criteria and payment adjustment returned to the statutory
requirements under section 1886(d)(12) of the Act that were in effect
prior to the amendments made by the Affordable Care Act and the ATRA.
(As previously noted, the provisions of the PAMA, enacted on April 1,
2014, further extended changes to the payment adjustment for low-volume
hospitals and the MDH program for an additional year, through March 31,
2015. The extension of the temporary changes to the low-volume hospital
payment adjustment for FY 2014 discharges occurring on or after April
1, 2014 through September 30, 2014 was announced in a notice that
appeared in the Federal Register on June 17, 2014 (79 FR 34444). The
extension of the temporary changes to the low-volume hospital payment
adjustment for FY 2015 discharges occurring on or after October 1, 2014
through March 31, 2015, is discussed in section IV.D. of the preamble
of this final rule.
The Affordable Care Act expanded the definition of low-volume
hospital and modified the methodology for determining the payment
adjustment for hospitals meeting that definition for FYs 2011 and 2012.
In general, the amendments made by the Affordable Care Act modified the
qualifying criteria for low-volume hospitals such that a hospital
qualifies as a low-volume hospital if it is more than 15 road miles
from another subsection (d) hospital and has less than 1,600 Medicare
discharges during the fiscal year. In addition, the amendments made by
the Affordable Care Act provide that the low-volume hospital payment
adjustment (that is, the percentage increase) is determined ``using a
continuous linear sliding scale'' that ranges from 25 percent for low-
volume hospitals with 200 or fewer Medicare discharges in the fiscal
year to 0 percent for low-volume hospitals with greater than 1,600
Medicare discharges. For additional information on the implementation
of the temporary changes in the low-volume hospital payment policy
provided by the Affordable Care Act, we refer readers to the FY 2011
IPPS/LTCH PPS final rule (75 FR 50238 through 50275) and the FY 2012
IPPS/LTCH PPS final rule (76 FR 51677 through 51680).
Section 605 of the ATRA extended the temporary changes in the low-
volume hospital payment policy provided for in FYs 2011 and 2012 by the
Affordable Care Act for FY 2013, that is, for discharges occurring
before October 1, 2013. For additional information on the extension of
the temporary changes in the low-volume hospital payment policy for FY
2013 as provided by the ATRA, we refer readers to the notice that
appeared in the Federal Register on March 7, 2013 (78 FR 14689 through
14694). Additional information on the expiration of the temporary
changes in the low-volume hospital payment policy for FYs 2011 through
2013 provided for by the Affordable Care Act and the ATRA can be found
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50610 through 50613).
(2) Summary of the Implementation of the Extension of the Low-Volume
Hospital Payment Adjustment for FY 2014 (through March 31, 2014)
Section 1105 of the Pathway for SGR Reform Act extended the changes
made by the Affordable Care Act and extended by the ATRA by amending
sections 1886(d)(12)(B), (C)(i), and (D) of the Act. In the March 2014
IFC (79 FR 15023 through 15025), we amended the regulations text at 42
CFR 412.101 to make conforming changes to the qualifying criteria and
the payment adjustment for low-volume hospitals according to the
amendments made by section 1105 of the Pathway for SGR Reform Act as
discussed in that rule.
To implement the extension of the temporary change in the low-
volume hospital payment policy through the first half of FY 2014 (that
is, for discharges occurring through March 31, 2014) provided for by
the Pathway for SGR Reform Act, we updated the discharge data source
used to identify

[[Page 50149]]

qualifying low-volume hospitals and calculate the payment adjustment
(percentage increase) for FY 2014 discharges occurring before April 1,
2014. This approach was consistent with the existing regulations at
Sec. 412.101(b)(2)(ii) and with our implementation of the changes in
FYs 2011 and 2012 and the extension of those changes in FY 2013.
Specifically, for FY 2014 discharges occurring before April 1, 2014,
consistent with our historical policy, we established that qualifying
low-volume hospitals and their payment adjustment are determined using
Medicare discharge data from the March 2013 update of the FY 2012
MedPAR file, as these data were the most recent data available at the
time of the development of the FY 2014 payment rates and factors
established in the FY 2014 IPPS/LTCH PPS final rule. Table 14 of the
March 2014 IFC (which is available only through the Internet on the CMS
Web site at https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp)
lists the ``subsection (d)'' hospitals with fewer than 1,600 Medicare
discharges based on the March 2013 update of the FY 2012 MedPAR files
and their FY 2014 low-volume payment adjustment (if eligible). However,
that list of hospitals with fewer than 1,600 Medicare discharges in
Table 14 does not reflect whether or not the hospital meets the
distance criterion for FY 2014 discharges occurring before April 1,
2014.
We explained in the March 2014 IFC (79 FR 15024 through 15025) that
in order to receive a low-volume hospital payment adjustment under
Sec. 412.101, in accordance with our previously established procedure,
a hospital must notify and provide documentation to its MAC that it
meets the distance criterion. We explained that the MAC would refer to
the hospital's Medicare discharge data determined by CMS (as provided
in Table 14) to determine whether or not the hospital meets the
discharge criterion, and the amount of the payment adjustment for FY
2014 discharges occurring before April 1, 2014, once it is determined
that the distance criterion has been met.
Consistent with our previously established procedure, we
implemented a procedure for a hospital to request low-volume hospital
status for FY 2014 discharges occurring before April 1, 2014.
Specifically, we established that in order for the applicable low-
volume percentage increase to be applied to payments for its discharges
beginning on or after October 1, 2013 (that is, the beginning of FY
2014), a hospital must make its request for low-volume hospital status
in writing and this request must be received by its MAC no later than
March 31, 2014. We also stated that a hospital that qualified for the
low-volume payment adjustment in FY 2013 may continue to receive a low-
volume payment adjustment for FY 2014 discharges occurring before April
1, 2014 without reapplying if it continues to meet the Medicare
discharge criterion based on the March 2013 update of the FY 2012
MedPAR data (shown in Table 14 of the March 2014 IFC), and the distance
criterion. However, the hospital must send written verification that
was received by its MAC no later than March 31, 2014, that it continued
to be more than 15 miles from any other ``subsection (d)'' hospital. We
noted that this procedure is similar to the policy we established when
we implemented the extension of the temporary changes to the low-volume
hospital payment adjustment for FY 2013 provided by the ATRA, as well
as the procedure for a hospital to request low-volume hospital status
for FYs 2011 and 2012 under the provisions of the Affordable Care Act.
b. Extension of the MDH Program
Section 1106 of the Pathway for SGR Reform Act of 2013 provided for
a 6-month extension of the MDH program, effective from October 1, 2013
to March 31, 2014. Specifically, section 1106 of the Pathway for SGR
Reform Act amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II)
of the Act by striking ``October 1, 2013'' and inserting ``April 1,
2014''. Section 1106 of the Pathway for SGR Reform Act also made
conforming amendments to sections 1886(b)(3)(D)(i) and
1886(b)(3)(D)(iv) of the Act.
In the March 2014 IFC (79 FR 15025 through 15027), we stated that,
in general, as a result of the extension of the MDH program under the
Pathway for SGR Reform Act, a provider that was classified as an MDH as
of the September 30, 2013 expiration of the MDH program, would be
reinstated as an MDH effective October 1, 2013 through March 31, 2014,
subject to the requirements of the regulations at Sec. 412.108, with
no need to reapply for MDH classification. In that same IFC, we amended
the regulations at Sec. 412.108(a)(1) and (c)(2)(iii) to reflect the
statutory extension of the MDH program through March 31, 2014, as
provided for by section 1106 of the Pathway for SGR Reform Act. We also
discussed that, while generally hospitals that previously qualified for
MDH status would be reinstated as an MDH retroactively to October 1,
2013, there were two situations where the effective date of MDH status
may not have been retroactive to October 1, 2013 (that is, MDHs that
classified as SCHs on or after October 1, 2013, and MDHs that requested
a cancellation of their rural classification under Sec. 412.103(b)).
We provided examples of various scenarios that illustrate how and when
MDH status under section 1106 of the Pathway to SGR Reform Act would be
determined for hospitals that were MDHs as of the September 30, 2013
expiration of the MDH program, subject to the timing considerations
described in that IFC.
c. Summary of Public Comments, Responses, and Statements of Final
Policies
We received approximately four timely pieces of correspondence in
response to the March 2014 IFC.
Comment: Commenters generally supported CMS' implementation of the
extension of the temporary changes to the payment adjustment for low-
volume hospitals and the MDH program through March 31, 2014. However,
they expressed concern that the March 31, 2014 deadline for hospitals
to submit a written request for low-volume hospital status to the MAC
did not allow sufficient and reasonable time period for hospitals to
submit the documentation necessary to qualify for the low-volume
payment adjustment during the 6-month extension. Therefore, the
commenters urged CMS to extend this deadline to allow hospitals a
minimum of 30 days to submit the documentation necessary to qualify for
the low-volume payment adjustment for FY 2014 discharges through March
31, 2014.
Response: We appreciate the commenters' general support for our
implementation of the extension of the temporary changes to the payment
adjustment for low-volume hospitals and the MDH program through March
31, 2014. While we understand the commenters' concern regarding the
time available for hospitals to request low-volume hospital status for
FY 2014 discharges occurring before April 1, 2014, we note that, at
this time, we are not aware of any hospitals that were unable to meet
the March 31, 2014 deadline for hospitals to request the low-volume
hospital payment adjustment for FY 2014 discharges occurring before
April 1, 2014. Furthermore, as we stated in the March 2014 IFC, a
hospital that qualified for the low-volume payment adjustment in FY
2013 did not need to reapply for FY 2014 if it continues to meet the
applicable discharge and the distance criteria (that is, such a
hospital did not have to resubmit a low-volume hospital

[[Page 50150]]

request with supporting documentation to demonstrate that it continues
to meet the distance criterion). Rather, such a hospital was only
required to send written verification to its MAC that it continues to
meet the distance criterion (that is, that it continues to be more than
15 miles from any other ``subsection (d)'' hospital) by the March 31,
2014 notification deadline. As in prior years, a short letter to the
MAC stating that the hospital continues to meet the low-volume hospital
distance criterion as documented in a prior low-volume hospital status
request would be considered sufficient for this verification
requirement.
For hospitals newly eligible for the low-volume hospital payment
adjustment, in the March 2014 IFC, we included guidance, consistent
with our previously established procedure, to provide focus to their
request preparation efforts. Specifically, we stated that the use of a
Web-based mapping tool, such as MapQuest, as part of documenting that
the hospital meets the distance criterion for low-volume hospitals, is
acceptable for the low-volume hospital request, along with providing
other relevant information such as the name and street address of the
nearest hospitals, location on a map, and distance from the hospital
requesting low-volume hospital status. We also stated that the MAC may
follow up with the hospital to obtain additional necessary information
to determine whether or not the hospital meets the low-volume hospital
status distance criterion.
Given the limited nature of the information required to satisfy the
request and notification requirement, and the opportunity to provide
additional information if needed, we believe that the March 31, 2014
deadline allowed for sufficient and reasonable time for hospitals to
submit their requests. In addition, as we noted in the March 2014 IFC,
the process for requesting and obtaining the low-volume hospital
payment adjustment for FY 2014 discharges occurring before April 1,
2014 was similar to the policy we established when we implemented the
extension of the temporary changes to the low-volume hospital payment
adjustment for FY 2013 provided by the ATRA. For the reasons stated
above, we are not adopting the commenters' request to allow hospitals a
minimum of 30 days to submit the documentation necessary to qualify for
the low-volume payment adjustment for FY 2014 discharges occurring
before April 1, 2014.
Comment: One commenter opposed using Medicare discharge data from
the March 2013 update of the FY 2012 MedPAR file (as listed in Table 14
of the March 2014 IFC) to assess the discharge criterion for low-volume
hospital eligibility (that is, to determine if the hospital had less
than 1,600 Medicare discharges) and to determine the amount of the
payment adjustment for FY 2014 discharges occurring before April 1,
2014. The commenter believed certain scenarios were not accounted for
by using historical Medicare discharge data in the MedPAR file to
prospectively determine low-volume hospital eligibility and payment.
For example, a hospital that became an IPPS hospital (either as a newly
participating hospital or conversion from another provider type, like a
CAH) would not be included in the historical MedPAR discharge data, or
a hospital that previously did not meet the discharge criterion based
on the historical Medicare discharge data in the MedPAR file that now
has fewer than 1,600 Medicare discharges in the current year. The
commenter requested that CMS modify its established policy of using
historical MedPAR discharge data to determine if a hospital meets the
discharge criterion to allow for scenarios such as the ones described
above, and noted that CMS could develop a settlement procedure on the
Medicare cost report for hospitals that did not have fewer than 1,600
Medicare discharges in the historical Medicare discharge data in the
MedPAR file but have fewer than 1,600 Medicare discharges in the
payment year.
Response: As explained in the March 2014 IFC (79 FR 15024), under
the existing regulations at Sec. 412.101(b)(2)(ii), for FYs 2011, 2012
and 2013, a hospital's Medicare discharges from the most recently
available MedPAR data, as determined by CMS, are used to determine if
the hospital meets the discharge criteria to receive the low-volume
payment adjustment in the current year. Since its initial
implementation in FY 2005, we established a policy of using historical
discharge data to determine if the hospital meets the discharge
criterion to receive the low-volume payment adjustment in the current
year. Prior to the temporary changes to the low-volume hospital payment
adjustment policy under the amendments made by the Affordable Care Act,
discharges from a prior cost reporting period were used to determine if
the hospital qualified for the low-volume payment adjustment in the
current year. We adopted the use of historical Medicare discharge data
from the MedPAR files when we implemented the amendments made by the
Affordable Care Act because MedPAR data are the most recent available
data that provide the number of discharges for individuals that are
entitled to or enrolled for Medicare Part A, as required by statute (75
FR 50241). The most recent Medicare discharge data are generally
available in the MedPAR files before the corresponding Medicare
discharges from the cost report data are available due to the
established timeframes for completion and submission of the Medicare
cost report. (We note that the MedPAR file contains only Medicare
discharge information, and does not contain discharge information for
non-Medicare patients. Therefore, hospital cost report data are the
best available data source for total discharges under the discharge
criterion in Sec. 412.101(b)(2)(i).)
As we discussed when we initially implemented the low-volume
hospital payment adjustment in the FY 2005 IPPS final rule (69 FR 49100
through 49101), if the determination of whether hospitals qualify for
low-volume payment adjustments and the computation of the payment
adjustment amount are based on the number of discharges in the current
fiscal year, neither CMS nor the hospital will know with certainty
whether a hospital qualifies for the adjustment, or what the amount of
the adjustment would be, until after the end of the payment year
(probably not until the time of final cost report settlement for the
year). In such circumstances, CMS could be faced with the prospect of
recouping large overpayments in some cases or reimbursing for large
underpayments in others, and hospitals would face similar
uncertainties. On the other hand, if these determinations are based on
discharge counts from a prior fiscal year, hospitals will know in
advance whether they will be receiving a payment adjustment and what
the size of the adjustment will be, which provides fiscal stability by
allowing both hospitals and CMS to plan accordingly. Therefore, we
established that the count of discharges, for purposes both of meeting
the qualifying definition of a low-volume hospital and determining the
amount of the low-volume hospital payment adjustment, is based on the
number of discharges occurring during the cost reporting period for the
most recent submitted cost report. In that same final rule, we also
recognized that this policy may temporarily disadvantage certain
hospitals, such as the situations mentioned by the commenter. However,
we believe that the fiscal stability provided under a policy based on

[[Page 50151]]

historical data offsets any temporary disadvantage hospitals in such
situations may experience until their historical data are used to meet
the low-volume hospital payment adjustment discharge criterion in a
future year, and for these reasons we believe a settlement process on
the Medicare cost report is not needed. Therefore, we are not adopting
the commenter's suggestion to modify our established policy of using
historical MedPAR discharge data to determine if a hospital meets the
low-volume hospital discharge criterion or to determine the amount of
the low-volume hospital payment adjustment for FY 2014 discharges
occurring before April 1, 2014.
After consideration of the public comments we received, we are
finalizing all of the provisions set forth in the March 2014 IFC
without modification. We note that the revisions to the low-volume
hospital payment adjustment regulations at Sec. 412.101 and the MDH
program regulations at Sec. 412.108 under the March 2014 IFC are
superseded by the final conforming changes to these same regulatory
provisions to reflect the subsequent extension of the changes to the
qualifying criteria and the payment adjustment methodology for low-
volume hospitals and the MDH program through March 31, 2015 under the
PAMA. We refer readers to sections IV.D. and IV.G. of the preamble of
this final rule, respectively, for more information on these final
conforming changes.
For information on the estimated change in payments to IPPS
hospitals in FY 2014 as a result of the implementation of sections 1105
and 1106 of the Pathway for SGR Reform Act, we refer readers to the
regulatory impact section of the March 2014 IFC (79 FR 15028 through
15030).

Q. Finalization of Interim Final Rule With Comment Period Relating to
Changes to Certain Cost Reporting Procedures for Medicare
Disproportionate Share Hospital (DSH) Uncompensated Care Payments

1. Background
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same Act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a new
section 1886(r) to the Social Security Act (the Act) that modified the
methodology for computing the Medicare disproportionate share hospital
(DSH) payment adjustment beginning in FY 2014. We implemented section
1886(r) of the Act in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647). For a detailed discussion of the background on the
reduction in DSH payments under section 1886(d)(5)(F) of the Act and
the uncompensated care payment under section 1886(r) of the Act, we
refer readers to section IV.F.3.a. of the preamble of this final rule.
Following the publication of the FY 2014 IPPS/LTCH PPS final rule,
we issued an interim final rule with comment period (CMS-1599-IFC) in
which we revised certain policies and processes described in the FY
2014 IPPS/LTCH PPS final rule. The interim final rule with comment
period appeared in the Federal Register on October 3, 2013 (78 FR 61191
through 61197). In the interim final rule with comment period, we
revised certain operational considerations for hospitals with Medicare
cost reporting periods that span more than one Federal fiscal year and
also made changes to the data that will be used in the uncompensated
care payment calculation in order to ensure that data from Indian
Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of
that calculation. We found that there was good cause to waive prior
notice and comment and the delay in effective date with respect to the
revisions discussed in the interim final rule with comment period (78
FR 61195 through 61196). Accordingly, the provisions of the interim
final rule with comment period went into effect on October 1, 2013.
We received 12 timely pieces of correspondence in response to the
interim final rule with comment period. Below we summarize the
provisions of the interim final rule with comment period and the public
comments we received, present our responses, and finalize the policies
that were originally implemented in the interim final rule with comment
period.
2. Summary of Provisions of the Interim Final Rule With Comment Period,
Public Comments Received, Responses, and Finalized Policy
a. Operational Considerations for Hospitals With Medicare Cost
Reporting Periods That Span More Than One Federal Fiscal Year
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50645), we finalized
``a process to distribute interim uncompensated care payments under the
IPPS on a per-discharge basis through our claims processing system,
with a reconciliation of the hospitals' [uncompensated care] payments
at cost report settlement to ensure that hospitals receive no more than
the estimated amount included in this final rule''. We described that
process as follows (78 FR 50646):
``[A]t cost report settlement, the . . . fiscal intermediary/MAC
will issue a notice of program reimbursement that includes a
determination concerning whether each hospital is eligible for
empirically justified Medicare DSH payments and, therefore, eligible
for uncompensated care payments in FY 2014 and each subsequent year. In
the case where a hospital received interim payments for its empirically
justified Medicare DSH payments and uncompensated care payments for FY
2014 or a subsequent year on the basis of estimates prior to the
payment year, but is determined to be ineligible for the empirically
justified Medicare DSH payment at cost report settlement, the hospital
would no longer be eligible for either payment and CMS would recoup
those monies. For a hospital that did not receive interim payments for
its empirically justified Medicare DSH payments and uncompensated care
payments for FY 2014 or a subsequent year, but at cost report
settlement is determined to be eligible for DSH payments, the
uncompensated care payment for such a hospital is calculated based on
the Factor 3 value determined prospectively for that fiscal year. . . .
The reconciliations at cost report settlement would be based on the
values for Factor 1, Factor 2, and Factor 3 that we have finalized
prospectively for a Federal fiscal year.''
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50646), we provided
an example in which a DSH eligible hospital has a cost reporting period
of January 1, 2014 through December 31, 2014. We stated that this
hospital would receive interim payments for its uncompensated care
payments beginning on October 1, 2013. For cost reporting purposes, we
stated that the uncompensated care payments for federal FY 2014 would
be assigned to cost reporting periods beginning on or after October 1,
2013, and would be reconciled on those cost reports. Thus, in the
example of the hospital with a cost reporting period beginning on
January 1, 2014, if the hospital remained eligible for empirically
justified DSH payments at cost report settlement, it would receive its
full FY 2014 uncompensated care payment on its cost report for the cost
reporting period beginning on January 1, 2014. Although we acknowledged
that it is possible to align interim and final payments for the
uncompensated care payment with an individual hospital's cost reporting
periods, we believed it would be administratively efficient and
practical

[[Page 50152]]

to pay the uncompensated care payment on the basis of the Federal
fiscal year because that is how it is determined, and to reconcile that
amount in the cost reporting period that begins in the respective
Federal fiscal year. We stated in the final rule (78 FR 50647) that we
believed this methodology would not delay the full payment of FY 2014
payments to hospitals with cost reporting periods that begin after
October 1, 2013.
However, as we prepared to implement the FY 2014 IPPS/LTCH PPS
final rule, several difficulties regarding this approach that we had
not previously considered came to our attention. We initially proposed
to make interim uncompensated care payments on a biweekly basis,
finalizing a different process to make interim uncompensated care
payments on a per discharge basis in response to comments. In addition
to proposing and finalizing a process for making interim uncompensated
care payments, we also proposed and finalized a reconciliation process
that would reconcile the uncompensated care payment for a given fiscal
year, such as FY 2014, on the cost report for the cost reporting period
beginning in that fiscal year (that is, for FY 2014, the cost report
for the cost reporting period beginning in FY 2014). We proposed and
finalized this approach because we believed it would be
administratively efficient and practical. As indicated previously and
in the FY 2014 IPPS/LTCH PPS final rule, we initially believed that
this policy would neither delay nor substantially affect the
disbursement of final uncompensated care payments; but, since the final
rule was issued, we came to doubt these conclusions.
In the interim final rule with comment period, we stated that we
had come to believe that the policy we adopted in the FY 2014 IPPS/LTCH
PPS final rule was inconsistent with longstanding cost reporting
requirements. As a general rule, payments for discharges are reported
in the cost reporting period in which they occur, and all payments made
for discharges during a cost reporting period are reconciled on the
cost report for that period (PRM-I, Section 2805 and 42 CFR 412.1(a)).
We did not specifically address or propose to change the cost reporting
rules in either the FY 2014 IPPS/LTCH PPS proposed or final rules.
However, for hospitals with cost reporting periods that were not
concurrent with the Federal fiscal year, the policy adopted in the FY
2014 IPPS/LTCH PPS final rule departed from these cost reporting
requirements by reconciling interim uncompensated care payments made
for discharges occurring during the hospital's 2013 cost reporting
period on the hospital's 2014 cost report. Under ordinary cost
reporting requirements, those payments (having been made during the
hospital's 2013 cost reporting period) would have to be treated as an
overpayment on the hospital's 2013 cost report and therefore recouped.
However, as finalized in the FY 2014 IPPS/LTCH PPS final rule, if the
hospital was found to be eligible for DSH payments for its cost
reporting period that began during FY 2014, we would pay the hospital
its full FY 2014 uncompensated care payment during the settlement of
the hospital's 2014 cost report (that is, we would repay the previously
recouped uncompensated care payments when we reconciled the hospital's
2014 cost report). We stated that these administrative issues would
effectively delay uncompensated care payments, frustrate our policy of
making uncompensated care payments promptly, and would likely lead to
serious cash flow difficulties for some hospitals. In summary, we did
not believe the policy we finalized in the FY 2014 IPPS/LTCH PPS final
rule of reconciling uncompensated care payments for hospitals with cost
reporting periods that begin after October 1, 2013 would work as
intended for the large majority of IPPS hospitals that have cost
reporting periods that are not concurrent with the Federal fiscal year.
To effectuate a revised process, in the interim final rule with
comment period, we sought to align final payments for the uncompensated
care payment with each individual hospital's cost reporting periods and
to reconcile interim uncompensated care payment amounts on the
hospital's cost report for the proportion of the cost reporting period
that overlaps a Federal fiscal year and in which the interim payments
were made or should have been made. Therefore, the final uncompensated
care payment amounts that would be included on a cost report spanning 2
Federal fiscal years would be the pro rata share of the uncompensated
care payment associated with each Federal fiscal year. This pro rata
share would be determined based on the proportion of the applicable
Federal fiscal year that is included in that cost reporting period. We
considered the same example from the FY 2014 IPPS/LTCH PPS final rule,
where a hospital is estimated to be eligible for the empirically
justified DSH payment and also an uncompensated care payment in FY 2014
and has a cost reporting period of January 1, 2014 through December 31,
2014. Under the revised process we adopted in the interim final rule
with comment period, in that example, that hospital would still begin
to receive interim payments for its uncompensated care on October 1,
2013. However, instead of having the entire FY 2014 payment reconciled
on its cost report for the cost reporting period beginning on January
1, 2014 (which ends on December 31, 2014, and would therefore require
the hospital to pay back monies received for the portion of its cost
reporting period beginning on January 1, 2013, that occurs in Federal
fiscal year 2014), we would reconcile the interim FY 2014 uncompensated
care payments received for discharges from October 1, 2013 through
December 31, 2013 on the hospital's cost report for the cost reporting
period beginning on January 1, 2013 against a pro rata share of its FY
2014 uncompensated care payment. If this hospital were eligible for DSH
on its cost report for the cost reporting period ending on December 31,
2013, it would receive a pro rata share of its FY 2014 uncompensated
care payment. This pro rata share would be approximately three-twelfths
(that is, the period of time from October 1, 2013 through December 31,
2013, divided by the period of time from January 1, 2013 through
December 31, 2013) of the hospital's FY 2014 uncompensated care
payment. If the hospital's subsequent cost reporting period is January
1, 2014 through December 31, 2014, we also would reconcile the interim
FY 2014 uncompensated care payments received for discharges from
January 1, 2014 through September 30, 2014 on the hospital's cost
report for the cost reporting period beginning on January 1, 2014
against a pro rata share of its FY 2014 uncompensated care payment. We
also would reconcile the interim FY 2015 uncompensated care payments
received for discharges from October 1, 2014 through December 31, 2014
(that is, discharges occurring in FY 2015 during that hospital's cost
reporting period) on the hospital's cost report for the cost reporting
period beginning on January 1, 2014 against a pro rata share of its FY
2015 uncompensated care payment. Accordingly, for the hospital in this
example, if it remained eligible for Medicare DSH on its cost report
for the cost reporting period beginning on January 1, 2014, it would
receive the sum of two pro rata shares of uncompensated care payments,
one pro rata share equal to approximately nine-twelfths (that is, the
period of time from January 1, 2014 through September 30, 2014 divided
by the period of time from January 1, 2014 through December 31,

[[Page 50153]]

2014) of the hospital's FY 2014 uncompensated care payment and one pro
rata share equal to approximately three-twelfths (that is, the period
of time from October 1, 2014 through December 31, 2014 divided by the
period of time from January 1, 2014 through December 31, 2014) of the
hospital's FY 2015 uncompensated care payment.
Under the interim final rule with comment period, and in accordance
with the policies we finalized in the FY 2014 IPPS/LTCH PPS final rule
regarding eligibility for the uncompensated care payment, hospitals
with cost reporting periods that span more than one Federal fiscal year
will be eligible for the respective pro rata shares of their
uncompensated care payment if they were eligible for DSH in that cost
reporting period. If they were ineligible for DSH in that cost
reporting period, they would be ineligible to receive the respective
pro rata share of the uncompensated care payment for the respective
Federal fiscal year (or years). We stated that we believed this
approach remained fundamentally consistent with the policy we finalized
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) where we stated
that ``our final determination on the hospital's eligibility for
uncompensated care payments would be based on the hospital's actual DSH
status on the cost report for that payment year.'' However, it avoided
the cost reporting difficulties that would have arisen from the
reconciliation process originally adopted in the final rule.
Comment: Several commenters supported the modifications to align
uncompensated care payments based on the Federal fiscal year, instead
of based on a hospital's cost reporting period. Commenters supported
the change in policy such that the final uncompensated care payment
amounts that would be included on a hospital's cost report that spans 2
Federal fiscal years will be the pro rata share of the uncompensated
care payment associated with each Federal fiscal year.
Response: We appreciate the commenters' support.
Comment: One commenter recommended that when CMS reconciles
uncompensated care payments on a pro rata basis based on the portion of
a hospital's cost reporting period that falls in the Federal fiscal
year, CMS prorate on a calendar month basis as opposed to calendar day
basis for administrative simplicity.
Response: We appreciate the commenter's recommendation. Under the
policy finalized in the interim final rule with comment period, we
determine a pro rata share based on the proportion of the applicable
Federal fiscal year that is included in that cost reporting period. We
intend to establish the pro rate share on a calendar day basis, as
opposed to a calendar month basis. We believe we can more accurately
account for the uncompensated care payment amounts when we reconcile on
a calendar day basis, as we can easily obtain the number of days from a
hospital's cost reporting period on the hospital's Medicare Hospital
Cost Report. Therefore, this process will not be administratively
burdensome. Furthermore, we disagree that it would be administratively
easier or simpler to prorate on a monthly basis, particularly in cases
where a hospital's cost report may end in the middle of the month.
b. Treatment of Indian Health Service Hospitals
In the FY 2014 IPPS/LTCH PPS final rule, we discussed the hospitals
that are eligible to receive the uncompensated care payments under
section 1886(r)(2) of the Act. Specifically, we stated (78 FR 50622)
that the ``new payment methodology under subsection (r) applies to
`subsection (d) hospitals' that would otherwise receive a
`disproportionate hospital share payment . . . made under subsection
(d)(5)(F).' '' Therefore, eligibility for empirically justified
Medicare DSH payments is unchanged under this new provision. Consistent
with the law, hospitals must receive empirically justified Medicare DSH
payments in FY 2014 or a subsequent year to receive an additional
Medicare uncompensated care payment for that year.
In the FY 2014 IPPS/LTCH PPS final rule, we finalized our
methodology for calculating the new uncompensated care payments. As we
discussed in that final rule, section 1886(r)(2) of the Act provides
that for each eligible hospital in FY 2014 and subsequent years, the
new uncompensated care payment is the product of three factors. Factor
1 of that methodology is the ``difference between our estimates of: (1)
the amount that would have been paid in Medicare DSH payments for FY
2014 and subsequent years, in the absence of the new payment provision;
and (2) the amount of empirically justified Medicare DSH payments that
are made for FY 2014 and subsequent years, which takes into account the
requirement to pay 25 percent of what would have otherwise been paid
under section 1886(d)(5)(F) of the Act. In other words, this factor
represents our estimate of 75 percent (100 percent minus 25 percent) of
our estimate of Medicare DSH payments that would otherwise be made, in
the absence of section 1886(r) of the Act, for FY 2014 and subsequent
years'' (78 FR 50627).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50630), we finalized
our proposal to use the most recently available estimates, as
calculated by the CMS Office of the Actuary, to determine both the
aggregate amount of empirically justified DSH payments under section
1886(r)(1) of the Act and the aggregate amount of payments that would
otherwise have been made under section 1886(d)(5)(F) of the Act. In
order to calculate these estimates, the Office of the Actuary used the
March 2013 update of the Medicare Hospital Cost Report Information
System (HCRIS) and the proposed rule's IPPS Impact file. The estimate
excluded Maryland hospitals, SCHs paid under their hospital-specific
rate, and hospitals in the Rural Community Hospital Demonstration
Program, as these hospitals do not receive a Medicare DSH payment. The
CMS Office of the Actuary's final estimate for Medicare DSH payments
for FY 2014 without regard to the application of section 1886(r)(1) of
the Act, was approximately $12.772 billion. The estimate for
empirically justified Medicare DSH payments for FY 2014, with the
application of section 1886(r)(1) of the Act, was approximately $3.193
billion. Factor 1 is the difference of these two estimates by our
Office of the Actuary; therefore, in the FY 2014 IPPS/LTCH PPS final
rule, we calculated Factor 1 to be approximately $9.579 billion.
IHS hospitals are subsection (d) hospitals that can receive
empirically justified Medicare DSH payments under section 1886(r)(1) of
the Act if they meet the eligibility requirements under subsection
(d)(5)(F). Therefore, eligible IHS hospitals also receive the new
uncompensated care payment under subsection (r)(2). However, following
the issuance of the FY 2014 IPPS/LTCH PPS final rule, it came to our
attention that, although IHS hospitals can receive Medicare DSH
payments, they submit Medicare hospital cost reports to CMS that are
not uploaded in the HCRIS database. Therefore, their Medicare DSH
payments were not included in the estimates by our Office of the
Actuary that were used to calculate Factor 1. We stated in the interim
final rule with comment period that because IHS hospitals are eligible
to receive Medicare DSH payments and the new uncompensated care
payments, we believe it is inappropriate to exclude the Medicare DSH
payments to IHS hospitals from the estimates used to calculate Factor
1. In addition, we acknowledged that we did not intend to

[[Page 50154]]

finalize a policy that specifically excludes DSH payments to IHS
hospitals from our estimate of Medicare DSH payments for purposes of
calculating Factor 1 in the calculation of the uncompensated care
payment.
Therefore, in the interim final rule with comment period, we
revised the policy originally adopted in the FY 2014 IPPS/LTCH PPS
final rule in order to change the data that will be considered in
calculating Factor 1 for FY 2014 and subsequent years. Specifically, in
addition to the March 2013 update of HCRIS, we will also consider cost
report data provided by IHS hospitals to CMS as of March 2013. We also
will recalculate Factor 1, to reflect the Office of the Actuary's
estimate of Medicare DSH payments to IHS hospitals, based on these cost
report data. With the inclusion of the Medicare DSH payments to IHS
hospitals, our Office of the Actuary's revised estimate of Medicare DSH
payments for FY 2014 without regard to the application of 1886(r)(1) of
the Act was approximately $12.791 billion (this revised estimate also
includes the correction for Factor 1 made in the correcting document
for the FY 2014 IPPS/LTCH PPS final rule that also appeared in the
Federal Register on October 3, 2013 (78 FR 61198)). The CMS Office of
the Actuary's revised estimate of empirically justified Medicare DSH
payments for FY 2014, with the application of section 1886(r)(1) of the
Act, was approximately $3.198 billion (this revised estimate also
includes the correction for Factor 1 made in the correcting document
for the FY 2014 IPPS/LTCH PPS final rule (78 FR 61198)). Factor 1 is
the difference of these two estimates of our Office of the Actuary;
therefore, in the interim final rule with comment period, we
recalculated Factor 1 to be approximately $9.593 billion (this revised
estimate also includes the correction for Factor 1 made in the
correcting document for the FY 2014 IPPS/LTCH PPS final rule (78 FR
61198)). We noted that, based on the recalculation of Factor 1, the
amount available for uncompensated care payments for FY 2014 would be
approximately $9.046 billion (our determination of Factor 2 as
finalized in the FY 2014 IPPS/LTCH PPS final rule of 0.943 times our
revised Factor 1 estimate of $9.593 billion).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through
50643), we discussed the methodology used to calculate Factor 3 in the
calculation of the uncompensated care payment. Under the final policy
adopted in that final rule, for FY 2014 we determined a DSH hospital's
Factor 3 as the sum of its Medicaid days and SSI days (numerator)
relative to the total number of Medicaid days and SSI days for all DSH
hospitals (denominator). We determined a hospital's SSI days based on
the most recent SSI fraction. As we stated in the FY 2014 IPPS/LTCH PPS
final rule, the most recent SSI fractions available for making this
determination for FY 2014 were the FY 2011 SSI fractions. The FY 2011
SSI fractions for each subsection (d) hospital were published on the
CMS Web site on June 27, 2013. In addition, under the final policy
adopted in the FY 2014 IPPS/LTCH PPS final rule, we determine a
hospital's Medicaid days based on the Medicaid days reported on the
2011, or if not available, the 2010 Medicare Hospital Cost Report,
using the March 2013 update of HCRIS.
Because the cost reports submitted by IHS hospitals are not
uploaded into HCRIS, we did not include their Medicaid days in our
calculation of Factor 3. Specifically, Medicaid days for IHS hospitals
were excluded from the numerator of Factor 3 for those IHS hospitals
and from the denominator of Factor 3 for all hospitals. As a result, in
the interim final rule with comment period, we indicated that we
believed that the Factor 3 that was calculated for each IHS hospital
under the policies adopted in the 2014 IPPS/LTCH PPS final rule, based
only on FY 2011 SSI days, significantly understated the actual amount
of uncompensated care furnished by these hospitals. The uncompensated
care payment amounts calculated for these hospitals were also
significantly lower than they would have been had these days been
included. We were concerned that, under the policy originally adopted
in the FY 2014 IPPS/LTCH PPS final rule, IHS hospitals that serve a
significant low income population would be subject to the 75-percent
reduction to their Medicare DSH payments under section 1886(r)(1) of
the Act but would receive reduced uncompensated care payments under
section 1886(r)(2) of the Act due to their cost reports not being
included in the HCRIS database. Given that we intended to base our
estimate of the uncompensated care provided by IHS hospitals, in part,
on the care they provide to Medicaid patients, we believed it was
appropriate to make a change to the data that are considered in
determining Factor 3 of the new uncompensated care payment to allow the
Medicaid days for IHS hospitals to be included. This change would also
help to ensure that eligible IHS hospitals receive an uncompensated
care payment that does not significantly understate the amount of
uncompensated care they provide. Accordingly, in the interim final rule
with comment period, we revised the policy adopted in the FY 2014 IPPS/
LTCH PPS final rule to permit us to consider cost report data submitted
to CMS as of March 2013 only by IHS hospitals in addition to data
reflected in the March 2013 update of HCRIS, in calculating Factor 3 of
the uncompensated care payment. The Medicaid days for IHS hospitals
that are reflected in the cost report data would be included in the
numerator of the Factor 3 calculation for IHS hospitals and would be
included in the denominator of Factor 3 for all hospitals eligible to
receive the uncompensated care payment.
Comment: Several commenters supported the change in policy to
incorporate hospital cost report data for IHS hospitals that was not
included in the HCRIS database in the calculation of Factor 1 and
Factor 3. Commenters agreed that it was inappropriate to exclude cost
report data for IHS hospitals from the calculation of Factor 1 and
supported the inclusion of cost report data for these hospitals in the
calculation of Factor 1, which represents the Secretary's estimate of
75 percent of Medicare DSH payments in FY 2014. In addition, commenters
supported using IHS cost report data to identify Medicaid days to
incorporate into the calculation of Factor 3 for these IHS hospitals.
One commenter sought clarification of the definition of an IHS hospital
in order to clarify what category of hospitals are subject to the
policies finalized in the interim final rule with comment period. The
commenters sought confirmation that an IHS hospital includes ``any
hospital operated by an Indian Tribe or Tribal health program carrying
out IHS programs under the Indian Self-Determination and Education
Assistance Act (ISDEAA).'' In other words, the commenters sought
clarification that IHS hospitals include facilities that are either
owned or leased by IHS or are deemed by CMS to be IHS facilities
because they are operated by an Indian Tribe or Tribal organization
under the ISDEAA. The commenters also sought clarification that CMS
will treat cost reports from all such qualifying hospitals in the same
way that it treats IHS directly operated hospitals in determining the
amount of uncompensated care payments.
Response: We appreciate the commenters' support of our policy
change. An IHS hospital is defined under section 1880 of the Act as a
``hospital or skilled nursing facility of the Indian Health Service,
whether

[[Page 50155]]

operated by such Service or by an Indian tribe or tribal organization
(as those terms are defined in section 4 of the Indian Health Care
Improvement Act) . . . .'' Therefore, with regard to the policies in
the interim final rule with comment period related to IHS hospitals, we
do not make a distinction with respect to whether the hospital is owned
or operated by the Indian Health Service or by an Indian tribe or
tribal organization. Cost report data submitted both by hospitals
operated by the IHS and by hospitals operated by an Indian tribe or
tribal organization are excluded from HCRIS. Therefore, the policies
described in the interim final rule with comment period regarding the
use of cost report data submitted by IHS hospitals in order to
calculate Factor 1 and Factor 3 apply to all IHS hospitals whether they
are owned or operated by the Indian Health Service or by an Indian
tribe or tribal organization.
Comment: Several commenters raised concerns that CMS did not
adequately address mergers in the calculation of the uncompensated care
payment. The commenters disagreed with CMS' treatment of mergers under
the policy finalized in the FY 2014 IPPS/LTCH PPS final rule that if
one DSH-eligible hospital merges with another DSH-eligible hospital,
only the data associated with the surviving hospital is used to
calculate the hospital's share of uncompensated care payments.
Commenters asserted that the policy on mergers understates
uncompensated care payments for merged providers and does not
accurately reflect the merged hospital's uncompensated care costs.
Response: We thank the commenters for these comments. However, we
consider these comments to be out of the scope of the policies
addressed in the interim final rule with comment period. We discuss our
policies regarding the treatment of mergers in the calculation of the
Factor 3 in section IV.F. of the preamble of this FY 2015 IPPS/LTCH PPS
final rule.
Comment: One commenter suggested that, for hospitals that had low-
income insured days calculated using a cost report for a cost reporting
period that was less than 12 months, CMS should use low-income insured
days based on an older cost reporting period that was 12 months.
Response: We thank the commenter for this comment. However, we
consider this comment to be out of the scope of the policies addressed
in the interim final rule with comment period. We discuss our
methodology to calculate Factor 3, including our treatment of short
cost reporting periods, in section IV.F. of the preamble of this FY
2015 IPPS/LTCH PPS final rule.
Comment: One commenter addressed the calculation of the interim per
claim uncompensated care payment amounts that are paid to hospitals
projected to be eligible to receive DSH payments in a Federal fiscal
year; the per claim amount is based on a hospital's total uncompensated
care amount divided by the hospital's average number of claims from the
most recent 3 years of data. Specifically, the commenter requested that
CMS use the claims published in the case-mix files to calculate the 3-
year average because, in the commenter's view, CMS' data source
understates the average number of claims potentially resulting in an
overpayment on a per claim basis. The commenter also recommended that
CMS use a growth factor to account for new enrollees that may increase
the number of claims in the calculation of the three year average
number of claims. The commenter also noted the wide variation in per
claim amounts from approximately $9 to $167,000 and requested that CMS
place a cap on the per claim amount to minimize swings in cash flow at
cost report settlement and because it did not make sense that Medicare
or MA plans pay such a high amount.
Response: We thank the commenter for this comment. However, we
consider the issues raised in the comment to be out of the scope of the
policies addressed in the interim final rule with comment period. We
received a similar comment on the FY 2015 IPPS/LTCH PPS proposed rule
and address the comment in section IV.F. of the preamble of this FY
2015 IPPS/LTCH PPS final rule.
After consideration of the public comments we received, we are
finalizing all of the provisions set forth in the interim final rule
with comment period without modification, to allow final uncompensated
care payments to be paid on the same schedule as Medicare DSH payments,
so that both the uncompensated care payment and Medicare DSH payments
will be paid and reconciled on a hospital's cost report, based on the
applicable Federal fiscal year(s) and to allow information included in
the cost reports submitted by IHS hospitals to be used in the
calculation of Factor 1 and Factor 3. For information on the estimated
change in payments to hospitals in FY 2014 as a result of the
provisions set forth in the interim final rule with comment period, we
refer readers to the regulatory impact statement in the interim final
rule with comment period (78 FR 61197). We note that the impact of our
decision to finalize the interim final rule with comment period is
included in the regulatory impact statement in Appendix A of this FY
2015 IPPS/LTCH PPS final rule as part of the discussion of the
estimated change in payments to hospitals in FY 2015 as a result of the
policies regarding Medicare DSH payments and uncompensated care
payments that we are adopting in the final rule.

V. Changes to the IPPS for Capital-Related Costs

A. Overview

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

[[Page 50156]]

extraordinarily high-cost cases that qualify under the thresholds
established for each fiscal year.

B. Additional Provisions

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

C. Annual Update for FY 2015

The annual update to the capital PPS Federal and Puerto Rico-
specific rates, as provided for at Sec. 412.308(c), for FY 2015 is
discussed in section III. of the Addendum to this final rule.
We note that, in section II.D. of the preamble of this final rule,
we present a discussion of the MS-DRG documentation and coding
adjustment, including previously finalized policies and historical
adjustments, as well as the recoupment adjustment to the standardized
amounts under section 1886(d) of the Act that we are finalizing for FY
2015 in accordance with the amendments made to section 7(b)(1)(B) of
Public Law 110-90 by section 631 of the ATRA. As we discussed in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28171), because section 631 of
the ATRA requires CMS to make a recoupment adjustment only to the
operating IPPS standardized amount, we are not making a similar
adjustment to the national or Puerto Rico capital IPPS rates (or to the
operating IPPS hospital-specific rates or Puerto Rico-specific
standardized amount). This approach is consistent with our historical
approach regarding the application of the recoupment adjustment
authorized by section 7(b)(1)(B) of Public Law 110-90.
In section II.D.7. of the preamble of this final rule, we also note
our discussion in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50747) of
the possibility of applying an additional prospective adjustment to
account for the cumulative MS-DRG documentation and coding effect
through FY 2010. In that same final rule (78 FR 50515 through 50517 and
50747), we stated that if we were to apply an additional prospective
adjustment for the cumulative MS-DRG documentation and coding effect
through FY 2010, we believe the most appropriate additional adjustment
is -0.55 percent. We did not apply an additional prospective adjustment
in FY 2014 for the cumulative MS-DRG documentation and coding effect
through FY 2010, consistent with the approach taken for the operating
IPPS standardized amount (and hospital-specific rates). We continue to
believe that if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation and coding effect through FY
2010, the most appropriate additional adjustment is -0.55 percent.
However, we did not propose such an adjustment to the capital Federal
rate in FY 2015, consistent with the approach taken for the operating
IPPS standardized amount (and hospital-specific rates) as discussed in
section II.D.7. of the preamble of this final rule. We will consider
whether such an adjustment to the capital IPPS Federal rate is
appropriate in future years' rulemaking.

VI. Changes for Hospitals Excluded From the IPPS

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

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

[[Page 50157]]

Islands, and American Samoa. For the reasons explained in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50747), we proposed in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28171) to continue to use the
percentage increase in the IPPS operating market basket to update the
target amounts for children's hospitals, cancer hospitals, RNHCIs, and
short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa for FY 2015 and
subsequent fiscal years.
In addition, because we have revised and rebased the IPPS operating
market basket to a FY 2010 base year, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28172) we proposed to continue to use the
percentage increase in the FY 2010-based IPPS operating market basket
to update these target amounts for FY 2015 and subsequent fiscal years.
(We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596
through 50603) for a further discussion of the revision and rebasing of
the IPPS operating market to a FY-2010 base year.)
We did not receive any public comments on these proposals.
Therefore, we are finalizing our proposals as discussed above and in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28171 through 28172).
Accordingly, for FY 2015, the rate-of-increase percentage to be applied
to the target amount for these children's hospitals, cancer hospitals,
RNHCIs, and short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa is the
FY 2015 percentage increase in the FY 2010-based IPPS operating market
basket.
For the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28172), based on
IHS Global Insight, Inc.'s 2014 first quarter forecast, we estimated
that the FY 2010-based IPPS operating market basket update for FY 2015
was 2.7 percent (that is, the estimate of the market basket rate-of-
increase). We indicated in the proposed rule that if more recent data
became available for the final rule, we would use them to calculate the
IPPS operating market basket update for FY 2015. For this FY 2015 IPPS/
LTCH PPS final rule, based on IHS Global Insight, Inc.'s 2014 second
quarter forecast (which is the most recent data available), we
calculated the FY 2010-based IPPS operating market basket update for FY
2015 to be 2.9 percent. Therefore, the FY 2015 rate-of-increase
percentage that is applied to the FY 2014 target amounts in order to
calculate the final FY 2015 target amounts for children's hospitals,
cancer hospitals, RNHCIs, and short-term acute care hospitals located
in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and
American Samoa is 2.9 percent, in accordance with the applicable
regulations at 42 CFR 413.40.

B. Report on Adjustment (Exceptions) Payments

Section 4419(b) of Public Law 105-33 requires the Secretary to
publish annually in the Federal Register a report describing the total
amount of adjustment payments made to excluded hospitals and hospital
units by reason of section 1886(b)(4) of the Act during the previous
fiscal year.
The process of requesting, adjusting, and awarding an adjustment
payment is likely to occur over a 2-year period or longer. First,
generally, an excluded hospital must file its cost report for a fiscal
year in accordance with Sec. 413.24(f)(2). The MAC reviews the cost
report and issues a notice of program reimbursement (NPR). Once the
hospital receives the NPR, if its operating costs are in excess of the
ceiling, the hospital may file a request for an adjustment payment.
After the MAC receives the hospital's request in accordance with
applicable regulations, the MAC or CMS, depending on the type of
adjustment requested, reviews the request and determines if an
adjustment payment is warranted. This determination is sometimes not
made until more than 180 days after the date the request is filed
because there are times when the applications are incomplete and
additional information must be requested in order to have a completed
application. However, in an attempt to provide interested parties with
data on the most recent adjustments for which we do have data, we are
publishing data on adjustment payments that were processed by the MAC
or CMS during FY 2013.
The table below includes the most recent data available from the
MACs and CMS on adjustment payments that were adjudicated during FY
2013. As indicated above, the adjustments made during FY 2013 only
pertain to cost reporting periods ending in years prior to FY 2012.
Total adjustment payments given to excluded hospitals during FY 2013
are $1,829,578. The table depicts for each class of hospitals, in the
aggregate, the number of adjustment requests adjudicated, the excess
operating costs over the ceiling, and the amount of the adjustment
payments.

----------------------------------------------------------------------------------------------------------------
Excess cost Adjustment
Class of hospital Number over ceiling payments
--------------------------------------------------------------------------------------------------
Children's........................................ 4 $2,032,227 $1,182,011
Cancer............................................ 0 N/A N/A
Religious Nonmedical Health Care Institution 3 1,056,142 647,567
(RNHCI)..........................................
���������������������������������������������������
Total......................................... .............. .............. 1,829,578
----------------------------------------------------------------------------------------------------------------

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

1. Background
Under section 1848 of the Act and 42 CFR Parts 414 and 415, medical
or surgical services furnished by physicians to individual Medicare
beneficiaries generally are billed and paid under Medicare Part B on a
fee-for-service basis under the Medicare Physician Fee Schedule (MPFS).
As required by section 1887(a)(2)(B) of the Act, the amount of
allowable compensation for services furnished by physicians to
providers that are paid by Medicare on a reasonable cost basis is
subject to reasonable compensation equivalent (RCE) limits. Under these
limits, Medicare recognizes as reasonable, for purposes of payment to
the provider, the lower of the actual cost of the services furnished by
the physician to the provider (that is, any form of compensation to the
physician) or an RCE. The allowable compensation costs for physicians'
services to a provider are described in Sec. 415.55 of the
regulations. Under Sec. 415.60(a) of the regulations, for purposes of
applying the RCE limits, physician compensation costs means monetary
payments, fringe benefits, deferred compensation, and any other items
of value (excluding office space and billing and collection services)
that a provider or other organization furnishes a physician in

[[Page 50158]]

return for the physician's services to the provider.
On March 2, 1983, we published a final rule in the Federal Register
that codified regulations to implement section 1887(a)(2)(B) of the Act
(currently at 42 CFR 415.70) and established the first set of RCE
limits (48 FR 8902). In accordance with Sec. 415.70(a)(2), RCE limits
do not apply to the costs of physician compensation attributable to
furnishing inpatient hospital services for which payment is made under
the IPPS or to the costs of physician compensation attributable to
approved GME programs that are payable under Sec. Sec. 413.75 through
413.83 of the regulations. In addition, under Sec. 415.70(a)(3),
compensation that a physician receives for activities that may not be
paid for under either Medicare Part A or Part B is not considered in
applying these RCE limits. Furthermore, in accordance with Sec.
413.70, RCE limits are not used in determining the reasonable costs
that CAHs incur in compensating physicians for services furnished to
the CAH.
The RCE limits apply equally to all physicians' services to
providers that are payable on a reasonable cost basis under Medicare.
If a physician receives any compensation from one or more providers for
his or her services to the provider (that is, those services that
benefit patients generally), payment to those providers for the costs
of such compensation is subject to the RCE limits. The RCE limits are
not applied to payment for services that are identifiable medical or
surgical services to individual patients and paid under the MPFS, even
if the physician agrees to accept compensation (for example, from a
hospital) for those services. Payments to teaching hospitals that have
elected cost reimbursement for their physicians' direct medical and
surgical services in accordance with section 1861(b)(7) of the Act are
subject to the RCE limits (68 FR 45458).
2. Overview of the Current RCE Limits
a. Application of the RCE Limits
Currently, we use the RCE limits to compute Medicare payments when
a physician is compensated by a provider that is subject to the RCE
limits. We also use these limits when the physician is compensated by
any other provider-related organization for physician administrative,
supervisory, and other services to the provider under Medicare. In
applying the RCE limits, we compute the Medicare payments using
information submitted on the cost report, and ensure that each
compensated physician is assigned to the most appropriate specialty
category. The current physician specialty categories for RCE limits are
General/Family Practice, Internal Medicine, Surgery, Pediatrics, OB/
GYN, Radiology, Psychiatry, Anesthesiology, Pathology, and Total. If
there is no specific specialty category (for example, for an emergency
room physician), we use the ``Total'' category, for which the RCE
limits are calculated based on mean annual income data for all
physicians.
If the physician's contractual compensation covers all duties,
activities, and services furnished to the provider and, under a
reassignment, all physicians' services furnished to individual patients
of the provider, and the physician is employed by the provider full
time, we use the RCE limit for the appropriate specialty, adjusted by
the physician's allocation agreement (which reflects the percentage of
total time spent performing services furnished to the provider) to
arrive at the Medicare program's share of the provider's allowable
physician compensation costs (Sec. 415.60). In the absence of an
allocation agreement, we would assume that 100 percent of the
compensation paid to the physician by the provider is related to
physicians' services for which payment is made under the MPFS and that
there are no allowable physician compensation costs to the provider
(Sec. 415.60(f)(2)).
If a physician's compensation from the provider represents payment
only for services that benefit patients generally (that is, the
physician bills for all services furnished to individual patients), we
use the appropriate specialty RCE limit. If a physician is employed by
a provider to furnish services of general benefit to patients on other
than a full-time basis, the RCE limit will be adjusted to reflect the
hours the physician actually worked, as reported on the provider's cost
report, related to a full work year of 2,080 hours.
b. Exceptions to the RCE Limits
Some providers such as small or rural hospitals may be unable to
recruit or maintain an adequate number of physicians at a compensation
level within the prescribed RCE limits. In accordance with section
1887(a)(2)(C) of the Act and Sec. 415.70(e) of the regulations, if a
provider can demonstrate to the MAC its inability to recruit or
maintain physicians at a compensation level allowable under the RCE
limits (as documented, for example, by unsuccessful advertising through
national medical or health care publications), the MAC may grant the
provider an exception to the RCE limits established under these rules.
Such exceptions would allow the provider to be paid based on costs for
compensation higher than the RCE limit.
c. Methodology for Establishing the RCE Limits
In the March 2, 1983 final rule with comment period (48 FR 8902),
we published the initial RCE limits, along with the methodology used to
calculate those limits, that were applicable to cost reporting periods
beginning during CYs 1982 and 1983. As part of that same rule, we
established regulations that outline our general authority to develop,
publish, and apply RCE limits (currently at Sec. 415.70). Section
415.70(b) of the regulations specifies that we establish the
methodology for determining annual RCE limits, considering, to the
extent possible, average physician incomes by specialty and type of
location, using the best available data.
The methodology for establishing the initial RCE limits was based
on the analysis contained in an internal working paper, ``A Methodology
for Determination of Reasonable FTE Compensation for Hospital-Based
Physicians.'' \56\ (Copies of this working paper are available on the
CMS Web site at: https://www.cms.gov/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.) As outlined in this working paper, our
methodology for establishing the initial reasonable levels of
compensation includes the following five steps (for additional
discussion of this methodology, we refer readers to the March 2, 1983
final rule with comment period (48 FR 8902)):
---------------------------------------------------------------------------

\56\ Cantwell, James R. and Sobaski, William J., A Methodology
for Determination of Reasonable FTE Compensation for Hospital-Based
Physicians, Working Paper No. OR-32, revised December 1982.
---------------------------------------------------------------------------

Step 1: We estimated the national average (mean) income for all
physicians using 1979 physician net incomes from the American Medical
Association (AMA) Periodic Survey of Physicians (PSP), published by the
AMA in its Profile of Medical Practices, 1981.
Step 2: We projected physicians' 1979 base net income levels to the
appropriate future year to account for changes in net income levels
occurring after the period for which we have data using the Consumer
Price Index for All Urban Consumers (CPI-U), and projected the results
using forecasts of the CPI-U for future years.
Step 3: We determined the relationship between average net income
for all physicians (estimated in the first step above) and net income
of

[[Page 50159]]

certain categories of specialist physicians that are commonly
compensated by providers for services that generally benefit Medicare
beneficiaries resulting in separate specialty adjusters for nine
physician specialties as well as the adjuster for the ``Total''
category.
Step 4: We also adjusted each of these specialty (including the
``Total'') adjusters for differences in costs between types of
geographic locations using Standard Metropolitan Statistical Areas
(SMSAs) as defined by the Office of Management and Budget (OMB).
Step 5: Using the AMA PSP data, we calculated the average hours
practiced per year for each specialty and location adjuster
combination, which we then related to a standard full-time equivalent
(FTE) work year of 2,080 hours. We used these ratios to weight the
specialty-location adjusters from the previous step.
This same methodology was used to update the RCE limits published
in a notice in the Federal Register on May 5, 1997 (62 FR 24483). These
updated RCE limits were effective for cost reporting periods beginning
on or after May 5, 1997.
For RCE limits established prior to January 1, 1998, we used the
CPI-U to update the RCE limits. In a final rule with comment period
published in the Federal Register on October 31, 1997 (62 FR 59075), we
finalized a policy to use the Medicare Economic Index (MEI) to update
the RCE limits (rather than the CPI-U), effective for cost reporting
periods beginning on or after January 1, 1998. We adopted the MEI as
the applicable update factor in order to achieve a measure of
consistency in the methodologies used to determine payments to
physicians for direct medical and surgical services furnished to
individual patients and reasonable compensation levels for services
that are of general benefit to a provider's patients. However, we did
not update the RCE limits at that time.
In the FY 2004 IPPS final rule published in the Federal Register on
August 1, 2003 (68 FR 45458), we published updated RCE limits that were
effective for cost reporting periods beginning on or after January 1,
2004. We updated the RCE limits using the CPI-U to adjust the data to
1997, and the MEI to adjust the data from 1998 to 2004. In addition, we
continued to adjust the RCE limits to account for differences in salary
levels by location, as well as by specialty. For the location
adjustment, we continued to base the geographical classifications of
the providers on Metropolitan Statistical Areas (MSAs) (the OMB changed
the area name to describe metropolitan areas in the 1980's from SMSAs
to MSAs, but the definition of MSAs differed only slightly from the
previously used SMSAs).
3. Changes to the RCE Limits
In accordance with Sec. 415.70(b), when establishing the
methodology to determine the RCE limits, we consider, to the extent
possible, the average physician incomes by specialty and type of
location using the best available data. Since the initial RCE limits
were developed, we have adjusted the RCE data to account for specialty
and location (as discussed earlier in this section). In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28173), we proposed to use the most
recent MEI data to update the RCE limits and to replace the RCE limits
that have been in effect since January 1, 2004. We believed that doing
so will enhance the accuracy of the RCE limits. In addition, for the
reasons discussed below, we proposed to eliminate the location
adjustment to the RCE data, while continuing to adjust the RCE limits
by specialty. We did not propose changes to any of the other existing
policies with respect to the application of and exceptions to the RCE
limits.
We invited public comments on our proposals to update the RCE
limits and to eliminate the location adjustment for the RCE limits for
cost reporting periods beginning on or after January 1, 2015. In
addition, we invited public comments on our proposal to revise Sec.
415.70(b) of the regulations to eliminate consideration of the type of
location as part of the methodology to establish RCE limits for cost
reporting periods beginning on or after January 1, 2015.
Comment: One commenter expressed appreciation that CMS is updating
the RCE limits and suggested that CMS update the RCEs on an annual
basis. The commenter also requested that the proposed RCEs be effective
for cost reporting periods beginning on or after January 1, 2014,
instead of cost reporting periods beginning on or after January 1,
2015.
Response: We will continue to review the RCE limits on a regular
basis by applying the most recent economic index data and publish
updates as necessary. We plan to keep the proposed effective date for
the updated RCEs, as we do not believe it would be appropriate in this
situation to make this provision retroactively effective.
As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28173 through 28175), in establishing the initial and subsequently
updated RCE limits, we included an adjustment to account for
differences in salary levels based on the location of the provider
using geographic classifications based on the MSAs as defined by the
OMB. We assigned an appropriate MSA designation based on the State/
county in which the provider is located. We included a table in each of
the previous RCE limit notices and rules, whereby each MSA designation
was grouped into one of three categories: Metropolitan areas with a
population greater than 1 million, metropolitan areas with a population
less than 1 million, and nonmetropolitan areas. The MSA designation of
the provider is then used to identify the appropriate RCE limit.
To update the current RCE limits by location under the current
methodology, we would need to use, as in past updates, the MSA
designations that correspond with the update period. However, since
2003, the OMB no longer updates or uses MSAs. We considered continuing
to use the MSA designations, as we have in the past, but we would have
no way to account for shifts in populations among MSAs because the OMB
no longer updates geographic classifications based on MSA designations.
The OMB regularly updates the geographic definitions, and the counties
included in each area, to account for population shifts due to
migrations, birth, and death rates but currently the OMB uses Core-
Based Statistical Area (CBSA) designations rather than MSAs. If we were
to continue to use the MSA designation, providers could potentially be
underpaid or overpaid if the population of their MSA changed
significantly from 2004. Therefore, we determined that, because the MSA
designations are no longer updated, it would not be appropriate to
continue using the previous location adjustment methodology. The most
recent geographic delineations used by the OMB are CBSAs, a term used
to refer to both Metropolitan and Micropolitan Statistical Areas.
However, CBSA delineations do not match the MSA definitions that were
used to develop the initial and subsequently updated RCE limits. As
noted above, we have used the AMA PSP data to develop previous and
current RCE limits. The AMA PSP data were collected from 1970 to 1980
and included physicians' income, hours worked, and MSA-based population
information. The data that have been used to develop and update the RCE
limits were developed using MSAs as the geographic unit. It is not
possible to exactly crosswalk the MSA designations to the CBSA
designations in order to update the RCE limits using

[[Page 50160]]

the current location adjustment methodology. Even if it was possible to
crosswalk the MSAs to the CBSAs, it would not be appropriate to use the
MSA-based AMA PSP data to develop CBSA-based RCE limits. There have
been significant changes in the populations of the MSA-based locations
contained in the AMA PSP data that could not be translated into CBSAs.
As such, that data would no longer be valid as the basis to develop RCE
limits based on CBSAs.
The OMB has cautioned users about using the new CBSA designations.
For instance, in OMB's 2010 ``Standards for Delineating Metropolitan
and Micropolitan Statistical Areas (CBSAs)'' published on June 28, 2010
in the Federal Register (75 FR 37246), OMB states:
``OMB establishes and maintains these areas solely for statistical
purposes. In reviewing and revising these areas, OMB does not take into
account or attempt to anticipate any public or private sector
nonstatistical uses that may be made of the delineations. These areas
are not designed to serve as a general-purpose geographic framework
applicable for nonstatistical activities or for use in program funding
formulas.
``Furthermore, the Metropolitan and Micropolitan Statistical Area
Standards do not produce an urban-rural classification, and confusion
of these concepts can lead to difficulties in program implementation.
Counties included in Metropolitan and Micropolitan Statistical Areas
and many other counties may contain both urban and rural territory and
populations. . . . OMB urges agencies, organizations, and policy makers
to review carefully the goals of nonstatistical programs and policies
to ensure that appropriate geographic entities are used to determine
eligibility for the allocation of Federal funds.'' (Emphasis in
original.)
For CMS to accurately update the location-adjusted RCE limits using
the CBSAs, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28174), we believe it would be necessary to use a new data source
for information on physician salaries, specialties, location, and hours
worked; and the data would need to be allocated to different geographic
areas based on CBSAs. The AMA PSP collected data from a large sample of
office-based physicians. We considered using data that are currently
collected and publicly available. We could not find a reliable dataset
that contained all of the necessary data elements needed to update the
location-adjusted RCE limits based on CBSAs. The most reliable data we
could find came from the Bureau of Labor Statistics (BLS) Occupational
Employment Statistics (OES). The BLS OES data are collected annually,
and capture a large and diverse population of physicians and
corresponding CBSAs. We believe the BLS OES data are the most current,
reliable source of income data for physicians. Although, the BLS OES is
very reliable and collects data points for physician specialties,
salary, and location, it does not collect detailed information for all
10 specialties; the ``Radiology'' and ``Pathology'' specialties are not
separately captured. As such, we did not believe it was appropriate to
use the BLS OES data to create an updated RCE limit if we would not
have data available for two specialties.
We also weighed the benefit of collecting updated information from
physicians (through use of a new nationwide survey) in order to obtain
the data necessary for application of an appropriate locality
adjustment based on CBSAs against the burden placed on such physicians
in providing such data. In order to have a dataset that could
accurately capture all the necessary information, we would need to
collect data from a large population of physicians, including a
sufficient sample size for each physician specialty in each CBSA. We
weighed the burden that such a nationwide survey would entail for all
physicians, including office-based physicians, to be asked to respond
to an in-depth survey regarding their salary, specialty, location,
hours worked, and other practice information against the benefit of
using updated, CBSA-based information to include a location adjustment
for the providers that are subject to the RCE limits.
When the RCE limits were developed in 1983, other than inpatient
acute care hospitals paid under the IPPS, most provider types were
reimbursed on a reasonable cost basis. Since then, providers such as
skilled nursing facilities (SNFs), long-term care hospitals (LTCHs),
inpatient rehabilitation facilities (IRFs), inpatient psychiatric
facilities (IPFs), and home health agencies (HHAs) that previously were
paid on a reasonable cost basis have transitioned to prospective
payment systems and are no longer subject to the RCE limits. As of FY
2011 (the most recent cost report year for which we have complete
data), our data show that there were only 59 children's hospitals and
cancer hospitals and 46 teaching hospitals (that have elected cost
reimbursement for their physicians' direct medical and surgical
services) that are subject to the RCE limits. As such, we believe the
benefit that could be gained by gathering the new data that would be
necessary to maintain a location adjustment for the RCE limits is
outweighed by the burden of conducting such a comprehensive survey of
physicians.
Furthermore, we analyzed how the elimination of the location
adjustment would affect the accuracy and appropriateness of the
proposed RCE limits. To perform this analysis, we needed a reliable
source of physician income data (without a location adjustment) which
could be compared to the RCE limits without a location adjustment. We
determined that the best available source of physician income data is
the mean annual income data for similar RCE physician specialties
collected by the BLS OES. As mentioned above, the BLS OES data are
collected annually and capture a large and diverse population of
physicians. These data are the most current, reliable source of income
data by physician specialties. In addition, when comparing salaries, it
is important to compare salary amounts that reflect the same number of
hours worked per year. Because many physicians do not work a 2,080 hour
work year, their salary may seem higher or lower due to the number of
hours actually worked. The RCE limits are based on physicians who
worked a 2,080 hour work year. The BLS OES data also are based on a
2,080 hour work year; therefore, we believe that comparing the RCE
limits to these BLS OES data is appropriate for purposes of our
analysis.
We performed an analysis comparing RCE limits for 2012, calculated
without a location adjustment and solely for purposes of the analysis,
to the most recently published (at the time of the analysis) BLS OES
physician mean annual income data for the same year, to determine
whether RCE limits based on the AMA PSP data, but without a location
adjustment, would continue to reasonably reflect mean annual physician
income data. For 2012, the BLS OES had income information for 8 of the
10 RCE specialties, which include the ``Total'' category; the BLS OES
data did not capture the ``Radiology'' and ``Pathology'' specialties.
We searched for another reliable data source for ``Radiology'' and
``Pathology'' but we could not find one with sufficient data elements
to compare with the RCE limits. We used the MEI to update the RCE
limits for these eight specialties to 2012 without including the
location factor. We then compared these 2012 RCE limits to the 2012 BLS
OES data for these same eight specialties. As shown in the table below,
we found that the RCE limits ranged from 10.41 percent

[[Page 50161]]

above the BLS OES mean annual income data to 3.58 percent below the BLS
OES data. Only three of the eight specialties had RCE limits slightly
less than the then-current BLS OES mean annual wages for their
specialty. The remaining five specialties had RCE limits above the
current BLS OES mean annual wages for the specialties.

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

The RCE amounts updated to 2012 and the BLS OES numbers for 2012
varied only slightly, and in most cases, the RCE limit was higher than
the BLS OES mean annual wage. Based on this analysis, as we stated in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28175), we believe that
RCE limits calculated using the AMA PSP data, and our proposed
elimination of the location adjustment for the updated RCE limits,
would result in RCE limits that are a reasonable reflection of mean
annual physician income and would continue to ensure that providers
subject to the RCE limits are paid in a fair and accurate manner.
Because there are a relatively small number of providers currently
affected by the RCE limits and because, as discussed above, we believe
the revised RCE limits without a location adjustment would continue to
ensure appropriate payment to such providers, we believe that
eliminating the location adjustment would have a minimal overall effect
on providers subject to the RCE limits and on the industry as a whole.
For the reasons discussed above, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28175), we proposed to eliminate the location
adjustment under the RCE limit methodology, and to revise Sec.
415.70(b) of the regulations to remove consideration of the ``type of
location'' as part of the methodology used to establish RCE limits.
Comment: One commenter suggested CMS work with the BLS to obtain
the information needed to calculate the RCE limits with a location
adjustment. One commenter suggested that CMS develop an alternative
method of establishing a location adjustment.
Response: We plan to evaluate the BLS Occupational Employment
Statistics and any other alternative data sources to further determine
if a location adjustment is a viable option for future RCE updates.
Comment: A few commenters suggested that CMS keep the location
adjustment as part of the RCE limits. They stated that location-
adjusted RCE limits continue to be important in capturing accurate
physician salary costs for all providers because all hospitals apply
the RCE limits to physician salaries on Worksheet A-8-2 of the Medicare
cost report. A few commenters expressed concern over the accuracy of
costs, such as GME costs, that would result from applying RCE limits
without a location adjustment.
Response: RCE limits currently have a payment impact on 105
Medicare providers, including 8 cancer hospitals, 51 children's
hospitals and 46 electing teaching amendment (ETA) hospitals that
elected cost reimbursement for their physicians' direct medical and
surgical services. While it is true that all hospitals use the RCE
limits on Worksheet A-8-2, for hospitals paid under the IPPS, the
application of the RCE limits on Worksheet A-8-2 does not have a
Medicare payment impact. Specifically, Worksheet C that is used for
payment purposes calculates cost-to-charge ratios for IPPS hospitals
using data prior to the application of the RCE limits on Worksheet A-8-
2. Therefore, RCE limits have no effect on payments to providers paid
under the IPPS. For the 46 ETA hospitals, Worksheet D-5 is used to
apply the RCE limits to determine the proper payment on a reasonable
cost basis of direct medical and surgical services of the physician.
Given the current limitations of the location designation data
described in the proposed rule, we believe it is appropriate to
eliminate the location adjustment to the RCE limits. Based on the
analysis discussed above and in the proposed rule, we believe that the
RCE limits calculated without a location adjustment are a reasonable
reflection of mean annual physician income and will continue to ensure
that providers subject to the RCE limits are paid in a fair and
accurate manner. Because of this, and because the RCE limits impact a
relatively small number of providers, we believe that eliminating the
location adjustment will have a minimal overall effect on providers
subject to the RCE limits and on the industry as a whole. While a few
commenters expressed concern over the accuracy of GME costs, we note
that, under Sec. 415.70(a)(2) of the regulations, RCE limits do not
apply to costs of physician compensation attributable to approved GME
programs that are payable under Sec. Sec. 413.75 through 413.83.
After consideration of the public comments we received, in this
final rule, we are adopting as final the proposed methodology for
establishing the RCE limits. We are setting forth the final updated RCE
limits on the amount of allowable compensation for services furnished
by physicians to providers (and for ETA hospitals, for direct medical
and surgical services of physicians) for cost reporting periods
beginning on or after January 1, 2015. To calculate these final RCE
limits, we used the same methodology that was used to calculate the
original and previous updates to the RCE limits, but did not apply an
adjustment based on geographical classification. As noted earlier, this
methodology was derived from the 1982 working paper. We used the mean
physician income by specialty from that working paper to calculate the
RCE limits without adjusting for geographical classification. We then

[[Page 50162]]

updated these data by the CPI-U (from 1982 to 1997) and then by the MEI
(from 1998 to 2015) to compute the updated RCE limits. The RCE limits
implemented by this final rule vary slightly from those in the proposed
rule due to a more recent estimate of the MEI for 2015.
The chart below sets forth the final updated RCE limits on the
amount of allowable compensation for services furnished by physicians
to providers for cost reporting periods beginning on or after January
1, 2015, established using the same methodology that was used to
calculate the original and previous updates to the RCE limits, but not
applying an adjustment based on geographical classification.

Final CY 2015 RCE Limits
------------------------------------------------------------------------

------------------------------------------------------------------------
Total................................................... $211,500
General/Family Practice................................. 179,000
Internal Medicine....................................... 197,500
Surgery................................................. 246,400
Pediatrics.............................................. 169,700
OB/GYN.................................................. 237,100
Radiology............................................... 271,900
Psychiatry.............................................. 181,300
Anesthesiology.......................................... 239,400
Pathology............................................... 260,300
------------------------------------------------------------------------

In addition, we are adopting as final our proposed revision of
Sec. 415.70(b) of the regulations to eliminate consideration of the
type of location as part of the methodology to establish RCE limits for
cost reporting periods beginning on or after January 1, 2015.

D. Critical Access Hospitals (CAHs)

1. Background
Sections 1820 and 1861(mm) of the Act, as amended by section 4201
of the Balanced Budget Act (BBA) of 1997, replaced the Essential Access
Community Hospitals and Rural Primary Care Hospitals (EACH/RPCH)
program with the Medicare Rural Hospital Flexibility Program (MRHFP),
under which a qualifying facility can be designated as a CAH. CAHs
participating in the MRHFP must meet the conditions for designation by
the State and be certified by the Secretary in accordance with section
1820 of the Act. Further, in accordance with section 1820(e)(3) of the
Act, a CAH must meet other criteria that the Secretary specifies.
The regulations that govern the conditions of participation (CoPs)
for CAHs under the statutory requirements of section 1820 are codified
at 42 CFR Part 485, Subpart F.
2. Proposed and Final Policy Changes Related to Reclassification as
Rural for CAHs
Under section 1820(c)(2)(B)(i) of the Act, a facility is eligible
for designation as a CAH only if it is located in a county or
equivalent unit of local government in a rural area (as defined in
section 1886(d)(2)(D) of the Act), or is being treated as being located
in a rural area in accordance with section 1886(d)(8)(E) of the Act.
The regulations implementing this location requirement are located at
Sec. 485.610(b). The regulations governing the process for a facility
located in an urban area to apply for reclassification as a rural
facility under section 1886(d)(8)(E) of the Act are located at Sec.
412.103.
As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28054 through 28064), we proposed to implement the most recently
published OMB delineations announced in OMB Bulletin No. 13-01. (We
refer readers to section III.B. of the preamble of this final rule for
a discussion of our final decision to implement the new OMB
delineations announced in OMB Bulletin No. 13-01.) As previously
stated, a facility must be located in a rural area in order to be
eligible for designation as a CAH. Therefore, a new OMB delineation
that redesignates an area from rural to urban, affects the status of a
facility that is currently a CAH and had met the CAH location
requirements prior to implementation of the new OMB delineation. A
facility that is located in an urban area cannot remain a CAH unless it
is reclassified as rural under Sec. 412.103 of the regulations. In
both the FY 2005 IPPS final rule (69 FR 49221 through 49222 and 69 FR
60242 and 60252) and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43939
through 43940), we amended the regulations at Sec. 412.103(a) and
Sec. 485.610(b) to provide for a transition period during which CAHs
that had previously been located in rural areas but, as a result of new
OMB delineations, were now located in urban areas, could reclassify as
rural under Sec. 412.103. Specifically, in both the FY 2005 IPPS final
rule and the FY 2010 IPPS/LTCH PPS final rule, we provided for a 2-year
period during which a CAH located in an urban area as a result of the
new OMB delineations could continue participating without interruption
as a CAH, thereby allowing the CAH sufficient time to reclassify as
rural under Sec. 412.103. If the facility did not reclassify as a
rural facility by the end of that 2-year period, the CAH would not be
able to retain its CAH status beyond that 2-year period. However, under
the FY 2005 IPPS final rule and the FY 2010 IPPS/LTCH PPS final rule,
the application of the regulation was limited to October 1, 2004
through September 30, 2006, and October 1, 2009 through September 30,
2011, respectively. As a result, in the absence of a new amendment to
the regulations each time there are new OMB delineations, a CAH that
becomes located in an urban area as a result of those OMB delineations
would not be given 2 years to reclassify as rural under Sec. 412.103
of the regulations.
In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43940), we stated
that we would consider whether it would be appropriate to propose, in
future IPPS rulemaking, to revise Sec. 485.610 and Sec. 412.103 to
provide for a transition period any time a CAH that was formerly
located in a rural area is designated as being located in an urban area
as a result of the redesignation of its county from rural to urban. In
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28176), we stated that
after further consideration, we believe that it is appropriate to
propose to change the regulations to provide for a transition period
that is not restricted to a timeframe, but rather can be applied any
time a facility that is currently designated as a CAH becomes located
in an urban area as a result of a new OMB delineation.
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28176), we proposed that, effective October 1, 2014, a CAH that was
previously located in a rural area but is now located in an urban area
as a result of a new OMB labor market area delineation will continue to
be treated as rural for 2 years from the date the OMB delineation is
implemented. Accordingly, we stated in the proposed rule that if the
OMB delineations announced in OMB Bulletin No. 13-01 on February 28,
2013 discussed in section III.B. of the preamble of the proposed rule
are implemented in this FY 2015 IPPS/LTCH PPS final rule, effective
October 1, 2014, any CAH affected by the new OMB delineations in OMB
Bulletin No. 13-01 would retain its rural status through September 30,
2016. An affected CAH would be required to reclassify as a rural
facility under Sec. 412.103 within that 2-year period in order to
continue participating in the Medicare program as a CAH after the 2-
year transition period ends. Therefore, taking into consideration the
example above, any CAH affected by a new OMB delineation that is
implemented in this FY 2015 IPPS/LTCH PPS final rule would be required
to reclassify as rural by September 30, 2016, in order to

[[Page 50163]]

retain its CAH status after September 30, 2016.
To implement this proposed change, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28176), we proposed to revise Sec. 412.103 by
adding a new paragraph (a)(6), and to revise Sec. 485.610 by making a
conforming change to the introductory text of paragraph (b) and adding
a new paragraph (b)(5) to provide for a 2-year transition period that
will apply any time a new OMB delineation causes a facility that was
previously located in a rural area and is designated as a CAH to be
located in an urban area. We stated we believe that this proposal to
revise the regulations to automatically provide for a 2-year transition
period following the implementation of new OMB delineations is more
efficient than providing for a regulatory change limited to a
timeframe, and, as a result, will be more effective in reducing any
disruption caused by new OMB delineations.
Comment: Commenters supported CMS' proposal to provide for a 2-year
transition period to allow CAHs affected by the implementation of new
OMB delineations time to reclassify as rural in order to retain their
CAH status after the 2-year transition period ends. Several commenters
requested that CMS work with and provide notification to affected CAHs
to alert them to the need to reclassify as rural in order to retain
their CAH status. One commenter asked how new OMB delineations would
impact necessary provider CAHs previously reclassified under prior
updates.
Another commenter requested that CMS provide for a 3-year
transition period to allow affected CAHs additional time to reclassify
as rural or to prepare to transition to urban PPS facilities. The
commenter stated that the size of CAHs and the number of regulations
they must follow make it difficult for these facilities to process and
respond to new requirements. The commenter stated that although only a
small number of CAHs are affected by the new OMB delineations, those
affected require considerable time to locate applicable State law,
examine Rural Urban Commuting Area (RUCA) scores, and in general
determine whether they are eligible to reclassify as rural facilities.
The commenter stated that CMS has a precedent for providing a 3-year
transition period because it proposed to apply such a grace period to
urban facilities redesignated as rural so that these facilities have
time to prepare for lower reimbursement resulting from several factors,
including a lower wage index. The commenter stated that CAHs that lose
their CAH status would also be subject to these lower payment rates and
therefore would also benefit from being provided with a 3-year
transition period.
Response: We appreciate the commenters' support of our proposal to
provide CAHs affected by new OMB delineations with a 2-year transition
period to reclassify as rural in order to retain their CAH status after
the 2-year transition period ends. In response to the commenters'
request that CMS notify each CAH affected by a change in OMB
delineations, we encourage CAHs to contact CMS if they have questions
regarding their rural status and whether this status has changed as a
result of the implementation of the new OMB delineations as discussed
in section III.B. of the preamble of this final rule.
In response to the question concerning necessary provider CAHs,
section 1820(c)(2)(B)(i) of the Act requires that in order for a
facility to be certified as a CAH, it must be located in a rural area
or have reclassified as a rural facility. Therefore, if a necessary
provider CAH is located in an urban area as a result of the new OMB
delineations implemented in this final rule effective October 1, 2014,
that CAH must now reclassify as rural in order to keep its CAH status
after September 30, 2016. If a necessary provider CAH had previously
reclassified as rural due to a prior change in OMB delineations, that
CAH's rural status remains unchanged.
In response to the request to provide affected CAHs with a 3-year
transition period during which they could either reclassify as rural or
prepare to transition to an PPS facility, we continue to believe that 2
years is the appropriate amount of time for such a transition period.
Consistent with the regulation changes made in FY 2005 and FY 2010
final rules (69 FR 49221through 49222, 69 FR 60242 and 60252, and 74 FR
43939 through 43940), we believe 2 years is a sufficient period of time
in order for the CAH to work with its State to be designated as rural
and engage in any other research it believes is necessary to determine
whether it should reclassify as rural. Therefore, we are finalizing our
proposal to provide CAHs affected by our implementation of the new OMB
delineations with a 2-year transition period during which they must
reclassify as rural in order to retain their CAH status after the 2-
year period ends.
Comment: Commenters requested that, in addition to providing CAHs
affected by the implementation of a new OMB delineation with a 2-year
transition period to reclassify as rural, SCHs and MDHs affected by the
implementation of a new OMB delineation also be provided with a
transition period to reclassify as rural. One commenter requested that
CMS clarify that a hospital's SCH status would not be affected by a CAH
that is now located in an urban area as a result of a new OMB
delineation while that CAH is in its 2-year transition period to
reclassify as rural. Specifically, the commenter requested that a CAH
not be considered a ``like hospital'' as defined at Sec. 412.92(c)(2)
during its transition period.
Response: We are clarifying that during an affected CAH's 2-year
transition period, the facility will continue to be considered a CAH.
We respond to the public comments related to transition periods for
SCHs and MDHs in sections IV.G.4. and IV.G.5. of the preamble of this
final rule.
After consideration of the public comments we received, we are
finalizing our policy as proposed to provide for a 2-year transition
period for CAHs affected by the implementation of a new OMB delineation
during which the CAH must reclassify as rural in order to retain its
CAH status after the 2-year transition period ends. To implement this
change, we are revising Sec. 412.103 by adding a new paragraph (a)(6),
and revising Sec. 485.610 by making a conforming change to the
introductory text of paragraph (b) and adding a new paragraph (b)(5) to
provide for a 2-year transition period that will apply any time the
implementation a new OMB delineation causes a facility that was
previously located in a rural area and is designated as a CAH to be
located in an urban area. These regulation changes are effective
October 1, 2014. For purposes of applying these regulation changes to
the new OMB delineations implemented in this final rule effective
October 1, 2014, CAHs affected by these most recent OMB delineations
will be treated as CAHs through September 30, 2016 and will have until
September 30, 2016, to reclassify as rural in order to keep their CAH
status after September 30, 2016.
3. Revision of the Requirements for Physician Certification of CAH
Inpatient Services
For inpatient CAH services to be payable under Medicare Part A,
section 1814(a)(8) of the Act requires that a physician certify ``that
the individual may reasonably be expected to be discharged or
transferred to a hospital within 96 hours after admission to the
critical access hospital.'' The regulations implementing this statutory
requirement are located at Sec. 424.15.

[[Page 50164]]

Prior to FY 2014, this physician certification was required no
later than 1 day before the date on which the claim for payment for the
inpatient CAH service is submitted. In the FY 2014 IPPS/LTCH PPS final
rule, we revised the CAH regulations concerning the timing requirements
for certification of inpatient CAH services. Specifically, we revised
Sec. 424.15(b) to state that certification begins with the order for
inpatient admission. The certification must be completed, signed, and
documented in the medical record prior to discharge (78 FR 50970). This
change was effective October 1, 2013.
However, in order to provide CAHs with greater flexibility in
meeting this certification requirement, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28176 through 28177), we proposed to amend the
regulations governing the timing of the 96-hour certification
requirement at Sec. 424.15(b) such that physician certification is
required no later than 1 day before the date on which the claim for
payment for the inpatient CAH service is submitted. That is, we
proposed to remove the requirement that certification of the 96-hour
requirement must be completed prior to discharge and we proposed to
reinstate the timing requirement that was in place prior to October 1,
2013.
We proposed to revise Sec. 424.15(b) to remove the phrase ``prior
to discharge'' and replace it with ``no later than 1 day before the
date on which the claim for payment for the inpatient CAH service is
submitted''. In addition, we proposed to make a conforming amendment to
Sec. 424.11(d)(5). Section 424.11(d)(5) states that for all inpatient
hospital or critical access hospital inpatient services, including
inpatient psychiatric facility services, a delayed certification may
not extend past discharge. Because we proposed to change the timing
requirement for physician certification of CAH inpatient services at
Sec. 424.15(b), such that the certification could be completed past
discharge, we proposed to revise Sec. 424.11(d)(5) to remove the
phrase ``or critical access hospital inpatient''. We sought public
comment on these proposed changes to the regulations governing the
requirement for physician certification of CAH inpatient services.
Comment: Most commenters supported the proposed change to allow
physician certification to be completed 1 day prior to when the claim
for the inpatient service is submitted. Commenters requested that CMS
provide additional flexibility and avoid further confusion by
clarifying that CAHs have until no later than 1 day prior to the day on
which the claim for the inpatient service is submitted to complete all
certification requirements. One commenter stated that the proposed
change could cause inaccurate and delayed chart entries because the
certification may take place 30, 60, or 90 days after the inpatient is
discharged. The commenter recommended that physician certification be
completed within 24 hours of admission and that the medical record be
used to meet all certification requirements. One commenter stated that
asking a physician to certify his or her expectation for an
individual's length of stay after the individual's inpatient stay has
exceeded 96 hours will create additional confusion and will be met with
greater resistance from physicians. Commenters asked for clarification
in understanding how the proposal would help CAHs if the certification
is still required to state that the individual will be discharged or
transferred to another hospital within 96 hours after admission to the
CAH.
Response: We appreciate the commenters' support of our proposal. In
response to commenters who requested that CMS clarify that all
certification requirements can be met no later than 1 day prior to when
the claim is submitted, we are revising our proposed amendment to Sec.
424.15(b) to provide that a CAH has until 1 day prior to when the claim
for the inpatient service is submitted to complete all certification
requirements. In order to finalize this policy, we are amending the
regulation text at Sec. 424.11(d)(5) to remove the phrase ``or
critical access hospital inpatient.'' In addition we are revising the
regulations at Sec. 424.15(b) to state that certification begins with
the order for inpatient admission. All certification requirements must
be completed, signed, and documented in the medical record no later
than 1 day before the date on which the claim for payment for the
inpatient CAH service is submitted. We believe these changes are
consistent with the 96-hour certification requirement and the existing
CoP requirements.
In response to commenters' concerns about providing a delayed
certification, the policy finalized in this rule requires that all
certification requirements be completed no later than 1 day prior to
when the claim for the inpatient service is submitted. Therefore, CAHs
are not precluded from completing these certification requirements in
advance of this deadline if they believe an earlier completion of
certification requirements is appropriate. We note that we are not
making any changes related to the order requirements for admission and
that in accordance with Sec. 412.3, an order is required before or at
the time of admission to admit an individual as an inpatient. In
addition, we refer readers to the CY 2015 OPPS/ASC proposed rule,
specifically section ``XVI. Proposed Revision of the Requirements for
Physician Certification of Hospital Inpatient Services Other
Psychiatric Inpatient Services'' (79 FR 41056 through 41058). In the CY
2015 OPPS/ASC proposed rule, we proposed to require inpatient admission
orders as a condition of payment based upon our general rulemaking
authority under section 1871 of the Act rather than as an element of
the physician certification under section 1814(a)(3) of the Act. In
addition, in the CY 2015 OPPS/ASC proposed rule, we proposed to change
our interpretation of section 1814(a)(3) of the Act to require a
physician certification only for long-stay cases and outlier cases. In
that rule, we proposed that 20 days is an appropriate minimum threshold
for physician certification and we proposed to define long-stay cases
as cases with stays of 20 days or longer. These proposed changes refer
to the general physician certification requirements under section
1814(a)(3) of the Act and do not address the 96-hour certification
requirement at section 1814(a)(8) of the Act
Comment: Although many commenters supported the proposed change,
many commenters indicated that they continue to have significant
concerns with the 96-hour certification requirement and that the
proposed change does not do enough to alleviate these concerns.
Commenters stated they continue to support the Critical Access Hospital
Relief Act of 2014, which would remove the 96-hour certification
requirement for payment. Commenters requested that CMS exercise its
discretion and make clear it will not enforce the 96-hour certification
requirement because as long as this requirement is enforced, CAHs may
not be eligible for Medicare payment. One commenter stated that
occasionally admitting a patient who is expected to stay longer than 96
hours is permissible and should be paid. Commenters stated that
physicians have been given the impossible task of coordinating the 96-
hour certification requirement for payment with the 2-midnight policy
and that, in some cases, the physician must certify that the patient
will be transferred or discharged within a 49-hour timeframe. Another
commenter stated that the 96-hour certification requirement is obsolete
and does not recognize advancements in services which CAHs provide,
including telehealth services. Commenters

[[Page 50165]]

requested that CMS seek a legislative change that would align the
certification requirement for payment with the CAH CoP requirement,
which requires an annual average length of stay of 96 hours. Commenters
stated that the certification requirement for payment could be met by
requiring that the CAH certify that it has the appropriate resources
and staff to treat the inpatient. Commenters stated that the CAH
program was established to provide individuals living in rural areas
with access to critical health care services so that these individuals
can receive high quality and cost efficient care close to home even
though providing this type of care may prove to be unprofitable for a
CAH. Commenters stated that CAHs provide services that may require
longer lengths of stay, and while the provision of these services does
not violate the CoP requirement for an annual average length of stay of
96 hours, CAHs are prevented from providing these types of services
because they cannot meet the 96-hour certification requirement for
payment. Commenters stated they are concerned about their ability to
treat patients, employ new providers, and maintain services essential
to their community.
Commenters expressed concern about the impact of the 96-hour
certification requirement for payment on surgical procedures.
Commenters stated CAHs have put much effort into providing these
procedures so that beneficiaries, particularly elderly individuals, can
receive these services close to home. One commenter stated that
surgeons who practice in rural areas rely on performing specific
surgical procedures such as colon resections. The commenter stated that
if these surgeons are only able to provide short-stay procedures and
can no longer provide procedures that require longer lengths of stay,
they would likely discontinue practicing at CAHs. One commenter stated
that delaying the 96-hour certification requirement is not a resolution
because it does not eliminate the fact that a surgeon will be unable to
admit an individual to a CAH if he or she ethically believes that the
individual will need 5 days as an inpatient.
One commenter recommended CMS withdraw the policy related to the
96-hour certification requirement for payment in the final rule for
several reasons. The commenter stated that the policy jeopardizes a
physician's ability to care for his or her patient as required by the
patient's condition because admission should be based on medical
judgment once an individual's condition and symptoms are evaluated. The
commenter stated that implementation of the policy will result in
dissatisfaction and confusion because patients will have to become
accustomed to new hospitals and new medical staff and a decline in
patient satisfaction scores is something from which a hospital may not
be able to recover. The commenter stated that although the 96-hour
certification requirement is in statute, it was not enforced by CMS
until FY 2014 and that CAHs were not given advance notification of the
enforcement and there has been little preparation, training or guidance
from CMS until very recently. The commenter noted that medical staff of
its member CAHs are angry and frustrated especially because of the
detrimental effect of the 96-hour certification requirement on their
patients.
Response: As stated earlier in this preamble, we believe the policy
we are finalizing in this rule is consistent with the 96-hour
certification requirement and the existing CoP requirements. The
remainder of this response provides a review of the 96-hour
certification requirement.
For inpatient CAH services, section 1814(a)(8) of the Act requires
for Medicare Part A payment that ``in the case of inpatient critical
access hospital services, a physician certifies that the individual may
reasonably be expected to be discharged or transferred to a hospital
within 96 hours after admission to the critical access hospital.''
Because this statutory requirement is based on an expectation, if a
physician certifies in good faith, that an individual may reasonably be
expected to be discharged or transferred to a hospital within 96 hours
after admission to the CAH and then something unforeseen occurs that
causes the individual to stay longer at the CAH, Medicare will pay for
the costs of treating that patient and there would not be a problem
with regard to the CAH designation as long as that individual's stay
does not cause the CAH to exceed its 96-hour annual average CoP
requirement. However, if a physician cannot in good faith certify that
an individual may reasonably be expected to be discharged or
transferred within 96 hours after admission to the CAH, the CAH will
not receive Medicare Part A payment for any portion of that
individual's inpatient stay.
In addition, time as an outpatient at the CAH is not included in
applying the 96-hour requirement, nor does time in a CAH swing bed,
which is being used to provide skilled nursing services, count towards
the 96-hour requirement. The clock for the 96 hours only begins once
the individual is admitted to the CAH as an inpatient.
After consideration of the public comments we received, we are
finalizing a policy that a CAH is required to complete all physician
certification requirements no later than 1 day before the date on which
the claim for the inpatient service is submitted. In order to finalize
this change, we are amending the regulation text at Sec. 424.11(d)(5)
to remove the phrase ``or critical access hospital inpatient.'' In
addition, we are revising the regulations at Sec. 424.15(b) to state
that certification begins with the order for inpatient admission. All
certification requirements must be completed, signed, and documented in
the medical record no later than 1 day before the date on which the
claim for payment for the inpatient CAH service is submitted. These
changes are effective October 1, 2014.

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

A. Background of the LTCH PPS

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

[[Page 50166]]

disease in the 12-month cost reporting period ending in FY 1997.
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge'' system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient
resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that
the Secretary shall examine, and may provide for, adjustments to
payments under the LTCH PPS, including adjustments to DRG weights, area
wage adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment.
In the August 30, 2002 Federal Register, we issued a final rule
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR
55954). For the initial implementation of the LTCH PPS (FYs 2003
through FY 2007), the system used information from LTCH patient records
to classify patients into distinct long-term care diagnosis-related
groups (LTC-DRGs) based on clinical characteristics and expected
resource needs. Beginning in FY 2008, we adopted the Medicare severity
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient
classification system used under the LTCH PPS. Payments are calculated
for each MS-LTC-DRG and provisions are made for appropriate payment
adjustments. Payment rates under the LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
(Pub. L. 97-248) for payments for inpatient services provided by a LTCH
with a cost reporting period beginning on or after October 1, 2002.
(The regulations implementing the TEFRA reasonable cost-based payment
provisions are located at 42 CFR Part 413.) With the implementation of
the PPS for acute care hospitals authorized by the Social Security
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the
Act, certain hospitals, including LTCHs, were excluded from the PPS for
acute care hospitals and were paid their reasonable costs for inpatient
services subject to a per discharge limitation or target amount under
the TEFRA system. For each cost reporting period, a hospital-specific
ceiling on payments was determined by multiplying the hospital's
updated target amount by the number of total current year Medicare
discharges. (Generally, in section VII. of the preamble of this final
rule, when we refer to discharges, we describe Medicare discharges.)
The August 30, 2002 final rule further details the payment policy under
the TEFRA system (67 FR 55954).
In the August 30, 2002 final rule, we provided for a 5-year
transition period from payments under the TEFRA system to payments
under the LTCH PPS. During this 5-year transition period, a LTCH's
total payment under the PPS was based on an increasing percentage of
the Federal rate with a corresponding decrease in the percentage of the
LTCH PPS payment that is based on reasonable cost concepts, unless a
LTCH made a one-time election to be paid based on 100 percent of the
Federal rate. Beginning with LTCHs' cost reporting periods beginning on
or after October 1, 2006, total LTCH PPS payments are based on 100
percent of the Federal rate.
In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
budget neutrality requirements mandated by section 123 of the BBRA. The
same final rule that established regulations for the LTCH PPS under 42
CFR Part 412, Subpart O, also contained LTCH provisions related to
covered inpatient services, limitation on charges to beneficiaries,
medical review requirements, furnishing of inpatient hospital services
directly or under arrangement, and reporting and recordkeeping
requirements. We refer readers to the August 30, 2002 final rule for a
comprehensive discussion of the research and data that supported the
establishment of the LTCH PPS (67 FR 55954).
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51733 through 51743) for a chronological summary of the main
legislative and regulatory developments affecting the LTCH PPS through
the annual update cycles prior to the FY 2014 rulemaking cycle. In
addition, in this final rule, we discuss the provisions of the Pathway
for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on December 26,
2013, that affect the LTCH PPS. In section VII.I.2. of the preamble of
this final rule, we discuss the provisions of section 1206(a) of Public
Law 113-67, which amended section 1886(m) of the Act by adding
paragraph (6) and established, among other things, patient-level
criteria for payments under the LTCH PPS for implementation beginning
with FY 2016. In section VII.E. of the preamble of this final rule, we
discuss the provisions of section 1206(b)(1) of Public Law 113-67,
which provide for the retroactive reinstatement and extension, for an
additional 4 years, of the moratorium on the full implementation of the
25-percent threshold payment adjustment policy (except for
``grandfathered'' hospitals-within-hospitals (HwHs), which are
permanently exempt from this policy). In section VII.G. of the preamble
of this final rule, we discuss the provisions of section 1206(b)(2) of
Public Law 113-67 (as amended by section 112(b) of the Protecting
Access to Medicare Act (Pub. L. 113-93), which, subject to certain
defined exceptions, provide for statutory moratoria on the
establishment of new LTCHs and LTCH satellite facilities and a new
statutory moratorium on the increase in the number of hospital beds in
LTCHs or LTCH satellite facilities for the period beginning April 1,
2014 and ending September 30, 2017. In section IX.C. of the preamble of
this final rule, we discuss the provisions of section 1206(c) of Public
Law 113-67, which amended the LTCH Quality Reporting Program
established under section 1886(m)(5) of the Act by requiring the
Secretary to establish a functional status quality measure to evaluate
the in mobility among inpatients requiring ventilator support no later
than October 1, 2015. In section VII.H. of the preamble of this final
rule, we discuss the findings of a review of payments to certain LTCHs
(that is, LTCHs classified under subclause (II) of section
1886(d)(1)(B)(iv) of the Act) that was conducted in accordance with
section 1206(d) of Public Law 113-67, and finalize a policy to apply a
payment adjustment under the LTCH PPS to ``subclause (II)'' LTCHs
beginning in FY 2015 that will result in payments to this type of LTCH
resembling payments under the reasonable cost TEFRA payment system
model.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
Under the regulations at Sec. 412.23(e)(1), to qualify to be paid
under the LTCH PPS, a hospital must have a provider agreement with
Medicare. Furthermore, Sec. 412.23(e)(2)(i), which implements section
1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an
average Medicare inpatient length of stay of greater than 25 days to be
paid under the LTCH PPS. Alternatively, Sec. 412.23(e)(2)(ii) states
that, for cost reporting periods beginning on or after August 5, 1997,
a hospital that was first excluded from the PPS in 1986 and can
demonstrate that at least 80 percent of its annual Medicare inpatient
discharges in the 12-month cost reporting period ending in

[[Page 50167]]

FY 1997 have a principal diagnosis that reflects a finding of
neoplastic disease must have an average inpatient length of stay for
all patients, including both Medicare and non-Medicare inpatients, of
greater than 20 days.
b. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR Part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject
to the rate-of-increase test at section 1814(b) of the Act).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002 final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH PPS (67 FR 55974
through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we
clarified that the discussion of beneficiary liability in the August
30, 2002 final rule was not meant to establish rates or payments for,
or define Medicare-eligible expenses. Under Sec. 412.507, if the
Medicare payment to the LTCH is the full LTC-DRG payment amount,
consistent with other established hospital prospective payment systems,
a LTCH may not bill a Medicare beneficiary for more than the deductible
and coinsurance amounts as specified under Sec. Sec. 409.82, 409.83,
and 409.87 and for items and services specified under Sec. 489.30(a).
However, under the LTCH PPS, Medicare will only pay for days for which
the beneficiary has coverage until the short-stay outlier (SSO)
threshold is exceeded. Therefore, if the Medicare payment was for a SSO
case (Sec. 412.529) that was less than the full LTC-DRG payment amount
because the beneficiary had insufficient remaining Medicare days, the
LTCH could also charge the beneficiary for services delivered on those
uncovered days (Sec. 412.507).
4. Administrative Simplification Compliance Act (ASCA) and Health
Insurance Portability and Accountability Act (HIPAA) Compliance
Claims submitted to Medicare must comply with both the
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105),
and the Health Insurance Portability and Accountability Act of 1996
(HIPAA) (Pub. L. 104-191). Section 3 of the ASCA requires that the
Medicare Program deny payment under Part A or Part B for any expenses
incurred for items or services ``for which a claim is submitted other
than in an electronic form specified by the Secretary.'' Section
1862(h) of the Act (as added by section 3(a) of the ASCA) provides that
the Secretary shall waive such denial in two specific types of cases
and may also waive such denial ``in such unusual cases as the Secretary
finds appropriate'' (68 FR 48805). Section 3 of the ASCA operates in
the context of the HIPAA regulations, which include, among other
provisions, the transactions and code sets standards requirements
codified under 45 CFR Parts 160 and 162 (generally known as the
Transactions Rule). The Transactions Rule requires covered entities,
including covered health care providers, to conduct certain electronic
health care transactions according to the applicable transactions and
code sets standards.
The Department of Health and Human Services has a number of
initiatives designed to encourage and support the adoption of health
information technology and promote nationwide health information
exchange to improve health care. The Office of the National Coordinator
for Health Information Technology (ONC) leads these efforts in
collaboration with other agencies, including CMS and the Office of the
Assistant Secretary for Planning and Evaluation (ASPE). Through a
number of activities, including several open government initiatives,
HHS is promoting the adoption of electronic health record (EHR)
technology certified under the ONC Health Information Technology (HIT)
Certification Program developed to support secure, interoperable,
health information exchange. The HIT Policy Committee (a Federal
Advisory Committee) has recommended areas in which HIT certification
under the ONC HIT Certification Program would help support providers
that are eligible for the Medicare and Medicaid EHR Incentive Programs,
such as long-term and postacute care (including LTCHs) and behavioral
health care providers. We believe that the use of certified EHRs by
LTCHs (and other types of providers that are ineligible for the
Medicare and Medicaid EHR Incentive Programs) can effectively and
efficiently help providers improve internal care delivery practices,
support the exchange of important information across care partners and
during transitions of care, and could enable the reporting of
electronically specified clinical quality measures (eCQMs) (as
described elsewhere in this rule). More information on the ONC HIT
Certification Program and efforts to develop standards applicable to
LTCHs can be found by accessing the following Web sites and resources:
https://www.healthit.gov/sites/default/files/generalcertexchangeguidance_final_9-9-13.pdf;
https://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoption;
https://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG;
and
https://wiki.siframework.org/Longitudinal+Coordination+of+Care.

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

1. Background
Section 123 of the BBRA requires that the Secretary implement a PPS
for LTCHs (that is, a per discharge system with a diagnosis-related
group (DRG)-based patient classification system reflecting the
differences in patient resources and costs). Section 307(b)(1) of the
BIPA modified the requirements of section 123 of the BBRA by requiring
that the Secretary examine ``the feasibility and the impact of basing
payment under such a system [the long-term care hospital (LTCH) PPS] on
the use of existing (or refined) hospital DRGs that have been modified
to account for different resource use of LTCH patients, as well as the
use of the most recently available hospital discharge data.''
When the LTCH PPS was implemented for cost reporting periods
beginning on or after October 1, 2002, we adopted the same DRG patient
classification system (that is, the CMS DRGs) that was utilized at that
time under the IPPS. As a component of the LTCH PPS, we refer to this
patient classification system as the ``long-term care diagnosis-related
groups (LTC-DRGs).'' Although the patient classification system used
under both the LTCH PPS and the IPPS are the

[[Page 50168]]

same, the relative weights are different. The established relative
weight methodology and data used under the LTCH PPS result in relative
weights under the LTCH PPS that reflect ``the differences in patient
resource use . . .'' of LTCH patients (section 123(a)(1) of the BBRA
(Pub. L. 106-113)).
As part of our efforts to better recognize severity of illness
among patients, in the FY 2008 IPPS final rule with comment period (72
FR 47130), the MS-DRGs and the Medicare severity long-term care
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY
2008). For a full description of the development, implementation, and
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through
47175 and 47277 through 47299). (We note that, in that same final rule,
we revised the regulations at Sec. 412.503 to specify that for LTCH
discharges occurring on or after October 1, 2007, when applying the
provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy
descriptions and payment calculations, all references to LTC-DRGs would
be considered a reference to MS-LTC-DRGs. For the remainder of this
section, we present the discussion in terms of the current MS-LTC-DRG
patient classification system unless specifically referring to the
previous LTC-DRG patient classification system that was in effect
before October 1, 2007.)
The MS-DRGs adopted in FY 2008 represent an increase in the number
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG
classifications are updated annually. There are currently 751 MS-DRG
groupings. After finalizing the proposed changes to the MS-DRG
groupings described in section II.G. of this preamble, there are a
total of 753 MS-DRG groupings for FY 2015. Consistent with section 123
of the BBRA, as amended by section 307(b)(1) of the BIPA, and Sec.
412.515 of the regulations, we used information derived from LTCH PPS
patient records to classify LTCH discharges into distinct MS-LTC-DRGs
based on clinical characteristics and estimated resource needs. We then
assigned an appropriate weight to the MS-LTC-DRGs to account for the
difference in resource use by patients exhibiting the case complexity
and multiple medical problems characteristic of LTCHs. Below we provide
a general summary of our existing methodology for determining the FY
2015 MS-LTC-DRG relative weights under the LTCH PPS.
In a departure from the IPPS, and as discussed in greater detail
below in section VII.B.3.f. of this preamble, we are continuing to use
low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less than 25 LTCH
cases) in determining the MS-LTC-DRG relative weights because LTCHs do
not typically treat the full range of diagnoses as do acute care
hospitals. For purposes of determining the relative weights for the
large number of low-volume MS-LTC-DRGs, we grouped all of the low-
volume MS-LTC-DRGs into five quintiles based on average charge per
discharge. (A detailed discussion of the initial development and
application of the quintile methodology appears in the August 30, 2002
LTCH PPS final rule (67 FR 55978).) Under our existing methodology, we
accounted for adjustments to payments for short-stay outlier (SSO)
cases (that is, cases where the covered length of stay at the LTCH is
less than or equal to five-sixths of the geometric average length of
stay for the MS-LTC-DRG). Furthermore, we made adjustments to account
for nonmonotonically increasing weights, when necessary. That is,
theoretically, cases under the MS-LTC-DRG system that are more severe
require greater expenditure of medical care resources and will result
in higher average charges such that, in the severity levels within a
base MS-LTC-DRG, the relative weights should increase monotonically
with severity from the lowest to highest severity level. (We discuss
nonmonotonicity in greater detail and our methodology to adjust the MS-
LTC-DRG relative weights to account for nonmonotonically increasing
relative weights in section VII.B.3.g. (Step 6) of this preamble.)
2. Patient Classifications into MS-LTC-DRGs
a. Background
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted above in
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the MS-DRGs used under the
IPPS.
The MS-DRGs are organized into 25 major diagnostic categories
(MDCs), most of which are based on a particular organ system of the
body; the remainder involve multiple organ systems (such as MDC 22,
Burns). Within most MDCs, cases are then divided into surgical DRGs and
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy
that orders operating room (O.R.) procedures or groups of O.R.
procedures by resource intensity. The GROUPER software program does not
recognize all ICD-9-CM procedure codes as procedures affecting DRG
assignment. That is, procedures that are not surgical (for example,
EKGs), or minor surgical procedures (for example, a biopsy of skin and
subcutaneous tissue (procedure code 86.11)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge and that payment varies
by the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis;
Additional or secondary diagnoses;
Surgical procedures;
Age;
Sex; and
Discharge status of the patient.
Through FY 2010, the number of diagnosis and procedure codes
considered for MS-DRG assignment was limited to nine and six,
respectively. However, for claims submitted on the 5010 format
beginning January 1, 2011, we increased the capacity to process
diagnosis and procedure codes up to 25 diagnoses and 25 procedures.
This includes one principal diagnosis and up to 24 secondary diagnoses
for severity of illness determinations. We refer readers to section
II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for
a complete discussion of this change (75 FR 50127).
Under HIPAA transactions and code sets regulations at 45 CFR Parts
160 and 162, covered entities must comply with the adopted transaction
standards and operating rules specified in Subparts I through S of Part
162. Among other requirements, by January 1, 2012, covered entities
were required to use the ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3--Health Care Claim: Institutional
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care
Claim: Institutional (837) ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X233A1 for the health care claims or equivalent encounter
information transaction (45 CFR 162.1102).
HIPAA requires covered entities to use the applicable medical data
code set requirements when conducting HIPAA transactions (45 CFR
162.1000). Currently, upon the discharge of the

[[Page 50169]]

patient, the LTCH must assign appropriate diagnosis and procedure codes
from the most current version of the Internal Classification of
Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). For
additional information on the ICD-9-CM coding system, we refer readers
to the FY 2008 IPPS final rule with comment period (72 FR 47241 through
47243 and 47277 through 47281). We also refer readers to the detailed
discussion on correct coding practices in the August 30, 2002 LTCH PPS
final rule (67 FR 55981 through 55983). Additional coding instructions
and examples are published in the Coding Clinic for ICD-9-CM, a product
of the American Hospital Association. (We refer readers to section
II.G.13. of the preamble of this final rule for additional information
on the annual revisions to the ICD-9-CM codes.)
Providers use the code sets under the ICD-9-CM coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system. We have been discussing the
conversion to the ICD-10 coding system for many years. In the FY 2015
IPPS/LTCH PPS proposed rule, we referred readers to section II.G.1. of
the preamble of that proposed rule for additional information on the
implementation of the ICD-10 coding system.
Comment: One commenter requested that CMS develop a crosswalk
between ICD-9-CM codes and ICD-10 codes to specifically assist LTCH
providers in determining the appropriate MS-LTC-DRGs that are affected
as a result of the transition to ICD-10-PCS. The commenter stated that
additional guidance is needed regarding the specific MS-LTC-DRGs that
LTCHs should concentrate their efforts on during the delay in the
implementation of ICD-10-PCS.
Response: As noted above, the MS-LTC-DRGs under the LTCH PPS are
structurally identical to the MS-DRGs used under the IPPS. For a
detailed discussion of the conversion from the ICD-9-CM to the ICD-10-
PCS code set and the ICD-9-CM to ICD-10 MS-DRGs, we refer readers to
section II.G.1.a. of the preamble of this FY 2015 IPPS/LTCH PPS final
rule. Included in this discussion are all the ICD-10 resources publicly
available via the Internet on the CMS ICD-10 Web site: https://www.cms.gov/Medicare/Coding/ICD10/. For example, the General
Equivalence Mappings (GEMs) that consist of forward and backward
mappings of ICD-9-CM and ICD-10-PCS coding sets are available for
providers to review their current list of ICD-9-CM codes and map (or
crosswalk) them to the appropriate available ICD-10-PCS codes. However,
we note that the GEMs are not a substitute for coding from actual
medical record documentation using the ICD-10-PCS code set. We also
have held several ICD-10-PCS National Provider Calls where interested
parties can listen to past presentations and review the accompanying
slide presentations available. We refer readers to the following Web
site: https://www.cms.gov/Medicare/Coding/ICD10/CMS-Sponsored-ICD-10-Teleconferences.html.
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base
DRGs were subdivided according to the presence of specific secondary
diagnoses designated as complications or comorbidities (CCs) into one,
two, or three levels of severity, depending on the impact of the CCs on
resources used for those cases. Specifically, there are sets of MS-DRGs
that are split into 2 or 3 subgroups based on the presence or absence
of a CC or a major complication or comorbidity (MCC). We refer readers
to section II.D. of the FY 2008 IPPS final rule with comment period for
a detailed discussion about the creation of MS-DRGs based on severity
of illness levels (72 FR 47141 through 47175).
Medicare administrative contractors (MACs) enter the clinical and
demographic information submitted by LTCHs into their claims processing
systems and subject this information to a series of automated screening
processes called the Medicare Code Editor (MCE). These screens are
designed to identify cases that require further review before
assignment into a MS-LTC-DRG can be made. During this process, certain
cases are selected for further development (74 FR 43949).
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the
basis of diagnosis and procedure codes and other demographic
information (age, sex, and discharge status). The GROUPER software used
under the LTCH PPS is the same GROUPER software program used under the
IPPS. Following the MS-LTC-DRG assignment, the Medicare contractor
determines the prospective payment amount by using the Medicare PRICER
program, which accounts for hospital-specific adjustments. Under the
LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG
assignments made by the Medicare contractor and to submit additional
information within a specified timeframe as provided in Sec.
412.513(c).
The GROUPER software is used both to classify past cases to measure
relative hospital resource consumption to establish the MS-LTC-DRG
relative weights and to classify current cases for purposes of
determining payment. The records for all Medicare hospital inpatient
discharges are maintained in the MedPAR file. The data in this file are
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during
our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH
PPS (Sec. 412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 2015
As specified by our regulations at Sec. 412.517(a), which require
that the MS-LTC-DRG classifications and relative weights be updated
annually, and consistent with our historical practice of using the same
patient classification system under the LTCH PPS as is used under the
IPPS, we proposed to update the MS-LTC-DRG classifications effective
October 1, 2014, through September 30, 2015 (FY 2015) consistent with
the proposed changes to specific MS-DRG classifications (that is,
proposed GROUPER Version 32.0). We did not receive any public comments
on this proposal. Therefore, we are adopting the proposal without
modification in this final rule. In accordance with Sec. 412.517(a)
and consistent with our historical practice, we are updating the MS-
LTC-DRG classifications effective October 1, 2014, through September
30, 2015 (FY 2015) consistent with the changes to specific MS-DRG
classifications presented in section II.G. of this preamble (that is,
GROUPER Version 32.0). Therefore, the MS-LTC-DRGs for FY 2015 presented
in this final rule are the same as the MS-DRGs that are being used
under the IPPS for FY 2015. In addition, because the MS-LTC-DRGs for FY
2015 are the same as the MS-DRGs for FY 2015, the other changes that
affect MS-DRG (and by extension MS-LTC-DRG) assignments under GROUPER
Version 32.0 as discussed in section II.G. of the preamble of this
final rule, including the changes to the MCE software and the ICD-9-CM
coding system, also are applicable under the LTCH PPS for FY 2015.
3. Development of the FY 2015 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative
Weights
One of the primary goals for the implementation of the LTCH PPS is
to

[[Page 50170]]

pay each LTCH an appropriate amount for the efficient delivery of
medical care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
Medicare patients whose care is more costly (67 FR 55984). To
accomplish these goals, we have annually adjusted the LTCH PPS standard
Federal prospective payment system rate by the applicable relative
weight in determining payment to LTCHs for each case.
The basic methodology used to develop the MS-LTC-DRG relative
weights is generally consistent with the general methodology
established when the LTCH PPS was implemented in the August 30, 2002
LTCH PPS final rule (67 FR 55989 through 55991), with the exception of
some modifications of our historical procedures for assigning relative
weights in cases of zero volume and/or nonmonotonicity resulting from
the adoption of the MS-LTC-DRGs. (For details on the modifications to
our historical procedures for assigning relative weights in cases of
zero volume and/or nonmonotonicity, we refer readers to the FY 2008
IPPS final rule with comment period (72 FR 47289 through 47295) and the
FY 2009 IPPS final rule (73 FR 48542 through 48550).) Under the LTCH
PPS, relative weights for each MS-LTC-DRG are a primary element used to
account for the variations in cost per discharge and resource
utilization among the payment groups (Sec. 412.515). To ensure that
Medicare patients classified to each MS-LTC-DRG have access to an
appropriate level of services and to encourage efficiency, we calculate
a relative weight for each MS-LTC-DRG that represents the resources
needed by an average inpatient LTCH case in that MS-LTC-DRG. For
example, cases in a MS-LTC-DRG with a relative weight of 2 will, on
average, cost twice as much to treat as cases in a MS-LTC-DRG with a
relative weight of 1.
b. Development of the MS-LTC-DRG Relative Weights for FY 2015
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755 through
50760), we presented our policies for the development of the MS-LTC-DRG
relative weights for FY 2014. The basic methodology we used to develop
the FY 2014 MS-LTC-DRG relative weights was the same as the methodology
we used to develop the FY 2013 MS-LTC-DRG relative weights in the FY
2013 IPPS/LTCH PPS final rule and was consistent with the general
methodology established when the LTCH PPS was implemented in the August
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). In the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28181 through 28187), we
proposed to continue to use our existing methodology to determine the
MS LTC-DRG relative weights for FY 2015, including the application of
established policies related to the data, the hospital-specific
relative value methodology, the treatment of severity levels in the MS
LTC-DRGs, low-volume and no-volume MS-LTC-DRGs, adjustments for
nonmonotonicity, and the steps for calculating the proposed MS-LTC-DRG
relative weights with a budget neutrality factor.
Beginning with the FY 2008 update, we established a budget
neutrality requirement for the annual update to the MS-LTC-DRG
classifications and relative weights at Sec. 412.517(b) (in
conjunction with Sec. 412.503), such that estimated aggregate LTCH PPS
payments would be unaffected, that is, would be neither greater than
nor less than the estimated aggregate LTCH PPS payments that would have
been made without the classification and relative weight changes (72 FR
26882 through 26884). Consistent with Sec. 412.517(b), we proposed to
continue to apply our established two-step budget neutrality
methodology. As such, the proposed update to the MS-LTC-DRG
classifications and relative weights for FY 2015 was based on the FY
2014 MS-LTC-DRG classifications and relative weights established in
Table 11 listed in section VI. of the Addendum to the FY 2014 IPPS/LTCH
PPS final rule (78 FR 51002).
Comment: A few commenters recommended that CMS review its
calculation of the proposed FY 2015 MS-LTC-DRG relative weights with
the proposed budget neutrality factor to confirm that the those weights
resulted in no change in aggregate LTCH PPS payments under Sec.
412.517. The commenters made this request after performing their own
analysis of the proposed relative weight calculations. One commenter
performed a comparative analysis using the LTCH discharges from the
MedPAR data and its estimate of LTCH PPS payments using the FY 2014 MS-
LTC-DRGs relative weights and the proposed FY 2015 MS-LTC-DRGs relative
weights, and found an aggregate reduction in LTCH PPS payments, in
which the majority of that reduction was due to the proposed decrease
in the relative weight for MS-LTC-DRG 207. Another commenter's analysis
found a reduction in the proposed relative weight for 11 of the 20 most
frequently utilized MS-LTC-DRGs, which the commenter believed suggested
that the proposed MS-LTC-DRGs relative weights result in an aggregate
decrease in LTCH PPS payments. Because these commenters believed that
their analyses revealed an estimated aggregate decrease in LTCH PPS
payments, they further believed that the proposed MS-LTC-DRGs relative
are not ``budget neutral'' and, therefore, are not consistent with the
requirement under Sec. 412.517(b) that CMS ensure that estimated LTCH
PPS payments are not affected by the annual update to the MS-LTC-DRGs
classifications and relative weights. We note that the commenters did
not comment specifically on any of our specific proposals related to
the determination of the MS-LTC-DRGs relative weights for FY 2015,
which includes our calculation of the normalization factor and the
budget neutrality factor determined under the proposed application of
our two-step budget neutrality methodology (discussed in Step 7 of
section VII.B.3.g. of the proposed rule).
Response: We appreciate the commenters' analysis of the
determination of the proposed MS-LTC-DRG relative weight calculations.
In consideration of these public comments, we have reviewed the
application of our methodology and the calculation of the MS-LTC-DRGs
relative weights for FY 2015. We found no methodological or
computational errors. In particular, in light of the commenter's focus
on MS-LTC-DRG 207, we reviewed our budget neutrality calculations to
ensure that the proposed decrease in the relative weight for MS-LTC-DRG
207 was accurately reflected in our aggregate LTCH PPS payment
estimates. As described in step 7 under section VII.B.3.g. of the
proposed rule, after determining and applying the normalization factor,
we compared estimated aggregate LTCH PPS payments using the FY 2014 MS-
LTC-DRGs and relative weights to estimate aggregate LTCH PPS payments
using the proposed FY 2015 MS-LTC-DRGs and relative weights using LTCH
claims data from the December 2013 update of the FY 2013 MedPAR file.
Prior to the application of the proposed budget neutrality factor, we
estimated that aggregate LTCH PPS payments using the proposed FY 2015
MS-LTC-DRGs and normalized relative weights would have resulted in an
increase in aggregate LTCH PPS payments in FY 2015. To remove this
estimated increase in aggregate LTCH PPS payments, we determined that a
factor of 0.995275 needed to be applied to each of the

[[Page 50171]]

proposed normalized FY 2015 MS-LTC-DRG relative weights. Therefore, we
disagree with the commenters that the proposed MS LTC DRG relative
weights are not ``budget neutral,'' and are not consistent with the
budget neutrality requirement under Sec. 412.517(b). As noted above,
the commenters did not comment specifically on our calculation of the
normalization factor and the budget neutrality factor determined under
the proposed application of our two-step budget neutrality methodology.
The budget neutrality provision under Sec. 412.517(b) requires
that estimated aggregate LTCH PPS payments would be unaffected, that
is, would be neither greater than nor less than the estimated aggregate
LTCH PPS payments that would have been made without the classification
and relative weight changes (72 FR 26882 through 26884). Consistent
with Sec. 412.517(b), we proposed to continue to apply our established
two-step budget neutrality methodology. Under both steps of this
methodology, based on the best data available, we assess the aggregate
effects of the annual classification and relative weight changes.
Specifically, as described in the proposed rule, in the first step we
determine a normalization factor to ensure that estimated payments are
not affected by changes in the composition of case types or the changes
to the classification system using a ratio of average CMIs calculated
across all LTCH PPS cases used for recalibration. Similarly, in the
second step, the comparison of estimated aggregate LTCH PPS payments
used to determine the budget neutrality factor is based on the sum of
the estimated payments for all LTCH claims in the specified database.
While the commenter is correct that the proposed relative weights for
11 of the 20 most frequently utilized MS-LTC-DRGs (or approximately 55
percent) are decreasing (which includes MS-LTC-DRG 207), the LTCH cases
in those MS-LTC-DRGs only includes less than 60 percent of the LTCH
claims. When the analysis is expanded to the 50 most frequently
utilized MS-LTC-DRGs, which includes over 80 percent of the LTCH
claims, the percentage of MS-LTC-DRGs with a proposed decrease in its
relative weight drops to approximately 45 percent. This demonstrates
that the number of MS-LTC-DRGs included in such an analysis can show
contrary results. Therefore, we disagree with the commenter's assertion
that its analysis of the proposed relative weights for 11 of the 20
most frequently utilized MS-LTC-DRGs is an indication that the proposed
MS-LTC-DRG relative weights will result in an aggregate decrease in
LTCH PPS payments and, therefore, are not budget neutral.
In this FY 2015 IPPS/LTCH PPS final rule, after consideration of
public comments we received, as proposed, we are continuing to apply
our established methodology to develop the MS-LTC-DRG relative weights
for FY 2015. Specifically, we are finalizing our proposed methodology
for developing the FY 2015 MS-LTC-DRG relative weights without
modification, including the proposed application of established
policies related to the data, hospital-specific relative value
methodology, the treatment of severity levels in the MS-LTC-DRGs, low-
volume and no-volume MS-LTC-DRGs, adjustments for nonmonotonicity, and
the proposed steps for calculating the MS-LTC-DRG relative weights with
a budget neutrality factor. Below we present the methodology that we
are continuing to use to determine the MS-LTC-DRG relative weights for
FY 2015, which is consistent with the methodology presented in the FY
2014 IPPS/LTCH PPS final rule. In addition, after consideration of the
public comments we received, we are adopting as final the continued
application our established two-step budget neutrality methodology,
which is based on the current year MS-LTC-DRG classifications and
relative weights (that is, the annual update to the MS-LTC-DRG
classifications and relative weights for FY 2015 are based on the FY
2014 MS-LTC-DRG classifications and relative weights established in
Table 11 listed in section VI. of the Addendum to the FY 2014 IPPS/LTCH
PPS final rule (78 FR 51002)). For additional information on the
established two-step budget neutrality methodology, we refer readers to
the FY 2008 IPPS final rule (72 FR 47295 through 47296).
c. Data
For the FY 2014 IPPS/LTCH PPS final rule (78 FR 50755), to
calculate the MS-LTC-DRG relative weights for FY 2014, we obtained
total charges from FY 2012 Medicare LTCH bill data from the December
2012 update of the FY 2012 MedPAR file, which were the best available
data at that time, and used the finalized Version 31.0 of the GROUPER
to classify LTCH cases. As stated previously in this section, this
approach is consistent with our proposals regarding the continued
application of established policies related to the data as presented in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28181 through 28182),
which we are finalizing without modification in this final rule.
Consistent with our historical practice, to calculate the MS-LTC-DRG
relative weights for FY 2015 in this final rule, we obtained total
charges from the FY 2013 Medicare LTCH bill data from the March 2014
update of the FY 2013 MedPAR file, which are the best available data at
this time, and used Version 32.0 of the GROUPER to classify LTCH cases.
In this final rule and consistent with our historical methodology,
we excluded the data from LTCHs that are all-inclusive rate providers
and LTCHs that are reimbursed in accordance with demonstration projects
authorized under section 402(a) of Public Law 90-248 or section 222(a)
of Public Law 92-603. Furthermore, consistent with our historical
practice, we excluded Medicare Advantage (Part C) claims, which are now
included in the MedPAR files, in the calculations for the relative
weights under the LTCH PPS that are used to determine payments for
Medicare fee-for-service claims. Specifically, we did not use any
claims from the MedPAR files that had a GHO Paid indicator value of
``1,'' which effectively removed Medicare Advantage claims from the
relative weight calculations. Accordingly, in the development of the FY
2015 MS-LTC-DRG relative weights in this final rule, we excluded the
data of 12 all-inclusive rate providers and one LTCH that is paid in
accordance with demonstration projects that had claims in the March
2014 update of the FY 2013 MedPAR file, as well as any Medicare
Advantage claims.
d. Hospital-Specific Relative Value (HSRV) Methodology
By nature, LTCHs often specialize in certain areas, such as
ventilator-dependent patients and treatment of infections and wound
care. Some case types (MS-DRGs) may be treated, to a large extent, in
hospitals that have, from a perspective of charges, relatively high (or
low) charges. This nonrandom distribution of cases with relatively high
(or low) charges in specific MS-LTC-DRGs has the potential to
inappropriately distort the measure of average charges. As stated
previously in this section, this approach is consistent with our
proposals regarding the continued use of the HSRV methodology as
presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28182),
which we are finalizing without modification in this final rule.
Therefore, in this final rule, to account for the fact that cases may
not be randomly distributed across LTCHs, consistent with the
methodology we

[[Page 50172]]

have used since the implementation of the LTCH PPS, we are continuing
to use a hospital-specific relative value (HSRV) methodology to
calculate the MS-LTC-DRG relative weights for FY 2015. We believe this
method removes this hospital-specific source of bias in measuring LTCH
average charges (67 FR 55985). Specifically, under this methodology, we
reduce the impact of the variation in charges across providers on any
particular MS-LTC-DRG relative weight by converting each LTCH's charge
for a case to a relative value based on that LTCH's average charge.
Under the HSRV methodology, we standardize charges for each LTCH by
converting its charges for each case to hospital-specific relative
charge values and then adjusting those values for the LTCH's case-mix.
The adjustment for case-mix is needed to rescale the hospital-specific
relative charge values (which, by definition, average 1.0 for each
LTCH). The average relative weight for a LTCH is its case-mix, so it is
reasonable to scale each LTCH's average relative charge value by its
case-mix. In this way, each LTCH's relative charge value is adjusted by
its case-mix to an average that reflects the complexity of the cases it
treats relative to the complexity of the cases treated by all other
LTCHs (the average case-mix of all LTCHs).
In accordance with our established methodology, we are continuing
to standardize charges for each case by first dividing the adjusted
charge for the case (adjusted for SSOs under Sec. 412.529 as described
in section VII.B.3.g. (Step 3) of this preamble) by the average
adjusted charge for all cases at the LTCH in which the case was
treated. SSO cases are cases with a length of stay that is less than or
equal to five-sixths the average length of stay of the MS-LTC-DRG
(Sec. 412.529 and Sec. 412.503). The average adjusted charge reflects
the average intensity of the health care services delivered by a
particular LTCH and the average cost level of that LTCH. The resulting
ratio is multiplied by that LTCH's case-mix index to determine the
standardized charge for the case (67 FR 55989).
Multiplying the resulting ratio by the LTCH's case-mix index
accounts for the fact that the same relative charges are given greater
weight at a LTCH with higher average costs than they would at a LTCH
with low average costs, which is needed to adjust each LTCH's relative
charge value to reflect its case-mix relative to the average case-mix
for all LTCHs. Because we standardize charges in this manner, we count
charges for a Medicare patient at a LTCH with high average charges as
less resource intensive than they would be at a LTCH with low average
charges. For example, a $10,000 charge for a case at a LTCH with an
average adjusted charge of $17,500 reflects a higher level of relative
resource use than a $10,000 charge for a case at a LTCH with the same
case-mix, but an average adjusted charge of $35,000. We believe that
the adjusted charge of an individual case more accurately reflects
actual resource use for an individual LTCH because the variation in
charges due to systematic differences in the markup of charges among
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the MS-LTC-DRG Relative
Weights
For purposes of determining the MS-LTC-DRG relative weights, under
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at least 25 cases are each assigned a unique relative weight;
(2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1
and 24 cases based on a given year's claims data) are grouped into
quintiles (as described below) and assigned the relative weight of the
quintile; and (3) no-volume MS-LTC-DRGs (that is, no cases in the given
year's claims data are assigned to those MS-LTC-DRGs) are cross-walked
to other MS-LTC-DRGs based on the clinical similarities and assigned
the relative weight of the cross-walked MS-LTC-DRG (as described in
greater detail below). As stated previously in this section, this
approach is consistent with our proposals regarding the continued use
of our existing methodology related to the treatment of severity levels
as presented in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28182),
which we are finalizing without modification in this final rule.
Therefore, in this final rule, we are continuing to utilize these
same three categories of MS-LTC-DRGs for purposes of the treatment of
severity levels in determining the MS-LTC-DRG relative weights for FY
2015. (We provide in-depth discussions of our policy regarding weight-
setting for low-volume MS-LTC-DRGs in section VII.B.3.f. of the
preamble of this final rule and for no-volume MS-LTC-DRGs, under Step 5
in section VII.B.3.g. of the preamble of this final rule.) Furthermore,
in determining the FY 2015 MS-LTC-DRG relative weights, when necessary,
we made adjustments to account for nonmonotonicity, as discussed in
greater detail below in Step 6 of section VII.B.3.g. of this preamble.
We refer readers to the discussion in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule for our rationale for including an adjustment for
nonmonotonicity (74 FR 43953 through 43954).
f. Low-Volume MS-LTC-DRGs
In order to account for MS-LTC-DRGs with low volume (that is, with
fewer than 25 LTCH cases), consistent with our existing methodology for
purposes of determining the FY 2015 MS-LTC-DRG relative weights, we are
continuing to employ the quintile methodology for low-volume MS-LTC-
DRGs, such that we grouped the ``low-volume MS-LTC-DRGs'' (that is, MS-
LTC-DRGs that contained between 1 and 24 cases annually) into one of
five categories (quintiles) based on average charges (67 FR 55984
through 55995 and 72 FR 47283 through 47288). As stated previously in
this section, this approach is consistent with our proposals regarding
the continued use of our existing methodology for the treatment of low-
volume MS-LTC-DRGs as presented in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28182 through 28183), which we are finalizing without
modification in this final rule. Therefore, in determining the FY 2015
MS-LTC-DRG relative weights in this final rule, in cases where the
initial assignment of a low-volume MS-LTC-DRG to a quintile results in
nonmonotonicity within a base-DRG, in order to ensure appropriate
Medicare payments, consistent with our historical methodology, we made
adjustments to the treatment of low-volume MS-LTC-DRGs to preserve
monotonicity, as discussed in detail below in section VII.B.3.g. (Step
6) of the preamble of this final rule.
In this final rule, using LTCH cases from the March 2014 update of
the FY 2013 MedPAR file (which is currently the best available data),
we identified 295 MS-LTC-DRGs that contained between 1 and 24 cases.
This list of MS-LTC-DRGs was then divided into one of the 5 low-volume
quintiles, each containing 59 MS-LTC-DRGs (295/5 = 59). We assigned a
low-volume MS-LTC-DRG to a specific low-volume quintile by sorting the
low-volume MS-LTC-DRGs in ascending order by average charge in
accordance with our established methodology. Based on the data
available for this final rule, the number of MS-LTC-DRGs with less than
25 cases was evenly divisible by 5, and therefore, it was not necessary
to employ our historical methodology for determining which of the low-
volume quintiles contain an additional low-volume MS-LTC-DRG.
Specifically for this final rule, after organizing the MS-LTC-DRGs by
ascending order by

[[Page 50173]]

average charge, we assigned the first fifth (1st through 59th) of low-
volume MS-LTC-DRGs (with the lowest average charge) into Quintile 1.
The MS-LTC-DRGs with the highest average charge cases were assigned
into Quintile 5. Table 13A, which is listed in section VI. of the
Addendum to this final rule and is available via the Internet, lists
the composition of the low-volume quintiles for MS-LTC-DRGs for FY
2015.
Accordingly, in order to determine the FY 2015 relative weights for
the MS-LTC-DRGs with low volume, we used the five low-volume quintiles
described above. We determined a relative weight and (geometric)
average length of stay for each of the five low-volume quintiles using
the methodology that we applied to the MS-LTC-DRGs (25 or more cases),
as described below in section VII.B.3.g. of the preamble of this final
rule. We assigned the same relative weight and average length of stay
to each of the low-volume MS-LTC-DRGs that made up an individual low-
volume quintile. We note that, as this system is dynamic, it is
possible that the number and specific type of MS-LTC-DRGs with a low
volume of LTCH cases will vary in the future. Furthermore, we note that
we will continue to monitor the volume (that is, the number of LTCH
cases) in the low-volume quintiles to ensure that our quintile
assignments used in determining the MS-LTC-DRG relative weights result
in appropriate payment for such cases and do not result in an
unintended financial incentive for LTCHs to inappropriately admit these
types of cases.
g. Steps for Determining the FY 2015 MS-LTC-DRG Relative Weights
In this final rule, we determined the FY 2015 MS-LTC-DRG relative
weights based on our existing methodology. (For additional information
on the original development of this methodology, and modifications to
it since the adoption of the MS-LTC-DRGs, we refer readers to the
August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55995) and the
FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43951 through 43966).)
As stated previously in this section, this approach is consistent with
our proposals regarding the continued use of our existing methodology
to determine the FY 2015 MS-LTC-DRG relative weights as presented in
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28183 through 28187),
which we are finalizing without modification in this final rule.
In summary, to determine the FY 2015 MS-LTC-DRG relative weights,
we grouped LTCH cases to the appropriate MS-LTC-DRG, while taking into
account the low-volume quintile (as described above). After grouping
the cases to the appropriate MS-LTC-DRG (or low-volume quintile), we
calculated the FY 2015 relative weights by first removing statistical
outliers and cases with a length of stay of 7 days or less (Steps 1 and
2 below). Next, we adjusted the number of cases in each MS-LTC-DRG (or
low-volume quintile) for the effect of SSO cases (Step 3 below). After
removing statistical outliers (Step 1 below) and cases with a length of
stay of 7 days or less (Step 2 below), the SSO adjusted discharges and
corresponding charges were then used to calculate ``relative adjusted
weights'' for each MS-LTC-DRG (or low-volume quintile) using the HSRV
method. Below we discuss in detail the steps for calculating the FY
2015 MS-LTC-DRG relative weights. We note that, as we discussed in
section VII.B.3.c. of the preamble of this final rule, we excluded the
data of all-inclusive rate LTCHs, LTCHs that are paid in accordance
with demonstration projects, and any Medicare Advantage claims in the
March 2014 update of the FY 2013 MedPAR file.
Step 1--Remove statistical outliers.
The first step in the calculation of the FY 2015 MS-LTC-DRG
relative weights is to remove statistical outlier cases. Consistent
with our historical relative weight methodology, we are continuing to
define statistical outliers as cases that are outside of 3.0 standard
deviations from the mean of the log distribution of both charges per
case and the charges per day for each MS-LTC-DRG. These statistical
outliers were removed prior to calculating the relative weights because
we believe that they may represent aberrations in the data that distort
the measure of average resource use. Including those LTCH cases in the
calculation of the relative weights could result in an inaccurate
relative weight that does not truly reflect relative resource use among
the MS-LTC-DRGs. (For additional information on this step of the
relative weight methodology, we refer readers to 67 FR 55989 and 74 FR
43959.)
Step 2--Remove cases with a length of stay of 7 days or less.
The MS-LTC-DRG relative weights reflect the average of resources
used on representative cases of a specific type. Generally, cases with
a length of stay of 7 days or less do not belong in a LTCH because
these stays do not fully receive or benefit from treatment that is
typical in a LTCH stay, and full resources are often not used in the
earlier stages of admission to a LTCH. If we were to include stays of 7
days or less in the computation of the FY 2015 MS-LTC-DRG relative
weights, the value of many relative weights would decrease and,
therefore, payments would decrease to a level that may no longer be
appropriate. We do not believe that it would be appropriate to
compromise the integrity of the payment determination for those LTCH
cases that actually benefit from and receive a full course of treatment
at a LTCH by including data from these very short stays. Therefore,
consistent with our historical relative weight methodology, in
determining the FY 2015 MS-LTC-DRG relative weights, we removed LTCH
cases with a length of stay of 7 days or less. (For additional
information on this step of the relative weight methodology, we refer
readers to 67 FR 55989 and 74 FR 43959.)
Step 3--Adjust charges for the effects of SSOs.
After removing cases with a length of stay of 7 days or less, we
were left with cases that have a length of stay of greater than or
equal to 8 days. As the next step in the calculation of the FY 2015 MS-
LTC-DRG relative weights, consistent with our historical relative
weight methodology, we adjusted each LTCH's charges per discharge for
those remaining cases for the effects of SSOs (as defined in Sec.
412.529(a) in conjunction with Sec. 412.503).
In this final rule, we made this adjustment by counting an SSO case
as a fraction of a discharge based on the ratio of the length of stay
of the case to the average length of stay for the MS-LTC-DRG for non-
SSO cases. This has the effect of proportionately reducing the impact
of the lower charges for the SSO cases in calculating the average
charge for the MS-LTC-DRG. This process produces the same result as if
the actual charges per discharge of an SSO case were adjusted to what
they would have been had the patient's length of stay been equal to the
average length of stay of the MS-LTC-DRG.
Counting SSO cases as full discharges with no adjustment in
determining the FY 2015 MS-LTC-DRG relative weights would lower the FY
2015 MS-LTC-DRG relative weight for affected MS-LTC-DRGs because the
relatively lower charges of the SSO cases would bring down the average
charge for all cases within a MS-LTC-DRG. This would result in an
``underpayment'' for non-SSO cases and an ``overpayment'' for SSO
cases. Therefore, we adjusted for SSO cases under Sec. 412.529 in this
manner because it results in more appropriate payments for all LTCH
cases. (For additional information on this step of the relative weight

[[Page 50174]]

methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 4--Calculate the FY 2015 MS-LTC-DRG relative weights on an
iterative basis.
Consistent with our historical relative weight methodology, we
calculated the FY 2015 MS-LTC-DRG relative weights using the HSRV
methodology, which is an iterative process. First, for each LTCH case,
we calculated a hospital-specific relative charge value by dividing the
SSO adjusted charge per discharge (see Step 3) of the LTCH case (after
removing the statistical outliers (see Step 1) and LTCH cases with a
length of stay of 7 days or less (see Step 2)) by the average charge
per discharge for the LTCH in which the case occurred. The resulting
ratio was then multiplied by the LTCH's case-mix index to produce an
adjusted hospital-specific relative charge value for the case. An
initial case-mix index value of 1.0 was used for each LTCH.
For each MS-LTC-DRG, we calculated the FY 2015 relative weight by
dividing the average of the adjusted hospital-specific relative charge
values (from above) for the MS-LTC-DRG by the overall average hospital-
specific relative charge value across all cases for all LTCHs. Using
these recalculated MS-LTC-DRG relative weights, each LTCH's average
relative weight for all of its cases (that is, its case-mix) was
calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative
weights by its total number of cases. The LTCHs' hospital-specific
relative charge values (from above) were then multiplied by the
hospital-specific case-mix indexes. The hospital-specific case-mix
adjusted relative charge values were then used to calculate a new set
of MS-LTC-DRG relative weights across all LTCHs. This iterative process
was continued until there was convergence between the relative weights
produced at adjacent steps, for example, when the maximum difference
was less than 0.0001.
Step 5--Determine a FY 2015 relative weight for MS-LTC-DRGs with no
LTCH cases.
As we stated above, we determined the FY 2015 relative weight for
each MS-LTC-DRG using total Medicare allowable total charges reported
in the best available LTCH claims data (that is, the March 2014 update
of the FY 2013 MedPAR file for this final rule). Using these data, we
identified the MS-LTC-DRGs for which there were no LTCH cases in the
database, such that no patients who would have been classified to those
MS-LTC-DRGs were treated in LTCHs during FY 2013 and, therefore, no
charge data were available for these MS-LTC-DRGs. Therefore, in the
process of determining the MS-LTC-DRG relative weights, we were unable
to calculate relative weights for the MS-LTC-DRGs with no LTCH cases
using the methodology described in Steps 1 through 4 above. However,
because patients with a number of the diagnoses under these MS-LTC-DRGs
may be treated at LTCHs, consistent with our historical methodology, we
assigned a relative weight to each of the no-volume MS-LTC-DRGs based
on clinical similarity and relative costliness (with the exception of
``transplant'' MS-LTC-DRGs and ``error'' MS-LTC-DRGs, as discussed
below). (For additional information on this step of the relative weight
methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through
43960.)
In general, we determined FY 2015 relative weights for the MS-LTC-
DRGs with no LTCH cases in the March 2014 update of the FY 2013 MedPAR
file used in this final rule (that is, ``no-volume'' MS-LTC-DRGs) by
cross-walking each no-volume MS-LTC-DRG to another MS-LTC-DRG with a
calculated relative weight (determined in accordance with the
methodology described above). Then, the ``no-volume'' MS-LTC-DRG was
assigned the same relative weight (and average length of stay) of the
MS-LTC-DRG to which it was cross-walked (as described in greater detail
below).
Of the 753 MS-LTC-DRGs for FY 2015, we identified 237 MS-LTC-DRGs
for which there are no LTCH cases in the database (including the 8
``transplant'' MS-LTC-DRGs and 2 ``error'' MS-LTC-DRGs). As stated
above, we assigned relative weights for each of the 237 no-volume MS-
LTC-DRGs (with the exception of the 8 ``transplant'' MS-LTC-DRGs and
the 2 ``error'' MS-LTC-DRGs, which are discussed below) based on
clinical similarity and relative costliness to one of the remaining 516
(753-237= 516) MS-LTC-DRGs for which we were able to determine relative
weights based on FY 2013 LTCH claims data using the steps described
above. (For the remainder of this discussion, we refer to the ``cross-
walked'' MS-LTC-DRGs as the MS-LTC-DRGs to which we cross-walked one of
the 237 ``no volume'' MS-LTC-DRGs, with the exception of the 8
``transplant'' MS-LTC-DRGs and the 2 ``error'' MS-LTC-DRGs, for
purposes of determining a relative weight.) Then, we assigned the no-
volume MS-LTC-DRG the relative weight of the cross-walked MS-LTC-DRG.
(As explained below in Step 6, when necessary, we made adjustments to
account for nonmonotonicity.)
For this final rule, we cross-walked the no-volume MS-LTC-DRG to an
MS-LTC-DRG for which there were LTCH cases in the March 2014 update of
the FY 2013 MedPAR file, and to which it was similar clinically in
intensity of use of resources and relative costliness as determined by
criteria such as care provided during the period of time surrounding
surgery, surgical approach (if applicable), length of time of surgical
procedure, postoperative care, and length of stay. We evaluated the
relative costliness in determining the applicable MS-LTC-DRG to which a
no-volume MS-LTC-DRG was cross-walked in order to assign an appropriate
relative weight for the no-volume MS-LTC-DRGs in FY 2015. (For more
details on our process for evaluating relative costliness, we refer
readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).)
We believe in the rare event that there would be a few LTCH cases
grouped to one of the no-volume MS-LTC-DRGs in FY 2015, the relative
weights assigned based on the cross-walked MS-LTC-DRGs would result in
an appropriate LTCH PPS payment because the crosswalks, which are based
on similar clinical similarity and relative costliness, generally
require equivalent relative resource use.
We then assigned the relative weight of the cross-walked MS-LTC-DRG
as the relative weight for the no-volume MS-LTC-DRG such that both of
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight for FY 2015. We note
that if the cross-walked MS-LTC-DRG had 25 cases or more, its relative
weight, which was calculated using the methodology described in Steps 1
through 4 above, was assigned to the no-volume MS-LTC-DRG as well.
Similarly, if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was
cross-walked had 24 or less cases and, therefore, was designated to one
of the low-volume quintiles for purposes of determining the relative
weights, we assigned the relative weight of the applicable low-volume
quintile to the no-volume MS-LTC-DRG such that both of these MS-LTC-
DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-
DRG) have the same relative weight for FY 2015. (As we noted above, in
the infrequent case where nonmonotonicity involving a no-volume MS-LTC-
DRG resulted, additional adjustments as described in Step 6 were
required in order to maintain monotonically increasing relative
weights.)
For this final rule, a list of the no-volume MS-LTC-DRGs and the
MS-LTC-DRGs to which each was cross-

[[Page 50175]]

walked (that is, the cross-walked MS-LTC-DRGs) for FY 2015 is shown in
Table 13B, which is listed in section VI. of the Addendum to this final
rule and is available via the Internet.
To illustrate this methodology for determining the relative weights
for the FY 2015 MS-LTC-DRGs with no LTCH cases, we are providing the
following example, which refers to the no-volume MS-LTC-DRGs crosswalk
information for FY 2015 provided in Table 13B.

Example: There were no cases in the FY 2013 MedPAR file used
for this final rule for MS-LTC-DRG 61 (Acute Ischemic Stroke with
Use of Thrombolytic Agent with MCC). We determined that MS-LTC-DRG
70 (Nonspecific Cerebrovascular Disorders with MCC) was similar
clinically and based on resource use to MS-LTC-DRG 61. Therefore, we
assigned the same relative weight of MS-LTC-DRG 70 of 0.8632 for FY
2015 to MS-LTC-DRG 61 (obtained from Table 11, which is listed in
section VI. of the Addendum to this final rule and is available via
the Internet).

Again, we note that, as this system is dynamic, it is entirely
possible that the number of MS-LTC-DRGs with no volume of LTCH cases
based on the system will vary in the future. We used the most recent
available claims data in the MedPAR file to identify no-volume MS-LTC-
DRGs and to determine the relative weights in this final rule.
Furthermore, for FY 2015, consistent with our historical relative
weight methodology, we are establishing a relative weight of 0.0000 for
the following transplant MS-LTC-DRGs: Heart Transplant or Implant of
Heart Assist System with MCC (MS-LTC-DRG 1); Heart Transplant or
Implant of Heart Assist System without MCC (MS-LTC-DRG 2); Liver
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 5); Liver
Transplant without MCC (MS-LTC-DRG 6); Lung Transplant (MS-LTC-DRG 7);
Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 8); Pancreas
Transplant (MS-LTC-DRG 10); and Kidney Transplant (MS-LTC-DRG 652).
This is because Medicare will only cover these procedures if they are
performed at a hospital that has been certified for the specific
procedures by Medicare and presently no LTCH has been so certified. At
the present time, we include these eight transplant MS-LTC-DRGs in the
GROUPER program for administrative purposes only. Because we use the
same GROUPER program for LTCHs as is used under the IPPS, removing
these MS-LTC-DRGs would be administratively burdensome. (For additional
information regarding our treatment of transplant MS-LTC-DRGs, we refer
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).)
Step 6--Adjust the FY 2015 MS-LTC-DRG relative weights to account
for nonmonotonically increasing relative weights.
As discussed earlier in this section, the MS-DRGs contain base DRGs
that have been subdivided into one, two, or three severity of illness
levels. Where there are three severity levels, the most severe level
has at least one secondary diagnosis code that is referred to as an MCC
(that is, major complication or comorbidity). The next lower severity
level contains cases with at least one secondary diagnosis code that is
a CC (that is, complication or comorbidity). Those cases without an MCC
or a CC are referred to as ``without CC/MCC.'' When data do not support
the creation of three severity levels, the base MS-DRG is subdivided
into either two levels or the base MS-DRG is not subdivided. The two-
level subdivisions could consist of the MS-DRG with CC/MCC and the MS-
DRG without CC/MCC. Alternatively, the other type of two-level
subdivision may consist of the MS-DRG with MCC and the MS-DRG without
MCC.
In those base MS-LTC-DRGs that are split into either two or three
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a
three-level split). That is, theoretically, cases that are more severe
typically require greater expenditure of medical care resources and
will result in higher average charges. Therefore, in the three severity
levels, relative weights should increase by severity, from lowest to
highest. If the relative weights decrease as severity increases (that
is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher
relative weight than one with MCC, or the MS-LTC-DRG ``without CC/MCC''
has a higher relative weight than either of the others), they are
nonmonotonic. We continue to believe that utilizing nonmonotonic
relative weights to adjust Medicare payments would result in
inappropriate payments because the payment for the cases in the higher
severity level in a base MS-LTC-DRG (which are generally expected to
have higher resource use and costs) would be lower than the payment for
cases in a lower severity level within the same base MS-LTC-DRG (which
are generally expected to have lower resource use and costs).
Therefore, in determining the FY 2015 MS-LTC-DRG relative weights in
this final rule, consistent with our historical methodology, we
combined MS-LTC-DRG severity levels within a base MS-LTC-DRG for the
purpose of computing a relative weight when necessary to ensure that
monotonicity was maintained. For a comprehensive description of our
existing methodology to adjust for nonmonotonicity, we refer readers to
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through
43966). Any adjustments for nonmonotonicity that were made in
determining the FY 2015 MS-LTC-DRG relative weights in this final rule
by applying this methodology are denoted in Table 11, which is listed
in section VI. of the Addendum to this final rule and is available via
the Internet.
Step 7--Calculate the FY 2015 budget neutrality factor.
In accordance with the regulations at Sec. 412.517(b) (in
conjunction with Sec. 412.503), the annual update to the MS-LTC-DRG
classifications and relative weights is done in a budget neutral manner
such that estimated aggregate LTCH PPS payments would be unaffected,
that is, would be neither greater than nor less than the estimated
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed
discussion on the establishment of the budget neutrality requirement
for the annual update of the MS-LTC-DRG classifications and relative
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR
26881 and 26882).)
The MS-LTC-DRG classifications and relative weights are updated
annually based on the most recent available LTCH claims data to reflect
changes in relative LTCH resource use (Sec. 412.517(a) in conjunction
with Sec. 412.503). Under the budget neutrality requirement at Sec.
412.517(b), for each annual update, the MS-LTC-DRG relative weights are
uniformly adjusted to ensure that estimated aggregate payments under
the LTCH PPS would not be affected (that is, decreased or increased).
Consistent with that provision, we are updating the MS-LTC-DRG
classifications and relative weights for FY 2015 based on the most
recent available LTCH data, and applying a budget neutrality adjustment
in determining the FY 2015 MS-LTC-DRG relative weights.
To ensure budget neutrality in the update to the MS-LTC-DRG
classifications and relative weights under Sec. 412.517(b), we are
continuing to use our established two-step budget neutrality
methodology. As discussed previously in this section, this approach is
consistent with our proposals regarding the continued use of our
existing methodology to calculate the FY 2015 budget neutrality factor
for the

[[Page 50176]]

FY 2015 MS-LTC-DRG relative weights as presented in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28183 through 28187), which we are
finalizing without modification after consideration of public comments
we received in this final rule.
In this final rule, in the first step of our MS-LTC-DRG budget
neutrality methodology, for FY 2015, we calculated and applied a
normalization factor to the recalibrated relative weights (the result
of Steps 1 through 6 above) to ensure that estimated payments were not
affected by changes in the composition of case types or the changes to
the classification system. That is, the normalization adjustment is
intended to ensure that the recalibration of the MS-LTC-DRG relative
weights (that is, the process itself) neither increases nor decreases
the average CMI.
To calculate the normalization factor for FY 2015 (the first step
of our budget neutrality methodology), we used the following three
steps: (1.a.) we used the most recent available LTCH claims data (FY
2013) and grouped them using the FY 2015 GROUPER (Version 32.0) and the
recalibrated FY 2015 MS-LTC-DRG relative weights (determined in Steps 1
through 6 of the Steps for Determining the FY 2015 MS-LTC-DRG Relative
Weights above) to calculate the average CMI; (1.b.) we grouped the same
LTCH claims data (FY 2013) using the FY 2014 GROUPER (Version 31.0) and
FY 2014 MS-LTC-DRG relative weights and calculated the average CMI; and
(1.c.) we computed the ratio of these average CMIs by dividing the
average CMI for FY 2014 (determined in Step 1.b.) by the average CMI
for FY 2015 (determined in Step 1.a.). In determining the MS-LTC-DRG
relative weights for FY 2015, each recalibrated MS-LTC-DRG relative
weight was multiplied by 1.12464 (determined in Step 1.c.) in the first
step of the budget neutrality methodology, which produced ``normalized
relative weights.''
In the second step of our MS-LTC-DRG budget neutrality methodology,
we determined a budget neutrality factor to ensure that estimated
aggregate LTCH PPS payments (based on the most recent available LTCH
claims data) after reclassification and recalibration (that is, the FY
2015 MS-LTC-DRG classifications and relative weights) are equal to
estimated aggregate LTCH PPS payments before reclassification and
recalibration (that is, the FY 2014 MS-LTC-DRG classifications and
relative weights). Accordingly, consistent with our existing
methodology, we used FY 2013 discharge data to simulate payments and
compared estimated aggregate LTCH PPS payments using the FY 2014 MS-
LTC-DRGs and relative weights to estimate aggregate LTCH PPS payments
using the FY 2015 MS-LTC-DRGs and relative weights. Specifically, for
this final rule, as discussed previously in section VII.B.3.c. of this
preamble, we used LTCH claims data from the March 2014 update of the FY
2013 MedPAR file, as these are the best available data at this time.
For this final rule, we determined the FY 2015 budget neutrality
adjustment factor using the following three steps: (2.a.) we simulated
estimated total LTCH PPS payments using the normalized relative weights
for FY 2015 and GROUPER Version 32.0 (as described above); (2.b.) we
simulated estimated total LTCH PPS payments using the FY 2014 GROUPER
(Version 31.0) and the FY 2014 MS-LTC-DRG relative weights in Table 11
of the Addendum to the FY 2014 IPPS/LTCH PPS final rule available on
the Internet (78 FR 51002); and (2.c.) we calculated the ratio of these
estimated total LTCH PPS payments by dividing the estimated total LTCH
PPS payments using the FY 2014 GROUPER (Version 31.0) and the FY 2014
MS-LTC-DRG relative weights (determined in Step 2.b.) by the estimated
total LTCH PPS payments using the FY 2015 GROUPER (Version 32.0) and
the normalized MS-LTC-DRG relative weights for FY 2015 (determined in
Step 2.a.). In determining the FY 2015 MS-LTC-DRG relative weights,
each normalized relative weight was multiplied by a budget neutrality
factor of 0.9956326 (determined in Step 2.c.) in the second step of the
budget neutrality methodology to determine the budget neutral FY 2015
relative weight for each MS-LTC-DRG.
Accordingly, in determining the FY 2015 MS-LTC-DRG relative weights
in this final rule, consistent with our existing methodology, we
applied a normalization factor of 1.12464 and a budget neutrality
factor of 0.9956326 (computed as described above). Table 11, which is
listed in section VI. of the Addendum to this final rule and is
available via the Internet, lists the MS-LTC-DRGs and their respective
relative weights, geometric mean length of stay, five-sixths of the
geometric mean length of stay (used to identify SSO cases under Sec.
412.529(a)), and the ``IPPS Comparable Thresholds'' (used in
determining SSO payments under Sec. 412.529(c)(3)), for FY 2015 (and
reflect both the normalization factor of 1.12464 and the budget
neutrality factor of 0.9956326).

C. LTCH PPS Payment Rates for FY 2015

1. Overview of Development of the LTCH Payment Rates
The basic methodology for determining LTCH PPS Federal prospective
payment rates is set forth at Sec. 412.515 through Sec. 412.536. In
this section, we discuss the factors that we are using to update the
LTCH PPS standard Federal rate for FY 2015, that is, effective for LTCH
discharges occurring on or after October 1, 2014 through September 30,
2015.
For further details on the development of the FY 2003 standard
Federal rate when the LTCH PPS was initially implemented, we refer
readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through
56037). For subsequent updates to the LTCH PPS standard Federal rate as
implemented under Sec. 412.523(c)(3), we refer readers to the
following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through
34140); RY 2005 LTCH PPS final rule (68 FR 25682 through 25684); RY
2006 LTCH PPS final rule (70 FR 24179 through 24180); RY 2007 LTCH PPS
final rule (71 FR 27819 through 27827); RY 2008 LTCH PPS final rule (72
FR 26870 through 27029); RY 2009 LTCH PPS final rule (73 FR 26800
through 26804); FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44021
through 44030); FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through
50444); FY 2012 IPPS/LTCH PPS final rule (76 FR 51769 through 51773);
FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 through 53481); and FY
2014 IPPS/LTCH PPS final rule (78 FR 50760 through 50765).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28187 through
28190), we presented our proposals related to the update to the LTCH
PPS standard Federal rate for FY 2015, which included the proposed
annual market basket update to the LTCH PPS standard Federal rate.
Consistent with our historical practice of using the best data
available, we also proposed to use more recent data, if available, to
determine the FY 2015 annual market basket update to the LTCH PPS
standard Federal rate in the final rule. We did not receive any public
comments in response to these proposals and, therefore, are adopting
the proposals as final without modification in this final rule, using
the most recent available data.
The update to the LTCH PPS standard Federal rate for FY 2015 is
presented in section V.A. of the Addendum to this final rule. The
components of the annual market basket update to the

[[Page 50177]]

LTCH PPS standard Federal rate for FY 2015 are discussed below,
including the reduction to the annual update for LTCHs that fail to
submit quality reporting data for fiscal year FY 2015 as required by
the statute (as discussed in section VII.C.2.c. of the preamble of this
final rule). Furthermore, as discussed in section VII.C.3. of the
preamble of this final rule, for FY 2015, in addition to the update
factor, under the final year of the 3-year phase-in under the current
regulations at Sec. 412.523(d)(3), we are making a one-time
prospective adjustment to the standard Federal rate for FY 2015 so that
the effect of any significant difference between the data used in the
original computations of budget neutrality for FY 2003 and more recent
data to determine budget neutrality for FY 2003 is not perpetuated in
the prospective payment rates for future years. In addition, as
discussed in section V.A. of the Addendum of this final rule, we are
making an adjustment to the standard Federal rate to account for the
estimated effect of the changes to the area wage level adjustment for
FY 2015 on estimated aggregate LTCH PPS payments, in accordance with
Sec. 412.523(d)(4). (We refer readers to the discussion of the
reduction to the annual update for LTCHs that fail to submit quality
reporting data under section VII.C.2.c. of the preamble of this final
rule, the application of the one-time prospective adjustment under the
final year of the 3-year phase-in under section VII.C.3. of this
preamble, and the budget neutrality adjustment for changes in the area
wage levels under section V.A. of the Addendum of this final rule.)
2. FY 2015 LTCH PPS Annual Market Basket Update
a. Overview
Historically, the Medicare program has used a market basket to
account for price increases in the services furnished by providers. The
market basket used for the LTCH PPS includes both operating and
capital-related costs of LTCHs because the LTCH PPS uses a single
payment rate for both operating and capital-related costs. As discussed
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we
adopted the newly created FY 2009-based LTCH-specific market basket for
use under the LTCH PPS beginning in FY 2013. For additional details on
the historical development of the market basket used under the LTCH
PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53467 through 53468) and this preamble.
Section 3401(c) of the Affordable Care Act provides for certain
adjustments to any annual update to the standard Federal rate and
refers to the timeframes associated with such adjustments as a ``rate
year'' (which are discussed in more detail in section VII.C.2.b. of the
preamble of this final rule.) We note that because the annual update to
the LTCH PPS policies, rates, and factors now occurs on October 1, we
adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY)
under the LTCH PPS beginning October 1, 2010, to conform with the
standard definition of the Federal fiscal year (October 1 through
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through
50397). Although the language of sections 3004(a) 3401(c), 10319, and
1105(b) of the Affordable Care Act refers to years 2010 and thereafter
under the LTCH PPS as ``rate year,'' consistent with our change in the
terminology used under the LTCH PPS from ``rate year'' to ``fiscal
year,'' for purposes of clarity, when discussing the annual update for
the LTCH PPS, including the provisions of the Affordable Care Act, we
use ``fiscal year'' rather than ``rate year'' for 2011 and subsequent
years.
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year through 2019, any annual update to the standard
Federal rate shall be reduced:
For rate year 2010 through 2019, by the ``other
adjustment'' specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the
Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment (which we refer to as ``the multifactor
productivity (MFP) adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year.
Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment
as equal to the 10-year moving average of changes in annual economy-
wide, private nonfarm business multifactor productivity (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, calendar year, cost reporting period, or other annual
period). Under our methodology, the end of the 10-year moving average
of changes in the MFP coincides with the end of the appropriate FY
update period. In addition, the MFP adjustment that is applied in
determining any annual update to the LTCH PPS standard Federal rate is
the same adjustment that is required to be applied in determining the
applicable percentage increase under the IPPS under section
1886(b)(3)(B)(i) of the Act as they are both based on a fiscal year.
The MFP adjustment is derived using a projection of MFP that is
currently produced by IHS Global Insight, Inc. (For additional details
on the development of the MFP adjustment and its application under the
LTCH PPS, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51691 through 51692 and 51770 through 51771).)
For FY 2015, as we proposed, we are continuing to use our
methodology for calculating and applying the MFP adjustment to
determine the annual update to the LTCH PPS standard Federal rate for
FY 2015. (For details on the development of the MFP adjustment,
including our finalized methodology for calculating and applying the
MFP adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51689 through 51692).)
c. Adjustment to the Annual Update to the LTCH PPS Standard Federal
Rate under the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program
1. Background
In accordance with section 1886(m)(5) of the Act, as added by
section 3004(a) of the Affordable Care Act, the Secretary established
the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. (As
noted above, although the language of section 3004(a) of the Affordable
Care Act refers to years 2011 and thereafter under the LTCH PPS as
``rate year,'' consistent with our change in the terminology used under
the LTCH PPS from ``rate year'' to ``fiscal year,'' for purposes of
clarity, when discussing the annual update for the LTCH PPS, including
the provisions of the Affordable Care Act, we use ``fiscal year''
rather than ``rate year'' for 2011 and subsequent years.) Under the
LTCHQR Program, as required by section 1886(m)(5)(A)(i) of the Act, for
FY 2014 and each subsequent year, in the case of an LTCH that does not
submit quality reporting data to the Secretary in accordance with
section 1886(m)(5)(C) of the Act with respect to such a year, any
annual update to a standard Federal rate for discharges for

[[Page 50178]]

the hospital during the year, and after application of section
1886(m)(3) of the Act, shall be reduced by 2.0 percentage points.
Section 1886(m)(5)(A)(ii) of the Act provides that the application of
the 2.0 percentage points reduction may result in an annual update that
is less than 0.0 for a year, and may result in LTCH PPS payment rates
for a year being less than such LTCH PPS payment rates for the
preceding year. Furthermore, section 1886(m)(5)(B) of the Act specifies
that the 2.0 percentage points reduction is applied in a noncumulative
manner, such that any reduction made under section 1886(m)(5)(A) of the
Act shall apply only with respect to the year involved, and shall not
be taken into account in computing the LTCH PPS payment amount for a
subsequent year. For additional information on the history of the
LTCHQR Program, including the statutory authority and the selected
measures, we refer readers to section IX.C. of the preamble of this
final rule.
2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate
under the LTCHQR Program
Consistent with section 1886(m)(5)(A)(i) of the Act, for FY 2014
and subsequent fiscal years, for LTCHs that do not submit quality
reporting data under the LTCHQR Program with respect to such a fiscal
year, any annual update to a standard Federal rate for discharges for
the LTCH during the fiscal year and after application of the market
basket update adjustments required by section 1886(m)(3) of the Act, is
further reduced by 2.0 percentage points. That is, in establishing an
update to the LTCH PPS standard Federal rate for FY 2014 and subsequent
fiscal years, the full LTCH PPS market basket increase estimate,
subject to an adjustment based on changes in economy-wide productivity
(``the MFP adjustment'') required under section 1886(m)(3)(A)(i) of the
Act and an additional reduction required by sections 1886(m)(3)(A)(ii)
and 1886(m)(4) of the Act, is further reduced by 2.0 percentage points
for LTCHs that fail to submit quality reporting data under the LTCHQR
Program. The reduction in the annual update to the LTCH PPS standard
Federal rate for failure to report quality data under the LTCHQR
Program for FY 2014 and subsequent fiscal years is codified under Sec.
412.523(c)(4) of the regulations.
Specifically, consistent with section 1886(m)(5)(A)(i) of the Act,
under Sec. 412.523(c)(4)(i), for an LTCH that does not submit quality
reporting data in the form and manner and at the time specified by the
Secretary under the LTCHQR Program, the annual update to the standard
Federal rate under Sec. 412.523(c)(3) is further reduced by 2.0
percentage points. In addition, consistent with section
1886(m)(5)(A)(ii) of the Act, Sec. 412.523(c)(4)(ii) specifies that
any reduction of the annual update to the standard Federal rate under
Sec. 412.523(c)(4)(i) will apply only to the fiscal year involved and
will not be taken into account in computing the annual update to the
standard Federal rate for a subsequent fiscal year. Lastly, consistent
with section 1886(m)(5)(B) of the Act, under Sec. 412.523(c)(4)(iii),
the application of any reduction of the annual update to the standard
Federal rate under Sec. 412.523(c)(4)(i) may result in an annual
update that is less than 0.0 percent for a fiscal year, and may result
in payment rates for a fiscal year that would be less than such payment
rates for the preceding rate year.
We discuss the application of the 2.0 percentage point reduction
under Sec. 412.523(c)(4)(i) in our discussion of the annual market
basket update to the LTCH PPS standard Federal rate for FY 2015 below
in section VII.C.2.e. of the preamble of this final rule.
d. Market Basket Under the LTCH PPS for FY 2015
Under the authority of section 123 of the BBRA as amended by
section 307(b) of the BIPA, in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53468), we adopted a newly created FY 2009-based LTCH-specific
market basket for use under the LTCH PPS beginning in FY 2013. The FY
2009-based LTCH-specific market basket is based solely on the Medicare
cost report data submitted by LTCHs and, therefore, specifically
reflects the cost structures of only LTCHs. For additional details on
the development of the FY 2009-based LTCH-specific market basket, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467
through 53476).
For FY 2015, as we proposed, we are continuing to use the FY 2009-
based LTCH-specific market basket to update the LTCH PPS for FY 2015.
We continue to believe that the FY 2009-based LTCH-specific market
basket appropriately reflects the cost structure of LTCHs for the
reasons discussed when we adopted the FY 2009-based LTCH-specific
market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53467 through 53476).
e. Annual Market Basket Update for LTCHs for FY 2015
Consistent with our historical practice and as we proposed, we
estimate the market basket update and the MFP adjustment based on IGI's
forecast using the most recent available data. Based on IGI's second
quarter 2014 forecast, the FY 2015 full market basket estimate for the
LTCH PPS using the FY 2009-based LTCH-specific market basket is 2.9
percent. Using our established methodology for determining the MFP
adjustment, the current estimate of the MFP adjustment for FY 2015
based on IGI's second quarter 2014 forecast is 0.5 percent, as
discussed in section IV.B. of the preamble of this final rule. In
addition, consistent with our historical practice of using the best
available data, as we proposed, we used the most recent data available
to estimate the market basket update and the MFP adjustment for FY 2015
in this final rule.
For FY 2015, section 1886(m)(3)(A)(i) of the Act requires that any
annual update to the standard Federal rate be reduced by the
productivity adjustment (``the MFP adjustment'') described in section
1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are
reducing the full FY 2015 market basket update by the FY 2015 MFP
adjustment. To determine the market basket update for LTCHs for FY
2015, as reduced by the MFP adjustment, consistent with our established
methodology, as we proposed, we subtracted the FY 2015 MFP adjustment
from the FY 2015 market basket update. Furthermore, sections
1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act requires that any annual
update to the standard Federal rate for FY 2015 be reduced by the
``other adjustment'' described in paragraph (4), which is 0.2
percentage point for FY 2015. Therefore, following application of the
productivity adjustment, as we proposed, we are reducing the adjusted
market basket update (that is, the full market basket increase less the
MFP adjustment) by the ``other adjustment'' specified by sections
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on
our established methodology for adjusting the market basket increase by
the MFP and the ``other adjustment'' required by the statute, we refer
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
As discussed previously in section VII.C.2.c. of the preamble of
this final rule, for FY 2015, section 1886(m)(5) of the Act requires
that for LTCHs that do not submit quality reporting data under the
LTCHQR Program, any annual update to a standard Federal rate, after
application of the adjustments required by section 1886(m)(3) of the
Act, is further reduced by 2.0 percentage points. Therefore, the update
to the LTCH PPS standard Federal rate for FY 2015 for LTCHs that fail
to submit

[[Page 50179]]

quality reporting data under the LTCHQR Program, the full LTCH PPS
market basket increase estimate, subject to an adjustment based on
changes in economy-wide productivity (``the MFP adjustment'') as
required under section 1886(m)(3)(A)(i) of the Act and an additional
reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the
Act, will also be further reduced by 2.0 percentage points.
In this final rule, in accordance with the statute, we are reducing
the FY 2015 full market basket estimate of 2.9 percent (based on IGI's
second quarter 2014 forecast of the FY 2009-based LTCH-specific market
basket) by the FY 2015 MFP adjustment (that is, the 10-year moving
average of MFP for the period ending FY 2015, as described in section
IV.B. of the preamble of this final rule) of 0.5 percentage point
(based on IGI's second quarter 2014 forecast). Following application of
the productivity adjustment, the adjusted market basket update of 2.4
percent (2.9 percent minus 0.5 percentage point) is then reduced by 0.2
percentage point, as required by sections 1886(m)(3)(A)(ii) and
1886(m)(4)(E) of the Act. Therefore, in this final rule, under the
authority of section 123 of the BBRA as amended by section 307(b) of
the BIPA, we are establishing an annual market basket update under the
LTCH PPS for FY 2015 of 2.2 percent (that is, the most recent estimate
of the LTCH PPS market basket update of 2.9 percent, less the MFP
adjustment of 0.5 percentage point, and less the 0.2 percentage point
required under section 1886(m)(4)(E) of the Act), provided the LTCH
submits quality reporting data in accordance with section 1886(m)(5) of
the Act. Accordingly, consistent with our proposal, we are revising
Sec. 412.523(c)(3) by adding a new paragraph (xi), which specifies
that the standard Federal rate for FY 2015 is the standard Federal rate
for the previous LTCH PPS year updated by 2.2 percent, and as further
adjusted, as appropriate, as described in Sec. 412.523(d). For LTCHs
that fail to submit quality reporting data under the LTCHQR Program,
under Sec. 412.523(c)(3)(xi) in conjunction with Sec. 412.523(c)(4),
we are further reducing the annual update to the LTCH PPS standard
Federal rate by 2.0 percentage points in accordance with section
1886(m)(5) of the Act. Accordingly, consistent with our proposal, we
are establishing an annual update to the LTCH PPS standard Federal rate
of 0.2 percent (that is, 2.2 percent minus 2.0 percentage points) for
FY 2015 for LTCHs that fail to submit quality reporting data under the
LTCHQR Program. As stated above, consistent with our historical
practice of using the best available data, we used the most recent data
available to establish an annual update to the LTCH PPS standard
Federal rate for FY 2015 under Sec. 412.523(c)(3)(xi) in this final
rule. (We note that, we also are adjusting the FY 2015 standard Federal
rate by applying a one-time prospective adjustment under the final year
of the 3-year phase-in under Sec. 412.523(d)(3) (discussed in section
VII.C.3. of the preamble of this final rule) and by an area wage level
budget neutrality factor in accordance with Sec. 412.523(d)(4) (as
discussed in section V.B.5. of the Addendum of this final rule).)
3. Adjustment for the Final Year of the Phase-In of the One-Time
Prospective Adjustment to the Standard Federal Rate under Sec.
412.523(d)(3)
We set forth regulations implementing the LTCH PPS, based upon the
broad authority granted to the Secretary, under section 123 of the BBRA
(as amended by section 307(b) of the BIPA). Section 123(a)(1) of the
BBRA required that the system ``maintain budget neutrality'' in the
August 30, 2002 LTCH PPS final rule (67 FR 55954). The statutory budget
neutrality requirement means that estimated aggregate payments under
the LTCH PPS for FY 2003 would be equal to the estimated aggregate
payments that would have been made if the LTCH PPS were not implemented
for FY 2003. The methodology for determining the LTCH PPS standard
Federal rate for FY 2003 that would ``maintain budget neutrality'' is
described in considerable detail in the August 30, 2002 final rule (67
FR 56027 through 56037). Our methodology for estimating payments for
the purposes of budget neutrality calculations used the best available
data, and necessarily reflected several assumptions (for example,
costs, inflation factors, and intensity of services provided) in
estimating aggregate payments that would have been made if the LTCH PPS
had not been implemented (without accounting for certain statutory
provisions that affect the level of payments to LTCHs in years prior to
the implementation of the LTCH PPS, as required by the statute).
In the August 30, 2002 final rule, we also stated our intentions to
monitor LTCH PPS payment data to evaluate whether later data varied
significantly from the data available at the time of the original
budget neutrality calculations (for example, data related to inflation
factors, intensity of services provided, or behavioral response to the
implementation of the LTCH PPS). To the extent the later data
significantly differed from the data employed in the original
calculations, the aggregate amount of payments during FY 2003 based on
later data may be higher or lower than the estimates upon which the
budget neutrality calculations were based. Therefore, in that same
final rule, under the broad authority conferred upon the Secretary in
developing the LTCH PPS, including the authority for establishing
appropriate adjustments, under section 123(a)(1) of the BBRA, as
amended by section 307(b) of the BIPA, we provided in Sec.
412.523(d)(3) of the regulations for the possibility of making a one-
time prospective adjustment to the LTCH PPS rates, so that the effect
of any significant difference between actual payments and estimated
payments for the first year of the LTCH PPS would not be perpetuated in
the LTCH PPS rates for future years. We refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53487 through 53488) for a complete
discussion of the history of the development of the one-time
prospective adjustment to the LTCH PPS standard Federal rate at Sec.
412.523(d)(3).
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53495), we finalized
our policy to make a one-time prospective adjustment to the standard
Federal rate so that it will be permanently reduced by approximately
3.75 percent to account for the estimated difference between projected
aggregate FY 2003 LTCH PPS payments and the projected aggregate
payments that would have been made in FY 2003 under the TEFRA payment
system if the LTCH PPS had not been implemented. Specifically, using
the methodology we adopted in that same final rule, we determined that
permanently applying a factor of 0.9625 (that is, a permanent reduction
of approximately 3.75 percent) to the standard Federal rate is
necessary to ensure estimated total FY 2003 LTCH PPS payments equal
estimated total FY 2003 TEFRA payments consistent with our stated
policy goal of the one-time prospective adjustment under Sec.
412.523(d)(3) (that is, to ensure that the difference between estimated
total FY 2003 LTCH PPS payments and estimated total FY 2003 TEFRA
payments is not perpetuated in the LTCH PPS payment rates in future
years). (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53487 through 53502) for a complete discussion of the evaluation
approach, methodology, and determination of the one-time prospective
adjustment to the LTCH PPS standard Federal rate at Sec.
412.523(d)(3).)

[[Page 50180]]

Given the magnitude of this adjustment, in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53501 through 53502), under Sec. 412.523(d)(3),
we established a policy to phase-in the permanent adjustment of 0.9625
to the standard Federal rate over a 3-year period. To achieve a
permanent adjustment of 0.9625, under the phase-in of this adjustment,
in that same final rule, we explained that we will apply a factor of
0.98734 to the standard Federal rate in each year of the 3-year phase-
in, that is, in FY 2013 (which does not apply to payments for
discharges occurring on or after October 1, 2012, and on or before
December 28, 2012, consistent with current law), FY 2014, and FY 2015.
By applying a permanent factor of 0.98734 to the standard Federal rate
in each year for FYs 2013, 2014, and 2015, we will completely account
for the entire adjustment by having applied a cumulative factor of
0.9625 (calculated as 0.98734 x 0.98734 x 0.98734 = 0.9625) to the
standard Federal rate. Accordingly, under Sec. 412.523(d)(3), we
applied a permanent factor of 0.98734 to the standard Federal rate in
both FY 2013 and FY 2014 under the established 3-year phase-in of the
one-time prospective adjustment.
In this final rule, for FY 2015, as we proposed, we are applying a
permanent one-time prospective adjustment factor of 0.98734 to the
standard Federal rate for FY 2015 under the last year of the 3-year
phase-in of the one-time prospective adjustment, in accordance with the
existing regulations under Sec. 412.523(d)(3).
4. Summary of Other Public Comments Received on the Proposed LTCH PPS
Payment Rates for FY 2015
We received a number of public comments that were not within the
scope of the proposed rule, but we appreciate the commenters for
providing that feedback. We also received a few public comments on
issues related to the proposed LTCH PPS payment rates for FY 2015, but
these issues were not specifically addressed by the proposals and
related discussion presented in the FY 2015 IPPS/LTCH PPS proposed
rule.
Comment: One commenter requested that CMS provide additional
payment for end-stage renal disease (ESRD) patients under the same
circumstances as under the IPPS under the LTCH PPS, noting that section
1881(b) of the Act does not limit the adjustment to subsection (d)
hospitals. The commenter indicated that included information and
analysis previously provided to CMS supports their request for this
additional payment amount.
Response: Despite the fact that this comment is beyond the scope of
the proposed rule, we note that we have responded to the issue that
this commenter raised in a detailed response in the FY 2014 IPPS/LTCH
PPS final rule (79 FR 50767). As discussed in that final rule, based on
an our analysis of FY 2012 LTCH PPS claims data, we continue to believe
that the costs of treating ESRD patients in LTCHs are adequately
reflected in data used to determine the MS-LTC-DRG relative weights for
non-dialysis MS-LTC-DRGs, and that the additional resources associated
with renal dialysis treatments are include in the LTCH PPS payments.
Therefore, we are not adopting the commenters' request to provide for
an additional payment for ESRD patients under the LTCH PPS.

D. Revision of LTCH PPS Geographic Classifications

1. Background
As discussed in the August 30, 2002 LTCH PPS final rule, which
implemented the LTCH PPS (67 FR 56015 through 56019), in establishing
an adjustment for area wage levels, the labor-related portion of an
LTCH's standard Federal payment rate is adjusted by using an
appropriate wage index based on the labor market area in which the LTCH
is located. Specifically, the application of the LTCH PPS area wage-
level adjustment, which is codified under existing Sec. 412.525(c) of
the regulations, is based on the location of the LTCH--either in an
``urban'' area or a ``rural'' area. Currently, under the LTCH PPS, as
codified under Sec. 412.503 of the regulations, an ``urban area'' is
defined as a Metropolitan Statistical Area (which includes a
Metropolitan division, where applicable) as defined by the Executive
OMB, and a ``rural area'' is defined as any area outside of an urban
area.
In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), we
revised Sec. 412.525(c) to update the labor market area definitions
used under the LTCH PPS, effective for discharges occurring on or after
July 1, 2005, based on the Executive OMB's Core-Based Statistical Area
(CBSA) designations (``CBSA designations''), which are based on 2000
Census data. We made this revision because we believed that the CBSA
designations (geographic classifications) would ensure that the LTCH
PPS wage index adjustment most appropriately accounts for and reflects
the relative hospital wage levels in the geographic area of the
hospital as compared to the national average hospital wage level. We
noted that these were the same CBSA designations implemented for acute
care hospitals under the IPPS, which were codified under Sec.
412.64(b) of the regulations, beginning in FY 2005. (For a further
discussion of the CBSA-based labor market area designations currently
used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final
rule (70 FR 24182 through 24191).) We have generally updated the LTCH
PPS CBSA designations annually since they were adopted for RY 2006 when
updates from OMB were available (73 FR 26812 through 26814, 74 FR 44023
through 44204, and 75 FR 50444 through 50445).
In OMB Bulletin No. 10-2, issued on December 1, 2009, OMB announced
that the CBSA changes in that bulletin would be the final update prior
to the 2010 Census of Population and Housing. We adopted those changes
under the LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444
through 50445), effective October 1, 2010. We continued to use these
CBSA designations for FYs 2012 and 2013 (76 FR 51808 and 77 FR 53710,
respectively). New OMB labor market area delineations (which we refer
to in this section as ``new OMB delineations'') based on 2010 standards
and the 2010 Decennial Census data were announced by OMB on February
28, 2013. OMB issued Bulletin No. 13-01, which announced revisions to
the delineation of Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the uses of the delineation of these labor market areas.
(For a copy of this bulletin, we refer readers to the following Web
site: https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. This bulletin specifically provides the delineations of
all Metropolitan Statistical Areas (MSAs), Metropolitan Divisions,
Micropolitan Statistical Areas, Combined Statistical Areas, and New
England City and Town Areas in the United States and Puerto Rico based
on the standards published in the Federal Register on June 28, 2010 (75
FR 37246 through 37252) and 2010 Census data. (We note that, as
discussed in section III.B. of the preamble of this final rule,
consistent with the terminology used in the OMB Bulletin No. 13-01 and
the standards published in the Federal Register on June 28, 2010, when
referencing the new OMB geographic boundaries of Metropolitan
Statistical Areas (MSAs) based on 2010 standards, we are using the term
``new OMB delineations'' rather than the term ``CBSA-based labor market
area definitions'' that we have used in the

[[Page 50181]]

past to refer to OMB geographic boundaries of statistical areas (75 FR
37249).)
As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994
through 50995), in order to implement these changes for the LTCH PPS
(as in the case of the IPPS), it is necessary to identify the new OMB
delineations for each county and hospital in the country. While the
revisions OMB published on February 28, 2013, are not as sweeping as
the changes OMB announced in 2003, the February 28, 2013 bulletin does
contain a number of significant changes. For example, under the new OMB
delineations, there are new CBSAs, urban counties that have become
rural, rural counties that have become urban, and existing CBSAs that
have been split apart and moved to other CBSAs. Because the update was
not issued until February 28, 2013, and it was necessary for the
changes made by the update and their ramifications to be extensively
reviewed and verified, we were unable to undertake such a lengthy
process before publication of the FY 2014 rulemaking cycle. That is, by
the time the update was issued, the FY 2014 IPPS/LTCH PPS proposed rule
was in the advanced stages of development, and the proposed FY 2014
LTCH PPS wage indexes based on the CBSA designations that are currently
used under the LTCH PPS had been developed. Therefore, we did not
propose to use the changes to the LTCH PPS CBSA designations for FY
2014 based on the new OMB delineations. Rather, to allow for sufficient
time to assess the new changes and their ramifications, we stated that
we intended to propose the adoption of the new OMB delineations and the
corresponding changes to the wage index based on those delineations
under the LTCH PPS for FY 2015 through notice and comment rulemaking,
consistent with the approach used under the IPPS (78 FR 50994 through
50995). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28191 through
28194), we proposed to adopt the new OMB delineations announced in the
February 28, 2013 OMB Bulletin No. 13-01, effective for FY 2015 under
the LTCH PPS. As discussed below, after consideration of the public
comments we received, in this final rule, under the authority of
section 123 of the BBRA, as amended by section 307(b) of the BIPA, we
are adopting the new OMB delineations announced in the February 28,
2013 OMB Bulletin No. 13-01, effective for FY 2015 under the LTCH PPS
as proposed without modification. We note that this policy consistent
with the approach being adopted under the IPPS as discussed in section
III.B. of the preamble of this final rule.
2. Use of the New OMB Labor Market Area Delineations (``New OMB
Delineations'')
Historically, Medicare prospective payment systems have utilized
labor market area definitions developed by the OMB. As discussed above,
the CBSA designations currently used under the LTCH PPS are based on
the most recent market area definitions issued by the OMB. The OMB
reviews its market area definitions/delineations based on data from the
preceding decennial census to reflect more recent population changes.
As discussed above and in section III.B. of the preamble of this final
rule, the new OMB delineations are based on the OMB's latest market
area delineations based on the 2010 Decennial Census data. Because we
believe that the OMB's latest labor market area delineations are the
best available data that reflect the local economies and wage levels of
the areas in which hospitals are currently located, as we proposed, we
are adopting the new OMB delineations based on the 2010 Decennial
Census data under the LTCH PPS, beginning in FY 2015, for the reasons
discussed below (which are consistent with the IPPS policy discussed in
section III.B. of the preamble of this final rule).
When we implemented the wage index adjustment under Sec.
412.525(c) for the LTCH PPS, and updated the LTCH PPS labor market area
definitions based on the CBSA designations beginning in RY 2006, we
explained that the LTCH PPS wage index adjustment was intended to
reflect the relative hospital wage levels in the geographic area of the
hospital as compared to the national average hospital wage level. (We
refer readers to the RY 2003 LTCH PPS final rule (67 FR 56016) and the
RY 2006 LTCH PPS final rule (70 FR 24184).) Because we believe that the
new OMB delineations based on 2010 Decennial Census data (reflect the
most recent available geographic classifications (market area
delineations), as we proposed, we are revising the geographic
classifications used under the LTCH PPS based on these new OMB
delineations to ensure that the LTCH PPS wage index adjustment
continues to most appropriately account for and reflect the relative
hospital wage and wage-related costs in the geographic area of the
hospital as compared to the national average hospital wage and wage-
related costs. Specifically, as we proposed, we are adopting the new
OMB delineations (as discussed in greater detail below), effective for
LTCH PPS discharges occurring on or after October 1, 2014 (that is,
effective for FY 2015). As we noted in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28191), because the application of the LTCH PPS
area wage-level adjustment under existing Sec. 412.525(c) is made on
the basis of the location of the LTCH--either in an ``urban'' area or a
``rural'' area as those terms are defined under existing Sec. 412.503.
Under Sec. 412.503, an ``urban area'' is defined as a Metropolitan
Statistical Area as defined by the Executive OMB. A ``rural area'' is
defined as any area outside of an urban area. Therefore, we did not
make any changes to the existing regulations under this policy.
As discussed in section III.B. of this preamble, while CMS and
other stakeholders have explored potential alternatives to the current
CBSA-based labor market system, no consensus has been achieved
regarding how best to implement a replacement system. While we
recognize that MSAs are not designed specifically to define labor
market areas, we believe that they do represent a useful proxy for this
purpose. Consistent with the approach taken for the IPPS, we have used
MSAs to define labor market areas for purposes of Medicare wage indices
under the LTCH PPS since its implementation in FY 2003. MSAs also are
used to define labor market areas for purposes of the wage index for
many of the other Medicare payment systems (for example, the IRF PPS,
the SNF PPS, the HHA PPS, the OPPS, and the IPF PPS). (We refer readers
to the RY 2006 LTCH PPS final rule (70 FR 24184).) Therefore, in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28191 through 28194), under the
authority of section 123 of the BBRA, as amended by section 307(b) of
the BIPA, we proposed to adopt the new OMB delineations as described in
the February 28, 2013 OMB Bulletin No. 13-01, effective for FY 2015
under the LTCH PPS. In addition, we proposed to use the new OMB
delineations to calculate area wage indexes in a manner that is
consistent with the CBSA-based methodologies finalized in the RY 2006
LTCH PPS final rule, as refined in subsequent rulemaking. We also
proposed to implement a transitional wage index policy (as discussed in
more detail below) for LTCHs that would experience a negative payment
impact due to the adoption of the new OMB delineations. This proposed
policy, including the transitional wage index policy, is consistent
with the policy proposed under the IPPS for FY 2015, as

[[Page 50182]]

discussed in section III.B. of this preamble.
Comment: A few commenters supported the proposal to adopt the new
OMB delineations and to use these new OMB delineations to calculate
area wage indexes effective for FY 2015 under the LTCH PPS. We did not
receive any public comments opposing the proposed adoption of the new
OMB delineations under the LTCH PPS. We also note that we did not
receive any public comments that specifically addressed the details of
our proposals with regard to the adoption of the new OMB labor market
area delineations relating to Micropolitan Statistical Areas, urban
counties that would become rural, rural counties that would become
urban, or urban counties that moved to a different urban CBSA. (We
refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28192
through 28193) for details regarding these proposals.) A few commenters
also commented on the proposed transitional wage index policy, which we
discuss below in section VII.D.2.e. of this preamble.
Response: We appreciate the commenters' support for the proposal to
adopt the new OMB delineations under the LTCH PPS, as we believe that
the new OMB delineations based on 2010 Decennial Census data reflect
the most recent data available to define geographic classifications
(market area delineations) for LTCHs and ensure that the LTCH PPS wage
index adjustment continues to most appropriately account for and
reflect the relative hospital wage and wage-related costs in the
geographic area of the hospital as compared to the national average
hospital wage and wage-related costs. Therefore, under the authority of
section 123 of the BBRA, as amended by section 307(b) of the BIPA, in
this final rule, we are adopting the new OMB delineations as described
in the February 28, 2013 OMB Bulletin No. 13-01, effective for FY 2015
under the LTCH PPS, as we proposed without modification. We also are
using these new OMB delineations to calculate area wage indexes in a
manner that is consistent with the CBSA-based methodologies finalized
in the RY 2006 LTCH PPS final rule, as refined in subsequent
rulemaking. In addition, as discussed below in section VII.D.2.e. of
this preamble, after consideration of the public comments we received,
as we proposed, we are implementing a budget neutral transitional wage
index policy for LTCHs that will experience a negative payment impact
due to the use of the new OMB delineations. This policy, including the
transitional wage index policy, is consistent with the policy being
adopted under the IPPS presented in section III.B. of the preamble of
this final rule. The discussion below focuses on issues related to the
use of the new OMB delineations to define labor market areas for
purposes of the wage index adjustment under the LTCH PPS, and as we
explained in the proposed rule, is consistent with what is being
adopted under the IPPS.
a. Micropolitan Statistical Areas
When we adopted the CBSA designations under the LTCH PPS in RY
2006, we discussed CMS' consideration of whether to use Micropolitan
Statistical Areas to define the labor market areas for the purpose of
the LTCH PPS wage index. OMB defines a ``Micropolitan Statistical
Area'' as a Consolidated Metropolitan Statistical Area (CMSA)
``associated with at least one urban cluster that has a population of
at least 10,000, but less than 50,000'' (70 FR 24183). We refer to
these areas as ``Micropolitan Areas.'' After conducting an extensive
impact analysis, we determined that the best course of action would be
to treat all hospitals located in ``Micropolitan Areas'' as ``rural,''
and to include these hospitals in the calculation of each State's rural
wage index. Because Micropolitian Areas tend to encompass smaller
population centers and contain fewer hospitals than MSAs, we determined
that if Micropolitan Areas were to be treated as separate labor market
areas, the IPPS wage index would include drastically more single-
provider labor market areas. This larger number of labor market areas
with fewer providers could create instability in year-to-year wage
index values for a large number of hospitals; could reduce the
averaging effect of the wage index, lessening some of the efficiency
incentive inherent in a system based on the average hourly wages for a
large number of hospitals; and could arguably create an inequitable
system when so many hospitals would have wage indexes based solely on
their own wage data while other hospitals' wage indexes would be based
on an average hourly wage across many hospitals. For these reasons, we
adopted a policy to include Micropolitan Areas in the State's rural
wage area, and have continued this policy through the present. (We
refer reader to the RY 2006 LTCH PPS final rule (70 FR 24187).)
Based upon the 2010 Decennial Census data, a number of rural and
urban counties have joined or have become Micropolitan Areas, while
other counties that once were part of a Micropolitan Area under
previous OMB CBSA designations, have become either urban or rural under
the new OMB delineations. Overall, there are fewer Micropolitan Areas
(541) under the new OMB delineations based on 2010 Decennial Census
data than existed under the data from the 2000 Census (581). As
discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28192), we
believe that it is appropriate to continue the policy established in
the RY 2006 LTCH PPS final rule, and we are treating Micropolitan Areas
as rural labor market areas under the LTCH PPS. These areas continue to
be defined as having relatively small urban cores (populations of
10,000-49,999). We do not believe that it would be appropriate to
calculate a separate wage index for areas that typically may include
only a few hospitals for the reasons set forth in the RY 2006 LTCH PPS
final rule, as discussed above.
As previously noted, we did not receive any public comments on our
proposals relating to the adoption of the new OMB labor market area
delineations with regard to Micropolitan Statistical Areas. Therefore,
we are adopting these policies as final without modification in this
final rule. In conjunction with our policy to adopt the new OMB labor
market area delineations, under the authority of section 123 of the
BBRA, as amended by section 307(b) of the BIPA, for FY 2015, we are
continuing to treat Micropolitan Areas as ``rural,'' and will assign
the Micropolitan Area the statewide rural wage index for the State in
which the LTCH is located. We also are establishing that, beginning in
FY 2015, the wage data for any IPPS hospitals located in the
Micropolitan Areas will be included in the calculation of each State's
LTCH PPS rural area wage index. (As discussed in section V.B.2. of the
Addendum to this final rule, the LTCH PPS area wage index values are
calculated using the wage data of IPPS hospitals.) We note that this
policy is consistent with the policy adopted under the IPPS discussed
in section III.B.2.a. of the preamble of this final rule. For a
discussion of our policies to moderate the impact of our adoption of
the new OMB delineations under the LTCH PPS, we refer readers to
section VII.D.2.e. of the preamble of this final rule.
b. Urban Counties That Became Rural under the New OMB Labor Market Area
Delineations
Under the new OMB delineations, which are based upon 2010 Decennial
Census data, for FY 2015, we found that there are a number of counties
(or county equivalents) that are defined as

[[Page 50183]]

``urban'' under the previous CBSA designations that are now defined as
``rural'' under the new OMB delineations. As discussed in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28193) and in section III.B. of this
preamble, an analysis of the new OMB delineations shows that a total of
37 counties (and county equivalents) that were considered to be part of
an ``urban'' CBSA will now be considered to be located in a ``rural''
area, beginning in FY 2015, based on the new OMB delineations. We refer
readers to a table presented in section III.B.2.b. of the preamble of
this final rule that lists the 37 urban counties that are defined as
rural under our adoption of the new OMB delineations.
As previously noted, we did not receive any public comments on our
proposals relating to the adoption of the new OMB labor market area
delineations with regard to urban counties that would become rural.
Therefore, we are adopting these policies as final without modification
in this final rule. Under our adoption of the new OMB delineations for
the LTCH PPS, we are establishing that LTCHs located in any of the 37
counties listed in the table under section III.B.2.b. of the preamble
of this final rule will be considered ``rural,'' and will receive their
respective State's rural area wage index for FY 2015 under the LTCH
PPS. We note that, currently, there are no LTCHs located in any of the
37 counties listed in the table that are currently considered to be
part of an ``urban'' CBSA and that will be considered to be located in
a ``rural'' area, beginning in FY 2015. The wage data for any IPPS
hospitals located in those 37 counties listed in the table now will be
considered ``rural'' when calculating the respective State's LTCH PPS
rural area wage index beginning in FY 2015. (As discussed in section
V.B.2. of the Addendum to this final rule, the LTCH PPS area wage index
values are calculated using the area wage data of IPPS hospitals.) We
note that this policy is consistent with the policy adopted under the
IPPS discussed in section III.B.2.b. of the preamble of this final
rule. We refer readers to section VII.D.2.e. of this preamble for a
discussion of our policies to moderate the impact of our policy to
implement the new OMB delineations under the LTCH PPS.
c. Rural Counties That Became Urban under the New OMB Labor Market Area
Delineations
In using the new OMB labor market area delineations (which are
based upon 2010 Decennial Census data) for FY 2015, we found that there
are a number of counties (or county equivalents) that are defined as
``rural'' under the previous OMB definitions (that is, CBSA
designations) will be considered ``urban'' based on the adoption of the
new OMB delineations. As discussed in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28193) and in section III.B.2.c. of the preamble
of this final rule, an analysis of the new OMB labor market area
delineations shows that a total of 105 counties (and county
equivalents) that were previously located in ``rural'' areas now are
located in an ``urban'' area under the new OMB delineations. We refer
readers to a table in section III.B.2.c. of the preamble of this final
rule that lists the 105 ``rural'' counties that will now be located in
an ``urban'' area, based on our policy to adopt the new OMB
delineations presented in section III.B.2.c. of the preamble of this
final rule. There are currently no LTCHs located in the 105 ``rural''
counties listed in that table.
As previously noted, we did not receive any public comments on our
proposals relating to the adoption of the new OMB labor market area
delineations with regard to rural counties that would become urban.
Therefore, we are adopting these policies as final without modification
in this final rule. Under our adoption of the new OMB labor market area
delineations, we are establishing that LTCHs located in any of those
105 counties will now be included in their new respective ``urban''
CBSAs and will receive the respective ``urban'' CBSA's area wage index.
We also are establishing that, beginning in FY 2015, the wage data for
any IPPS hospitals located within those 105 counties will now be
included in the calculation of the LTCH PPS area wage index for those
hospitals' respective ``urban'' CBSAs. (As discussed in section V.B.2.
of the Addendum to this final rule, the LTCH PPS area wage index values
are calculated using the area wage data of IPPS hospitals.) We note
that this policy is consistent with the policy adopted under the IPPS
discussed in section III.B.2.c. of the preamble of this final rule. We
refer readers to section VII.D.2.e. of the preamble of this preamble
for a discussion of our policies to moderate the impact of our policy
to implement the new OMB delineations under the LTCH PPS.
d. Urban Counties Moved to a Different Urban CBSA under the New OMB
Labor Market Area Delineations
In addition to ``rural'' counties that became ``urban'' and
``urban'' counties that became ``rural'' under the new OMB
delineations, we found that several urban counties shifted from one
urban CBSA to another urban CBSA. In certain cases, the new OMB
delineations involved a change only in the CBSA name or code, while the
CBSA continued to encompass the same constituent counties. However, in
other cases, under the new OMB delineations, some counties are shifted
between existing urban CBSAs and new urban CBSAs, changing the
constituent makeup of those CBSAs. For example, in some cases, entire
CBSA are subsumed by another CBSA. In other cases, some CBSAs have
counties that are split off as part of a different urban CBSA, or to
form entirely new labor market areas. We refer readers to section
III.B.2.d. of the preamble of this final rule for additional
information, including examples, on urban counties that have moved from
one urban CBSA to a different urban CBSA under the new OMB
delineations. As discussed in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28193), LTCHs located in these affected counties that will move
from one urban CBSA to a different urban CBSA under our policy to adopt
the new OMB delineations will experience both negative and positive
impacts in regard to the LTCH's specific area wage index values. We
refer readers to section VII.D.2.e. of this preamble for a discussion
of our policies to moderate the impact imposed upon hospitals because
of our policy to adopt the new OMB labor market area delineations under
the LTCH PPS. As previously noted, we did not receive any public
comments on our proposals relating to the adoption of the new OMB labor
market area delineations with regard to urban counties that moved to a
different urban CBSA. Therefore, we are adopting these policies as
final without modification in this final rule.
e. Transition Period
As indicated above, overall, we believe that our policy to adopt
the new OMB delineations will result in LTCH PPS wage index values
being more representative of the actual costs of labor in a given area.
However, as we discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28193), we also recognize that some LTCHs would experience decreases
in their area wage index values as a result of our policy. We also
realize that many LTCHs would have higher area wage index values under
our policy. To mitigate the impact imposed upon hospitals, we have in
the past provided for transition periods when adopting changes that
have significant payment implications, particularly large negative
impacts.

[[Page 50184]]

While we believe that using the new OMB delineations would create a
more accurate payment adjustment for differences in area wage levels,
we also recognize that adopting such changes may cause some short-term
instability in LTCH PPS payments. Therefore, under the authority of
section 123 of the BBRA, as amended by section 307(b) of the BIPA, we
proposed to implement a transitional wage index policy for LTCHs that
would experience a decrease in their area wage index values due to our
proposal to adopt the new OMB delineations under the LTCH PPS.
Specifically, we proposed a 1-year transitional wage index policy under
which any LTCH that would experience a decrease in its area wage index
value solely due to the adoption of the new OMB delineations would get
a ``50/50 blended area wage index'' value that would be calculated as
the sum of 50 percent of the wage index computed under the FY 2014 CBSA
designations and 50 percent of the wage index computed under the new
OMB delineations proposed for FY 2015. Furthermore, we proposed that
this proposed transitional wage index policy would be applied in a
budget neutral manner, consistent with the existing requirement under
Sec. 412.525(c)(2) that any changes to the adjustment for differences
in area wage levels will be made in a budget neutral manner. We also
presented a proposed methodology for calculating an area wage level
adjustment budget neutrality factor for FY 2015 that included the
proposed 50/50 blended wage index as applicable (79 FR 28193 through
28194).
Comment: Commenters that supported the proposed adoption of the new
OMB delineations under the LTCH PPS also supported our proposed
transitional wage index policy for LTCHs that would experience a
negative payment impact due to the adoption of the new OMB
delineations. While the commenters conveyed their appreciation for the
proposed transitional wage index policy to help mitigate any negative
financial ramifications, they requested that the proposed transitional
wage index policy be extended beyond FY 2015 to allow hospitals more
time to operationally adjust to the change to their area wage
adjustment. We note that we did not receive any public comments on our
proposal to apply the proposed transitional wage index policy in a
budget neutral manner, or on our proposed methodology for calculating
an area wage level adjustment budget neutrality factor for FY 2015 that
included the proposed 50/50 blended wage index as applicable.
Response: We appreciate the commenters' support for the proposed
transitional wage index policy for LTCHs that would experience a
negative payment impact due to the adoption of the new OMB
delineations. While we understand the commenters' concern regarding the
potential financial impact, as we explained in the proposed rule, the
revisions under the new OMB delineations are not as extensive as the
changes that OMB announced in 2003 that were adopted under the IPPS in
FY 2005 with a 1-year transition and adopted under the LTCH PPS in RY
2006 with no additional transitional policy other than the transitional
wage index policy in effect at that time. While it is our longstanding
policy to provide temporary adjustments to mitigate negative impacts
from the adoption of new policies or procedures, we continue to believe
that the 1-year ``50/50 blended wage index'' transitional policy
provides an adequate safeguard against any significant payment
reductions, allows for sufficient time to make operational changes for
future fiscal years, and provides a reasonable balance between
mitigating some short-term instability in LTCH PPS payments and
improving the accuracy of the payment adjustment for differences in
area wage levels.
While we acknowledge that some LTCHs will experience a reduction in
their wage index as a result of the adoption of the new OMB
delineations, we also point out that several LTCHs will experience an
increase in their wage index based on the adoption of the new OMB
delineations. Because the new OMB delineations reflect the most recent
data available to define geographic classifications (market area
delineations) for LTCHs, we believe that the wage index values computed
under those delineations will result in more appropriate payments to
providers by more accurately accounting for and reflecting the
differences in area wage levels (that is, the relative hospital wage
and wage-related costs in the geographic area of the hospital as
compared to the national average hospital wage and wage-related costs).
Because we believe that the implementation of the new OMB delineations
will create more accurate representations of a LTCH's labor market
areas and result in LTCH PPS wage index values being more
representative of the actual costs of labor in a given area, we believe
that it is important to implement the wage index values calculated
under new OMB delineations with as minimal a transition as possible.
Extending the transitional ``50/50 blended wage index'' policy beyond
FY 2015 would only further delay the improved accuracy of area wage
level adjustments to LTCH PPS payments under the new OMB delineations.
In addition, because the proposed transitional 50/50 blended wage index
policy would be made in a budget neutral manner, all LTCH PPS payments
are reduced to offset the additional payments that result under the
transitional policy. For these reasons, we are not adopting the
commenters' suggestion to extend the proposed transitional 50/50
blended wage index policy beyond FY 2015.
Therefore, in this final rule, under the authority of section 123
of the BBRA, as amended by section 307(b) of the BIPA, we are adopting
a 1-year transitional wage index policy for LTCHs that will experience
a decrease in their area wage index values due to our policy to adopt
the new OMB delineations under the LTCH PPS, as we proposed without
modification. In addition, we are finalizing our proposal to apply the
transitional area wage index policy in a budget neutral manner, and our
methodology for calculating an area wage level adjustment budget
neutrality factor for FY 2015, which includes the proposed 50/50
blended wage index as applicable, as proposed without modification.
Under the transitional wage index policy that we are establishing
for FY 2015 we computed a blended area wage index value for any LTCH
that will experience a decrease in its area wage index value solely due
to the adoption of the new OMB delineations. That is, for purposes of
determining an LTCH's area wage index for FY 2015, we computed LTCH PPS
wage index values using the area wage data (discussed in section V.B.4.
of the Addendum to this final rule) under both the FY 2014 CBSA
designations and the FY 2015 new OMB delineations based on the 2010 OMB
Decennial Census data. For each LTCH, we compared these two wage
indexes. If an LTCH's wage index for FY 2015 under the new OMB
delineations was lower than the LTCH's wage index under the FY 2014
CBSA designations, we are establishing that, for FY 2015, the LTCH will
be paid based on a blended wage index that is computed as the sum of 50
percent of each of the two wage index values described above (referred
to as the 50/50 blended wage index). If an LTCH's wage index for FY
2015 under the new OMB delineations is higher than the LTCH's wage
index under the FY 2014 CBSA designations, we are establishing that,
for FY 2015, the LTCH will be paid based on 100 percent of the wage
index

[[Page 50185]]

under the FY 2015 new OMB delineations (and will not receive the 50/50
blended wage index).
Furthermore, we are establishing that the transitional area wage
index policy will be adopted in a budget neutral manner. Under Sec.
412.525(c)(2), any changes to the adjustment for differences in area
wage levels will be made in a budget neutral manner such that estimated
aggregate FY 2015 LTCH PPS payments are unaffected; that is, will be
neither greater than nor less than estimated aggregate LTCH PPS
payments without such changes to the area wage level adjustment. Under
this policy, we determine an area wage-level adjustment budget
neutrality factor that is applied to the standard Federal rate (under
Sec. 412.523(d)(4)) to ensure that any changes to the area wage level
adjustments are budget neutral such that any changes to the wage index
values or labor-related share would not result in any change (increase
or decrease) in estimated aggregate LTCH PPS payments. Because our
transitional wage index policy for LTCHs that will experience a
decrease in their area wage index values solely as a result of our
finalized policy to adopt the new OMB delineations under the LTCH PPS
will result in an increase in estimated aggregate LTCH PPS payments
without such changes, we are including the finalized 50/50 blended wage
index values in our calculations for the area wage level adjustment
budget neutrality factor that is applied to the standard Federal rate
to ensure that any changes to the area wage level adjustment are budget
neutral. Specifically, consistent with our established methodology, we
used the following methodology to determine an area wage level
adjustment budget neutrality factor for FY 2015:
Step 1--We simulated estimated aggregate LTCH PPS payments
using the FY 2014 wage index values as established in Tables 12A and
12B for the FY 2014 IPPS/LTCH PPS final rule (which is available via
the Internet on the CMS Web site) and the FY 2014 labor-related share
of 62.537 percent as established in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50996).
Step 2--We simulated estimated aggregate LTCH PPS payments
using the FY 2015 wage index values as shown in Tables 12A through 12D
for this final rule (which are available via the Internet on the CMS
Web site), including the transitional 50/50 blended wage index values,
if applicable (as discussed above and in section V.B.4. of the Addendum
of this final rule), and the FY 2015 labor-related share of 62.306
percent (as discussed in section V.B.3. of the Addendum to this final
rule).
Step 3--We determined the ratio of these estimated total
LTCH PPS payments by dividing the estimated total LTCH PPS payments
using the FY 2014 area wage level adjustments (calculated in Step 1) by
the estimated total LTCH PPS payments using the FY 2015 area wage level
adjustments (calculated in Step 2) to determine the FY 2015 area wage
level adjustment budget neutrality factor.
Step 4--We applied the FY 2015 area wage level adjustment
budget neutrality factor from Step 3 to the FY 2015 LTCH PPS standard
Federal rate after the application of the FY 2015 annual update as
discussed in section V.A.2. of the Addendum to this final rule.
As explained above, we are applying this factor in determining the
FY 2015 standard Federal rate to ensure that the updates to the area
wage level adjustment for FY 2015 will be implemented in a budget
neutral manner. For this final rule, using the steps in the methodology
described above, we determined a FY 2015 area wage level adjustment
budget neutrality factor of 1.0016703.
We note that this transitional wage index policy under our policy
to adopt the new OMB delineations for FY 2015 under the LTCH PPS is
consistent with the policies adopted under the IPPS presented in
sections III.B.2.e.(5) and (6) of the preamble of this final rule. As
noted previously in section VII.D.2.b. of the preamble of this final
rule, there are currently no LTCHs located in an ``urban'' county that
became ``rural'' under the policy to adopt the new OMB delineations.
Therefore, as we discussed in the FY 2015 IPPS/LTCH PPS proposed rule,
we are not establishing a transitional wage index policy that is
consistent with the IPPS policy presented in section III.B.2.e.(2) of
the preamble of this final rule for hospitals that are currently
located in an ``urban'' county that became ``rural'' under the adoption
of the new OMB delineations. We also note that we are not establishing
any transitional policies under the LTCH PPS that are consistent with
those presented under the IPPS for hospitals with a reclassification or
redesignation as discussed in section III.B.2.e.(3) of the preamble of
this final rule, or for hospitals deemed urban under section
1886(d)(8)(B) of the Act as discussed in section III.B.2.e.(4) of the
preamble of this final rule, as those reclassifications,
redesignations, and statutory deems are not applicable to LTCHs.

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

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

[[Page 50186]]

referring hospitals, a 50-percent threshold was applied.). Under this
policy, discharges in excess of the threshold are paid at an ``IPPS
equivalent'' rate, instead of the much higher LTCH PPS rate. (We refer
readers to detailed discussions of the 25-percent policy for LTCH HwHs
and LTCH satellite facilities in the FY 2005 IPPS final rule (69 FR
49191 through 49214) and its application to all other LTCHs in the RY
2008 LTCH PPS final rule (72 FR 26919 through 26944).)
The results of the different rulemaking schedules in effect when
Sec. Sec. 412.534 and 412.536 were implemented (FY 2005 (October 1,
2004) and RY 2007 (July 1, 2006), respectively) are as follows: for co-
located LTCHs and LTCH satellite facilities governed under Sec.
412.534, the 25-percent policy was effective for cost reporting periods
beginning on or after October 1, 2005 (``October'' LTCHs); for LTCHs
and LTCH satellite facilities governed under Sec. 412.536, the 25-
percent policy was effective for cost reporting periods beginning on or
after July 1, 2007 (``July'' LTCHs). In addition, even though
grandfathered LTCH HwHs and LTCH satellite facilities are governed
under Sec. 412.534(h), they are ``July'' LTCHs because the 25-percent
policy was applied to these facilities in the RY 2008 LTCH PPS final
rule.
Section 114(c) of the MMSEA, as amended by section 4302(a) of the
ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act,
provided for a 5-year moratorium on the full application of the 25-
percent policy that expired for some LTCHs and LTCH satellite
facilities for cost reporting periods beginning on or after October 1,
2012 (``October'' LTCHs) and for other LTCHs and LTCH satellite
facilities for cost reporting periods beginning on or after July 1,
2012 (``July'' LTCHs). (For a detailed description of the moratorium on
the application of the 25-percent policy, we refer readers to the May
22, 2008 Interim Final Rule with Comment Period (73 FR 29699 through
29704) and the August 27, 2009 Interim Final Rule with Comment Period
for the ARRA, which was published in the FY 2010 IPPS final rule and
Changes to the LTCH PPS and Rate Years 2010 and 2009 Rates final rule
(74 FR 43990 through 43992).
The expiration of the statutory moratorium for both ``July'' and
``October'' LTCHs was delayed because CMS established regulatory
extensions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53483 through
53484), as amended by the FY 2013 IPPS/LTCH PPS correcting amendment
(77 FR 63751 through 63753). Specifically, we established a 1-year
extension (that is, for cost reporting periods beginning on or after
October 1, 2012, and before October 1, 2013) on the full application of
the 25-percent policy for ``October'' LTCHs. For those ``July'' LTCHs
that would have been affected by the ``gap'' between the expiration of
the statutory moratorium (for cost reporting periods beginning on or
after July 1, 2012) and our prospective regulatory relief (for cost
reporting periods beginning on or after October 1, 2012), we also
provided for an additional moratorium based on LTCH discharges
occurring on or after October 1, 2012 and ending at the start of the
LTCHs' next cost reporting period. For those ``July'' LTCHs with cost
reporting periods beginning on or after October 1, 2012, the regulatory
extension of the statutory moratorium, described above, effective for
the hospital's first cost reporting period beginning on or after
October 1, 2012, resulted in seamless coverage for that group. However,
for those ``July'' LTCHs with cost reporting periods beginning on or
after July 1, 2012, and before October 1, 2012, that would have
otherwise been subject to the ``gap'' between the expiration of the
statutory moratorium and the effective date of the regulatory
moratoria, we established a second regulatory moratorium effective with
discharges occurring beginning October 1, 2012, through the end of the
LTCH's cost reporting period (that is, the end of the cost reporting
period that began on or after July 1, 2012, and before October 1,
2012). Therefore, by providing for the above described regulatory
extension for ``July'' LTCHs, we eliminated the distinction between
``July'' and ``October'' LTCHs, which resulted in the 25-percent policy
being applied for all cost reporting periods beginning on or after
October 1, 2012, following the expiration of the moratorium. For more
details about these moratoria, we refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53483 through 53484).
Because we did not extend the regulatory moratorium on the 25-
percent policy in the FY 2014 IPPS/LTCH PPS final rule, the full
application of the payment adjustment policy was effective for all
LTCHs (both ``October'' and ``July'' LTCHs) for cost reporting periods
beginning on or after October 1, 2013 (78 FR 50772).
2. Implementation of Section 1206(b)(1) of Pub. L. 113-67
As stated earlier, section 1206(b)(1)(A) of Public Law 113-67
provides an additional amendment to section 114(c) of the MMSEA, as
amended by section 4302(a) of the ARRA and sections 3106(c) and
10312(a) of the Affordable Care Act, that extends the ``original''
statutory moratorium on the full implementation of the 25-percent
policy to a total of 9 years from the original effective dates
established by the MMSEA (July 1 or October 1, 2007, as applicable). As
a result, the lapse of the regulatory moratorium on the full
implementation of the 25-percent policy is moot. This ``seamless''
statutory moratorium provides relief until cost reporting periods
beginning on or after July 1, or October 1, 2016, as applicable.
Section 1206(b)(1)(B) provides a permanent exemption from the 25-
percent policy for certain grandfathered co-located LTCHs. In this
final rule, based on the statutory changes made by sections
1206(b)(1)(A) and (b)(1)(B) of Public Law 113-67, we are making
conforming amendments to the regulations governing application of the
25-percent policy. Specifically, we are revising Sec. Sec.
412.534(c)(1)(i) and (c)(1)(ii), (c)(2), (c)(3), (d)(1) and (d)(1)(i),
(d)(2), (d)(3), (e)(1) and (e)(1)(i), (e)(2), (e)(3), the introductory
text of paragraph (h), (h)(4), and (h)(5) and removing paragraph
(h)(6); and removing paragraphs (a)(1)(iii) and (a)(2)(ii), revising
(a)(2), and removing paragraph (a)(3) of Sec. 412.536 to reflect the
statutory changes.
Comment: One commenter suggested that the costs associated with the
new limitations provided by the application of the 25-percent policy,
that is, any additional costs to the Medicare program because of the
moratorium on full implementation of the 25-percent policy, be absorbed
by the hospitals that receive the benefit from the extension of this
moratorium. The commenter questioned whether this absorption of costs
could be accomplished by a hospital-specific adjustment similar to the
one presently used for failure to submit quality data, and whether the
suggested adjustment amount could be calculated based on a facility's
compliance with 25-percent policy.
Response: We appreciate the commenter's suggestion, but note that
these suggestions are beyond the scope of the proposals presented in
the FY 2015 IPPS/LTCH PPS proposed rule. We believe that Congress
specified how we are to implement this policy when it instructed the
Secretary to extend the relief provided by section 114(c) of the MMSEA
of 2007, and its amendments, until the moratorium expires, or in the
case of certain grandfathered LTCHs, indefinitely. The provisions of
section 114(c) of the MMSEA of 2007, nor its amendments, include any
measures to absorb any Medicare program costs associated with the
moratorium on the

[[Page 50187]]

full application of this policy. We do not believe that further
regulatory initiatives are appropriate at this time.
Comment: Several commenters urged CMS to repeal the 25-percent
policy immediately. Some commenters reasoned that ``Congress has not
required the partial implementation of the 25 percent rule, but rather
has prohibited the full implementation of the 25 percent rule.'' Other
commenters believed that applying the 25-percent policy after patient-
level criteria are implemented would ``violate'' the provisions in
Public Law 113-67 that require use of patient-level criteria to
determine which cases receive standard or site neutral Medicare
payments. Some commenters also believed that the 25-percent policy is
unnecessary recognizing the forthcoming changes to the LTCH PPS, and
stated that the 25-percent policy would reduce the payment distinctions
between the number of cases receiving payments based on standard
payment rates and the number of cases receiving payments based on site-
neutral payment rates, thereby ``weakening'' the incentives that the
commenters believed Congress intended to impose under the statute.
Response: Although we initially implemented the 25-percent policy
under Sec. Sec. 412.534 and 412.536 of the regulations through our
general rulemaking authority, the 25-percent policy is now mandated
under section 114(c) of the MMSEA, as amended. This statutory
moratorium currently expires effective with cost reporting periods
beginning on July 1, 2016, or October 1, 2016, as applicable.
Therefore, CMS does not have the authority to ``repeal'' a statutory
provision. As discussed in the May 22, 2008 interim final rule with
comment period, and as we further discussed in the FY 2010 IPPS/LTCH
final rule (74 FR 43980 through 43986), we believe that section
114(c)(1) of the MMSEA provided a 3-year delay in the application of
Sec. Sec. 412.534 and 412.536 to ``only two categories of LTCHs . . .
[s]imilarly, the 3-year relief . . . in section 114(c)(2) in the form
of increased thresholds . . . was narrowly targeted to only those
`applicable LTCHs and LTCH satellite facilities,' that is, those
`subject to the transition rules under Sec. 412.534(g) of title 42
Code of Federal Regulations' '' (74 FR 43982). In fact, with the
enactment of the extension of the original moratorium under section
1206(b)(1)(B) of Public Law 113-67, and the extended relief provided
from the 25-percent policy, Congress added only one specific change to
the provisions of the original moratorium, that is, the permanent
exemption of grandfathered LTCHs from the 25-percent policy. We also
note that there is an additional provision of the statute that
specifies the viability of the 25-percent policy, at least until the
initial implementation of the new payment framework under the LTCH PPS.
Specifically, section 1206(b)(1)(C) requires CMS to submit a report to
Congress ``[n]ot later than 1 year before the end of the 9-year period
referred to in section 114(c) of the Medicare, Medicaid, and SCHIP
Extension Act of 2007 . . . on the need for any further extensions (or
modifications of the extensions) of the 25 percent rule . . .
particularly taking into account the application of section 1886(m)(6)
of the Social Security Act as added by subsection (a)(1).'' In response
to the commenters expressed concerns relating to an ``overlapping'' of
the full implementation of the 25-percent policy and the new payment
framework specified under section 1206(a) of Public Law 113-67, we
assure the commenters that any such interplay will be fully considered
during the development of the required July 2015 Report to Congress.
This date is at least a full year prior to the expiration of the
current moratorium. Furthermore, as the statutory payment methodology
revisions to the LTCH PPS will be phased-in under a ``blended'' payment
methodology effective with LTCH cost reporting periods beginning during
FY 2016, there still may be a need for the 25-percent policy during
that phase-in period, although our study may or may not conclude that
this policy is not required after full implementation of the new
statutory payment methodology under the LTCH PPS.

F. Discussion of the ``Greater Than 3-Day Interruption of Stay'' Policy
and the Transfer to Onsite Providers Policies Under the LTCH PPS

The interrupted stay policy is a payment adjustment that was
included under the LTCH PPS from the inception; that is, for cost
reporting periods beginning on or after October 1, 2002 (FY 2003). In
this discussion, we use the terms ``interrupted stay'' and
``interruption of stay'' interchangeably. An ``interruption of stay''
occurs when, during the course of an LTCH hospitalization, a patient is
discharged to an inpatient acute care hospital, an IRF, or a SNF for
treatment or services not available at the LTCH for a specified period
followed by a readmittance to the same LTCH. We refer readers to the RY
2003 LTCH PPS final rule (67 FR 56002). When we established this
policy, we believed that the readmission to the LTCH represented a
continuation of the initial treatment, a stay in which an
``interruption'' occurred, rather than a new admission if the length of
stay at the intervening facility was within a specified number of days.
If an ``interruption of stay'' occurred, payment for both ``halves'' of
the LTCH discharge were then ``bundled,'' and Medicare would make one
payment based on the second date of discharge. Specifically, under this
policy, we established a fixed-day threshold, which applied to the
specified number of days a Medicare beneficiary spends as an inpatient
at an acute care hospital, an IRF, or a SNF. In the RY 2003 LTCH PPS
final rule, we explained that we were implementing this policy because
we wanted ``. . . to reduce the incentives inherent in a discharged-
based prospective payment system of `shifting' patients between
Medicare-covered sites of care in order to maximize Medicare payments.
This policy is particularly appropriate for LTCHs because, as a group,
these hospitals differ considerably in the range of services offered
such that where some LTCHs may be able to handle certain acute
conditions, others will need to transfer their patients to acute care
hospitals.
``For instance, some LTCHs are equipped with operating rooms and
intensive care units and are capable of performing minor surgeries.
However, other LTCHs are unable to provide those services and will need
to transfer the beneficiary to an acute care hospital. We believed that
our policy also provided for a patient . . . ``who no longer requires
hospital-level care, but is not ready to return to the community,'' and
who ``. . . could be transferred to a SNF.'' (We refer readers to the
RY 2003 LTCH PPS final rule (67 FR 56002).)
In the regulations under 42 CFR 412.531, we defined two types of
interruptions of stays. Under Sec. 412.531(a)(1), ``[a] 3-day or less
interruption of stay'' means a stay at a LTCH during which a Medicare
inpatient is discharged from the LTCH to an acute care hospital, IRF,
SNF, or the patient's home and readmitted to the same LTCH within 3
days of the discharge from the LTCH. Under the ``3 day or less
interruption of stay policy,'' the fixed-day threshold period begins
with the calendar date of discharge from the LTCH and ends not later
than midnight of the third day. If an LTCH patient's ``interruption''
exceeds this threshold, payment is governed by the ``greater than 3-day
interruption of stay'' policy. (We refer readers to the RY 2005 LTCH
PPS final rule (69 FR 25690 through 25700), the RY 2006 LTCH PPS final
rule (70 FR 24206), and the RY 2007 LTCH PPS final rule (71 FR 27872
through 27875) for detailed discussions

[[Page 50188]]

of the 3-day or less interruption of stay policy.) In the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28196), we did not propose to revise the
3-day or less category of interrupted stays, but we make mention of the
policy for clarity in making a distinction between the 3-day or less
interruption of stay policy and the greater than 3-day interruption of
stay policy that we proposed to revise in our proposed rule.
The ``greater than 3-day interruption of stay policy,'' is defined
under Sec. 412.531(a)(2) as a stay during which a Medicare inpatient
is transferred upon discharge to an acute care hospital, an IRF, or a
SNF for treatment or services that are not available in the long-term
care hospital and returns to the same long-term care hospital within
the applicable fixed-day period specified in regulations under Sec.
412.531(a)(2)(i) through (a)(2)(iii). For a discharge to an acute care
hospital, the applicable fixed-day period is between 4 and 9
consecutive days; the counting of the days begins on the calendar day
of discharge from the LTCH and ends on the 9th day when the patient is
readmitted to the LTCH. For a discharge to an IRF, the applicable
fixed-day period is between 4 and 27 consecutive days; the counting of
the days begins on the calendar day of discharge from the LTCH and ends
on the 27th day. For a discharge to a SNF, the applicable fixed-day
period is between 4 and 45 consecutive days; the counting of the days
begins on the calendar day of discharge from the LTCH and ends on the
45th day. We refer readers to our proposed rule for a more detailed
description of the derivation of our day thresholds (79 FR 28196).
Under the greater than 3-day interrupted stay policy, if an LTCH
readmission occurs within the fixed-day period both halves of the LTCH
discharge are treated as a single discharge for the purposes of payment
under the LTCH PPS. In such instances, the beneficiary's readmittance
to the LTCH is paid for with a single MS-LTC-DRG payment that covers
the initial admission to the LTCH and the subsequent readmission. That
is, a single Medicare payment is made for the entire two-part
discharge. Payment to the acute care hospital, the IRF, or the SNF is
then made in accordance with the applicable payment policies for those
providers when the interruption of stay exceeds 3 days. Therefore, we
balanced the payment incentives of both the LTCH and the acute care
hospital, the IRF, or the SNF to which the LTCH patient might be
discharged before being readmitted to the LTCH.
As we discussed in the RY 2003 LTCH PPS final rule (67 FR 56007),
our concerns about patient shifting were significantly increased in the
context of transfers between co-located LTCHs and LTCH satellite
facilities, or for LTCH hospital-within-hospital transfers.
Collectively, we refer to these arrangements as transfers to ``onsite''
providers. In the regulations under Sec. 412.532(b), we define a
facility that is ``co-located or ``onsite'' as a hospital, satellite
facility, unit, or SNF that occupies space in a building also used by
another hospital or unit or in one or more buildings on the same
campus, as defined in Sec. 413.65(a)(2), as buildings used by another
hospital or unit. Under this LTCH PPS policy, if more than 5 percent of
the Medicare patients discharged from an LTCH during a cost reporting
period were discharged to an ``onsite'' SNF, IRF, or psychiatric
facility, or to an ``onsite'' acute care hospital, and directly
readmitted to the same LTCH, the LTCH would be paid one MS-LTC-DRG
payment to cover both LTCH discharges, regardless of the length of the
interrupted stay. As is the case in regard to the greater than 3-day
interruption of stay policy, payment to an acute care hospital, an IRF,
or a SNF would not be affected under the 5-percent policy.
Our concern about patient shifting among ``onsite'' providers did
not originate with the implementation of the LTCH PPS. The LTCH 5-
percent policy under Sec. 412.532 was recodified from an earlier
regulation under Sec. 413.40(a)(3), which applied a payment adjustment
to hospitals paid under the TEFRA payment system, including LTCHs, to
address inappropriate discharges of patients to a host hospital paid
under the IPPS from an excluded hospital-within-a-hospital (such as a
LTCH) that culminated in a readmission to the hospital-within-a-
hospital. We refer readers to the FY 2000 IPPS final rule, the RY 2003
LTCH PPS final rule, and the FY 2015 IPPS/LTCH PPS proposed rule for a
detailed description of the 5-percent policy, its initial application
under the TEFRA payment system, and our policy concerns (64 FR 41535,
67 FR 56007 through 56014, and 79 FR 28196 through 28197).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28196), we
proposed to revise our policies on interrupted stays. Specifically, we
proposed to modify the fixed-day thresholds under the greater than 3-
day interruption of stay policy to provide for a 30-day fixed threshold
as an ``acceptable standard'' for determining a linkage between an
index discharge and a readmission from an inpatient facility as
specified under this policy (that is, an IPPS hospital, an IRF, or a
SNF) consistent with the intervals presently used in two recently
implemented Medicare initiatives: the Hospital Readmissions Reductions
Program and the Hospital Inpatient Quality Reporting Program. (We refer
readers to our proposed rule for a description of these two policies
(79 FR 28197). We also proposed to remove our regulation at Sec.
412.532, Special payment provisions for patients who are transferred to
onsite providers and readmitted to a long-term care hospital, stating
that as an ``after the fact'' payment adjustment (that is, following
cost report settlement), we believed that this policy had a limited
impact on provider behavior, and additionally our proposed changes to
the interrupted stay policy make it unnecessary.
Comment: Commenters objected to the CMS proposal to modify the
fixed-day threshold for the greater than 3-day interrupted stay policy.
The commenters provided many reasons for their objections to the
proposal, including that:
CMS should first implement the new statutory framework
under Public Law 113-67 that applies patient-level criteria to payments
under the LTCH PPS in FY 2016 and then ``. . . assess whether any
problems related to the interrupted stay policy exist under the
transformed payment system.''
CMS used an ``inappropriate analogy'' in its proposal to
change the fixed-day threshold under the greater than 3-day interrupted
stay policy to 30 days because the referenced thresholds for the
Hospital IQR Program and the Hospital Readmissions Reduction Program
are used under the IPPS, but not under the LTCH PPS. Therefore, the
commenters believed that 30 days is an inappropriate benchmark for the
LTCH PPS policy. The commenters further noted that the LTCH PPS greater
than 3-day interrupted stay policy applies a payment adjustment when an
LTCH discharges a patient for access to clinical services not available
at the LTCH and the patient is readmitted to the LTCH within the fixed-
day threshold. In contrast, under the Hospital Readmissions Reduction
Program, a payment reduction is applied to the hospital's payment if
the patient returns to the hospital for care within the fixed-day
threshold, and it was not expected that the patient would return to the
hospital for continuation of care in relation to the most recent
discharge. The commenters specifically stated that ``the interrupted
stay thresholds are intended . . . to define a point at which the care
required for a

[[Page 50189]]

current episode of illness changes significantly enough to warrant `re-
setting the clock' to an entirely separate episode of care for the
subsequent readmission . . .'' to the LTCH. They added that ``The 30-
day readmission threshold, on the other hand, can be likened to a 30-
day warranty period during which a readmission could indicate
suboptimal quality of care during the initial admission.'' The
commenters believed that comparing the interrupted stay policy to the
readmissions initiatives would result in ``crucial incongruence''
because the two policies address fundamentally different clinical care
scenarios. Furthermore, the commenters stated that a clinical threshold
is not the same as a quality initiative. Some commenters stated that
CMS had not demonstrated that an LTCH stay interrupted by 30 days at an
IPPS hospital followed by a readmission to the LTCH constitutes a
single episode of care or hospital stay. Several commenters asserted
that ``the agency's previous research contradicts this premise upon
which the proposed policy change is based.''
The proposal did not include an adequate discussion of
CMS' rationale as an explanation of the Agency's proposal. The
commenters asserted that the publically available data sets did not
provide adequate information for stakeholders to study the potential
impact on hospitals based on this proposed policy. The commenters noted
that the inclusion of such material in the FY 2012 proposal enabled
LTCH stakeholders to meaningfully comment in response to the proposals.
Furthermore, the commenters believed that as a result of the policy
changes that will be implemented in FY 2016, LTCHs would be subject to
significant financial and operational upheaval if this new policy is
implemented as well.
CMS did not offer evidence to indicate that LTCHs have
been overpaid under the current policy or adequate data detailing the
impact this proposed policy would have on LTCHs. The commenters
suggested a more detailed impact analysis for this policy, including
whether patient access to care would be harmed.
Given that the potential impact imposed upon LTCHs based
on the proposal to change the fixed-day threshold from 9 to 30 days for
an intervening IPPS stay is so ``drastic,'' if finalized, there should
be 3-year transition period from the current policy if CMS were to
finalize such a policy, and CMS should change the MS-LTC-DRG relative
payment weights to account for the resulting changes in LTCH treatment
costs and Medicare payments.
Response: We appreciate the commenters' responses. After careful
consideration of the public comments we received, we agree with the
commenters who indicated that, in light of the forthcoming
modifications to the LTCH PPS, a major revision to the existing greater
than 3-day interrupted stay policy may be premature at this time. We
will take the other comments we received into consideration in
preparation for any potential future rulemaking on this issue.
Despite our decision to not finalize our proposal to change the
fixed-day threshold under the LTCH PPS greater than 3-day interrupted
stay policy, our goal continues to be to help ensure that readmission
decisions are made on a clinical basis and not based on payment
considerations. During the past several years, the Office of the
Inspector General (OIG) has been evaluating the effects of the
interrupted stay policies for LTCHs, primarily focusing on readmissions
from acute care hospitals. In the OIG's March 28, 2014 report,
``Vulnerabilities in Medicare's Interrupted-Stay Policy'' (OEI-04-12-
00490), the OIG stated that ``we identified several vulnerabilities in
the LTCH interrupted-stay policy, including inappropriate payments
(and) financial incentives to delay readmissions. . . .'' The report
further stated that ``. . . 59 LTCHs had a high number of readmissions
after the fixed-day period. . . .'' (We refer readers to the Executive
Summary of the OIG's March 28, 2014 report for further details.) The
report also noted that ``[f]orty-five of the 59 LTCHs were part of a
chain, and 23 of these LTCHs were part of the same chain . . . For 50
of these 59 LTCHs, the number of returns doubled immediately after the
fixed-day period.'' (We refer readers to page 17 of the OIG's March 28,
2014 report for further details.) The OIG recommended, among other
things, that CMS take appropriate action regarding LTCHs with a high
number of readmissions immediately after the fixed-day period and LTCHs
with a high number of readmissions following multiple short intervening
facility stays.
In our response to the OIG's report, CMS agreed that LTCH
readmission decisions should be based on the patient's clinical needs
and not the hospital's financial benefit. We stated that if we find
evidence that an individual hospital or chain is making readmission
decisions based on financial considerations rather than the patient's
clinical needs, we would take the appropriate action in those cases to
rectify the inconsistencies in adhering to the current policy. In
addition, as noted earlier, we will consider potential changes to the
greater than 3-day interrupted stay policy as we gain experience under
the new framework for the LTCH PPS.
Comment: Commenters supported the proposal to remove the regulation
at Sec. 412.532 (Special payment provisions for patients who are
transferred to onsite providers and readmitted to a long-term care
hospital), noting that the existing greater than 3-day interrupted stay
policy addresses many of CMS' concerns about patient shifting.
Commenters also indicated that they believed that the patient-level
criteria that we will be implementing for FY 2016 will result in
changes to LTCH PPS that further reduce the need for this policy.
Response: We appreciate the commenters' support. After
consideration of the public comments we received, we are finalizing our
proposal to remove the regulatory requirements under Sec. 412.532
because we believe that this policy has had a limited impact on
provider behavior.
In summary, in this final rule, we are not finalizing our proposal
to change the fixed day threshold under the greater than 3-day
interrupted stay policy under Sec. Sec. 412.531(a)(2) and (b)(4) of
the regulations. However, we are finalizing the proposal to remove
Sec. 412.532 in its entirety and to make a conforming change to Sec.
412.525 by removing and reserving paragraph (d)(3), which references
payments under Sec. 412.532.

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

As previously noted, Public Law 113-67 was enacted on December 26,
2013. Section 1206(b)(2) of Public Law 113-67 amended section 114(d) of
the MMSEA of 2007, as previously amended by section 4302 of the
American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111-5)
and sections 3106(b) and 10312(b) of the Affordable Care Act (Pub. L.
111-148). As further amended by section 112(b) of the Protecting Access
to Medicare Act of 2014 (Pub. L. 113-93), section 114(d) of the MMSEA
includes a ``new'' statutory moratoria on the establishment of new
LTCHs and LTCH satellite facilities, and on the increase in the number
of hospital beds in existing LTCHs and LTCH satellite facilities, ``for
the period beginning April 1, 2014 and ending September 30, 2017, which
mirrors nearly identical provisions of the ``expired'' moratoria under
section 114(d)(1) of the MMSEA,

[[Page 50190]]

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

[[Page 50191]]

actual construction of a hospital that intends to be classified as an
LTCH, the entity hiring those who would complete the construction would
not be classified as an LTCH. Prior to the designation or
classification of a hospital or an entity as an LTCH, a hospital must
first be established and certified and must then complete the
procedures specified under Sec. 412.23(e) in order to qualify as an
LTCH, at which point the hospital would be reclassified as an LTCH.
In accordance with our interpretation of section 114(d)(2)(B) of
the MMSEA, as amended by section 4302 of the ARRA and sections 3106(b)
and 10312(b) of the Affordable Care Act, we are interpreting the
contracting and expenditure provisions under section 114(d)(7)(B) of
the MMSEA, as added by section 112(b) of Public Law 113-93, to apply to
the hospital/entity requesting an exception to the moratorium on the
establishment of new LTCHs and LTCH satellite facilities between April
1, 2014, and September 30, 2017--the entity that would be classified as
an LTCH if it meets the stated requirements. That entity must have a
binding written agreement with an outside unrelated party for the
actual construction, renovation, lease, or demolition for converting
the hospital to an LTCH, and it must have expended at least 10 percent
of the estimated cost of the project (or, if less, $2,500,000) by the
date of enactment of Public Law 113-93--April 1, 2014.
Furthermore, with regard to the first prong, as when we implemented
the ``expired'' moratoria, we continue to believe that the use of the
term ``actual'' in the context of the ``actual construction,
renovation, lease, or demolition'' indicates that the provision focuses
only on the specific actions cited in the statute, and does not include
those actions that are being contemplated or are not yet substantially
underway. Although we are aware that a hospital or some other type of
entity may enter into binding written agreements regarding services and
items (for example, feasibility studies or land purchase) and incur
costs for those services and items prior to actual construction,
renovation, lease or demolition, we believe that those services or
items are not included in what we are permitted to consider under the
statutory language of the exception requirements.
With respect to the second prong, the statute specifies that the
hospital or entity must have ``expended'' at least 10 percent of the
estimated cost of the project (or, if less, $2,500,000) by April 1,
2014. As we did in regard to the interpretation of section 114(d)(2)(B)
of the MMSEA, as amended by section 4302 of the ARRA and section
3106(b) and 10312(b) of the Affordable Care Act, we are interpreting
the phrase ``cost of the project'' to mean the activities enumerated in
the first prong: ``the actual construction, renovation, lease, or
demolition for a long-term care hospital.'' That is, the statute
requires the hospital or entity to have spent the amount specified in
the statute on the actual construction, renovation, lease, or
demolition for the contemplated LTCH. Furthermore, as we did previously
in regard to the interpretation of section 114(d)(2)(B) of the MMSEA,
as amended by section 4302 of the ARRA and sections 3106(b) and
10312(b) of the Affordable Care Act, because the statute uses the
phrase ``has expended'' (that is, a past tense phrase), we are limiting
funds counting toward the 10 percent or $2,500,000 minimum to those
funds that have actually been transferred as payment for the stated
aspects of the project prior to April 1, 2014, as opposed to merely
obligating capital and posting the cost of the project on its books. We
believe that the provision addressed the concept of ``obligate'' in the
first prong of the test where the statute specifies ``a binding written
agreement . . . for the actual construction, renovation, lease, or
demolition of the long-term care hospital. . . .'' and there is no
reason to believe that the second prong of the test, which requires the
``expenditure'' of 10 percent of the project or, if less, $2,500,000,
was intended as a redundancy. The ability to post the expense on the
hospital's or entity's books could be satisfied by merely having a
binding written agreement under the first prong of section 114(d)(7)(B)
of the MMSEA. The fact that a second requirement is included that
involves an expenditure indicates that an additional threshold must be
met.
Finally, section 114(d)(7)(C) of the MMSEA includes an exception to
the moratorium if an LTCH, prior to April 1, 2014, has ``obtained an
approved certificate of need in a State where one is required''. As
discussed above, we are applying this exception requirement to the
entity that is requesting approval for an exception to the moratorium
on the establishment of new LTCHs and LTCH satellite facilities between
April 1, 2014, and September 30, 2017--the entity that would be
classified as an ``LTCH'' if the stated requirements are met.
However, with that said, we are clarifying what kind of certificate
of need we will accept under the provisions of section 114(d)(7) of the
MMSEA. We believe that the certificate of need exception applies to a
``hospital'' or entity that was actively engaged in developing an LTCH,
as evidenced by the fact that either an entity that wanted to create a
LTCH but did not exist as a hospital prior to April 1, 2014, had
obtained a certificate of need for a hospital by the date of enactment,
or an existing hospital had obtained a certificate of need to convert
the hospital into a new LTCH by that date. We are applying this
exception requirement to a hospital that is already in existence prior
to the date of enactment of Public Law 113-93, and that had previously
obtained an approved certificate of need for a hospital (other than a
LTCH) prior to April 1, 2014. We believe that Congress intended the
exception to the moratorium to save those entities that were already
actively engaged in becoming an LTCH. The fact that a hospital may have
had a certificate of need issued to it years before April 1, 2014, to
operate a hospital (other than a LTCH) is not indicative of such active
engagement, and, we believe, is outside of what is contemplated in
these LTCH-specific statutory provisions. We are only applying this
exception requirement where the certificate of need is specifically for
an LTCH. Because the certificate of need process is controlled at the
State level, in determining whether the hospital or entity has obtained
an approved certificate of need prior to April 1, 2014, we will consult
the applicable State on a case-by-case basis for that determination.
Decisions regarding the application of these moratoria and
exceptions provided within the provisions of section 114(d) of the
MMSEA will be handled on a case-by-case basis by the applicant's MAC
and the CMS Regional Office. ``Final'' instructions on implementing the
moratoria will be posted following the publication of this final rule.
In accordance with these policies, in this final rule we also are
revising our regulations under Sec. 412.23(e)(6) and (e)(7) to include
a description of the ``new'' moratoria, which is in effect from April
1, 2014, through September 30, 2017, on the establishment of new LTCHs
and LTCH satellite facilities (with specific exceptions), and on
increasing the number of beds in existing LTCHs and existing LTCH
satellite facilities.
Comment: Several commenters urged CMS to establish a regulatory
exception to the statutory moratorium on the increase in the number of
beds in existing LTCHs and LTCH satellite facilities. The commenters
pointed out

[[Page 50192]]

that, unlike the ``expired'' moratoria, the ``new'' moratoria under
section 1206(b)(2) of Public Law 113-67 do not provide for such
exceptions. The commenters further stated that when the statute was
further amended by section 112(b) of the PAMA of 2014, Congress elected
to provide an exception for the establishment of new LTCHs and LTCH
satellite facilities, but not for the increase in the number of LTCH
beds. Specifically, the commenters requested that CMS provide two
regulatory exceptions to the moratorium to allow for the increase in
the number of beds in existing LTCHs and LTCH satellite facilities if:
(1) the LTCH has a binding written agreement as of the date of the
enactment of this paragraph with an outside, unrelated party for the
actual construction, renovation, lease or demolition for long-term care
hospital beds, and has expended, before such date of enactment, at
least 10 percent of the estimated cost of the project (or, if less,
$2,500,000) (the ``binding written agreement exception''); or (2) if
the LTCH has obtained an approved certificate of need (CON) from the
State where one is required on or before the date of enactment (the
``CON exception''). The commenters believed that the creation of these
exceptions would be within CMS' authority because: (1) the statute is
``ambiguous'' and, therefore, CMS may exercise its authority under the
general rulemaking provisions under sections 1102 and 1871 of the Act
to ``resolve the ambiguity''; (2) with the enactment of section 112(b)
of the PAMA, the effective date of the new moratorium on the increase
in the number of beds in existing LTCHs and LTCH satellite facilities
was changed from January 1, 2015, to April 1, 2014, which creates a
disadvantage for those LTCHs that were in the process of increasing the
number of beds in their facilities based on ``reasonable reliance'' on
the January 1, 2015 effective date; (3) Congress acted in haste when
enacting the PAMA, and not including a bed number exception was an
error; and (4) the health needs of the critically ill Medicare
beneficiary population will go unmet without these additional beds.
Response: We do not agree with the commenters' assertion regarding
CMS' authority to establish two regulatory exceptions to the statutory
moratorium on the increase in the number of beds in existing LTCHs and
LTCH satellite facilities. Unlike the ``expired'' moratoria, the
``new'' moratoria under section 1206(b)(2) of Public Law 113-67
expressly noted that such exceptions would not apply under the ``new''
moratoria. We refer readers to section 1206(b)(2)(B) of Public Law 113-
67. When further amended by section 112(b) of the PAMA of 2014,
Congress only elected to provide exceptions for the establishment of
new LTCHs and LTCH satellite facilities, but not for the increase in
the number of LTCH beds. We do not believe that these two laws, read in
concert, are ambiguous. Congress explicitly addressed the former
exceptions as they relate to the ``new'' moratorium. In doing so,
Congress clearly demonstrated its awareness of the prior exceptions,
and by stating that the exceptions do not apply under the ``new''
moratorium while concurrently not offering new exceptions, clearly
indicated that Congress intended to offer no such exceptions.
Furthermore, there is no reason for CMS to presume that the subsequent
provisions for exceptions under the ``new'' moratoria on the
establishment of new LTCHs and LTCH satellite facilities, but not for
the increase in the number of LTCH beds was anything other than
intentional, absent evidence to the contrary. The commenters did not
present any evidence of this nature. Therefore, in the absence of some
indication that Congress intended to reverse its specific statement
under section 1206(b)(2)(B) of Public Law 113-67 that limits the
application of exceptions, such as it did in establishing exceptions to
the moratorium on the establishment of new LTCHs and LTCH satellite
facilities, we see no reason to infer that the absence of any
exceptions in regard to the moratorium on the increase in the number of
beds in existing LTCHs and LTCH satellite facilities was anything other
than intentional.
Furthermore, in response to the commenters' ``reasonable reliance''
assertions, while we may understand the commenters' concerns regarding
wasted resources, such concerns do not permit us to offer rulemaking
that would be contrary to the express intent of Congress. Finally,
while we understand the commenters' concerns regarding access to care
for Medicare beneficiaries, we believe that Congress would have
provided exceptions if it believed that beneficiary access to LTCH and
LTCH satellite facility beds would be negatively impacted. Furthermore,
we expect that Congress would address any unanticipated access issues,
should these issues arise. Therefore, we disagree with the commenters'
assertions.
Comment: One commenter urged CMS to revise its interpretation of
the exceptions provisions under the moratorium on the development of
new LTCHs and LTCH satellite facilities so as to include ``ownership''
of the property in the list of permitted activities that could be
included in the criteria for qualifying for the ``binding written
agreement'' exception. The commenter also urged CMS to include the
purchase of architectural plans as a necessary element that would count
towards quantifying the total expenditure amount.
Response: In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that
the ``new'' moratorium on the development of new LTCHs and LTCH
satellite facilities provided under section 1206(b)(2) of Public Law
113-67, as amended by section 112(b) of the PAMA, and incorporated as
section 114(d)(7) of the MMSEA ``. . . mirrors the expired provisions
of section 114(d)(2)(A)'' of the `expired' moratorium.'' Because
Congress used the identical wording for these provisions, we proposed
to apply the same interpretation of the exceptions provisions that we
used for the ``expired'' moratorium in regard to the ``new moratorium.
(We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28198).) The specific exception provision that the commenters are
questioning is outlined under section 114(d)(7)(B) of the MMSEA, as
amended, and is defined as the ``binding written agreement'' exception.
Section 114(d)(7)(B) of the MMSEA of 2007, as amended, specifies one of
the qualifying criterion for this exception, namely, the requirement
for the facility to have a binding written agreement with an outside,
unrelated party for the actual construction, renovation, lease, or
demolition for a long-term care hospital, and have expended, before the
date of the enactment of the PAMA, at least 10 percent of the estimated
cost of the project (or, if less, $2,500,000).
After we implemented the provisions of the ``expired'' moratorium,
published in the May 22, 2008 interim final rule with comment period
(73 FR 29699), in response to the FY 2010 IPPS/LTCH PPS final rule,
commenters urged CMS to revise its interpretation of the ``binding
written agreement'' exception under section 114(d)(2)(B) of the MMSEA
to include ``. . . feasibility studies, land purchases, architectural
fees, attorneys' fees, appraisals, purchase of rights of way, as well
as other activities that occur during the development of a hospital . .
.'' At that time, we stated in our response that, ``. . . Congress
expressly specified only four `actual' activities in the statute.'' We
also believe, as we stated in the May 22, 2008 interim final rule with

[[Page 50193]]

comment period, that the use of the term ``actual'' in the context of
the exception provisions terminology of ``actual construction,
renovation, lease, or demolition'' limits the activities that Congress
considers to represent a substantial commitment to that particular
project of developing an LTCH or an LTCH satellite facility. By using
the term ``cost of the project,'' we believe that the statute refers to
the activities enumerated in the first prong, ``the `actual'
construction, renovation, lease, or demolition for a long-term care
hospital.'' (We refer readers to the FY 2010 IPPS/LTCH PPS final rule
with comment period (74 FR 43988).) Our interpretation of the exception
provisions for a ``binding written agreement'' under the ``expired''
moratorium was implemented in FY 2008 with the publication of the May
22, 2008 interim final rule with comment period (73 FR 29699), and
finalized in the FY 2010 IPPS/LTCH PPS final rule with comment period
(74 FR 43754). While we understand that our longstanding interpretation
of the language in this exception may cause hardship to developing
LTCHs and LTCH satellite facilities that seek to qualify for the
exception under the ``expenditure'' prong, we continue to believe that
only the specific costs cited in the statute may be considered in
evaluating and granting exceptions to the ``new'' moratorium.
Furthermore, we also believe that by using the same language in the
exceptions provisions under the ``new'' moratorium that was used in the
provisions of the ``expired'' moratorium, Congress had reason to expect
that CMS would apply the same interpretation under the ``new''
exception provisions as were applied under the ``expired'' moratorium
exception provisions. If Congress disagreed with our interpretation, or
believed that other costs should be included or considered in
determining whether an LTCH or LTCH satellite facility would qualify
for this exception to the moratorium, it could have revised the
language used under section 112(b) of the PAMA, which applies the
exceptions, accordingly.

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

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

[[Page 50194]]

that policy were to be applied to subclause (II) LTCHs.
In accordance with the requirements of section 1206(d)(1) of Public
Law 113-67, we conducted an evaluation of the payment rates and
regulations governing subclause (II) LTCHs. We analyzed MedPAR claims
data for FY 2010 and estimated Medicare costs incurred by the one LTCH
currently classified as a subclause (II) LTCH, a 225-bed LTCH located
in New York. We also evaluated the same metrics for two comparison
groups of LTCHs, that is, approximately 40 LTCHs located in the same
census region (that is, the Northeast Census Region, which includes
Connecticut, Maine, New Jersey, and Pennsylvania), and approximately 25
LTCHs with the same bed size category (that is, between 150 and 250
beds) in order to assess the distinctions between a subclause (I) LTCH
and a subclause (II) LTCH. For purposes of this analysis, LTCH PPS
payments were calculated from the payment field in the MedPAR claims
data, and the estimated costs for those claims were calculated using
the covered charges and CCRs in the Provider-Specific File (PSF) that
correlate to the discharge date on each claim. We calculated the
aggregate average margins (ratio of payment to costs) for the subclause
(II) LTCH and for the two sets of comparison groups of LTCHs using the
calculated FY 2010 costs and payments. Our analysis found that, under
current LTCH PPS payment policy, the subclause (II) LTCH has much lower
margins than comparable LTCHs located in the Northeast Census Region or
LTCHs with 150-250 beds. Specifically, the subclause (II) LTCH had a
negative margin for its Medicare patients paid under LTCH PPS in FY
2010, while both the Northeast Census Region LTCHs and LTCHs with 150-
250 beds had positive aggregate margins for its Medicare patients paid
under LTCH PPS for the same period.
In our evaluation of subclause (II) LTCHs under the LTCH PPS, in
accordance with the requirements of section 1206(d) of Public Law 113-
67, we also compared the types of patients treated at subclause (I) and
subclause (II) LTCHs. The top five MS-LTC-DRGs for patients treated at
the subclause (II) LTCH in FY 2010 account for almost one-third of all
of its Medicare discharges. Four of the top five MS-LTC-DRGs for the
subclause (II) LTCH involve a neoplastic disease, and its case-mix
differs significantly from the subclause (I) LTCHs, which had large
proportions of ventilator and respiratory patients. The five most
common MS-LTC-DRGs for the subclause (I) LTCHs were: Respiratory system
diagnosis with ventilator support 96+ hours (MS-LTC-DRG 207); Pulmonary
edema and respiratory failure (MS-LTC-DRG 189); Septicemia or severe
sepsis without ventilator support 96+ hours with MCC (MS-LTC-DRG 870);
Skin ulcers with MCC (MS-LTC-DRG 592); and Respiratory system diagnosis
with ventilator support < 96 hours (MS-LTC-DRG 208). In comparison, for
the subclause (II) LTCH, the five most common MS-LTC-DRGs were:
Respiratory neoplasms with CC (MS-LTC-DRG 181); Digestive malignancy
with CC (MS-LTC-DRG 375); Respiratory neoplasms with MCC (MS-LTC-DRG
180); Organic disturbances & mental retardation (MS-LTC-DRG 884); and
Malignancy, female reproductive system w CC (MS-LTC-DRG 755). These
data highlight significant differences between a subclause (I) LTCH and
a subclause (II) LTCH based on patient-mix and Medicare margins,
notwithstanding the considerations that have been made in structuring
the current LTCH regulations to acknowledge the uniqueness of an LTCH
meeting the statutory definition of a subclause (II) LTCH.
In evaluating ``both the payment rates and regulations governing
hospitals which are classified under subclause (II) . . . ,'' as
required by section 1206(d) of Public Law 113-67, we also analyzed the
impacts of upcoming changes to the LTCH PPS under section 1206(a) of
Public Law 113-67. In discussing these analyses, we note that, as
discussed in section VII.I.2. of the preamble of this final rule, we
are not making any specific policy and payment changes in this final
rule to implement the provisions of section 1206(a) of Public Law 113-
67. We intend to establish policies related to the types of LTCH cases
expected to meet the legislative patient-level criteria for the
``standard LTCH PPS payment'' and cases expected to meet the criteria
for the ``site neutral'' payments under the LTCH PPS in the FY 2016
rulemaking cycle. Although we are not making any specific policy or
payment changes in this final rule related to the provisions of section
1206(a) of Public Law 113-67 at this time, we discuss these provisions
in this section because they relate to our analysis of the LTCH PPS
payment rates and regulations governing subclause (II) LTCHs.
Absent the adoption of policies for the implementation of section
1206(d) of Public Law 113-67, the payment changes required by section
1206(a) of Public Law 113-67 will apply to subclause (II) LTCHs
beginning with discharges occurring in cost reporting periods beginning
on or after October 1, 2015 (that is, FY 2016 and beyond). Due to the
changes required by the provisions of section 1206(a) of Public Law
113-67 (discussed at greater length under section VII.I. of the
preamble of this final rule), beginning in FY 2016, only those LTCH
discharges meeting specified patient-level clinical criteria will be
paid a ``standard LTCH PPS payment amount.'' Discharges not meeting
those criteria will be paid based on a ``site neutral'' payment amount
(the lesser of the ``IPPS comparable'' amount, as applied under our SSO
policy at Sec. 412.529, or 100 percent of the estimated costs of the
case). The statutory requirements to be paid the ``standard LTCH PPS
payment amount'' are that the LTCH discharge does not have a principal
diagnosis relating to a psychiatric diagnosis or to rehabilitation,
and:
The stay in the LTCH was immediately preceded by a
discharge from an acute care hospital that included at least 3 days in
an intensive care unit (ICU); or
The stay in the LTCH was immediately preceded by a
discharge from an acute care hospital and the patient's LTCH stay is
assigned to an MS-LTC-DRG based on the receipt of ventilator services
of at least 96 hours.
Furthermore, section 1206(a)(1)(C)(ii)(II) of Public Law 113-67
specifies that, effective with cost reporting periods beginning on or
after FY 2020, any LTCH with an ``LTCH discharge payment percentage''
that demonstrates that more than 50 percent of that LTCH's discharges
were paid for based on the ``site neutral'' payment rate will
subsequently be paid for all discharges at the rate ``. . . that would
apply under subsection (d) for the discharge if the hospital were a
subsection (d) hospital.'' We refer readers to section VII.I. of the
preamble of this final rule for a further discussion of the provisions
of section 1206(a) of Public Law 113-67.
In light of these forthcoming statutory changes, we evaluated
MedPAR claims data from the only hospital meeting the statutory
definition of a subclause (II) LTCH for FY 2010 to project the impact
of the revisions to the LTCH PPS made by section 1206(a) of Public Law
113-67. Our simulations included analyses of the potential financial
impact of applying the patient-level criteria and ``site neutral''
payment policies to a subclause (II) LTCH, and the financial impact on
payments if that LTCH were to be paid for more than 50 percent of its
discharges at the ``site neutral'' payment rate. In conducting this
analysis in the absence of rules implementing the changes mandated by

[[Page 50195]]

section 1206(a) of Public Law 113-67, we assumed that there would be no
changes in LTCH admission patterns in response to the LTCH PPS payment
changes required by section 1206(a) of Public Law 113-67. Furthermore,
we used the FY 2010 claims data for the subclause (II) LTCH and the two
LTCH comparison groups described above in order to compare the
potential effects of the payment changes under the LTCH PPS required by
section 1206(a) of Public Law 113-67 between subclause (I) LTCHs and
subclause (II) LTCHs. We simulated payments for those discharges that
would be expected to meet the legislative patient-level criteria for
the ``standard LTCH PPS payment'' and for discharges that would be
expected to receive ``site neutral'' payments under the LTCH PPS. Our
analysis found that the subclause (II) LTCH would be expected to have
significantly fewer (approximately 5 times fewer) discharges that would
be expected to meet the legislative patient-level criteria for the
``standard LTCH PPS payment'' than the comparison groups of subclause
(I) LTCHs (that is, Northeast Census Region LTCHs and LTCHs with 150-
250 beds).
Additionally, we analyzed the potential effects of the ``LTCH
discharge payment percentage'' provision under the requirements of
section 1206(a)(1)(C)(ii)(II) of Public Law 113-67, as noted above. We
evaluated FY 2010 claims data from the subclause (II) LTCH to project
the potential impact of this provision. Based on our simulations in
which we projected which FY 2010 LTCH claims would be expected to
receive ``site neutral'' payments under the LTCH PPS (as described
above), and having found a significant number, we project that a
significant negative financial impact would be imposed upon the
subclause (II) LTCH's payments. Without considerable behavioral
changes, the subclause (II) LTCH would be expected to have more than 50
percent of its discharges paid based on a ``site neutral'' payment and,
therefore, would receive a payment adjustment under the provisions of
section 1206(a)(1)(C)(ii)(II) of Public Law 113-67 for all of its
discharges. Furthermore, our analysis revealed that, given the
particular medical profile of their patient population, that the
``subsection (d)'' comparable payment amount under the payment
adjustment required by section 1206(a)(1)(C)(ii)(II) of Public Law 113-
67 would not likely cover the costs for a significant number of their
discharges. Consequently, our analysis shows that the subclause (II)
LTCH is projected to experience a large negative aggregate average
margin for its Medicare discharges under the payment changes required
by section 1206(a) of Public Law 113-67.
Based on our findings under our evaluation of payments to subclause
(II) LTCHs under the LTCH PPS and consistent with the provisions of
section 1206(d) of Public Law 113-67, we evaluated adjustments that
could be applied to ensure appropriate payments under the LTCH PPS for
a subclause (II) LTCH under the LTCH PPS. This analysis included
consideration of a reasonable-cost based model, such as the TEFRA
payment system under which certain PPS-excluded hospitals (such as
children's and cancer hospitals) are currently paid. The TEFRA payment
system, which was established under the provisions of Public Law 97-
248, is implemented under the regulations at 42 CFR 413.40.
In addition to governing the current payment of certain PPS-
excluded hospitals, the TEFRA payment system was also previously used
to pay LTCHs prior to the implementation of the LTCH PPS. As described
in the RY 2003 LTCH PPS final rule (67 FR 55957), the TEFRA payment
system was ``. . . established [to make] payments based on hospital-
specific limits for inpatient operating costs. A ceiling on payments to
such hospitals is determined by calculating the product of a facility's
base year costs (the year on which its target reimbursement limit is
based) per discharge, updated to the current year by a rate-of-increase
percentage, and multiplied by the number of total current year
discharges.'' (A detailed discussion of target amount payment limits
under Public Law 97-248 can be found in the September 1, 1983 final
rule published in the Federal Register (48 FR 39746).)'' Under the
TEFRA payment system, in accordance with section 1886(g) of the Act,
Medicare allowable capital costs are paid on a reasonable cost basis.
We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule for a
detailed description of our analysis and evaluation of the application
of the TEFRA payment model to a subclause (II) LTCH (78 FR 28202
through 28203). We note that in describing our estimated operating and
capital payments under the TEFRA payment system principles in the
proposed rule, we mistakenly stated that we used FY 2010 cost report
data when those estimates were determined using FY 2011 cost report
data.
Our analysis of the subclause (II) LTCH's projected payments under
a TEFRA-payment model indicated that such payments would reasonably
cover the costs for most of their discharges, and consequently, the
subclause (II) LTCH is not projected to experience a negative aggregate
margin for its Medicare discharges, unlike our projections under both
the current LTCH PPS and the forthcoming payment changes to the LTCH
PPS required by section 1206(a) of Public Law 113-67.
In the above analyses, we evaluated the current regulations as well
as anticipated payment rates under various statutorily mandated
policies for FY 2016 on a subclause (II) LTCH under the LTCH PPS based
on FY 2010 discharge data, including payments, costs and case-mix. As
discussed above, our evaluation indicates that, given the required
patient-mix for a subclause (II) LTCH, the forthcoming changes to the
LTCH PPS are likely to result in a financial situation that is not
sustainable for the subclause (II) LTCH evaluated above. Furthermore,
our analysis also shows that current LTCH PPS payments for a subclause
(II) LTCH, even with taking into account the considerations that have
been made in structuring current LTCH PPS policies to acknowledge the
uniqueness of a subclause (II) LTCH, may not be sufficient to cover the
costs incurred for the treatment of patients of the particular medical
profile of the subclause (II) patient population prescribed by the
statute. Furthermore, we believe that in establishing subclause (II)
LTCHs, Congress endorsed the support of the unique mission of this
particular category of hospital. In fact, while mandating a significant
revision to the LTCH PPS under section 1206(a) of Public Law 113-67,
under section 1206(d) of the same statute, Congress directed the
Secretary to evaluate the impact of the LTCH PPS on subclause (II)
LTCHs, and, based on those findings, authorized the Secretary to adjust
payment rates and other regulations, as appropriate, for this category
of LTCHs.
Accordingly, in recognition of the subclause (II) LTCH's current
estimated payment-to-cost ratio under the LTCH PPS and further
anticipated losses that would likely otherwise occur under the
forthcoming statutory changes to the LTCH PPS, which would render this
type of specially recognized facility fiscally untenable, we believe
that it is appropriate to exercise the authority under section
1206(d)(2) of Public Law 113-67. Therefore, in this final rule, for
cost reporting periods beginning on or after October 1, 2014 (FY 2015
and beyond), we are applying a payment adjustment to subclause (II)
LTCH payments under the LTCH PPS such that these LTCH PPS payments will

[[Page 50196]]

resemble payments made under the reasonable cost-based TEFRA payment
system. We believe that it is appropriate to apply this payment
adjustment for a subclause (II) LTCH's first cost reporting period
beginning on or after October 1, 2014, rather than discharges occurring
on or after October 1, 2014, because it is consistent with the annual
update of the hospital-specific limits (ceiling) for inpatient
operating costs under the TEFRA payment system (as described below). We
are implementing this payment adjustment for subclause (II) LTCHs in
the regulations by adding new Sec. 412.526 under 42 CFR Part 412,
Subpart O.
Specifically, in this final rule we are establishing new
regulations under Sec. 412.526 that will provide that, for cost
reporting periods beginning on or after October 1, 2014, payments to a
``subclause (II)'' LTCH will be made under the LTCH PPS under Subpart O
of Part 412, as adjusted. This adjusted payment amount will generally
be equivalent to an amount determined under the reasonable cost-based
reimbursement rules for both operating and capital-related costs under
42 CFR Part 413. As described above, Medicare payments for inpatient
operating costs under the reasonable-cost based TEFRA payment system
are subject to a hospital-specific ceiling on payments that is
determined as the product of a hospital's base year costs per discharge
(``target amount per discharge''), updated to the current year by a
rate-of-increase percentage, and multiplied by the number of its
Medicare discharges for the year. Medicare allowable inpatient capital-
related costs are paid on a reasonable cost basis, in accordance with
section 1886(g) of the Act.
Under this payment adjustment under new Sec. 412.526 for inpatient
operating costs, the adjusted payment amount will generally be
determined in accordance with the cited provisions of Sec. 413.40.
Accordingly, we are establishing a ``target amount'' for a subclause
(II) LTCH for purposes of calculating a hospital-specific ceiling on
payments for inpatient operating costs under this payment adjustment.
We will determine such a target amount based on the subclause (II)
LTCH's target amount that was used to determine its payments for
inpatient operating costs under the TEFRA payment system prior to the
implementation of the LTCH PPS, updated by the TEFRA payment system
rate-of-increase percentages under Sec. 413.40(c)(3). Furthermore, in
determining a subclause (II) LTCH's target amount for purposes of this
payment adjustment, consistent with the statute (as explained below),
we are not including the increases to LTCHs' TEFRA target amounts and
caps provided for by section 307(a) of the BIPA. As discussed
previously, prior to the implementation of the LTCH PPS, section 307(a)
of the BIPA provided a 2-percent increase to the wage-adjusted 75th
percentile cap on the TEFRA target amounts for existing LTCHs for cost
reporting periods beginning in FY 2001 and a 25-percent increase to the
hospital-specific TEFRA target amounts for LTCHs, subject to the
increased 75th percentile cap. Section 307(a)(2) of the BIPA also
specifies that the 2-percent increase to the 75th percentile cap and
the 25-percent increase to the TEFRA target amounts were not to be
taken into account in the development and implementation of the LTCH
PPS. Therefore, consistent with the statutory requirement under section
307(a)(2) of the BIPA, under new Sec. 412.526, we will determine a
subclause (II) LTCH's updated target amount based on its FY 2000 TEFRA
payment system target amount, the year prior to when the increases
under section 307(a) of the BIPA were effective. Using its FY 2000
TEFRA payment system target amount will ensure that the increases
provided for by section 307(a) of the BIPA will not be included in the
LTCH PPS payments to subclause (II) LTCHs under this LTCH PPS payment
adjustment. This approach for excluding those increases to the TEFRA
payment system target amounts is consistent with the methodology that
was used to develop the one-time prospective adjustment to the standard
Federal rate in which we calculated what amount would have been paid
under the TEFRA payment system had the LTCH PPS not been implemented
(77 FR 53497 through 53500). Therefore, under the payment adjustment
for subclause (II) LTCHs under new Sec. 412.526, we will determine a
FY 2015 LTCH PPS target amount by updating the subclause (II) LTCH's FY
2000 TEFRA target amount using the applicable rate-of-increase
percentages for FYs 2001 through 2015 established under Sec.
413.40(c)(3).
In addition, as with TEFRA payment system, we will pay for
inpatient capital-related costs in accordance with the regulations
under 42 CFR Part 413, under which Medicare allowable capital costs are
paid on a reasonable cost basis, consistent with section 1886(g) of the
Act.
Comment: Several commenters supported the proposed policy to apply
a payment adjustment to subclause (II) LTCHs payments modeled on the
TEFRA payment system. In addition, the commenters suggested that CMS
provide the authority for this LTCH to request and receive an
adjustment to its rate-of-increase ceiling, as specified in our TEFRA
regulations at 42 CFR 413.40 (e), (g), and (i) for other hospitals paid
on a TEFRA basis ``. . . to address circumstances that arise that are
beyond a hospital's control and render an applicable TEFRA ceiling
amount inadequate.''
Response: We have evaluated the provisions specified by the
commenters and considered the fiscal circumstances of the one subclause
(II) LTCH that will be affected by the payment system revisions
finalized in this final rule. In response to the commenters' concerns,
we believe that it would be reasonable to consider circumstances that
may arise that are beyond a hospital's control and that may render an
applicable LTCH PPS ceiling amount inadequate. Therefore, we are adding
new paragraph (c)(5)(i) under new Sec. 412.526 entitled ``Adjustments
for Extraordinary circumstances.'' Paragraph (c)(5)(i)(A) under new
Sec. 412.526 states that CMS may adjust the ceiling determined under
paragraph (c)(1) of the section for one or more cost reporting periods
when unusual inpatient operating costs have resulted in the hospital
exceeding its ceiling imposed under this section due to extraordinary
circumstances beyond the hospital's control. These circumstances
include, but are not limited to, strikes, fire, earthquakes, floods, or
similar unusual occurrences with substantial cost effects.
The other suggestion recommended by the commenters deal with the
LTCH's ability to request an adjustment to their allowed LTCH PPS rate-
of-increase ceiling, if their costs during a specific period are no
longer comparable to the base year and the authority to request a new
base year for its LTCH PPS target amount. Because our data reveal that,
on average, for the past 6 years, this LTCH's costs are considerably
below the amount that OACT calculated as its FY 2015 target amount, we
believe that these additional features are unnecessary at this time.
Moreover, if future data indicate that a change is warranted, we will
consider proposing to add these features to our policy in future
rulemaking.
In summary, for cost reporting periods beginning on or after
October 1, 2014, we are establishing that payment to a ``subclause
(II)'' LTCH will be made under the LTCH PPS, as adjusted. The adjusted
payment amount will be comprised of an amount determined under the
reasonable cost-based reimbursement rules for both operating and
capital-related costs in accordance with the cited portions of Part
413.

[[Page 50197]]

Under this payment adjustment, Medicare inpatient operating costs will
be reimbursed on a reasonable cost basis, subject to a ceiling; that
is, subject to an aggregate upper limit on the amount of a hospital's
net Medicare inpatient operating costs that will be recognized for
payment purposes. For each cost reporting period, the ceiling on
payments for Medicare inpatient operating costs will be determined by
multiplying the updated target amount for that period by the number of
LTCH PPS discharges during that period. For cost reporting periods
beginning during FY 2015, the target amount will be equal to the
hospital's target amount determined under Sec. 413.40(c)(4) for its
cost reporting period beginning during FY 2000, updated by the
applicable annual rate-of-increase percentages specified in Sec.
413.40(c)(3) to the subject period (that is, for FYs 2001 through
2015). For subsequent cost reporting periods, the target amount will
equal the hospital's target amount for the previous cost reporting
period updated by the applicable annual rate-of-increase percentage
specified in Sec. 413.40(c)(3) for the subject cost reporting period.
Payment for Medicare allowable inpatient capital-related costs under
this payment adjustment will be made on a reasonable cost basis, in
accordance with the cited portions of 42 CFR Part 413. In this final
rule, we are codifying the provisions of this payment adjustment to
subclause (II) LTCHs under new Sec. 412.526 of the regulations. We are
adding paragraph (c)(5), which establishes the general rules for
requesting adjustments and also includes a provision to provide
adjustments for unusual costs arising from extraordinary circumstances.
In addition, we are making conforming changes to Sec. 412.521(a)(2) to
cross reference this payment adjustment under new Sec. 412.526.

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

1. Overview
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27668 through
27676), we presented a description of our research on the development
of patient-level and facility-level criteria for LTCHs and a potential
framework for developing changes to the LTCH PPS. The framework was
based on the preliminary findings of two projects conducted by Kennell
and Associates (Kennell) and its subcontractor, RTI, under the guidance
of CMS' Center for Medicare and Medicaid Innovation (the Innovation
Center). We stated that we believed that the findings from these
projects, in large part, could be used to identify the subpopulation of
Medicare beneficiaries that should form the core group of patients
under the LTCH PPS (that is, a chronically critical ill/medically
complex (CCI/MC) framework for the LTCH PPS). Although this research
was not completed at the time of issuance of the FY 2014 IPPS/LTCH PPS
proposed rule, we solicited feedback from LTCH stakeholders in the FY
2014 IPPS/LTCH PPS proposed rule on the description of the interim
framework, and indicated that any public comments submitted would be
evaluated and considered by our contractors with the expectation of
formulating a proposal for FY 2015 based on this research (78 FR 27668
through 27676).
Section 1206(a) of Public Law 113-67 amended section 1886(m) of the
Act by adding paragraph (6), which establishes patient-level criteria
for payments under the LTCH PPS for implementation beginning in FY
2016. Therefore, our prior intention to present a proposal for a CCI/MC
framework for the LTCH PPS (as discussed in the FY 2014 IPPS/LTCH PPS
proposed and final rules) in the FY 2015 IPPS/LTCH PPS proposed rule
was superseded. Accordingly, we did not propose revisions to the LTCH
PPS based upon the Kennell/RTI framework for FY 2015. Rather, we stated
that we intend to propose to implement the requirements established by
section 1206(a) of Public Law 113-67 in the FY 2016 LTCH PPS rulemaking
cycle. (We note that the final report on the CCI/MC framework developed
by Kennell/RTI under our research contract is expected to be available
later this year and will be made available to the public through a Web
site.)
We refer readers to section VII.I.2. of the preamble of the
proposed rule in which we summarized the statutory provisions of
section 1206(a) of Public Law 113-67 (78 FR 28204). In section VII.I.2.
of the preamble of this final rule, we discuss several significant
issues arising from these statutory changes to the LTCH PPS, on which
we requested stakeholder feedback prior to developing our proposals for
FY 2016 implementation. We intend to propose the specific policy and
payment changes that will be necessary to implement the provisions of
Public Law 113-67 for cost reporting periods beginning on or after
October 1, 2015, during the FY 2016 rulemaking cycle. Although we did
not propose to make any policy and payment changes mandated by section
1206(a)(1) of Public Law 113-67 in the FY 2015 IPPS/LTCH PPS proposed
rule, in light of the degree of the forthcoming changes, in section
VII.I.3. of the preamble of the proposed rule, we discussed some of the
changes and requested public feedback to inform our proposals for FY
2016.
2. Additional LTCH PPS Issues
The LTCH PPS was originally established for cost reporting periods
beginning on or after October 1, 2002, by section 123(a) of the BBRA
(Pub. L. 106-113) and section 307(b) of the BIPA (Pub. L. 106-554). (We
also refer readers to section 1886(m) of the Act, as added by section
114(e) of the MMSEA.) Section 307(b) of the BIPA granted the Secretary
considerable authority in developing the LTCH PPS, specifying that the
Secretary shall ``. . . examine and may provide for appropriate
adjustments to the long-term hospital payment system, including
adjustments to DRG weights, area wage adjustments, geographic
reclassification, outliers, updates, and a disproportionate share
adjustment. . . .''
Accordingly, as we evaluate the revisions to the LTCH PPS required
by section 1206(a)(1) of Public Law 113-67, we believe that the broad
authority permitted by the original statutory mandates continues to
grant us the authority to modify, if appropriate, methodologies for our
payment determinations under the LTCH PPS. (We refer readers to the RY
2003 LTCH PPS final rule (67 FR 55954), which describes the development
and implementation of the LTCH PPS for FY 2003.) Specifically, section
1206(a) of Public Law 113-67 establishes two distinct payment groups
for LTCH discharges under the revised system: discharges meeting
specified patient-level criteria that will be paid under the ``standard
LTCH PPS payment amount'' and all other patient discharges that will be
paid under the ``site neutral'' payment rate and methodology (discussed
above). In setting the payment rates and factors under the LTCH PPS as
required by section 1206(a) of Public Law 113-67 for certain LTCH PPS
payment adjustments, such as the MS-LTC-DRG relative weights and high-
cost outlier payments, we plan to evaluate whether it would be
appropriate to modify our historical methodology to account for the
establishment of the two distinct payment methodologies for LTCHs. For
example, we intend to examine whether, beginning in FY 2016, it is
still appropriate to include data for all LTCH PPS cases, including
``site neutral'' payment cases, in our methodology for setting relative
payment weights for MS-LTC-DRGs. We also intend to

[[Page 50198]]

explore the need for changes to the LTCH PPS high-cost outlier payment
policies. Given the fact that, for a number of LTCH patients, payment
will be made based on the lower of the ``IPPS comparable'' per diem
payment and the estimated cost of the case, we will need to decide
whether to maintain a single high-cost outlier ``target'' for all LTCH
PPS cases (including ``site neutral'' payment cases) or whether it may
be more appropriate to establish separate high-cost outlier ``targets''
for each of the two payment groups under the revised LTCH PPS. Our
existing methodology for calculating the MS-LTC-DRG relative weights is
discussed during the annual rulemaking cycle and was, most recently,
included in the FY 2014 IPPS/LTCH final rule (78 FR 50753 through
50760). Our detailed description of our existing high-cost outlier
payment policy, which has remained the same since being implemented,
can be found in the RY 2003 LTCH PPS final rule (67 FR 56022 through
56027). (We note that our methodology for calculating the MS-LTC-DRG
relative payment weights for FY 2015 can be found in section VII.B.3.
of the preamble of this final rule, and our policies under the high-
cost outlier payment policy for FY 2015 can be found in section V.D. of
the Addendum to this final rule.)
In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we were
interested in receiving feedback from LTCH stakeholders on our plans to
evaluate whether it would be appropriate to modify any of our
historical methodologies as we implement the payment changes to the
LTCH PPS under section 1206(a) of Public Law 113-67. In particular, we
were interested in public feedback on the issues mentioned earlier
(that is, policies relating to establishing the relative payment
weights and high-cost outliers) so that we may evaluate various options
in preparation for developing proposals to implement the statutory
changes beginning in FY 2016.
Comment: In response to our request for feedback from LTCH
stakeholders, numerous commenters addressed the setting of relative
payment weights for MS-LTC-DRGs and establishing a high-cost outlier
policy under the new LTCH PPS framework. MedPAC urged CMS to establish
``. . . new LTCH base payment rates and new relative payment weights
for each MS-LTC-DRG based solely on the most recent available
standardized data associated with discharges meeting the specified
patient-level criteria.'' MedPAC stated that the change in methodology
required by the new LTCH PPS framework should not result in increased
aggregate payments for the cases paid under the standard LTCH PPS rate
under the new LTCH PPS framework. MedPAC also recommended that both
standard and site neutral payments receive high-cost outliers, and that
total outlier payments under the LTCH PPS continue to account for 8
percent of total LTCH payments for all cases (both payment types
combined) with the ``same uniform national fixed-loss amount . . .
applied to both cases being paid the standard LTCH PPS payment amount
and to cases being paid the site neutral amount.'' Most of the other
commenters recommended that the high-cost outlier threshold and MS-LTC-
DRG relative payment weights be calculated only using data from cases
that meet the patient-level criteria established by section 1206 of
Public Law 113-67; that is, cases for whom Medicare will make standard
payments under the LTCH PPS, without including data on ``site neutral''
payments. Some of the commenters urged CMS to focus on keeping payments
for standard cases at the same payment level as they have recently
been, and recommended focusing only on standard cases for the
calculation of the high-cost outlier threshold and for establishing MS-
LTC-DRG relative payment weights. Other commenters recommended setting
the fixed-loss threshold for high-cost outliers at 8 percent initially
and then readjusting the threshold as more data become available.
Several commenters conducted individual analyses and specifically
recommended setting the fixed-loss threshold at 8 percent for each of
the two payment types, standard and site neutral. A number of
commenters made recommendations regarding specific aspects of the law.
Other commenters opined that site neutral payments should be based on a
full IPPS payment rather than the lesser of an IPPS comparable payment
and the estimated costs of the case. Many commenters expressed concern
regarding the severity of illness of many LTCH patients for whom site
neutral payments would be made under the new LTCH PPS framework, and
noted that the costs of treating such patients would not be covered
under the statutory framework and could result in patient access
problems for LTCH care. Other commenters suggested that the patient-
level criteria that would have to be met in order for an LTCH to
receive the standard payment rate be expanded to include severe wound
care patients and diabetes diagnoses with post-surgical complications.
Several commenters suggested that the statutory language be clarified
regarding the application of IPPS ICU and CCU codes 020X and 021X to
determine compliance with the 3-day criteria, and urged CMS to consider
all categories within those codes. Several commenters requested that
CMS hold public meetings for stakeholders to address the issues
presented by the implementation of section 1206 of Public Law 113-67.
Response: We appreciate the commenters' thoughtful and detailed
feedback, particularly those comments received regarding setting
relative payment weights for MS-LTC-DRGs and establishing a high-cost
outlier policy under the new LTCH PPS framework. In preparation for
proposing the new LTCH PPS framework in the FY 2016 IPPS/LTCH PPS
proposed rule, we will consider these suggestions and respond to
stakeholders' concerns with openness and transparency.
Comment: MedPAC included additional comments on CMS' SSO policy in
light of the new LTCH PPS framework that it believed are appropriate
for inclusion in this final rule. MedPAC believed that the existing SSO
policy, which pays an adjusted amount for cases with lengths of stay
less than or equal to five-sixths of the geometric average length of
stay for the MS-LTC-DRG, provides an incentive for LTCHs to make
discharge decisions based on financial gain rather than purely clinical
reasons. MedPAC analyses of LTCH discharge patterns indicate that the
frequency of discharges rises sharply immediately after the SSO
threshold. Once the statutory changes to the LTCH PPS are implemented,
MedPAC recommended limiting the application of the existing SSO policy
solely to cases paid under the standard LTCH PPS rate, and modifying
the SSO policy to reduce the existing financial incentives by lowering
the payment penalty for discharging patients before the SSO threshold.
MedPAC recommended adopting the methodology used under the IPPS
transfer policy; that is, for the first day of SSO cases payments would
be twice the per diem rate for the MS-LTC-DRG with payment for each
additional day set at the per diem rate up to the maximum of the full
standard per discharge payment, which would only be reached 1 day
before the average length of stay for the MS-LTC-DRG. For LTCH cases
paid based on the site neutral payment methodology under the
forthcoming statutory framework, MedPAC suggested that CMS adopt the
short-stay policies that apply under the IPPS. Another commenter urged
CMS to consider implementing a number of the SSO suggestions made by
MedPAC.

[[Page 50199]]

Response: We appreciate MedPAC's detailed and thoughtful
suggestions.

J. Technical Change

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

VIII. Administrative Appeals by Providers and Judicial Review

A. Proposed and Final Changes Regarding the Claims Required in Provider
Cost Reports and for Provider Administrative Appeals

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we
proposed to revise the cost reporting regulations in 42 CFR Part 413,
Subpart B, by requiring a provider to include an appropriate claim for
a specific item in its Medicare cost report in order to receive or
potentially qualify for Medicare payment for the specific item. If the
provider's cost report does not include an appropriate claim for a
specific item, we proposed that payment for the item will not be
included in the notice of program reimbursement (NPR) issued by the
Medicare administrative contractor (MAC) (formerly known as fiscal
intermediary and herein referred to as ``contractor'') or in any
decision or order issued by a reviewing entity (as defined in 42 CFR
405.1801(a) of the regulations) in an administrative appeal filed by
the provider. In addition, we proposed to revise the appeals
regulations in 42 CFR Part 405, Subpart R, by eliminating the
requirement that a provider must include an appropriate claim for a
specific item in its cost report in order to meet the dissatisfaction
requirement for jurisdiction before the Provider Reimbursement Review
Board (Board), and by specifying the procedures for Board review of
whether the provider's cost report meets the proposed substantive
reimbursement requirement of an appropriate cost report claim for a
specific item. We also proposed technical revisions to other Board
appeal regulations to conform those regulations to the main revisions
(described above) to the cost reporting regulations and the provider
appeal regulations, and proposed similar revisions to the Part 405,
Subpart R regulations for appeals before the contractor hearing
officers. We proposed that these revisions to the cost reporting
regulations and the provider appeals regulations would apply to
provider cost reporting periods beginning on or after the effective
date of the final IPPS annual update rule.
We received numerous public comments of varied legal and procedural
opinions in response to our proposals to revise the cost reporting
regulations and the provider appeals regulations. The concerns raised
by commenters about the breadth of the proposed provisions, and the
questions raised in public comments about the interpretations we
provided in the preamble to the proposed rule, have instead provided us
with an opportunity to further and more fully dissect and digest the
public comments. Therefore, we are not finalizing our proposals to
revise the cost reporting regulations and the provider appeals
regulations as set forth in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 27978). We note that, in this final rule, we are not addressing
public comments received with respect to the provisions of the proposed
rule that we are not finalizing at this time. Rather, we will address
them at a later time, in a subsequent rulemaking document, as
appropriate.

B. Proposed and Final Changes To Conform Terminology From
``Intermediary'' to ``Contractor''.

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we
proposed to conform the terminology in Part 405, Subpart R and all
subparts of Part 413 from ``intermediary'' or ``fiscal intermediary''
to ``contractor'' pursuant to sections 1816, 1874A and 1878 of the Act.
We did not receive any public comments on our proposal to conform
the terminology in Part 405, Subpart R and all subparts of Part 413
from ``intermediary'' or ``fiscal intermediary'' to ``contractor''
pursuant to sections 1816, 1874A and 1878 of the Act. Therefore, we are
finalizing our proposal to conform the terminology in Part 405, Subpart
R and all subparts of Part 413 from ``intermediary'' or ``fiscal
intermediary'' to ``contractor''.

C. Technical Correction to Sec. 405.1835 of the Regulations and
Corresponding Amendment to Sec. 405.1811 of the Regulations

1. Background and Technical Correction to Sec. Sec. 405.1811 and
405.1835 of the Regulations
Section 1878(a) of the Act allows providers to appeal to the
Provider Reimbursement Review Board (the Board) final determinations of
program reimbursement made by a contractor, as well as certain final
determinations by the Secretary involving payment under section 1886(d)
(the inpatient hospital prospective payment system) and section 1886(b)
(commonly known as the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA) payment system) of the Act. In addition, by regulation,
providers are given the right to appeal to the Board or to contractor
hearing officers certain other determinations.
Under section 1878(a)(1)(A), (2), and (3) of the Act, and Sec.
405.1835(a)(1), (2), and (3)(i) of the regulations, a provider may
obtain a Board hearing if it meets three jurisdictional requirements:
(1) the provider is dissatisfied with a final determination of the
contractor or the Secretary; (2) the amount in controversy is at least
$10,000; and (3) the provider files a request for a hearing to the
Board within 180 days of notice of the final determination of the
contractor or the Secretary. The same jurisdictional requirements
govern provider appeals to contractor hearing officers under Sec.
405.1811(a)(1), (a)(2), and (a)(3)(i) of the regulations, except that
the amount in controversy requirement is at least $1,000 but less than
$10,000.
However, the statutory requirements for Board jurisdiction are
somewhat different if the provider does not receive a final
determination of the contractor on a timely basis. Under section
1878(a)(1)(B), (a)(2), and (a)(3) of the Act, a provider may obtain a
Board hearing if: (1) the provider does not receive a final
determination of the contractor on a timely basis; (2) the amount in
controversy is at least $10,000; and (3) the provider files a request
for a hearing to the Board within 180 days after notice of the
contractor's final determination would have been received if such
contractor determination had been issued on a timely basis. Moreover,
Sec. 405.1835(a)(3)(ii) of the regulations provides that a contractor
determination is not timely if it is not issued, through no fault of
the provider, within 12 months of the contractor's receipt of the
provider's perfected cost report or amended cost report (as specified
in Sec. 413.24(f) of the regulations). The same jurisdictional
requirements govern provider appeals to contractor hearing officers,
based on an untimely contractor determination, under Sec. 405.1811(a),
except that the amount in controversy requirement is at least $1,000
but less than $10,000.
As noted, section 1878(a)(1)(A) of the Act requires that the
provider ``is dissatisfied with a final determination'' of the
contractor or the Secretary.

[[Page 50200]]

However, section 1878(a)(1)(B) of the Act does not require provider
dissatisfaction for Board appeals based on an untimely final contractor
determination.
Before a 2008 final rule (73 FR 30190; May 23, 2008) substantially
amended the appeals rules, the regulations tracked fully the statute as
to whether provider dissatisfaction was a prerequisite for Board
jurisdiction. In the 2007 edition of the appeals regulations, Sec.
405.1835(a) addressed the requirements for Board appeals of final
contractor determinations, and referred to Sec. 405.1841(a), which
required the provider to set forth its dissatisfaction with specific
aspects of the contractor determination. Thus, consistent with section
1878(a)(1)(A) of the Act, Sec. 405.1835(a) and Sec. 405.1841(a) of
the 2007 regulations required provider dissatisfaction for Board
appeals of final contractor determinations.
By contrast, Board appeals based on untimely contractor
determinations were addressed in Sec. 405.1835(c), which did not
reference provider dissatisfaction. Instead, Sec. 405.1835(c) simply
provided that notwithstanding the provisions of paragraph (a)(1) of the
section, the provider also has a right to a hearing before the Board if
an intermediary's determination is not rendered within 12 months after
receipt of a provider's perfected cost report or amended cost report
provided such delay was not occasioned by the fault of the provider.
Thus, as with section 1878(a)(1)(B) of the Act, Sec. 405.1835(c) of
the 2007 regulations did not require provider dissatisfaction for Board
appeals based on untimely final contractor determinations.
In the 2008 final rule (73 FR 30190), Sec. 405.1835 was
substantially revised, Sec. 405.1841 was removed, and the prior
provisions in paragraph (c) of Sec. 405.1835 for Board appeals based
on untimely contractor determinations were also eliminated. As amended,
Sec. 405.1835(a) now states that a provider has a right to a Board
hearing ``only if'' three criteria are satisfied. First, the provider
must have ``preserved its right to claim dissatisfaction with the
amount of Medicare payment'' by making a cost report claim for the item
in dispute, or by ``self-disallowing'' the item by listing it as a
``protested amount'' in the cost report. Second, the amount in
controversy must be at least $10,000. Third, the Board must receive the
provider's hearing request within 180 days after the provider received
the final determination of the intermediary or the Secretary. However,
if a final contractor determination is not issued (through no fault of
the provider) within 12 months of the contractor's receipt of the
provider's perfected cost report or amended cost report, a Board
hearing must be requested within 180 days after the expiration of that
12 month period. Under the existing regulations, provider
dissatisfaction is a requirement for Board jurisdiction over appeals
based on an untimely contractor determination, as well as for appeals
of a final determination of the contractor or the Secretary.
As amended by the 2008 final rule (73 FR 30190), Sec.
405.1835(a)'s provisions for Board appeals based on untimely contractor
determinations no longer track fully the provisions for such appeals in
section 1878(a)(1)(B) of the Act. Specifically, Sec. 405.1835(a) of
the regulations now requires provider dissatisfaction as a condition
for Board jurisdiction over appeals based on an untimely contractor
determination, but section 1878(a)(1)(B) of the Act does not impose a
provider dissatisfaction requirement for such appeals.
When this difference between Sec. 405.1835(a) of the regulations
and section 1878(a)(1)(B) of the Act came to our attention, we looked
into this matter. After reviewing the 2008 final rule and the
corresponding parts of the 2004 proposed rule (69 FR 35716; June 25,
2004), we determined that the inclusion in Sec. 405.1835(a) of a
provider dissatisfaction requirement for Board appeals based on an
untimely contractor determination reflects an inadvertent error in the
drafting of the 2008 final rule and the 2004 proposed rule.
In this final rule, we are revising Sec. 405.1835 of the
regulations to eliminate provider dissatisfaction as a requirement for
Board jurisdiction over appeals based on untimely contractor
determinations. This is simply a technical correction inasmuch as this
amendment to Sec. 405.1835 conforms the regulations to the provisions
in section 1878(a)(1)(B) of the Act for Board appeals based on an
untimely contractor determination. In effect, this amendment to Sec.
405.1835 of the regulations restores the full conformity of the
regulations with the statutory requirements for Board jurisdiction over
appeals based on untimely contractor determinations--a conformity that
obtained before the 2008 final rule (73 FR 30190) inadvertently imposed
a provider dissatisfaction requirement for Board appeals based on
untimely contractor determinations. Moreover, in order to maintain
consistency between the regulations for Board appeals and the rules for
contractor hearing officer appeals, we also are revising Sec. 405.1811
of the regulations to eliminate provider dissatisfaction as a
requirement for contractor hearing officer jurisdiction over appeals
based on untimely contractor determinations.
2. Waiver of Notice of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register to provide a period for public comment before the
provisions of a rule take effect in accordance with section 553(b) of
the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). However, we
can waive this notice and comment procedure if the Secretary finds, for
good cause, that the notice and comment process is impracticable,
unnecessary, or contrary to the public interest, and incorporates a
statement of the finding and the reasons therefore in the notice.
We find it unnecessary to undertake notice-and-comment rulemaking
for the above-described revisions because those revisions are simply
technical corrections that bring Sec. 405.1835 of the Board appeals
regulations into full conformity with section 1878(a)(1)(B) of the Act,
and maintain consistency between Sec. 405.1811 of the intermediary
(contractor) hearing officer appeals regulations and Sec. 405.1835 of
the Board appeals regulations. The revisions do not represent changes
in policy, nor do they have a substantive effect, and the public
interest would be best served by timely correction of these technical
errors. Therefore, we find good cause to waive notice and comment
procedures.
3. Effective Date and Applicability Date; Finality and Reopening
The technical correction to Sec. 405.1835 of the Board appeals
regulations and the corresponding revision to Sec. 405.1811 of the
intermediary (contractor) hearing officer appeals regulations is
effective October 1, 2014. The revisions to Sec. 405.1835 of the Board
appeals regulations and Sec. 405.1811 of the intermediary (contractor)
hearing officer appeals regulations are applicable, subject to the
rules of administrative finality and reopening in Sec. 405.1807 and
Sec. 405.1885 of the regulations, to appeals pending or filed on or
after the August 21, 2008 effective date of the 2008 final rule (73 FR
30190).
The technical correction to Sec. 405.1835 of the Board appeals
regulations and the corresponding revision to Sec. 405.1811 of the
intermediary (contractor) hearing officer appeals regulations apply
automatically to appeals, based on an untimely contractor
determination, pending or filed on or after the October 1, 2014
effective date of this final rule. If the Board or the Administrator of
CMS finally dismissed an appeal, based

[[Page 50201]]

on an untimely contractor determination, due to the provider's failure
to make an appropriate cost report claim for the matter at issue, the
provider may ask the Board or the Administrator, as applicable, to
reopen such decision pursuant to Sec. 405.1885 of the regulations and
apply this technical correction to Sec. 405.1835 of the Board appeals
regulations, provided that such final jurisdictional dismissal decision
was issued no more than 3 years before the October 1, 2014 effective
date of this final rule. Similarly, if the contractor hearing officer
or the CMS reviewing official finally dismissed an appeal, based on an
untimely contractor determination, due to the provider's failure to
make an appropriate cost report claim for the matter at issue, the
provider may ask the contractor hearing officer or the CMS reviewing
official, as applicable, to reopen such decision pursuant to Sec.
405.1885 of the regulations and apply this technical correction to
Sec. 405.1811 of the intermediary (contractor) hearing officer appeals
regulations, provided that such final jurisdictional dismissal decision
was issued no more than 3 years before the October 1, 2014 effective
date of this final rule.
We believe that, because the above-described regulatory amendments
are simply technical corrections that do not make substantive changes
to the regulations for appeals to the Board and the contractor hearing
officers, the public interest is served by correcting the inadvertent
drafting errors in the 2008 final rule's provisions for appeals to the
Board and the contractor hearing officers based on untimely contractor
determinations. As technical corrections to the 2008 final rule, we
believe the above-described amendments to Sec. 405.1811 and Sec.
405.1835 should apply as of the August 21, 2008 effective date of the
2008 final rule, subject to the rules of administrative finality and
reopening in Sec. 405.1807 and Sec. 405.1885 of the regulations.
We believe that fixing the applicability date, subject to the rules
of administrative finality and reopening in Sec. 405.1807 and Sec.
405.1885 of the regulations, of these amendments by reference to the
August 21, 2008 effective date of the 2008 final rule is not
impermissibly retroactive in effect because the amendments simply
correct and clarify longstanding agency policy and practice, and are
procedural in nature. For example, we refer readers to Heimmermann v.
First Union Mortgage Corp., 305 F.3d 1257, 1260-61 (11th Cir. 2002) (a
rule clarifying the law, especially in an unsettled or confusing area
of the law, is not a substantive change in the law, and thus the rule
may apply to matters that preceded issuance of the rule.) However, if
the above-described amendments to Sec. 405.1811 and Sec. 405.1835
were deemed a retroactive application of a substantive change to a
regulation, section 1871(e)(1)(A) of the Act permits retroactive
application of a substantive change to a regulation if the Secretary
determines that such retroactive application is necessary to comply
with statutory requirements or that failure to apply the change
retroactively would be contrary to the public interest. We have
determined that any retroactive application of these amendments to
Sec. 405.1811 and Sec. 405.1835 is necessary to ensure full
compliance with the statutory provisions for Board appeals based on
untimely contractor determinations (under section 1878(a)(1)(B) of the
Act). We have further determined that it would be in the public
interest to apply these amendments, subject to the rules of
administrative finality and reopening in Sec. 405.1807 and Sec.
405.1885 of the regulations, to Board appeals and contractor hearing
officer appeals that were initiated or pending on or after the August
21, 2008 effective date of the 2008 final rule. The alternative, of not
applying these amendments to Sec. 405.1811 and Sec. 405.1835 to Board
appeals and contractor hearing officer appeals that were initiated or
pending on or after the August 21, 2008 effective date of the 2008
final rule, would be inconsistent with the statutory provisions for
Board appeals based on untimely contractor determinations (under
section 1878(a)(1)(B) of the Act) and would undermine the public
interest in maintaining consistency between the requirements for Board
appeals and contractor hearing officer appeals.

IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers

We seek to promote higher quality and more efficient health care
for Medicare beneficiaries. This effort is supported by the adoption of
widely agreed-upon quality measures. We have worked with relevant
stakeholders to define quality measures for most settings and to
measure various aspects of care for most Medicare beneficiaries. These
measures assess structural aspects of care, clinical processes, patient
experiences with care, care coordination, and improving patient
outcomes.
We have implemented quality reporting programs for multiple care
settings, including:
Hospital inpatient services under the Hospital Inpatient
Quality Reporting (IQR) Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program);
Hospital outpatient services under the Hospital Outpatient
Quality Reporting (OQR) Program (formerly referred to as the Hospital
Outpatient Quality Data Reporting Program (HOP QDRP));
Care furnished by physicians and other eligible
professionals under the Physician Quality Reporting System (PQRS,
formerly referred to as the Physician Quality Reporting Program
Initiative (PQRI));
Inpatient rehabilitation facilities under the Inpatient
Rehabilitation Facility Quality Reporting Program (IRF QRP);
Long-term care hospitals under the Long-Term Care Hospital
Quality Reporting (LTCHQR) Program;
PPS-exempt cancer hospitals under the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program;
Ambulatory surgical centers under the Ambulatory Surgical
Center Quality Reporting (ASCQR) Program;
Inpatient psychiatric facilities under the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program;
Home health agencies under the home health quality
reporting program (HH QRP); and,
Hospice facilities under the Hospice Quality Reporting
Program.
We have also implemented the End-Stage Renal Disease Quality
Incentive Program and Hospital Value-Based Purchasing Program
(described further below) that link payment to performance.
In implementing the Hospital IQR Program and other quality
reporting programs, we have focused on measures that have high impact
and support CMS and HHS priorities for improved quality and efficiency
of care for Medicare beneficiaries. Our goal for the future is to align
the clinical quality measure requirements of the Hospital IQR Program
with various other Medicare and Medicaid programs, including those
authorized by the Health Information Technology for Economic and
Clinical Health (HITECH) Act, so that the reporting burden on providers
will be reduced. As appropriate, we will consider the adoption of
clinical quality measures with electronic specifications so that the
electronic collection of performance information is part of care
delivery. Establishing such a system will require interoperability
between EHRs and CMS data collection systems,

[[Page 50202]]

additional infrastructural development on the part of hospitals and
CMS, and adoption of standards for capturing, formatting, and
transmitting the data elements that make up the measures. However, once
these activities are accomplished, adoption of measures that rely on
data obtained directly from EHRs will enable us to expand the Hospital
IQR Program measure set with less cost and reporting burden to
hospitals. We believe that in the near future, collection and reporting
of data elements through EHRs will greatly simplify and streamline
reporting for various CMS quality reporting programs, and that
hospitals will be able to switch primarily to EHR-based data reporting
for many measures that are currently manually chart-abstracted and
submitted to CMS for the Hospital IQR Program.
We also have implemented a Hospital Value-Based Purchasing (VBP)
Program under section 1886(o) of the Act. In 2011, we issued the
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547).
We most recently adopted additional policies for the Hospital VBP
Program in section XIV. of the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75120 through 75121). We are finalizing additional
policies for this program in section IV.I. of the preamble of this
final rule. Under the Hospital VBP Program, hospitals will receive
value-based incentive payments based on their quality performance with
respect to performance standards for a performance period for the
fiscal year involved. The measures under the Hospital VBP Program must
be selected from the measures (other than readmission measures)
specified under the Hospital IQR Program as required by section
1886(o)(2)(A) of the Act.
In selecting measures for the Hospital IQR Program, we are mindful
of the conceptual framework we have described for the Hospital VBP
Program. The Hospital IQR Program is linked with the Hospital VBP
Program because many of the measures and the reporting infrastructure
for the programs overlap. We view the Hospital VBP Program as the next
step in promoting higher quality care for Medicare beneficiaries by
transforming Medicare from a passive payer of claims into an active
purchaser of quality healthcare for its beneficiaries. Value-based
purchasing is an important step to revamping how care and services are
paid for, moving increasingly toward rewarding better value, outcomes,
and innovations instead of merely volume.
We also view the Hospital-Acquired Condition (HAC) payment
adjustment program authorized by section 1886(p) of the Act, as added
by section 3008 of the Affordable Care Act, and the Hospital VBP
Program, as related but separate efforts to reduce HACs. The Hospital
VBP Program is an incentive program that awards payments to hospitals
based on quality performance on a wide variety of measures, while the
HAC Reduction Program creates a payment adjustment resulting in payment
reductions for the lowest performing hospitals based on their rates of
HACs. Newly finalized policies for the Hospital VBP Program are
included in section IV.I. of the preamble of this final rule. Newly
finalized policies for the HAC Reduction Program are included in
section IV.J. of the preamble of this final rule.
Although we intend to monitor the various interactions of programs
authorized by the Affordable Care Act and their overall impact on
providers and suppliers, we also view programs that could potentially
affect a hospital's Medicaid payment as separate from programs that
could potentially affect a hospital's Medicare payment.
In the preamble of this final rule, we are finalizing changes to
the following Medicare quality reporting systems:
In section IX.A., the Hospital IQR Program.
In section IX.B., the PCHQR Program.
In section IX.C., the LTCHQR Program.
In addition, in section IX.D. of the preamble of this final rule,
we are finalizing changes to the Medicare EHR Incentive Program.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50180 through 50181) for detailed discussions of the history of
the Hospital IQR Program, including the statutory history, and to the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50789 through 50807) for the
measures we have adopted for the Hospital IQR measure set through the
FY 2016 payment determination and subsequent years.
b. Maintenance of Technical Specifications for Quality Measures
The technical specifications for the Hospital IQR Program measures,
or links to Web sites hosting technical specifications, are contained
in the CMS/The Joint Commission (TJC) Specifications Manual for
National Hospital Quality Measures (Specifications Manual). This
Specifications Manual is posted on the QualityNet Web site at https://www.qualitynet.org/. We generally update the Specifications Manual on a
semiannual basis and include in the updates detailed instructions and
calculation algorithms for hospitals to use when collecting and
submitting data on required measures. These semiannual updates are
accompanied by notifications to users, providing sufficient time
between the change and the effective date in order to allow users to
incorporate changes and updates to the specifications into data
collection systems.
The technical specifications for the HCAHPS patient experience of
care survey are contained in the current HCAHPS Quality Assurance
Guidelines manual, which is available at the HCAHPS On-Line Web site,
https://www.hcahpsonline.org. We maintain the HCAHPS technical
specifications by updating the HCAHPS Quality Assurance Guidelines
manual annually, and include detailed instructions on survey
implementation, data collection, data submission and other relevant
topics. As necessary, HCAHPS Bulletins are issued to provide notice of
changes and updates to technical specifications in HCAHPS data
collection systems.
Many of the quality measures used in different Medicare and
Medicaid reporting programs are endorsed by the National Quality Forum
(NQF). As part of its regular maintenance process for endorsed
performance measures, the NQF requires measure stewards to submit
annual measure maintenance updates and undergo maintenance of
endorsement review every 3 years. In the measure maintenance process,
the measure steward (owner/developer) is responsible for updating and
maintaining the currency and relevance of the measure and will confirm
existing or minor specification changes with NQF on an annual basis.
NQF solicits information from measure stewards for annual reviews, and
it reviews measures for continued endorsement in a specific 3-year
cycle.
The NQF regularly maintains its endorsed measures through annual
and triennial reviews, which may result in the NQF making updates to
the measures. We believe that it is important to have in place a
subregulatory process to incorporate nonsubstantive updates made by the
NQF into the measure specifications we have adopted for the Hospital
IQR Program so that these measures remain up-to-date. We also recognize
that some

[[Page 50203]]

changes the NQF might make to its endorsed measures are substantive in
nature and might not be appropriate for adoption using a subregulatory
process.
Therefore, In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504
through 53505), we finalized a policy under which we use a
subregulatory process to make nonsubstantive updates to measures used
for the Hospital IQR Program. With respect to what constitutes
substantive versus nonsubstantive changes, we expect to make this
determination on a case-by-case basis. Examples of nonsubstantive
changes to measures might include updated diagnosis or procedure codes,
medication updates for categories of medications, broadening of age
ranges, and exclusions for a measure (such as the addition of a hospice
exclusion to the 30-day mortality measures). We believe that
nonsubstantive changes may include updates to NQF-endorsed measures
based upon changes to guidelines upon which the measures are based.
We will continue to use rulemaking to adopt substantive updates
made to measures we have adopted for the Hospital IQR Program. Examples
of changes that we might consider to be substantive would be those in
which the changes are so significant that the measure is no longer the
same measure, or when a standard of performance assessed by a measure
becomes more stringent (for example, changes in acceptable timing of
medication, procedure/process, or test administration). Another example
of a substantive change would be where the NQF has extended its
endorsement of a previously endorsed measure to a new setting, such as
extending a measure from the inpatient setting to hospice. These
policies regarding what is considered substantive versus nonsubstantive
would apply to all measures in the Hospital IQR Program. We also note
that the NQF process incorporates an opportunity for public comment and
engagement in the measure maintenance process.
We believe this policy adequately balances our need to incorporate
updates to Hospital IQR Program measures in the most expeditious manner
possible while preserving the public's ability to comment on updates
that so fundamentally change an endorsed measure that it is no longer
the same measure that we originally adopted.
c. Public Display of Quality Measures
Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section
3001(a)(2) of the Affordable Care Act, requires that the Secretary
establish procedures for making information regarding measures
submitted available to the public after ensuring that a hospital has
the opportunity to review its data before they are made public. In the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28218 through 28219), we did
not propose to change our current policy of reporting data from the
Hospital IQR Program as soon as it is feasible on CMS Web sites such as
the Hospital Compare Web site (https://www.medicare.gov/hospitalcompare)
and/or the interactive https://data.medicare.gov Web site, after a
preview period.
The Hospital Compare Web site is an interactive Web tool that
assists beneficiaries by providing information on hospital quality of
care to those who need to select a hospital. For more information on
measures reported to Hospital Compare, please see https://www.medicare.gov/hospitalcompare. Other information not reported to
Hospital Compare may be made available on other CMS Web sites such as
https://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50777 through 50778)
we responded to public comments on what additional quality measures and
information featured on Hospital Compare may be highly relevant to
patients and other consumers of health care, and how we may better
display this information on the Hospital Compare Web site.
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital IQR
Program
As discussed further below, we generally retain measures from the
previous year's Hospital IQR Program measure set for subsequent years'
measure sets except when we specifically propose to remove or replace
them. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50185), the criteria that we consider when determining whether to
remove Hospital IQR Program measures are the following: (1) Measure
performance among hospitals is so high and unvarying that meaningful
distinctions and improvements in performance can no longer be made
(``topped-out'' measures); (2) availability of alternative measures
with a stronger relationship to patient outcomes; (3) a measure does
not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or the availability of a measure that is more proximal in
time to desired patient outcomes for the particular topic; (5)
performance or improvement on a measure does not result in better
patient outcomes; (6) the availability of a measure that is more
strongly associated with desired patient outcomes for the particular
topic; and (7) collection or public reporting of a measure leads to
negative unintended consequences other than patient harm. We also take
into account the views of the Measure Applications Partnership (MAP)
when determining when a measure should be removed, and we strive to
eliminate redundancy of similar measures (77 FR 53505 through 53506).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28219), we
proposed to change the criteria for determining when a measure is
``topped-out.'' A measure is ``topped-out'' when measure performance
among hospitals is so high and unvarying that meaningful distinctions
and improvements in performance can no longer be made (``topped-out''
measures) (77 FR 53505 through 53506). We do not believe that measuring
hospital performance on ``topped-out'' measures provides meaningful
information on the quality of care provided by hospitals. We further
believe that quality measures, once ``topped-out,'' represent care
standards that have been widely adopted by hospitals. We believe such
measures should be considered for removal from the Hospital IQR Program
because their associated reporting burden may outweigh the value of the
quality information they provide.
In order to determine ``topped-out'' status, we proposed to apply
the following two criteria, the first of which was previously adopted
by the Hospital VBP Program in the Hospital Inpatient VBP Program final
rule (76 FR 26496 through 26497), to Hospital IQR Program measures. The
second criterion is a modified version of what was previously adopted
by the Hospital VBP Program in the above mentioned final rule, with the
change from the ``less than'' operator (<) to the ``less than or equal
to'' operator ([gteqt]):
Statistically indistinguishable performance at the 75th
and 90th percentiles; and
Truncated coefficient of variation <= 0.10.
The coefficient of variation (CV) is a common statistic that
expresses the standard deviation as a percentage of the sample mean in
a way that is independent of the units of observation. Applied to this
analysis, a large CV would indicate a broad distribution of

[[Page 50204]]

individual hospital scores, with large and presumably meaningful
differences between hospitals in relative performance. A small CV would
indicate that the distribution of individual hospital scores is
clustered tightly around the mean value, suggesting that it is not
useful to draw distinctions among individual hospitals' measure
performance. By adopting ``less than or equal to'' in our ``topped-
out'' test, we are clarifying the interpretation of the CV when a tie
at 0.1 occurs due to rounding. We believe that the proposed criteria
distinguish measures with significant variation in performance among
hospitals.
In the Hospital VBP Program context, we used a modified version of
the CV, namely a truncated CV, for each measure, in which the 5 percent
of hospitals with the lowest scores, and the 5 percent of hospitals
with highest scores were first truncated (set aside) before calculating
the CV. This was done to avoid undue effects of the highest and lowest
outlier hospitals, which if included, would tend to greatly widen the
dispersion of the distribution and make the measure appear to be more
reliable or discerning.
Comment: A number of commenters supported the criteria for
determining when a measure is ``topped-out.'' Some commenters
specifically noted that removing ``topped-out'' measures will reduce
hospital reporting burden.
Several commenters supported removing ``topped-out'' chart-
abstracted measures. Some commenters specifically supported the removal
of structural measures.
Response: We appreciate the commenters' support for removing
``topped-out'' measures. We will consider removal of topped-out
structural measures in future years consistent with our measure removal
and topped-out status policies.
Comment: A commenter stated that the process of care measures that
are ``topped-out'' should be removed both in their chart-abstracted and
electronic clinical quality measure versions. The commenter believed
that interpreting disparate and incorrect performance rates for the
measures as reported in their electronic versions is burdensome to
stakeholders, and that the specifications for the chart-abstracted and
electronic versions of measures would be misaligned which may lead to
issues in capturing the full range of patient care. The commenter also
expressed concern about which electronic versions of these measures
will be submitted to CMS. Finally, the commenter stated that process of
care measures, whether submitted as chart-abstracted or electronic
versions, distract from measures of outcomes and hospital-acquired
conditions.
Response: We would like to clarify that we consider both the chart-
abstracted and the electronically specified versions to be ``topped-
out.'' However, we would like to retain the electronically specified
versions of these ``topped-out'' measures for the following reasons:
(1) To align the Hospital IQR Program and the Medicare EHR Incentive
Program, (2) to allow us to monitor the effectiveness of measure
reporting by EHRs, and (3) to familiarize hospitals with reporting
electronically specified measures to us.
As we continue aligning the Hospital IQR Program and the Medicare
EHR Incentive Program, and we believe collecting this measure on a
voluntary basis enables us to continue collecting quality data on this
topic while working to minimize reporting burden on participating
hospitals. We believe that the benefits outweigh the possible
disadvantages to reporting the electronic clinical quality measure
versions of these measures. Collecting the electronic version of these
measures would prepare hospitals for data submission using our
electronic measure specifications prior to electronic clinical quality
measures becoming a requirement in the Hospital IQR Program. Retaining
of the electronic versions of these topped-out measures creates
alignment with the Medicare EHR Incentive Program.
We remind commenters that hospitals could choose whether to submit
the voluntary electronic clinical quality measures. We also would allow
the voluntary submission of the chart-abstracted version of the
``topped-out'' measures for those hospitals that prefer to submit
measure data in that format. In this way, we believe that we are
representing the full range of care provided to patients and responding
to commenters' concerns.
We acknowledge the commenter's concerns that with multiple versions
of a particular electronic clinical quality measure creates confusion
for hospitals to determine which one to use. To address this concern,
we are modifying our proposal to finalize a policy that hospitals must
submit the April 2014 version of the electronic clinical quality
measures as discussed in section IX.A.2.h.(1) of the preamble of this
final rule.
Comment: Several commenters urged CMS to consider the broader
context and uses of measures before removing them based on quantitative
data only, noting that some measures meeting the ``topped-out''
criteria may still provide value to patients and hospitals.
Response: We agree that both quantitative criteria and clinically-
based qualitative criteria should be used in assessing ``topped-out''
measures. These criteria are part of the existing criteria available to
us to determine whether to remove a measure from the Hospital IQR
Program. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50185), the criteria that we consider when determining whether to
remove Hospital IQR Program measures are the following: (1) Measure
performance among hospitals is so high and unvarying that meaningful
distinctions and improvements in performance can no longer be made
(``topped-out'' measures); (2) availability of alternative measures
with a stronger relationship to patient outcomes; (3) a measure does
not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or the availability of a measure that is more proximal in
time to desired patient outcomes for the particular topic; (5)
performance or improvement on a measure does not result in better
patient outcomes; (6) the availability of a measure that is more
strongly associated with desired patient outcomes for the particular
topic; and (7) collection or public reporting of a measure leads to
negative unintended consequences other than patient harm.
We also take into account the views of the Measure Applications
Partnership (MAP) when determining when a measure should be removed,
and we strive to eliminate redundancy of similar measures (77 FR 53505
through 53506).
Comment: A few commenters wanted CMS to continue publicly reporting
topped-out measures used in pay-for-performance or payment penalty
programs or to maintain focus on issues hospitals achieved high
performance.
Response: We will allow those hospitals that would like to submit
the voluntary measures in chart-abstracted format or as electronic
clinical quality measures.
After consideration of the public comments we received, we are
finalizing our proposal to update the criteria to determine ``topped-
out'' measure status as proposed.
b. Removal of Hospital IQR Program Measures for the FY 2017 Payment
Determination and Subsequent Years
As we continue moving towards including more clinical outcomes
measures as opposed to process-of-care measures in the Hospital IQR
Program

[[Page 50205]]

measure set, we have considered removing additional measures using our
previously-adopted removal criteria. In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28219 through 28220), we proposed to remove five
measures from the Hospital IQR Program for the FY 2017 payment
determination and subsequent years, which begins in the CY 2015
reporting period: (1) AMI-1 Aspirin at arrival (NQF 0132); (2)
AMI-3 ACEI/ARB for left ventricular systolic dysfunction (NQF
0137); (3) AMI-5 Beta-blocker prescribed at discharge (NQF
0160); (4) SCIP Inf-6 Appropriate Hair Removal; and (5)
Participation in a systematic database for cardiac surgery (NQF
0113).
We proposed to remove the first four measures because they were
previously determined to be ``topped-out'' and suspended (77 FR 53509).
We proposed to remove the fifth measure because the MAP recommended the
measure's removal in its MAP Pre-Rulemaking Report: 2014
Recommendations on Measures for More than 20 Federal Programs, which is
available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. The MAP report states that the
measure's NQF endorsement has been placed on reserve status because the
measure is ``topped-out.'' The purpose of reserve status is to retain
endorsement of reliable and valid quality performance measures that
have overall high levels of performance with little variability so that
performance could be monitored in the future if necessary to ensure
that performance does not decline. This status would apply only to
highly credible, reliable, and valid measures that have high levels of
performance due to quality improvement actions (often facilitated or
motivated through public reporting and other accountability programs).
More information about NQF reserve status is available at: https://www.qualityforum.org/docs/Reserve_Endorsement_Status.aspx.
By removing these measures, we would alleviate the maintenance
costs and administrative burden to hospitals associated with retaining
them. Should we determine that hospital adherence to these practices
has unacceptably declined, we would propose to resume data collection
in future rulemaking. In addition, we would comply with any
requirements imposed by the Paperwork Reduction Act before re-proposing
these measures.
We also analyzed the remainder of the Hospital IQR Program measure
set for other potential ``topped-out'' measures using the previously
adopted criteria. The analysis was based on the most recent two
quarters of clinical process of care data available in the CMS Clinical
Data Warehouse for IPPS eligible hospitals, which covers a measurement
period from 01/01/2013 to 06/30/2013 (Q1 2013-Q2 2013). Based on this
analysis and using the previously adopted criteria, we noted that an
additional 15 chart-abstracted measures were ``topped-out,'' and we
proposed to remove them from the measure set for the FY 2017 payment
determination and subsequent years.
However, we proposed to retain the electronic clinical quality
measure version of 10 of these chart-abstracted measures for Hospital
IQR Program reporting as discussed further in section IX.A.7.f. of the
preamble of this final rule. As we continue aligning the Hospital IQR
Program and Medicare EHR Incentive Program, and we believe collecting
this measure on a voluntary basis enables us to continue collecting
quality data on this topic while working to minimize reporting burden
on participating hospitals.
Further, allowing hospitals the option to electronically report
topped-out measures will provide hospitals with an opportunity to test
the accuracy of their electronic health record reporting systems. We
believe that retaining ``topped-out'' measures under certain
circumstances enables us to continue monitoring the clinical topic
covered by the measure to ensure that hospitals continue to maintain
high levels of performance. Further, we believe the additional
reporting burden associated with retaining these measures is mitigated
by retaining electronic versions of those measures, which are more
easily reported by hospitals. These 10 measures are denoted in the
chart below by an asterisk.

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

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

We welcomed public comments on our proposal to remove these
measures.
Comment: Many commenters supported the removal of ``topped-out''
measures, some saying that by doing so CMS is reducing hospital burden.

[[Page 50206]]

Response: We thank the commenters for their support.
Comment: A commenter opposed the removal of the AMI-1 measure. The
commenter noted that aspirin after a myocardial infarction is a
potentially life-saving measure and should continue to be tracked.
Response: We thank the commenter for their recommendation. We are
removing AMI-1 because the measure is ``topped-out'' and was previously
suspended in FY 2012 IPPS/LTCH PPS final rule. We believe that the
practice of providing aspirin to patients on arrival to the hospital
addressed by this measure continues to be routinely practiced. As the
practice measured by the AMI-1 measure is standard procedure among most
hospitals, we do not believe that retaining it as a chart-abstracted
measure would be a value to hospitals or for monitoring quality
performance.
Comment: A commenter opposed the removal of AMI-8a: Primary PCI
Received within 90 Minutes of Hospital Arrival because it is ``topped-
out.'' The commenter did not believe that it is appropriate to retire a
measure without first finding a replacement measure. The commenter was
concerned that the retirement of numerous AMI and heart failure
measures may unintentionally shift hospital resources to other measures
and adversely affect the quality of care received by these patients.
Response: We respectfully disagree with the commenter that we
should not remove a measure until a replacement is found. We believe
that we should retire measures once we determine that there is no
further value to hospitals or patients because the process of care the
measure is monitoring has become standard practice. We believe that
removing ``topped-out'' measures are appropriate and necessary to
improve patient care. As we stated in the proposed rule, we believe
that quality measures, once ``topped-out,'' represent care standards
that have been widely adopted by hospitals (79 FR 28219). Therefore, it
makes sense to remove the ``topped-out'' measures and adopt other
measures which may represent care standards that are not widely adopted
by hospitals, but which we believe should be widely adopted.
We invite the commenter to recommend measures for the Hospital IQR
Program through the Measures Under Consideration process for our
consideration. Information on how to recommend measures for the
Hospital IQR Program is available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallForMeasures.html.
Comment: One commenter opposed the removal of HF-2: Evaluation of
Left Ventricular Systolic Function because it is ``topped-out.'' With
the removal of this measure, the commenter noted that the only heart
failure measures left in the program will be the 30-day readmission and
30-day mortality measures. The commenter is concerned that removing
this measure will signal to hospitals that heart failure is not a CMS
priority.
Response: We respectfully disagree with the commenter that the
removal of ``topped-out'' measures will result in hospitals no longer
focusing on the practice the measure is monitoring. Hospitals are
committed to providing good quality care to patients and we do not have
any indication that they will stop doing so in these areas for which
the quality of care measured has become standard practice.
Comment: A commenter suggested that CMS continue to collect chart-
abstracted data on SCIP-Inf-3 for another year because is inappropriate
to assume that the measure will be ``topped-out'' given that the
measure had significant data definition changes effective January 1,
2014. SCIP-Inf-3 no longer excludes for patients on home antibiotics or
that do not receive general anesthesia.
Response: We acknowledge that SCIP-Inf-3 no longer excludes for
patients on home antibiotics, however our analysis showed that these
patients were being excluded by documentation of infection. For this
reason, this change was not considered to be substantive enough to
withhold removal of the measure. With regard to the concern about the
exclusion for patients that do not receive general anesthesia, SCIP-Inf
3 measure has never had an exclusion for anesthesia type so this would
have no impact on the measure results, and would not change our topped-
out status analysis. We continue to believe SCIP-Inf-3 is ``topped-
out'' and should be removed from the Hospital IQR Program.
Comment: Several commenters questioned the removal of SCIP-Inf-4,
stating that CMS cannot assess whether the measure is topped-out. These
commenters stated that CMS revised the specifications for the SCIP-Inf-
4: Cardiac Surgery Patients with Controlled Postoperative Blood Glucose
measure to incorporate the recent NQF endorsement maintenance
decisions, beginning with January 1, 2014, discharges. These commenters
stated that the NQF changed the measure from controlled glucose at 6AM
to a more comprehensive measure of controlled glucose 18-24 hours post-
cardiac surgery, and required that corrective action be documented if
post-operative glucose is over 180mg/dl. These commenters expressed
concern that these substantial changes would change the performance
scores.
Response: We acknowledge that there were refinements made to SCIP-
Inf-4 that were finalized in the FY 2014 IPPS/LTCH PPS final rule (78
FR 50787 through 50788). The ``topped-out'' analysis cited in the
proposed rule (79 FR 28220) was completed using SCIP-Inf-4 data before
these refinements were implemented. Because we do not yet have
sufficient data to accurately assess whether this refined measure meets
``topped-out'' criteria, we are modifying our proposal and will not
remove this measure. Instead, we will continue to require reporting on
SCIP-Inf-4 in the Hospital IQR Program as previously finalized.
Comment: Several commenters supported the removal of STK-2, STK-3,
STK-5, and STK-10.
Response: We thank the commenters for their support. We believe
that these four measures are ``topped-out'' and will be removed from
the Hospital IQR Program in their chart-abstracted measure version.
Please note, however, that we will continue to accept STK-2, STK-3,
STK-5, and STK-10 data as electronic clinical quality measures.
Comment: A commenter opposed the removal of STK-2, STK-3, STK-5,
and STK-10 measures because they are ``topped-out.'' The commenter
believed that CMS should allow hospitals to choose whether they wish to
report these measures via EHR or via claims registry. The commenter
stated that providing hospitals with alternate mechanisms for reporting
is important at this juncture, and can allow for the measure developer
to identify any issues with the electronic specifications of the
measures.
Response: We note that the commenter seeks alternative reporting
mechanisms for measures. However, submission via a claims registry,
which would be such an alternative reporting mechanism, is not a
feasible option at this time as these measures do not have claims-based
specifications nor do we have a claims registry for the Hospital IQR
Program. Hospitals may report on these measures using the electronic
clinical quality measure specifications and submit using QRDA Category
I. We believe that these four measures are ``topped-out'' and should be
removed as a requirement from the Hospital IQR Program in their chart-
abstracted measure versions.

[[Page 50207]]

Comment: A commenter supported the proposal to remove the six
``topped-out'' measures noted for permanent removal and the 4 ``topped-
out,'' previously suspended measures proposed for permanent removal.
This same commenter did not support the retention of the electronic
version of 10 measures to support the voluntary electronic reporting
option due to the cost of implementing electronic tools, and having the
loss or convenience of chart abstracted measures that help the
commenter keep track of their performance of these medical conditions.
The commenter was also concerned that without clearly established goals
and expectations for core measures by CMS and TJC that there will be
discrepancies in performance.
Response: We thank the commenter for this feedback. We appreciate
how the commenter is making full use of the ``topped-out'' measures and
applaud their striving towards constant quality improvement. We note,
however that we are encouraging, through alignment with Medicare EHR
Incentive Program, to have all facilities move to electronic measures.
We also believe that aligning electronic measures across facilities
will minimize confusion between quality reporting programs. Regarding
the concern that without clearly established goals and expectations for
core measures by CMS and TJC there will be discrepancies in
performance, we appreciate this concern and will take this into
consideration during our daily operations.
Comment: A commenter asked CMS to clarify how the SCIP measures can
be topped-out for the Hospital IQR Program but required for PPS-exempt
Cancer Hospitals (PCHs). The commenter asked whether the measures
specifications will be provided in a manual other than the Inpatient
Specifications Manual if they are removed from the Hospital IQR
Program. The commenter also asked whether the measures will still be
programmed into the CMS Abstraction and Reporting Tool (CART).
Response: Although the SCIP measures are ``topped-out'' under the
Hospital IQR Program, for the reasons discussed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50840 through 50841), we believe that the
SCIP measures are appropriate for the PCH setting. At this time, we do
not have sufficient data to determine whether these SCIP measures are
``topped-out'' in the PCH setting, given that hospital inpatient
facilities and PCHs treat different patient populations and the lack of
evidence that the SCIP measures are ``topped-out'' in the PCH setting.
We will assess ``topped-out'' status of the SCIP measures as part
of our PCHQR measure analysis in our annual measures consideration. We
believe that this analysis must focus on evidence specific to the PCH
setting. We recognize that the PCHQR patient population is exclusively
comprised of cancer patients, unlike ``subsection (d)'' hospitals
included in the Hospital IQR Program. We will, however, continue to
monitor and evaluate the PCHQR SCIP measures. In addition, we will
consider adopting the ``topped-out'' criteria and measure removal
policies for the PCHQR Program similar to those adopted by other
quality reporting programs, including the Hospital IQR Program, in
future years. We will also support PCHQR program reporting of patient
level data to QualityNet by updating the CART tool to reflect the
current SCIP measure specifications.
We intend to post SCIP and other PCHQR measures in the PCHQR
Specifications Manual. As a result, the existing information technology
infrastructure will be available for the PCHQR Program.
Comment: A commenter supported the transition of SCIP-Inf-1, SCIP-
Inf-2, and SCIP-Inf-9 to voluntary electronic clinical quality
measures.
Response: We thank the commenter for their support.
Comment: Some commenters opposed the proposal to retain the
electronic versions of 10 of the ``topped-out'' chart-abstracted
measures to support the voluntary electronic measure reporting option.
A commenter stated that the proposed modification in the voluntary
electronic reporting program holds the form of the data collected for
quality measurement to a higher scientific significance than the data
collected as a metric to assess the delivery of care. The commenter
stated that this proposal would neither lead to improved hospital
quality nor offer us insight on how to improve electronic clinical
quality measures. The commenter recommended that CMS work with the
Office of the National Coordinator (ONC) and the Agency for Healthcare
Research and Quality (AHRQ) to study the feasibility, reliability and
validity of electronic clinical quality measures to effectively
calculate and report clinical quality measures that are at least as
accurate as chart-abstracted measures.
Response: As discussed above, we believe that retaining electronic
versions of chart-abstracted measures in certain circumstances enables
us to continue monitoring the covered clinical topic while reducing
hospitals' reporting burden, and we view both of those actions as
desirable. We note further that we are encouraging hospitals to
familiarize themselves with the electronic measure submission process
by retaining electronic versions of certain measures, and we will also
be able to assess differences in clinical quality measure data between
the two data capture methods. We believe that understanding any
discrepancies between the two data capture methods will help us as we
transition to electronic reporting of clinical quality measures. This
also will lead to hospitals improving how they report clinical quality
data electronically, which can be used to improve patient care.
We respectfully disagree that the proposed measures lack scientific
significance. Each measure, as it is fully described, provides evidence
of its significance.
We thank the commenter for their suggestion to work with the ONC
and AHRQ to study the feasibility, reliability and validity of
electronic clinical quality measures to effectively calculate and
report clinical quality measures that are at least as accurate as
chart-abstracted measures. We will take this suggestion under
consideration.
Comment: Some commenters asked CMS to delay adopting ``topped-out''
measures as voluntary electronic clinical quality measures for one year
to allow hospitals time to prepare to collect the measure
electronically.
Another commenter suggested that including these measures sends the
wrong message about the goals of the Hospital IQR Program and the Stage
3 Meaningful Use Program and inappropriately distracts resources from
areas that would more readily benefit from targeted attention. Instead,
the commenter recommended that we address further alignment through the
advancement of electronic quality measures required for the Medicare
EHR Incentive Program. If CMS decide to move forward with this policy,
the commenter urged CMS to publicly report the measures somewhere other
than Hospital Compare to leave the space for measures that are more
meaningful to consumers and purchasers.
Response: We respectfully disagree with the commenters. We do not
agree that delaying by one year the adoption of ``topped-out'' measures
as voluntary electronic clinical quality measures would be useful
because reporting is voluntary. Any hospital can choose not to report
these ``topped-out'' measures as electronic clinical quality measures.
By retaining ``topped-out'' chart-abstracted measures as voluntary
electronic clinical quality measures, we

[[Page 50208]]

are encouraging hospital to familiarize themselves with the electronic
measure submission process and we can assess differences in clinical
quality measure data between the two data capture methods. Allowing
voluntary submission of the ``topped-out'' measures will help us
monitor for declines in performance.
We also disagree with the commenter that the removal of ``topped-
out'' measures will result in hospitals no longer focusing on the
practice the measure is monitoring. We believe that hospitals are
committed to providing good quality care to patients and we do not have
any indication that they will stop doing so in these areas for which
the quality of care measured has become standard practice.
We thank the commenter for their suggestion to publicly report the
measures somewhere other than Hospital Compare. We will take this
suggestion under consideration. We welcome any suggestions commenters
have on further aligning the Hospital IQR Program with the EHR
Incentive Program.
Comment: A few commenters advised that although CMS may no longer
require hospitals to submit data on topped-out measures, hospitals will
be required to submit data on measures required by TJC for
accreditation. The commenters stated that this lack of alignment
creates a burden for hospitals and does not allow hospitals to plan for
the future. A commenter encouraged us to work with TJC when proposing
measures to remove from the Hospital IQR Program because many of these
measures remain core measure reporting requirements for TJC.
Response: We wish to reduce burden on hospitals for reporting
``topped-out'' measures to us, and believe that our proposal
accomplishes that intent and focuses measurement on quality areas that
can be improved. We invite the commenter to relay their concerns to TJC
as to why TJC requires hospitals to report ``topped-out'' measures.
Comment: A commenter asked that CMS move cautiously with respect to
removing measures and adopting more clinical outcome measures noting it
should be done with ample opportunity for public comment to ensure
these measures are tested and validated prior to adoption. The
commenter noted that vetting is important, as hospitals need sufficient
lead in time to implement measures, especially those with information
technology requirements.
Response: We thank the commenter for the suggestion and will
provide the public the necessary time period to comment. We have six
criteria for determining whether to remove a measure from the Hospital
IQR Program, including a measure's ``topped-out'' status as described
above in section IX.A.2.a. of the preamble of this final rule.
We would like to clarify that the public has many opportunities to
comment on potential measures through the measure adoption process,
which includes the public posting of the MUC (Measures Under
Consideration) list, the NQF measure endorsement process, and comments
on the annual rulemaking process for the Hospital IQR Program.
Comment: A commenter requested clarification regarding why CMS is
proposing to remove all of the suspended/voluntary measures except IMM-
1 and if IMM-1 will continue to be suspended for FY 2017.
Response: We proposed to remove the suspended voluntary measures
because of their ``topped-out'' status. IMM-1 was not proposed for
removal because this measure will be reported in another program and we
are responding to the need for more harmonized and global clinical
quality measures. This measure was finalized for reporting in the PQRS
in the CY 2013 Medicare Physician Fee Schedule final rule with comment
period (see Table 95 at 77 FR 69215). As we stated above in section
IXA.2.(a), ``topped-out'' status is only one of the six considerations
we use in determining whether to remove a clinical quality measure from
the Hospital IQR Program.
Comment: One commenter expressed concern that CMS may use a
subregulatory process to make ``nonsubstantive'' updates to measures
and that CMS may consider changes to age groups to be
``nonsubstantive.'' The commenter recommended that any review of
changes to include individuals under the age of 18 in measures that
were initially developed for adult populations include a process for
review by a panel of pediatric experts, opportunity for broad
stakeholder comment and appropriate testing of the revised measure.
Response: We thank the commenter for the suggestion. We will
consider the suggestion to include a pediatric expert review process
when considering the inclusion of the under 18 population to measures
exclusively including the adult population.
After consideration of the public comments we received, we are
finalizing our policy as proposed with one modification. We are
finalizing removal of 19 measures for the FY 2017 payment determination
and subsequent years as noted in the chart above with the exception of
the SCIP-Inf-4 measure, which we are retaining in the Hospital IQR
Program measure set in its chart-abstracted form as previously
finalized.
We are also finalizing our proposal to retain reporting for 10 of
these ``topped-out'' measures as electronic clinical quality measures
as noted in the chart above. We believe this approach provides CMS an
opportunity to monitor topped-out measures for performance decline.
This policy simplifies alignment between the Hospital IQR and Medicare
EHR Incentive Programs for eligible hospitals and provides a more
straight-forward approach to educate stakeholders on electronic
reporting options.
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53512 through 53513), for our finalized measure retention policy. When
we adopt measures for the Hospital IQR Program beginning with a
particular payment determination, these measures are automatically
adopted for all subsequent payment determinations unless we propose to
remove, suspend, or replace the measures.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220) we did not
propose any changes to our policy for retaining previously adopted
measures for subsequent payment determinations.
4. Additional Considerations in Expanding and Updating Quality Measures
Under the Hospital IQR Program
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53510 through 53512) for a discussion of the considerations we use to
expand and update quality measures under the Hospital IQR Program. In
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220) we did not
propose any changes to the considerations in expanding or updating
quality measures.
5. Previously Adopted Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28220 through
28221), for currently adopted and future condition-specific, claims-
based measures, beginning with the FY 2017 payment determination and
subsequent years, we proposed to use 3 years of data to calculate
measures unless otherwise specified. In other words, this reporting
period would apply to all

[[Page 50209]]

future calculations of condition specific measures already adopted in
the Hospital IQR Program and any condition-specific measures that may
be subsequently adopted in future years. The currently adopted,
applicable measures are:
Hospital 30-day, all-cause, risk-standardized mortality
rate (RSMR) following acute myocardial infarction (AMI) hospitalization
for patients 18 and older (NQF 0230).
Hospital 30-day, all-cause, risk-standardized mortality
rate (RSMR) following heart failure (HF) hospitalization for patients
18 and older (NQF 0229).
Hospital 30-day, all-cause, risk-standardized mortality
rate (RSMR) following pneumonia hospitalization (NQF 0468).
Stroke 30-day mortality rate.
Hospital 30-Day, All-Cause, Risk-Standardized Mortality
Rate (RSMR) following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization (NQF 1893).
30-day all-cause, Acute Myocardial Infarction (AMI) 30-day
risk standardized readmission rate (RSMR) following Acute Myocardial
Infarction (AMI) hospitalization (NQF 0505).
30-day all-cause, risk standardized readmission rate
(RSMR) following Heart Failure (HF) hospitalization (NQF
0330).
30-day all-cause, risk standardized readmission rate
(RSMR) following Pneumonia (PN) hospitalization (NQF 0506).
30-day risk standardized readmission rate (RSMR) following
Total Hip/Total Knee Arthroplasty (NQF 1551).
30-day risk standardized readmission rate (RSMR) following
Stroke hospitalization.
30-day risk standardized readmission rate (RSMR) following
COPD hospitalization (NQF 1891).
Hip/Knee Complication: Hospital-level Risk-Standardized
Complication Rate (RSCR) following Elective Primary Total Hip
Arthroplasty (NQF 1550).
We welcomed public comments on our proposal to use 3 years of data
to calculate current and future condition-specific, claims-based
measures.
Comment: Several commenters supported CMS' proposal to use 3 years
of claim-based data for all currently adopted and future condition-
specific, claims-based measures, for the FY 2017 payment determination
and subsequent years.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing our proposal to use 3 years of data to calculate current and
future condition-specific, claims-based measures as proposed.
The following table shows measures previously adopted for the
Hospital IQR Program, including suspended measures.

Hospital IQR Program Measures Previously Adopted for the FY 2016 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Short name Measure name NQF No. FY 2016 payment determination
----------------------------------------------------------------------------------------------------------------
AMI-1.................. Aspirin at Arrival..... N/A.............. Data collection suspended.
AMI-3.................. ACEI or ARB for LVSD... NQF 0137 Data collection suspended.
AMI-5.................. Beta-Blocker Prescribed NQF 0160 Data collection suspended.
at Discharge.
AMI-7a................. Fibrinolytic Therapy NQF 0164 Required.
Received Within 30
Minutes of Hospital
Arrival.
AMI-8a................. Primary PCI Received NQF 0163 Required.
Within 90 Minutes of
Hospital Arrival.
HF-2................... Evaluation of LVS NQF 0135 Required.
Function.
PN-6................... Initial Antibiotic NQF 0147 Required.
Selection for
community-acquired
pneumonia (CAP) in
Immunocompetent
Patients.
SCIP-Inf-1............. Prophylactic Antibiotic NQF 0527 Required.
Received Within One
Hour Prior to Surgical
Incision.
SCIP-Inf-2............. Prophylactic Antibiotic NQF 0528 Required.
Selection for Surgical
Patients.
SCIP-Inf-3............. Prophylactic NQF 0529 Required.
Antibiotics
Discontinued Within 24
Hours After Surgery
End Time--Overall Rate.
SCIP-Inf-4............. Cardiac Surgery NQF 0300 Refined measure specifications.
Patients with
Controlled
Postoperative Blood
Glucose.
SCIP-Inf-6............. Surgery Patients with NQF 0301 Data collection suspended.
Appropriate Hair
Removal.
SCIP-Inf-9............. Urinary catheter NQF 0453 Required.
removed on
Postoperative Day 1
(POD 1) or
Postoperative Day 2
(POD 2) with day of
surgery being day zero.
SCIP-Card-2............ Surgery Patients on NQF 0284 Required.
Beta-Blocker Therapy
Prior to Arrival Who
Received a Beta-
Blocker During the
Perioperative Period.
SCIP-VTE-2............. Surgery Patients Who NQF 0218 Required.
Received Appropriate
Venous Thromboembolism
Prophylaxis Within 24
Hours Prior to Surgery
to 24 Hours After
Surgery.
CLABSI................. National Healthcare NQF 0139 Required.
Safety Network (NHSN)
Central line-
associated Bloodstream
Infection (CLABSI)
Outcome Measure.
SSI.................... American College of NQF 0753 Required.
Surgeons--Centers for
Disease Control and
Prevention (ACS-CDC)
Harmonized Procedure
Specific Surgical Site
Infection (SSI)
Outcome Measure.
Colon procedures.......
Hysterectomy procedures
CAUTI.................. National Healthcare NQF 0138 Required.
Safety Network (NHSN)
Catheter-associated
Urinary Tract
Infection (CAUTI)
Outcome Measure.

[[Page 50210]]

MRSA................... National Healthcare NQF 1716 Required.
Safety Network (NHSN)
Facility-wide
Inpatient Hospital-
onset Methicillin-
resistant
Staphylococcus aureus
(MRSA) Bacteremia
Outcome Measure.
CDI.................... National Healthcare NQF 1717 Required.
Safety Network (NHSN)
Facility-wide
Inpatient Hospital-
onset Clostridium
difficile Infection
(CDI) Outcome Measure.
HCP.................... Influenza vaccination NQF 0431 Required.
coverage among
healthcare personnel
(HCP).
ED-1................... Median time from ED NQF 0495 Required submission, but voluntary
arrival to ED electronic clinical quality measure.
departure for admitted
ED patients.
ED-2................... Admit Decision Time to NQF 0497 Required submission, but voluntary
ED Departure Time for electronic clinical quality measure.
Admitted Patients.
Imm-1.................. Pneumoccocal NQF 1653 Data collection suspended.
Immunization.
Imm-2.................. Influenza Immunization. NQF 1659 Required.
Stroke-1............... Venous thromboembolism NQF 0434 Required.
(VTE) prophylaxis.
Stroke-2............... Discharged on NQF 0435 Required submission, but voluntary
antithrombotic therapy. electronic clinical quality measure.
Stroke-3............... Anticoagulation therapy NQF 0436 Required submission, but voluntary
for atrial electronic clinical quality measure.
fibrillation/flutter.
Stroke-4............... Thrombolytic therapy... NQF 0437 Required submission, but voluntary
electronic clinical quality measure.
Stroke-5............... Antithrombotic therapy NQF 0438 Required submission, but voluntary
by the end of hospital electronic clinical quality measure.
day two.
Stroke-6............... Discharged on statin NQF 0439 Required submission, but voluntary
medication. electronic clinical quality measure.
Stroke-8............... Stroke education....... N/A.............. Required submission, but voluntary
electronic clinical quality measure.
Stroke-10.............. Assessed for NQF 0441 Required submission, but voluntary
rehabilitation. electronic clinical quality measure.
VTE-1.................. Venous thromboembolism NQF 0371 Required submission, but voluntary
prophylaxis. electronic clinical quality measure.
VTE-2.................. Intensive care unit NQF 0372 Required submission, but voluntary
venous thromboembolism electronic clinical quality measure.
prophylaxis.
VTE-3.................. Venous thromboembolism NQF 0373 Required submission, but voluntary
patients with electronic clinical quality measure.
anticoagulation
overlap therapy.
VTE-4.................. Patients receiving un- N/A.............. Required submission, but voluntary
fractionated Heparin electronic clinical quality measure.
with doses/labs
monitored by protocol.
VTE-5.................. VTE discharge N/A.............. Required submission, but voluntary
instructions. electronic clinical quality measure.
VTE-6.................. Incidence of N/A.............. Required submission, but voluntary
potentially electronic clinical quality measure.
preventable VTE.
PC-01.................. Elective delivery NQF 0469 Required submission, but voluntary
(Collected in electronic clinical quality measure.
aggregate, submitted
via Web-based tool or
electronic clinical
quality measure).
MORT-30-AMI............ Hospital 30-day, all- NQF 0230 Required.
cause, risk-
standardized mortality
rate (RSMR) following
acute myocardial
infarction (AMI)
hospitalization for
patients 18 and older.
MORT-30-HF............. Hospital 30-day, all- NQF 0229 Required.
cause, risk-
standardized mortality
rate (RSMR) following
heart failure (HF)
hospitalization for
patients 18 and older.
MORT-30-PN............. Hospital 30-day, all- NQF 0468 Required.
cause, risk-
standardized mortality
rate (RSMR) following
pneumonia
hospitalization.

[[Page 50211]]

COPD Mortality......... Hospital 30-Day, All- NQF 1893 Required.
Cause, Risk-
Standardized Mortality
Rate (RSMR) following
Chronic Obstructive
Pulmonary Disease
(COPD) Hospitalization.
STK Mortality.......... Stroke 30-day mortality N/A.............. Required.
rate.
READM-30-AMI........... Hospital 30-day all- NQF 0505 Required.
cause risk-
standardized
readmission rate
(RSRR) following acute
myocardial infarction
(AMI) hospitalization.
READM-30-HF............ Hospital 30-day, all- NQF 0330 Required.
cause, risk-
standardized
readmission rate
(RSRR) following heart
failure
hospitalization.
READM-30-PN............ Hospital 30-day, all- NQF 0506 Required.
cause, risk-
standardized
readmission rate
(RSRR) following
pneumonia
hospitalization.
READM-30-TH/TKA........ Hospital-level 30-day, NQF 1551 Required.
all-cause risk-
standardized
readmission rate
(RSRR) following
elective primary total
hip arthroplasty (THA)
and/or total knee
arthroplasty (TKA).
READM-30-HWR........... Hospital-Wide All-Cause NQF 1789 Required.
Unplanned Readmission
(HWR).
COPD READMIT........... Hospital 30-Day, All- NQF 1891 Required.
Cause, Risk-
Standardized
Readmission Rate
(RSRR) following
Chronic Obstructive
Pulmonary Disease
(COPD) Hospitalization.
STK READMIT............ 30-day risk N/A.............. Required.
standardized
readmission rate
(RSMR) following
Stroke hospitalization.
MSPB................... Payment-Standardized NQF 2158 Required.
Medicare Spending Per
Beneficiary (MSPB).
AMI payment............ AMI Payment per Episode N/A.............. Required.
of Care.
Hip/knee complications. Hospital-level risk- NQF 1550 Required.
standardized
complication rate
(RSCR) following
elective primary total
hip arthroplasty (THA)
and/or total knee
arthroplasty (TKA).
PSI 4 (PSI/NSI)........ Death among surgical NQF 0351 Required.
inpatients with
serious, treatable
complications.
PSI 90................. Patient safety for NQF 0531 Required.
selected indicators
(composite).
Database for Cardiac Participation in a NQF 0113 Required.
Surgery. systematic database
for cardiac surgery.
Registry for Nursing Participation in a N/A.............. Required.
Sensitive Care. Systematic Clinical
Database Registry for
Nursing Sensitive Care.
Registry for General Participation in a N/A.............. Required.
Surgery. Systematic Clinical
Database Registry for
General Surgery.
Safe Surgery Checklist. Safe Surgery Checklist N/A.............. Required.
Use.
HCAHPS................. HCAHPS + CTM-3......... NQF 0166 Required.
NQF 0228
----------------------------------------------------------------------------------------------------------------

6. Refinements and Clarification to Existing Measures in the Hospital
IQR Program
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28223 through
28226), we proposed to incorporate refinements for several measures
that were previously adopted in the Hospital IQR Program. These
refinements have either arisen out of the NQF endorsement maintenance
process, or during our internal efforts to harmonize measure
approaches. The measure refinements include the following: (1) refining
the planned readmission algorithm for all seven readmission measures
included in the Hospital IQR Program; (2) modifying the hip/knee
readmission and complication measure cohorts to exclude index
admissions with a secondary fracture diagnosis; and (3) modifying the
hip/knee complication measure to not count as complications coded as
``present on admission'' (POA) during the index admission.
We received one general comment on our proposed refinements.
Comment: One commenter supported CMS' continued refinements to the
readmission measures.
Response: We thank the commenter for their support.
a. Refinement of Planned Readmission Algorithm for 30-Day Readmission
Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50785 through 50787)
we adopted the CMS Planned Readmission Algorithm Version 2.1 (the
Algorithm) for the Hospital IQR Program. In the same final rule (78 FR
50785 through 50787, 50790 through 50792, and 50794 through 50798), we
also finalized the use of the CMS Planned Readmission Algorithm Version
2.1 in the AMI, HF, PN, THA/TKA, HWR, and COPD measures. This algorithm
identifies readmissions that are planned and occur within 30 days of
discharge from the hospital. A complete description of the Algorithm,
which includes lists of planned diagnoses and procedures, is available
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html in the
``Planned Readmission'' folder. NQF has endorsed the use of the
Algorithm for these measures.
In that final rule (78 FR 50652) and in response to comments, we
agreed to continually review the Algorithm and make updates as needed.
Since its development, we have identified and

[[Page 50212]]

made improvements to the Algorithm. As a result, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28223 through 28224) we proposed to use
an updated, revised version, the CMS Planned Readmission Algorithm
Version 3.0, for the AMI, HF, PN, THA/TKA, HWR, COPD, and Stroke
readmission measures for the FY 2015 payment determination and
subsequent years. As discussed further below, we also proposed to use
Version 3.0 of this algorithm for the CABG readmission measure that we
proposed to include in the Hospital IQR Program starting in FY 2017,
proposed in section IX.A.7.a. of the preamble of the proposed rule.
Version 3.0 incorporates improvements made based on a validation
study of the algorithm. Researchers reviewed 634 patients' charts at 7
hospitals, classified readmission as planned or unplanned based on the
chart review, and compared the results to the claims-based algorithm's
classification of the readmissions. The findings suggested the
algorithm was working well but could be improved.
Specifically, the study suggested the need to make small changes to
the tables of procedures and conditions used in the algorithm to
classify readmission as planned or unplanned. The algorithm uses AHRQ's
Clinical Classification Software (CCS) to group thousands of procedure
and diagnosis codes into fewer categories of related procedures or
diagnoses. The algorithm then uses four tables of procedures and
diagnoses categories and a flow diagram to classify tables as planned
or unplanned. Additional information on this software is available at:
https://www.hcup-us.ahrq.gov/toolssoftware/ccs/ccs.jsp. For all
measures, the first table identifies procedures that, if present in a
readmission, classify the readmission as planned. The second table
identifies primary discharge diagnoses that always classify
readmissions as planned. Because almost all planned admissions are for
procedures or surgeries, a third table identifies procedures for which
patients are typically admitted; if any of these procedures is coded in
the readmission, we classify a readmission as planned as long as that
readmission does not have an acute (unplanned) primary discharge
diagnosis. The fourth table lists the acute (unplanned) primary
discharge diagnoses that disqualify readmissions that include one or
more of the potentially planned procedure in the third table as
planned. These tables are structured similarly across all measures, but
the specific procedure and conditions they contain vary slightly for
certain measures based on clinical considerations for each cohort. The
current tables for each measure can be found in the measure methodology
reports at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Version 3.0 modifies two of these tables by removing or adding
procedures or conditions to improve the accuracy of the algorithm.
First, the validation study revealed that the algorithm could be
improved by removing two procedure CCS categories from the third table,
the potentially planned procedure table: CCS 211--Therapeutic Radiation
and CCS 224--Cancer Chemotherapy. Typically, patients do not require
admission for scheduled Therapeutic Radiation treatments (CCS 211). The
study found that readmissions that were classified as planned because
they included Therapeutic Radiation were largely unplanned.
The algorithm was also more accurate when CCS 224--Cancer
Chemotherapy was removed from the potentially planned procedure table.
The second table of the algorithm classifies all readmissions with a
principal diagnosis of Maintenance Chemotherapy as planned. Most
patients who receive cancer chemotherapy have both a code for Cancer
Chemotherapy (CCS 224) and a principal discharge diagnosis of
Maintenance Chemotherapy (CCS 45). In the validation study, the
readmissions for patients who received Cancer Chemotherapy (CCS 224),
but who did not have a principal diagnosis of Maintenance Chemotherapy
were largely unplanned, therefore removing CCS 224 from the potentially
planned procedure table improved the algorithm's accuracy. Therefore,
Version 3.0 removes CCS 211 and CCS 224 from the list of potentially
planned procedures to improve the accuracy of algorithm.
As noted above, the algorithm uses a table of acute principal
discharge diagnoses to help identify unplanned readmissions.
Readmissions that have a principal diagnosis listed in the table are
classified as unplanned, regardless of whether they include a procedure
in the potentially planned procedure table. The validation study
identified one diagnosis CCS that should be added to the table of acute
diagnoses to more accurately identify truly unplanned admissions as
unplanned: Hypertension with Complications (CCS 99). Hypertension with
complications is a diagnosis that is rarely associated with planned
readmissions.
In addition, the validation study identified a subset of ICD-9
diagnosis codes within two CCS diagnosis categories that should be
added to the acute diagnosis table to improve the algorithm. CCS 149,
Pancreatic Disorders, includes the code for acute pancreatitis;
clinically there is no situation in which a patient with this acute
condition would be admitted for a planned procedure. Therefore, Version
3.0 adds the ICD-9 code for acute pancreatitis, 577.0, to the acute
primary diagnosis table to better identify unplanned readmissions.
Finally, CCS 149, Biliary Tract Disease, is a mix of acute and non-
acute diagnoses. Adding the subset of ICD-9 codes within this CCS group
that are for acute diagnoses to the list of acute conditions improves
the accuracy of the algorithm for these acute conditions while still
ensuring that readmissions for planned procedures, like
cholecystectomies, are counted accurately as planned. For more detailed
information on how the algorithm is structured and the use of tables to
identify planned procedures and diagnoses, we refer readers to CMS'
Planned Readmission Algorithm Version 2.1: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. As noted above, readers
can find the specific Version 3.0 tables for each measure in the
measure updates and specifications reports at the above link.
We invited public comment on our proposal to use the CMS Planned
Readmission Algorithm Version 3.0, for the AMI, HF, PN, THA/TKA, HWR,
COPD, and Stroke readmission measures for the FY 2015 payment
determination and subsequent years.
Comment: One commenter supported the use of the planned readmission
algorithm for the COPD readmission measure. Several commenters believed
updates to the COPD readmission rate calculation will increase the
measures precision.
Response: We thank the commenters for their support.
Comment: Several commenters did not support the Cancer Exclusions
and urged CMS to continue excluding therapeutic radiation and cancer
chemotherapy from readmissions penalties. Commenters stated that given
the immunosuppression associated with these conditions and treatments,
it is in the best interest of the patients to be sent home as soon as
possible as it reduces their chances of getting hospital acquired
infections that are often more virulent than community-acquired
pathogens. One commenter was

[[Page 50213]]

concerned that the proposed exclusion may not be able to fully account
for the increased readmissions associated with this population that are
often not preventable. Another commenter also noted that some hospitals
may treat more patients who receive these treatments compared to other
hospitals, which would not be accounted for in the measures. Another
commenter did not believe that CMS presented convincing evidence that
the cancer codes proposed for exclusion are appropriate to exclude at
this time. The commenter urged CMS to report its findings to NQF for a
transparent review prior to implementation.
Response: We recognize that cancer care readmissions are often not
preventable. In response to commenters' concerns regarding the cancer
exclusions and certain hospitals treating more cancer patients than
other hospitals, we are removing both CCS 211--Therapeutic Radiation
and CCS 224--Cancer Chemotherapy from the potentially planned procedure
table of the planned readmission algorithm to improve the accuracy of
the algorithm. We are removing Therapeutic Radiation because patients
are not typically admitted for therapeutic radiation, and admissions
with this treatment in a validation study we conducted of the algorithm
were generally unplanned. Further, our validation study showed
admissions for people who receive cancer chemotherapy, but do not have
a principal diagnosis of maintenance chemotherapy are typically
unplanned admissions. Therefore, we expect that removal of CCS 211 and
CCS 224 will improve the algorithm's accuracy and we do not anticipate
it will have the unintended consequence of discouraging needed cancer
care.
We acknowledge that in many cases it is in the best interest of the
patients to be sent home as soon as possible as it reduces their
chances of getting hospital acquired infections that are often more
virulent than community-acquired pathogens.
As we are removing these cancer exclusions, we believe that we
would not need to report additional information to NQF, as requested by
the commenter.
Comment: Several commenters believed that the readmission algorithm
is critically important in the appropriate attribution of readmissions.
One commenter was disappointed that CMS have not sent the planned
readmissions algorithm back to the NQF and several suggested that CMS
seek an ad hoc review before proposing changes to the readmission
measures that are used in the Hospital IQR Program and the Hospital
Readmissions Reduction Program.
Response: We would like to reassure the commenters that our
proposed changes to the readmission algorithm will have minimal effect
on how it attributes readmissions. We believe the changes should
undergo NQF review as part of the endorsement maintenance and annual
update processes for individual measures instead of an ad hoc review
because the changes to the algorithm have a minimal effect on the
planned readmission rates for each measure as detailed in the proposed
rule (Table IV.H.1) (79 FR 28107 through 28108) and improve the
accuracy of the algorithm. We have submitted changes related to the
heart failure, pneumonia, and hip/knee, COPD and CABG readmission
measures with Version 3.0 to NQF, all under annual update review with
the exception of the CABG readmission measures which are new. For the
AMI measure, endorsement maintenance occurred in 2013 prior to CMS'
updating the algorithm to Version 3.0; therefore, we will submit the
AMI readmission measure with the revised algorithm in the next NQF
review cycle.
We acknowledge the commenter's view that the readmission algorithm
is critically important in the appropriate attribution of readmissions.
After consideration of the public comments we received, we are
finalizing our policy to use the CMS Planned Readmission Algorithm
Version 3.0, for the AMI, HF, PN, THA/TKA, HWR, COPD, and Stroke
readmission measures for the FY 2015 payment determination and
subsequent years as proposed.
b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty
(THA/TKA) 30-Day Complication and Readmission Measures
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28224 through
28225), for the FY 2015 payment determination and subsequent years, we
proposed to refine: (1) the measure outcome and cohort for the Elective
Primary THA/TKA All-Cause 30-Day Risk-Standardized Complication Measure
(NQF 1550); and (2) the measure cohort for the Elective
Primary THA/TKA All-Cause Unplanned 30-Day Risk-Standardized
Readmission Measure (NQF 1551).
As part of measure implementation, we conducted a dry run for both
the THA/TKA readmission and complication measures in September/October
of 2012. More information on the dry run is available at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889945763&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DDryRun_HWR-HK_SummRept_122112.pdf&blobcol=urldata&blobtable=MungoBlobs.
During the dry run, several commenters suggested that we evaluate
the use of Present on Admission (POA) codes for both the hip/knee
readmission and complication measures. We agreed with the suggestion
and have been monitoring POA data collection and testing its readiness
for use in claims-based measures. We also noted our intent to evaluate
the use of POA codes in Hospital IQR Program measures, such as the
stroke mortality rate measure, in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50801). We have since tested the use of the POA codes and
proposed to incorporate POA codes into the hip/knee complication
measure for FY 2015 payment determination and subsequent years in order
to prevent identifying a condition as a complication of care if it was
present during admission.
In addition, currently, the THA/TKA Readmission Measure (NQF
1551) adopted for the Hospital IQR Program is intended to only
include patients who have an elective THA or TKA. Currently, this
measure excludes patients who have a principal discharge diagnosis of
femur, hip, or pelvic fracture on their index admission since hip
replacement for hip fracture is not an elective procedure. However,
after hospitals reviewed their hospital-specific THA/TKA Readmission
Measure data during the national dry-run, we learned that hospitals
code hip fractures that occur during the same admission as a THA as not
only a principal diagnosis, but also alternatively, a secondary
diagnosis, instead of just a principal diagnosis as currently specified
by the measure. According to feedback received from hospitals
participating in the dry-run, the measure methodology failed to
identify, and, appropriately exclude, a small number of patients (that
is, 0.42 percent of patients in 2009-2010 data) with a hip fracture
that had non-elective total hip arthroplasty as captured by these
secondary diagnoses.
Therefore, to ensure that all such non-elective hip fracture
patients are excluded from the measure, we proposed to refine the
measure to exclude patients with hip fractures coded as either a
principal or secondary diagnosis during the index admission beginning
with the FY 2015 payment determination and subsequent years. We believe
this refinement is responsive to

[[Page 50214]]

comments previously received from hospitals (78 FR 50709) and will
allow us to accurately exclude patients who were initially admitted for
a hip fracture and who then subsequently underwent total hip
arthroplasty, making their procedure non-elective.
We invited public comment on these proposed refinements.
Comment: Many commenters supported these refinements. Specifically,
commenters supported CMS' proposals to:
Add POA condition codes to the THA/TKA measures,
contending that doing so will minimize the misidentification of pre-
existing conditions as complications related to the procedure.
Exclude from this 30-day readmission measure cohort
patients with hip fracture who had a non-elective total hip
anthroplasty.
Exclude patients who have a hip fracture coded as either a
principal or secondary diagnosis during the index admission from the
THA/TKA complication and readmission measures.
Remove cases where the hip/knee complication was present
prior to the relevant admission as such complications should accrue to
the hospitals furnishing the procedure prior to follow-up care.
Evaluate the performance of the Risk Standardized
Readmission and Complication Rate (RSRR and RSCR) measures for total
hip and total knee arthroplasty.
Response: We thank the commenters for their support.
Comment: Several commenters appreciated CMS' efforts to make
measure improvements but explained that they did not support the update
until measures have completed the NQF measure maintenance process,
arguing that changes should not be made through the subregulatory
process.
Response: To clarify, since we are using the notice and comment
rulemaking process to make these measure refinements here, we are not
making these changes using subregulatory methods. We believe these
refinements are necessary to ensure that the measure accurately
reflects the care provided to patients. We do not believe that we
should delay making efforts to improve the measure's accuracy.
Comment: One commenter did not support the modifications to the THA
and TKA readmission and complication measures, noting that the need to
make corrections reinforces the view that there should be sufficient
comprehensive testing before they are adopted for use.
Response: We agree with the commenter that the measures should
undergo extensive testing prior to inclusion in reporting programs. The
modifications here were identified during field testing of the THA/TKA
readmission and complication measures and were incorporated prior to
inclusion of the measures in the Hospital IQR Program. In addition, we
reevaluate our measures on an annual basis in order to make
methodological refinements required by: (1) Ongoing changes in clinical
practice; (2) coding update; and (3) evolving input from stakeholders.
Comment: One commenter was concerned about the accuracy of
administrative claims data used for the Hip/Knee Complication measure.
The commenter suggested that the claims data used for the measure has
been known to underreport significant comorbidities, particularly
obesity.
Response: We believe that the administrative claims data used for
the Hip/Knee Complication measure are accurate. We have validated the
AMI, HF, and pneumonia readmission and mortality measures by building
comparable models using medical record data for risk adjustment for
heart failure patients (National Heart Failure data), AMI patients
(Cooperative Cardiovascular Project data), and pneumonia patients
(National Pneumonia Project dataset). When the medical record-based
models were applied to the corresponding patient population, the
hospital risk-standardized rates estimated using the claims-based risk
adjustment models had a high level of agreement with the results based
on the medical record model. This supports the use of the claims-based
models for public reporting.
Regarding the commenters' concern about under-reporting significant
co-morbidities, particularly morbid obesity, we have also conducted a
medical record validation study of the THA/TKA complications measure.
The goal of that study was to determine the overall agreement between
arthroplasty patients identified as having a complication (or no
complication) in the claims-based measure and those who had a
complication (or no complication) also documented in the medical
record. Overall measure data agreement was 93 percent (598/644
patients) before any changes were made to the model specifications.
After the measure specifications were changed based upon the results of
this validation study, the measure agreement between claims data and
the medical record was 99 percent (635/644).
We also acknowledge the commenters' concern that obesity is
associated with poorer outcomes after joint replacement; however,
evidence supports that the potential greatest risk lies in patients who
are morbidly obese.\57\ Administrative codes for morbid obesity have
been shown to have greater sensitivity and specificity than obesity
codes overall, with a specificity of 99 percent,\58\ and morbid obesity
(ICD-9-CM code 278.01) is currently included in the measure risk model.
---------------------------------------------------------------------------

\57\ Horan F. Obesity and joint replacement. J Bone Joint Surg
[Br] 2006;88-B:1269-71.
\58\ Nicholas S. Golinvaux, Daniel D. Bohl, Bryce A. Basques,
Michael C. Fu, Elizabeth C. Gardner, Jonathan N. Grauer. Limitations
of Administrative Databases In Spine Research: A Study in Obesity.
Spine Journal, In Press, Accepted Manuscript, Available online 26
April 2014.
---------------------------------------------------------------------------

Comment: Several commenters requested that the Hip/Knee
Complication measure be adjusted for socioeconomic status (SES).
Response: We appreciate the commenters' concerns and note that
these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule
(79 FR 50653 through 50654, 50673 through 50674). As described in prior
rulemaking, we do not currently risk adjust for SES in the Hospital IQR
Program. However, we do risk adjust for comorbidities (that is,
correlated illnesses) and other factors to ensure that hospitals are
not penalized for serving populations that are sicker or have higher
incidences of chronic disease.
We are aware that there are differing opinions regarding this
approach. We appreciate the commenters' suggestions on the importance
of addressing SES in the Hospital IQR Program. We have continued to
consider and evaluate stakeholder concerns regarding the influence of
patient socioeconomic status on clinical quality measures. We refer
readers to section IV.H.4. of the preamble of this final rule for a
discussion of the use of SES in our quality programs.
After consideration of the public comments we received, we are
finalizing the refinements to the THA/TKA measure as proposed.
c. Anticipated Effect of Refinements to Existing Measures
Based on our analyses of discharges between July 2009 and June
2012, our proposal to use the Planned Readmission Algorithm Version 3.0
would have the following effects on measures had these changes been

[[Page 50215]]

applied for the FY 2014 payment determination as an example. We are
sharing this information to provide the public with a sense of the
extent to which these refinements to the measures will change the
measure scores. As the results show, while the refinements improve the
accuracy of the measures, the changes in actual scores are very slight.
The proposed 30-day readmission rate (excluding the planned
readmissions) would increase by 0.1 percentage points for AMI; 0.2
percentage points for HF; 0.1 percentage points for PN; 0.1 percentage
points for COPD; 0.0 percentage points for hip/knee; 0.1 percentage
points for HWR; and 0.0 percentage points for stroke.
The new national measure (unplanned) rate for each condition would
have been 18.4 percent for AMI; 23.2 percent for HF; 17.7 percent for
PN; 21.1 percent for COPD; 5.4 percent for hip/knee; 16.1 percent for
HWR; and 13.8 percent for stroke.
The number of readmissions considered planned (and, therefore, not
counted as a readmission) would decrease by 334 for AMI; 1,375 for HF;
981 for PN, 574 for COPD; 309 for hip/knee; 7,417 for HWR; and 242 for
stroke.

[[Page 50216]]

[GRAPHIC] [TIFF OMITTED] TR22AU14.008

[[Page 50217]]

d. Clarification Regarding Influenza Vaccination for Healthcare
Personnel
The Influenza Vaccination Coverage Among Healthcare Personnel (HCP)
(NQF 0431) measure was finalized for the Hospital IQR Program
in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51633) and the Hospital
Outpatient Quality Reporting (HOQR) in the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75099). We received public comments
regarding the burden of separately collecting and reporting HCP
influenza vaccination statuses for both the inpatient and outpatient
settings. In response to these concerns, we clarified that beginning
with the 2014-2015 influenza season (CY 2014 reporting period and FY
2016 payment determination), facilities should collect and report a
single vaccination count for each healthcare facility by CMS
Certification Number (CCN), instead of separately by inpatient or
outpatient setting, in order to reduce burden. We announced this
clarification regarding how to designate HCP for this measure in an
Operational Guidance document which can be found on our on our Web page
at: https://origin.glb.cdc.gov/nhsn/PDFs/HCP/Operational-Guidance-ACH-HCP-Flu.pdf. Using the CCN will allow healthcare facilities with
multiple care settings to simplify data collection and submit a single
count applicable across the inpatient and outpatient settings. We will
then publicly report the percentage of HCP who received an influenza
vaccination per CCN. This single count per CCN will inform the public
of the percentage of vaccinated HCP at a particular healthcare
facility, which would still provide meaningful data and help to improve
the quality of care. Specific details on data submission for this
measure can be found at: https://www.cdc.gov/nhsn/acute-care-hospital/hcp-vaccination/ and at https://www.cdc.gov/nhsn/acute-care-hospital/.
(We discussed this clarification in section IX.A.5. of the preamble
to the proposed rule (79 FR 28221).)
Comment: Several commenters supported the collection and submission
of the influenza vaccination measure as a single facility count, which
the commenters agreed will reduce the burden on providers and lead to
more meaningful results. One commenter specifically supported the
healthcare personnel influenza vaccination coverage clarification
because it accommodates injectable and nasal spray vaccines.
Response: We thank the commenters for their support.
Comment: A commenter requested clarification on reporting for the
inpatient and outpatient settings, stating that it reports to NHSN
separately for these settings through a Facility Organization
Identification (Org ID) rather than by CCN. The commenter believed
that, after all data have been submitted by Org ID, the CDC will roll-
up the data reported by Org ID to the CCN level, in order to report
data to CMS.
Response: We agree with the commenter's assessment and clarify that
hospitals should report by enrolled facility, according to their NHSN
OrgID, in order to be consistent with CDC NHSN infrastructure. These
data are to be reported for all patient care units included within the
enrolled facility's OrgID that also share the same CCN (some patient
care units within the OrgID may have separate CCNs and those should not
be included in these counts). Therefore, data will be submitted to NHSN
by facility Org ID, not CCN. CDC will then aggregate the facility level
data into a CCN HCP rate and submit aggregate hospital-level measure
rates at the CCN level to us on behalf of facilities for Hospital
Compare public reporting purposes.
After consideration of public comments we received, we are
clarifying that hospitals should report a single count per enrolled
facility, and not CCN, for the previously finalized Influenza
Vaccination Coverage Among Healthcare Personnel (HCP) (NQF
0431) measure. We will require facilities to collect and
submit a single vaccination count for each health care facility
enrolled in NHSN by facility OrgID. This modifies our statement in the
proposed rule indicating that facilities should submit data by CCN, and
better aligns with the FY 2015 OPPS Proposed rule (79 FR 41035) as well
as NHSN guidance documents.
7. Additional Hospital IQR Program Measures for the FY 2017 Payment
Determination and Subsequent Years
For purposes of the Hospital IQR Program, section
1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by
the Secretary must have been endorsed by the entity with a contract
under section 1890(a) of the Act. However, the statutory requirements
under section 1886(b)(3)(B)(IX)(bb) of the Act provide an exception
that, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28227 through
28243) we proposed to add a total of 11 measures to measure set for the
FY 2017 payment determination and subsequent years. The first nine new
measures are: (1) Hospital 30-day, all-cause, unplanned, risk-
standardized readmission rate (RSRR) following coronary artery bypass
graft (CABG) surgery (claims-based); (2) Hospital 30-day, all-cause,
risk-standardized mortality rate (RSMR) following coronary artery
bypass graft (CABG) surgery (claims-based); (3) Hospital-level, risk-
standardized 30-day episode-of-care payment measure for pneumonia
(claims-based); (4) Hospital-level, risk-standardized 30-day episode-
of-care payment measure for heart failure (claims-based); (5) Severe
Sepsis and Septic Shock: Management Bundle (NQF 0500) (chart-
abstracted); (6) EHDI-1a Hearing Screening Prior to Hospital Discharge
(NQF 1354) (electronic clinical quality measure); (7) PC-05
Exclusive Breast Milk Feeding and the subset measure PC-05a Exclusive
Breast Milk Feeding Considering Mother's Choice (NQF 0480)
(electronic clinical quality measure); (8) CAC-3 Home Management Plan
of Care (HMPC) Document Given to Patient/Caregiver (electronic clinical
quality measure); and, (9) Healthy Term Newborn (NQF 0716)
(electronic clinical quality measure).
In addition, to align the Hospital IQR Program with the Medicare
EHR Incentive Program for Eligible Hospitals and CAHs and allow
hospitals as many measure options as possible that overlap both
programs, we proposed to readopt two measures previously removed from
the Hospital IQR Program as voluntary electronic clinical quality
measures: (10) AMI-2 Aspirin Prescribed at Discharge for AMI (NQF
0142) (electronic clinical quality measure); and (11) AMI-10
Statin Prescribed at Discharge (NQF 0639) (electronic clinical
quality measure). These two measures are part of the Stage 2 Medicare
EHR Incentive Program measure set for eligible hospitals and CAHs.
The four proposed claims-based measures (1-4, above) were included
on a publicly available document entitled ``List of Measures Under
Consideration for December 1, 2013'' in compliance with section
1890A(a)(2) of the Act, and they were reviewed by the MAP in its MAP
2014 Recommendations on Measures for More Than 20 Federal

[[Page 50218]]

Programs final report, available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
The proposed chart-abstracted measure (5 above) Severe Sepsis and
Septic Shock: Management Bundle (NQF 0500) was included in the
MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under
Consideration by HHS final report, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
The proposed measures 6-9 above were included on a publicly
available document entitled ``List of Measures Under Consideration for
December 1, 2012'' in compliance with section 1890A(a)(2) of the Act,
and they were reviewed by the MAP in its MAP Pre-Rulemaking Report:
2013 Recommendations on Measures Under Consideration by HHS final
report, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738.
Measures 10 and 11 were included on a publicly available document
entitled ``Measures Under Consideration for Calendar Year 2012'' in
compliance with section 1890A(a)(2) of the Act, and they were reviewed
by the MAP in its Pre-Rulemaking Report: Input on Measures Under
Consideration by HHS for 2012 Rulemaking available at https://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report__Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx.
We received a number of comments applying across proposed measures
and will address those comments first before individually addressing
comments related to specific measures.
Comment: One commenter supported the inclusion of the CABG
mortality and readmission, heart failure payment, and pneumonia payment
measures in the Hospital IQR Program. The commenter preferred that the
measures be NQF-endorsed. Another commenter supported CMS' proposal to
increase the number of outcome measures.
Response: We thank the commenters for their support.
Comment: Several commenters expressed concern that four of the five
measures proposed for adoption under the Hospital IQR Program were not
NQF-endorsed and have not been recommended by the MAP. The most
frequently expressed concerns were in regards to the CABG mortality,
CABG readmission, heart failure and pneumonia payment measures,
although there were several comments addressing the other proposed
measures that are not NQF-endorsed. A commenter noted the NQF process
is important to the reliability and validity of the measures used in
the programs and to monitor adverse events.
Response: As described above, we may adopt non-NQF-endorsed
measures under the Hospital IQR Program exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act. This provision provides that, in the
case of a specified area or medical topic determined appropriate by the
Secretary for which a feasible and practical measure has not been
endorsed by the entity with a contract under section 1890(a) of the
Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
Although we proposed some measures that are not currently NQF-endorsed,
they are pending NQF endorsement. We also considered other available
measures that have been endorsed by the NQF and found no other feasible
and practical measures. In addition, the MAP has supported or
conditionally supported several of the measures. We are actively
seeking NQF endorsement for the claims-based measures. More detailed
discussions for individual measures are below.
Comment: A commenter requested that CMS outline its standards for
conducting an environmental scan of available measures in the absence
of a non-NQF-endorsed measure.
Response: We conduct thorough environmental scans of available
measures using a standardized system set out in A Blueprint for the CMS
Measures Management System (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MeasuresManagementSystemBlueprint.html). We follow these core processes
set out in the Blueprint as we develop, implement, and maintain quality
measures. Our process for conducting an environmental scan of existing
or related measures is set out below.
First we search for similar or related measures (existing or in
development) that will help achieve the quality goals. We keep the
search parameters broad to obtain an overall understanding of the
measures in existence, including measures that closely meet the
contract requirements and other potential sources of information. We
then look for measures endorsed and recommended by multi-stakeholder
organizations whenever applicable and include a search for measures
developed and/or implemented by the private sector. Then we determine
what types of measures are needed to promote the quality goals for a
particular topic/condition or setting and determine what measurement
gaps exist for the topic area, as well as existing measures that may be
adopted or adapted for the project. For example, if the objective is
the development of immunization measures for use in the home health
setting, it will be necessary to identify and review existing home
health measures. In addition, it might also be helpful to analyze
immunization measures used in other settings such as nursing homes and
hospitals.
The CMS Measures Management staff assists in identifying measures
in development to ensure that no duplication occurs or to ensure
related measures are developed with harmonization in mind. Search
parameters include: (1) Measures in the same setting, but for a
different topic; (2) Measures in a different setting, but for the same
topic; (3) Measures that are constructed in a similar manner; (4)
Quality indicators; (5) Accreditation standards; and (5) NQF preferred
practices for the same topic.
Searching for existing and related measures may involve two steps:
(1) searching databases, and (2) searching for other sources of
information, such as performance indicators, accreditation standards,
or preferred practices. We use a variety of databases and sources to
search for existing and related measures. Below are links to a few
readily available sources:
National Quality Measures Clearinghouse (https://www.qualitymeasures.ahrq.gov/);
HHS Inventory (https://www.qualitymeasures.ahrq.gov/hhs-measure-inventory/browse.aspx);
CMS Measures Inventory and Pipeline (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/CMS-Measures-Inventory.html);
National Quality Forum (https://www.qualityforum.org/Measures_List.aspx);
AHRQ (https://www.qualityindicators.ahrq.gov/; and,
American Medical Association-Physician Consortium for
Performance Improvement (https://www.ama-assn.org/apps/listserv/x-check/qmeasure.cgi?submit=PCPI).
We also search other HHS agency pipeline measures. We search for
other sources of information, such as performance indicators,
accreditation standards, or preferred practices, that may pertain to
the contract topic.

[[Page 50219]]

Though they may not be as fully developed as a quality measure, quality
indicators could be further developed to create a quality measure by
providing detailed and precise specifications. Measures aligned with
those standards may be easier to implement and be more readily accepted
by the providers. These standards are linked to specific desired
outcomes, and quality measures may be partially derived from the
preferred practices reflected in the standards.
Comment: Several commenters believed that all measures should be
risk-adjusted for SES, explaining that failing to risk adjust for SES
factors will skew our data measurements and produce inaccurate and
unreliable outcomes. One commenter emphasized the need for adjusting
for SES factors in all outcomes measures, arguing that such variables
have an impact on patient outcomes, but are outside of a hospitals
control. The commenter added that CMS as not provided data that shows
this point to be untrue. One commenter stated that CMS should analyze
the differences in performance for safety net providers to other
hospitals by determining if the means of performance distribution are
significantly different thus resulting in penalties. If it does, the
commenter believed that SES risk adjustment would provide incentives
for hospitals to improve as quality differences for reasons outside of
a hospital's control would be illuminated.
Another commenter explained that many studies show reliable
statistical results that SES is a risk factor for patient outcomes and
that we have not demonstrated otherwise. As a result, the commenter
believed that not adjusting for this risk factor obscures quality
differences. One commenter believed that empirical studies demonstrate
that patient SES impacts outcomes and failure to account for such
impact disadvantages hospitals that treat them. Another commenter
believed that hospitals should not be accountable for outcomes
attributable to patient risk factors. Instead, the commenter believed
that risk adjustment should be performed if data-stratified by SES show
that safety net hospitals are providing poorer care for reasons
unrelated to quality.
Another commenter suggested that CMS' argument for not risk
adjusting for SES factors is that it would hold hospitals serving these
areas to a different standard than others. The commenter stated that
CMS' belief that risk adjusting for SES obscures true quality
differences is based on the assumption that SES is not a risk factor
beyond the hospital's control. Another commenter listed unintended
consequences that may result from not risk adjusting for SES which were
echoed by several commenters. These potential consequences included not
providing care for disadvantaged patients so as to not be labeled a
poor performer, shifts in funds to hospitals caring for affluent
patients, and consumers avoiding providers labeled poor performers when
they are not. Several commenters were concerned that not risk-adjusting
for SES could result in safety net providers losing scarce resources
that are necessary to care for vulnerable patients, which would
potentially make disparities worse.
Further, one commenter stated that current CMS measures do not
improve quality and weaken the social safety net. Another commenter
believed that the current policy to exclude ``factors related to the
disparities in care'' from all measures creates a ``one size fits all''
approach that ignores fundamentally the challenges that many academic
health centers face in delivering high-quality care to their entire
patient population, regardless of race, income, or other socioeconomic
characteristics. Commenters urged CMS to review important studies
published about risk adjustment for SES and revise measure methodology
to account for SES. One commenter suggested that CMS comply with the
NQF's recommendations related to the use of risk adjustment versus
stratification for patient SES.
Response: We have received many comments regards risk-adjusting
measures for SES in several quality programs. We appreciate the
commenters' concerns and note that these concerns were addressed in the
FY 2014 IPPS/LTCH PPS final rule (79 FR 50653 through 50654, 50673
through 50674). As described in prior rulemaking, we do not currently
risk adjust for SES in the Hospital IQR Program. However, we do risk
adjust for comorbidities (that is, correlated illnesses) and other
factors to ensure that hospitals are not penalized for serving
populations that are sicker or have higher incidences of chronic
disease.
We are aware that there are differing opinions regarding this
approach. We appreciate the commenters' suggestions on the importance
of addressing SES in the Hospital IQR Program. We have continued to
consider and evaluate stakeholder concerns regarding the influence of
patient socioeconomic status on clinical quality measures. We refer
readers to section IV.H.4. of the preamble of this final rule for
further discussion of this issue.
Comment: One commenter stated that ``a large proportion of low-
income patients sometimes achieve good quality scores even as compared
the scores for hospitals that have a lower proportion of low-income
patients. But this is simply an anecdotal observation. It is not a
statistically acceptable and reliable analysis.''
Response: We thank the commenter for their feedback, we understand
this comment to mean a hospital with a high proportion of low SES
patients can perform high in comparison with hospitals with a
relatively low proportion of SES patients. We note similar findings in
our Chartbook that follows the trends of hospital performance on
readmission, mortality, and complication (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.) The statement referred to was based on descriptive
statistics of the measure scores that can be found in our 2013 Medicare
Hospital Quality Chartbook at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
The risk-adjustment for clinical factors likely captures much of
the variation due to SES, therefore resulting in an attenuation of the
impact of SES factors on hospitals' results. We continue to monitor
related activities at NQF, such as the July 23, 2014 decision by the
NQF Board to approve a trial period to test the impact of
sociodemographic factor risk adjustment of performance measures
(available at: https://www.qualityforum.org/Press_Releases/2014/NQF_Board_Approves_Trial_Risk_Adjustment.aspx), and in Congress. As we
stated in the past, we are committed to working with the NQF and other
stakeholder communities to continuously refine our measures and to
address the concerns associated with SES and risk adjustment. We
believe that continued collaboration with the stakeholder communities
will enable us to identify feasible ways to appropriately address any
unintended consequences for providers serving high proportions of low
SES patients.
Comment: A commenter was concerned that CMS proposed several new
measures for the Hospital IQR Program that the commenter believes lack
the scientific rigor needed for public reporting. However, the
commenter did not specify which proposed measures caused concern.

[[Page 50220]]

Response: We respectfully disagree with the commenter that the
proposed measures lack the scientific rigor needed for public
reporting. We believe that these measures, as they are detailed below,
are scientifically rigorous as they are described.
Comment: Several commenters did not support the use of the
pneumonia payment measure in the Hospital IQR Program since it is not
NQF-endorsed. One commenter believed that, because the measure is not
NQF endorsed, it is too soon to finalize the measure for the FY 2017
Hospital IQR Program.
Response: We received numerous comments that concerned both the
Hospital-level, risk-standardized 30-day episode-of-care payment
measure for pneumonia and Hospital-level, risk-standardized 30-day
episode-of-care payment measure for heart failure payment measures. We
are addressing those comments here first before addressing the
individual measures.
a. Hospital 30-day, All-cause, Unplanned, Risk-Standardized Readmission
Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery
(1) Background
CABG is a priority area for outcomes measure development because it
is a common procedure associated with considerable morbidity,
mortality, and health care spending. In 2007, there were 114,028
hospitalizations for CABG surgery and 137,721 hospitalizations for
combined surgeries for CABG and valve procedures (``CABG plus valve''
surgeries) in the U.S.\59\
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\59\ Drye E, Krumholz H, Vellanky S, Wang Y. Probing New
Conditions and Procedures for New Measure Development: Yale New
Haven Health Systems Corporation; Center for Outcomes Research and
Evaluation.; 2009:1-7.
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Readmission rates following CABG surgery are high and vary across
hospitals. For example, in 2009 Medicare fee-for-service (FFS) data,
the median hospital-level risk-standardized readmission rate after CABG
was 17.2 percent and ranged from 13.9 percent to 22.1 percent.\60\ This
is consistent with published data as the average 30-day all-cause,
hospital-level readmission rate in New York state was 16.5 percent and
ranged from 8.3 percent to 21.1 percent among all patients who
underwent CABG surgery between January 1, 2005 and November 30,
2007.\61\ Among patients readmitted within 30 days, 87.3 percent of
readmissions were for reasons related to CABG surgery, with a 30-day
rate of readmissions due to complications of CABG surgery of 14.4
percent. Patients readmitted within 30 days also experienced a 2.8
percent in-hospital mortality rate during their readmission(s), three-
fold higher than the 30-day mortality rate for patients without
readmissions.\62\ Hence, addressing the causes of readmission will
improve outcomes for patients.
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\60\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
\61\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
\62\ Ibid.
---------------------------------------------------------------------------

Readmissions after CABG also impose significant health care costs.
In 2007, the Medicare Payment Advisory Committee (MedPAC) published a
report to Congress in which it identified the seven conditions
associated with the most costly potentially preventable readmissions in
the U.S.\63\ Among these seven, CABG ranked as having the highest
potentially preventable readmission rate within 15 days following
discharge (13.5 percent) and the second highest average Medicare
payment per readmission ($8,136).\64\ The annual cost to Medicare for
potentially preventable CABG readmissions was estimated at $151
million.
---------------------------------------------------------------------------

\63\ Medicare Payment Advisory Committee. Report to the
Congress: Promoting Greater Efficiency in Medicare, 2007.
\64\ Ibid.
---------------------------------------------------------------------------

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

[[Page 50221]]

outcome of care, even though not all readmissions are preventable.
Second, limiting the measure to CABG-related readmissions may limit the
effort focus too narrowly rather than encouraging broader initiatives
aimed at improving the overall care within the hospital and transitions
from the hospital setting. Moreover, it is often hard to exclude
quality issues and accountability based on the documented cause of
readmission. For example, a patient who underwent a CABG surgery and
develops a hospital-acquired infection may ultimately be readmitted for
sepsis. It would be inappropriate to consider such a readmission to be
unrelated to the care the patient received for their CABG surgery.
Finally, while the measure does not presume that each readmission is
preventable, interventions generally have shown reductions in all types
of readmissions.^{65 66}
---------------------------------------------------------------------------

\65\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\66\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------

The measure does not count planned readmissions as readmissions.
Planned readmissions would be identified in claims data using the CMS
Planned Readmission Algorithm Version 3.0 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. Version 2.1 of the algorithm was finalized for use in the
current Hospital IQR Program readmission measures in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50785 through 50787, 50790 through 50792 and
50794 through 50798). However, we proposed to update the algorithm to
version 3.0, and details on the updates to this algorithm can be found
in section IX.A.6.a. of the preamble of this final rule. The proposed
CABG readmission measure uses the planned readmission algorithm
tailored for CABG patients. We adapted the algorithm for this group of
patients with input from CABG surgeons and other experts, narrowing the
types of readmissions considered planned since planned readmissions
following CABG are less common and less varied than among patients
discharged from the hospital following a medical admission. More
detailed information on how the CABG measure incorporates the Planned
Readmission Algorithm Version 3.0 can be found on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Once at the
Web site, users should open the Coronary Artery Bypass Graft (CABG)
Readmission ZIP file, then open the file labeled, ``Version10--
Readmission--CABG--Measure--Methodology--Report--3 19 2014'' and refer
to Section 2.3.3. For the CABG measure, unplanned readmissions that
fall within the 30-day post-discharge timeframe from the index
admission would not be counted as readmissions for the index admission
if they were preceded by a planned readmission.
(5) Cohort
The cohort includes patients aged 65 years and older who received a
qualifying CABG procedure at an acute care facility. Patients are
eligible for inclusion if they had a qualifying CABG procedure and
continuous enrollment in Medicare FFS one year prior to the first day
of the index hospital stay and through 30 days post-discharge. The
index stay is the stay that triggers the 30-day measurement period.
In order to include a clinically-coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and non-cardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures, that is, CABG procedures performed without concomitant
high-risk cardiac and non-cardiac procedures.\67\ Limiting the measure
cohort to ``isolated'' CABG patients is consistent with published
reports of CABG outcomes\9\; therefore, the measure cohort considers
only patients undergoing isolated CABG as eligible for inclusion in the
measure. We defined isolated CABG patients as those undergoing CABG
procedures without concomitant valve or other major cardiac, vascular
or thoracic procedures. In addition, our clinical experts, consultants,
and Technical Expert Panel (TEP) members agreed that an isolated CABG
cohort is a clinically coherent cohort for quality measurement. For
detailed information on the cohort definition, we refer readers to the
2012 CABG Readmission Measure Methodology Report on the CMS Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\67\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
---------------------------------------------------------------------------

(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients who are 65 years
of age or older at the time of index admission and for whom there was a
complete 12 months of Medicare FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients who are discharged against
medical advice (excluded because providers do not have the opportunity
to deliver full care and prepare the patient for discharge); (2)
admissions for patients who die during the initial hospitalization
(these patients are not eligible for readmission); (3) admissions for
patients with subsequent qualifying CABG procedures during the
measurement period (a repeat CABG procedure during the measurement
period very likely represents a complication of the original CABG
procedure and is a clinically more complex and higher risk surgery,
therefore we select the first CABG admission for inclusion in the
measure and exclude subsequent CABG admissions from the cohort); and
(4) admissions for patients without at least 30 days post-discharge
enrollment in Medicare FFS (excluded because the 30-day readmission
outcome cannot be assessed in this group).
(7) Risk-Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for readmission relative to patients cared for by
other hospitals. The measure uses claims data to identify patient
clinical conditions and comorbidities to adjust patient risk for
readmission across hospitals, but does not adjust for potential
complications of care. We refer readers to section IV.4.H of the
reamble of this final rule for further discussion of risk-adjustment
for socioeconomic factors.
(8) Calculating the Risk-Standardized Readmission Ratio (RSRR)
The measure is calculated using hierarchical logistic modeling
(HLM). This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The HLM is an appropriate
statistical approach to measuring quality based on patient outcomes
when the patients are clustered within hospitals (and therefore the
patients' outcomes are not statistically independent) and the number of
eligible patients for the

[[Page 50222]]

measure varies from hospital to hospital. As noted above, the measure
methodology defines hospital case mix based on the clinical diagnoses
provided in the hospital claims for their patients' inpatient and
outpatient visits for the 12 months prior to the CABG hospitalization,
as well as those present in the claims for care at admission. The
methodology, however, specifically does not account for diagnoses
present in the index admission that may indicate complications rather
than patient comorbidities.
The RSRR is calculated as the ratio of the number of predicted
readmissions to the number of expected readmissions and then the ratio
is multiplied by the national unadjusted readmission rate. The ratio is
greater than one for hospitals that have more readmissions that would
be expected for an average hospital with similar cases and less than
one if the hospital has fewer readmissions than would be expected for
an average hospital with similar cases. This approach is analogous to a
ratio of ``observed'' or ``crude'' rate to an ``expected'' or risk-
adjusted rate used in other similar types of statistical analyses.
The RSRR is a point estimate--the best estimate of a hospital's
readmission rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://cms.gov/Medicare/QualityInitiativesPatientAssessmentInstruments/HospitalQualityInits/Measure-Methodology.html.
We invited public comment on this proposal.
Comment: Several commenters supported the inclusion of CABG
readmission into the Hospital IQR Program. One commenter specifically
believes the CABG measure will lead to increased attention to care
after discharge.
Response: We thank the commenters for their support.
Comment: Several commenters recommended that CMS focus on
developing an electronically specified measure based on the ICD-10-CM/
PCS coding system for future adoption instead of the current proposed
measure.
Response: We thank the commenters and will take this suggestion
into consideration as we move towards use of electronic clinical
quality measures for CABG measures.
Comment: Several commenters did not support inclusion of the CABG
readmission measure in the Hospital IQR Program because the measure is
not NQF-endorsed.
Response: We proposed to include this non-NQF-endorsed measure
under the Hospital IQR Program exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act. Although the proposed measure is not
currently NQF-endorsed, we considered available measures that have been
endorsed or adopted by the NQF. We also are not aware of any other
similar measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. We refer readers to section IX.A.7. of the preamble of this
final rule where we discuss other comments on our adoption of non-NQF-
endorsed measures. On February 5, 2014, we submitted the Hospital-Level
30-Day All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft (CABG) Surgery measure to NQF for endorsement.
Comment: Several commenters oppose the CABG readmission measure
because it is not risk-adjusted for SES. Another commenter also
suggested removing other readmission measures from the Hospital IQR
Program until they are risk-adjusted for SES. Several commenters
suggest following NQF-endorsed panel recommendations that propose
evidence be presented in either support for or against the inclusion of
SES in the measure. A commenter requested we risk-adjust the measure
for SES and stated that this materially impacts the patient's
likelihood of being readmitted, and the members on NQF's panel to
examine adjusting for SES recommended adjusting for SES when
appropriate. A commenter stated that the lack of risk-adjustment of
this measure materially impacts the patient's likelihood of being
readmitted.
Response: We appreciate the commenters' concerns and note that
these concerns were addressed in the FY 2014 IPPS/LTCH PPS final rule
(79 FR 50653 through 50654, 50673 through 50674). As described in prior
rulemaking, we do not currently risk adjust for SES in the Hospital IQR
Program. However, we do risk adjust for comorbidities (that is,
correlated illnesses) and other factors to ensure that hospitals are
not penalized for serving populations that are sicker or have higher
incidences of chronic disease.
We are aware that there are differing opinions regarding this
approach. We appreciate the commenters' suggestions on the importance
of addressing SES in the Hospital IQR Program. We have continued to
consider and evaluate stakeholder concerns regarding the influence of
patient socioeconomic status on clinical quality measures. We have
received many comments regards risk-adjusting measures for SES in
several quality programs. We refer readers to section IV.H.4. of the
preamble of this final rule for further discussion of this issue.
Comment: Several commenters noted that there could be unintended
consequences from adopting this measure. One commenter believed it is
equally likely to result in hospitals avoiding complex cases in order
to avoid potential penalty. Another commenter requested that CMS
carefully monitor CABG utilization in high[hyphen]risk, older patients
to ensure hospitals are not avoiding performing them for high risk
patients in order to appear as lower readmission. If evidence is found
that CABG surgeries are not being offered to high[hyphen]risk patients,
the commenters suggested that CMS may need to reconsider its risk
adjustment methodology to mitigate this unintended consequence.
Response: We note that the measures are risk-adjusted to take into
account clinically complicated conditions. We appreciate commenters'
concerns for potential unintended consequences of the measure. We
believe the measure is adequately risk-adjusted for high-risk patients
and so will not create a disincentive to treat these patients, but we
will consider monitoring for any shift in their care (for example, by
evaluating the risk profile of Medicare patients undergoing surgery
before and after commencement of public reporting). The proposed CABG
readmission measure adjusts for differences across hospitals in the
level of risk their patients have for readmission relative to patients
cared for by other hospitals. The measure uses administrative claims
data to identify patient clinical conditions and comorbidities to
adjust patient risk for readmission across hospitals, but does not
adjust for potential complications of care.
Comment: One commenter opposed the measure construction and risk-
adjustment methodology, citing concerns that the low R-squared meant
that the measure does not truly differentiate performance between
hospitals.

[[Page 50223]]

Response: The commenter refers to the R-squared statistic, but this
is not a statistic used to evaluate the CABG measures. Therefore, we
are assuming the commenter's primary concern is with the c-statistic of
the measure. The c-statistic evaluates the measure's ability to
discriminate or differentiate among low- versus high-risk patients. For
measures used to profile hospital performance the goal is not always to
achieve the highest c-statistic possible. The role of risk-adjustment
in hospital profiling models is to level the playing field for
hospitals for measures that assess relative performance--that is, how
well hospitals fare compared to others with a similar patient case-mix.
The risk-adjustment variables should be only those that are inherent to
the patient and present at the time of admission. Some variables that
might increase predictive power, such as complications of care, would
not be appropriate for inclusion in an outcome quality measure, even if
they would lead to a higher c-statistic. The c-statistic of this CABG
measure is similar to other measures that are NQF-endorsed and in use,
such as the AMI/HF/PN readmission measures.
In addition, this measure's risk model has been validated using
registry data from the Society of Thoracic Surgeons' (STS) Adult
Cardiac Surgery Database, which produced nearly identical c-statistics
in a matched set of patients with correlation coefficients between 0.92
and 0.96, depending upon the statistic used.\68\
---------------------------------------------------------------------------

\68\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

Comment: One commenter does not support the CABG readmission
measure, because it holds hospitals responsible for pre-existing
underlying conditions. The commenter expected that risk adjusting is
unlikely to be sufficient.
Response: We believe that the measure should appropriately account
for patient case mix, including pre-existing conditions. This measure's
risk model includes a range of medical and surgical comorbidities
predictive of complications and readmissions following CABG surgery. In
addition, as noted above, the risk model has been validated against a
clinical risk model using registry data from the STS' Adult Cardiac
Surgery Database.\69\
---------------------------------------------------------------------------

\69\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

Comment: One commenter noted that the CABG readmission measure has
poor discrimination ability.
Response: As outlined above, we believe the commenter's primary
concern is with the c-statistic of the measure. Discrimination refers
to the ability to distinguish high risk subjects from low risk. The c-
statistic is one of the statistical tools used to assess
discrimination. We would like to clarify the important difference
between predictive models intended for patient-level risk-
stratification versus models used to profile hospital performance. In a
patient-level predictive model, the objective is to best predict
patient outcomes; the risk-adjustment variables are a means to better
predict these outcomes. As an example, a patient who has a serious
complication of care may be at higher risk of mortality and
readmission; therefore, complications might be useful to include in a
model used for patient-level prediction.
By contrast, the role of risk-adjustment in a hospital profiling
model is to level the playing field for hospitals for measures that
assess relative performance--that is, how well hospitals are doing
compared to others with similar patients. The risk-adjustment variables
should be only those that are inherent to the patient and present at
admission. Although risk adjusting for complications of care could
increase the statistical power of a profiling model, it would not make
sense to risk-adjust for complications here since it could lead
hospitals with high rates of complications to appear to be performing
better than hospitals with similar patients even though the quality of
care is worse.
In addition, as noted above, this measure's risk model has been
validated using registry data from the STS' Adult Cardiac Surgery
Database and produced nearly identical c-statistics in a matched set of
patients with correlation coefficients between 0.92 and 0.96, depending
upon the statistic used.\70\
---------------------------------------------------------------------------

\70\ Suter L.G., Wang, C., Vellanky S., Potteiger J., Curtis J.,
Lin Z., Geary L.L., Krumholz H.M., Drye E.D. Hospital-level 30-day
All-Cause Unplanned Readmission Following Coronary Artery Bypass
Graft Surgery: Report prepared for the Centers for Medicare &
Medicaid Services. 2012.
---------------------------------------------------------------------------

Comment: One commenter requested that the measure differentiate
between readmissions within and outside the control of the bypass
surgeon.
Response: We interpret readmissions ``within and outside the
control of the bypass surgeon'' to mean those that are only related to
the CABG surgery. We proposed this measure for hospital-specific
performance measurement, not for measurement of surgeon-level
performance. The measure defines the outcome as ``all-cause'' unplanned
readmissions rather than readmissions only related to the CABG surgery
for several reasons. First, from the patient perspective, readmission
for any reason is likely to be an undesirable outcome of care.
Second, there is no reliable way to determine whether a readmission
is related to the previous hospitalization based on the documented
cause of readmission. For example, a CABG patient with post-operative
left ventricular dysfunction inadequately managed by the hospital
performing the surgery may ultimately be readmitted for heart failure.
It would be inappropriate to treat this readmission as unrelated to the
care the patient received for their CABG surgery.
Third, the range of potentially avoidable readmissions also
includes those not directly related to the index condition such as
those resulting from medication reconciliation errors, poor
communication at discharge, or inadequate follow-up post-discharge.
Therefore, we believe that creating a comprehensive list of potentially
avoidable readmissions related to the previous hospitalization's
condition category would be arbitrary and, ultimately, challenging to
implement.
Fourth, all existing CMS readmission measures report all-cause
readmission, making this approach consistent with existing measures.
Fifth, research shows that readmission reduction interventions can
reduce all-cause readmission, not only condition-specific readmission.
Finally, defining the outcome as all-cause readmissions may
encourage hospitals to implement broader initiatives aimed at improving
the overall care within the hospital and transitions from the hospital
setting instead of limiting the focus to a narrow set of condition-
specific approaches.
Comment: One commenter cited a study\71\ that concluded that
readmission rates for the majority of hospitals were unreliable due to
low case volume over the measurement period.
---------------------------------------------------------------------------

\71\ Shih and Dimick. Reliability of readmission rates as a
hospital quality measure in cardiac surgery. Annals of Thoracic
Surgery. April 2014; 97:1214-1219.
---------------------------------------------------------------------------

Response: The study cited uses a different approach to calculate
hospital-specific risk-adjusted readmission rates, including a logistic
regression model and distinct risk variables, than that used in our
proposed measure. Our proposed measure uses a hierarchical logistic
regression model to account for the clustering of patients within

[[Page 50224]]

hospitals while risk-adjusting for differences in patient case-mix.
Therefore, we do not believe that conclusions drawn from this study are
generalizable to this measure. Reliability testing of this measure
score using a split-sample approach, in which each hospitals' patients
are divided into two completely distinct groups and the measure score
is calculated for each group and compared, produces an intraclass
correlation coefficient of 0.33 on a three year data sample (which is
the equivalent of a year and a half of data for each comparison group).
One limitation of this split-sample approach is that the
reliability is estimated under the assumption of only half the number
of patients per hospital that would normally be used. Using the
Spearman Brown prophecy formula \72\ to estimate the reliability of the
measure if the entire three year cohort was used (that is, if the
number of items in a test increases by a factor of N, then the new
reliability [rho]' can be estimated from the original reliability.
Validity for this measure has been documented by both: (1) face
validity assessment by a Technical Expert Panel (TEP)--79 percent of
TEP members agreed (71 percent moderately or strongly agreed) that the
measure will provide an accurate reflection of quality, and (2) in a
formal validation study against clinical registry data that documented
correlations in excess of 0.90 between clinical data and claims-based
risk models.\73\
---------------------------------------------------------------------------

\72\ Traub, R. (1994).MMSS Reliability for the Social Sciences:
Theory and Applications (Page 100). Sage Publications. Newbury Park
CT.
\73\ Suter L.G., Wang C., Araas M., Joyce E., Vellanky S.,
Potteiger J., Lin Z., Curtis J., Geary L.L., Krumholz H.M., Drye
E.D. Hospital-level 30-day All-Cause Mortality Following Coronary
Artery Bypass Graft Surgery: Report prepared for the Centers for
Medicare & Medicaid Services. 2012.
---------------------------------------------------------------------------

To assess face validity, we surveyed the Technical Expert Panel and
asked each member to rate the following statement using a six-point
scale (1=Strongly Disagree, 2=Moderately Disagree, 3=Somewhat Disagree,
4=Somewhat Agree, 5=Moderately Agree, and 6=Strongly Agree): ``The
readmission rates obtained from the readmission measure as specified
will provide an accurate reflection of quality.'' Fourteen TEP members
provided the following responses: Moderately Disagreed (2), Somewhat
Disagreed (2), Somewhat Agreed (4), Moderately Agreed (5), and Strongly
Agreed (1). Therefore, 71 percent of TEP members agreed (43 percent
moderately or strongly agreed) that the measure will provide an
accurate reflection of quality.
After consideration of the public comments we received, we are
finalizing the Hospital 30-day, All-cause, Unplanned, Risk-Standardized
Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG)
Surgery measure as proposed.
b. Hospital 30-day, All-cause, Risk-Standardized Mortality Rate (RSMR)
Following Coronary Artery Bypass Graft (CABG) Surgery.\74\
---------------------------------------------------------------------------

\74\ Krumholz H. CABG Mortality Measure Methodology Report
Section 1, Subtask 3.1, Deliverable 49a: Yale New Haven
Systems Corporation; Center for Outcomes Research and Evaluation;
2012.
---------------------------------------------------------------------------

(1) Background
CABG is a priority area for outcomes measure development because it
is a common procedure associated with considerable morbidity,
mortality, and health care spending. In 2007, there were 114,028
hospitalizations for CABG surgery and 137,721 hospitalizations for
combined surgeries for CABG and valve procedures (``CABG plus valve''
surgeries) among Medicare FFS patients in the U.S.\75\
---------------------------------------------------------------------------

\75\ Drye E, Krumholz H, Vellanky S, Wang Y. Probing New
Conditions and Procedures for New Measure Development: Yale New
Haven Systems Corporation; Center for Outcomes Research and
Evaluation; 2009:7.
---------------------------------------------------------------------------

CABG surgeries are costly procedures that account for the majority
of major cardiac surgeries performed nationally. In FY 2009, isolated
CABG surgeries accounted for almost half (47.6 percent) of all cardiac
surgery hospital admissions in Massachusetts.\76\ This provides an
example of the frequency in which a CABG Is performed for a patient
admitted for cardiac surgery. In 2008, the average Medicare payment was
$30,546 for CABG without valve and $47,669 for CABG plus valve
surgeries.\77\
---------------------------------------------------------------------------

\76\ Massachusetts Data Analysis Center. Adult Coronary Artery
Bypass Graft Surgery in the Commonwealth of Massachusetts: Hospital
and Surgeons Risk-Standardized 30-Day Mortality Rates. In: Health
MDoP, ed. Boston; 2009:77.
\77\ Pennsylvania Health Care Cost Containment Council. Cardiac
Surgery in Pennsylvania 2008-2009. Harrisburg; 2011:60.
---------------------------------------------------------------------------

Mortality rates following CABG surgery are not insignificant and
vary across hospitals. For example, in 2009 Medicare FFS data indicated
that the median hospital-level, risk-standardized mortality rate after
CABG was 3.0 percent and ranged from 1.5 percent to 7.9 percent.\78\
Even within a single state, the observed in-hospital, 30-day all-cause,
hospital-level mortality rate was 1.81 percent and ranged from 0.0
percent to 5.6 percent among patients who were discharged after CABG
surgery (without any other major heart surgery earlier in the hospital
stay) in New York in 2008. The risk-adjusted mortality rate ranged from
0.0 percent to 8.2 percent.\79\
---------------------------------------------------------------------------

\78\ Ibid.
\79\ New York State Department of Health. Adult Cardiac Surgery
in New York State 2006-2008; 2010:54.
---------------------------------------------------------------------------

Variation in these rates suggests that there is room for
improvement. An all-cause mortality measure for patients who undergo
CABG surgery will provide hospitals with an incentive to reduce
mortality through improved coordination of perioperative care and
discharge planning. This is further supported by the success of
registry-based mortality measures in reducing CABG mortality rates. For
example, California reports that CABG mortality in that state has
steadily declined from 2.9 percent in 2003, the first year of mandatory
reporting of their state registry measure, to 2.2 percent in 2008.\80\
---------------------------------------------------------------------------

\80\ California CABG Outcomes Reporting Program. The California
Report on Coronary Artery Bypass Graft Surgery: 2007-2008 Hospital
and Surgeon Data. 2011:119.
---------------------------------------------------------------------------

The specifics of the measure methodology are included in the
measure methodology report we have posted on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer readers to the
report for further details on the risk-adjustment statistical model.
We proposed to include this non-NQF-endorsed measure in the
Hospital IQR Program under the exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section
IX.A.7. of the preamble of this final rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by the NQF, and we were unable to
identify any measures that assess hospital 30-day, all-cause, risk-
standardized mortality rate (RSMR) following coronary artery bypass
graft (CABG) surgery. We also are not aware of any other 30-day, all-
cause, RSMR measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. The measure has been reviewed by the MAP and was
conditionally supported pending NQF endorsement as detailed in its Pre-
Rulemaking 2014 Map Recommendations Report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.

[[Page 50225]]

This measure was submitted to NQF on March 17, 2014 and is currently
under review.
(2) Overview of Measure
The CABG mortality measure assesses hospitals' 30-day, all-cause
risk-standardized rate of mortality following admission for a CABG
procedure. In general, the measure uses the same approach to risk
adjustment and hierarchical logistic modeling (HLM) methodology that is
specified for CMS' other mortality measures previously adopted for this
program. Information on how the measure employs HLM can be found in the
2012 CABG Mortality Measure Methodology Report (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
The proposed measure is claims-based. It uses Medicare
administrative data from hospitalizations for Medicare FFS
beneficiaries hospitalized for a CABG procedure.
(4) Outcome
The outcome for this measure is 30-day, all-cause mortality,
defined as death for any cause within 30 days of the date of the index
procedure date. We use a standard period of assessment so that the
outcome for each patient is measured consistently. Without a standard
period, variation in length of stay would have an undue influence on
mortality rates, and institutions would have an incentive to adopt
strategies to shift deaths out of the hospital without improving
quality. The measure differs from the timeframe used in the other 30-
day mortality measures in the Hospital IQR Program by starting the
outcome window from the procedure date rather than the admission date.
Data from 2009 Medicare FFS patients demonstrates that 25 percent of
CABG procedures occurred more than 3 days after the admission date.
Therefore, dating the measurement period from admission would
potentially underestimate the period of risk for a substantial number
of hospitals.
We chose 30-day mortality because it is an outcome that can be
strongly influenced by hospital care and the early transition to the
outpatient setting. Clinical experts concur that a 30-day timeframe is
clinically sensible for measuring outcomes following CABG surgery.
The measure assesses all-cause mortality rather than CABG-specific
mortality for several reasons. First, limiting the measure to CABG-
related mortalities may limit the focus of efforts to improve care to a
narrow set of approaches as opposed to encouraging broader initiatives
aimed at improving the overall in-hospital care. Second, cause of death
may be unreliably recorded and it is often not possible to exclude
quality issues and accountability based on the documented cause of
mortality. Finally, from a patient perspective, death due to any cause
is the outcome that matters.
(5) Cohort
The cohort includes patients aged 65 years and older who received a
qualifying CABG procedure at an acute care facility. Patients are
eligible for inclusion if they had a qualifying CABG procedure and
continuous enrollment in Medicare FFS one year prior to the first day
of the index hospital stay and through 30 days post-procedure.
In order to include a clinically-coherent set of patients in the
measure, we sought input from clinical experts regarding the inclusion
of other concomitant cardiac and non-cardiac procedures, such as valve
replacement and carotid endarterectomy. Adverse clinical outcomes
following such procedures are higher than those following ``isolated''
CABG procedures, that is, CABG procedures performed without concomitant
high-risk cardiac and non-cardiac procedures.\81\ Limiting the measure
cohort to ``isolated'' CABG patients is consistent with published
reports of CABG outcomes; \82\ therefore, the measure cohort considers
only patients undergoing isolated CABG as eligible for inclusion in the
measure. We defined isolated CABG patients as those undergoing CABG
procedures without concomitant valve or other major cardiac, vascular
or thoracic procedures. In addition, our clinical experts, consultants,
and Technical Expert Panel (TEP) members agreed that an isolated CABG
cohort is a clinically coherent cohort for quality measurement. For
detailed information on the cohort definition, we refer readers to the
2012 CABG Mortality Measure Methodology Report on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

\81\ Hannan EL, Zhong Y, Lahey SJ, et al. 30-day readmissions
after coronary artery bypass graft surgery in New York State. JACC
Cardiovasc Interv. 2011;4(5):569-576.
\82\ Ibid.
---------------------------------------------------------------------------

(6) Inclusion and Exclusion Criteria
The measure includes hospitalizations for patients who are 65 years
of age or older at the time of index admission and for whom there was a
complete 12 months of Medicare FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) Admissions for patients who leave hospital against
medical advice excluded because providers do not have the opportunity
to deliver full care and prepare the patient for discharge); and (2)
admissions for patients with subsequent qualifying CABG procedures
during the measurement period (a repeat CABG procedure during the
measurement period very likely represents a complication of the
original CABG procedure and is a clinically more complex and higher
risk surgery, therefore we select the first CABG admission for
inclusion in the measure and exclude subsequent CABG admissions from
the cohort).
(7) Risk-Adjustment
The measure adjusts for differences across hospitals in how at risk
their patients are for death relative to patients cared for by other
hospitals. The measure uses claims data to identify patient clinical
conditions and comorbidities to adjust patient risk for readmission
across hospitals, but does not adjust for potential complications of
care. We refer readers to section IV.H.4 of the preamble of this final
rule for further discussion of risk-adjustment for socioeconomic
factors.
(8) Calculating the Risk-Standardized Mortality Ratio (RSMR)
The measure is calculated using hierarchical logistic modeling
(HLM). This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The HLM is an appropriate
statistical approach to measuring quality based on patient outcomes
when the patients are clustered within hospitals (and therefore the
patients' outcomes are not statistically independent) and the number of
eligible patients for the measure varies from hospital to hospital. As
noted above, the measure methodology defines hospital case mix based on
the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the CABG hospitalization, as well as those present in the claims for
care at admission. The methodology, however, specifically does not
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.

[[Page 50226]]

The RSMR is calculated as the ratio of the number of predicted
deaths to the number of expected deaths and then the ratio is
multiplied by the national unadjusted mortality rate. The ratio is
greater than one for hospitals that have more deaths than would be
expected for an average hospital with similar cases and less than one
if the hospital has fewer deaths than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or risk-adjusted rate
used in other similar types of statistical analyses.
The RSMR is a point estimate--the best estimate of a hospital's
mortality rate based on the hospital's case mix. For displaying the
measure for the Hospital IQR Program, we computed an interval estimate,
which is similar to the concept of a confidence interval, to
characterize the level of uncertainty around the point estimate. We use
the point estimate and interval estimate to determine hospital
performance (for example, higher than expected, as expected, or lower
than expected). For more detailed information on the calculation
methodology, we refer readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We invited public comment on this proposal.
Comment: Several commenters supported the inclusion of CABG
mortality into the Hospital IQR Program.
Response: We thank the commenters for their support.
Comment: Several commenters opposed adoption of this measure
because it is not NQF-endorsed.
Response: We proposed to include this non-NQF-endorsed measure
under the Hospital IQR Program exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act. This provision provides that, in the
case of a specified area or medical topic determined appropriate by the
Secretary for which a feasible and practical measure has not been
endorsed by the entity with a contract under section 1890(a) of the
Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary. We
refer readers to section IX.A.7. of the preamble of this final rule
where we discuss other commenters concerns regarding our use of non-
NQF-endorsed measures.
Although the proposed measure is not currently NQF-endorsed, it is
pending NQF endorsement. We considered available measures that have
been endorsed or adopted by the NQF. We also are not aware of any other
similar measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. We refer readers to section IX.A.7. of the preamble of this
final rule for a general discussion on adoption of non-NQF-endorsed
measures. This measure was submitted to NQF for endorsement and is
currently under review.
Comment: One commenter recommended that CMS focus on developing an
electronically-specified measure based on ICD-10-CM/PCS for future
adoption instead of the current proposed measure.
Response: We will take this suggestion into consideration as we
move towards use of electronic clinical quality measures for CABG
measures.
Comment: One commenter did not support the measure construction and
risk-adjustment methodology, citing concerns that the low R-squared
meant that the measure does not truly differentiate performance between
hospitals.
Response: We refer readers to our discussion of this issue above in
response to the same concern regarding our proposed Hospital 30-day,
All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR)
Following Coronary Artery Bypass Graft (CABG) Surgery measure.
Comment: One commenter expressed concerns about the reliability and
validity of CMS' mortality measures. Several commenters opposed this
measure because they believed that a more robust methodology is needed
to appropriately hold hospitals accountable.
Response: We refer readers to our discussion of this issue above in
response to the same concern expressed for reliability, validity, and
robust methodology regarding our proposed Hospital 30-day, All-cause,
Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary
Artery Bypass Graft (CABG) Surgery measure.
We understand ``robust'' as having good reliability and validity
and we believe we demonstrated this in the response below which is the
similar to the response for the CABG readmission measure.
Comment: Several commenters believed that the CABG mortality
measure has poor discrimination ability. One commenter expressed
concern regarding the ability of claims data to adequately adjust for
mortality risk. The commenter suggested comparing results for this
measure with results for the STS CABG mortality measure. A commenter
expressed concern regarding the ability of claims data to adequately
adjust for mortality risk. The commenter suggested comparing results
for this measure with results for the Risk-Adjusted Operative Mortality
for CABG mortality measure.
Response: We thank the commenters for their feedback. The STS CABG
measure provides a clinical model based upon registry data and the CMS
CABG mortality measures uses administrative claims data. These measures
have similar but not identical mortality outcomes STS NQF
0119, includes inpatient deaths beyond 30 days, and NQF
2558, excludes inpatient deaths beyond 30 days. For these
reasons we would not compare the results of these measures. We refer
readers to our discussion of this issue in response to the same concern
above regarding our proposed Hospital 30-day, All-cause, Unplanned,
Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery
Bypass Graft (CABG) Surgery measure.
Comment: Several commenters did not support the CABG mortality
measure as it does not risk adjust for SES. Commenters requested CMS
risk adjust the measure for SES and stated that this materially impacts
the patient's likelihood of death and the members on NQF's panel to
examine adjusting for SES recommended adjusting for SES when
appropriate.
Response: We refer readers to our earlier responses in sections
IX.A.6. and 7. Of the preamble to this final rule under our Hospital
IQR Program discussion. We also refer readers to our responses in
section IV.H.4. of the preamble to this final rule for further
discussion of this issue.
Comment: One commenter requested that CMS carefully monitor CABG
utilization in high[hyphen]risk, older patients to ensure hospitals are
not avoiding performing them for high risk patients in order to appear
as lower mortality. The commenter noted that if evidence is found that
CABG surgeries are not being offered to high[hyphen]risk patients, CMS
may need to reconsider its risk adjustment methodology to mitigate this
unintended consequence.
Response: We refer readers to our discussion of this issue in
response to the same concern regarding our proposed Hospital 30-day,
All-cause, Unplanned, Risk-Standardized Readmission Rate (RSRR)
Following Coronary Artery Bypass Graft (CABG) Surgery measure.

[[Page 50227]]

After consideration of the public comments we received, we are
finalizing the Hospital 30-day, All-cause, Risk-standardized Mortality
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery
measure as proposed.
c. Hospital-level, Risk-standardized 30-day Episode-of-Care Payment
Measure for Pneumonia
(1) Background
Providing high-value care is an essential part of our mission to
provide better health care for individuals, better health for
populations, and lower costs for health care. In order to incentivize
innovation that promotes high-quality care at high value it is critical
to examine measures of payment and patient outcomes concurrently. There
is evidence of variation in payments at hospitals for pneumonia
patients; mean 30-day risk-standardized payment among Medicare FFS
patients aged 65 or older hospitalized for pneumonia in 2008-2009 was
$13,237, and ranged from $8,281 to $27,975 across 4,155 hospitals.
However, high or low payments to hospitals are difficult to interpret
in isolation. Some high payment hospitals may have better clinical
outcomes when compared with low payment hospitals while other high
payment hospitals may not have better outcomes. For this reason, the
value of hospital care is more clearly assessed when pairing hospital
payments with hospital quality. Therefore, we proposed to include this
non-NQF-endorsed measure in the Hospital IQR Program under the
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as
previously discussed in section IX.A.7. of the preamble of this final
rule. Although the proposed measure is not currently NQF-endorsed, we
considered available measures that have been endorsed or adopted by the
NQF, and we were unable to identify any measures that assess hospital
risk- standardized payment associated with a 30-day episode-of-care for
pneumonia. We also are not aware of any other 30-day episode-of- care
pneumonia measures that have been endorsed or adopted by a consensus
organization, and found no other feasible and practical measures on
this topic. The MAP supports this measure but reiterated the need for
this measure to be submitted for NQF-endorsement: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. This measure was submitted to the NQF for endorsement on
April 18, 2014.
We believe it is important to adopt this measure as pneumonia is
one of the leading causes of hospitalization for Americans 65 and over,
and pneumonia patients incur roughly $10 billion in aggregate health
care costs.\83\ Furthermore, because 30-day all-cause mortality and
readmission measures for pneumonia are already publicly reported,
pneumonia serves as a model condition for assessing relative value for
an episode of care that begins with an acute hospitalization because
including this measure in the Hospital IQR Program and publicly
reporting it on Hospital Compare will allow stakeholders to assess
information about a hospital's quality and cost of care for pneumonia.
The measure reflects differences in the management of care for patients
with pneumonia both during hospitalization and immediately post-
discharge. By focusing on one specific condition, value assessments may
provide actionable feedback to hospitals and incentivize targeted
improvements in care.
---------------------------------------------------------------------------

\83\ Lindenauer PK, Lagu T, Shieh M, Pekow PS, Rothberg MB.
Association of diagnostic coding with trends in hospitalizations and
mortality of patients with pneumonia, 2003-2009. JAMA: The Journal
of the American Medical Association. 2012;307(13):1405-1413.
---------------------------------------------------------------------------

(2) Overview of Measure and Rationale for Examining Payments for a 30-
Day Episode-of-Care
The pneumonia payment measure assesses hospital risk-standardized
payment associated with a 30-day episode-of-care for pneumonia for any
hospital participating in the Hospital IQR Program. The measure
includes Medicare FFS patients aged 65 or older admitted for pneumonia
and calculates payments for these patients over a 30-day episode-of-
care beginning with the index admission. In general, the measure uses
the same approach to risk-adjustment as our 30-day outcome measures
previously adopted for the Hospital IQR Program. We refer readers to
our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
When examining variation in payments, consideration of the episode-
of-care triggered by admission is meaningful for several reasons.
First, hospitalizations represent a brief period of illness that
requires ongoing management post-discharge and decisions made at the
admitting hospital affect payments for care in the immediate post-
discharge period. Second, attributing payments for a continuous
episode-of-care to admitting hospitals may reveal practice variations
in the full care of the illness that can result in increased payments.
Third, a 30-day preset window provides a standard observation period by
which to compare all hospitals. Lastly, the pneumonia payment measure
is intended to be paired with our 30-day pneumonia mortality and
readmission measures and capture payments for Medicare patients across
care settings, services, and supplies, except for Medicare Part D (that
is, inpatient, outpatient, skilled nursing facility, home health,
hospice, physician/clinical laboratory/ambulance services, supplier
Part B items, and durable medical equipment, prosthetics/orthotics, and
supplies).
We have posted the measure methodology report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer
readers to the report for further details on the risk adjustment
statistical model as well as the model results.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations and payments for
Medicare FFS beneficiaries hospitalized with pneumonia.
(4) Outcome
The primary outcome of the pneumonia payment measure is the
hospital-level risk-standardized payment for a pneumonia episode-of-
care. The measure captures payments for Medicare patients across all
care settings, services, and supplies, except Part D. By risk-
standardizing the payment measure, we are able to adjust for case-mix
at any given hospital and compare a specific hospital's pneumonia
payment to other hospitals with the same case-mix. The analytic time
frame for the pneumonia payment measure begins with the index admission
for pneumonia and ends 30 days post-admission.
In order to isolate payment variation that reflects practice
patterns rather than CMS payment adjustments, the pneumonia payment
measure excludes policy and geography payment adjustments unrelated to
clinical care decisions. We achieve this by ``stripping'' or
``standardizing'' payments for each care setting. Stripping refers to
removing geographic differences and policy adjustments in payment rates
for individual services from the total payment for that service.
Standardizing refers to averaging

[[Page 50228]]

payments across geographic areas for those services where geographic
differences in payment cannot be stripped. Stripping and standardizing
the payment amounts allows for a fair comparison across hospitals based
solely on payments for decisions related to clinical care of pneumonia.
(5) Cohort
We created the pneumonia payment measure cohort to be aligned with
the publicly reported pneumonia mortality measure cohort. Consistent
with these measures, the pneumonia payment measure includes
hospitalizations with a principal hospital discharge diagnosis of
pneumonia using the International Classification of Diseases, 9th
Edition, Clinical Modification (ICD-9-CM). These measures will use data
from July 2010-June 2013, which does not yet include the period for
which ICD-10 codes are mandatory. We refer readers to our discussion of
data collection for this measure during the transition period from ICD-
9-CM codes to ICD-10-CM/PCS codes (79 FR 28232). A full list of ICD-9-
CM codes included in the final cohort can be found in Appendix B of the
technical report on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The measure includes
only those hospitalizations from short-stay acute care hospitals in the
index cohort and restricts the cohort to patients enrolled in FFS
Medicare Parts A and B (with no Medicare Advantage coverage).
(6) Inclusion and Exclusion Criteria
The pneumonia payment measure includes hospitalizations for
patients 65 years or older at the time of index admission and for whom
there was a complete 12 months of FFS enrollment to allow for adequate
risk adjustment. An index admission/hospitalization is the initial
pneumonia admission that triggers the 30-day episode-of-care for this
payment calculation. The measure excludes the following admissions from
the measure cohort: (1) Admissions for patients with fewer than 30 days
of post-admission enrollment in Medicare because this is necessary in
order to identify the outcome (payments) in the sample over the
analytic period; (2) admissions for patients having a principal
diagnosis of pneumonia during the index hospitalization who were
transferred from another acute care facility are excluded, because the
hospital where the patient was initially admitted made the critical
acute care decisions (including the decision to transfer and where to
transfer); (3) admissions for pneumonia patients who were discharged on
the same or next day as the index admission and did not die or get
transferred are excluded, because it is unlikely these patients
suffered a clinically significant pneumonia; (4) admissions for
patients enrolled in the Medicare Hospice program any time in the 12
months prior to the index hospitalization, including the first date of
the index admission are excluded, because it is likely that these
patients are continuing to seek comfort care and their goal may not be
survival; (5) admissions for patients who are discharged alive and
against medical advice are excluded because providers did not have the
opportunity to deliver full care and prepare the patient for discharge;
(6) admissions for patients transferred to or from federal or Veterans
Administration hospitals are excluded, because we do not have claims
data for these hospitals; thus, including these patients would
systematically underestimate payments; and (7) admissions without a DRG
or DRG weight for the index hospitalization are excluded, because we
cannot calculate a payment for these patients' index admission using
the IPPS; this would underestimate payments for the entire episode-of-
care. There are two portions of the DRG system that determine how much
a provider is reimbursed. The first is the DRG itself which indicates
the reason a patient was admitted. The second is the DRG weight which
determines the severity of the admission. Without either of these, we
were unable to calculate the payment for the index admission.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how
payments are affected by patient comorbidities relative to patients
cared for by other hospitals. We refer readers to section IV.H.4 of the
preamble of this final rule for further discussion of risk-adjustment
for socioeconomic factors.
(8) Calculating the Risk-Standardized Payment (RSP)
The measure is calculated using a hierarchical generalized linear
model with a log link and a Poisson error distribution. This is a
widely accepted statistical method that enables fair evaluation of
relative hospital performance by taking into account patient risk
factors as well as the number of patients that a hospital treats. This
statistical model accounts for the structure of the data (patients
clustered within hospitals) and calculates: (1) how much variation in
hospital payment overall is accounted for by patients' individual risk
factors (such as age and other medical conditions); and (2) how much
variation is accounted for by hospital-specific performance. This
approach appropriately models a positive, continuous, right-skewed
outcome like payment and also accounts for the types of patients a
hospital treats (that is, hospital case mix), the number of patients it
treats, and the quality of care it provides. The hierarchical
generalized linear model is an appropriate statistical approach to
measuring quality based on patient outcomes when the patients are
clustered within hospitals and sample sizes vary across hospitals.
Clustered patients are within the same hospital, and the quality of
care of the hospital effects all patients, so the outcomes for each
hospital's patients are not fully independent (that is, completely
unrelated) as is assumed by many statistical models. As noted above,
the measure methodology defines hospital case mix based on the clinical
diagnoses provided in the hospital claims for their patients' inpatient
and outpatient visits for the 12 months prior to the pneumonia
hospitalization, as well as those present in the claims for care at
admission. This methodology specifically does not, however, account for
diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
The RSP is calculated as the ratio of predicted payments to
expected payments and then the ratio is multiplied by the national
unadjusted average payment for an episode of care. The ratio is greater
than one for hospitals that have higher payments than would be expected
for an average hospital with similar cases and less than one if the
hospital has lower payments than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted''
rate used in other similar types of statistical analyses.
The RSP is a point estimate--the best estimate of a hospital's
payment based on the hospital's case mix. To calculate the measure for
the Hospital IQR Program, we computed an interval estimate, which is
similar to the concept of a confidence interval, to characterize the
level of uncertainty around the point estimate, we use the point
estimate and interval estimate to determine hospital performance (for
example, higher than expected, as expected, or lower than expected).
The interval estimate indicates that the true value of the

[[Page 50229]]

payment ratio lies between the lower limit and the upper limit of the
interval. For more detailed information on the calculation methodology,
we refer readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
This measure is meant to be paired with our 30-day pneumonia
mortality and/or readmission measure in order for us to gain a better
understanding of the value of care for a hospital's patients and the
nation as a whole.
We invited public comment on this proposal.
Comment: One commenter did not support inclusion of the heart
failure and pneumonia payment measures in the Hospital IQR Program
because of concern that much of the variation in 30-day episode
measures is attributable to factors outside of the hospitals control,
most notably post-acute care (PAC) services. The commenter felt that
measures of accountability should hold all entities accountable as
opposed to focusing only on hospitals.
Response: We appreciate the commenter's suggestion and note that we
addressed this question in the FY 2014 IPPS/LTCH PPS final rule. In
that final rule (78 FR 50804), we stated that ``when considering
payments to hospitals, we attributed payments for a 30-day episode of
care to the hospital since the episode is triggered by admission to an
inpatient hospitalization. Hospitalizations represent a brief period of
acute illness that requires ongoing management post- discharge and
hospitals are often directly responsible for scheduling post-discharge
follow-up. Therefore decisions made at the admitting hospital affect
not only the hospitalization payments, but payments for care in the
immediate post-discharge period.''
Comment: Several commenters generally supported and appreciated
CMS' proposal to report 30-day risk-standardized episode of care
payment measures for pneumonia and heart failure, as a way to optimally
measure care for these patients. A commenter urged CMS to monitor
measure results with respect to volume of procedures. A commenter
supported condition-specific or more granular, episode-based payment
measures over the Medicare Spending Per Beneficiary (MSPB) measure.
Response: We thank the commenters for their support, We will take
their recommendations to monitor measure results with respect to volume
of procedures and the request to add condition-specific or more
granular, episode-based payment measures into consideration when
planning future measure development.
Comment: Several commenters believed payment measures are
necessary, but do not support payment measures that examine episodes of
care beyond the inpatient admission due to variations in availability
of PAC services.
Response: Because acute care providers make decisions that affect
PAC spending, including scheduling follow-up care and others, we
believe it is appropriate to attribute payments arising from the PAC
setting to the acute care provider.
Comment: A commenter stated that CMS should adjust episode-based
payment measures for outcome differences that accrue over clinically
relevant time horizons.
Response: We thank the commenter for this suggestion, and will
consider these comments in the future. We appreciate the commenter's
feedback. However we believe that the proposed measure does account for
outcome differences over clinically relevant time horizons as the
measure captures payments for Medicare patients across all care
settings, services, and supplies, except Part D.
Comment: Several commenters did not support the use of the
Hospital-level, Risk-standardized 30-day Episode-of-Care Payment
Measure for Pneumonia measure in the Hospital IQR Program because they
believed that the proposed measure reflected actions of many health
care entities that are beyond the hospital's control, such as cost
variation in Medicare spending and notably PAC services. The commenters
felt measures of accountability should hold all entities accountable as
opposed to focusing only on hospitals. Commenters noted that hospitals
are legally unable to direct patient toward high-quality, cost-
efficient providers. Several commenters were concerned that the payment
measures assume hospitals have more control over costs that occur post
hospitalization than what is realistic and it reflects actions of many
health care entities that are beyond the hospital's control. Therefore,
the commenters stated that the pneumonia and heart failure payment
measures were not appropriate for evaluating care exclusively in the
inpatient setting.
Commenters suggested the measures would be more appropriate for
physician, LTCH, home health, and PAC reporting programs. Several
commenters believed measures should hold accountable all entities so
that incentives are aligned across continuum. A commenter noted that
legal and regulatory challenges at the State and federal level prevent
hospitals from coordinating care as fully as possible and episode of
care measures holding only the hospital accountable create misaligned
incentives which could lead to unintended consequences.
Response: We appreciate the commenters' suggestions and note that
we addressed many of these questions in the FY 2014 IPPS/LTCH PPS final
rule. In that final rule (78 FR 50804), we stated that, ``when
considering payments to hospitals, we attributed payments for a 30-day
episode of care to the hospital since the episode is triggered by
admission to an inpatient hospitalization. Hospitalizations represent a
brief period of acute illness that requires ongoing management post-
discharge and hospitals are often directly responsible for scheduling
post-discharge follow-up. Therefore decisions made at the admitting
hospital affect not only the hospitalization payments, but payments for
care in the immediate post-discharge period.'' Finally, the objective
of these episode of care payment measures is to encourage efficiencies
gained by well-coordinated care across a patient's experience of
illness.
We understand the commenters concerns about differences among
hospitals in the availability of post-acute services, such as LTCHs. We
hope that the differences in episode payments revealed by these
measures will catalyze hospitals, other providers and communities to
engage in an examination of local service availability to encourage
efficient and sufficient services are available to all patients.
Without the reporting of standardized episode payment measures, the
knowledge of differences among hospitals payment patterns would not be
available to provide incentives for such efforts. Although hospitals
are not responsible for all differences in episode payments alone, they
are well-positioned to participate in such collaborations.
Comment: A commenter was disappointed that CMS continue to develop
and adopt measures that examine episodes of care beyond the inpatient
admission. The commenter stated that measures of accountability, such
as the proposed episode measures, should hold accountable all entities
so that the incentives are aligned across the continuum.
Another commenter opposed measures that reflect the broad spectrum
of care inside and outside of the hospital. The commenter did not
believe that measures that encompass a range of

[[Page 50230]]

services from admission until 30 days post-discharge should be used as
an indicator of hospital-specific care.
Response: We respectfully disagree with the commenters. We refer
readers to our discussion of this issue in response to the same concern
in the response above. In addition, we believe that these measures
should reflect the broad spectrum of care inside a hospital as well as
care transitions, which are important for hospitals' and for the health
care system's efforts to reduce readmissions and prevent hospitals from
being financially penalized. We believe measures that look beyond the
discharge will encourage hospitals to communicate more effectively with
their patients and their peers thereby, improving care, reducing costs,
and improving the health of the nation.
Comment: A commenter did not support inclusion of the pneumonia or
heart failure payment measures in in the Hospital IQR Program, because
they do not exclude certain high-cost patients (patients with ESRD,
cancer, or HIV/AIDS).
Response: We appreciate the concern about high-cost patients. The
payment measures are intended to assess differences in payment
associated with different practice patterns for the broad range of
patients cared for by a hospital. We note that the episode of care
measures account for the fact that some hospitals care for more
patients with needs for high-cost care by risk adjusting for patients'
conditions, such as cancer, rather than excluding such patients. In the
course of selecting variables for risk-adjustment, high-cost chronic
conditions such as cancer, end-stage renal disease, HIV/AIDS, and
others are considered. Once the variables are considered, we determined
if the variable should be included in the measure. To be included in
the measure, each risk variable must be found to be significantly and
consistently related to the payment outcome in the risk-model selection
process. We note that the Agency for Healthcare Research and Quality's
Condition Categories for HIV/AIDS; Metastatic Cancer and Acute
Leukemia; Lung, Upper Digestive Tract, and Other Severe Cancers;
Lymphatic, Head And Neck, Brain, and Other Major Cancers; Dialysis
Status; and Renal Failure are included in the final risk adjustment
model for pneumonia payment. The Condition Categories for HIV/AIDS;
Dialysis Status; and Renal Failure were also included the final risk-
adjustment model for HF payment. The HF measures' risk-adjustment was
discussed at length by the NQF Cost and Resource Steering Committee. In
its final vote, the NQF Cost and Resource Steering Committee
recommended endorsement of the episode-of-care payment measure for
heart failure.
Comment: A commenter was concerned that the measures unfairly
disadvantage hospitals that treat sicker patients. For example,
patients with heart failure who receive a defibrillator are sicker,
however they are not excluded from the measures, so hospitals that
perform this service appear less efficient.
Response: We appreciate the commenter's concern about complex
patient factors that may contribute to the cost of care. The payment
measures are risk-adjusted in order to account for differences in case-
mix, or patient complexity, between hospitals. For each patient, the
claims for the 12-months prior to the measured hospitalization are
examined to identify additional clinical conditions that patients may
have which could contribute to costs of care. These conditions are
included in the risk-model for the measure to ensure that all providers
are assessed fairly and avoid putting providers at risk of appearing to
have patient costs that are higher than other hospitals due to the
clinical complexity of their patients. Although we do not believe that
the use of defibrillators is likely to substantially change hospitals'
results, we appreciate this comment and plan to investigate the
prevalence of defibrillators in the heart failure cohort and its effect
on the payment outcome.
Comment: A commenter did not support the inclusion of the PN and HF
payment measures in the Hospital IQR Program and recommended using a
single hospital-wide payment measure instead of condition-specific
payment measures to pool information for all patients to increase
sample size and improve reliability.
Response: We believe the condition-specific payment measures are
useful for several reasons. By focusing on one specific condition,
payment measures may provide actionable feedback to hospitals and
incentivize targeted improvements in care. Heart failure and pneumonia
are both common conditions in the elderly with a substantial range in
payments due to different practice patterns. Furthermore, because 30-
day all-cause mortality and readmission measures for heart failure and
pneumonia are already publicly reported, heart failure and pneumonia
serve as model conditions for examining both payments for an episode-
of-care and the quality of a hospital's care for the same patient
population.
Comment: Commenters recommended that CMS pilot the PN and HF
payment measures prior to implementation.
Response: We thank the commenter for their recommendation. We will
consider this as we plan dry runs in the future. A dry run provides the
opportunity for hospitals to review their measure results and ask
questions about the measure methodology. The measure results used
during a dry run are based on data outside of the performance period
designated for a given fiscal year, and the measure results are made
available to hospitals on a secure Web site and are not publically
reported. From our perspective, a dry run is type of pilot in which
hospitals become familiar with their measure results and the measure
methodology.
Comment: A commenter requested that CMS transparently assess the
reliability of the PN and HF payment measures prior to adoption into
the Hospital IQR Program.
Response: We appreciate this feedback. We note that we have been
transparent in assessing the reliability of the PN and HF payment
measures, in that the measure methodologies for these measures contain
the reliability testing results and have been posted at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html in May 2015
We note that the Intraclass Correlation Coefficient (ICC) is a
statistical process used to assess the reliability of measures. The ICC
score can be used to determine the extent to which assessments of a
hospital using different, but randomly selected subsets of patients
produces similar measures of hospital performance. To the extent that
the calculated measures of these two subsets agree, we have evidence
that the measure assesses an attribute of the hospital, not of the
patients. The agreement between the two independent assessments of each
hospital was 0.825 for the PN measure and 0.752 for the HF measure,
which according to the conventional interpretation, is ``almost
perfect'' for the PN measure and ``substantial'' for the HF
measure.\84\
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\84\ Landis JR, Koch GG. The measurement of observer agreement
for categorical data. Biometrics. 1977:159-174.
---------------------------------------------------------------------------

Comment: A commenter was concerned about CMS measuring overuse, as
there are patient scenarios that are not addressed by available
evidence. The commenter stated that proper evaluation of validity and
reliability is lacking; however, current registry-based measures are
filling this gap. The commenter recommends halting the development and
implementation of these measures.

[[Page 50231]]

Response: These measures are not specifically designed to identify
overuse. We interpret overuse to mean using more resources than
expected given how sick the patients are. Rather, the measures are
designed to evaluate broad patterns of care, both within the inpatient
environment and in the transition to the outpatient setting, that might
lead to higher overall payments. As noted in another response above,
the reliability and validity of these measures has been evaluated by
both a Technical Expert Panel and the NQF Cost and Resource Use
Standing Committee. We also analyzed the ICC score for these measures
to help assess reliability. Although registry data offers some
advantages, it is much more burdensome for hospitals to collect and is
not uniformly available.
Comment: Several commenters requested that CMS adjust the payment
measures for SES based on the NQFs expert panel recommendations.
Response: We refer readers to section IV.H.4. of the preamble to
this final rule for further discussion of this issue.
After consideration of the public comments we received, we are
finalizing the Hospital-Level, Risk-Standardized Payment Associated
with a 30-Day Episode of Care for Pneumonia measure, as proposed.
d. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care Payment
Measure for Heart Failure
(1) Background
There is evidence of variation in payments at hospitals for heart
failure patients; mean 30-day risk-standardized payment among Medicare
FFS patients aged 65 or older hospitalized for heart failure in 2008-
2009 was $13,922, and ranged from $9,630 to $20,646 across 3,714
hospitals. However, high or low payments to hospitals are difficult to
interpret in isolation. Some high payment hospitals may have better
clinical outcomes when compared with low payment hospitals while other
high payment hospitals may not have better outcomes. For this reason,
the value of hospital care is more clearly assessed when pairing
hospital payments with hospital quality. Therefore, we proposed to
include this non-NQF-endorsed measure: hospital risk-standardized
payment associated with a 30-day episode-of-care for heart failure in
the Hospital IQR Program under the exception authority in section
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section
IX.A.7. of the preamble of this final rule. Although the proposed
measure is not currently NQF-endorsed, we considered available measures
that have been endorsed or adopted by the NQF, and we were unable to
identify any measures that assess hospital risk- standardized payment
associated with a 30-day episode-of-care for heart failure. We also are
not aware of any other 30-day episode-of-care heart failure measures
that have been endorsed or adopted by a consensus organization, and
found no other feasible and practical measures on this topic. The MAP
supports this measure but reiterated the need for this measure to be
submitted for NQF endorsement: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The HF measure was
submitted to the NQF and is currently under review as part of the cost
and resource use project.
We believe it is important to adopt this measure as heart failure
is one of the leading causes of hospitalization for Americans 65 and
over and costs roughly $34 billion annually.^{85 86}
Furthermore, because 30-day all-cause mortality and readmission
measures for heart failure are already publicly reported, heart failure
serves as a model condition for assessing relative value for an episode
of care that begins with an acute hospitalization. Including this
measure in the Hospital IQR Program and publicly reporting it on
Hospital Compare will allow stakeholders to assess information about a
hospital's quality and cost of care for heart failure. The measure
reflects differences in the management of care for patients with heart
failure both during hospitalization and immediately post-discharge. By
focusing on one specific condition, value assessments may provide
actionable feedback to hospitals and incentivize targeted improvements
in care.
---------------------------------------------------------------------------

\85\ Russo CA, Elixhauser, A. Hospitalizations in the Elderly
Population, 2003. Agency for Healthcare Research and Quality. 2006.
\86\ Heidenriech PA, Trogdon JG, Khavjou OA, Butler J, Dracup K,
Ezekowitz MD, et al. Forecasting the future of cardiovascular
disease in the United States: a policy statement from the American
Heart Association. Circulation. 2011;123(8):933-44.
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(2) Overview of Measure and Rationale for Examining Payments for a 30-
Day Episode-of-Care
The heart failure payment measure assesses hospital risk-
standardized payment associated with a 30-day episode-of-care for heart
failure for any hospital participating in the Hospital IQR Program. The
measure includes Medicare FFS patients aged 65 or older admitted for
heart failure and calculates payments for these patients over a 30-day
episode-of-care beginning with the index admission. In general, the
measure uses the same approach to risk-adjustment as our 30-day outcome
measures previously adopted for the Hospital IQR Program. We refer
readers to the measure methodology report on our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
When examining variation in payments, consideration of the episode-
of-care triggered by admission is meaningful for several reasons.
First, hospitalizations represent brief periods of illness that require
ongoing management post-discharge; and decisions made at the admitting
hospital affect payments for care in the immediate post-discharge
period. Second, attributing payments for a continuous episode-of-care
to admitting hospitals may reveal practice variations in the full care
of the illness that can result in increased payments. Third, a 30-day
preset window provides a standard observation period by which to
compare all hospitals. The term preset window means that every
admission will be tracked 30 days post admission in order to apply a
standardized measurement window. In order to compare payments across
providers it is important that the comparison window is identical for
each admission at each hospital. Lastly, the heart failure payment
measure is intended to be paired with our 30-day heart failure
mortality and readmission measures and capture payments for Medicare
patients across all care settings, services, and supplies, except for
Medicare Part D (that is, inpatient, outpatient, skilled nursing
facility, home health, hospice, physician/clinical laboratory/ambulance
services, supplier Part B items, and durable medical equipment,
prosthetics/orthotics, and supplies).
We have posted the measure methodology report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We refer
readers to the report for further details on the risk adjustment
statistical model as well as the model results.
(3) Data Sources
The proposed measure is claims-based and uses Medicare
administrative data that contain hospitalizations and payments for
Medicare FFS beneficiaries hospitalized with heart failure.

[[Page 50232]]

(4) Outcome
The primary outcome of the heart failure payment measure is the
hospital-level risk-standardized payment for a heart failure episode-
of-care. The measure captures payments for Medicare patients across all
care settings, services, and supplies, except Part D. By risk-
standardizing the payment measure, we are able to adjust for case-mix
at any given hospital and compare a specific hospital's heart failure
payment to other hospitals with the same case-mix. The analytic time
frame for the heart failure payment measure begins with the index
admission for heart failure and ends 30 days post-admission. The index
admission is any admission included in the measure calculation that
begins the 30-day heart failure episode of care.
In order to isolate payment variation that reflects practice
patterns rather than CMS payment adjustments, the heart failure payment
measure excludes policy and geography payment adjustments unrelated to
clinical care decisions. We achieve this by ``stripping'' or
``standardizing'' payments for each care setting. These concepts were
also discussed previously in the proposed hospital-level, risk-
standardized 30-day episode-of-care payment measure for pneumonia
measure in section IX.A.7.c.(4) of the preamble of this final rule.
(5) Cohort
We created the heart failure payment measure cohort to be aligned
with the publicly reported heart failure mortality measure cohort.
Consistent with these measures, the heart failure payment measure
includes hospitalizations with a principal hospital discharge diagnosis
of heart failure using ICD-9-CM codes included in the final cohort can
be found in Appendix B of the technical report on our Web site at:
https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The measure
will be using data from July 2010-June 2013, which does not yet include
the period when ICD-10 codes are mandatory. We refer readers to our
discussion of data collection for this measure during the transition
period from ICD-9-CM codes to ICD-10-CM/PCS codes (79 FR 28234).
An index admission/hospitalization is the initial heart failure
admission that triggers the 30-day episode-of-care for this payment
calculation. The measure includes only those hospitalizations from
short-stay acute care hospitals in the index cohort and restricts the
cohort to patients enrolled in FFS Medicare Parts A and B (with no
Medicare Advantage coverage). These hospitalizations are the admissions
which were included in the measure after applying all inclusion/
exclusion criteria.
(6) Inclusion and Exclusion Criteria
The heart failure payment measure includes hospitalizations for
patients 65 years or older at the time of index admission and for whom
there was a complete 12 months of FFS enrollment to allow for adequate
risk adjustment. The measure excludes the following admissions from the
measure cohort: (1) admissions for patients with fewer than 30 days of
post-admission enrollment in Medicare because this is necessary in
order to identify the outcome (payments) in the sample over the
analytic period; (2) admissions for patients having a principal
diagnosis of heart failure during the index hospitalization who were
transferred from another acute care facility are excluded, because the
hospital where the patient was initially admitted made the critical
acute care decisions (including the decision to transfer and where to
transfer); (3) admissions for heart failure patients who were
discharged on the same or next day as the index admission and did not
die or get transferred are excluded, because it is unlikely these
patients suffered a clinically significant heart failure; (4)
admissions for patients enrolled in the Medicare Hospice program any
time in the 12 months prior to the index hospitalization, including the
first date of the index admission are excluded, because it is likely
that these patients are continuing to seek comfort care and their goal
may not be survival; (5) admissions for patients who are discharged
alive and against medical advice are excluded because providers did not
have the opportunity to deliver full care and prepare the patient for
discharge; (6) admissions for patients transferred to or from federal
or Veterans Administration hospitals are excluded, because we do not
have claims data for these hospitals; thus, including these patients
would systematically underestimate payments; (7) admissions without a
DRG or DRG weight for the index hospitalization are excluded, because
we cannot calculate a payment for these patients' index admission using
the IPPS; this would underestimate payments for the entire episode-of-
care; and (8) admissions for patients who receive a heart transplant or
LVAD during the index admissions or episode of care because these
patients are clinically distinct, generally very high payment cases,
and not representative of the typical heart failure patient that this
measure aims to capture.
(7) Risk Adjustment
The measure adjusts for differences across hospitals in how
payments are affected by patient comorbidities relative to patients
cared for by other hospitals. We refer readers to section IV.H.4 of the
preamble of this final rule for further discussion of risk-adjustment
for socioeconomic factors.
(8) Calculating the Risk-Standardized Payment (RSP)
The measure is calculated using hierarchical generalized linear
statistical models with a log link and a Gamma error distribution. This
approach appropriately models a positive, continuous, right-skewed
outcome like payment and also accounts for the types of patients a
hospital treats (that is, hospital case-mix), the number of patients it
treats, and the quality of care it provides. The hierarchical
generalized linear model is an appropriate statistical approach to
measuring quality based on patient outcomes when the patients are
clustered within hospitals (and therefore the patients' outcomes are
not statistically independent) and sample sizes vary across hospitals.
As noted above, the measure methodology defines hospital case mix based
on the clinical diagnoses provided in the hospital claims for their
patients' inpatient and outpatient visits for the 12 months prior to
the heart failure hospitalization, as well as those present in the
claims for care at admission. This methodology specifically does not,
however, account for diagnoses present in the index admission that may
indicate complications rather than patient comorbidities.
The RSP is calculated as the ratio of predicted payments to
expected payments and then the ratio is multiplied by the national
unadjusted average payment for an episode of care. The ratio is greater
than one for hospitals that have higher payments than would be expected
for an average hospital with similar cases and less than one if the
hospital has lower payments than would be expected for an average
hospital with similar cases. This approach is analogous to a ratio of
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted''
rate used in other similar types of statistical analyses.
The RSP is a point estimate--the best estimate of a hospital's
payment based on the hospital's case mix. For displaying the measure
for the Hospital

[[Page 50233]]

IQR Program, we computed an interval estimate, which is similar to the
concept of a confidence interval, to characterize the level of
uncertainty around the point estimate, we use the point estimate and
interval estimate to determine hospital performance (for example,
higher than expected, as expected, or lower than expected). For more
detailed information on the calculation methodology, we refer readers
to our Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
This measure is meant to be paired with our 30-day heart failure
mortality and/or readmission measure in order for us to gain a better
understanding of the value of care for a hospital's patients and the
nation as a whole.
We invited public comment on this proposal.
Comment: Several commenters opposed the payment measures because
they did not believe it is fair to hold a hospital responsible for
payments that occur outside of its walls. The commenters recommended
that these mortality and readmissions measures instead be adopted in
the PQRS, as well as long-term care, PAC, home health, and other
entities that participate in the patient's care.
One commenter cited a study that stated that 80 percent of the
variability in the payment measures is driven by PAC and noted that
areas with more LTCHs will likely have higher spending. Several
commenters believed measures should hold accountable all entities so
that incentives are aligned across the continuum of care. Another
commenter noted that legal and regulatory challenges at the State and
federal levels prevent hospitals from coordinating care as fully as
possible and episode of care measures holding only the hospital
accountable create misaligned incentives, which could lead to
unintended consequences.
Response: We interpret the commenter's statement that, ``these
types of measures should instead be adopted in the PQRS, as well as
long-term care, PAC, home health, and other entities that participate
in the patient's care,'' to mean the Long-Term Care Quality Reporting
(LTCHQR) Program, PAC (all care provided after a patient is discharged
from an index hospitalization), Home Health Quality Reporting Program
and other CMS quality reporting programs applicable to entities that
participate in the patient's care. As described above, because heart
failure is one of the leading causes of hospitalization for Americans
65 and over, and its associated care costs roughly $34 billion
annually, we believe it is appropriate to pair a measure of Medicare
payments for heart failure with the existing quality measures on this
topic. We intend to closely monitor the measure's effects on hospitals'
and PAC providers' behavior.
We developed these measures in accordance with national guidelines
\87\ and in consultation with clinical and measurement experts, key
stakeholders, and the public. Furthermore, the AMI/HF measures were
recommended for endorsement by the NQF Standing Committee for Cost and
Resource Use, Phase 2. This information can be located in the following
report: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76905.
---------------------------------------------------------------------------

\87\ Krumholz HM, Brindis RG, Brush JE, et al. Standards for
statistical models used for public reporting of health outcomes: an
American Heart Association Scientific Statement from the Quality of
Care and Outcomes Research Interdisciplinary Writing Group:
cosponsored by the Council on Epidemiology and Prevention and the
Stroke Council. Endorsed by the American College of Cardiology
Foundation. Circulation. Jan 24 2006;113(3):456-462) and ``Standards
for Measures Used for Public Reporting of Efficiency in Health
Care'' (Krumholz HM, Keenan PS, Brush JE, Jr., et al. Standards for
measures used for public reporting of efficiency in health care: a
scientific statement from the American Heart Association
Interdisciplinary Council on Quality of Care and Outcomes Research
and the American College of Cardiology Foundation. Circulation. Oct
28 2008;118(18):1885-1893.
---------------------------------------------------------------------------

Comment: Several commenters expressed concern that the heart
failure payment measure did not receive NQF endorsement, and
specifically, that the Cardiovascular Technical Advisory Panel or the
Cost and Resource Use Standing Committee did not endorse the measure.
These commenters noted that the Cost and Resource Use Standing
Committee felt the risk model did not properly account for differences
in patient risk and it was not until CMS pressed for a third vote that
it received endorsement (see https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76905). Consequently, the
commenters believed the measure is premature and should not be
implemented.
Response: We appreciate this comment. We note the following
sequence of events regarding the recommendation for endorsement of this
measure confirms that this measure is not premature in consideration
for implementation. Earlier this year the measure was assessed by the
Cost and Resource Use Standing Committee. During this part of the
endorsement process the Standing Committee did not reach consensus on a
recommendation for endorsement and the measure was submitted for public
comment. After review of CMS' responses to the public comments the
Consensus Standards Approval Committee (CSAC) voted to recommend the
Hospital-Level, Risk-standardized 30-day Episode-of-Care Payment
Measure for Heart Failure for endorsement. The NQF Board is expected to
review this measure in August 2014. We are actively seeking NQF
endorsement for this measure. A Voting Draft Report of the Cost and
Resource Use Standing Committee can be found at https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76905.
Comment: A commenter suggested the need for innovative solutions
for providers in addition to outcome measures. This commenter believed
that hospitals should: consider innovative ways to identify heart
failure patients early in admission; implement evidence-based clinical
pathways to assure the patient moves efficiently through their stay
with optimal outcomes; develop a tight network of post-acute providers;
and implement an enhanced communication system to identify where the
patient is at any point in timed during the 30-day window.
Response: We agree with the commenter's points about the need for
continued innovation to drive high-quality and efficient care. We
believe the measures that we have selected will help drive hospitals to
provide that care.
Comment: One commenter noted that much of the care expended during
the first 30 days is aimed at increasing long-term survival and
requested that CMS consider a measure with a longer outcome window to
pair with the measure.
Response: We agree that it is possible that some of the variation
in hospital payments will be due to patterns of care that are intended
to improve longer term outcomes. However at this time, we are not aware
of a publicly reported, or non-NQF endorsed NQF-endorsed quality metric
that considers a longer-term outcome with which we can harmonize the
payment measure. As part of ongoing measure reevaluation and
surveillance, we will evaluate the relationship between payments and
longer term outcomes to assess if the performance of hospitals differs
when looking at a longer time frame. Our plan is to eventually compare
30-day payments with longer outcomes like 1-year mortality to determine
if high upfront payments have a longer term benefit.
Comment: One commenter was concerned that the proposed payment

[[Page 50234]]

measure will be used in isolation and not understood by practitioners
and the public. The commenter recommended that CMS instead create a
composite measure with both cost and quality.
Response: We will take into consideration the suggestion to create
a single composite measure of cost and quality for future measure
development. In order to ensure practitioners and the public appreciate
out intent, which is to evaluate payment in the context of quality, we
plan to report the payment measure alongside the outcomes measures on
the Hospital Compare Web site.
Comment: A commenter noted that it will be difficult to determine
value with the existing heart failure measures since mortality and
readmission are inversely related and the process measures are almost
``topped-out.''
Response: We appreciate this feedback. We intend this episode of
care measure to be used in conjunction with the other outcome heart
failure measures of readmission and mortality. We do not intend to use
the outcome heart failure measures with the heart failure process
measures as the outcome and process measure results would not provide
useful and comparable information. Regarding the concern of not being
able to determine the value of the heart failure episode of care
measure since the heart failure mortality and readmission are inversely
related, we believe that there is value in the episode of care measure
because a hospital's performance on mortality and readmissions measures
represents different aspects of quality. We also note that there does
not appear to be a meaningful correlation between hospital risk-
standardized mortality rates and readmission rates. Finally, we believe
that this measure can determine value as it was specifically developed
to align with the heart failure mortality and readmissions measure. A
recent MedPAC report indicates that there may be an inverse correlation
between readmission and mortality rates, but we note that this inverse
relationship has been found to be modest (available at https://www.medpac.gov/documents/Jun13_EntireReport.pdf). We recognize the
commenter's concern and will monitor changes in the strength of these
inverse correlations over time.
Comment: Several commenters did not support adopting the heart
failure payment measures for the Hospital IQR Program due to concerns
regarding the measures' utility and its attribution specifications, all
episode-of-care payments to the admitting hospital.
Response: We view the proposed measure of payments made for heart
failure as an important component of quality improvement when paired
with existing quality measures. We believe it is important for
hospitals to be held accountable for care decisions made during acute
care episodes, particularly when those decisions include, for example,
scheduling post-discharge follow-up care. We believe the measure
appropriately attributes spending during the heart failure episode to
the admitting hospital, and we will monitor close hospitals'
performance on the measure, as well as possible unintended consequences
for patient care. We do not understand the commenter's concern
regarding ``all episode-of-care payments to the admitting hospital,''
but welcome the opportunity to address it upon clarification.
Comment: A commenter recommended performing multi-level testing to
determine the appropriate level for use of this measure.
Response: The episode-of-care payment measures are hospital-level
measures. They account for risk at the patient-level, but attribute
payments to the hospital. We interpret ``multi-level testing'' to mean
the influence of community-level variables, like patient income levels
or rural or urban setting, on the payment outcomes. Although hospitals
cannot fully control all payments during the episode of care, they are
well positioned to influence the outcome or the total episode-of-care
payment. We will take into consideration the recommendation to test
multiple levels.
Comment: A commenter did not support this measure due to concerns
that the measure's risk adjustment model does not properly account for
differences in patient case mix and severity, which may lead to the
misinterpretation of differences in episode cost performance.
Response: We believe that the measure properly accounts for
differences in patient case mix and severity. We developed the measure
in accordance with national guidelines and in consultation with
clinical and measurement experts, key stakeholders, and the public. The
measure is consistent with the technical approach to outcomes
measurement set forth in the NQF guidance for outcomes measures (https://www.qualityforum.org/projects/Patient_Outcome_Measures_Phases1-2.aspx), CMS' Measure Management System (https://www.cms.gov/Medicare/Quality-Initiatives-PatientAssessmentInstruments/MMS/?redirect=/MMS/19_MeasuresManagementSystemBlueprint.asp),
and the guidance articulated in two American Heart Association
scientific statements.^{88 89} Furthermore, this measure was
vetted by the NQF Standing Committee for Cost and Resource Use, Phase
2. Furthermore, this measure was recommended for endorsement by the NQF
Standing Committee for Cost and Resource Use, Phase 2 and the Consensus
Standards Approval Committee in the third quarter of 2014. It is
anticipated to be reviewed by the NQF Board in August 2014.
---------------------------------------------------------------------------

\88\ Krumholz HM, Brindis RG, Brush JE, et al. Standards for
statistical models used for public reporting of health outcomes: an
American Heart Association Scientific Statement from the Quality of
Care and Outcomes Research Interdisciplinary Writing Group:
cosponsored by the Council on Epidemiology and Prevention and the
Stroke Council. Endorsed by the American College of Cardiology
Foundation. Circulation. Jan 24 2006;113(3):456-462.
\89\ Krumholz HM, Keenan PS, Brush JE, Jr., et al. Standards for
measures used for public reporting of efficiency in health care: a
scientific statement from the American Heart Association
Interdisciplinary Council on Quality of Care and Outcomes Research
and the American College of Cardiology Foundation. Circulation. Oct
28 2008;118(18):1885-1893.
---------------------------------------------------------------------------

Comment: One commenter agreed with comments made by the NQF
Cardiovascular TEP that accountability for heart failure payment
outcomes should be attributed to primary care providers. The commenter
believed that there is a wide range of heart failure severity, which
determines the level of accountability and that patients with heart
failure are often cared for by a range of providers who vary in level
and skill.
Response: Although many providers contribute to the cost of care,
we attributed payments for a 30-day episode of care to the hospital
because the episode is triggered by admission to an inpatient
hospitalization. Inpatient hospitalizations represent a brief period of
acute illness that require ongoing management post-discharge, and
hospitals are often directly responsible for scheduling post-discharge
follow-up. Therefore, decisions made at the admitting hospital affect
not only the hospitalization payments, but payments for care in the
immediate post-discharge period. Finally, the objective of this episode
of care payment measure is to encourage efficiencies gained by well-
coordinated care across a patient's experience of illness.
Comment: One commenter felt that the measure is counter to CMS'
implementation of episode groupers since it would capture all costs
associated with the patient instead of only the costs of medical and
procedural services related to heart failure. The commenter recommended
that CMS include episode groupers that

[[Page 50235]]

assign specific services to certain episodes in the heart failure
payment measure.
Response: Episode Groupers are designed to capture epsiodes of care
in the Medicare Population. However, these groupers are used to
evaluate physicians' resource use while our measure is constructed to
capture hospitals' resource use.
Comment: One commenter did not agree with a 30-day outcome
timeframe because it does not align with heart failure disease
progression and recommended more focus be placed on the ambulatory care
environment with a longer time period focused on outpatient care.
Response: Although heart failure is a chronic condition, patients
often suffer acute decompensation requiring hospital admission. Acute
decompensation is acute exacerbation that compromises the patient's
cardiorespiratory status and requires admission. This measure focuses
on this acutely decompensated cohort of heart failure patients, not on
ambulatory patients. Heart failure admissions are associated with a
substantial 30-day mortality rate as well as variation in costs.\90\ In
addition, heart failure admissions have high rates of readmission
prompting heart failure to be targeted in current readmission reduction
programs. For these reasons, we believe that heart failure is an
appropriate focus for a hospital-based episode-of-care measure.
---------------------------------------------------------------------------

\90\ Xiao, X, Li S-X, Normand SL, Kim N, Ott LS, Lagu T, Duan M,
Kroch EA, Krumholz HM. '' `Phenotyping' Hospital Value of Care for
Patients with Heart Failure'' Health Services Research Early View,
Article first published online: 28 Jun 2014.
---------------------------------------------------------------------------

Comment: Several commenters did not believe transfer patients
should be attributed to the admitting hospital because the organization
that initially admits a patient may not have as much control over the
patient's course of care. Furthermore, the commenters were concerned
that hospitals would have a stronger incentive to hold onto patients
longer to avoid being held accountable for the costs of another
facility.
Response: While we understand the commenters' concerns, attributing
the outcome to the first admitting hospital makes the most sense given
the focus of this particular payment measure, which is hospital risk-
standardized payment associated with a 30-day episode-of-care for heart
failure]. We define a transfer as any admission that requires acute
inpatient care at two or more hospitals for the same HF. We attribute
total episode payments that involve a transfer for acute care of HF to
the transferring hospital because:
The episode of care begins at the time of the index
admission, which thereby, provides a standard measure time frame for
each hospital.
The transferring hospital is responsible for initial care
decisions as well as the decision to transfer the patient, both of
which can have a cascading effect on subsequent care decisions.
This method avoids incentivizing hospitals to transfer
patients who are critically ill and at high risk of being very
expensive to treat. As a result, we disagree with the commenter that
hospitals would have a stronger incentive to hold onto patients longer
to avoid being held accountable for the costs of another facility.
This method aligns with CMS' publicly reported measure for
HF risk-standardized mortality.
The objective of this episode-of-care payment measure is
to encourage efficiencies gained by well-coordinated care across a
patient's experience of illness.
Comment: Several commenters believed the HF payment measure should
exclude transplant or LVAD patients who underwent the procedure in the
previous 12 months.
Response: We interpret this comment to mean that the measure should
exclude patients with any type of transplant or a left ventricular
assist device (LVAD) within 12 months of the index admission for heart
failure. We agree that these patients will likely cost more than other
HF patients. Accordingly, we plan to evaluate the data to see if either
a heart transplant or LVAD placement occurred within 12 months prior to
HF admission and exclude these patients from the measure beginning in
FY 2016. We will then determine whether or not we should exclude
patients from the measure with a history of LVAD or transplant.
Comment: One commenter was concerned that the measure may not
adequately adjust for older and more frail patients who are at a higher
risk for readmission.
Response: We note that the measure specifically adjusts for age and
multiple indicators of patient frailty such as malnutrition and
dementia. The measure is risk-adjusted in order to account for
differences in case-mix, or patient complexity, between hospitals. For
each patient, the claims for the 12-months prior to the measured
hospitalization are examined to identify additional clinical conditions
that patients may have which could contribute to costs of care. These
conditions are included in the risk model for the measure to ensure
providers are: 1)compared on their performance; 2) are not penalized
for caring for sicker patients; and 3) to prevent putting providers at
risk of being profiled as high cost facilities due to the clinical
complexity of their patients.
Comment: Several commenters believed that the measure does not
adequately adjust for patient risk and cited NQF concerns regarding R-
square values of 0.03-0.05 in the development and validation samples.
Response: While we appreciate the concern that the measure does not
adequately adjust for patient risk factors, we disagree for several
reasons. First, the measure model was evaluated with a number of
statistical methods in addition to the R-square. The results of these
other diagnostic tests (over-fitting indices, distribution of
Standardized Pearson residuals, and predictive ratios) all suggest that
the model predicts payments well, after adjustment for patient risk
factors. These results consider the measure from a different
perspective than the R-square. Second, we feel the focus on the R-
square value for this measure is not appropriate because the
statistical methods we used do not produce a traditional R-square
value. To provide conceptually similar number, we produced a quasi-R-
square, the details of which can be found in our technical report
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
Third, this quasi-R-square is consistent with other patient-level risk-
adjustment models for health care payment. Lastly, the R-square results
suggest that factors other than clinical severity may be predictive of
resource utilization that can increase payments as discussed at length
during the NQF proceedings.^{91 92} We note that despite the
concerns raised about the R-square value during endorsement proceeding,
in June 2014, the NQF Standing Committee for Cost and Resource Use
Phase 2 recommended endorsement of the HF episode of care measure.
---------------------------------------------------------------------------

\91\ Chen SI, Dharmarajan K, Kim N, et al. Procedure intensity
and the cost of care. Circ Cardiovasc Qual Outcomes 2012;5:308-13.
\92\ Safavi KC, Dharmarajan K, Kim N, et al. Variation exists in
rates of admission to intensive care units for heart failure
patients across hospitals in the United States. Circulation
2013;127:923-9.
---------------------------------------------------------------------------

After consideration of the public comments we received, we are
finalizing the Hospital-Level, Risk-Standardized Payment Associated
with a 30-Day Episode of Care for Heart Failure measure as proposed.

[[Page 50236]]

e. Severe Sepsis and Septic Shock: Management Bundle Measure (NQF
0500)
(1) Background
Sepsis, severe sepsis, and septic shock can arise from a simple
infection, such as pneumonia or urinary tract infection. Although it
can affect anyone at any age, it is more common in infants, the
elderly, and patients with chronic health conditions such as diabetes
and immunosuppressive disorders seen in transplant patients.
Information for this measure comes from the NQF Measure Information-
Composite for the Severe Sepsis and Septic Shock: Management Bundle
(NQF 0500).\93\ More information on this issue is available
from the Surviving Sepsis Campaign: International Guidelines for
Management of Severe Sepsis and Septic Shock: 2012.\94\ Sepsis is
associated with mortality rates of over 16 to 49 percent, which is more
than 8 times higher than the rate for inpatient stays for other
hospital admissions. Findings from the National Hospital Discharge
Survey indicate that the number of hospital stays for septicemia more
than doubled between the years of 2000 and 2008, and patients with this
condition were more severely ill than patients hospitalized for other
conditions. Severe sepsis and septic shock are frequent causes of re-
hospitalizations, especially during the first year after the initial
hospitalization.
---------------------------------------------------------------------------

\93\ National Quality Forum (NQF). Measure Information-
Composite. 500 Severe Sepsis and Septic Shock: Management
Bundle. Updated 2014 Jan 2. NQF: Washington, DC https://www.qualityforum.org/Home.aspx.
\94\ Dellinger RP, Levy MM, Rhodes A, Annane D, et al. Surviving
Sepsis Campaign: international guidelines for management of severe
sepsis and septic shock: 2012. Crit Care Med. 2013 Feb; 41(2):580-
637.
---------------------------------------------------------------------------

Based on national discharge data reported by the AHRQ, sepsis was
the sixth most common principal reason for hospitalization in the
United States in 2009, accounting for 836,000 hospital stays. There
were an additional 829,500 stays with a secondary diagnosis of sepsis
for a total of 1,665,400 inpatient stays and 258,000 deaths. From 1993
to 2009, sepsis-related hospital stays increased by 153 percent, with
an average annual increase of 6 percent. Medicare was the predominant
payer for sepsis-related hospital stays, covering 58.1 percent of
patients. Sepsis cases and sepsis-related deaths are expected to
continue to increase with the aging of the population.
In a landmark study by Rivers et al.,\95\ it has been shown that an
absolute and relative reduction in mortality from sepsis can be reduced
16 percent and 30 percent, respectively, when aggressive care is
provided within 6 hours of hospital arrival. Furthermore, a recent
study of the 2008 Healthcare Cost and Utilization Project (HCUP)
Nationwide Inpatient Sample \96\ determined that patients admitted
through the Emergency Department had a 17 percent lower likelihood of
dying from sepsis than when directly admitted.
---------------------------------------------------------------------------

\95\ Rivers E, Nguyen B, Havstad S et al. Early goal-directed
therapy in the treatment of severe sepsis and septic shock. N Engl J
Med. 2001; 345: 1368-77.
\96\ HCUP Nationwide Inpatient Sample (NIS). Healthcare Cost and
Utilization Project (HCUP). 2007-2009. Agency for Healthcare
Research and Quality, Rockville, MD. https://www.hcup-us.ahrq.gov/nisoverview.jsp.
---------------------------------------------------------------------------

The Severe Sepsis and Septic Shock: Management Bundle measure (NQF
0500) was supported by the MAP for the Hospital IQR Program,
contingent on NQF endorsement in its Pre-Rulemaking Report: 2013
Recommendations on Measures Under Consideration by HHS, available at:
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted the measure
addresses an NQS priority not adequately addressed in the program
measure set and that early detection and treatment of sepsis in the
emergency department and inpatient settings is important (page 125).
This measure was initially endorsed by the NQF in 2008 for the
hospital/acute care facility setting, underwent maintenance review and
update in March 2013, June 2013, and May 2014.
The MAP conditionally supported this measure as a Meaningful Use
measure in its Pre-Rulemaking Report: 2014 Recommendations on Measures
Under Consideration by HHS, available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. The MAP stated, ``Not ready for implementation; measure
concept is promising but requires modification or further
development.'' In its Additional Findings the MAP stated that it,
``noted the need for continued development of electronic specifications
for NQF 0500 Severe Sepsis and Septic Shock: Management
Bundle. While some workgroup members challenged the feasibility and
evidence behind this measure, MAP deferred to the recent endorsement
review of this measure and conditionally supported it for the
Meaningful Use Program. Public comment from Edwards Lifesciences
supports MAP's conclusion [page 168].'' (In the proposed rule (79 FR
28236), we attributed all of the MAP's statements to its 2013 Pre-
Rulemaking Report.)
(2) Overview of Measure
The purpose of the proposed Severe Sepsis and Septic Shock:
Management Bundle measure is to support the efficient, effective, and
timely delivery of high quality sepsis care in support of the Institute
of Medicine's (IOM) aims for quality improvement. This is consistent
with the Department of Health and Human Service National Quality
Strategy[acute]s priorities directed at one of the leading causes of
mortality. By providing timely, patient-centered care, and making
sepsis care more affordable through early intervention, reduced
resource use and complication rates can result. The severe sepsis and
septic shock early management bundle provides a standard operating
procedure for the early risk stratification and management of a patient
with severe infection. Through applying this standard operating
procedure, a clinically and statistically significant decrease in organ
failure, mortality, and the utilization of health care resources has
been demonstrated for over 10 years. Additional information about this
measure is available on the NQF's Web site at https://www.qualityforum.org/QPS/0500.
(3) Data Sources
The proposed measure is chart-abstracted data of patients
presenting with septic shock who received treatment detailed in the
Calculations section below.
(4) Outcome
The outcome criteria for this measure consists of: measure lactate;
blood cultures; timely antibiotics; fluid resuscitation; lactate
clearance; vasopressors, central venous pressure (CVP), central venous
oxygen saturation (ScvO2); and overall bundle compliance. These are
discussed in more detail below
Measure Lactate
Measurement of lactate levels is specifically associated with
improved outcomes in sepsis, and an elevated lactate value identifies
patients at higher risk for poor outcomes. Up to 10 percent of in-
hospital cardiac arrest in the United States per year is secondary to
sepsis (pneumonia). These patients are often misdiagnosed and sent to
the medical floors only to suffer acute hemodynamic deterioration.
These outcomes could be potentially avoided with lactate measurement
upon admission providing risk stratification triggering alternative
dispositions.

[[Page 50237]]

Levy et al.\97\ conducted an international, multisite ``Surviving
Sepsis Campaign'' (SSC) initiative to determine the rate of change at
which the sites reached the SSC guideline targets. In the first quarter
of this initiative, only 61.0 percent of patients had lactate values
measured consistent with guidelines. In addition, prior studies have
shown that care prompted by measurement of lactate levels in sepsis
patients reduced resource utilization and cost. This leads to lower
likelihood of hospital-acquired conditions. This performance measure
has been previously used as a core component of multicenter and
national quality improvement initiatives. Formalizing it as a national
performance measure will provide direct targets for intervention that
are closely linked with improvements in mortality and cost.
---------------------------------------------------------------------------

\97\ Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign.
The Surviving Sepsis Campaign: results of an international guideline
based performance improvement program targeting severe sepsis. Crit
Care Med. 2010 Feb;38(2):367-74.
---------------------------------------------------------------------------

Blood Cultures
In the first quarter of the Levy et al. SSC initiative, only 64.5
percent of patients had blood cultures collected prior to antibiotic
administration. Collecting blood cultures prior to antibiotic
administration is specifically associated with improved outcomes in
sepsis, and pathogens identified by blood cultures allow for customized
therapy. As a result, blood cultures continue as a recommendation of
the current Surviving Sepsis Guidelines.
By obtaining blood cultures, antibiotic regimens can be customized
to treat the specific infecting organism. This will result in less
unnecessary exposure to antibiotics, reducing complications associated
with antibiotic use, including drug reactions, allergies and adverse
events, the development of drug-resistant organisms, and the occurrence
of Clostridium difficile colitis. The performance measure for
collecting blood cultures for suspected sepsis has been previously used
and continues as a core component of the SSC guidelines.
Timely Antibiotics
Kumar et al.\98\ found the median time to appropriate antibiotics
was 6 hours after shock. In the first quarter of the Levy et al.\99\
SSC initiative, only 60.4 percent of patients received timely
antibiotics. Multiple studies, for example, have demonstrated that
delays in administration of appropriate antibiotics in patients with
sepsis and other severe infections are associated with longer lengths
of stay, higher costs, and higher mortality. In septic shock, the Kumar
et al. study demonstrated that every hour in delay of appropriate
antibiotics was associated with a 7.6 percent higher mortality. The
timely administration of broad-spectrum antibiotics was associated with
significantly higher risk adjusted survival. Based on a preponderance
of data, the current recommendations in the international guidelines
for the management of severe sepsis and septic shock includes the
administration of broad-spectrum antibiotic therapy within 1 hour of
diagnosis of septic shock and severe sepsis.
---------------------------------------------------------------------------

\98\ Kumar A, Roberts D, Wood K, Light B, et al. Duration of
Hypotension before Initiation of Effective Antimicrobial Therapy is
the Critical Determinant of Survival in Human Septic Shock. Crit
Care Med. 2006;34 (6):1589-96.
\99\ Levy MM, Dellinger RP, et al.; Surviving Sepsis Campaign.
The Surviving Sepsis Campaign: results of an international guideline
based performance improvement program targeting severe sepsis. Crit
Care Med. 2010 Feb;38(2):367-74.
---------------------------------------------------------------------------

Fluid Resuscitation
A common finding in patients with septic shock, manifested by low
blood pressure and/or other signs of organ hypoperfusion, such as
elevated serum lactate levels, is intravascular volume depletion. The
degree of the intravascular volume deficit in sepsis varies, yet nearly
all patients require initial volume resuscitation and many patients
require continuing fluid resuscitation over the first 24 hours.
Early fluid resuscitation is associated with improved outcomes for
patients with acute lung injury due to septic shock. International
guidelines recommend that patients with suspected hypovolemia be
initially treated with at least 30 mL/kg of crystalloid (for example,
Ringer's solution) to determine clinical response. In the first quarter
of the Levy et al.\100\ SSC initiative, only 59.8 percent of patients
received fluid resuscitation consistent with guidelines. Timely fluid
resuscitation avoids an error of omission in which indicated therapy is
delayed or omitted. By improving outcomes, length of stay is reduced.
This leads to lower likelihood of hospital-acquired conditions. This
performance measure has been previously used as a core component and
continues as a core component of the SSC guidelines. Formalizing it as
a national performance measure will provide direct targets for
intervention that are closely linked with improvements in mortality and
cost.
---------------------------------------------------------------------------

\100\ Ibid.
---------------------------------------------------------------------------

Lactate Clearance
Elevated lactate levels prompt the consideration of specific care
practices toward hemodynamic optimization guided by either central
venous oxygen saturation or lactate clearance. International guidelines
recommend that patients with sepsis and continued elevated lactate
values have additional therapies until lactate levels are normalized.
However, normal lactate levels can be seen in septic shock, especially
in children.
Vasopressors, Central Venous Pressure (CVP), and Central
Venous Oxygen Saturation (ScvO2)
Performance gaps in individual bundle elements can range from 79
percent (Confidence Interval (CI) (69-89 percent) for vasopressors, to
27 percent (CI 18-36 percent) for Central Venous Pressure (CVP)
measurement, and as low as 15 percent (CI 7-23 percent) for Central
Venous Oxygen Saturation (ScvO2) in some community emergency
departments. These numbers increase (50-75 percent) in larger hospital
settings. CVP has been shown to have a significant association with
mortality \101\ and multiple studies and meta-analysis have shown a
significant association with reaching an ScvO2 of 70 percent and
improved mortality.
---------------------------------------------------------------------------

\101\ Varpula M, Tallgren M, Saukkonen K, Voipio-Pulkki LM,
Pettila V. Hemodynamic variables related to outcome in septic shock.
Intensive Care Med. Jun 23 2005;31:1066-1071.
---------------------------------------------------------------------------

Overall Bundle Compliance
Multiple initiatives promoting bundles of care for severe sepsis
and septic shock were associated with improved guideline compliance and
lower hospital mortality. Even with compliance rates of less than 30
percent, absolute reductions in mortality of 4-6 percent have been
noted. Coba et al.\102\ found that when all bundle elements were
completed within 18 hours and compared with patients who did not have
bundle completion, the mortality difference was 10.2 percent. Thus,
there is a direct association between bundle compliance and improved
mortality. In addition, a continuous quality improvement (CQI)
initiative, can improve compliance rates. CQI is a quality management
process that encourages continually assessing performance and whether
improvements can be made.\103\ Multiple studies have shown that
standardized order sets, enhanced bedside monitor display, telemedicine
and comprehensive CQI feedback is feasible, modifies clinician behavior
and is associated with decreased hospital mortality.
---------------------------------------------------------------------------

\102\ Coba V, Whitmill M, Mooney R, et al. Resuscitation Bundle
Compliance in Severe Sepsis and Septic Shock: Improves Survival, Is
Better Late than Never. J Intensive Care Med. Jan 10 2011.
\103\ Edwards PJ, et al. Maximizing your investment in EHR:
Utilizing EHRs to inform continuous quality improvement. JHIM
2008;22(1):32-7.

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[[Page 50238]]

(5) Cohort
This measure will focus on patients aged 18 years and older who
present with symptoms of severe sepsis or septic shock. These patients
will be eligible for the 3 hour (severe sepsis) and/or 6 hour (septic
shock) early management measures.
(6) Inclusion and Exclusion Criteria
Numerator Statement: the numerator is: Patients from the
denominator who received all the following: Step 1, Step 2, and Step 3
within 3 hours of time of presentation, and if septic shock is present
(as either defined as hypotension or lactate >=4 mmol/L), who also
received Step 4, Step 5, Step 6, and Step 7 within 6 hours of time of
presentation. The steps are described in detail below.

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

Denominator: The denominator is the number of patients presenting
with severe sepsis or septic shock. The following patients presenting
with severe sepsis or septic shock will be excluded from the
denominator:
Patients with advanced directives for comfort care;
Patients with clinical conditions that preclude total
measure completion;
Patients for whom a central line is clinically
contraindicated;
Patients for whom a central line was attempted but could
not be successfully inserted;
A patient or a surrogate decision maker declines or is
unwilling to consent to such therapies or central line placement; and
Patients who are transferred to an acute care facility
from another acute care facility.
(7) Calculations
In calculating this measure, the denominator is the number of
patients presenting with severe sepsis or septic shock. The numerator
in this measure is patients from the denominator who had their lactate
levels measured, had blood cultures obtained prior to receiving
antibiotics, and who received broad spectrum antibiotics within 3 hours
of presentation. If septic shock is present, the patients also must
receive 30 ml/kg crystalloid for hypotension or lactate >=4 mmol/L,
apply vasopressors (for hypotension that does not respond to initial
fluid resuscitation to maintain a mean arterial pressure >=65), in the
event of persistent arterial hypotension despite volume resuscitation
(septic shock) or initial lactate >=4 mmol/L (36 mg/dl) measure central
venous pressure and central venous oxygen saturation, and the patient's
lactate level must be re-measured if the initial lactate level is
elevated.
We invited public comment on this proposal.
Comment: Several commenters supported adopting this measure. Some
commenters supported adopting this measure because it is NQF-endorsed.
One commenter supported the addition of this measure and noted that it
fills an important measure gap, and should positively impact patient
care.
Another commenter strongly supported incorporating the sepsis/
septic shock measure into the Hospital IQR Program beginning in the FY
2017 payment determination because of the association of sepsis with
patient deaths, hospital admissions, and length of hospital stays.
Further, the commenter stated that Medicare is the largest payer for
sepsis-related hospital stays, accounting for close to 60 percent of
all patients.
Response: We proposed adopting this measure because we believe this
measure improves patient health outcomes.
Comment: Several commenters noted that there are two other trials
that examine the risks/benefits of protocolized care of septic patients
which are yet to be published. As this field is evolving, the commenter
believed that it is not appropriate to set benchmarks which were not
confirmed in the most recent, largest randomized controlled trial.
Specifically, the commenters suggested that specific measure criteria
should await the results of the Australian Resuscitation In Sepsis
Evaluation Randomised Controlled Trial (ARISE) and The Protocolised
Management in Sepsis Trial (ProMISe).
Response: We thank the commenter for feedback. We acknowledge the
importance of the results pending from the ARISE and the ProMISe trials
and will take those results and their potential impact into
consideration when available. However, we believe that care of patients
with severe sepsis and septic shock is of paramount importance and
there is a significant performance gap within the Hospital IQR Program.
The presence of this gap warrants the adoption of this clinical quality
metric prior to the finalization of the two pending trials referenced
above. The severe sepsis/septic shock bundle measure is the only NQF-
endorsed sepsis measure currently available to CMS.
Comment: Many commenters opposed CMS adopting this measure citing
the recent Protocolized Care for Early Septic Shock (ProCESS) trial
published after publication of the proposed rule. The ProCESS trial
found no additional benefit in including measurement of central venous
pressure (CVP) and central venous oxygen saturation.
Response: We thank the commenters for this feedback. We note from
the measure steward that the Severe Sepsis and Septic Shock: Management
Bundle (NQF 0500) measure ``has undergone the rigorous NQF
evaluation process for over 6-7 years based on over 13 years of
confirmatory studies. These studies provided the framework which
allowed the measure to navigate the validity and reliability metrics as
a whole measure including the central venous catheter to measure
central venous pressure and oxygen saturation
(SCVO2).'' \104\ We note that these two clinical
parameters guide the administration of intravenous fluids,
vasopressors, inotropes, and blood transfusions. Further, both
parameters provide critical information about cardiac dysfunction,
which when treated appropriately improves outcome. The steward further
notes ``As a result CVC placement has been shown to be one of the most
important bundle elements ^34-37 and independently associated
with a 9 percent reduction in mortality.'' ^{38 39}
---------------------------------------------------------------------------

\104\ NQF. Patient Safety Measure. Henry Ford Comments. June
2014. Available at: https://www.qualityforum.org/ProjectMaterials.aspx?projectID=73701.
---------------------------------------------------------------------------

Regarding the ProCESS trial, we note that this randomized trial
focused on a different set of guidelines for septic shock patients and
did not require patients to have a central venous catheter placed,
unless peripheral access was insufficient.\105\ The protocol-based
standard therapy was the result of the ProCESS Investigators reviewing
the literature, surveying emergency physicians and intensivists
worldwide with consensus feedback from investigators.\2\ The ProCESS
trial

[[Page 50239]]

protocol-based standard therapy also included administration of fluids
and vasoactive agents to reach goals for systolic blood pressure and
shock index (the ratio of heart rate to systolic blood pressure).\2\
The results of this trial were published in March 2014 and NQF reviewed
the Severe Sepsis and Septic Shock: Management Bundle (NQF
0500) measure and narrowly voted to remove the central venous
catheter portion of the EGDT bundle in June 2014. We note that the
ProCESS trial was performed in 31 U.S. hospital emergency departments
known to have a high volume of patients and that over a 5-year period
randomized 1351 patients with septic shock into the trial, or on
average 8 patients per site per year. The measure steward noted that a
meta-analysis of 49 studies found the ProCESS trial population to
account for 3 percent of the 41,064 patients in the these studies and
that the 31 centers in the trial are not reflective of community
settings where the majority of patients are treated in the U.S.,\2\ nor
are the 31 centers a majority of the 4500 hospitals in the U.S.
---------------------------------------------------------------------------

\105\ ProCESS Investigators. A Randomized trial of Protocol-
Based Care for early septic shock. NEJM. 2014; 370:1683-1693.
---------------------------------------------------------------------------

Finally, during the NQF Patient Safety Measure Standing Committee
meeting, the steward noted that the recommendation to remove the CVC
portion of the Severe Sepsis and Septic Shock: Management Bundle (NQF
0500) measure had not been tested to assess if the measure
would still be reliable and valid with this change to the measure, and
that the recommendation was based on a single study's protocol-based
standard therapy which was noted not to be identical to the EGDT
treatment used in the Severe Sepsis and Septic Shock: Management Bundle
(NQF 0500) measure.
In view of this background of information we believe the most
logical next step is to gather more information from two other studies
that will be completed in the near future, as well as to await further
recommendations from the NQF Patient Safety Measures Project as the
ProCESS investigators collaborate with the stewards of the Severe
Sepsis and Septic Shock: Management Bundle (NQF 0500) measure
to refine the measure. We believe that sepsis and its mortality rate
are important medical conditions which have also shown wide variation
in treatment and outcome. We believe severe sepsis and septic shock
should be monitored for improvements in mortality rates.
Comment: Commenters noted that the CVP and central venous oxygen
saturation monitoring and other processes were adopted in the Surviving
Sepsis Campaign (SSC) after the results of a single center trial
published in 2001.\106\ Commenters also stated that the Surviving
Sepsis Campaign (SSC) moderated some of its recommendations based on
the results of the ProCESS trial citing the SSC's response to the
ProCESS trial.\107\
---------------------------------------------------------------------------

\106\ Rivers E, Nguyen B, Havstad S et al. Early goal-directed
therapy in the treatment of severe sepsis and septic shock. N Engl J
Med.2001; 345: 1368-77.
\107\ Surviving Sepsis Campaign. Surviving Sepsis Campaign
Responds to ProCESS Trial. May 19, 2014. Available at: https://www.survivingsepsis.org/SiteCollectionDocuments/SSC-Responds-Process-Trial.pdf.
---------------------------------------------------------------------------

Response: We thank the commenter for feedback. We note that
monitoring CVP and central venous oxygen saturation monitoring are
important components of the sepsis bundle. The SSC recommendations note
that mortality outcomes increase if CVP or oxygen saturation of 70
percent or 65 percent respectively, is not achieved with fluid
resuscitation to the central venous pressure target. We acknowledge
that the CVP and central venous oxygen saturation monitoring and other
processes were adopted by the Surviving Sepsis Campaign (SSC) after the
results of a single center trial published in 2001. However, we would
like to point out the SSC recommendations have been updated since their
initial publication and these updated recommendations are based on many
different international studies. With regard to the comment that SSC
has moderated some of its recommendations based on the ProCESS trial.
We note that in their response to the ProCESS trial dated May 19, 2014,
SSC recognizes that there are alternative ways to obtain these results
and they will address ways to include this data in future versions of
their quality improvement database.
Comment: One commenter stated that support for this measure was not
lessened by the ProCESS trial questioning the level of support for
element ``F'' (measurement of central venous pressure and central
venous oxygen saturation) of this measure. The commenter noted that,
while the NQF Patient Safety Steering Committee voted in favor of
removing element ``F,'' final ratification is pending by the NQF Board
of Directors.
The commenter noted that the NQF Patient Safety Steering Committee
did not remove its endorsement of the full measure, and cited the Draft
Report for Comment \108\ on the ad hoc review that stated that ``usual
care for severe sepsis and septic shock had changed dramatically in the
past decade with dramatic improvements in sepsis-related morbidity and
mortality with several elements of the NQF 0500 measure being
key to this improvement in outcomes'' (p. 20).
---------------------------------------------------------------------------

\108\ National Quality Forum. NQF-Endorsed Measures for Patient
Safety. Draft Report for Comment. May 28, 2014. Available at:
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76698.
---------------------------------------------------------------------------

Response: We agree that support for this measure has not lessened
as a result of the ProCESS trial. As part of its ongoing work, the NQF
Patient Safety Standing Committee conducted an ad hoc review of the
sepsis measure (NQF 0500) based on results from the ProCESS
trial. While the NQF Patient Safety Steering Committee voted in favor
of removing element ``F,'' it recommended retaining endorsement of the
measure as a whole. At this time final ratification is pending by the
NQF Board of Directors. We refer readers to the NQF Web site for
complete information on this measure's review at: https://www.qualityforum.org/News_And_Resources/Press_Releases/2014/Statement_from_NQF_on_Review_of_Sepsis_Measure.aspx. We intend
to closely monitor and incorporate new information as the evidence base
improves.
Comment: A commenter asked CMS to invest additional resources in
developing a stronger sepsis outcome measure. Another commenter asked
CMS to consider adding non-NQF-endorsed measures that address early
detection of sepsis.
Response: We thank the commenters for these suggestions and will
take them into consideration in the future.
Comment: A commenter supported the severe sepsis/septic shock:
management bundle measure provided the chart-abstracted measures that
are proposed for removal in this rule are removed. The commenter noted
that, if all existing chart-abstracted measures are left intact and the
proposed mandatory electronic submission requirements for CY 2016 are
added, it will be difficult for the commenter to find the resources to
add the new measures.
Response: We are working to lessen the burden by removing several
chart-abstracted measures.
Comment: One commenter was concerned that the measure, as defined,
may have a high rate of false positives.
Response: We are unaware of any studies indicating the severe
sepsis/septic shock measure, as defined, has a high rate of false
positives. We would be interested in seeing any evidence of a high rate
of false positives.
Comment: One commenter stated that the science of sepsis treatment
is evolving and measurements of the incidence of sepsis and sepsis
outcomes

[[Page 50240]]

are likely inaccurate due to coding variances and payment incentives.
Response: We acknowledge that the science of sepsis treatment is
evolving. We note that this is common phenomenon in medicine, and this
is why all measures undergo routine measure maintenance. We believe
that the coding of sepsis is accurate because these codes are used for
payment reimbursement. In addition, our payment reimbursement processes
allow for review, correction, and appeals. The payment incentive in the
Hospital IQR Program is for reporting, therefore there is no financial
incentive associated with actual sepsis/septic shock outcomes.
Comment: Many commenters suggested that this measure poses a
possible risk to patients and would be a burden on hospitals to collect
the data. Specifically, one commenter was concerned about whether
emergency department staff would be required to complete elements of
the bundle while they triage patients.
Response: We believe this measure will benefit consumers seeking
information regarding the quality of health care outcomes. Sepsis is
associated with patient deaths, hospital readmissions, and increased
length of hospital stays. The measure fills an important measure gap,
and will positively impact patient care. We believe that these benefits
will outweigh data collection burdens. We also do not believe this
measure will be more burdensome than other measures for hospitals
because the measure data may be collected concurrently,
retrospectively, or a combination of both.
Regarding the concern of the inability to complete the bundle
elements in the emergency department during triage, we note that the
measure allows for completion of elements A-C within 3 hours.
Timeliness of accurate detection and treatment of sepsis has been
associated with improved survival in numerous studies, for example.
^{109 110}
---------------------------------------------------------------------------

\109\ Castellanos-Ortega A, Suberviola B, Garcia-Astudilllo LA,
Holanda MS, et al. Impact of the Surviving Sepsis Campaign protocols
on hospital length of stay and mortality in septic shock patients:
Results of a three-year follow-up quasi-experimental study. Crit
Care Med. 2010, 8(4):1036-1043.
\110\ Ferrer R, Artigas A, Suarez D, Palencia E, et al.
Effectiveness of Treatments for Severe Sepsis. A Prospective,
Multicenter, Observational Study. Am J Respir Crit Care Med. 2009,
180:861-866.
---------------------------------------------------------------------------

Comment: A commenter suggested that CMS defer the sepsis reporting
requirements until 2016, when the next version of the Surviving Sepsis
Guidelines (SSG) is published.
Response: We believe the measure is important and addresses a
critical gap in measurement and therefore, should be adopted at this
time. However, we intend to closely monitor and incorporate new
information as the evidence base improves.
Comment: Several commenters requested that CMS consider alternative
sepsis measures that are NQF-endorsed, reliable, accurate, feasible,
evidence- based, streamlined, and can be collected consistently and
reliably, with minimal burden.
Response: At the time of this publication, we note that here are no
other NQF-endorsed severe sepsis/septic shock measures available.
Comment: A commenter asked for clarification as to which patients
would be excluded from this measure. This commenter also wanted
clarification on whether we are developing a sampling methodology for
the sepsis measure. The commenter suggested that we define a minimum
case threshold for publicly reporting this measure.
Response: The exclusions for this measure were outlined above, in
the proposed rule (79 FR 28237), and at: https://www.qualityforum.org/QPS/0500. We intend to develop a sampling strategy for the sepsis
measure. In addition, regarding a minimum case threshold for public
reporting, we will follow our existing guidelines. We display a
footnote on Hospital Compare when the number of cases/patients is too
few to report, that is fewer than 11 cases.\111\
---------------------------------------------------------------------------

\111\ https://www.medicare.gov/hospitalcompare/Data/Footnotes.html.
---------------------------------------------------------------------------

Comment: Many commenters also asked for changes to specific aspects
of the measure. Components of the sepsis measure commenters would like
to change include:
Allowing exclusions to the required fluid resuscitation
amount of 30 ml/kg to take into account the elderly, frail, and cardiac
compromised that are not able to handle this amount of fluid, and may
have fluid overload. For example, one exclusion could be 25 ml/kg for
cardiac compromise, which the commenter stated the literature also
supports in sepsis fluid resuscitation.
Allowing administration of 30 ml/kg crystalloid for
hypotension or lactate >/=4 mmol/L should be administered within 3
hours of time of presentation and not 6 hours, according to current
guidelines.
Excluding patients from the blood culture before
antibiotic measure if blood cultures are attempted without success and
patients that present to the emergency department with an atypical
sepsis presentation (cardiac arrest prior to arrival).
Many commenters opposed the inclusion of element F from the
measure, specifically ``In the event of persistent hypotension despite
volume resuscitation (septic shock) or initial lactate >=4 mmol/L (36
mg/dl) measure central venous pressure and central venous oxygen
saturation,'' per the recommendation of the Patient Safety Measure
Committee. A commenter cautioned that central lines have many
complications and this trial showed early goal directed therapy without
a central line was equivocal to placing a central line for monitoring.
Commenters also noted that central venous catheters should be used
sparingly, as they can lead to infections and other complications.
A commenter stated that the measure specifications of care steps
within six hours (required only for patients with septic shock) should
not include steps five through seven because they are no longer
considered the standard of care or high-quality sepsis resuscitation
metrics and are outdated.
Response: We thank the commenters for their feedback. We are
adopting this measure as developed by the measure steward, Henry Ford
Hospital, and endorsed by the NQF. We suggest the commenters recommend
any changes to this measure to the measure developer/steward so that
those changes would go through the consensus development process.
Comment: Several commenters sought clarification on aspects of the
sepsis measure, such as:
Clarification of the denominator for identification of
septic shock patients. The commenter asked that we clarify if the
measure has specific ICD-9-CM diagnosis codes that would limit the
review. If those are present, the commenter did not object to this
measure. However, if they are not present, the commenter strongly
objected to this measure based upon the significant burden of work that
it imposes.
Clarification on whether the measure will be collected as
aggregate data (Web-based) or if we will require the submission of
patient-level data.
Clarification as to if the measure specifications will be
provided in the standard manual format and when those specifications
will be released. At this time, the commenter noted that there is no
algorithm, data elements, initial patient population or sampling
guidelines available to be able to begin programming this measure for
collection. As this is a very complicated measure, the commenter noted
that to

[[Page 50241]]

collect this measure as a chart-abstracted measure will be a burden to
the hospitals.
Clarification and rationale as to why we wanted to collect
this as a chart-abstracted measure and not as an electronic clinical
quality measure. A commenter suggested that the Severe Sepsis and
Septic Shock measure be introduced as an electronic clinical quality
measure rather than as a chart-abstracted measure. The inclusion of
this measure should be timed to occur when electronic measure
specification is available to support its inclusion. Another commenter
requested clarification and rationale as to why we want to collect this
as a chart-abstracted measure and not as an electronic clinical quality
measure.
Response: The denominator is the number of patients presenting with
severe sepsis or septic shock. These types of patients have specific
ICD-9-CM codes and the codes will be provided with the measure
specifications. The measure is a composite patient safety measure,
which will require submission of patient-level data.
The electronic specifications of the measure are not ready for
implementation. We will consider adopting the electronic clinical
quality measure version when it becomes fully electronically-specified.
Comment: A commenter requested that, pending approval of the Sepsis
and Septic Shock: Management Bundle Measure (NQF 0500), CMS
provide the measure specifications six months in advance of the
abstraction period to provide hospitals with ample time to review and
evaluate any necessary process changes before the data collection
period begins. Another commenter requested clarification as to if the
measure specifications will be provided in the standard manual format
and when those specifications will be released. At this time, the
commenter notes that there is no algorithm, data elements, initial
patient population or sampling guidelines available to be able to begin
programming this measure for collection. As this is a very complicated
measure, the commenter notes that to collect this measure as a chart-
abstracted measure will be a burden to the hospitals.
Response: The measure specifications will be released in the
standard format, in the Specifications Manual, which will contain the
data elements and algorithm. Typically, our specifications manuals are
posted on QualityNet in January for July-December discharges and July
for January-June discharges. We also provide addendums each year after
the finalization of the IPPS/LTCH PPS final rule. The release date of
this addendum is to be determined.
Comment: One commenter stated that the quality improvement
opportunities are when missed diagnosis occurs. The commenter asked if
CMS will include possible diagnosis from an electronic health record
problem list as a data source.
Further, the commenter stated that the first three elements for
severe sepsis have best-practice times of three hours from
presentation. The commenter asked if that is three hours from arrival
to the facility, upon transfer between units, from presentation of
symptoms, or all of the above. The commenter advised that three hours
could also be very difficult to meet depending on emergency department
volumes at any given time.
Response: We note that this is a chart-abstracted measure and
hospitals can collect data from all available sources of medical
records including EHRs.
Regarding the best-practice times for the measure, we refer the
commenter to the Inclusion and Exclusion Criteria described above for a
description of the steps to be completed within 3 hours of the
patient's presentation. According to the measure steward, Henry Ford
Hospital, the measure's intent is to use three hours following
presentation/onset from one endpoint to another, be it facility
transfer/arrival or unit transfer/arrival.
After consideration of the public comments we received, we are
finalizing the Severe Sepsis and Septic Shock: Management Bundle
Measure (NQF 0500) as proposed. We will closely monitor this
measure as new clinical evidence becomes available, and will update the
public via future rulemaking and/or operational guidance as necessary.
f. Electronic Health Record-Based Voluntary Measures
(1) Overview of New Electronic Health Record-Based Voluntary Measures
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28238 through
28239) we proposed four new voluntary electronic health record-based
measures to be submitted as electronically specified measures: (1)
Hearing Screening Prior to Hospital Discharge (NQF 1354); (2)
PC-05 Exclusive Breast Milk Feeding and the subset measure PC-05a
Exclusive Breast Milk Feeding Considering Mother's Choice (collectively
referred to as NQF 0480); (3) Home Management Plan of Care
(HMPC) Document Given to Patient/Caregiver; (4) and Healthy Term
Newborn (NQF 0716). The four proposed electronic health
record-based measures were included on a publicly available document
entitled ``List of Measures Under Consideration for December 1, 2012''
in compliance with section 1890A(a)(2) of the Act, and they were
reviewed by the MAP in its MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under Consideration by HHS. The final MAP
report is available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72746. We considered the input and
recommendations provided by the MAP in selecting measures to propose
for the Hospital IQR Program.
The specifications for the electronic clinical quality measures for
eligible hospitals are found at: https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html.
Many commenters raised similar concerns applicable across the
proposed electronic clinical quality measures; we summarize and respond
to these general comments first below before discussing the individual
electronic clinical quality measures.
Comment: Many commenters opposed one or more of these voluntary
electronic clinical quality measures for the following reasons:
A significant portion of the measures' populations are not
covered by Medicare.
The proposed measures would not lead to improved hospital
quality or offer insight on how to improve electronic clinical quality
measures.
CMS did not propose to allow hospitals to submit chart-
abstracted data on these measures in addition to the electronic
clinical quality measures.
Response: We are concerned with improving the quality of care
provided to all patients, not just Medicare patients. All of our non-
claims-based measures include all-payer patients, meaning they include
non-Medicare patients as well as Medicare beneficiaries.
We disagree that these measures would not lead to improved hospital
quality of care. The measures address high-impact conditions not
adequately addressed in the program measure set. We also disagree that
these measures will not improve electronic clinical quality measures.
Reporting clinical quality measures in their electronic form is a
different mode of data collection that, as with any measure, will
require refinement over time. We believe that implementing and using
will drive quality improvement through measuring quality through EHR's,
and

[[Page 50242]]

provide nationally representative information to inform future
electronic clinical quality measure refinements.
Finally, we believe these measures will give hospitals useful
information that can be used to improve the quality of care for those
patients in the measure population regardless of the mode of collection
and submission. We are in the process of moving away from chart-
abstracted measures. Therefore, in part to minimize hospitals data
collection burden and when electronic specifications are available, we
intend to adopt those versions. We proposed to adopt these measures as
voluntary electronic clinical quality measures to align with the
Medicare EHR Incentive Program to provide hospitals' flexibility in
reporting. We note that the proposed measures are voluntary and a
hospital may choose to not report one or more of the proposed measures.
Comment: One commenter was concerned that the complexity of the
data currently in chart abstraction for these measures will make it
difficult to ensure that this information will accurately be translated
when submitting these measures electronically.
Response: These measures are already electronically-specified and
as such, no translation is required. As previously stated in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50817 through 50818), we do not
believe that the electronic clinical quality measures are substantively
different from their chart-abstracted form.
Comment: Commenters recommended aligning CMS and TJC requirements
for these measures in an effort to reduce the amount of resources that
are spent when requirements are different or the timing of changes in
requirements creates additional challenges.
Response: We intend to continue working with TJC and other
stakeholders to reduce hospitals' quality reporting burden.
(2) Voluntary Electronically Specified Measure: Hearing Screening Prior
to Hospital Discharge (NQF 1354)
The Hearing Screening Prior to Hospital Discharge (NQF
1354) measure assesses the proportion of all live births born
at a hospital that have been screened for hearing loss before hospital
discharge. The Joint Committee on Infant Hearing encourages early
screening and intervention in infants with hearing loss to maximize
linguistic competence and literacy development in children with hearing
loss or who are hard of hearing. Early intervention improves
developmental and social outcomes for children. The States and CDC have
collected this measure as a population-based measure for more than 10
years.
This measure is NQF-endorsed and was supported by the MAP in its
Pre-Rulemaking Report: 2013 Recommendations on Measures Under
Consideration by HHS, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted that
the measure addresses a high-impact condition not adequately addressed
in the program measure set.
The numerator is all live births during the measurement period born
at a facility and screened for hearing loss prior to discharge, or
screened but still not discharged, or not screened due to medical
reasons or a medical exclusion.
The denominator includes all live births during the measurement
period born at a facility and discharged without being screened, or
screened prior to discharge, or screened but still not discharged.
The measure excludes any patient deceased prior to discharge and
has not received hearing screening.
Comment: One commenter supported the hearing screening prior to
hospital discharge measure.
Response: We thank the commenter for their support.
Comment: One commenter opposed the Hearing Screening Prior to
Hospital Discharge measure, and expressed concern that it will
encourage physicians to obtain other preventative screenings during the
hospitalization that are unnecessary or unrelated to the cause of the
patient's admission.
Response: This measure relates to hearing screening for newborns
prior to discharge, not all patients. Newborns, as defined by this
measure, are not in the same category as other admitted patients as
they are born to an admitted patient. Early screening allows for early
intervention in infants with hearing loss. We do not believe newborn
preventive hearing screenings will encourage physicians to perform
unneeded preventive screenings.
After consideration of the public comments we received, we are
finalizing the adoption of the Hearing Screening Prior to Hospital
Discharge measure for voluntary electronic reporting as proposed.
(3) Voluntary Measure: PC-05 Exclusive Breast Milk Feeding and the
subset measure PC-05a Exclusive Breast Milk Feeding Considering
Mother's Choice (collectively referred to as NQF 0480)
Exclusive breast milk feeding for the first 6 months of neonatal
life has long been the expressed goal of World Health Organization
(WHO), HHS, American Academy of Pediatrics (AAP) and American College
of Obstetricians and Gynecologists (ACOG).
The PC-05 Exclusive Breast Milk Feeding measure and the subset
measure PC-05a Exclusive Breast Milk Feeding Considering Mother's
Choice (NQF 0480) is endorsed by the NQF and supported by the
MAP in its Pre-Rulemaking Report: 2013 Recommendations on Measures
Under Consideration by HHS, available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. The MAP noted that
the measure addresses a high-impact condition not adequately addressed
in the program measure set.
This measure assesses the number of newborns exclusively fed breast
milk during the newborn's entire hospitalization; and the subset
measure only includes those newborns whose mothers chose to exclusively
feed breast milk.
The numerator is the same for both the measure and subset measure--
newborns that were fed breast milk only since birth. However, the
denominators differ. For PC-05, the denominator is defined as single
term liveborn newborns discharged alive from the hospital with ICD-9-CM
Principal Diagnosis Code for single liveborn newborn. The denominator
for the subset measure, PC-05a, is defined as single term newborns
discharged alive from the hospital excluding those whose mothers chose
not to breast feed with ICD-9-CM Principal Diagnosis Code for single
liveborn newborn. The ICD-9-CM Principal Diagnosis Codes for single
liveborn newborns are found in Appendix A, Table 11.20.1: Single Live
Newborn in the Specifications Manual for Joint Commission National
Quality Measures available at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
Excluded populations:
Admitted to the Neonatal Intensive Care Unit (NICU) at
this hospital during the hospitalization.
ICD-9-CM Other Diagnosis Codes for galactosemia as defined
in Appendix A, Table 11.21 in the Specifications Manual for Joint
Commission National Quality Measures found at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
ICD-9-CM Principal Procedure Code or ICD-9-CM Other
Procedure Codes for parenteral infusion as defined in Appendix A, Table
11.22 in the Specifications Manual for Joint Commission National
Quality Measures found at: https://

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manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
Experienced death.
Length of Stay >120 days.
Enrolled in clinical trials.
Patients transferred to another hospital.
ICD-9-CM Other Diagnosis Codes for premature newborns as
defined in Appendix A, Table 11.23 in the Specifications Manual for
Joint Commission National Quality Measures found at: https://manual.jointcommission.org/releases/TJC2013A/AppendixATJC.html.
Documented Reason for Not Exclusively Feeding Breast Milk.
The maternal reasons for not exclusively breastfeeding are limited
to the following situations:
HIV infection;
Human t-lymphotrophic virus type I or II;
Substance abuse and/or alcohol abuse;
Active, untreated tuberculosis;
Taking certain medications, that is, prescribed cancer
chemotherapy, radioactive isotopes, antimetabolites, antiretroviral
medications and other medications where the risk of morbidity outweighs
the benefits of breast milk feeding;
Undergoing radiation therapy;
Active, untreated varicella;
Active herpes simplex virus with breast lesions; and
Admission to Intensive Care Unit (ICU) post-partum.
We invited public comments on this proposal.
Comment: One commenter strongly supported the adoption of PC-05:
Exclusive Breast Milk Feeding and the Subset Measure PC-05a Exclusive
Breast Milk Feeding Considering Mother's Choice (Collectively Referred
to as NQF 0480). Another commenter urged CMS to make the
exclusive breast milk feeding measure a mandatory measure no later than
FY 2017. The commenter believed that exclusive electronic reporting of
these measures could ultimately reduce the burden of collection and
increase the potential for timely feedback to all stakeholders on the
ever important area of maternity care. The commenter indicated that the
health benefits of breastfeeding for mothers and for babies are well
established and that the measure has the virtue of being included in
TJC's core Perinatal Care measure set (PC-05), which hospitals with
more than 1,100 births annually are now required to collect and report.
The commenter indicated that the use of standardized measures helps
avoid confusion among consumers and health professionals and reduces
duplication of related measure concepts and burden of collection.
Response: We thank the commenters for their support. We will take
into consideration their recommendations as we plan Hospital IQR
Program policies in the future.
Comment: One commenter stated that it is unclear whether
noncompliance with the breast feeding measure would be created if the
mother changed her mind at some point during the stay.
Response: For PC-05a only, if the mother's initial feeding plan was
to exclusively feed breast milk and she diverges from that plan to feed
formula later in the hospitalization, then the case will fail. A case
is only excluded from the denominator if formula feeding is the initial
stated feeding plan.
Comment: One commenter believed there should be exclusions for
newborns' medical conditions that require supplemental feedings. This
commenter did not support the measure because it is an electronic
clinical quality measure only. The commenter would support the measure
in its chart-abstracted form because it is NQF-endorsed and supported
by the MAP.
Response: We suggest that any recommendations for changes to the
measure be shared with the measure developer/steward, TJC. As is, the
measure is NQF-endorsed and includes the electronic specification. In
2012, The MAP declined to support the electronic clinical quality
measure because of an issue regarding patient choice. However, the
measure developer has addressed this issue following the 2012 MAP
recommendation. Patients that choose not to exclusively breast feed are
excluded from the denominator. In 2013, the MAP supported the measure
for adoption by the Hospital IQR Program, noting the measure addresses
an NQS priority not adequately addressed in the program measure set.
Comment: Several commenters recommended the integration of
technical assistance provided by TJC and the United States
Breastfeeding Committee (USBC) to assist with implementation of the
measure. The commenters pointed out that USBC has published an online
toolkit \112\ to help hospitals implement the measure and suggested
that we should inform hospitals of the availability of the toolkit.
---------------------------------------------------------------------------

\112\ https://www.usbreastfeeding.org/HealthCare/HospitalMaternityCenterPractices/ToolkitImplementingTJCCoreMeasure/tabid/184/Default.aspx).
---------------------------------------------------------------------------

Response: We thank the commenters for their suggestions and will
consider them in the future.
After consideration of the public comments we received, we are
finalizing are finalizing the PC-05 Exclusive Breast Milk Feeding and
the subset measure PC-05a Exclusive Breast Milk Feeding Considering
Mother's Choice (collectively referred to as NQF 0480) measure
as a voluntary electronic clinical quality measure as proposed.
(4) Voluntary Measure CAC-3: Home Management Plan of Care (HMPC)
Document Given to Patient/Caregiver
Asthma is the most common chronic disease in children and a major
cause of morbidity and health care costs nationally. For children,
asthma is one of the most frequent reasons for admission to hospitals.
There were approximately 157,000 admissions for childhood asthma in the
United States in 2009. Under-treatment and/or inappropriate treatment
of asthma are recognized as major contributors to asthma morbidity and
mortality. Guidelines developed by the National Asthma Education and
Prevention Program (NAEPP) of the National Heart, Lung and Blood
Institute (NHLBI), as well as by the American Academy of Pediatrics
(AAP) for the diagnosis and management of asthma in children, recommend
establishing a plan for maintaining control of asthma and for
establishing plans for managing exacerbations.
The CAC-3: Home Management Plan of Care (HMPC) Document Given to
Patient/Caregiver measure is no longer endorsed by the NQF and was not
supported by the MAP in its Pre-Rulemaking Report: 2013 Recommendations
on Measures Under Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738, because the measure no
longer meets the NQF endorsement criteria. However, based on the
prevalence of asthma among children, as well as the risks associated
with under-treatment or over-treatment described above, we believe the
measure is appropriate for voluntary collection. Because asthma is a
serious, and potentially life-threatening disease, we believe that it
is important to allow hospitals to voluntarily report this data, which
may help inform our policy.
This measure assesses the proportion of pediatric asthma patients
(aged 2-17 years) discharged from an inpatient hospital stay with a
HMPC document in place. The numerator is the number of pediatric asthma
inpatients with documentation that they or their caregivers were given
a written HMPC document that addresses: (1)

[[Page 50244]]

Arrangements for follow-up care, (2) environmental control and control
of other triggers, (3) method and timing of rescue actions, (4) use of
controllers, and (5) use of relievers.
The denominator is the number of pediatric asthma inpatients (age 2
years through 17 years) discharged with a principal diagnosis of
asthma.
The measure excludes: (1) Patients with an age less than 2 years or
18 years or greater; (2) patients who have a length of stay greater
than 120 days; and (3) patients enrolled in clinical trials.
We invited public comments on this proposal.
Comment: A commenter supported the CAC-3 HPMC measure and noted
that this plan of care supports patients' successful transition from
the hospital to home.
Response: We thank the commenter for their support.
Comment: Some commenters opposed the measure's adoption as a
voluntary electronic clinical quality measure because the NQF has
removed its endorsement and the MAP has not recommended this measure.
Another commenter requested that CMS provide additional information
beyond what was stated in the proposed rule regarding our rationale for
inclusion of the CAC-3 Home Management Plan of Care Document Given to
Patient/Caregiver. The commenter noted that this measure's loss of NQF
endorsement is cause for concern, but more importantly, the commenter
did not feel this documentation measure appropriately contributes to
evaluating the state of perinatal care in the U.S.
Response: This is a pediatric measure addressing children aged 2-
17, not a perinatal care measure. Since it is a pediatric measure, CAC-
3 fills a gap in the Hospital IQR Program measure set. We are moving
away from chart-abstracted measures and when electronic specifications
are available, we intend to adopt the electronic clinical quality
measure version of a new measure. We acknowledge that the MAP did not
support the adoption of this measure because the NQF withdrew their
endorsement. According to the NQF report, the reason for this was
because the measure did not pass the criteria for the category
``Importance to Measure and Report.'' \113\ NQF stated that the
evidence is not as strong for care plan as for use of ICS. The
Committee noted the recent publication in JAMA by Morse in October 5,
2011 that found ``Among children admitted to pediatric hospitals for
asthma, there was high hospital-level compliance with CAC-1 and CAC-2
quality measures and moderate compliance with the CAC-3 measure but no
association between CAC-3 compliance and subsequent ED visits and
asthma-related readmissions'' (https://jama.ama-assn.org/content/306/13/1454.abstract). The NQF also cited concerns over the lack of
standardization of a quality care plan, how language is constructed,
and health literacy issues. Despite these findings, however, the NQF
still agreed that ``patient education is clearly an essential component
in successful asthma management.'' Our purpose for adopting this
voluntary electronic clinical quality measure is to align with the
Medicare EHR Incentive Program and to provide hospitals with
flexibility in their quality reporting. We reiterate that the proposed
measure is voluntary and a hospital may choose to not report this
measure.
---------------------------------------------------------------------------

\113\ https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=73041.
---------------------------------------------------------------------------

Furthermore, we proposed to include this non-NQF endorsed measure
under the Hospital IQR Program exception authority as discussed in
section IX.A.7. of the preamble of this final rule.
After consideration of the public comments we received, we are
finalizing the Home Management Plan of Care (HMPC) Document Given to
Patient/Caregiver measure as a voluntary electronic clinical quality
measure as proposed.
(5) Voluntary Measure: Healthy Term Newborn (NQF 0716)
This measure assesses the optimal outcome of pregnancy and
childbirth, specifically a healthy term newborn. It evaluates the
impact of any changes in the management or intervention on the positive
outcome for the newborn.
The measure is NQF-endorsed. The MAP recommended removal of this
measure in its Pre-Rulemaking Report: 2013 Recommendations on Measures
under Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738, because the
measure required modification or further development. However, the MAP
strongly supported the measure concept for inclusion once technical
issues were resolved. Given its endorsement by NQF, as well as the
MAP's strong support for the measure concept, we believe the measure is
appropriate for voluntary reporting.
The result of the measure calculation is the percentage of term
singleton live births (excluding those with diagnoses originating in
the fetal period) that do not have significant complications during
birth or the nursery care.\114\
---------------------------------------------------------------------------

\114\ National Quality Forum. National Voluntary Consensus
Standards for Patient Outcomes 2009. Available at: https://
www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=67546.
---------------------------------------------------------------------------

The numerator of this measure is the absence of conditions or
procedures reflecting morbidity that happened during birth and nursery
care to an otherwise normal infant.
The denominator is composed of singleton, term (>=37 weeks),
inborn, live births in their birth admission. The denominator further
has eliminated fetal conditions likely to be present before labor.
Maternal and obstetrical conditions (for example, hypertension, prior
cesarean, malpresentation) are not excluded unless there is evidence of
fetal effect prior to labor (for example, Intrauterine Growth
Restriction (IUGR)/Small for Gestational Age (SGA)).
This measure excludes: (1) multiple gestations; (2) preterm,
congenital anomalies; and, (3) fetuses affected by selected maternal
conditions.
We invited public comments on this proposal.
Comment: Some commenters supported the adoption of this measure.
One commenter noted the measure has recently been refined and renamed
as ``Unexpected Newborn Complications'' and expressed the hope that CMS
will adopt the updated version.
Further, one commenter recommended that CMS make the measure
mandatory no later than FY 2017. The commenter believed that the
exclusive electronic reporting of this measure could ultimately reduce
the burden of collection and increase the potential for timely feedback
to all stakeholders on the ever important area of maternity care.
Response: We will monitor the progress of the refined measure and
consider adopting it after the measure completes the NQF-endorsement
process. We will take into consideration the commenters'
recommendations as we plan Hospital IQR Program policies in the future.
After consideration of the public comments we received, we are
finalizing the Healthy Term Newborn (NQF 0716) measure as a
voluntary electronic clinical quality measure as proposed.
g. Readoption of Measures As Voluntarily Reported Electronic Clinical
Quality Measures
In order to align with the Medicare EHR Incentive Program for
eligible hospitals (EHs) and critical access hospitals (CAHs), in the
FY 2015 IPPS/

[[Page 50245]]

LTCH PPS proposed rule (79 FR 28239 through 28242) we proposed to re-
adopt two measures previously removed from the Hospital IQR Program;
(a) AMI-2 Aspirin Prescribed at Discharge for AMI (acute myocardial
infarction) (NQF 0142) (electronic clinical quality measure);
and (b) AMI-10 Statin Prescribed at Discharge (NQF 0639)
(electronic clinical quality measure). In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28239) we proposed to add these measures to the
list of voluntarily reported electronic clinical quality measures as
described in section IX.A.7.f. of the preamble of this final rule. We
believe we should continue aligning the Hospital IQR Program and the
Medicare EHR Incentive Program in order to minimize reporting burden
and continue the transition to reporting of electronic clinical quality
measures, and we believe voluntary adoption of these measures will
further that aim. Further, we believe that allowing hospitals the
option to electronically report topped-out measures will provide
hospitals with an opportunity to test the accuracy of their electronic
health record reporting systems.
(1) Readoption of AMI-2 Aspirin Prescribed at Discharge (NQF
0142)
The AMI-2 Aspirin Prescribed at Discharge (NQF 0142)
assesses the percentage of acute myocardial infarction (AMI) patients
who are prescribed aspirin at hospital discharge.
The measure is NQF endorsed, but has been placed in reserve status,
as the performance on this measure is ``topped-out.'' The MAP
recommended the measure should be suspended and phased out in its Pre-
Rulemaking Report: 2013 Recommendations on Measures under Consideration
by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738. However, as stated above,
we intend to continue aligning the Hospital IQR Program and Medicare
EHR Incentive Program, and we believe collecting this measure on a
voluntary basis enables us to continue collecting quality data on this
topic while working to minimize reporting burden on participating
hospitals. Further, allowing hospitals the option to electronically
report topped-out measures will provide hospitals with an opportunity
to test the accuracy of their electronic health record reporting
systems.
The numerator includes AMI patients in the denominator who are
prescribed aspirin at hospital discharge. The denominator includes
patients with the following ICD-9-CM principal diagnosis codes of AMI:
410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31, 410.40,
410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80, 410.81,
410.90, and 410.91.
The following patients are excluded from this measure:
Patients less than18 years of age;
Patients who have a length of stay greater than 120 days;
Patients enrolled in clinical trials;
Patients who were discharged to another hospital;
Patients who expired;
Patients who left the hospital against medical advice;
Patients who were discharged to home for hospice care;
Patients who were discharged to a health care facility for
hospice care;
Patients with comfort measures only documented; and
Patients with a documented reason for no aspirin at
discharge.
(2) Readoption of AMI-10 AMI-Statin Prescribed at Discharge (NQF
0639)
AMI-10 AMI-Statin Prescribed at Discharge (NQF 0639)
assesses the percent of acute myocardial infarction (AMI) patients who
are prescribed a statin at hospital discharge.
The measure is NQF endorsed. The MAP recommended phased removal in
its Pre-Rulemaking Report: 2013 Recommendations on Measures under
Consideration by HHS available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738 because the
performance on this measure is likely ``topped-out.'' However, as
stated above, we intend to continue aligning the Hospital IQR Program
and Medicare EHR Incentive Program, and we believe collecting this
measure on a voluntary basis enables us to continue collecting quality
data on this topic while working to minimize reporting burden on
participating hospitals. Further, allowing hospitals to electronically
report topped-out measures on a voluntary basis will provide hospitals
with an opportunity to test the accuracy of their electronic health
record reporting systems.
The numerator includes AMI patients in the denominator who are
prescribed a statin medication at hospital discharge. The denominator
includes patients with the following ICD-9-CM principal diagnosis codes
of AMI: 410.00, 410.01, 410.10, 410.11, 410.20, 410.21, 410.30, 410.31,
410.40, 410.41, 410.50, 410.51, 410.60, 410.61, 410.70, 410.71, 410.80,
410.81, 410.90, and 410.91.
The following patients are excluded from this measure:
Patients less than 18 years of age;
Patients who have a length of stay greater than 120 days;
Patients with comfort measures only documented;
Patients enrolled in clinical trials;
Patients who were discharged to another hospital;
Patients who left the hospital against medical advice;
Patients who expired;
Patients who were discharged to their home for hospice
care;
Patients who were discharged to a health care facility for
hospice care;
Patients with low-density lipoprotein less than 100 mg/dL
within the first 24 hours after hospital arrival or 30 days prior to
hospital arrival and not discharged on a statin; and
Patients with a reason for not prescribing statin
medication at discharge.
We invited public comments on our proposal to readopt these two
measures as electronic clinical quality measures.
Comment: Some commenters supported the inclusion of voluntary
reporting for certain electronic clinical quality measures for the
Hospital IQR Program, and noted that voluntary reporting allows
hospitals to be better prepared for submitting new quality measures
from EHRs and to correct any operational issues that arise. Several
commenters supported adopting AMI-2 and AMI-10 as electronic clinical
quality measures, because aligning the Hospital IQR Program with the
Medicare EHR Incentive Program could reduce reporting burdens. The
commenter hoped that CMS will continue to expand efforts to allow for
electronic reporting to include registries, which are commonly used for
data collection and reporting, in addition to EHRs.
Response: We thank these commenters for their support. We would
like to clarify that at this time we do not allow registry reporting
for these measures.
Comment: One commenter did not support CMS' proposal to readopt two
topped-out measures for purposes of electronic reporting, arguing that
topped-out measures, by definition, are removed because they are no
longer an accurate measure of hospital performance. The commenter was
concerned that these measures would not advance hospital quality or
improve electronic reporting.
Other commenters opposed AMI-2 and AMI-10 as electronic clinical
quality measures because they were topped-out and retired as chart-
abstracted measures and they believed retaining them would not advance
hospitals' understanding of how to

[[Page 50246]]

submit electronic clinical quality measures or improve the quality of
hospital care.
Response: As we explained in section IX.A.2.g.(2) of the preamble
of this final rule in response to a similar comment, even though these
measures are topped-out, we would still like to retain the
electronically specified versions for the following reasons: (1) to
align the Hospital IQR Program and the Medicare EHR Incentive Program,
(2) to allow us to monitor the effectiveness of measure reporting by
EHR's, and (3) to familiarize hospitals with reporting electronically
specified measures. Topped-out status is also only one of many factors
which we consider before determining whether a measure should be
removed.
While these measures may be topped-out, they are still an accurate
measure of performance. Continuing to report on these measures is a way
to monitor for continued high performance. Electronic measure data will
help us evaluate variations in data capture modes (chart-abstracted
versus electronic clinical quality measures) in order to determine
whether and what adjustments are necessary for the two different modes
of collection. In addition, we believe that by allowing hospitals to
voluntarily report these measures via electronic submission, we will
provide hospitals needed flexibility in electronic clinical quality
measure reporting, as requested by hospitals in their comments to the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through 50814). As stated
in the proposed rule (79 FR 208243), we intend to propose to require
electronic clinical quality measure reporting in future rulemaking. We
are providing this voluntary option to provide hospitals time to
prepare for required electronic clinical quality measure reporting.
After consideration of the public comments we received, we are
finalizing the readoption of both AMI-2: Aspirin Prescribed at
Discharge (NQF 0142) and AMI-10: Statin Prescribed at
Discharge (NQF 0639) as voluntary electronic clinical quality
measures as proposed.
In summary, for FY 2017 payment determination and subsequent years,
we are finalizing: (1) the adoption of 11 total measures--9 new
measures (4 of which are voluntary electronic clinical quality
measures) and 2 previously removed measures re-adopted as voluntary
electronic clinical quality measures, and (2) the removal of 19
measures (4 of which were previously suspended), ten of which are being
retained as voluntary electronic clinical quality measures. We are not
finalizing the removal of one of the required chart-abstracted measures
(SCIP-Inf-4). This gives a total of 63 measures (47 required and 16
voluntary electronic clinical quality measures) in the Hospital IQR
Program measure set.
Set out below is a table showing both the previously adopted and
the newly finalized quality measures for the FY 2017 payment
determination and subsequent years. Please note that this table does
not include suspended measures.

Previously Adopted Hospital IQR Program Measures and Measures Newly Finalized in This Final Rule for the FY 2017
Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Submission methods New for FY 2017
Short name Measure name NQF No. for FY 2017 payment payment
determination determination
----------------------------------------------------------------------------------------------------------------
AMI-7a........................ Fibrinolytic Therapy NQF 0164. quality measure or
Minutes of Hospital chart-abstracted
Arrival. REQUIRED.
SCIP-Inf-4.................... Cardiac Surgery NQF 0300. REQUIRED.
Controlled 6 A.M.
Postoperative Blood
Glucose.
Sepsis........................ Severe sepsis and NQF 0500. REQUIRED.
management bundle.
Imm-2......................... Influenza NQF 1659. REQUIRED.
Stroke-1...................... Venous NQF 0434. REQUIRED.
(VTE) prophylaxis.
ED-1.......................... Median time from ED NQF 0495. quality measure or
departure for chart-abstracted
admitted ED patients. REQUIRED.
ED-2.......................... Admit Decision Time NQF 0497. quality measure or
for Admitted chart-abstracted
Patients. REQUIRED.
Stroke-4...................... Thrombolytic therapy. NQF 0437. quality measure or
chart-abstracted
REQUIRED.
Stroke-6...................... Discharged on statin NQF 0439. quality measure or
chart-abstracted
REQUIRED.
Stroke-8...................... Stroke education..... N/A............. Electronic clinical ................
quality measure or
chart-abstracted
REQUIRED.
VTE-1......................... Venous NQF 0371. quality measure or
prophylaxis. chart-abstracted
REQUIRED.
VTE-2......................... Intensive care unit NQF 0372. quality measure or
thromboembolism chart-abstracted
prophylaxis. REQUIRED.
VTE-5......................... VTE discharge N/A............. Electronic clinical ................
instructions. quality measure or
chart-abstracted
REQUIRED.
VTE-6......................... Incidence of N/A............. Electronic clinical ................
potentially quality measure or
preventable VTE. chart-abstracted
REQUIRED.
PC-01......................... Elective delivery NQF 0469. quality measure or
aggregate, submitted chart-abstracted
via Web-based tool REQUIRED.
or electronic
clinical quality
measure).
CLABSI........................ National Healthcare NQF 0139.
(NHSN) Central line-
associated
Bloodstream
Infection (CLABSI)
Outcome Measure.

[[Page 50247]]

SSI........................... American College of NQF 0753.
for Disease Control
and Prevention (ACS-
CDC) Harmonized
Procedure Specific
Surgical Site
Infection (SSI)
Outcome Measure.
Colon procedures
Hysterectomy
procedures
CAUTI......................... National Healthcare NQF 0138.
(NHSN) Catheter-
associated Urinary
Tract Infection
(CAUTI) Outcome
Measure.
MRSA.......................... National Healthcare NQF 1716.
(NHSN) Facility-wide
Inpatient Hospital-
onset Methicillin-
resistant
Staphylococcus
aureus (MRSA)
Bacteremia Outcome
Measure.
CDI........................... National Healthcare NQF 1717.
(NHSN) Facility-wide
Inpatient Hospital-
onset Clostridium
difficile Infection
(CDI) Outcome
Measure.
HCP........................... Influenza vaccination NQF 0431.
healthcare personnel
(HCP).
MORT-30-AMI................... Hospital 30-day, all- NQF 0230.
standardized
mortality rate
(RSMR) following
acute myocardial
infarction (AMI)
hospitalization for
patients 18 and
older.
MORT-30-HF.................... Hospital 30-day, all- NQF 0229.
standardized
mortality rate
(RSMR) following
heart failure (HF)
hospitalization for
patients 18 and
older.
MORT-30-PN.................... Hospital 30-day, all- NQF 0468.
standardized
mortality rate
(RSMR) following
pneumonia
hospitalization.
COPD Mortality................ Hospital 30-Day, All- NQF 1893.
Standardized
Mortality Rate
(RSMR) following
Chronic Obstructive
Pulmonary Disease
(COPD)
Hospitalization.
STK Mortality................. Stroke 30-day N/A............. Claims REQUIRED...... ................
mortality rate.
CABG mortality................ Hospital 30-day, all- N/A............. Claims REQUIRED...... New for FY 2017.
cause, risk-
standardized
mortality rate
(RSMR) following
coronary artery
bypass graft (CABG)
surgery.
READM-30-AMI.................. Hospital 30-day all- NQF 0505.
standardized
readmission rate
(RSRR) following
acute myocardial
infarction (AMI)
hospitalization.
READM-30-HF................... Hospital 30-day, all- NQF 0330.
standardized
readmission rate
(RSRR) following
heart failure
hospitalization.
READM-30-PN................... Hospital 30-day, all- NQF 0506.
standardized
readmission rate
(RSRR) following
pneumonia
hospitalization.
READM-30-TH/TKA............... Hospital-level 30- NQF 1551.
standardized
readmission rate
(RSRR) following
elective primary
total hip
arthroplasty (THA)
and/or total knee
arthroplasty (TKA).
READM-30-HWR.................. Hospital-Wide All- NQF 1789.
Readmission (HWR).
COPD READMIT.................. Hospital 30-Day, All- NQF 1891.
Standardized
Readmission Rate
(RSRR) following
Chronic Obstructive
Pulmonary Disease
(COPD)
Hospitalization.

[[Page 50248]]

STK READMIT................... 30-day risk N/A............. Claims REQUIRED...... ................
standardized
readmission rate
(RSMR) following
Stroke
hospitalization.
CABG READMIT.................. Hospital 30-day, all- N/A............. Claims REQUIRED...... New for FY 2017.
cause, unplanned,
risk-standardized
readmission rate
(RSRR) following
coronary artery
bypass graft (CABG)
surgery.
PSI 4 (PSI/NSI)............... Death among surgical NQF 0351.
serious, treatable
complications.
PSI 90........................ Patient safety for NQF 0531.
(composite).
MSPB.......................... Payment-Standardized NQF 2158.
Per Beneficiary
(MSPB).
AMI payment................... AMI Payment per N/A............. Claims REQUIRED...... ................
Episode of Care.
HF Payment.................... Hospital-level, risk- N/A............. Claims REQUIRED...... New for FY 2017.
standardized 30-day
episode-of-care
payment measure for
heart failure.
PN payment.................... Hospital-level, risk- N/A............. Claims REQUIRED...... New for FY 2017.
standardized 30-day
episode-of-care
payment measure for
pneumonia.
Hip/knee complications........ Hospital-level risk- NQF 1550.
complication rate
(RSCR) following
elective primary
total hip
arthroplasty (THA)
and/or total knee
arthroplasty (TKA).
Registry Nursing Sensitive Participation in a N/A............. Web-based REQUIRED... ................
Care. Systematic Clinical
Database Registry
for Nursing
Sensitive Care.
Registry for General Surgery.. Participation in a N/A............. Web-based REQUIRED... ................
Systematic Clinical
Database Registry
for General Surgery.
Safe Surgery Checklist........ Safe Surgery N/A............. Web-based REQUIRED... ................
Checklist Use.
HCAHPS........................ HCAHPS + CTM-3....... NQF 0166. REQUIRED.
NQF 0228.
AMI-2......................... Aspirin Prescribed at NQF 0142. quality measure. electronic
clinical
quality
measure.
AMI-8a........................ Primary PCI Received NQF 0163. quality measure. electronic
Hospital Arrival. clinical
quality
measure.
AMI-10........................ Statin Prescribed at NQF 0639. quality measure. electronic
clinical
quality
measure.
SCIP-Inf-1a................... Prophylactic NQF 0527. quality measure. electronic
Within One Hour clinical
Prior to Surgical quality
Incision. measure.
SCIP-Inf-2a................... Prophylactic NQF 0528. quality measure. electronic
for Surgical clinical
Patients. quality
measure.
SCIP-Inf-9.................... Urinary catheter NQF 0453. quality measure. electronic
Postoperative Day 1 clinical
(POD 1) or quality
Postoperative Day 2 measure.
(POD 2) with day of
surgery being day
zero.
Stroke-2...................... Discharged on NQF 0435. quality measure. electronic
therapy. clinical
quality
measure.
Stroke-3...................... Anticoagulation NQF 0436. quality measure. electronic
fibrillation/flutter. clinical
quality
measure.
Stroke-5...................... Antithrombotic NQF 0438. quality measure. electronic
of hospital day two. clinical
quality
measure.
Stroke-10..................... Assessed for NQF 0441. quality measure. electronic
clinical
quality
measure.
VTE-3......................... Venous NQF 0373. quality measure. electronic
patients with clinical
anticoagulation quality
overlap therapy. measure.

[[Page 50249]]

VTE-4......................... Patients receiving un- N/A............. Electronic clinical Voluntary
fractionated Heparin quality measure. electronic
with doses/labs clinical
monitored by quality
protocol. measure.
PC-05......................... Exclusive Breast Milk NQF 0480. quality measure. electronic
subset measure PC- clinical
05a Exclusive Breast quality
Milk Feeding measure.
Considering
Mother[acute]s
Choice.
EHDI-1a....................... Hearing Screening NQF 1354. quality measure. electronic
Discharge. clinical
quality
measure.
CAC-3......................... Home Management Plan N/A............. Electronic clinical Voluntary
of Care (HMPC). quality measure. electronic
Document Given to clinical
Patient/Caregiver. quality
measure.
HTN........................... Healthy Term Newborn. NQF 0716. quality measure. electronic
clinical
quality
measure.
----------------------------------------------------------------------------------------------------------------

h. Electronic Clinical Quality Measures
(1) Data Submission Requirements for Quality Measures That May Be
Voluntarily Electronically Reported for the FY 2017 Payment
Determination
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data that is currently manually chart-
abstracted and submitted to CMS for the Hospital IQR Program. As we
noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we
recognize the need to align and harmonize measures across CMS quality
reporting programs to minimize the reporting burden imposed on
hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77
FR 54083 through 54087), we finalized a total of 29 clinical quality
measures from which hospitals must select at least 16 measures covering
three National Quality Strategy (NQS) domains to report beginning in FY
2014. We anticipate that, as health information technology evolves and
infrastructure is expanded, we will have the capacity to accept
electronic reporting of many of the chart-abstracted measures that are
currently part of the Hospital IQR Program.
In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the
exception of STK-1), VTE, ED, and PC measure sets, we allowed hospitals
to either: (1) electronically report at least one quarter of CY 2014
(Q1, Q2, or Q3) quality measure data for each measure in one or more of
those four measure sets; or (2) continue reporting all measures in
those four measure sets using chart-abstracted data for all four
quarters of CY 2014 (78 FR 50818).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28242 through
28243) for the FY 2017 payment determination, we proposed to expand
this policy, such that providers may select to voluntarily report any
16 of the 28 Hospital IQR Program electronic clinical quality measures
that align with the Medicare EHR Incentive Program as long as those 16
measures span three different NQS domains. The 28 measures are listed
in the table below. Only 28 of the 29 measures adopted in the Medicare
EHR Incentive Program are applicable for the Hospital IQR Program,
because the measure ED-3 Median time from ED arrival to ED departure
for discharged ED patients (NQF 0496) is an outpatient quality
measure. We expect eligible hospitals to select measures that best
apply to their patient mix.
For the FY 2017 payment determination, we also proposed to expand
the reporting requirement of electronic clinical quality measures to
require a full year's data collection and submission instead of a
minimum of one quarter. In addition, for the FY 2017 payment
determination, we proposed to require data submission within
approximately 60 days after the end of a calendar year quarter. We have
listed the proposed submission deadlines in the table below. We also
refer readers to section IX.D.2. of the preamble of this final rule for
a description of the electronic clinical quality measures data
reporting periods and proposed submission deadlines.

CY 2015/FY 2017 Electronic Clinical Quality Measures Data Reporting
Periods and Proposed Submission Deadlines
------------------------------------------------------------------------
Proposed
CY 2015 quarter Reporting period submission
(2015) deadlines
------------------------------------------------------------------------
1............................. January 1-March 31.... May 30, 2015.
2............................. April 1-June 30....... Aug 30, 2015.
3............................. July 1-September 30... Nov 30, 2015.
4............................. October 1-December 31. Feb 28, 2016.
------------------------------------------------------------------------

As an incentive for hospitals to voluntarily submit electronically-
specified clinical quality measures, we proposed that for the FY 2017
payment determination, hospitals successfully submitting electronic
clinical quality measures according to our procedures will not have to
validate those electronic clinical quality measures by

[[Page 50250]]

submitting chart-abstracted data to validate the accuracy of the
measure data submitted electronically.
By proposing these changes, we believe we would further align the
Hospital IQR Program and the Medicare EHR Incentive Program and promote
greater electronic clinical quality measure data reporting for
hospitals. In addition, we believe that these changes would ease
hospitals' administrative burden, as they will be able to report the
same clinical quality measures once to partially satisfy both the
Hospital IQR and Medicare EHR Incentive Programs' requirements.
We welcomed public comments on these proposals.
Commenters' opinions on these proposals focused on timing,
substantive and nonsubstantive quality measure updates, our
collaboration with hospitals and EHR vendors, certification
requirements, and general concerns about electronic clinical quality
measure reporting.
Comment: Some commenters were concerned that we were not allowing
hospitals and EHR vendors enough time to transition to the new data
submission deadlines. Some commenters supported the long-term goal of
transitioning to EHR-enabled measurement and the general progression
toward electronic clinical quality measures, noting that it will
improve communication and documentation while reducing hospital
resources now used for chart-abstracted measures. A commenter strongly
supported CMS using electronic clinical quality measures and strongly
objected to the implementation of chart-abstracted measures. The
commenter stated that the current methodology of manual chart
abstraction is resource intensive and inefficient for hospitals. By
focusing on electronic clinical quality measures, hospitals can focus
on performance improvement and target resources to implementing EHRs
and processes to improve patient care.
Response: We thank commenters for their support. We plan to move
away from chart-abstracted measures and move towards electronic
clinical quality measures, as appropriate.
This voluntary option also simplifies alignment with the Medicare
EHR Incentive Program and allows hospitals to partially satisfy
requirements in both programs using a common set of measures. Since
hospitals have a choice whether to submit voluntary electronic clinical
quality measure data or chart-abstracted data, we recommend hospitals
that are not yet prepared to submit electronically instead submit via
chart-abstraction. We encourage hospitals to submit test data when they
are ready.
We are actively working to reduce hospitals' reporting burden by
offering the option to submit electronic clinical quality measures.
We received a number of comments regarding the timing of this
proposal in relation to hospitals' readiness to submit electronic
clinical quality measures.
Comment: Some commenters stated that healthcare providers and
electronic health records systems are not yet ready to adopt electronic
clinical quality measures, expressing concern about vendor problems
related to meaningful use, including problems associated with
submitting data to CMS, and about the accuracy and feasibility of
electronically specified measures.
Other commenters suggested that CMS not specify a date for
mandatory electronic reporting until significant levels of CEHRT
adoption are achieved, and a validation process for electronic clinical
quality measures is operational and yields evidence of measure
reliability.
Response: We recently published a proposed rule (79 FR 29732
through 29738) proposing changes to the meaningful use stage timeline
and changes to the requirements for the reporting of clinical quality
measures for 2014. The comment period closed July 21, 2014. We hope the
commenter was able to share their concerns regarding vendor problems
related to meaningful use by responding to the proposed rule. We would
like to clarify that this rule provides flexibility to hospitals and
CAHs needing to update their EHR systems only for the most recent
version of the CQMs, which is not a criteria for 2014 CEHRT. No changes
to 2014 CEHRT criteria or timelines are being finalized in this rule.
As we have previously mentioned, we are finalizing voluntary electronic
clinical quality measure submission in order to give hospitals
flexibility. Hospitals that are not yet ready to submit electronically
can satisfy requirements for applicable measures as previously
finalized and finalized in this rule at section IX.A.2.g.(2) of the
preamble of this final rule, that is submit via chart-abstraction. We
encourage hospitals to work with vendors and encourage vendors to work
with the various EHR-related and electronic clinical quality measure
HHS working groups to become more informed about policies and
standards. As participants in these groups, the hospitals and vendors
can share their concerns with CMS, ONC, and other measure stakeholders
and help to improve processes. In addition, we suggest hospitals
participate in our pilot electronic validation test to get free
feedback on the accuracy of their data and have an opportunity to
provide direct input regarding concerns. We refer readers to section
IX.A.11.e. of the preamble of this final rule where this policy is
discussed.
Comment: A commenter opposed the creation of voluntary electronic
reported clinical quality measures.
Response: We respectfully disagree with the commenter that did not
support voluntary electronic clinical quality measure reporting. This
voluntary reporting provides hospitals the opportunity to test their
submissions to prepare before electronic clinical quality measure
reporting is required for this program.
Comment: Commenters urged CMS to begin a more robust dialogue with
hospitals, EHR vendors, and other stakeholders regarding submitting
electronic clinical quality measures so that there is a shared
understanding of the opportunities and challenges that lay ahead--both
from the hospital operational perspective as well as from our
perspective.
Response: We have begun our education and outreach efforts with
hospitals and vendors by holding educational webinars/sessions,
uploading a number of resources to QualityNet,\115\ and creating a
listserv for updates and announcements. Further, we have past recorded
sessions discussing electronic clinical quality measures issues on our
Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287738
52046. We also note that hospitals may submit test files or practice
submissions at any time and encourage hospitals and vendors to begin
submitting test files as soon as feasible.
---------------------------------------------------------------------------

\115\ https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287
73849716.
---------------------------------------------------------------------------

Comment: One commenter recommended that CMS consider that certain
measures currently improve quality of care for patients, but may not
immediately lend themselves to e-specification.
Response: We will take the comment into consideration for future
measures, and note that we have expanded our measures under
consideration process in order to find measures from a greater number
of sources.
Comment: Some commenters requested that CMS allow more time for
implementing certification requirements and adopting measure
specification

[[Page 50251]]

updates. A commenter specifically suggested that CMS allow 18 months
between the time of an updated specification adoption and the federal
fiscal year to which the specification updates should apply. Another
commenter recommended that CMS refrain from requiring certification of
the revised measures and provide flexibility on the date by which the
revisions must be fully implemented on provider sites. The commenter
expressed concern that the current time frame of just prior to the
October 1, 2014 start of the measure reporting year is inadequate to
accommodate the development, testing, certification of the software by
health IT vendors and subsequent delivery and implementation of
software for every customer site. This time constraint could lead
providers to continue to attest to their electronic clinical quality
measures in FY 2015, rather than submit their electronic clinical
quality measures as CMS would prefer.
One commenter noted that there is insufficient time for vendors and
certification test labs to obtain certification and subsequently
deliver the certified product in time for hospitals to submit
electronic clinical quality measures electronically in CY 2015. The
commenter therefore anticipated that hospitals will continue to attest
their clinical quality measure data in FY 2015. The commenter suggested
that CMS allow hospitals who elect to attest their clinical quality
measure for the Medicare EHR Incentive Program in CY 2015 to submit
data electronically for the Hospital IQR Program during CY 2015.
Response: We believe when discussing the ``revised measures,'' the
commenter is referring to the annual April updates to the electronic
clinical quality measures. For submission of CY 2015 data, we will only
accept data consistent with the April 2014 measure specifications.
Electronic clinical quality measure specifications are available in the
CMS eCQM Library at: https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. The October 1,
2014 date is the beginning of the reporting period for the Medicare EHR
Incentive Program only. However, we proposed, that in order to align
the two programs' electronic clinical quality measure reporting and
submission periods, both programs' reporting periods and submission
deadlines would begin with Q1 CY 2015 discharges (79 FR 28245 through
28246).
However, after consideration of these comments regarding timing and
hospitals' readiness, we are modifying our proposal so that hospitals
that wish to participate in the voluntary reporting need only submit
one CY 2015 quarter (Q1, Q2, or Q3) of electronic clinical quality
measure data with a submission deadline of November 30, 2015. We hope
that this modification will encourage more hospitals to submit
electronic clinical quality measures rather than attest. The commenter
is reminded that attesting is a Medicare EHR Incentive Program option
only and would not apply to Hospital IQR Program requirements. In
addition, if a hospital chooses not to voluntarily submit one quarter
of electronic clinical quality measure data for the Hospital IQR
Program, it must submit all four quarters of chart-abstracted data in
CY 2015.
We believe that by modifying our proposal and reducing the data
requirement to one quarter's worth of data and by adopting the November
30th submission deadline, hospitals will have adequate time to update
their EHR's ability to capture and report data.
In addition, measure certification falls under the ONC. ONC
published a proposed rule February 26, 2014 describing voluntary 2015
Edition Electronic Health Record (EHR) Certification Criteria;
Interoperability Updates and Regulatory Improvements (79 FR 10880
through 10946). The proposed rule offered a potential ``gap
certification'' solution which may help the commenter with their
concerns about the current timelines for development, testing,
certification of the software by health IT vendors. The final rule is
expected to be published in the summer of 2014. With respect to CEHRT
requirements, though 2014 CEHRT is required, eligible hospitals are not
required to ensure that their CEHRT products are recertified to the
most recent version of the electronic specifications for the clinical
quality measures.
A hospital may submit electronic clinical quality measures for the
Hospital IQR Program during CY 2015 even if they attest their aggregate
measure numerators and denominators through the Medicare EHR Incentive
Program. The hospital could submit as test data or production data.
Test data submissions are submissions that do not count as submissions;
they are practice submissions. Production data submissions are
considered final submissions meant to fulfill Program submission
requirements. With respect to CEHRT requirements, although 2014 CEHRT
is required, eligible hospitals are not required to ensure that their
CEHRT products are recertified to the most recent version of the
electronic specifications for the clinical quality measures.
Comment: One commenter noted that the proposed subregulatory
process for annual updates is to incorporate ``nonsubstantive'' changes
to measure specifications. However, the commenter believed that the
annual updates include substantive changes. The commenter looks forward
to working with CMS to further refine the definition of nonsubstantive
changes and recommended that the annual updates be limited to changes
that do not have a significant impact on clinicians, software, or
recertification.
Response: We interpret the commenter's use of the term ``annual
updates'' to be in reference to our publication of the measure
specifications in the electronic clinical quality measure Library at:
https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. We will work with stakeholders
to help define substantive and nonsubstantive changes related
specifically to electronic measure specifications, and will take
suggestions regarding any recommended changes into consideration for
future rulemaking.
Comment: A commenter explained that there is confusion as to
whether vendors need to certify to the updated measures and whether
hospitals must start their measure reporting year with the annual
updates and request clear and consistent guidance. The commenter also
noted that the Cypress tool is not yet available for testing of the new
measures, and no information has been provided as to when Cypress may
be available.
Response: Although 2014 CEHRT is required, eligible hospitals are
not required to ensure that their CEHRT products are recertified to the
most recent version of the electronic specifications for the clinical
quality measures. Hospitals that choose to voluntarily submit
electronic clinical quality measures in Q1, Q2, or Q3 of CY 2015 for FY
2017 payment determination must use the 2014 version of the measure
specifications.
Cypress version 2.5 is expected to be available with the eligible
hospital and eligible provider measure packages in September 2014.
Cypress version 2.51 is expected to align with the CMS Implementation
Guide released for publication in July 2014.
Comment: A commenter expressed concerns about electronic clinical
quality measure specifications in regards to the ``Medication, Order
not done: Medical Reason'' related to the

[[Page 50252]]

STK, VTE, and future AMI, PN, and SCIP measures. The commenter pointed
out that the Hospital IQR Program requires providers to document a
medical reason for not prescribing a medication/device and the MU/
electronic clinical quality measure requires providers to document
``what medication of choice would you have prescribed if not for a
medical reason.'' The commenter disagreed with the requirement to
answer these questions and suggested that providers may view the
questions as inefficient ``administrative only questions'' and may
avoid them entirely. The commenter also suggested that the questions
may force the institution to intentionally fail a measure due to lack
of a contraindication and that it is improper to use data related to
medication orders for public reporting of quality of care and financial
incentives because not all medication orders that count for the
Hospital IQR Program also count for electronic clinical quality
measures since they are not all included in the qualifying RxNorm
document.
Response: We acknowledge that this is a known issue that is being
addressed through HL7 and expected to be implemented in FY 2015. ONC
has consolidated several JIRA comments into one issue. The commenter
can follow the progress of the issue at https://jira.oncprojectracking.org/browse/CQM-970. We note that to date there
are no consequences for measure failure and encourage the commenter to
review our zero denominator clarification in section IX.D.5. of the
preamble of this final rule.
Comment: A commenter expressed concern with the increasing number
of measures for electronic clinical quality measure submission. The
commenter advised that since electronic health records allow
documentation to be placed in multiple places, chart review is
required. The commenter stated that current medical record technology
has not matured to restrict documentation input into only the field or
fields designated for electronic data retrieval. Potential
technological solutions contribute to alert fatigue. Further, the
commenter believed that because there is not a common electronic
medical record system for all staff to use regardless of the care
setting, multiple inefficient documentation systems are created and
customized to suit the needs of the individual hospital and facility.
The commenter stated that resolving these problems will require a
significant financial investment while reimbursement for services
declines.
Response: We recognize that many hospitals struggle with proper
data capture in the EHR. We encourage these hospitals to work with
their vendors to reduce burden and human intervention through chart
abstraction. The electronically-specified clinical quality measures
remain voluntary at this time to provide an opportunity for hospitals
to improve upon accurate data capture.
Comment: A commenter specifically disagrees with CMS' statement
that electronic clinical quality measures are more easily reported than
chart-abstracted measures.
Response: We disagree that electronic clinical quality measures are
not more easily reported than chart-abstracted measures; once capture
is possible within EHR, the time and resources compared to manual
abstraction should be significantly less. As data becomes more
standardized, it is expected that reporting burden will decrease over
time. For example, electronic clinical quality measure collection does
not require hospital staff time to find and pull paper medical records,
and manually review medical records to abstract data elements used in
measure calculation. We acknowledge there are costs, but also benefits
to moving to electronic data capture. EHR user training is a cost that
will ultimately result in consistency coming from a common
understanding and capture of common data definitions.
Comment: A commenter recommended that CMS develop and share a five-
year roadmap for the future regarding the transition of all clinical
quality measurement programs to electronic reporting so hospitals can
strategically plan for workflows that support electronic reporting. The
commenter further recommended that this guidance, as well as all
electronic quality reporting sub regulatory guidance and eMeasure
specifications should be located on a central Web site.
Response: We are working on a roadmap for both the Hospital IQR and
Hospital VBP Programs, as well as a consolidated location for
electronic clinical quality measure resources.
After consideration of the public comments we received, we are
modifying our proposal to finalize that hospitals that choose to
voluntarily report electronic measures should submit one quarter of
electronic clinical quality measure data from Q1, Q2, or Q3 of CY 2015
for FY 2017 payment determination. Hospitals that choose to voluntarily
submit electronic clinical quality measures must use the 2014 version
of the measure specifications and submit 16 measures covering three NQS
domains from the 28 available electronically specified measures.
However, hospitals may voluntarily submit more than one quarter of
data. We will not accept Q4 2015 data for CY 2015 as this would likely
delay EHR Incentive Program payments. Policies for CY 2016/FY 2018
payment determination electronic clinical quality measure reporting and
submission will be made in future rulemaking.
Because we are modifying our proposal to now only require 1
quarter's worth of data from hospitals that wish to voluntarily submit
electronically specified measures. We are subsequently also modifying
the submission deadline to November 30, 2015 regardless of which
quarter of data is submitted. We also refer readers to section X.2.h.1
for further discussion of submission of electronically specified
measures.
The chart below provides a summary of the finalized reporting
periods and electronic submission deadlines for the FY 2017 Hospital
IQR Program:

FY 2017 Hospital IQR Program Electronic Reporting Periods and Submission
Deadlines for Eligible Hospitals
------------------------------------------------------------------------
Discharge reporting Submission
CY 2015 Quarter periods deadlines
------------------------------------------------------------------------
Q1............................ January 1, 2015-March November 30,
31, 2015. 2015.
Q2............................ April 1, 2015-June 30, November 30,
2015. 2015.
Q3............................ July 1, 2015-September November 30,
30, 2015. 2015.
Q4............................ October 1, 2015- Not Applicable.
December 31, 2015.
------------------------------------------------------------------------

[[Page 50253]]

(2) Public Reporting of Electronic Clinical Quality Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50813 through
50818), we adopted a policy under which we would only publicly report
electronic clinical quality measure data under the Hospital IQR Program
if we determined that the data are accurate enough to be reported.
However, we noted that the majority of public commenters had opposed
our proposal to withhold the electronically reported data from
publication on Hospital Compare, and instead urged us to publicly
display it (78 FR 50815). Therefore, for electronic clinical quality
measure data submitted for the FY 2016 payment determination, we will
publically report the data as previously finalized. However, for the FY
2017 payment determination, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28243) we proposed to provide hospitals that voluntarily report
one year of electronic clinical quality measure data (as proposed
above) an option to have their data reported on Hospital Compare with a
preview period prior to public reporting. We also proposed to add a
footnote next to that publically reported data indicating that it is a
result of electronically-specified measures.
We welcomed public comments on these proposals.
Comment: Commenters suggested that when reporting electronic
clinical quality measure data, hospitals should be provided a preview
period for the FY 2016 payment determination. One commenter believed
that public display of electronic measures for the FY 2016 payment
determination should not occur because accuracy of data has not been
validated, there would be inconsistencies in reporting time periods and
that display of the data may not provide accurate or valuable data to
the public for decision making.
Commenters noted that display of the data may not provide accurate
or valuable data to the public for decision making, and specifically
stated that there are no validity and reliability studies demonstrating
the capture of equivalent data between chart-abstracted measures and
electronically captured measures and urging us to develop a data
validation strategy before publicly posting this information.
Commenters stated that measures submitted as electronic clinical
quality measures should not be publicly reported until validation of
electronic clinical quality measures demonstrates that they are
comparable to values reached through chart-abstraction. A commenter
expressed concern that opportunity for a preview period before posting
electronic clinical quality data on Hospital Compare will not offset
the risks associated with reporting clinical quality measures
electronically. One commenter asked that CMS wait until more research
is conducted and there is an understanding of the limitations and
opportunities of the electronic clinical quality measures. The
commenter also asked that CMS wait until the preponderance of hospitals
can do so and a data validation system for electronic measures is
established.
However, other commenters stated that not reporting electronic
clinical quality measures on Hospital Compare fails to provide the
public with reliable data and requested that CMS communicate the
criteria it will use to determine if the electronic clinical quality
measure data are accurate enough to be publicly displayed.
Response: Regarding public reporting for electronically reported
data submitted for the FY 2016 payment determination, we note that this
policy is not subject to change in this rulemaking as it was previously
finalized. However, consistent with our finalized policy, we will not
post data that we determine are not deemed to be accurate. We intend to
use the results of our validation pilot to assist in determining
criteria for identifying electronic clinical quality measure data
accuracy. These criteria will be proposed in future rulemaking.
With respect to inconsistencies in reporting periods, historically
we publicly reports data on Hospital Compare as it becomes available.
Therefore, it is not unusual for there to be inconsistencies in
reporting periods. The current data collection periods for each measure
are posted on Hospital Compare.
We appreciate the commenter's concerns about validation. As
finalized in section IX.A.11.e. of the preamble of this final rule, we
intend to conduct a validation strategy pilot test in FY 2015. We also
intend to develop mandatory requirements for validation in the FY 2016
IPPS/LTCH PPS proposed rule, which will make assessment of validity
possible prior to posting of data collected for the FY 2018 payment
determination.
However, based on public comments received opposing public
reporting for FY 2017, we are modifying our proposal to finalize that
we will only publish the names of hospitals who successfully submit CY
Q1, Q2, or Q3 electronic clinical quality measure data by November 30,
2015. We will not: (1) report actual data or performance rates for
measures submitted as electronic clinical quality measures on Hospital
Compare, (2) include a preview period, or (3) provide hospitals an
option to suppress their participation.
Comment: One commenter encouraged CMS to use a strategy similar to
the Star Ratings program with ``topped-out'' measures. The commenter
suggested we allow voluntary submission of ``topped-out'' measures
through all reporting mechanisms and publically report on Hospital
Compare as ``display measures.'' This would allow for continued
monitoring of performance and increase alignment with the Medicare
Advantage and Part D plans. This concept of display measures could be
used for introducing and testing new measures by first introducing the
new measures on the display page.
Response: We thank the commenter for the suggestion and will
consider the idea in the future.
After consideration of the public comments we received and as a
logical outgrowth of our existing public reporting policy, we are
finalizing our policy that we will only publicly report the names of
those hospitals who successfully submit CY 1, CY 2, or CY 3 electronic
clinical quality measure data by the November 30, 2015 submission
deadline. Hospitals will not have a preview period nor will we allow
hospitals to opt out of this public reporting. We will indicate these
hospitals with a symbol on Hospital Compare to recognize their advanced
ability to submit data electronically. We will not publicly report
actual data or performance rates of electronic clinical quality
measures at this time.
8. Possible New Quality Measures and Measure Topics for Future Years
a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018
Payment Determination
We anticipate that, as EHR technology changes and improves,
hospitals will electronically report all clinical process-of-care and
HAI measures that are currently part of the Hospital IQR Program or
that have been proposed for adoption into the Program. As stated above,
we intend for the future direction of electronic quality measure
reporting to reduce significantly administrative burden on hospitals
under the Hospital IQR Program. We will continue to work with measure
stewards and developers to develop new measure concepts, and conduct
pilot, reliability, and validity testing. We believe that this
voluntary reporting option will provide hospitals and us with the
ability to test systems in CY 2015 for future quality program

[[Page 50254]]

proposals that, if finalized, will make electronic reporting a
requirement instead of voluntary. We believe this will simplify measure
collection and submission for the Hospital IQR Program, and will reduce
the burden on hospitals to report chart-abstracted measures.
We intend to propose to require reporting of electronic clinical
quality measures for the Hospital IQR Program beginning for the CY 2016
reporting period or FY 2018 payment determination. We considered
proposing to require hospitals to electronically report some Hospital
IQR Program quality measures in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27695). After considering public comments, we made electronic
reporting voluntary in CY 2014 in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50813 through 50814). However, after two years, we believe that
hospitals are more prepared and should be required to report Hospital
IQR Program measures as electronic clinical quality measures beginning
in CY 2016. We intend to propose this policy in future rulemaking, but
requested comments on this intention here.
Comment: A commenter asked for clarification on the proposal to
electronically report all clinical process of care and HAI measures
beginning in CY 2016, which are currently part of the Hospital IQR
Program or which have been proposed for adoption for the FY 2018
payment determination and subsequent years. The commenter believed that
CMS is moving away from the critical work of the Infection
Preventionist and into a realm that is without professional judgment
for identifying an HAI.
Response: We clarify that we did not propose electronic reporting
of all clinical process of care and HAI measures in CY 2016. We do not
intend to take away the professional judgment of the Infection
Preventionist professionals.
Comment: One commenter was very concerned about the amount of
resources that would be needed to analyze, validate, and ensure
compliance with the electronically specified clinical quality measure
specifications as well as the actual submission process. The commenter
asked that CMS require the use of electronic submissions gradually
instead of for all Hospital IQR Program measures in CY 2016. The
commenter recommended a proposal that encourages voluntary submission
of one or two measures that are not ``topped-out'' for CY 2016 with
future gradual expansion of required electronic measures over a period
of several years. The commenter stated that this would allow hospitals
to become proficient in reporting measures electronically while
curtailing the administrative burden that hospitals experience when
implementing new electronic measures.
The commenter also urged CMS to allow hospitals to have flexibility
in how measures are transmitted until all measure developers confirm
that the measures can be e-specified within the timeframe. A commenter
noted that any decisions to add electronic clinical quality measures
should be dependent on the final decisions for Stage 2 and Stage 3 of
meaningful use, given the current difficulties providers and vendors
are experiencing with Stage 2 EHR implementation. In addition, the
commenter recommended that CMS consider that certain measures currently
improve quality of care for patients, but may not immediately lend
themselves to e-specification.
Response: We believe we are providing a gradual approach to
electronic clinical quality measure adoption and submission. This will
be the second year that the Hospital IQR Program has provided a
voluntary electronic reporting option. With respect to the commenter's
request that we allow flexibility in how measures are submitted, we
will strive to include a variety of measures in the Hospital IQR
Program, such as claims-based, chart-abstracted, electronically
specified, and structural aggregate measures. We recognize that many
hospitals struggle with proper data capture in the EHR and we encourage
these hospitals to work with their vendors to reduce burden associated
with human intervention through chart abstraction. The electronic
clinical quality measures remain voluntary at this time to provide an
opportunity to improve upon accurate data capture. We continue to work
with the Medicare EHR Incentive Program team to ensure measure
alignment moving forward.
We agree that not all measures are appropriate for electronic
specification.
Comment: A commenter stated that while ONC and others are working
to ensure common data standards, it is unwise to dismiss inclusion of a
measure that is currently not electronically specified, but which may
improve the quality of care for patients.
Response: We will not remove a measure merely because it lacks an
electronic specification. In the FY 2011 IPPS/LTCH PPS final rule (75
FR 50185), we outlined seven criteria for removing measures from the
Hospital IQR Program. In section IX.A.2.a. of the preamble of this
final rule, we are also finalizing updated criteria for determining
``topped-out'' status. Conversely, we will consider adopting a measure
that does not have electronic specifications if the measure meets a
critical need and measurement gap.
Comment: A commenter urged CMS to reconsider the proposal to begin
requiring electronic clinical quality measures in CY 2016. The
commenter stated that there is a lack of clear e-specifications and
certification requirements, and that mandatory reporting should only
begin when EHR systems are able to reliably generate this data.
Response: We will consider these suggestions as we develop policies
on electronic reporting. Please note that we did not propose to require
electronic clinical quality measures in CY 2016, but rather, we
signaled an intent. We thank the commenters for providing this
feedback, and will take it into account in the future.
b. Possible Future Electronic Clinical Quality Measures
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28244) we stated
that we intend to continue to support the following measure domains in
the Hospital IQR Program measure set: effective clinical care (for
example, the AMI, PN, STK, and VTE measures), communication and care
coordination (for example, the readmission measures), patient safety
(for example, the HAI measures), person and caregiver-centered
experience (for example, the HCAHPS measure), community/population
health (for example, the global immunization measure), and efficiency
and cost reduction (for example, the Medicare Spending per Beneficiary
measure). This approach will enhance better patient care while aligning
the Hospital IQR Program with our other established quality reporting
and pay-for-performance programs, such as the Hospital VBP Program.
Based on the above approach, we stated our intent to propose to
adopt the following electronic clinical quality measures with data
collection beginning with October 1, 2016 discharges (or, as described
further above, January 1, 2017, if the proposal to align reporting
under the Hospital IQR Program and Medicare EHR Incentive Program is
finalized) to coincide with Medicare EHR Incentive Program Stage 3
collection:

[[Page 50255]]

Hepatitis B Vaccine Coverage Among All Live Newborn Infants
Prior to Hospital or Birthing Facility Discharge (NQF 0475)
The Hepatitis B Vaccine Coverage Among All Live Newborn Infants
Prior to Hospital or Birthing Facility Discharge (NQF 0475)
measure is NQF-endorsed, supported by the MAP, and conditionally
supported by the MAP as an electronic clinical quality measure for the
EHR Incentive Program by the MAP in its 2014 Recommendations on
Measures for More Than 20 Federal Programs final report available at:
https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. However, the MAP recommends a review of the
electronic specifications of this measure through the NQF endorsement
process.
This measure requires each hospital/birthing facility to measure
its administration of a dose of hepatitis B vaccine to all infants born
in their hospital/birthing facility prior to discharge for a specific
time period (for example, one calendar year). Hospitals are required to
assess infants whose parents refused vaccination for exclusion from the
coverage estimate.
PC-02 Cesarean Section (NQF 0471)
The PC-02 Cesarean Section (NQF 0471) is NQF-endorsed and
supported by the MAP in its 2014 Recommendations on Measures for More
Than 20 Federal Programs final report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. The MAP noted that there is an important public
education piece to the reporting of PC-02 and recommended that we work
with others to ensure consumers understand what the results mean and
why the measure is important.
This measure assesses the number of nulliparous women with a term,
singleton baby in a vertex position delivered by cesarean section.
Adverse Drug Events--Hyperglycemia
Adverse Drug Events--Hyperglycemia is conditionally supported by
the MAP in its 2014 Recommendations on Measures for More Than 20
Federal Programs final report available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Use of this measure would address a very common
condition. The MAP expressed concerns over the feasibility of using
this measure in the Hospital IQR Program as it has been tested using
electronic data and stated that the NQF endorsement process should
resolve this issue.
This measure assesses the average percentage of hyperglycemic
hospital days for individuals with a diagnosis of diabetes mellitus,
anti-diabetic drugs (except metformin) administered, or at least one
elevated glucose level during the hospital stay. The measure's
numerator is the sum of the percentage of hospital days in
hyperglycemia for all admissions in the denominator. The measure's
denominator is the total number of admissions with a diagnosis of
diabetes mellitus, at least one administration of insulin or any oral
anti-diabetic medication except metformin, or at least one elevated
blood glucose value (>200 mg/dL [11.1 mmol/L]) at any time during the
entire hospital stay.
Exclusions include: (1) Admissions with a diagnosis of diabetic
ketoacidosis (DKA) or hyperglycemic hyperosmolar syndrome (HHS); (2)
admissions without any hospital days included in the analysis; (3)
admissions with lengths of stay greater than 120 days.
Adverse Drug Events--Hypoglycemia
Adverse Drug Events--Hypoglycemia is conditionally supported by the
MAP in its 2014 Recommendations on Measures for More Than 20 Federal
Programs final report, which is available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report_2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Use of this measure would address a common condition
that is very dangerous to patients. The MAP expressed concerns over the
feasibility of using this measure in the Hospital IQR Program as it has
been tested using electronic data and that the NQF endorsement process
should resolve this issue.
This measure assesses the rate of hypoglycemic events following the
administration of an anti-diabetic agent. The measure's numerator is
the total number of hypoglycemic events (<40 mg/dL) that were preceded
by administration of a short/rapid-acting insulin within 12 hours or an
anti-diabetic agent other than a short/rapid-acting insulin within 24
hours, were not followed by another glucose value greater than 80 mg/dL
within 5 minutes, and were at least 20 hours apart. The measure's
denominator is total number of hospital days with at least one anti-
diabetic agent administered. Exclusions include admissions with length
of stay greater than 120 days.
We requested comments on these possible future measures.
Comment: One commenter strongly supported the proposed measure
Adverse Drug Events--Hypoglycemia.
Response: We thank the commenter for their support.
Comment: One commenter strongly supported adding Adverse Drug
Events--Hyperglycemia. Another commenter advised that measurement of
Adverse Drug Events--Hyperglycemia via chart abstraction requires
searching for discrete, out-of-range blood glucose lab values, which is
resource intensive. The commenter stated that collection of this
measure as an electronic clinical quality measure is the most efficient
data collection mechanism and supports Meaningful Use of an electronic
health record. The commenter believed that glucose testing results can
be captured at the point-of-care or from the laboratory system and
stored in the EHR as discrete data fields.
Response: We thank the commenters for their support and will
address this measure in future policy making.
Comment: A commenter noted that that electronically submitted data
on Adverse Drug Events-Hyperglycemia would be highly unreliable.
Further, that commenter stated that recommendations regarding levels of
glucose control are variable among patient populations and there is
limited information within CMS' proposal regarding what patient
populations would be included in the sample.
Response: Adverse Drug Events--Hyperglycemia is conditionally
supported by the MAP. The MAP expressed concerns over the feasibility
of using this measure in the Hospital IQR Program as it has been tested
using data from the EHR. Some hospitals and health systems are able to
use the results of these electronic measures to address adverse events
at the point of care and to track improvement over time. The data
elements are still under development.
Comment: Several commenters supported the adoption of the Hepatitis
B Vaccine measure. A commenter recommended that further attention is
given to high volume conditions and/or procedures, the goals of the
three-part aim, and alignment between the Hospital IQR Program and
other HHS programs.
Response: We thank the commenters for their support.

[[Page 50256]]

Comment: Several commenters supported the adoption of the Cesarean
Section measure. One commenter believed that exclusive electronic
reporting of this measure could ultimately reduce the burden of
collection and increase the potential for timely feedback to all
stakeholders on the ever important area of maternity care. Commenters
also noted that the two leading obstetric professional societies,
American College of Obstetricians and Gynecologists and Society for
Maternal-Fetal Medicine, recently released a detailed set of consensus
recommendations for safely reducing the rate of initial or primary
cesarean sections, stating that this procedure is overused and that
there are many safe ways to reduce the rate.
Response: We thank the commenters for their support.
We note that we received many public comments regarding other
suggested future measures and policies addressing different operational
aspects of the Hospital IQR Program such as public reporting and
working with other stakeholders. We thank the commenters for their
comments. Because we believe these comments are not within the scope of
this current rulemaking, we are not addressing them in this final rule.
However, we intend to consider all of these views for future rulemaking
and Hospital IQR Program development.
9. Form, Manner, and Timing of Quality Data Submission
a. Background
Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the
applicable percentage increase for FY 2007 and each subsequent fiscal
year shall be reduced by 2.0 percentage points (or beginning with FY
2015, by one-quarter of such applicable percentage increase (determined
without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the
Act)) for any subsection (d) hospital that does not submit, to the
Secretary in accordance with this clause and in a form and manner, and
at a time, specified by the Secretary, data required to be submitted on
measures selected under this clause with respect to such a fiscal year.
We note that, in accordance with this section, the FY 2015 payment
determination begins the first year that the Hospital IQR Program will
reduce the applicable percentage increase by one-quarter of such
applicable percentage increase. In order to participate in the Hospital
IQR Program, hospitals must meet specific procedural requirements.
Hospitals choosing to participate in the Hospital IQR Program must
also meet specific data collection, submission, and validation
requirements. For each Hospital IQR Program year, we require that
hospitals submit data on each measure in accordance with the measure's
specifications for a particular period of time. The data submission
requirements, Specifications Manual, and submission deadlines are
posted on the QualityNet Web site at: https://www.QualityNet.org/.
Hospitals submit quality data through the secure portion of the
QualityNet Web site. There are safeguards in place in accordance with
the HIPAA Security Rule to protect patient information submitted
through this Web site.
In order to participate in the Hospital IQR Program, hospitals must
meet specific procedural requirements. Hospitals choosing to
participate in the Hospital IQR Program must also meet specific data
collection, submission, and validation requirements.
b. Procedural Requirements for the FY 2017 Payment Determination and
Subsequent Years
The Hospital IQR Program procedural requirements are codified in
regulation at 42 CFR 412.140. We refer readers to the codified
regulations for participation requirements, as further explained by the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811).
c. Data Submission Requirements for Chart-Abstracted Measures
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811)
for details on the Hospital IQR Program data submission requirements
for chart-abstracted measures.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28245) we did not
propose any changes to data submission requirements for chart-
abstracted measures.
d. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures with Hospital IQR
Program Reporting and Submission Timelines
The Hospital IQR Program and the Medicare EHR Incentive Program
have different reporting and submission periods for electronic clinical
quality measures, with hospitals reporting data to the Hospital IQR
Program based on calendar year deadlines while the Medicare EHR
Incentive Program is based on fiscal year deadlines. In addition, the
Hospital IQR Program generally requires quarterly reporting and
submission of data for chart-abstracted measures while the Medicare EHR
Incentive Program requires annual submission of clinical process of
care measure data.
As a result of the different and incongruent Hospital IQR and
Medicare EHR Incentive Programs' schedules, hospitals reporting and
submitting measure data to both programs would have to do so multiple
times in a calendar year. This discrepancy may create confusion and
additional burden for hospitals attempting to report data to both
programs. To alleviate this possible confusion and reduce provider
burden, beginning with the CY 2015 reporting period/FY 2017 payment
determination, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28245
through 28246) we proposed to align incrementally the data reporting
and submission periods for clinical quality measures for the Medicare
EHR Incentive Program and the Hospital IQR Program on a calendar year
basis.
This proposed change also would also move us closer to meeting our
commitment to align quality measurement and reporting among our
programs, as we described in the Electronic Health Record Incentive
Program--Stage 2 final rule (77 FR 54049 through 54051), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53502 and 53534), and the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50811 through 50819 and 78 FR 50903 through
50904).
In order to ease the transition and prevent the delay of Medicare
EHR Incentive Program payments, we proposed to shift incrementally the
Medicare EHR Incentive Program reporting and submission periods for
clinical quality measures to align with that of the Hospital IQR
Program. We refer readers to section IX.D.2. of the preamble of this
final rule for a detailed discussion of this proposal in the Medicare
EHR Incentive Program. Specifically, for the CYs 2015 and 2016, we
proposed in the Medicare EHR Incentive Program to require CY reporting,
but only for the first three calendar quarters (that is, January
through September). This proposal will allow us to align data reporting
and submission periods without shifting the Medicare EHR incentive
payments.
We note that for the Hospital IQR Program, for the FY 2017 payment
determination, we proposed to change the November 30th submission
deadline to require data submission within approximately 60 days of the
close of a quarter. We refer readers to section

[[Page 50257]]

IX.A.7.h.(1) of the preamble of this final rule where this proposal is
discussed. We also proposed this change in the Medicare EHR Incentive
Program in order to align the two programs. We refer readers to section
IX.D.2. of the preamble of this final rule where this proposal is
discussed. In summary, we proposed to align the reporting and
submission periods of the Medicare EHR Incentive Program clinical
quality measures with that of the Hospital IQR Program for CYs 2015 and
2016.

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

We invited public comments on these proposals.
Comment: Many commenters supported CMS' proposal to align the
Hospital IQR Program and the Medicare EHR Incentive Program. One
commenter supported efforts aligning the Hospital IQR Program and the
EHR Incentive Program and supported using the Hospital IQR Program as
the foundation of the alignment.
Response: We thank these commenters for their support.
Comment: One commenter recommended that additional steps be taken
to fully align the Hospital IQR and Medicare EHR Incentive Programs,
and stated that it is currently not possible for a hospital to satisfy
the meaningful use requirements with mandatory Hospital IQR Program
measures only. This commenter observed that the Stage 2 list of
electronic clinical measures includes some that have not been adopted
for the Hospital IQR Program, and also some Hospital IQR Program
measures that have been found to be ``topped-out.'' Two measures that
previously were removed from the Hospital IQR Program remain as
electronic clinical quality measures for demonstrating meaningful use
of EHRs. The commenter recommended that CMS work to ensure hospitals
could meet the meaningful use requirements by electronically reporting
some mandatory Hospital IQR Program measures, without having to report
additional measures that have not been determined to have value for
public reporting or quality improvement purposes under the Hospital IQR
Program.
Response: We are actively taking steps to align the list of
available measures between the Hospital IQR and Medicare EHR Incentive
Programs by proposing to adopt six new and retain 10 topped-out
measures as electronic clinical quality measures (79 FR 28220 through
28242) so that 28 of the 29 Stage 2 measures are adopted by the
Hospital IQR Program. As previously noted, ED-3--Median time from ED
arrival to ED departure for discharged ED patients, is an outpatient
quality measure. While 12 of the Stage 2 measures are required Hospital
IQR Program measures, we believe that allowing hospitals the
flexibility to select other measures that best fit their patient
population is a benefit to the hospitals. This flexibility was
requested by commenters in response to our restriction to 16 specific
measures in CY 2014 (78 FR 50814-50815). As proposed and as finalized
in this rule, hospitals can meet some meaningful use requirements by
electronically reporting some mandatory Hospital IQR Program measures.
We intend to continue working with hospitals to ensure that they are
able to meet meaningful use requirements by reporting Hospital IQR
Program measures electronically. We respectfully disagree with the
commenter's implication that only the mandatory Hospital IQR Program
measures have value. We believe that allowing hospitals the flexibility
to choose which additional measures to report is a benefit to the
hospital and their patient population. We refer readers to our response
in section IX.A.2.a. of the preamble of this final rule regarding why
we are retaining ``topped-out'' measures.
Comment: Some commenters opposed or expressed concerns with CMS'
alignment proposal. One commenter stated that it is premature to
require quarterly reporting of electronic clinical quality measures
because of the implementation delays with 2014 CEHRT for meaningful use
and the anticipated changes in the attestation requirements for
meaningful use in 2014.
Response: We understand the commenters' concerns. We are not
finalizing quarterly reporting of electronic clinical quality measures
at this time. We refer readers to section IX.A.2.h.(1) of the preamble
of this final rule where this is discussed in more detail.

[[Page 50258]]

Comment: One commenter appreciated CMS' goal to align the Hospital
IQR Program and the Medicare EHR Incentive Program, but noted several
concerns. Specifically, the commenter is concerned about the validity
of the electronic clinical quality measures, noting that hospitals that
are performing well under the chart-abstracted versions of measures are
not the same hospitals that achieve high performance levels under the
electronic clinical quality measure versions. Because of this concern,
the commenter urged CMS to develop a methodology for validation and
argues that chart-abstracted versions of measures should never be
compared to electronic clinical quality measure versions.
Response: We are unaware of data showing that hospitals that are
performing well under the chart-abstracted versions of measures are not
the same hospitals that achieve high performance levels under the
electronic clinical quality measure versions. To date, we have only
heard anecdotal comments about actual performance level differences
between the two modes of collection. We do not have sufficient data to
be able to confirm these comments. We are conducting a small validation
pilot and have proposed to conduct a larger pilot in CY 2015. More
discussion of the electronic clinical quality measure validation pilot
can be found in section IX.A.11.e. of the preamble of this final rule.
Comment: One commenter is concerned that CMS' data systems may not
be prepared to routinely accept EHR-based measures.
Response: We would like to reassure the commenter that our data
systems are prepared to accept EHR-based measures. The CMS database has
been open to accept electronic clinical quality measure submissions
since January 2, 2014.
Comment: One commenter was concerned that different deadlines (that
is, for chart-abstracted measures versus electronic clinical quality
measures) may lead to confusion and requested that CMS undertake a
strong educational initiative using current educational resources for
both programs and ensure that technical assistance is available for
hospitals opting to submit data for both programs electronically.
Response: We routinely provide educational sessions and resources
on the QualityNet Web site. After publication of the final rule, we
will update the resources and offer additional educational sessions to
assist reporting hospitals. We urge the commenter to sign up for our
electronic mail distribution list available for pertinent updates and
announcements of upcoming educational sessions. Further, we have
recorded sessions available on electronic clinical quality measures on
our Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287738
52046. We also refer readers to our response in section IX.A.2.h.(1) of
the preamble of this final rule regarding education and outreach to
hospitals and vendors.
Comment: Another commenter expressed concern that the methods to
encourage participation in the voluntary electronic reporting option
and to align critical quality measure reporting in the Hospital IQR
Program and the Medicare EHR Incentive Program undermine the goals of
the Hospital IQR Program--namely, continuous hospital quality
improvement. Rather than consider exceptions to Hospital IQR Program
requirements, the commenters suggested that CMS leverage the data from
the Medicare EHR Incentive Program for insight and development of a
report on lessons learned to date from hospitals' experience with
certified electronic health record technology (CEHRT), and their use
for electronic clinical quality measures.
Response: We respectfully disagree with the commenter that our
efforts to align reporting of electronic clinical quality measures
between the Hospital IQR and Medicare EHR Incentive Programs undermine
the goals of the Hospital IQR Program. We believe that clinical quality
measure reporting, regardless of the mode of submission, will lead to
continuous quality improvement.
We interpret the commenter's statement ``consider exceptions to
Hospital IQR Program requirements'' and ``CMS leverage the data from
the Medicare EHR Incentive Program'' to request that we not introduce
an electronic voluntary reporting option for Hospital IQR. By allowing
one submission to partially fulfill requirements for two programs, we
believe we are alleviating the burden of reporting data to two
programs. We disagree that leveraging data from the Medicare EHR
Incentive Program would promote continuous quality improvement, since
many hospitals have elected to attest results of their electronic
clinical quality measures.
Comment: One commenter cautioned that its EHR vendor prioritizes
complying with federal government requirements over fixing critical
errors in its system that could affect patient safety.
Response: Patient safety is the top priority and we urge hospitals
to work closely with their vendors to ensure patient safety as the
highest priority.
Comment: One commenter encouraged CMS to more clearly state that
references to submission timelines in its proposal to align the
Hospital IQR Program and the Medicare EHR Incentive Program do not
impact chart-abstracted measures. Another commenter asked CMS to
clarify whether the submission deadline for the first quarter of CY
2015 is May 30 or May 31.
Response: Our proposal to align the Hospital IQR Program and the
Medicare EHR Incentive Program does not affect chart-abstracted
measures' submission deadlines. The alignment applies to electronic
clinical quality measures only.
In addition, as stated in section IX.A.2.h.(1) of the preamble of
this final rule above, we are finalizing a modified version of our
proposal. We will not require quarterly reporting at this time for the
electronic clinical quality measures. As a result, we also modified the
submission deadline for electronic clinical quality measures, which
instead will be November 30, 2015. Policies for electronic clinical
quality measure reporting in CY 2016/FY 2018 payment determination and
subsequent years will be made in future rulemaking.
Comment: One commenter recommended that CMS finalize the zero
denominator and case threshold changes as proposed.
Response: We refer readers to sections IX.D.5. and IX.D.6. of the
preamble of this final rule for the discussion of zero dominators and
the case threshold exemption in the EHR Incentive Program. We note that
while this policy was clarified in the EHR Incentive Program, it also
applies to electronic reporting for the Hospital IQR Program.
After consideration of the public comments we received, we are
finalizing our proposal to align the EHR Incentive Program with the
Hospital IQR Program, with modifications. We proposed to align the
reporting period and submission deadlines of the Medicare EHR Incentive
Program clinical quality measures with that of the Hospital IQR Program
for CY 2015. While we are finalizing our proposal to align the
reporting period and submission deadline of the Medicare EHR Incentive
Program with those of the Hospital IQR Program on the calendar year for
clinical quality measures that are reported electronically, we are not
finalizing our proposal to require quarterly submission

[[Page 50259]]

of clinical quality measure data in CY 2015.
Since we are also modifying our proposal in the Hospital IQR
Program to finalize that hospitals can voluntarily submit one calendar
year (CY) quarter's data for CY Q1 (January 1-March 31, 2015), CY 2
(April 1-June 30, 2015), or CY 3 (July 1-September 30) by November 30,
2015, we are also applying these modifications to the alignment with
the Medicare EHR Incentive Program. As a result, we are not
incrementally shifting the Medicare EHR Incentive Program reporting
period and submission deadlines for clinical quality measures as
proposed. We plan to continue to align reporting periods and submission
deadlines in CY 2016 and subsequent years in future policy years. We
refer readers to section IX.E.2. of the preamble of this final rule for
a detailed discussion of the final policy in the Medicare EHR Incentive
Program.
ED-1, ED-2, Stroke-4, Stroke-6, Stroke-8, VTE-1, VTE-2, VTE-3, VTE-
5, VTE-6, AMI-7a, and PC-01 are measures required under the Hospital
IQR Program and may be submitted as chart-abstracted or as electronic
clinical quality measures. If a hospital chooses to submit one calendar
quarter (CY 2015 Q1, Q2, or Q3) as an electronic clinical quality
measure by November 30, 2015, a hospital does not need to also submit
chart-abstracted data for that measure.
The chart below provides a summary of the finalized reporting
periods and electronic submission deadlines for the FY 2017 Hospital
IQR Program:

FY 2017 Hospital IQR Program Electronic Reporting Periods and Submission
Deadlines for Eligible Hospitals
------------------------------------------------------------------------
Discharge reporting periods Submission deadline
------------------------------------------------------------------------
January 1, 2015-March 31, 2015............ November 30, 2015.
April 1, 2015-June 30, 2015............... November 30, 2015.
July 1, 2015-September 30, 2015........... November 30, 2015.
October 1, 2015-December 31, 2015......... Not Applicable.
------------------------------------------------------------------------

e. Sampling and Case Thresholds for the FY 2017 Payment Determination
and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (75 FR
50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50819) for details on our sampling and case
thresholds for the FY 2016 payment determination and subsequent years.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not
propose any changes to sampling or case thresholds.
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through
53538), the FY 2014 IPPS/LTCH PPS final rule and (78 FR 50819 through
50820) for details on HCAHPS requirements.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not
propose any changes to HCAHPS requirements.
Hospitals and HCAHPS survey vendors should, however, regularly
check the official HCAHPS Web site at https://www.hcahpsonline.org for
new information and program updates regarding the HCAHPS Survey, its
administration, oversight and data adjustments.
g. Data Submission Requirements for Structural Measures for the FY 2017
Payment Determination and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51643 through 51644), and the FY 2013 IPPS/LTCH PPS final rule (77 FR
53538 through 53539) for details on the data submission requirements
for structural measures.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not
propose any changes to data submission requirements for structural
measures.
h. Data Submission and Reporting Requirements for Healthcare-Associated
Infection (HAI) Measures Reported via NHSN
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51631 through 51633; 51644 through 51645), the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53539), and the FY 2014 IPPS/LTCH PPS final rule (78
FR 50820 through 50822) for details on the data submission and
reporting requirements for healthcare-associated infection (HAI)
measures reported via the CDC's National Healthcare Support Network
(NHSN) Web site. The data submission deadlines are posted on the
QualityNet Web site at: https://www.QualityNet.org org/.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246) we did not
propose any changes to data submission and reporting requirements for
healthcare-associated infection measures reported via the NHSN.
10. Submission and Access of HAI Measures Data Through the CDC's NHSN
Web Site
As finalized in the FY 2014 Hospital IPPS/LTCH PPS final rule (78
FR 50805 through 50807), the Hospital IQR Program requires hospitals to
report data via the CDC's NHSN Web site for the following HAI measures:
(1) CLABSI (NQF 0139); (2) CAUTI (NQF 0138); (3) SSI
following colon surgery; (4) SSI following abdominal hysterectomy; (5)
laboratory-identified MRSA bacteremia infection (NQF 1716);
(6) laboratory-identified Clostridium difficile infection (NQF
1717); and, (7) healthcare personnel vaccination (NQF
0413). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51644
through 51645), we adopted the data submission and reporting standard
procedures that have been set forth by CDC for NHSN participation in
general and for submission of specific HAI measures to NHSN.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28246 through
28247) for the FY 2016 payment determination and subsequent years, for
the Hospital IQR Program, we clarified our data reporting and
submission requirements for the above stated HAI measures. By adopting
the data reporting and submission procedures set forth by the CDC, we
intended that hospitals report, through the existing NHSN process, any
and all data elements at the patient-level that are designated as
``required'' on NHSN forms (such as, the ``primary bloodstream
infection'' or ``annual facility survey'' forms). Some examples of
these ``required'' patient-level data elements include: patient
identifier, date of birth, and gender; detailed event data, such as
specific symptoms identified to meet case definitions and laboratory
results; and risk factor data used to calculate the hospital-level
measures. Hospitals may find a comprehensive list of required forms and
data elements on the NHSN Web site (https://www.cdc.gov/nhsn/acute-care-hospital/).
We further clarified that the NHSN required data collected by the
CDC will be shared with CMS for Hospital IQR Program and Hospital VBP
Program administration, monitoring and evaluation activities, including
validation, appeals review, program impact evaluation, and development
of quality measure specifications. We routinely use submitted quality
measure

[[Page 50260]]

data for these types of program administration, monitoring and
evaluation activities.
In addition, we proposed that we will also receive access from the
CDC to voluntarily submitted name and race identifying information with
respect to Hospital IQR Program required measures. These data will also
be used for Hospital IQR Program and Hospital VBP Program
administration, monitoring and evaluation activities, including
validation, appeals review, program impact evaluation, and development
of quality measure specifications. More specifically, for Hospital IQR
Program validation, we proposed to use these data to ensure accurate
matching between patient charts submitted for HAI validation that
cannot be matched to NHSN using Medicare beneficiary identification
numbers. We also proposed to use these data as appropriate for program
evaluation.
We invited public comment on this proposal.
Comment: Several commenters strongly supported the proposal for CMS
to access NHSN patient-, system-, and aggregate-level data. Commenters
stated that this access is necessary to evaluate the impact of the
Hospital VBP and Hospital IQR Programs as required by the Affordable
Care Act, as well as the HAC Reduction Program. Commenters stated that
this information is also critical to inform quality improvement efforts
and to ensure accurate data collection and will also increase the
sampling power of the Hospital IQR Program validation process. A
commenter also noted its trust that CMS will ensure data privacy and
abide by all security and privacy requirements, as CMS has historically
been an excellent steward to ensure data privacy and security in its
quality programs.
Response: We thank the commenters for the support.
Comment: Many commenters opposed the proposed NHSN data access
policy for validation purposes. Many of these commenters expressed the
opinion that access to patient-level data was not needed for validation
because CMS already has a validation process.
Response: We would like to clarify why we need access to these NHSN
data for validation. Although commenters correctly point out that we
already have an HAI validation process, the current validation process
is inefficient, does not provide timely information for the validation-
related appeals process, and does not give hospitals all the
information that would be useful to them.
One example of how validation could improve in efficiency is by
providing the CMS' clinical data abstraction center (CDAC) contractor
with access to data regarding which symptoms a patient experienced in
order to meet the requirements for reporting a particular type of HAI
event. In validating a single quarter of 2013 HAI data, CDAC
encountered more than 30 episodes-of-care in which the hospital
reported an event to NHSN and for which CDAC did not find a reportable
infection during its medical record review. In these situations, CDAC
employs quality controls to ensure that its staff have not overlooked
or misinterpreted important documentation. However, HAI records
selected for validation are on average more than 1,000 pages in length,
with maximum page length above 60,000 pages. Having information about
which symptoms CDAC should be looking for and on what dates catheters
were inserted would greatly assist the CDAC in ensuring that a properly
documented and reported HAI was not overlooked, and that the hospital
was credited appropriately. Without this data access, we rely on
hospitals to request an educational review or appeal cases to identify
any potential CDAC errors, thereby increasing inefficiencies and burden
for hospitals.
Another reason we need direct access to patient-level NHSN data for
Hospital IQR Program administration is to support the processing of
validation-related appeals. A hospital may request from CMS at any time
an educational review to better understand whether or not CDAC reached
a correct conclusion during validation. However, a hospital which fails
to meet Hospital IQR Program validation requirements has 30 days to
appeal after this determination. Hospitals that fail to meet any
Hospital IQR Program requirement, including validation, are ineligible
for the Hospital VBP Program, and therefore, would not contribute to
Hospital VBP Program performance standards. Because of the tight
timeframe between the Hospital IQR Program payment determination and
when Hospital VBP Program benchmarks must be posted, we must process
Hospital IQR Program appeals very quickly, sometimes in 48 hours or
less. Taking time at precisely this juncture to verify with CDC what
was submitted to NHSN as the basis for the appeal is inefficient, and
threatens timely payment determinations.
Lastly, under our current validation process, we are unable to
provide patient-level data element information of hospital reported HAI
data for mismatched validation cases. We believe that our proposal is
in part responsive to the commenters in previous rules; those comments
indicated that we needed to provide hospitals with more detailed HAI
validation educational feedback (78 FR 50826 through 50827). We believe
that this patient-level information is necessary to provide specific
and actionable feedback to hospitals to report more accurate HAI data
for CMS programs. For example, if CDAC can explain to a hospital that a
patient did have the infection symptoms that the hospital reported to
NHSN, but that the symptoms (and therefore, the infection) first
occurred too long after a catheter was removed, the hospital would have
a clearer explanation of why an infection was reported incorrectly.
Moreover, by accessing NHSN data at the patient-level for every
required reporting element, CDAC can review the accuracy of data
reporting to NHSN at the data-element level and provide all of this
feedback to hospitals. When CDAC validates clinical process-of-care
measures, CDAC reviews and provides feedback to hospitals for every
data element submitted to the Hospital IQR Program. CDAC is unable to
provide a comparable level of feedback to hospitals for HAI measures,
because it does not have access to patient-level data at the element-
level.
Comment: Many commenters stated that the proposal to access patient
name and race submitted on a voluntary basis as particularly
objectionable. Some commenters questioned why patient name and race
were needed for validation. A few commenters noted that this patient
identifiable information would not be particularly useful because it is
not available for every patient. A few commenters wanted to know why
CMS needed data on non-Medicare beneficiaries. A few commenters stated
that CMS should observe whether the new requirement to link data using
Medicare Beneficiary ID for validation is helpful before instituting
new policies. One commenter asked how frequently CMS failed to match
validation cases on Medicare Beneficiary ID number.
Response: Our past validation experience indicates that accessing
patient race and name data for validation will allow CDAC to match
validation cases that lack Medicare beneficiary numbers with a higher
level of confidence. If we cannot access these data, a hospital might
have to request an educational review or appeal to determine that we
made an inappropriate mismatch. We believe that this approach is much
less efficient and more burdensome to hospitals than using the patient
name and race data

[[Page 50261]]

from NHSN where available to confirm the match. The policy requiring
hospitals to report Medicare beneficiary identification numbers to NHSN
is first effective for HAIs occurring in patients discharged in quarter
3, 2014 (78 FR 50822). We do not agree with commenters who indicated
that we should wait until we implement this policy because of the
number of patients with HAIs who are not receiving Medicare who will be
impacted. We anticipate that there will be many cases that lack
Medicare beneficiary identification numbers, because a large percentage
of the 5 HAIs reportable to NHSN as part of the Hospital IQR Program
occur among patients under 65 years of age. For infections reported in
2013, the percentage of events reported for patients under 65 years of
age ranged from a low of 44 percent for laboratory-identified
Clostridium difficile (CDI) events to a high of 64 percent for surgical
site infections (SSI). In these instances without Medicare beneficiary
numbers, it would be helpful to have other data, such as name and race
where available, in order to more effectively match validation cases.
We agree that patient race and name data is not available for every
patient. We believe that this information would be more useful if it
were required and not voluntary. We will discuss this with CDC and take
the suggestion under consideration for future rulemaking, considering
both the burden of added requirements as well as the potential
benefits. For the present, we believe that the available patient race
and name data will greatly assist in identification of medical records
required for CMS validation submission, and CMS' matching of validation
medical records to NHSN reported infection events. Regarding data for
non-Medicare beneficiaries, we remind commenters that the Hospital IQR
Program requires quality data that encompasses all-payer patients (both
Medicare beneficiaries and those not participating in Medicare).
Therefore, data from all patients must be validated.
Comment: Some commenters asked CMS to clarify: (1) how it intends
to use patient-level data for program evaluation, and (2) why
aggregate-level data cannot be used for this purpose. Some commenters
stated that CMS should only use aggregate-level data for program
evaluation. Several commenters observed that patient name and race
would have limited usefulness because these data are submitted
voluntarily and are not available for all submitted cases. One
commenter wanted to know what CMS meant by the phrase ``as appropriate
for program evaluation.''
Response: We are collecting data from NHSN using our authority to
collect these data for validation purposes. For purposes of Hospital
IQR Program data program administration, including validation and
appeals, like all data we collect for that purpose, we intend to use
that data more broadly to meet goals of the Hospital IQR and VBP
Programs including measure and program evaluation. Measure and program
evaluation are two key components of administering a public reporting
program. We intend to use patient-level data for program evaluation to
assess the impact of quality measures used in the Hospital IQR and
Hospital VBP Programs and determine whether either program may have
unintended consequences as we already do with other non-NHSN measures
data.
Aggregate-level data have limited effectiveness for program
evaluation, because they do not have a strong predictive power nor
allow for multivariate statistical modeling. On the other hand,
patient-level data provides us with much greater predictive power and
the capability to perform multivariate statistical modeling through
matching this data across all quality measures, including HAI measures.
Such analyses provide additional information about the validity and
impact of individual measures included in the Hospital IQR Program. For
example, information from the same group of patients must be matched at
the individual patient-level for the SCIP process-of-care antibiotic
administration, PSI-90 component claims, and HAI measures to assess
correlation among measure results. Such analyses provide additional
information about the validity of individual measures included in the
Hospital IQR Program, and also assist with assessing the relative
impact of different types of measures on the distribution of Hospital
VBP Program performance scores. These types of analyses provide
actionable data to determine whether either program may have unintended
consequences, including disproportionately penalizing hospitals serving
the poor and vulnerable.
Patient level data on race and Hispanic ethnicity are particularly
important for evaluating any potential unintended consequences related
to poor and vulnerable populations. Aggregate level analyses have
limited predictive power and lack the level of detail needed to
evaluate whether program initiatives have had unintended consequences
in contributing to disparities both within and across hospitals as well
as disparities associated with specific populations. We intend to use
patient-level information, as well as race and Hispanic origin
information where available, to improve the accuracy of categorizing
safety net hospitals in our impact analysis. However, we agree with the
concerns of some of the commenters that the patient race and ethnicity
data may be of limited usefulness because it may be reported by too few
hospitals. This is why we described the use of these voluntarily
reported data ``as appropriate''. In the routine course of analysis, we
intend to evaluate the level of completeness of the voluntarily
submitted patient race and Hispanic ethnicity data, and its
appropriateness for the specific analyses designed to evaluate the
impact of the HVBP Program on safety net hospitals.
Comment: Several commenters expressed concern about specific uses
for patient-level access to NHSN data. A few indicated that CMS should
not access patient-level NHSN data to produce standardized infection
ratios (SIRs) to post on Hospital Compare. CDC currently performs this
role and these commenters believe that CDC should continue to do so.
One commenter expressed concern that CMS would misuse or misinterpret
data to reduce hospital payment rates.
Response: We agree with commenters that CDC effectively produces
SIRs and should continue to provide these data to us to post on the
Hospital Compare Web site, and that it would be duplicative for us to
perform this work. We do not intend to perform these analyses and will
not use the data in ways that reduce an individual hospital's payment
rates.
Comment: Several commenters viewed CDC as housing the only
``credible'' experts on NHSN data collection and analysis, such that if
CMS used these data to produce trends, evaluate and update NHSN measure
specifications, or conduct data mining activities, the results might be
incorrect, misleading, or not scientifically valid.
Response: We recognize that CDC is the measure steward for NHSN
data, and uniquely understands the intricacies of NHSN data collection.
We do not intend to independently update NHSN measure specifications
and would only make changes in response to CDC updates. Such changes
would be subject to our substantive and nonsubstantive changes policy
(see 77 FR 53504). We also would not conduct data mining activities.
The measure steward, CDC, is responsible for updating measure
specifications. We would invite CDC to provide feedback on any NHSN
quality trend data we

[[Page 50262]]

produce for Hospital IQR or Hospital VBP Program evaluation purposes.
Comment: Several commenters viewed any analyses that CMS might
conduct as potentially duplicative with CDC efforts and therefore,
wasteful of resources. One commenter asserted that CDC should conduct
validation instead of CMS.
Response: Our intention to access and use NHSN data does not
constitute redundant or duplicative efforts with the CDC. CDC produces
national and hospital level HAI SIRs for NHSN, and also provides CMS
with hospital-specific data for reporting on Hospital Compare. We
intend to continue using CDC reported HAI SIRs.
Further, the CDC does not validate these measures for purposes of
the Hospital IQR Program. CMS has both the authority and the
responsibility to conduct validation activities under section
1886(b)(3)(B)(viii)(XI) of the Act. We are statutorily responsible with
auditing a number of hospitals to ensure the validity of the reporting
program. Our validation process provides hospitals with a single
standardized national process and provides hospitals in the validation
sample with actionable and specific patient-level, confidential
feedback on mismatched patient-level validation results in order to
improve accuracy.
We might consider contracting with CDC to conduct such validation
in future years if we determine that CDC is interested in conducting
validation for the Hospital IQR Program and could do so more
efficiently than CMS. However, any validation process that CMS would
undertake would have to be standardized nationally and employ quality
assurance standards such as assessing inter-abstractor reliability.
CDC's current validation strategy, which involves providing technical
assistance to states conducting validation, is not nationally
standardized.\116\ It therefore does not meet CMS' needs to ensure
accuracy of HAI measure data using a standardized and nationwide
process.
---------------------------------------------------------------------------

\116\ National Healthcare Safety Network (NHSN) Validation
Guidance and Toolkit 2012. Validation for Central Line-Associated
Bloodstream Infection (CLABSI) in ICUS. https://www.cdc.gov/nhsn/toolkit/validation-clabsi/, last accessed 7/29/2014.
---------------------------------------------------------------------------

Comment: Many commenters questioned whether CMS had rights to the
data, and stated that CMS access would violate the confidentiality
agreement between hospitals and NHSN, or indicated that the data being
required and accessed exceeded those needed to measure performance as
posted on Hospital Compare. Several commenters indicated that CMS
should justify its need for specific data elements, arguing that CMS
should require and access the minimum data needed to meet its goals.
Response: We believe that our responsibility encompasses more than
merely measuring quality performance. As described above in this
section, we have both the authority and the responsibility to conduct
validation of the data for the Hospital IQR Program. Furthermore, we
wish to clarify that this policy does not constitute an expansion of
reporting requirements, because we would access data that hospitals are
already required to submit to meet Hospital IQR Program requirements.
In addition, our policy to access data required by the Hospital IQR
Program also does not violate the confidentiality agreement between
facilities and the CDC. The confidentiality agreement signed by
facilities specifically indicates that one purpose for the data
submitted to NHSN is to ``enable healthcare facilities to report HAI
and prevention practice adherence data via NHSN to the U.S. Centers for
Medicare and Medicaid Services (CMS) in fulfillment of CMS's quality
measurement reporting requirements for those data.'' We would only be
accessing data reported to fulfill Hospital IQR Program requirements,
and therefore, would not violate the confidentiality agreement.
We agree with commenters that data collection requirements should
be kept to the minimum necessary to meet quality measurement goals, and
that each data element collected should be justified.
Using our authority and responsibility to access data needed to
administer the Hospital IQR Program including by performing validation
and appeals, we intend to access and store only the minimum data for
any of the particular analysis of the types described above. However,
given the varied analytical requirements for validation and appeals,
and the frequency with which CDC makes small changes are made to NHSN
specifications, we believe it would be impractical to provide a data
element by data element rationale in a regulation.
Comment: Many commenters expressed concerns about security for this
highly sensitive and confidential data. Many commenters wanted to know
whether CMS or its contractors would access the data, and how CMS would
prevent inadvertent disclosures or privacy breaches. One commenter
specifically wanted to know how the data would be transferred and how
long it would be stored.
Response: It is our intention that our staff as well as contractors
would request access to data submitted via the NHSN for the purposes of
administering the Hospital IQR Program. In accessing data submitted via
the NHSN, we would uphold the same privacy and security standards we
use for other quality measures data submitted directly to us. For
example, we would comply with all applicable requirements of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy
and Security Rules to safeguard and limit the use and disclosure of the
information we access and obtain through the NHSN, as well as require
through HIPAA business associate agreements that our contractors do the
same.
We have several options for securely transferring data. For
example, the Secure Transfer Protocol on QualityNet has secure transfer
capabilities that ensure encryption of both the data and the
transmission process. We will collaborate closely with CDC to ensure
that we minimize the number of requests made for data. We will store
data according to the CMS Center for Clinical Standards and Quality
standard operating procedure for retention of records, which calls for
retention of data for 10 years.
Comment: A few of the commenters opposing CMS' proposed data access
policy urged CMS to work with CDC to support activities that increase
accuracy through education, validation, and widespread adoption of
electronic health records with ``infection decision and support
software.''
Response: As described above and further below, we conduct data
validation and would like to do more to educate hospitals about data
accuracy. This would require better access to NHSN data as proposed in
this policy. We will consider the recommendation regarding infection
decision and support software for future policy development in concert
with our other efforts and incentives to promote EHR adoption.
After considering public comments we received, we are finalizing
the policy to access NHSN data as proposed.
11. Modifications to the Existing Processes for Validation of Chart-
abstracted Hospital IQR Program Data
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through
53553), we finalized the processes and procedures for validation of
chart-abstracted measures in the Hospital IQR Program for the FY 2015
payment determination and subsequent years; this rule also contained a
comprehensive summary of all procedures finalized in previous years and
still in effect. Several modifications to these processes were
finalized for the FY 2016 and FY 2017

[[Page 50263]]

payment determinations in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50822 through 50835). In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28219) for the FY 2017 payment determination and subsequent years, we
proposed additional modifications to these processes. Proposed changes
fall into the following categories: (a) Eligibility criteria for
hospitals selected for validation; (b) number of charts to be submitted
per hospital for validation; (c) combining scores for HAI and clinical
process-of-care measures; (d) processes to submit medical records for
chart-abstracted measures; and (e) plans to validate electronic
clinical quality measure data.
a. Eligibility Criteria for Hospitals Selected for Validation
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50833 through
50834), for the FY 2016 payment determination and subsequent years, we
finalized our process to draw a random sample of 400 hospitals and an
additional sample of up to 200 hospitals meeting specific targeting
criteria for purposes of validation. For the FY 2017 payment
determination and subsequent years, we proposed one minor change to
this process. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227), we
defined hospitals eligible for validation as the subset of subsection
(d) hospitals that successfully submitted ``at least one case for the
third calendar quarter of the year two years prior to the year to which
validation applies.''
For the FY 2017 payment determination and subsequent years, we
proposed to change the definition of validation-eligible hospitals to
be the subset of subsection (d) hospitals that successfully submitted
at least one case to the Hospital IQR Clinical Data Warehouse during
the quarter containing the most recently available data. The quarter
containing the most recently available data will be defined based on
when the random sample is drawn. For example, for the FY 2017 payment
determination, we intend to draw this sample in November or December of
2014. The second quarter (Q2) of 2014 ends in June 2014, but hospitals
participating in the Hospital IQR Program may submit quality data from
this quarter until November 15, 2014 (see www.qualitynet.org for
submission deadlines). If CMS draws its sample early in November 2014,
before all the second quarter hospital data are submitted and processed
by the Clinical Data Warehouse, the ``quarter containing the most
recently available data'' will be first quarter (Q1) of 2014. On the
other hand, if CMS draws its sample late November or early December
2014 after the second quarter 2014 hospital data are processed, the
second quarter of 2014 will contain the most recently available data.
We proposed this change because, in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50822 through 50825), for the FY 2017 annual payment
determination and subsequent years, we changed the timing of quarters
for validation of HAI measures, as illustrated in the three graphs (78
FR 50824). To align with this change for HAI measures and to give
hospitals more time to complete HAI validation template requirements
once selected, we intend to draw the validation sample several months
sooner than we have historically drawn it. Historically, we drew the
sample early in each calendar year. This proposal provides us with
greater flexibility for when we can sample hospital data and allows CMS
to use the most recent data available to select hospitals.
We invited public comment on this proposal.
Comment: Several commenters supported CMS' proposal to change the
definition of validation-eligible hospitals because it allows more
flexibility in the timing to draw the sample, allows alignment of the
HAI and chart-abstracted validation timeframes, and provides hospitals
with more time to submit HAI validation templates.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing this policy as proposed.
b. Number of Charts To Be Submitted per Hospital for Validation
(1) Background
In the sections that follow, we discuss our proposals to: (1)
Change the number of charts hospitals must submit for validation; (2)
change the measure-specific sample sizes for HAI validation; and (3)
change the topic areas and sample design for clinical process of care
measures. We proposed these changes because section 1886(o) of the Act
requires the Hospital VBP Program to use a subset of Hospital IQR
Program measures and there is a declining number of measures and chart-
abstracted measure topic areas available to the Hospital VBP Program.
Our proposals also will direct more resources to measures and topic
areas that also overlap with the Hospital VBP Program. Finally, our
proposals will ensure that all chart-abstracted measure topic areas
containing required measures within the Hospital IQR Program are
included in validation. A more detailed rationale accompanies each
proposal.
As described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539
through 53553), the Hospital IQR Program validates chart-abstracted
data submitted to two different systems: clinical process-of-care data
submitted to the Hospital IQR Program Clinical Data Warehouse and HAI
data submitted to the NHSN. Different validation approaches are used
for the data submitted to each of the systems. The process for
selecting and validating HAI data was first introduced in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51646 through 51648) and has evolved
annually in each successive IPPS/LTCH PPS rule. In contrast, validation
of the clinical process of care measures, which involves separate
samples for each topic area, has not substantively changed since it was
first finalized for the FY 2012 payment determination in the FY 2010
IPPS/LTCH PPS final rule (74 FR 43884 through 43889).
(2) Number of Charts To Be Submitted for Validation
(A) Total Number of Charts Required for Validation
Our current policy requires hospitals to submit 96 charts for
validation (60 charts for clinical process-of-care measures and 36
charts for HAIs) (78 FR 50825 through 50834). In the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28248) for the FY 2017 payment determination
and subsequent years, we proposed to require hospitals selected for
Hospital IQR Program validation to submit 18 patient charts per quarter
for a total of 72 charts per year. A sample size of 72 charts is
statistically estimated to be the number of charts needed to determine
whether an individual hospital clearly passed validation and to assess
hospital performance across both types of measures (HAIs and clinical
process-of-care) combined. As finalized in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53551), hospitals may fall into three validation
categories: (1) Hospitals pass validation with a lower bound of the
confidence interval greater than or equal to 75 percent; (2) hospitals
fail validation with an upper bound for a hospital's confidence
interval lower than 75 percent; and (3) hospitals neither pass nor fail
validation with a 90 percent confidence interval that includes values
above and below 75 percent. Hospitals in the third category that
neither pass nor fail validation receive their annual payment update,

[[Page 50264]]

but may be randomly sampled for inclusion in the targeted validation in
the following year.
We estimate that a sample of 72 charts will be sufficient to
estimate a reliability of 75 percent +/- 10 percent with 90 percent
confidence, assuming a design effect no greater than 1.4. Historical
data suggests that most hospitals in the Hospital IQR Program pass
validation and validated data have a high level of accuracy. For
example, for the FY 2013 payment determination, approximately 95
percent of hospitals validated had data reliability of 85 percent or
higher. With a sample of 72 charts and an expected mean data
reliability well above 85 percent, we should be able to identify most
hospitals that pass validation. Of the remaining hospitals, we will use
the same conservative approach to identify hospitals failing validation
that we have used since the inception of the Hospital IQR Program.
Comment: Many commenters supported the decrease in the number of
charts required for validation.
Response: We thank the commenters for their support.
Comment: Several commenters opposed CMS' proposed changes to the
chart-abstracted data validation process. The commenters were concerned
that hospitals were more likely to fail as a consequence of the policy.
One commenter suggested a two-stage process, under which the initial
sample size for clinical process of care charts would be small, but a
hospital failing validation would be invited to submit additional
charts. The validation score for the combined larger pool of charts
then would be used for determining whether the hospital has failed
validation. Since only a small number of hospitals fail validation,
this would be an efficient strategy. Some commenters also said that
hospitals needed more feedback on these chart-abstracted measures.
Response: We disagree that the proposed policy to decrease sample
size will increase the likelihood that one or more individual hospitals
will fail validation. As explained in the proposal above, a hospital
fails validation when the upper bound for its two-tailed 90 percent
confidence interval is less than 75 percent. For any hospital that
submits data at a given level of reliability, the only two factors that
would affect how likely the upper bound of the confidence interval is
to be less than that reliability standard are (1) the level of
reliability selected for the standard, and (2) the confidence level. We
did not propose to change either the standard level of reliability
(currently 75 percent) or the confidence level of the upper bound
(currently 90 percent) (77 FR 53551). Therefore, the likelihood that
hospitals fail validation will not increase by decreasing sample size.
Currently, a high percentage of hospitals pass, and we anticipate
that the same percentages of hospitals would continue to pass, but
acknowledge that the width of the confidence interval would increase
due to decreased sample size. As stated in our proposal, we anticipate
that additional hospitals would be eligible for targeted selection for
validation in the following year. This targeting process is quite
similar to the recommendation made by the commenter. We will take into
consideration for future rulemaking the remainder of the commenter's
recommendations to combine scores across the first and second samples
to produce a final passing or failing score.
We also appreciate that the commenters would like more data on
these chart-abstracted, clinical process-of-care cases. However, our
proposal reflects our best efforts to balance the cost and burden
against the desire for more detailed feedback. Moreover, some of the
measures that have been in the program for a long time are reported
very accurately. For these measures, only minimal feedback is needed.
We intend to summarize national validation results and provide
educational training for hospitals to incorporate the lessons learned
to address the most frequently occurring validation mismatches. We
believe it would be wasteful to increase resources simply to verify the
accuracy of the measures that are already being reported well.
After consideration of the public comments we received, we are
finalizing our proposal to require hospitals selected for Hospital IQR
Program validation to submit 18 patient charts per quarter for a total
of 72 charts per year as proposed.
(B) Number of Charts Required for HAI and Clinical Process-of-Care
Measures
As finalized in the FY 2014 IPPS/LTCH PPS final rule for the FY
2017 payment determination and future years, we require hospitals to
submit 9 charts for HAI measures per quarter (78 FR 50831) and for the
FY 2016 payment determination and future years, we require hospitals to
submit 15 charts for clinical process-of-care measures per quarter for
validation (78 FR 50830). In the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28248) for the FY 2017 payment determination and subsequent
years, we proposed that of the 18 charts proposed to be submitted per
quarter (above), 10 charts would be submitted to validate HAI measures
and 8 charts would be submitted to validate clinical process-of-care
measures. This would equal 72 charts per year with a mix of 40 HAI and
32 clinical process-of-care measure charts. We proposed to require more
HAI charts than clinical process-of-care measure charts because HAI
measures now, as proposed, have a greater impact on the Hospital VBP
and the HAC Reduction Programs. Considering only the relative
importance of HAIs and clinical process-of-care charts to the Hospital
VBP Program, which is about 4 times as great, CMS might choose a ratio
larger than 10 HAI charts for every 8 clinical process-of-care charts.
However, we estimate that we spend about 4 times as much money per
chart to validate HAIs as clinical process-of-care measures. Moreover,
the clinical process-of-care measures are still a critical part of the
Hospital IQR Program.
Therefore, we proposed this mix of 40 HAI and 32 clinical process
of care charts per year because we believe it to be optimal after
considering both the relative importance of the two types of charts to
the Hospital IQR Program and related payment incentive programs and the
relative cost of validation for the two types of charts.
We invited public comment on these proposals.
Comment: Many commenters supported this proposal. Most commenters
supported the proposed mix of HAI and clinical process of care cases.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal that of the 18 charts proposed to be submitted
per quarter, 10 charts would be submitted to validate HAI measures and
8 charts would be submitted to validate clinical process-of-care
measures as proposed.
(3) HAI Validation: Measures and Measure-Specific Sample Sizes
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50828 through 50832)
for the FY 2016 payment determination and subsequent years, we
finalized the HAI measures to be included in validation, the processes
for completing validation, and the specific sample sizes for each. To
validate HAI data, hospitals must use Validation Templates to provide
supplemental data to CMS. These supplemental data provide CMS with a
set of candidate infections for each HAI. As finalized previously,
hospitals sampled for validation will be randomly assigned to provide
two Validation Templates, either: (1) CLABSI and CAUTI, or (2) MRSA and
CDI.

[[Page 50265]]

Consequently, up to 300 hospitals will provide data on each of these 4
measures. We also previously finalized a decision to validate a smaller
number of patient charts for SSI from twice as many hospitals because
of the smaller number of candidate SSIs expected per hospital per
quarter. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28248) we
did not propose to change the process for validating individual
measures.
However, as described above in this section, we proposed to
increase the total HAI sample size by 1 chart per quarter for a total
of 4 more charts per year. As explained below in this section, HAI
measures have greater relative scoring weights in the Hospital VBP and
HAC Reduction Programs than clinical process-of-care measures.
Therefore, in order to align the Hospital IQR Program with the Hospital
VBP and HAC Reduction Programs, we proposed to increase measure-
specific sample size targets to support this 1 chart per quarter
increase in the Hospital IQR Program for the FY 2017 payment
determination and subsequent years. Specifically, the total number of
charts for CLABSI, CAUTI, MRSA, and CDI would increase by 1 from 15 to
16; and the total number of charts for SSI would increase by 2 from 6
to 8. The previously finalized and proposed specific sample-size charts
are detailed in the tables below.

Previously Finalized Number of Charts Required for HAI Validation for the FY 2017 Payment Determination and
Subsequent Years
----------------------------------------------------------------------------------------------------------------
Charts/ Number of
HAI Number of hospitals Number of quarter/ charts per
quarters hospital hospital
----------------------------------------------------------------------------------------------------------------
Previously Finalized:
Central line associated bloodstream Up to 300.............. 4 3.75* 15
infections (CLABSI).
Catheter-associated urinary tract Up to 300.............. 4 3.75* 15
infections (CAUTI).
MRSA............................... Up to 300.............. 4 3.75* 15
CDI................................ Up to 300.............. 4 3.75* 15
SSI................................ Up to 600.............. 4 1.5* 6
----------------------------------------------------------------------------------------------------------------
*As previously finalized, within each hospital, quarterly targets are 3, 3, and 1 respectively for CLABSI,
CAUTI, and SSI, and 3, 3, and 1 respectively for MRSA, CDI, and SSI. As finalized, 2 additional charts per
quarter per hospital were to be randomized to meet the fractional case targets on average.

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

We invited public comment on this proposal.
Comment: Many commenters expressed general support for validation
provisions.
Response: We thank commenters for their support.
Comment: One commenter asked CMS to provide a rationale as to why
CDAC assesses over-reporting of CLABSI and CAUTI events to NHSN. The
commenter further wanted to know whether the purpose of validation is
``to determine if the hospital knows how to read and understand the
measure specifications and report accordingly or to assist the
hospitals in identifying processes and procedures needed to reduce the
rates and improve quality of care.''
Response: We have both the authority and the responsibility to
conduct validation activities under section 1886(b)(3)(B)(viii)(XI) of
the Act. We are statutorily responsible with auditing a number of
hospitals to ensure the accuracy of the reported data. This includes
verifying the accuracy of data reported to NHSN. We look to confirm
that all events that should have been reported were reported and all
events that should not have been reported were not.
An important factor for increasing accuracy is ensuring that
hospitals know how to read and understand measure specifications and
report them accordingly. Because hospitals have a financial
disincentive to erroneously report more infections than actually
occurred in their hospitals, education and feedback about these types
of errors can benefit hospitals.
After consideration of the public comments we received, we are
finalizing our proposal to increase measure-specific sample size
targets by 1 chart per quarter for the FY 2017 payment determination
and subsequent years as proposed.
(4) Clinical Process of Care Measures: Topic Areas and Sample Design
As discussed above in this section, we proposed to sample 8 total
patient charts for clinical process-of-care measures per quarter per
hospital included in validation for the Hospital IQR Program for the FY
2017 payment determination and subsequent years. Those 8 charts are
discussed in greater detail below.
As shown in the table below, two other (than immunization) Hospital
IQR Program clinical process-of-care topic areas overlap with measures
proposed for inclusion in the FY 2017 Hospital VBP Program. Regardless,
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28249 through 28250)
we did not propose to target those topic areas for the following
reasons. One of these

[[Page 50266]]

measures, PC-01, Elective delivery prior to 39 completed weeks of
gestation, is reported in aggregate. We cannot use the same mechanism
to validate PC-01 as we use for measures reported at the patient level,
but we hope to include it in our validation program in the future
should reporting PC-01 as an electronic clinical quality measure
becomes a requirement. The second measure is AMI-7a. AMI-7a describes a
process of care only performed in small rural hospitals. Of the
approximately 3,300 hospitals participating in the Hospital IQR Program
for the FY 2015 payment determination, only 113 submitted cases for
this measure in the first two quarters of CY 2013. Therefore, targeting
hospitals that report the AMI-7a measure would unduly single out small
rural hospitals that disproportionately report relatively high AMI-7a
measure denominator counts for validation, and would be inequitable.

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

For the FY 2017 payment determination and subsequent years, we
proposed that the remaining 5 of the 8 clinical process-of-care charts
be drawn from a systematic random sample of charts across all topic
areas containing required measures other aside from those in the
immunization and perinatal care topic areas. Across all hospitals
included in validation, we believe this approach will ensure adequate
numbers of patient charts are sampled for each topic area. Under this
proposal, the pool of clinical process-of-care topic areas sampled for
validation will include: STK, VTE, ED, and sepsis, as well as all other
Hospital IQR Program-required topic areas such as AMI. We received many
comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through
50810; 78 FR 50825) regarding the importance of validating VTE, STK,
and ED measures not included in validation for the FY 2016 payment
determination. With this proposal, STK, VTE, ED, and sepsis measures
would be included in the pool of clinical process-of-care measures for
validation. The systematic random sample of topic areas from this pool
would ensure that charts are sampled proportionate to the number of
charts submitted for each topic. Thus, a sample of 20 charts per year
would not be limited to only one topic area by random occurrence. In
addition, across all hospitals included in validation, we believe this
approach will ensure adequate numbers of patient charts are sampled for
each topic area.\117\
---------------------------------------------------------------------------

\117\ We used data submitted to the Clinical Data Warehouse for
the Hospital IQR Program from quarters 1 and 2 of 2013 to estimate
that at least 400 cases per topic area would be validated per year
(across all hospitals).
---------------------------------------------------------------------------

This proposal simultaneously simplifies the sampling plan for
clinical process-of-care measures and gives us the flexibility of
introducing or removing new topic areas into validation each year
without having to redesign and propose a new sampling strategy. Using a
random sample ensures that new topic areas are not excluded from the
validation sample and we can more easily adjust as the topic areas
change over the years. If this proposal is finalized, every time a new
required topic area is added to the Hospital IQR Program, it will
automatically be added to validation, and every time a topic is removed
from the Hospital IQR Program, it will automatically be excluded from
validation.
We invited public comment on these proposals.
Because of the close relationship between this proposal and the one
immediately below, we provide one consolidated set of comments and
final policy for the two sections together at the end of the next
proposal.
(5) Immunization Measure Validation
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250) we
proposed for the Hospital IQR Program for the FY 2017 payment
determination and subsequent years, that 3 of the 8 total patient
charts each quarter be targeted from the Immunization topic area.
Currently, this topic area only includes the Immunization for Influenza
(NQF 1659) measure, which overlaps with the Hospital VBP
Program. We want to ensure that every hospital included in validation
is validated for this topic area because of the overlap.
Comment: Many commenters supported the proposed policies to drop
the measures that are topped-out from the validation process, and to
divide the quarterly clinical process-of-care sample of 8 charts per
hospital into a systematic random sample of 5 charts of all required
topic areas other than immunization and perinatal care and a second
sample of 3 immunization charts because of the importance of
immunization to the Hospital VBP Program.
Response: We thank these commenters for their support.
Comment: A few commenters opposed the proposed policy to have 3
charts dedicated to immunization each quarter. These commenters
observed that the IMM-2 measure only has meaning in the months of
October through March, when hospitals are

[[Page 50267]]

expected to immunize patients. Therefore, in 2 of the 4 quarters, the
only data element available to validate would be the patient's
discharge date. Because discharge date is not a measure of care
quality, validating this element alone would not yield meaningful
results. These commenters requested further clarification on the
proposed methodology. For example, the commenters asked if ED
Throughput (EDT) would be validated on those charts instead. A
commenter asked if CMS will validate EDT on every IMM chart, since
hospitals use the same population to sample cases for both measures.
Response: We had not considered the seasonal nature of this measure
when we proposed this policy, and that very limited data would be
available for 2 of the 4 quarters included in validation for this
measure. We agree that it would be wasteful to validate 6 cases per
year (or 3 cases per quarter for 2 quarters) per hospital during a time
period which we know will not contain any meaningful data.
We will address this concern by finalizing a modified version of
our proposal as follows. We will not sample any records for the IMM
topic area in the quarters when the IMM-2 measure does not yield
meaningful data and increase the number of IMM records sampled in the
quarters during which this measure does yield meaningful data. In other
words, for quarters 4 and 1 for each hospital included in validation,
we will draw a quarterly random sample of 5 charts for validation for
the IMM topic area and a quarterly systematic random sample of 3 charts
in the ``other'' category. In quarters 2 and 3, when the IMM-2 measure
does not apply, we will draw a systematic random sample of 8 charts
from the ``other'' category. As established in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50822 through 50825), the quarters to be included
in validation for the FY 2017 payment determination are quarters 3 and
4, 2014 and quarters 1 and 2, 2015. In quarters 3 and 4, 2014, the
topic areas that will be in the ``other'' stratum are: AMI, ED, HF, PN,
SCIP, STK, and VTE. In quarters 1 and 2, 2015, the topic areas that
will be in the ``other'' category are: AMI, ED, SCIP, STK, VTE, and
sepsis.
We did not propose to validate the same cases for EDT and IMM,
because EDT measures are not also finalized for the Hospital VBP
Program. We disagree that making a one-for-one substitution of EDT for
IMM cases would be an appropriate substitution, because unlike the IMM
measure set, which contains a measure finalized in the Hospital VBP
Program, the EDT topic area is not inherently more important than any
other required topic area in the Hospital IQR Program.
Comment: A few commenters expressed concern that CMS intended to
drop some required measure sets from validation in its ``other''
systematic random sample, and/or suggested that CMS continue validating
chart-abstracted data for all measures sets that are part of the
Hospital IQR and Hospital VBP Programs. In addition, several commenters
noted that the ``other'' sample would include the ED, STK, VTE, and
sepsis measures in validation.
Response: We agree that all required measure sets should be
included in validation to the extent that this is operationally
feasible. In our weighting proposal below in this section, we
identified the topic areas containing required measures other than
Immunization and Perinatal Care only for quarters 1 and 2, in CY 2015
and inadvertently omitted HF, PN, and SCIP. However, we explicitly
proposed to include a generic category so that we would not be required
to revise our validation strategy every time a new topic area was added
or deleted from the Hospital IQR Program measure set. Further, we
included all CY 2014 Hospital IQR Program measures, including HF, PN,
and SCIP, in our table above in this section, ``Number of Chart-
Abstracted Clinical Process-of-Care Measures per Topic Area Proposed to
Be Reported in the Hospital IQR Program in the CY 2014 and CY 2015
discharge periods.'' We thank the commenter for the opportunity to
clarify this ambiguity that we had no intention of dropping these
measures from validation, and that in fact, as reflected in the Table
above in quarters 3 and 4, 2014, these topic areas would meet the
definition of the ``other'' category because they contain Hospital IQR
Program required measures other than immunization and perinatal care.
We appreciate the commenter's concern and wish to reiterate that we
proposed to draw a systematic random sample of records from ``topic
areas containing required measures aside from those in the immunization
and perinatal care topic areas.'' For example, the HF, PN, and SCIP
topic areas include measures that are required for the Hospital IQR
Program in quarters 3 and 4, 2014, which are part of validation for the
FY 2017 payment determination. Therefore, the HF, PN, and SCIP measure
sets would fall into the ``other'' category in these quarters. However,
these topics are not included in the Hospital IQR Program in 2015
because they met ``topped-out'' criteria and therefore, they would not
fall into the ``other'' category in quarters 1 and 2, 2015.
Comment: A few other commenters opposed validation of the VTE, STK,
or sepsis measures. These commenters opposed validation of the VTE or
STK measures because they believed that the measure specifications were
of poor quality. These commenters wanted to know how CMS would ensure
the clarity of TJC-developed specifications. Those commenters opposing
validation of the sepsis measure observed that because it was new,
hospitals were inexperienced with reporting it.
Response: Although we appreciate that the measure specifications
could be clearer for the VTE and STK measures and that the sepsis
measure is new, all of these measures are NQF-endorsed and are
finalized in the Hospital IQR Program. Any lack of clarity regarding
the meaning of VTE and STK measure specifications and the inexperience
of hospitals with the sepsis measures appear to be good reasons to
provide hospitals with education and feedback on the data quality of
these measures.
We believe that the potential adverse impact to any individual
hospital of validating measures in the VTE, STK, and Sepsis topic areas
to be very small. In contrast, we believe that combining the validation
data in these topic areas across all hospitals will provide the
Hospital IQR Program and hospitals with rich information about the
quality of data and needs for education and improved specifications.
After consideration of public comments we received, we are
modifying both our proposals that the remaining 5 of the 8 clinical
process-of-care charts be drawn from a systematic random sample of
charts across all topic areas containing required measures aside from
those in the immunization and perinatal care topic areas, and our
proposal that 3 of the 8 total patient charts each quarter are to be
targeted from the Immunization topic area. The modification takes into
consideration the seasonal nature of the IMM measure set and is
otherwise consistent with our proposals to sample 8 clinical process of
care charts per quarter and to validate the IMM topic area separately
from other topic areas because of its importance to the Hospital VBP
Program.
We are finalizing a modified policy as follows. In quarters 4 and
1, for each hospital included in validation, we will draw a quarterly
random sample of 5 charts for validation of the IMM topic area and a
quarterly systematic random sample of 3 charts in the ``other''

[[Page 50268]]

category. In quarters 2 and 3, for each hospital included in
validation, we will draw a quarterly systematic random sample of 8
charts from all topic areas containing required measures other than
immunization and perinatal care.
c. Combining Scores for HAI and Clinical Process of Care Topic Areas
We refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR
43885) for the process of scoring clinical process-of-care measures,
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50832 through 50833) for
the process of scoring HAI measures, and FY 2014 IPPS/LTCH PPS final
rule (78 FR 50833) for the process to be used to compute the confidence
interval. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250) we
did not propose any changes to those established policies.
However, for the FY 2017 payment determination and subsequent
years, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28250 through
28251) we proposed to modify our approach to weighting the scores for
each of the HAI, IMM and ``other topic areas'' with two proposals.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50226) and the FY
2013 IPPS/LTCH PPS final rule (77 FR 53548 through 53553), we
established a process to combine the HAI and clinical process-of-care
measure scores by weighting them proportionate to the number of
measures included in validation. For example, in section IX.A.11.b.(4)
of the preamble of this final rule, our proposal to validate all
clinical process-of-care measures required by the Hospital IQR Program
for the FY 2017 payment determination would yield 14 clinical process-
of-care measures in validation in CY 2015 and only 5 HAI measures in
validation. Using the previously finalized weights, the clinical
process of care measures score would contribute 14/19 and the HAI score
would contribute only 5/19 to the combined score. This weighting does
not reflect either the relative importance of HAIs to clinical process
of care measures in the Hospital VBP Program nor the resources proposed
to devote to their validation.
In sections IV.I. and IV.J. of the preamble of this final rule (the
Hospital VBP Program and the HAC Reduction Program, respectively), we
discuss our proposals to weight the patient safety domain (of which the
HAI measures are part) more heavily in the Hospital VBP Program (20
percent for the patient safety domain versus 5 percent for the clinical
process of care measures) and to use the HAI measures for the HAC
Reduction Program.
In this section, we discuss our proposal to weight the HAI measures
more heavily than the clinical process of care scores to align with
these proposals in sections IV.I and IV.J. In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28250 through 28251) for the FY 2017 payment
determination and subsequent years, we proposed to weight the HAI score
66.7 percent (or 2/3) of the total score and the clinical process-of-
care measures to weight 33.3 percent (or 1/3) of the total score.
Further justification is provided after the second proposal.
In addition, we proposed to weight the IMM measures more heavily
than other chart-abstracted clinical process-of-care measures validated
in the Hospital IQR Program to align with the Hospital VBP Program. We
are changing the process currently established to calculate the
clinical process-of-care score, which is based on application of the
formulas for the variance of a stratified single-stage cluster sample
with unequal cluster sizes and the variance of a proportion in a
stratified random sample (see reference to Cochran's ``Sampling
Techniques'' at 75 FR 50226 and 78 FR 53550). We have previously
applied this formula without consideration for the relative importance
of different measures. When so applied, each topic area is weighted
proportionate to the amount of data submitted to the warehouse for that
topic area.
However, we proposed to modify the formulas as previously applied
to weight the IMM topic area more heavily because of the overlap with
the Hospital VBP Program. For the FY 2017 payment determination and
subsequent years, we proposed to weight the ``IMM'' clinical topic area
as 66.7 percent (2/3) and all other topic areas combined 33.3 percent
(1/3) of the clinical process-of-care score. The weights reflect our
policy preference to place greater relative weight on Hospital VBP
Program included measures to better ensure accurate scores and payment.
Emphasizing chart-abstracted clinical process of care measures
validated in the Hospital IQR Program to align with the Hospital VBP
Program will address the need to validate Hospital IQR Program data not
currently included in Hospital VBP Program for public reporting and
validation feedback to hospitals.
The table below shows the effect of the two proposals combined (the
first to weight the HAI score more heavily than the clinical process-
of-care score and the second to weight IMM data more heavily than other
clinical process-of-care topic areas). The HAI topic area will count 3
times as much as the IMM topic area and 6 times as much as all other
topic areas combined.

Proposed Weighting To Combine Scores Across Chart-Abstracted Topic Areas
Included in Validation for the FY 2017 Payment Determination and
Subsequent Years
------------------------------------------------------------------------
Topic Area Weight percent
------------------------------------------------------------------------
Healthcare-associated infection (HAI)................. 66.7
Immunization (IMM).................................... 22.2
Other (all clinical process of care topic areas 11.1
containing required measures other than IMM and
Perinatal Care)......................................
-----------------
Total............................................. 100
------------------------------------------------------------------------

Previously, the clinical process-of-care measures accounted for 20
percent of the Hospital VBP Program score, whereas the HAI measures, a
subset of the outcome measures, weighted 30 percent (FR 53605 through
53606). The proposed relative weights for the HAI (66 percent) and IMM
(22 percent) topic areas better reflect the strong emphasis we have
proposed for the HAI measures.
These proposals will require adjustments to the formulas applied to
compute the confidence intervals. As we have done in the past, we
intend to post the specific formulas used to compute the confidence
interval on the QualityNet Web site at least one year prior to final
computation (https://www.qualitynet.org/dcs/ContentServer?c=Page
&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115987129). These
formulas will continue to account appropriately for the manner in which

[[Page 50269]]

patient charts were sampled and data were abstracted.
We invited public comment on these proposals.
Comment: Many commenters supported the proposals to increase the
weight of HAI measures, to decrease the weight of process of care
measures, and to weight the immunization measure more heavily than
other clinical process of care measures when computing a hospital's
validation score.
Response: We thank the commenters for their support.
Comment: A few commenters opposed the proposal to weight the IMM
measure more heavily than other clinical process-of-care measures
because of the seasonal nature of the measure. These commenters
suggested that weighting the EDT measure more heavily might be
appropriate.
Response: We have addressed the commenters' concern by finalizing a
policy to validate IMM data only in-season (we refer readers to section
IX.A.11.b.(5) of the preamble of this final rule, above). Having made
this policy adjustment above in this section, we believe that weighting
IMM more heavily than other clinical process of care measures because
of its importance to the Hospital VBP Program is still appropriate. The
EDT measure is not included in the Hospital VBP Program; so it should
not count more than any other process-of-care measures.
After consideration of the public comments we received, we are
finalizing our policy to weight the ``IMM'' clinical topic area twice
as heavily and all other topic areas combined of the clinical process-
of-care score as proposed with final weights of 66.7% for HAI, 22.2%
for IMM, and 11.1% for all topic areas containing required clinical
process of care measures other than IMM and perinatal care.
d. Processes To Submit Patient Medical Records for Chart-Abstracted
Measures
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50834 through
50835), we finalized a process for the FY 2016 payment determination
and subsequent years that allows hospitals to submit patient charts for
validation via: (1) paper patient medical records; or (2) secure
transmission of electronic versions of patient information. The process
previously finalized restricts electronic submission of patient
information to digital images of patient medical records submitted
using encrypted CD-ROMs, DVDs, or flash drives.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28251) we
proposed for the FY 2017 payment determination and subsequent years to
expand the options for secure transmission of electronic versions of
patient medical records. Specifically, we proposed to allow hospitals
to submit digital images (PDFs) of patient charts using a Secure File
Transfer Portal on the QualityNet Web site. This portal would allow
hospitals to transfer files through either a Web-based portal or
directly from a client application using a secure file transfer
protocol. The system provides a mechanism for securely exchanging
documents containing sensitive information such as Protected Health
Information (PHI) or Personally Identifiable Information (PII).
Detailed instructions on how to use this system are available in the
Secure File Transfer 1.0 User Manual available on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228773343598. After July 2014, hospitals can submit all Hospital IQR Program
validation data using this portal. This proposal responds to many
commenters from the FY 2014 IPPS/LTCH PPS rulemaking that were
concerned that encrypted CD-ROMs were cumbersome and requested viable
alternatives. We believe that the burden associated with using this
portal will be similar to or less than that involved with submitting
patient medical records via portable electronic media (that is,
encrypted CD-ROMS, DVDs, or flash drives). Therefore, we intend to
reimburse hospitals according to the rate established for submitting
patient medical records via portable electronic media (78 FR 50956).
We invited public comment on this proposal.
Comment: A few commenters strongly supported the proposal to expand
the transmission options for patient medical records, specifically the
option to submit pdfs via the QualityNet Web site. The commenters
believed this action will streamline the validation process and reduce
the burden on hospitals.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing our policy to allow hospitals to submit digital images
(PDFs) of patient charts using a Secure File Transfer Portal on the
QualityNet Web site as proposed.
e. Plans To Validate Electronic Clinical Quality Measure Data
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through
50810), we finalized a voluntary process allowing hospitals to
partially meet Hospital IQR Program requirements for the FY 2014
payment determination by submitting electronic clinical quality measure
data via certified electronic health record technology. Many commenters
expressed concern that we did not have an adequate methodology to
validate these data.
To respond to these concerns as well as to ensure that Hospital IQR
Program data are accurate and reliable, we conducted an environmental
scan, including review of prior public comments to CMS proposed rules
and requests for information, review of the technical and academic
literatures, numerous listening sessions, and interviews with nine
hospitals. From these activities, we identified three key categories of
threats to data accuracy: (1) the design of the EHR product, including
both the manufacturer-provided EHR product and the hospital's
customizations of that EHR product to support the hospital's specific
workflows and processes, (2) hospital and provider documentation
practice, and (3) EHR and electronic clinical quality measure standards
and specifications. We understand the potential threats to validity in
each of these categories. To respond to these concerns, we are
currently conducting a small scale test of a remote real-time
validation strategy for electronic clinical quality measures in
approximately 9 hospitals.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28251 through
28253) we did not propose any requirements for validation of electronic
clinical quality measures for the FY 2017 payment determination.
However, we stated that we intend to conduct a larger scale pilot test
of validation activities in FY 2015. The pilot test will engage up to
100 volunteer hospitals in a highly interactive test abstraction of
their EHR systems using a secure remote access, real-time abstraction
technology. Hospitals that volunteer to participate must meet the
Medicare EHR Incentive Program Stage 2 criteria (77 FR 53968 through
54162) and be able to produce QRDA Category 1 Revision 2 extracted data
(individual patient data) for at least 6 of the 16 measures in the STK,
VTE, ED, and PC topic areas. The Office of the National Coordinator for
Health Information Technology (ONC) adopted QRDA as the standard to
support both QRDA Category I (individual patient) and QRDA Category III
(aggregate) data submission approaches for meaningful use Stage 2 in
the Health Information Technology: Standards, Implementation
Specifications, and Certification Criteria for Electronic Health Record
Technology, 2014 Edition; Revisions to

[[Page 50270]]

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

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

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

[[Page 50271]]

We invited public comment on this voluntary pilot test for
validation.
Because of the close relationship of comments for this policy and
the request for information that follows, we respond to comments for
both after the next paragraph.
We also considered other validation approaches including one that
supplements the current procedures and compares quality data manually
abstracted by the hospitals with QRDA Category 1 extracts from their
EHRs. Although we are making no specific proposals related to these
alternatives at this time, we invited comments on whether we should
develop or identify existing computerized applications to assist
hospitals in self-validation and on the specific functionalities that
may be useful for self-validation. For example, as part of the
validation process, should we develop or identify an existing
application that would use natural language processing, to identify
potential threats to validity that human abstractors might then review
more closely. An example of such an application might be one that
searches the unstructured fields for contraindications to VTE
prophylaxis, even if such contraindications were not noted in a
structured field within an EHR. We also invited comments any other
types of applications that would be useful for self-validation.
Comment: Many commenters expressed concern that there is no
proposed validation process for the electronic clinical quality
measures, or that the validation strategy that CMS proposed is still in
its initial stages. These commenters opposed CMS' use of electronic
clinical quality measure data that has not been validated and proven to
be reliable for public reporting or pay-for-performance. Some
commenters are pleased that CMS has taken steps to validate electronic
clinical quality measures data, but believed that all measures used in
public reporting and pay-for-performance programs should be subject to
data validation, and noted that failure to do so will eliminate any
benefit of electronic clinical quality measures.
Response: We understand commenters' concerns regarding use of
electronic clinical quality measure data that is not validated and
proven reliable for public reporting or pay-for-performance. We note
that although we have signaled target dates for requiring hospitals to
report electronic clinical quality measure validation requirements in
the Hospital IQR Program, we have not proposed, nor are we finalizing
any formal requirements to report electronically specified measures at
this time. We recognize that validation is a major concern for many
stakeholders interested in electronic clinical quality measure
reporting and will take these comments into consideration for future
rulemaking.
Comment: Many commenters expressed general support for CMS' efforts
towards a voluntary pilot test for EHR validation. Some commenters
encouraged CMS to complete this process quickly. Several of these
commenters encouraged CMS to publicly report the results of the pilot
to allow hospitals and vendors to implement processes to support
electronic clinical quality measure validation.
Response: We intend to complete pilot activities in CY 2015. We
also intend to publicly report aggregated results from the pilot, while
protecting the confidentiality of individual providers and patients.
Comment: Many commenters advocated for greater collaboration in the
electronic clinical quality measure validation process. Several
commenters suggested that CMS work with other federal agencies and
private sector experts to develop the protocols and testing
environments needed to begin validation of electronic clinical quality
measures. Other commenters emphasized the important role of the vendor
in the validation pilot. A few commenters specifically observed that
the validation plan does not ``reflect the significant role of EHR
vendors in this effort,'' and/or that vendors need to be engaged so
that hospitals are prepared to participate in the pilot, including
being prepared to produce QRDA-1 files on demand in real-time. One
commenter specifically recommended that the pilot should only include
functional requirements that are required in Stage 2, 2014 Edition
certification.
Response: We recognize the importance of engaging vendors, federal
partners, and other private sector experts in the validation process,
and we intend to do so going forward. We intend to reach out to vendors
prior to implementation of the pilot to compare current product
capabilities relative to pilot requirements. As described in our
proposed policy, the only requirements for participation are that
hospitals must meet the Medicare EHR Incentive Program Stage 2 criteria
(77 FR 53968 through 54162) and be able to produce QRDA Category 1
Release 2 extracted data (individual patient data) for at least 6 of
the 16 measures in the STK, VTE, ED, and PC topic areas. We realize
that this may limit participation of hospitals who qualify for
meaningful use based on reporting of other measures. Our proposed
policy does not require that hospitals are able to produce QRDA-1 files
in real time, only that hospitals are able to produce these files.
We have instructed the CDAC contractor to be very flexible so that
if a hospital cannot produce QRDA-1 files or the measures of interest
in real-time, but can provide them later, our contractor will accept
them later during the pilot project data collection period. Similarly,
we have directed CDAC to work out a flexible process if some hospitals
are not able to generate patient lists for the ED, STK, VTE, or PC
measure sets in real time. We intend to revise our pilot data
collection materials to reflect that flexibility. We are not aware of
any other specific functional requirements in the pilot materials
proposed that are not part of stage 2, 2014 edition certification. We
believe that we can complete outreach and collaborative activities
before and after the validation pilot within the framework of the
policy we have proposed.
During the pilot itself, we will allow CDAC to engage with the
vendor with the hospital's permission, and can do so within the
confines of the policy as proposed. However, we will not reimburse
vendors. As we describe in the burden section XIII.B.6. of the preamble
of this final rule, we will limit reimbursement to hospitals for the
costs associated with one staff person participating for up to 16 hours
and costs associated with providing medical records. We believe this is
reasonable as it is in the business interests of vendors to support
hospitals that need QRDA Category-1 files.
Comment: Most commenters believe that the validation pilot should
accommodate a comparison of chart-abstracted and electronic clinical
quality measure outcomes for the same measures, and/or that CMS should
clarify whether it will evaluate whether the intent of the chart-
abstracted and electronic clinical quality measures are the same.
In contrast, several commenters specifically noted that one should
not expect the same result from a manual process (which allows for
differences in documentation practices, judgment, and error and
accommodates data from multiple sources) as from an electronic process
which extracts data from a ``defined specific data element location,''
or that the processes for electronic clinical quality measure
validation should be ``independent'' from validation of chart-
abstracted measures. One of these commenters also advised that CMS
acknowledge the role of customization in creating variability

[[Page 50272]]

in records and that data can be unstructured in the EHR and that
provider documentation can vary and still support the intent of the
measure.
Response: We understand that although the purpose of validation for
chart-abstracted and electronic clinical quality measures are the same,
the outcomes of validation may be different for many reasons, including
what was described by the commenter above. We agree with commenters
that our validation process should also include a comparison of chart-
abstracted and electronic clinical quality measure outcomes for the
same measures and will add this to our electronic clinical quality
measures validation pilot as finalized below.
We also are aware that hospitals may customize software in ways
that create reporting errors and that individual providers may create
errors by using the software in a manner other than that intended by
the manufacturer. We understand, from a scoring perspective, that we
can only hold vendors and hospitals accountable for achieving an
outcome that should be generated based on existing standards and
specifications. In addition to problems that may arise because of
misalignment or errors in standards or specifications, we also are
aware that hospitals may customize software in ways that create errors
and that individual providers may create errors by using the software
in a manner other than intended. We did not include a proposal for
scoring individual hospitals, because we are aware that vendors have no
choice but to code to existing specifications and standards. We intend
to partner with stakeholders to assist in interpreting results and help
develop a validation strategy that addresses these issues.
We also understand that provider documentation may vary, be located
in unstructured fields, and still support the measure. We intend that
our validation pilot will be able to distinguish among these many
different threats to accuracy as well as identify times when
variability in documentation does not threaten accuracy. We further
believe that the pilot will be a rich source of information about all
of these scenarios.
Comment: A few commenters raised issues related to the questions
included in the detailed participation pilot materials posted on
QualityNet describing the EHR walkthrough process. One commenter
recommended that CMS include vendors as a source of information for
many of the questions in the interview document that CMS posted on the
QualityNet Web site to document the methodology we proposed to use for
the validation pilot as noted in CMS' proposal. This commenter also
requested additional guidance on the purpose of these questions and
their relation to the outcome of the pilot and encouraged us to develop
a final process that minimized burden to providers and the health
system. One commenter recommended that the electronic clinical quality
measure data validation pilot exclude assessment of EHR features,
focusing instead on the health data of the EHR.
Response: We assume that when the first commenter was requesting
guidance on the Electronically Specified Clinical Quality Measures
Program Walk-through and Interview Document, the commenter was
referring to questions related to ``acceptability of remote technology
for validation'' as the other questions have a very clear relationship
to the range of technical issues that this commenter raised in relation
to electronic clinical quality measure validation generally. This
section on ``acceptability of remote technology for validation''
includes the questions assessing EHR features that one commenter
suggested we remove. We agree that vendors may be a better source of
information for these questions, and therefore, intend to remove
questions 9-12 based on the comments received. The purpose of the
remaining questions in this section is to gauge the general level of
acceptability of the approach that we are piloting, and to judge how
many hours of staff time hospitals would be willing and capable of
dedicating to validation activities to support to ensure reliable
electronic clinical quality measure data. We intend to retain questions
6-8 and 13-15, because we would value hospitals' opinions about these
ideas.
Comment: Several commenters urged CMS to implement the
recommendations of a March 2014 GAO report to ``develop a comprehensive
strategy for ensuring that data collected and reported using certified
EHR technology are reliable, including testing for and mitigation of
reliability issues arising from variance in certified EHR systems
tested to different CQM specifications.'' \118\
---------------------------------------------------------------------------

\118\ Electronic Health Record Programs: Participation Has
Increased, but Action Needed to Achieve Goals, Including Improved
Quality of Care: Report to Congressional Committees. (GAO
Publication No. GAO-14-207). Retrieved from U.S. Government
Accountability Office: https://www.gao.gov/assets/670/661399.pdf.
---------------------------------------------------------------------------

Response: We agree that reliability of data collected and reported
using certified EHR technology is critical. As proposed, our validation
pilot is intended to develop a methodology that achieves that goal. We
intend to address problems arising from the fact that certified EHR
systems may have been tested to specifications issued in different
years, by only including in the pilot only those data certified to 2014
specifications. We will take the recommendations of the GAO report as a
whole into consideration in future policy-making.
Comment: One commenter specifically wanted to know how the
validation pilot would align with Meaningful Use specifications when
the QRDA does not take into account any information from scanned
documents, text, and documentation added at a later time.
Response: We understand that Meaningful Use specifications require
that QRDA files extract data only from structured fields and therefore,
the QRDA does not take into account data from scanned documents, text,
and documentation added at a later time. Our proposed validation
strategy was developed to acknowledge that because the QRDA does not
take into account data from scanned documents, text, and documentation
added at a later time, even the perfect EHR system could produce
clinically meaningless validation results in contrast to chart-
abstracted validation. In addition, as described above in this section,
many commenters have observed errors in standards and specifications.
By employing CDAC to look at the entire content of the record during
our validation process, as we have described in our proposal, we hope
to be able to identify those situations in which the calculated measure
does not produce results consistent with the intent of the measure. We
recognize that our validation pilot test may uncover problems that are
not the fault of the provider, hospital, or developer, which is one of
the goals of this pilot. We note that we have not proposed a process
for scoring hospitals based on validation findings.
Comment: One commenter requested further details regarding what
controls will be put into place to allow CDAC to remotely view records
in real-time.
Response: The process that we intend to use to access medical
records remotely contains several important controls to prevent
unauthorized access to hospital systems. We clarify that access would
be pursuant to a request by CDAC for the minimum necessary access to
such records that includes an assertion of CDAC's legal authority
(including the applicable basis(-es) under HIPAA) for such access. The
Bomgar software that we intend to use is installed on a secure CMS-
owned

[[Page 50273]]

system that has safeguards in place in accordance with the HIPAA
Security Rule to protect sensitive patient data. The Bomgar software is
configured to transmit all information exchanged during the medical
record review through CMS-owned hardware at a secure facility. All
information needed to access hospital systems remotely is guarded by
strong HTTPS secure socket layer (SSL) encryption, which protects the
information as it is transmitted from the hospital to the CDAC. This
hardware and software, which CDAC will use to access medical records
remotely, will not store any information about the medical records
themselves. Only a limited number of CDAC personnel, authorized by CMS,
will have access to the Bomgar device. For more information, see: video
https://www.bomgar.com/products/security.
In addition, CDAC contractors employ security controls to protect
medical record information as follows: (1) all screen captures saved
and QRDA files received by CDAC contractors are controlled and
monitored according to security standards established by the National
Institute of Standards and Technology (NIST); \119\ (2) all Protected
Health Information (PHI) is encrypted on all CDAC servers; and (3)
firewalls and servers are monitored by CMS security contractors. Only a
limited number of CDAC personnel have been granted access to view any
PHI. These CDAC personnel undergo background checks and undergo privacy
and security training prior to being issued passwords to view records
containing PHI. All of these security controls are audited in
compliance with CMS Security Standards.\120\
---------------------------------------------------------------------------

\119\ https://csrc.nist.gov/, last accessed 7/17/2014.
\120\ https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-Information-Technology/InformationSecurity/?redirect=/informationsecurity, last accessed 7/17/2014.
---------------------------------------------------------------------------

Comment: One commenter who supported CMS' validation plan for
electronic clinical quality measures also agreed ``that the development
or identification of existing computerized applications that can assist
hospitals in self-validation and functionalities will be useful in
self-validation of eCQMs.'' The commenter believed this process could
take the place of the current internal inter-rater reliability (IRR)
efforts (on abstracted data) and ensure accurate data capture
practices.
Response: We will consider this suggestion to develop tools to
replace more labor-intensive quality control efforts such as inter-
rater reliability efforts (that is, comparing chart-abstracted results
from two different abstractors) in development of future policies.
We thank the commenters for their comments. We will consider them
as we develop plans to validate electronic clinical quality measure
data.
After consideration of public comments on our proposal to conduct a
validation pilot test for electronically specified measures in FY 2015,
we are finalizing the policy as proposed with a few minor
modifications.
We will compare results generated from QRDA-1 files with data from
up to 10 sources identified through chart-abstraction as proposed. In
addition, we will compare measure outcomes abstracted from electronic
clinical quality measure specifications to those abstracted according
to chart-abstracted specifications. Also, we plan to remove the
questions related to ``acceptability of remote technology for
validation'' and to EHR functionality from the ``Electronically
Specified Clinical Quality Measures Program Walk-through and
Interview'' document and reflect our intended flexible approach to
accommodate hospitals that cannot produce patient lists or QRDA-1 files
in real time as long as submissions can occur during the data
collection period for the pilot project. We also intend to reach out to
stakeholders to collaborate in preparing for the pilot and interpreting
results after the pilot.
f. Data Submission Requirements for Quality Measures That May Be
Voluntarily Electronically Reported for the FY 2017 Payment
Determination
We believe that collection and reporting of data through health
information technology will greatly simplify and streamline reporting
for many CMS quality reporting programs. Through electronic reporting,
hospitals will be able to leverage EHRs to capture, calculate, and
electronically submit quality data that is currently manually chart-
abstracted and submitted to CMS for the Hospital IQR Program. As we
noted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51614), we
recognize the need to align and harmonize measures across CMS quality
reporting programs to minimize the reporting burden imposed on
hospitals. In the Medicare EHR Incentive Program Stage 2 final rule (77
FR 54083 through 54087), we finalized a total of 29 clinical quality
measures from which hospitals must select at least 16 measures covering
three National Quality Strategy (NQS) domains to report beginning in FY
2014. We anticipate that, as health information technology evolves and
infrastructure is expanded, we will have the capacity to accept
electronic reporting of many of the chart-abstracted measures that are
currently part of the Hospital IQR Program.
In the FY 2014 IPPS/LTCH PPS final rule, for the STK (with the
exception of STK-1), VTE, ED, and PC measure sets, we allowed hospitals
to either: (1) electronically report at least one quarter of CY 2014
(Q1, Q2, or Q3) quality measure data for each measure in one or more of
those four measure sets; or (2) continue reporting all measures in
those four measure sets using chart-abstracted data for all four
quarters of CY 2014 (78 FR 50818).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28242 through
28243) for the FY 2017 payment determination, we proposed to expand
this policy, such that providers may select to voluntarily report any
16 of the 28 Hospital IQR Program electronic clinical quality measures
that align with the Medicare EHR Incentive Program as long as those 16
measures span three different NQS domains. The 28 measures are listed
in the table below. Only 28 of the 29 measures adopted in the Medicare
EHR Incentive Program are applicable for the Hospital IQR Program,
because the measure ED-3 Median time from ED arrival to ED departure
for discharged ED patients (NQF 0496) is an outpatient setting
measure. We expect eligible hospitals to select measures that best
apply to their patient mix.

----------------------------------------------------------------------------------------------------------------
Available data
Short name Measure name NQF number NQS domain \121\ submission modes
----------------------------------------------------------------------------------------------------------------
ED-1.................... Median time from ED NQF 0495 Engagement. quality measure or
departure for chart-abstracted.
admitted ED patients.
ED-2.................... Admit Decision Time to NQF 0497 Engagement. quality measure or
Admitted Patients. chart-abstracted.

[[Page 50274]]

PC-01................... Elective delivery NQF 0469 Effectiveness. quality measure or
aggregate, submitted chart-abstracted
via Web-based tool or aggregated with Web-
electronic clinical based submission.
quality measure).
Stroke-2................ Discharged on NQF 0435 Effectiveness. clinical quality
therapy. measure.
Stroke-3................ Anticoagulation NQF 0436 Effectiveness. clinical quality
fibrillation/flutter. measure.
Stroke-4................ Thrombolytic therapy.. NQF 0437 Effectiveness. quality measure or
chart-abstracted.
Stroke-5................ Antithrombotic therapy NQF 0438 Effectiveness. clinical quality
hospital day two. measure.
Stroke-6................ Discharged on statin NQF 0439 Effectiveness. quality measure or
chart-abstracted.
Stroke-8................ Stroke education...... N/A Patient and Family Electronic clinical
Engagement. quality measure or
chart-abstracted.
Stroke-10............... Assessed for NQF 0441 clinical quality
measure.
VTE-1................... Venous thromboembolism NQF 0371 quality measure or
chart-abstracted.
VTE-2................... Intensive care unit NQF 0372 quality measure or
thromboembolism chart-abstracted.
prophylaxis.
VTE-3................... Venous thromboembolism NQF 0373 Effectiveness. quality measure or
anticoagulation chart-abstracted.
overlap therapy.
VTE-4................... Patients receiving un- N/A Clinical Process/ Voluntary electronic
fractionated Heparin Effectiveness. clinical quality
with doses/labs measure.
monitored by protocol.
VTE-5................... VTE discharge N/A Patient and Family Electronic clinical
instructions. Engagement. quality measure or
chart-abstracted.
VTE-6................... Incidence of N/A Patient Safety........ Electronic clinical
potentially quality measure or
preventable VTE. chart-abstracted.
AMI-2................... Aspirin Prescribed at NQF 0142 Effectiveness. clinical quality
measure.
AMI-7a.................. Fibrinolytic Therapy NQF 0164 Effectiveness. quality measure or
minutes of Hospital chart-abstracted.
Arrival.
AMI-8a.................. Primary PCI Received NQF 0163 Effectiveness. clinical quality
Hospital Arrival. measure.
AMI-10.................. Statin Prescribed at NQF 0639 Effectiveness. clinical quality
measure.
PN-6.................... Initial Antibiotic NQF 0147 Healthcare Resources. clinical quality
community-acquired measure.
pneumonia (CAP) in
Immunocompetent
Patients.
SCIP-Inf-1a............. Prophylactic NQF 0527 clinical quality
Within One Hour Prior measure.
to Surgical Incision.
SCIP-Inf-2a............. Prophylactic NQF 0528 Healthcare Resources. clinical quality
for Surgical Patients. measure.
SCIP-Inf-9.............. Urinary catheter NQF 0453 clinical quality
Postoperative Day 1 measure.
(POD 1) or
Postoperative Day 2
(POD 2) with day of
surgery being day
zero.
PC-05................... Exclusive Breast Milk NQF 0480 Effectiveness. clinical quality
subset measure PC-05a measure.
Exclusive Breast Milk
Feeding Considering
Mother[acute]s Choice.
EHDI-1a................. Hearing Screening NQF 1354 Effectiveness. clinical quality
Discharge. measure.
CAC-3................... Home Management Plan N/A Patient and Family Voluntary electronic
of Care (HMPC) Engagement. clinical quality
Document Given to measure.
Patient/Caregiver.
HTN..................... Healthy Term Newborn.. NQF 0716 clinical quality
measure.
----------------------------------------------------------------------------------------------------------------
\121\ Medicare EHR Incentive Program Stage 2 final rule (77 FR 54083 through 54087).

Comment: A commenter requested clarification regarding whether
hospitals are required to report on the ED-1 and ED-2 measures for FY
2015. If hospitals are required to report on these measures, the
commenter would like clarification regarding whether the data must be
submitted electronically as opposed to chart-abstracted.
Response: ED-1 and ED-2 are shown as voluntary electronic clinical
quality measures in the table on 79 FR 28242, but are not identified as
voluntary measures in the table on 79 FR 28241. We would like to
clarify that both ED-1 and ED-2 are required measures that can be
submitted either as chart-abstracted measures or as electronic clinical
quality measures under the voluntary reporting option.
For the FY 2017 payment determination, we also proposed to expand
the reporting requirement of electronic clinical quality measures to
require a full year's data collection and submission instead of a
minimum of one quarter. In addition, for the FY 2017 payment
determination, we proposed to

[[Page 50275]]

require data submission within approximately 60 days after the end of a
calendar year quarter. We have listed the proposed submission deadlines
in the table below. We also refer readers to section IX.D.2. of the
preamble of this final rule for a description of the electronic
clinical quality measures data reporting periods and proposed
submission deadlines.

CY 2015/FY 2017 Electronic Clinical Quality Measures Data Reporting Periods and Proposed Submission Deadlines
----------------------------------------------------------------------------------------------------------------
CY 2015 quarter Reporting period (2015) Proposed submission deadline
----------------------------------------------------------------------------------------------------------------
1............................. January 1-March 31.................. May 30, 2015.
2............................. April 1-June 30..................... Aug 30, 2015.
3............................. July 1-September 30................. Nov 30, 2015.
4............................. October 1-December 31............... Feb 28, 2016.
----------------------------------------------------------------------------------------------------------------

As an incentive for hospitals to voluntarily submit electronic
clinical quality measures, we proposed that for the FY 2017 payment
determination, hospitals successfully submitting electronic clinical
quality measures according to our procedures will not have to validate
those measures by submitting chart-abstracted data.
By proposing these changes, we would further align the Hospital IQR
Program and the Medicare EHR Incentive Program and promote greater
electronic clinical quality measure data reporting for hospitals. In
addition, we believe that these changes would ease hospitals'
administrative burden, as they will be able to report the same clinical
quality measures once to partially satisfy both the Hospital IQR and
Medicare EHR Incentive Programs' requirements.
We invited public comment on this proposal.
Comment: One commenter requested that CMS allow hospitals to
electronically report data for one calendar quarter instead of an
entire CY.
Response: We refer readers to section IX.A.2.h.(1) of the preamble
of this final rule where we are finalizing a modification of our
proposal, which will only require one CY quarter of electronic clinical
quality measure data for those hospitals that elect to participate in
the voluntary electronic clinical quality measures reporting option.
Comment: A commenter supported the inclusion of voluntary reporting
for certain electronic clinical quality measures for the Hospital IQR
Program, and noted that voluntary reporting allows hospitals to be
better prepared for submitting new quality measures from EHRs and to
correct any operational issues that arise. Another commenter supported
the long-term goal of using EHRs to streamline and reduce the burden of
quality reporting while increasing access to real-time information to
improve care and patient outcomes. One commenter supported the proposal
that hospitals electronically report a full year of data on the 12
Hospital IQR Program measures that overlap with the 2014 Medicare EHR
Incentive Program measures.
Response: We thank the commenters for their support and, as noted
in the response above, we have modified in our finalized policy the
number of quarters of data to be reported by those hospitals that elect
to participate in the voluntary electronic clinical quality measures
reporting option.
Comment: One commenter requested clarification on whether the
deadlines for submitting chart-abstracted measures remain the same
given the proposal for requiring data submission within 60 days after
the calendar year quarter ends for electronic clinical quality
measures. Commenters also stated that the shortened time frame for
reporting measure data poses a burden on facilities and increases the
possibility of errors, which could affect measure scores and,
therefore, payment.
Response: We would like to clarify that we did not propose any
changes to the submission requirements for chart-abstracted measures
(79 FR 28245). We retained the 4\1/2\ months quarterly submission
deadline (78 FR 50811). In addition, we are not finalizing the 60 day
quarterly submission deadline for electronic clinical quality measures.
We refer readers to section IX.A.2.h.(1) of the preamble of this final
rule where this is discussed in more detail.
Comment: Some commenters supported the alignment of measures and
reporting requirements and timelines across quality reporting and
incentive programs, specifically noting that this alignment would
reduce hospital's administrative burden and confusion, uses the later
Hospital IQR Program deadlines, reduce the number of quarters required
until the transition is complete, and does not delay incentive
payments. Some commenters argued that CMS' timeline for alignment is
aggressive and requested CMS give hospitals time to comply with this
requirement. Commenters noted that EHRs are not ready for year two of
Stage 1 meaningful use criteria or Stage 2 meaningful use criteria.
Other commenters opposed CMS' proposal to require Q4 2014 and Q1
2015 data submission by May 15, 2015, stating that it does not provide
enough time for data submission, particularly for hospitals that
conduct manual chart abstraction.
Response: We thank the commenters for supporting our proposal to
align reporting between the Hospital IQR Program and the Medicare EHR
Incentive Program. We proposed to begin aligning the reporting periods
between the two programs beginning with the CY 2015 reporting period.
We believe some commenters may have confused the proposed electronic
clinical quality measure requirements of the Medicare EHR Incentive
Program with the proposed electronic clinical quality measure
submission requirements for the Hospital IQR Program.
We proposed for the Hospital IQR Program, that hospitals choosing
to submit electronic clinical quality measures would need to submit all
four quarters of CY 2015, whereas the Medicare EHR Incentive Program
proposed to require only the first three quarters of CY 2015 (79 FR
28245 through 28246). However, we are not finalizing our proposal for
hospitals to submit electronic clinical quality measures for all four
quarters for the Hospital IQR Program and are instead finalizing a
modified policy. We refer readers to section IX.A.2.h.(1) of the
preamble of this final rule where this is discussed in more detail. We
recognize that many hospitals have faced challenges moving to the
latest CQM versions, which is why electronic clinical quality measure
reporting remains voluntary at this time.
Comment: One commenter noted that they appreciated the opportunity
to gain experience with voluntary electronic

[[Page 50276]]

reporting for the Hospital IQR Program before such reporting is made
mandatory. The commenter also asked that CMS provide further
explanation on the set of voluntary electronic clinical quality
measures within the Hospital IQR Program.
Response: We refer the commenter to the table above listing the 28
possible electronic clinical quality measures. If a hospital chooses to
submit electronic clinical quality measures, the hospital must submit
16 of the 28 possible measures covering three NQS domains. Please note
that 12 of the 28 measures are measures required in the Hospital IQR
Program. These 12 measures do cover three NQS domains. We would like to
clarify that if a hospital chooses to submit electronic clinical
quality measures, chart-abstraction of those submitted measures is not
necessary.
Comment: One commenter urged CMS to be mindful of safety net
hospitals' limited resources when proposing new requirements for
reporting measure data electronically. The commenter advised that
electronic reporting of quality data requires significant work to
obtain, validate, and report and that it also requires information
technology and quality management resources. The commenter stated that
many hospitals are struggling to meet the current electronic data
reporting requirements and that additional requirements will increase
hospital expenses for labor, data analysis, and validation.
Response: We note that reporting electronic clinical quality
measure data remains voluntary for CY 2015 reporting/FY 2017 payment
determination. We believe that our electronic clinical quality measure
reporting voluntary reporting option is not unduly burdensome to
hospitals, and will allow hospital an opportunity to prepare for
electronic reporting of quality measure data. As data becomes more
standardized, it is expected that provider burden will decrease over
time. In addition, we have modified our proposal for CY 2015 so that
for those hospitals choosing to submit electronic clinical quality
measures, only one quarter of data submission is necessary to meet the
Hospital IQR Program requirement. We want to clarify that we have not
made proposals for CY 2016 electronic clinical quality measure
reporting/FY 2018 payment determination. These will be addressed in
future rulemaking.
Comment: One commenter raised concern that participation in the
voluntary electronic clinical quality measure program under the
Hospital IQR Program would be low and would therefore, not provide the
data to inform future policy direction. In order to make the voluntary
electronic clinical quality measure program more attractive to
hospitals, the commenter recommended that CMS work with payers and
quality assurance organizations to further align measure sets, provide
electronic clinical quality measure specifications at least nine months
before each relevant reporting period, allow providers to post or omit
electronically-generated electronic clinical quality measure data to
Hospital Compare, and either require only one-quarter of electronic
clinical quality measure data in order to fulfill EHR MU and Hospital
IQR Program requirements, or incorporate a robust logic model to
monitor and evaluate the burdens and benefits associated with more
frequent reporting.
Response: We are actively working with measure developers/stewards
to align measure sets and revise measure specifications, as needed.
Issues identified by measure stakeholders should be reported to ONC's
JIRA tool at: https://jira.oncprojectracking.org/browse/CQM where all
stakeholders can comment and follow the progress of the issue.
Electronic clinical quality measure specifications are published/
updated annually at: https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. Also, we are
modifying our proposal so that for those hospitals choosing to submit
electronic clinical quality measures, only one quarter of data
submission is necessary to meet the Hospital IQR Program requirements.
We refer readers to section IX.A.2.h.(1) of the preamble of this final
rule where this is discussed in more detail.
After consideration of the public comments we received, we are
finalizing our proposals with some modifications. We are finalizing our
policy for hospitals that chose to participate in the voluntary
electronic reporting option in CY 2015 must report any 16 of the 28
measures across 3 NQS domains as proposed. We are also finalizing that
we will only accept the April 2014 version of the measure
specifications for CY 2015 reporting/FY 2017 payment determination.
Policies for electronic clinical quality measure reporting in CY 2016
and subsequent years will be made in future rulemaking. We are
finalizing a modified version of our proposal to expand the reporting
requirement of electronic clinical quality measures to require a full
year's data collection to only requiring one quarter's worth of data.
In addition, we are finalizing a modified version of our proposal to
require data submission within approximately 60 days after the end of a
calendar year quarter to require submission of CY Q1, Q2, or Q3 data by
November 30, 2015. We refer readers to section IX.A.2.h.(1) of the
preamble of this final rule for a more detailed discussion.
We note that hospitals choosing to report at least one quarter of
quality measure data electronically are not required, but are
encouraged, to also submit the same data via chart-abstraction. We
understand that many hospitals may be submitting chart-abstracted
quality measure data to TJC so the reporting burden would not be
increased. Hospitals will gain experience in understanding the
differences in the submission methods.
Hospitals voluntarily submitting electronically specified clinical
quality measures will utilize their existing QualityNet account to
submit electronic quality measure data.
12. Data Accuracy and Completeness Acknowledgement Requirements for the
FY 2017 Payment Determination and Subsequent Years
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53554) for information for details on DACA requirements for the FY 2017
payment determination and subsequent years.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not
propose any changes to DACA form requirements.
We did not invite public comment regarding DACA requirements, but
received one comment that we are addressing below.
Comment: One commenter expressed concerns that the Data Accuracy
and Completeness Acknowledgement statement for hospitals does not
provide a means for hospitals to indicate to CMS any errors they have
discovered in their quality reporting throughout the year. The
commenter observed that a hospital may discover in the fourth quarter
an error in the data that was submitted in the first quarter of the
year, but the DACA only permits a `Yes' or `No' response regarding
whether all of the data was complete and accurate to the best of their
knowledge at the time of submission, which does not provide a means for
fixing any errors. The commenter observed that there also should be a
process for fixing such errors from prior years.
Response: We currently provide a review and correction process for
Hospital IQR Program process of care, HAI, and HCAHPS data during the
submission period. Hospitals can review their measure rate before the
submission deadline, and can review patient-level data to correct any
identified errors on

[[Page 50277]]

previously submitted data. We strongly encourage hospitals to closely
review their Hospital IQR Program measure and patient feedback reports
to detect these errors before the submission deadline. We do not allow
patient-level data correction after the submission deadline or for
previous years. We must set a deadline to ensure timely computation of
measure rates, Hospital VBP performance scores and payment adjustment
factors.
13. Public Display Requirements for the FY 2017 Payment Determination
and Subsequent Years
We refer readers to the FY 2008 IPPS final rule (72 FR 47360), the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77
FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for
details on public display requirements for the FY 2017 payment
determination and subsequent years.
The Hospital IQR Program quality measures are typically reported on
the Hospital Compare Web site at: https://www.medicare.gov/hospitalcompare, but on occasion are reported on other CMS Web sites
such as https://www.cms.gov and/or https://data.medicare.gov.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not
propose any changes to public display requirements.
14. Reconsideration and Appeal Procedures for the FY 2017 Payment
Determination and Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR
50836), and at 42 CFR 412.140(e) for details on reconsideration and
appeal procedures for the FY 2017 payment determination and subsequent
years.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not
propose any changes to the reconsideration and appeals procedures.
15. Hospital IQR Program Extraordinary Circumstances Extensions or
Exemptions
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836
through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital
IQR Program extraordinary circumstances extensions or waivers. In the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28253) we did not propose
any substantive changes to these policies or the processes. However, in
the future, we will refer to the process as the Extraordinary
Circumstances Extensions or Exemptions process. We are currently in the
process of revising the Extraordinary Circumstances/Disaster Extension
or Waiver Request form, previously approved under OMB control number
0938-1171.
In addition, we proposed to make a conforming change from the
phrase ``extension or waiver'' to the phrase ``extension or exemption''
in 42 CFR 412.140(c)(2). Section 412.140(c)(2) currently states that
upon request by a hospital, CMS may grant an extension or waiver of one
or more data submission deadlines in the event of extraordinary
circumstances beyond the control of the hospital. Specific requirements
for submission of a request for an extension or waiver are available on
QualityNet.org. We proposed to revise this language to state that upon
request by a hospital, CMS may grant an extension or exemption of one
or more data submission deadlines in the event of extraordinary
circumstances beyond the control of the hospital. Specific requirements
for submission of a request for an extension or exemption are available
on QualityNet.org.
We did not receive any public comments on this proposal and we are
finalizing this policy as proposed.

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

1. Statutory Authority
Section 3005 of the Affordable Care Act added new sections
1866(a)(1)(W) and (k) to the Act. Section 1866(k) of the Act
establishes a quality reporting program for hospitals described in
section 1886(d)(1)(B)(v) of the Act (referred to as ``PPS-Exempt Cancer
Hospitals'' or ``PCHs''). Section 1866(k)(1) of the Act states that,
for FY 2014 and each subsequent fiscal year, a PCH must submit data to
the Secretary in accordance with section 1866(k)(2) of the Act with
respect to such a fiscal year. Section 1866(k)(2) of the Act provides
that, for FY 2014 and each subsequent fiscal year, each hospital
described in section 1886(d)(1)(B)(v) of the Act must submit data to
the Secretary on quality measures specified under section 1866(k)(3) of
the Act in a form and manner, and at a time, specified by the
Secretary.
Section 1866(k)(3)(A) of the Act requires that any measure
specified by the Secretary must have been endorsed by the entity with a
contract under section 1890(a) of the Act, unless an exception under
section 1866(k)(3)(B) of the Act applies. The National Quality Forum
(NQF) currently holds this contract. The NQF is a voluntary, consensus-
based, standard-setting organization with a diverse representation of
consumer, purchaser, provider, academic, clinical, and other health
care stakeholder organizations. The NQF was established to standardize
health care quality measurement and reporting through its consensus
development processes. We have generally adopted NQF-endorsed measures
in our reporting programs.
However, section 1866(k)(3)(B) of the Act provides an exception.
Specifically, it provides that, in the case of a specified area or
medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the entity with
a contract under section 1890(a) of the Act, the Secretary may specify
a measure that is not so endorsed as long as due consideration is given
to measures that have been endorsed or adopted by a consensus
organization identified by the Secretary.
Under section 1866(k)(3)(C) of the Act, the Secretary was required
to publish the measures select for PCHs no later than October 1, 2012,
with respect to FY 2014.
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making public the data submitted by PCHs under the PPS-
Exempt Cancer Hospital Quality Reporting (PCHQR) Program. Such
procedures must ensure that a PCH has had the opportunity to review the
data that are to be made public with respect to the PCH prior to such
data being made public. The Secretary must report measures of
processes, structural measures, measures of outcomes, patients'
perspective on care, efficiency, and costs of care that relate to
services furnished by PCHs on the CMS Web site.
2. Covered Entities
Section 1886(d)(1)(B)(v) of the Act excludes particular cancer
hospitals from payment under the IPPS. This final rule covers only
those PPS-excluded cancer hospitals meeting eligibility criteria
specified in 42 CFR 412.23(f).
3. Previously Finalized PCHQR Program Quality Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through
53561), we finalized five quality measures for the FY 2014 program and
subsequent years. Specifically, we finalized two of the CDC NHSN-based
HAI quality measures (outcome measures): (1) CLABSI; and (2) CAUTI. We
also finalized three cancer-

[[Page 50278]]

specific process of care measures: (1) Adjuvant chemotherapy is
considered or administered within 4 months (120 days) of diagnosis to
patients under the age of 80 with the American Joint Committee on
Cancer (AJCC) III (lymph node positive) colon cancer; (2) Combination
chemotherapy is considered or administered within 4 months (120 days)
of diagnosis for women under 70 with AJCC T1c, or Stage II or III
hormone receptor negative breast cancer; and (3) Adjuvant hormonal
therapy. We also discussed the collection requirements and submission
timeframes for these measures in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53563 through 53566).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through
50840), we finalized one new quality measure for the FY 2015 program
and subsequent years. Specifically, we finalized the CDC's NHSN HAI
measure of Surgical Site Infection (SSI). We did not remove or replace
any of the previously finalized measures from the PCHQR Program for the
FY 2015 program and subsequent years.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50840 through
50846), we finalized 12 new quality measures for the FY 2016 program
and subsequent years. Specifically, we finalized six new SCIP measures,
five new clinical process/oncology care measures, and the HCAHPS Survey
for reporting beginning with the FY 2016 program and subsequent years.
We did not remove or replace any of the previously finalized measures
from the PCHQR Program for the FY 2016 program and subsequent years. We
also discussed the collection requirements and submission timeframes
for these measures in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50850
through 50853).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254), we did
not propose to remove or replace any of the previously finalized
measures from the PCHQR Program for the FY 2017 program and subsequent
years.
4. Update to the Clinical Process/Oncology Care Measures Beginning With
the FY 2016 Program
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254), beginning
with the FY 2016 program, we proposed to update the specifications for
each of the five clinical process/oncology care measures so that, for
each measure, PCHs must report all-patient data. We believe that the
delivery of high quality care in the PCH setting is critically
important and that collecting data on all patients will enable us to
ensure that high quality care is delivered to Medicare beneficiaries in
this setting. In addition, all-patient data increase transparency in
the health care system and align with State and Federal
initiatives.\122\ Our proposal to require PCHs to collect all-patient
data provides us with the data necessary to inform the public
accurately about the quality of care and patient outcomes in the PCH
setting. In addition, this proposal will align the specifications of
the clinical process/oncology care measures with those of the SCIP
PCHQR measures, for which all-patient data are required for submission.
---------------------------------------------------------------------------

\122\ All-Payer Claims Database (APCD) Fact Sheet; available at:
https://www.apcdcouncil.org/issue-briefs-and-fact-sheets.
---------------------------------------------------------------------------

We welcomed public comments on this proposal for the clinical
process/oncology care measures for the FY 2016 program and subsequent
years.
Comment: One commenter supported the proposal to require PCHs to
report all-patient data for the five clinical process/oncology care
measures, noting that it is consistent with reporting requirements in
other CMS quality reporting programs.
Response: We thank the commenter for its support.
After consideration of the public comments we received, we are
finalizing our proposal requiring PCHs to submit all-patient data for
the five clinical process/oncology care measures beginning with the FY
2016 program.
5. New Quality Measure Beginning With the FY 2017 Program
a. Considerations in the Selection of Quality Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556) and in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50838), we indicated
that we have taken a number of principles into consideration when
developing and selecting measures for the PCHQR Program, and that many
of these principles are modeled on those we use for measure development
and selection under the Hospital IQR Program:
Public reporting should rely on a mix of standards,
outcomes, process of care measures, and patient experience of care
measures, including measures of care transitions and changes in patient
functional status.
The measure set should evolve so that it includes a
focused core set of measures appropriate to cancer hospitals that
reflects the level of care and the most important areas of service
furnished by those hospitals. The measures should address gaps in the
quality of cancer care.
We also consider input solicited from the public through
rulemaking and public listening sessions.
We consider suggestions and input from a PCH Technical
Expert Panel (TEP), convened by a CMS measure development contractor,
which rated potential PCH quality measures for importance, scientific
soundness, usability, and feasibility. The TEP membership includes
health care providers specializing in the treatment of cancer, cancer
researchers, consumer and patient advocates, disparities experts, and
representatives from payer organizations.
Like the Hospital IQR Program, the PCHQR Program supports the
National Quality Strategy (NQS), national priorities, HHS Strategic
Plans and Initiatives, the CMS Quality Strategy, and strives to reduce
the burden on participating PCHs whenever possible. The PCHQR Program
also takes into consideration the recommendations of the Measure
Applications Partnership (MAP). The MAP is a multi-stakeholder body
convened by the NQF for the purpose of providing input to HHS on the
selection of measures.
b. New Quality Measure Beginning With the FY 2017 Program
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28254 through
28456), we proposed to adopt one new clinical effectiveness measure for
the FY 2017 program and subsequent years: External Beam Radiotherapy
for Bone Metastases (NQF 1822). The proposed clinical
effectiveness measure was included on a publicly available document
entitled ``List of Measures under Consideration for December 1, 2013,''
a list of quality and efficiency measures being considered for use in
various Medicare programs. The proposed measure was submitted to the
MAP Hospital Workgroup for review. The MAP supported the inclusion of
this measure in the PCHQR Program. The MAP's conclusions may be found
in the ``MAP Pre-Rulemaking Report: 2014 Recommendations on Measures
Under Consideration by HHS,'' which is available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. We considered the MAP's input and recommendations for
this proposed measure for the PCHQR Program, and specifically, we note
that the proposed measure addresses the MAP priority of palliative care
for cancer patients. In addition, the proposed measure addresses the
NQS domain of effective clinical care.

[[Page 50279]]

We believe that this NQF-endorsed measure, developed by the
American Society for Radiation Oncology (ASTRO), meets the requirement
under section 1866(k)(3)(A) of the Act that measures specified for the
PCHQR generally be endorsed by the entity with a contract under section
1890(a) of the Act (currently the NQF). This measure assesses the
percentage of patients (both Medicare and non-Medicare) with painful
bone metastases and no history of previous radiation who receive EBRT
with an acceptable dosing schedule. The measure numerator includes all
patients with painful bone metastases and no previous radiation to the
same site who receive EBRT with any of the following recommended
fractionation schemes: 30Gy/10fxns; 24Gy/6fxns; 20Gy/5fxns; or 8Gy/
1fxn. The measure denominator includes all patients with painful bone
metastases and no previous radiation to the same site who receive EBRT.
The following patients are excluded from the denominator: patients who
have had previous radiation to the same site; patients with femoral
axis cortical involvement greater than 3 cm in length; patients who
have undergone a surgical stabilization procedure; and patients with
spinal cord compression, cauda equina compression, or radicular pain.
For the reasons explained more fully below, we believe that this
measure will reduce the rate of EBRT services overuse, support our
commitment to promoting patient safety, and support the NQS domains.
Bone metastases are a common manifestation of malignancy. Some
cancer types have a bone metastasis prevalence as high as 70 to 95
percent.\123\ EBRT can provide significant pain relief in 50 to 80
percent of patients with painful bone metastases.\124\
---------------------------------------------------------------------------

\123\ Coleman RE. Metastatic bone disease: clinical features,
pathophysiology and treatment strategies. Cancer Treat Rev.
2001;27:165-176.
\124\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy
for bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
---------------------------------------------------------------------------

In October 2009, ASTRO organized a Task Force to perform an
assessment of existing recommendations in order to address a lack of
palliative radiotherapy guidelines. Based on a review of the
literature, the Task Force recommended the following EBRT dosing
schedules for patients with previously unirradiated painful bone
metastases: 30 Gy over the course of 10 fractions; 24 Gy over the
course of 6 fractions; 20 Gy over the course of 5 fractions; and a
single 8 Gy fraction.\125\ Despite the recommendations, the actual
doses applied for EBRT continue to include dosing schedules as high as
25 fractions.\126\ Other studies support the conclusion that shorter
EBRT schedules produce similar pain relief outcomes when compared to
longer EBRT schedules, and that patients prefer shorter EBRT schedules
because of their convenience, increased tolerability, and reduced side
effects.\127\
---------------------------------------------------------------------------

\125\ Ibid.
\126\ Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
\127\ Ibid.
---------------------------------------------------------------------------

In addition, the ASTRO Task Force found that the frequency and
severity of side effects associated with a single fraction were the
same or less than those associated with multiple fraction regimens,
indicating that shorter treatment schedules may be preferable.\128\ The
proposed External Beam Radiotherapy for Bone Metastases measure seeks
to address the performance gap in treatment variation, ensure
appropriate use of EBRT, and prevent the overuse of radiation therapy.
We believe that this measure is necessary to support patient
preferences for shorter EBRT schedules as well as to ensure patient
safety, given that shorter treatment courses show similar or fewer side
effects while producing similar clinical outcomes.
---------------------------------------------------------------------------

\128\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy
for bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
---------------------------------------------------------------------------

We believe the proposed measure is applicable to the PCH setting
because it addresses cancer care associated with radiation therapy. The
adoption of measures that apply to multiple health care settings is one
of our objectives in promoting quality care consistently across all
health care settings. Detailed specifications for this proposed measure
may be found at: https://www.Fqualityforum.Forg/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
In summary, in addition to the 18 measures that we have previously
finalized for the PCHQR Program, we proposed one new measure for
reporting beginning with the FY 2017 program. The proposed policies
regarding the form, manner, and timing of data collection for this
measure are discussed in later sections. We welcomed public comment on
this proposal.
Comment: Several commenters supported the proposed EBRT for bone
metastases measure, noting that it aims to address the variation in
practice patterns for using radiation therapy for palliative care and
promotes improved quality of inpatient care provided to Medicare
beneficiaries. However, the commenters encouraged CMS to conduct a
performance gap analysis of radiation therapy practice that is specific
to the PCH setting.
Response: We thank the commenters for their support. Radiation
therapy is a common treatment modality for some cancers, and the ASTRO
Task Force (2009) found that the literature demonstrates widespread
variation in palliative radiation dose fractionation schedules. Because
of this variation, we believe it is important to protect patient safety
in the PCH setting by addressing potentially unnecessary and harmful
radiation doses. We understand that PCHs, specifically, provide EBRT
services, and we believe that the ASTRO Task Force findings demonstrate
that the EBRT for bone metastases measure is relevant and appropriate
for the PCH setting.
We agree with the commenters' suggestions that we conduct a
``performance gap analysis'' to assess the appropriateness of the EBRT
measure in the PCH setting. We intend to conduct that analysis when we
have collected data beginning with the FY 2017 PCHQR Program.
Comment: One commenter supported the adoption of the EBRT for bone
metastases measure but recommended that CMS revise the measure to
include a broader population of patients receiving radiation therapy.
Response: We appreciate the commenter's feedback. The measure is
NQF-endorsed for the population described in the specifications. We
will continue to work closely with ASTRO to assess the current clinical
evidence base for the broader PCH population. We will consider
incorporating any future measure updates supported by clinical
evidence.
After consideration of the public comments we received, we are
finalizing the EBRT for bone metastases measure for the FY 2017 program
and subsequent years.
The table below lists all previously adopted measures as well as
the finalized measure for the PCHQR Program for the FY 2017 program and
subsequent years.

[[Page 50280]]

PCHQR Program Measures for the FY 2017 Program and Subsequent Years
[Including measure finalized in this final rule]
------------------------------------------------------------------------
Topic
-------------------------------------------------------------------------
Safety and Healthcare-Associated Infection--HAI:
(NQF 0139) NHSN Central Line-Associated
Bloodstream Infection (CLABSI) Outcome Measure \*\
(NQF 0138) NHSN Catheter-Associated Urinary Tract
Infections (CAUTI) Outcome Measure \*\
(NQF 0753) Harmonized Procedure Specific Surgical
Site Infection (SSI) Outcome Measure \*\ (currently includes SSIs
following Colon Surgery and Abdominal Hysterectomy Surgery)
Clinical Process/Cancer-Specific Treatments:
(NQF 0223) Adjuvant Chemotherapy is Considered or
Administered Within 4 Months (120 days) of Diagnosis to Patients
Under the Age of 80 with AJCC III (lymph node positive) Colon
Cancer \*\
(NQF 0559) Combination Chemotherapy is Considered
or Administered Within 4 Months (120 days) of Diagnosis for Women
Under 70 with AJCC T1c, or Stage II or III Hormone Receptor
Negative Breast Cancer \*\
(NQF 0220) Adjuvant Hormonal Therapy \*\
SCIP:
(NQF 0218) Surgery Patients who Received
Appropriate VTE Prophylaxis within 24 Hrs Prior to Surgery to 24
Hrs After Surgery End Time \*\
(NQF 0453) Urinary Catheter Removed on Post-
Operative Day 1 or Post-Operative Day 2 with Day of Surgery Being
Day Zero \*\
(NQF 0527) Prophylactic Antibiotic Received Within
1 Hr Prior to Surgical Incision \*\
(NQF 0528) Prophylactic Antibiotic Selection for
Surgical Patients \*\
(NQF 0529) Prophylactic Antibiotic Discontinued
Within 24 Hrs After Surgery End Time \*\
(NQF 0284) Surgery Patients on Beta Blocker
Therapy Prior to Admission who Received a Beta Blocker During the
Perioperative Period \*\
Clinical Process/Oncology Care Measures:
(NQF 0382) Oncology-Radiation Dose Limits to
Normal Tissues \*\
(NQF 0383) Oncology: Plan of Care for Pain \*\
(NQF 0384) Oncology: Pain Intensity Quantified \*\
(NQF 0390) Prostate Cancer-Adjuvant Hormonal
Therapy for High-Risk Patients \*\
(NQF 0389) Prostate Cancer-Avoidance of Overuse
Measure-Bone Scan for Staging Low-Risk Patients \*\
Patient Engagement/Experience of Care:
(NQF 0166) HCAHPS \*\
Clinical Effectiveness Measure:
(NQF 1822) External Beam Radiotherapy for Bone
Metastases \**\
------------------------------------------------------------------------
* Previously finalized measures.
** Finalized for the FY 2017 program and subsequent years in this final
rule.

6. Possible New Quality Measure Topics for Future Years
We seek to develop a comprehensive set of quality measures for
widespread use for informed decision-making and quality improvement in
the PCH setting. Therefore, in future rulemaking, we intend to propose
to adopt new or updated measures, such as measures that assess the
safety and efficiency of the diagnosis and treatment of cancer,
measures that take into account novel diagnostic and treatment
modalities, measures that assess symptoms and functional status, and
measures of appropriate disease management. Additional measure topics
we intend to consider include patient-centered care planning and care
coordination, shared decision-making, measures of quality of life
outcomes, and measures of admissions for complications of cancer and
treatment for cancer. We believe that such measures will help us
further our goal of achieving better health care and improved health
for Medicare beneficiaries who obtain cancer services through the
widespread dissemination and use of quality of care information.
We welcomed public comments and specific suggestions for measure
topics for the following measure domains: outcomes; quality of life;
clinical quality of care; care coordination; patient safety; patient
and caregiver experience of care; population/community health; and
efficiency. These domains align with those of the NQS, and we believe
that selecting measures to address these domains will promote better
cancer care while aligning the PCHQR Program with other established
quality reporting and pay-for-performance programs such as the Hospital
IQR Program, the Hospital OQR Program, and the Hospital VBP Program.
Comment: Several commenters supported the types of measures that
CMS stated its intent to adopt for the PCHQR Program, specifically
measures that take into account the use of novel treatments and
diagnostic tests, noting that CMS' approach will ensure that cancer
patients have appropriate access to new treatments.
Response: We thank the commenters for their support and will
consider this feedback for future rulemaking.
Comment: Several commenters suggested measure topics that CMS
should consider for future years. They recommended that CMS: (1)
develop and adopt measures on topics including benign and malignant
hematology; (2) consider measures that address non-small cell lung
cancer (NSCLC) treatment; (3) develop measures of risk-adjusted, stage-
specific survival rates for various types of cancer; (4) adopt
validated outcomes measures over process-based measures; (5) emphasize
the importance of the HCAHPS survey; and (6) consider palliative care
measures.
Response: We appreciate the commenters' suggestions and will
consider this feedback for future rulemaking. We note that, in the FY
2014 IPPS/LTCH PPS final rule, we adopted the HCAHPS survey for use in
the PCHQR Program measure set beginning with the FY 2016 program (78 FR
50844 through 50845).
Comment: One commenter supported the measure topics proposed for
consideration for the PCHQR Program in future years. Several commenters
also described the importance of ensuring that measures adopted for the
PCHQR Program be supported by the MAP, tested for their applicability,
and assessed for potential unintended consequences that may result from
their use in specific patient populations. Another commenter
recommended that CMS continue to align measures

[[Page 50281]]

adopted for the PCHQR Program with those in other IPPS quality
reporting programs.
Response: We thank the commenters for their support and comments.
We will consider this feedback in future rulemaking.
Comment: One commenter commended CMS for focusing attention on
addressing high priority measure gaps such as outcomes, quality of life
measures, safety, and overuse of care to be considered for future use
in the PCHQR Program. The commenter encouraged CMS to coordinate with
partners in addressing the following challenges: measures that require
multiple data sources; research that demonstrates gaps in care; and the
need to develop a ``core'' set of measures for a population with varied
diagnoses.
Response: We thank the commenter for its support and will strive
continually to collaborate with external stakeholders.
Generally, we retain measures from the previous years' PCHQR
Program measure sets for subsequent years. However, in future years, we
will consider developing criteria to determine whether or not to remove
or replace measures from the PCHQR Program measure set. In developing
removal criteria, we will consider those criteria used by other CMS
quality reporting programs in order to align the PCHQR Program with
those programs.
We also welcomed public comments on the criteria for removal or
replacement of measures from the PCHQR Program.
Comment: Several commenters noted that, in the FY 2015 IPPS/LTCH
PPS proposed rule, CMS proposed to remove nearly all of the SCIP
measures from the Hospital IQR Program and recommended that CMS
consider removing the six SCIP measures from the PCHQR Program.
Commenters also recommended that CMS adopt criteria for determining
``topped out'' measures and measure removal in future years.
Response: At this time, we do not have sufficient data to determine
whether these SCIP measures are ``topped-out'' in the PCH setting. We
recognize that the PCHQR patient population is exclusively comprised of
cancer patients, unlike the patient population at acute care hospitals
that are included in the Hospital IQR Program.
As a result, we will retain the PCH SCIP measures until we have
adopted ``topped out'' policy and until we have sufficient data to
conduct ``topped-out'' analyses in future years and we will continue to
monitor and evaluate the PCHQR SCIP measures. As noted above, we will
consider adopting ``topped out'' and other measure removal criteria
similar to those adopted by other quality reporting programs, including
the Hospital IQR Program, in future rulemaking.
In an effort to reduce the reporting burden for PCHs, in future
years, we will consider proposing to require PCHs to report
electronically-specified clinical quality measures for the PCHQR
Program. We believe that the collection and reporting of data through
health information technology would greatly simplify and streamline
reporting for many CMS quality reporting programs, including the PCHQR
Program. Through electronic reporting, PCHs would be able to leverage
EHRs to capture, calculate, and electronically submit quality data that
are currently manually chart-abstracted and submitted to CMS for the
PCHQR Program. In developing future proposals for electronic clinical
quality measures adoption, we will consider the need to align and
harmonize measures across various quality reporting programs to
minimize the reporting burden imposed on PCHs.
We welcomed public comments on the development of electronic
clinical quality measure reporting criteria for future years.
Comment: Several commenters supported CMS' proposal to develop
electronic clinical quality measure reporting criteria for future years
and recommended that CMS consider the content validity and clinical
appropriateness of any measures adopted for the PCHQR Program.
Response: We thank the commenters for their support and will
consider this feedback in future rulemaking.
7. Maintenance of Technical Specifications for Quality Measures
We maintain technical specifications for the PCHQR Program
measures, and we periodically update those specifications. The
specifications may be found on the QualityNet Web site at: https://qualitynet.org/dcs/ContentServer?cid=1228772356060&pagename=QnetPublic%2FPage%2FQnetTier2&c=Page.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through
53505), we finalized a policy under which we use a subregulatory
process to make nonsubstantive updates to measures used for the
Hospital IQR Program. We also adopted this process for all measures
adopted for the PCHQR Program. With respect to what constitutes
substantive versus nonsubstantive changes, we expect to make this
determination on a case-by-case basis. Examples of nonsubstantive
changes to measures might include updated diagnosis or procedure codes,
medication updates for categories of medications, broadening of age
ranges, and exclusions for a measure. We believe that nonsubstantive
changes may include updates to measures based upon changes to
guidelines on which the measures are based.
We will continue to use rulemaking to adopt substantive updates to
the measures we have adopted for the PCHQR Program. Examples of changes
that we might consider to be substantive would be those in which the
changes are so significant that the measure is no longer the same
measure, or when a standard of performance assessed by a measure
becomes more stringent (for example, changes in acceptable timing of
medication, procedure/process, or test administration). Another example
of a substantive change would be where the NQF has extended its
endorsement of a previously endorsed measure to a new setting, such as
extending a measure from the inpatient setting to hospice. We also note
that, to the extent a PCHQR measure is endorsed by the NQF, the NQF
measure maintenance process incorporates an opportunity for public
comment and engagement.
We believe the endorsement processes, as well as our treatment of
substantive versus nonsubstantive measure changes, adequately balances
our need to incorporate updates to PCHQR Program measures in the most
expeditious manner possible while preserving the public's ability to
comment on updates that so fundamentally change an endorsed measure
that it is no longer the same measure that we originally adopted.
8. Public Display Requirements Beginning with the FY 2014 Program
Section 1866(k)(4) of the Act requires the Secretary to establish
procedures for making the data submitted under the PCHQR Program
available to the public. Such procedures must ensure that a PCH has the
opportunity to review the data that are to be made public with respect
to the PCH prior to such data being made public. Section 1866(k)(4) of
the Act also provides that the Secretary must report quality measures
of process, structure, outcome, patients' perspective on care,
efficiency, and costs of care that relate to services furnished in such
hospital on the CMS Web site.
In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53562 through 53563), we finalized our policy to
display publicly PCHQR Program data on the Hospital Compare Web site
(https://www.hospitalcompare.hhs.gov/) and

[[Page 50282]]

established a preview period of 30 days prior to making such data
public.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through
50848), we finalized our proposal to display publicly in 2014 and
subsequent years the data for the measures listed below:
Adjuvant Chemotherapy is considered or administered within
4 months (120 days) of diagnosis to patients under the age of 80 with
AJCC III (lymph node positive) colon cancer (NQF 0223); and
Combination Chemotherapy is considered or administered
within 4 months (120 days) of diagnosis for women under 70 with AJCC
T1c, or Stage II or III hormone receptor negative breast cancer (NQF
0559).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28257), we
proposed to display publicly in 2015 and subsequent years the data for
the Adjuvant Hormonal Therapy measure (NQF 0220).
We also proposed to display publicly no later than 2017 and for
subsequent years the data for the measures listed below:
NHSN Catheter-Associated Urinary Tract Infections (CAUTI)
Outcome Measure (NQF 0138); and
NHSN Central Line-Associated Bloodstream Infection
(CLABSI) Outcome Measure (NQF 0139).
At present, all PCHs are reporting CLABSI and CAUTI data to the
NHSN under the PCHQR Program. However, due to the low volume of data
produced and reported by the small number of facilities (in fewer than
2 years), the CDC is unable to calculate reasonable and reliable
baseline estimates, or expected rates, which are needed for the purpose
of calculating these measure rates. Therefore, we estimate that the
first public posting of the CLABSI and CAUTI PCHQR Program data
reported to the NHSN from the PCHs will occur no later than 2017.
We invited public comment on these proposals.
Comment: Commenters recommended that CMS revise the CLABSI, CAUTI,
and SSI measures to account for cancer-specific risks and consider the
variation in the cancer patient population case-mix, especially
regarding the percentage of patients discharged to palliative or
hospice care, when assessing performance on these measures for public
display, and recommended that CMS display publicly ICU versus non-ICU
rates for the CLABSI and CAUTI data.
Response: We appreciate the commenters' feedback and will consider
it for future years. We note that the CDC is the measure steward and is
responsible for maintaining the measure specifications for the CLABSI,
CAUTI, and SSI measures. CDC works closely with external partners and
subject-matter experts to develop and maintain NHSN definitions and
criteria that are both standardized and clinically relevant. A
concerted effort is made to take into account the heterogeneous patient
populations that are monitored and tracked using NHSN, cancer patients
being one of many such populations. However, CDC recognizes that the
HAI definitions may not account for all heterogeneity and variation
among the patient populations and will continue to work with subject-
matter experts to gain input and insight on additional criteria that
are needed to better represent specific populations where possible. In
addition, now that we have received data specifically from PCHs, those
data can be reviewed, along with all other NHSN data, when the SIRs are
to be recalculated to determine baselines based on the FY 2014 program
year. If strong variations are found, we will consider revising the
calculation for PCHs.
Comment: One commenter supported CMS' proposal to delay the display
of both NHSN CAUTI and CLABSI until no later than 2017 in order to
ensure that reliable expected rates can be calculated, and recommended
that CMS evaluate the NHSN SSI data under the same standard.
Response: We thank the commenter for its support. The main purposes
of the PCHQR Program are to report publicly quality of care information
that consumers can use to make decisions about their health care and to
encourage PCHs to improve their quality of care. Accordingly, we will
delay public reporting of CLABSI and CAUTI data until no later than
2017 so that reliable baseline estimates and expected rates can be
determined. We believe this delay is necessary in order to provide
meaningful and reliable data available for consumers to make informed
health care decisions. After considering the comment, we agree that
this same standard should apply to the SSI measure.
After consideration of the public comments we received, we are
finalizing the proposal to display publicly beginning in 2015 the data
for the Adjuvant Hormonal Therapy measure (NQF 0220), and to
display publicly the CLABSI and CAUTI data no later than 2017.
9. Form, Manner, and Timing of Data Submission Beginning With the FY
2017 Program
a. Background
Section 1866(k)(2) of the Act requires that, beginning with the FY
2014 PCHQR Program, each PCH must submit to the Secretary data on
quality measures specified under section 1866(k)(3) of the Act in a
form and manner, and at a time, as specified by the Secretary.
Data submission requirements and deadlines for the PCHQR Program
are generally posted on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Reporting Requirements for the New Measure: External Beam
Radiotherapy for Bone Metastases (NQF 1822) Beginning With the
FY 2017 Program
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28257 through
28258), we proposed that PCHs report the External Beam Radiotherapy for
Bone Metastases (NQF 1822) measure beginning with January 1,
2015 discharges and for subsequent years. We proposed that PCHs would
report this measure to us via a CMS Web-based Measures Tool on an
annual basis (July 1 through August 15 of each respective year). This
approach is consistent with the data submission deadlines finalized for
the clinical process/oncology care measures (78 FR 50850 through 50851)
and PCHs are already preparing to begin submitting PCHQR data using
this timeline. We also believe that annual data submission of once per
year (as opposed to quarterly data submission of four times per year)
will reduce PCHs' costs and burden. We believe that these proposed
dates will provide enough advance notice for PCHs to prepare to report
the measure.
We proposed to collect the EBRT for Bone Metastases measure rates
for the FY 2017 program and subsequent years using all-patient (both
Medicare and non-Medicare) data from the four quarters (Q1, Q2, Q3, and
Q4) of CY 2015, and that PCHs must submit aggregate data for the
measure for each of these quarters during a data submission window that
would be open from July 1 through August 15, 2016. For the FY 2017
program and subsequent years, we refer readers to the reporting periods
and data submission window outlined in the table below in this section.
For data collection, we proposed that PCHs submit aggregate-level
data through the CMS Web-based Measures

[[Page 50283]]

Tool or submit an aggregate data file through a vendor (via QualityNet
infrastructure). We refer readers to the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50850 through 50851) for more information on the CMS Web-
based Measures tool.
We welcomed public comment on the proposed reporting periods, data
submission timeframes, and data collection methods/modes for the
proposed measure for the FY 2017 program and subsequent years.
Comment: One commenter requested that CMS provide clarification on
whether a sampling methodology (including population and sampling
guidelines) will be permitted for the EBRT for bone metastases measure
because this approach will lessen the burden on PCHs.
Response: We agree that an all-patient EBRT sampling methodology
would provide the public with quality measure data that represents the
entire patient population of PCHs. We believe that this approach would
facilitate PCH education through a consistent sampling methodology
across PCHQR measures. Accordingly, we are finalizing a sampling
methodology for the EBRT measure in this final rule that is consistent
with the sampling methodology standards finalized for the clinical
process/oncology care and SCIP measures. We will incorporate this EBRT
sampling methodology in the next feasible regularly scheduled PCHQR
specifications manual semiannual update.
Comment: One commenter recommended that CMS adopt the same
reporting requirements proposed for the clinical process/oncology care,
clinical process/cancer specific treatment, and SCIP measures for the
new EBRT for bone metastases measure.
Response: The EBRT for bone metastases reporting proposals (79 FR
28257) are consistent with the clinical process/oncology care proposals
(79 FR 28258). These proposals allow two data submission options to
submit aggregate data: via a CMS Web-based Measures Tool or an
aggregate data file.
After consideration of the public comments we received, we are
finalizing the sampling methodology by allowing PCHs to use the same
sampling approach that we are finalizing for the clinical process/
oncology care measures (we refer readers to the sampling table found in
section IX.B.9.d. of the preamble of this final rule (New Sampling
Methodology for the Clinical Process/Oncology Care Measures Beginning
with the FY 2016 Program)) for the EBRT measure sampling purposes. In
addition, we are finalizing our proposed reporting requirements for the
EBRT measure, beginning with the FY 2017 PCHQR Program. The table below
outlines the finalized reporting periods and submission timeframes for
FY 2017, FY 2018, and subsequent years for the EBRT for bone metastases
measure.

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

c. Reporting Options for the Clinical Process/Cancer Specific Treatment
Measures Beginning With the FY 2015 Program and the SCIP and Clinical
Process/Oncology Care Measures Beginning With the FY 2016 Program
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28258 through
28259), we proposed to modify the data submission requirements for the
three clinical process/cancer specific treatment measures that we
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53564), and the
six SCIP measures and five clinical process/oncology care measures that
we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50846). Under
those requirements, PCHs submit aggregate-level clinical process/cancer
specific treatment measure data to a CMS contractor, aggregate-level
clinical process/oncology care measure data through the CMS Web-based
Measures Tool, and patient-level SCIP measure data through the
QualityNet infrastructure. We proposed to allow PCHs to report the
clinical process/cancer specific treatment, SCIP, and clinical process/
oncology care data to CMS using one of two mechanisms. Under the first
option, which was newly proposed for the SCIP and clinical process/
oncology care measure sets, PCHs or their authorized vendors may

[[Page 50284]]

enter aggregate numerator and denominator data into a CMS Web page
located on the secure part of the CMS QualityNet infrastructure. Under
the second option, which was newly proposed for the clinical process/
cancer specific treatment, SCIP, and clinical process/oncology care
measures, PCHs or their authorized vendors may submit an aggregate data
file through a CMS secure QualityNet file exchange process. We proposed
these options in order to decrease the reporting burden for PCHs.
We believe that the newly proposed submission option, which is
described further below for the SCIP measures, will result in a
considerable burden reduction for PCHs, as it includes once annually,
rather than once quarterly, submission deadlines and submission of
aggregate data as opposed to patient-level data for the SCIP measures.
In addition, we proposed a second option, allowing PCHs to submit
an annual aggregate data file stratified by four quarters for each of
the SCIP measures. We stated that we believed this additional option
would provide the public with sufficiently reliable quality measure
information while reducing PCH burden through providing two data
collection options. We also stated that we would provide detailed
technical file format specifications on the public QualityNet Web site
(www.qualitynet.org) following publication of this final rule. We
outlined the new submission deadlines for the SCIP measures in the
table below.
We stated that these requirements would replace, for the purposes
of the PCHQR Program, the update to the SCIP timeline and IT
infrastructure that we finalized for the PCHQR Program in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50851 through 50852).
We invited public comment on the proposed new reporting mechanism
that would apply to the three clinical process/cancer specific
treatment measures, five clinical process/oncology care treatment
measures, and six SCIP measures.
Comment: One commenter supported the proposal to allow two
reporting options for the clinical process/cancer specific treatment,
clinical process/oncology care, and SCIP measures. One commenter
supported the proposal to update the reporting periods and submission
timelines for the six SCIP measures, noting that the proposal
simplifies the PCHQR Program's data reporting process.
Response: We appreciate the commenters' support of this proposal.
Our intent is to reduce burden and effort and align CMS infrastructure
where appropriate by offering alternative options for PCHs to submit
measure data. We are finalizing the two reporting options for the
clinical process/cancer specific treatment and clinical process/
oncology care measures as proposed. However, the six PCHQR SCIP
measures, we are only finalizing the second proposed option, under
which PCHs or their vendors may submit an annual aggregate data file
stratified by four quarters data via the CMS QualityNet portal.
We are not finalizing the first proposed option that would have
allowed PCHs to submit aggregate numerator and denominator data into a
CMS Web-Based Measures Tool for the SCIP measures because we were
recently informed by our IT developers that the proposed CMS Web page
would not be modified to collect aggregate SCIP data by the previously
finalized January 2015 initial discharge date. As a result, we are
retaining as a second option for these measures the data submission
that is currently in place, under which PCHs may submit patient-level
data to CMS through the QualityNet infrastructure.
Comment: One commenter expressed concern that the proposed
submission options for the clinical process/cancer specific treatment
measures, which allow for a data submission other than through the CMS
contractor (77 FR 53564) which uses the Commission on Cancer Rapid
Quality Reporting System (RQRS), could result in declining patient
outcomes and less PCH accountability.
Response: We appreciate the commenter's feedback. We strongly
believe that the vendor submission approach, allowing for vendors to
submit aggregate data files is consistent across all PCHQR measures and
other CMS quality reporting programs to submit data on behalf of the
respective hospital facilities. In addition, we believe this approach
will greatly reduce reporting burden, minimize duplication of effort,
and increase efficiency because vendors commonly submit more than one
measure set at the same time (for example, annually or quarterly) on
behalf of the facilities.
Comment: One commenter recommended that CMS update NQF
0383 (Oncology: Plan of Care for Pain) to include a minimum
threshold for pain in the denominator and to provide a more specific
definition for ``visit'' that includes oncology visits (for example,
for palliative care). The commenter also recommended all changes to the
measure specifications of the clinical process/oncology care measures
be communicated to NQF and PCHs.
Response: We appreciate the commenter's feedback and will consider
it in future rulemaking.
Comment: Several commenters asked CMS to consider whether the SCIP
measures have been adequately tested in the PCH patient population,
noting that the measures may inadvertently encourage care that is not
applicable to the PCH setting. For example, one commenter noted that
SCIP-Inf-3 requires that prophylactic antibiotics be discontinued
within 24 hours after surgery end time, but that this approach may not
be well-suited for oncologic patient populations.
Response: We note that we have considered the appropriateness of
these measures for the PCH settings, as the inclusion and exclusion
criteria for the SCIP measures adopted for the PCHQR Program exclude
patients from the measure denominator when the care does not apply. For
example, the SCIP-Inf-3 measure specifications include an exclusion
criterion for patients with a Reason to Extend Antibiotics. We believe
it is important to note that the SCIP measures include all cancer
surgeries (and not limited to orthopedic surgeries) performed by both
PCHs and many acute care hospitals. We will continue to collaborate
with PCHs that have questions about the SCIP measures, and to
incorporate nonsubstantive updates into the PCHQR specifications
manual.
After consideration of the public comments we received, we are
finalizing the proposed reporting requirements for the clinical
process/cancer specific treatment and clinical process/oncology care
measures beginning with the FY 2015 and FY 2016 program years
respectively with one modification. We are not finalizing the CMS Web-
Based Measures Tool (aggregate-level data) for the SCIP measures
because we are able to leverage the existing patient-level CMS SCIP IT
collection infrastructure. PCHs may submit the SCIP measures using two
options: (1) Authorized vendor submission of an aggregate data file
into the secure CMS QualityNet portal to CMS; or (2) submission of data
via the secure CMS QualityNet portal. This finalized policy aligns our
existing reporting infrastructure across the PCHQR Program and other
CMS quality improvement programs and provides an additional vendor
option to report SCIP data to CMS.
The reporting periods and submission timeframes for the clinical
process/cancer specific treatment and clinical process/oncology care
measures are

[[Page 50285]]

outlined in the FY 2013 and FY 2014 IPPS/LTCH PPS final rules (77 FR
53564 and 78 FR 50851, respectively). The table below outlines the
finalized aggregate data file reporting periods and submission
timeframes for FY 2016, FY 2017, and subsequent years for the SCIP
measures. Patient-level SCIP reporting period and data submission
timeframes are available on the QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287737
16091).

Finalized Six SCIP Measures-Aggregate Data File Reporting Periods and Submission Timeframes for the FY 2016
Program and Subsequent Years
----------------------------------------------------------------------------------------------------------------
Program year (FY) Reporting periods (CY) Data submission deadlines
----------------------------------------------------------------------------------------------------------------
2016.......................... Q1 2015 discharges.................. July 1, 2015-August 15, 2015.
(January 1, 2015-March 31, 2015)....
2017.......................... Q2 2015 discharges.................. July 1, 2016-August 15, 2016.
(April 1, 2015-June 30, 2015).......
Q3 2015 discharges..................
(July 1, 2015-September 30, 2015)...
Q4 2015 discharges..................
(October 1, 2015-December 31, 2015).
Subsequent Years.............. Q1 discharges....................... July 1-August 15 of each year before the
(January 1-March 31 of each year 2 program year.
years before the program year).
Q2 discharges.......................
(April 1-June 30 of each year 2
years before the program year).
Q3 discharges.......................
(July 1-September 30 of each year 2
years before the program year).
Q4 discharges.......................
(October 1-December 31 of each year
2 years before the program year).
----------------------------------------------------------------------------------------------------------------

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259), we did
not propose any changes to the previously finalized procedural
requirements, Notice of Participation (NOP) requirements, or Data
Accuracy and Completeness Acknowledgement (DACA) requirements. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53563 through
53567) for more information on these requirements.
d. New Sampling Methodology for the Clinical Process/Oncology Care
Measures Beginning With the FY 2016 Program
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50842), we adopted a
policy under which PCHs could report the five clinical process/oncology
care measures finalized for the FY 2016 program and subsequent years
using the same sampling methodology that we allow for the reporting of
those measures under the PQRS. In the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28259), we proposed to replace the previously adopted
sampling methodology with a sampling methodology similar to the one we
have allowed hospitals to use to report the SCIP measures under the
Hospital IQR Program. The sampling methodology specified in the PQRS
Specifications Manual is specific to the physician office setting. We
believe that the methodology we proposed is more applicable to PCHs
because it was developed for hospital-level reporting.
The proposed methodology will allow for different numbers of cases
to be reported based on each PCH's cancer patient population size. This
is necessary for the PCHQR Program because bed size varies among PCHs
from 20 to >250 beds.\129\ The sampling methodology for the clinical
process/oncology care measures is shown below, and we believe it will
decrease the reporting burden on PCHs while producing reliable measure
rates.
---------------------------------------------------------------------------

\129\ American Hospital Directory: https://www.ahd.com/freesearch.php.

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

We also proposed that PCHs report population and sample size counts
(by measure) for Medicare and non-Medicare discharges by quarter for
the five clinical process/oncology care measures for the FY 2016
program and subsequent years.
We proposed these requirements in order to support our effort to
align with existing reporting requirements used in other CMS quality
reporting programs, such as the Hospital IQR Program, which requires
participating hospitals to submit population and sample size counts for
certain measures in addition to the all-payer data needed to calculate
measure rates. We view it as vital for PCHs to determine accurately
their aggregate population and appropriate sample size data in order
for us to assess PCHs' data reporting accuracy and completeness for
their total population of cases, including both Medicare and non-
Medicare patients.
We welcomed public comments on the proposed sampling guidelines and
proposed population and sample size reporting requirements for the
clinical process/oncology care measures for the FY 2016 program and
subsequent years.
Comment: Several commenters supported the proposal to replace the
PQRS physician-level sampling methodology with the proposed new
sampling methodology. However, one commenter requested clarification on
whether the proposal to collect all-patient data for the clinical
process/oncology care measures conflicts with the proposed sampling
methodology and also on whether the sampling methodology is based on
the number of patients applicable for each measure, or on bed size
(that is, hospital-level sample size determination).
Response: We thank the commenters for their support. The term
``all-patient data'' refers to data regarding both Medicare and non-
Medicare patients. Consistent with the sampling methodology standards
that we adopted for these measures under the Hospital IQR Program, when
PCHs identify the

[[Page 50286]]

initial patient population, they will use ``all-patient data'' to
determine the population of patients meeting the measure criteria prior
to individual measure denominator exclusions. Thus, the sample will
include both patients included and excluded from the measure
denominator. We believe that this sampling methodology reduces
potential bias in measure rates from sampling all patients included in
the measure's initial patient population. This initial patient
population is usually defined by groups of ICD-9-CM principal procedure
or diagnosis codes, which may be readily identified by PCHs by using
computer billing records common to Medicare and non-Medicare health
insurance payers. The PCHs will subsequently identify the sample size
based on the patient population (``all-patient data''). This sampling
process is applicable for each clinical process/oncology care measure.
Comment: One commenter requested that CMS provide the
specifications for the clinical process/oncology care measures and
their new sampling method.
Response: We appreciate the commenter's feedback. We have partnered
closely with all 11 PCHs and will provide training and education
materials on all measures, including the clinical process/oncology care
measures and the applicable proposed sampling methodology. These
materials will be available on our QualityNet Web site (https://
www.qualitynet.org).
Comment: One commenter recommended that CMS revise the proposed
reporting requirements for the clinical process/oncology care measures
in order to require that reporting of population and sample size counts
be based on electronically available data only.
Response: We appreciate the commenter's feedback. We interpret the
comment to recommend that data be submitted via the CMS Web-based
Measures Tool only. However, we believe it is most appropriate and
feasible at this time to provide PCHs with data submission options. We
also understand from past discussions with PCHs that the 11 PCHs vary
in their implementation of EHRs. We will consider future available data
collection options for PCHs, including electronic Clinical Quality
Measures (eCQMs). We also believe that requiring population and sample
size count reporting based on electronic data might adversely burden
PCHs that do not yet have the means to collect electronic data.
Comment: One commenter recommended that benchmarks for the clinical
process/oncology care measures be based on statistically significant
aggregate calculations only.
Response: We thank the commenter for its feedback. Currently, we do
not have a policy to develop benchmarks. In our effort to monitor and
evaluate program growth and sustainability, we will be observing the
clinical process/oncology care measures baselines and expected rates.
10. Exceptions From Program Requirements
In our experience with other quality reporting and performance
programs, we have noted occasions when providers have been unable to
submit required quality data due to extraordinary circumstances that
are not within their control (for example, natural disasters). We do
not wish to unduly increase their burden during these times. Therefore,
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our
policy that, for the FY 2014 program and subsequent years, PCHs may
request and we may grant exceptions (formerly referred to as waivers)
with respect to the reporting of required quality data when
extraordinary circumstances beyond the control of the PCH warrant. When
exceptions are granted, we will notify the respective PCH. We are in
the process of revising the Extraordinary Circumstances/Disaster
Extension or Waiver Request form (CMS-10432), approved under OMB
control number 0938-1171.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259), we did
not propose any substantive changes to this PCHQR exception process.

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

1. Background
In accordance with section 1886(m)(5) of the Act, as added by
section 3004(a) of the Affordable Care Act, the Secretary established
the Long-Term Care Hospital Quality Reporting (LTCHQR) Program. Under
section 1886(m)(5)(A)(i) of the Act, for the rate year 2014 and each
subsequent rate year, in the case of an LTCH that does not submit data
to the Secretary in accordance with section 1886(m)(5)(C) of the Act
with respect to such a rate year, any annual update (which we also
refer to as a ``payment determination'') to a standard Federal rate for
discharges for the hospital during the rate year, and after application
of section 1886(m)(3) of the Act, shall be reduced by two percentage
points. As we discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51743 through 51744), for the purposes of the LTCH PPS, the term ``rate
year'' and the term ``fiscal year'' both refer to the time period
beginning October 1 and ending September 30. In order to avoid any
possible confusion, we will use the term ``fiscal year'' rather than
``rate year'' in our discussion of the LTCHQR Program.
Under section 1886(m)(5)(D)(i) of the Act, the quality measures for
the LTCHQR Program are measures selected by the Secretary that have
been endorsed by an entity that holds a contract with the Secretary
under section 1890(a) of the Act, unless section 1886(m)(5)(D)(ii) of
the Act applies. This contract is currently held by the National
Quality Forum (NQF). Additional information regarding the NQF and its
measure review processes is available at: https://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.
While as a general matter the Secretary must select endorsed
measures for the LTCHQR Program, section 1886(m)(5)(D)(ii) of the Act
provides that an exception may be made in the case of a specified area
or medical topic determined appropriate by the Secretary for which a
feasible and practical measure has not been endorsed by the entity that
holds a contract with the Secretary under section 1890(a) of the Act.
In such a case, section 1886(m)(5)(D)(ii) of the Act authorizes the
Secretary to specify a measure that is not so endorsed, as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary.
The LTCHQR Program was implemented in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51743 through 51756).
2. General Considerations Used for Selection of Quality Measures for
the LTCHQR Program
We seek to promote higher quality and more efficient health care
for the beneficiaries we serve. Quality reporting programs, including
public reporting of quality information, advance such quality
improvement efforts. Quality measurement remains the key tool to the
success of these programs. Therefore, the selection of only the highest
caliber of measures is a priority for CMS.
We seek to adopt measures for the LTCHQR Program that promote
better, safer, and more efficient care. Our measure development and
selection activities for the LTCHQR Program take into account national
priorities, such as those established by the National Priorities
Partnership (https://www.qualityforum.org/Setting--

[[Page 50287]]

Priorities/NPP/National--Priorities--Partnership.aspx), the HHS
Strategic Plan (https://www.hhs.gov/secretary/about/priorities/priorities.html), the National Quality Strategy (NQS) https://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm), and the CMS
Quality Strategy (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html).
We also must consider input from the NQF Measures Application
Partnership (MAP) when selecting measures under the LTCHQR Program. The
MAP is composed of multi-stakeholder groups convened by the NQF, our
current contractor under section 1890 of the Act. The NQF must convene
these stakeholders and provide us with the stakeholders' input on the
selection of certain categories of quality and efficiency measures as
part of a pre-rulemaking process described in section 1890A of the Act.
We, in turn, must take this input into consideration in selecting those
categories of measures. The NQF MAP met in December 2013 and January
2014 and provided input to CMS as required under section 1890A(a)(3) of
the Act. This input appears in the MAP's January 2014 Pre-Rulemaking
Report available for download at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. Measures proposed for the LTCHQR Program in this final
rule are measures CMS included under the List of Measures under
Consideration (MUC List) for December 1, 2013,\130\ a list that the
Secretary must make available to the public by December 1 of each year,
as part of the pre-rulemaking process, as described in section
1890A(a)(2) of the Act. The measures we proposed in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28263 through 28268) for the LTCHQR
Program are discussed in the MAP Pre-Rulemaking Report (pp. 192-193).
The MAP reviewed each measure proposed in this rule. We refer readers
to the following sections of the preamble of this final rule for more
information on the MAP's recommendations: IX.C.7.a.(1), Functional
Status Quality Measure: Percent of Long-Term Care Hospital Patients
with an Admission and Discharge Functional Assessment and a Care Plan
That Addresses Function; IX.C.7.a.(2), Functional Status Quality
Measure: Functional Outcome Measure: Change in Mobility among Long-Term
Care Hospital Patients Requiring Ventilator Support; and IX.C.7.b.,
Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure.
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\130\ Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=74245.
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After due consideration to any measures that may have been endorsed
or adopted by a consensus organization, including the NQF, for the LTCH
setting, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28259
through 28278) we proposed measures that are either supported by the
MAP for the LTCHQR Program, or that we believe most closely align with
the national priorities discussed in this section of the proposed rule.
In the absence of the MAP's support, in some cases we proposed measures
for which the MAP expressed conditional support and that meet the
exception criteria in section 1886(m)(5)(D)(ii) of the Act. Further
discussion of why each measure is a high priority in the LTCH setting
is included below.
3. Policy for Retention of LTCHQR Program Measures Adopted for Previous
Payment Determinations
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through
53615), for the LTCHQR Program, we adopted a policy that once a quality
measure is adopted, it will be retained for use in subsequent years,
unless otherwise stated. For the purpose of streamlining the rulemaking
process, when we initially adopt a measure for the LTCHQR Program for a
payment determination, this measure will be automatically adopted for
all subsequent years or until we propose to remove, suspend, or replace
the measure. For further information on how measures are considered for
removal, suspension, or replacement, we refer readers to the FY 2013
IPPS/LTCH PPS final rule.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28260), we did
not propose any changes to this policy for retaining LTCHQR Program
measures adopted for previous payment determinations.
4. Policy for Adopting Changes to LTCHQR Program Measures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through
53616), we adopted our policy that if the NQF updates an endorsed
measure that we have adopted for the LTCHQR Program in a manner that we
consider to not substantively change the nature of the measure, we will
use a subregulatory process to incorporate those updates to the measure
specifications that apply to the LTCHQR Program. With respect to what
constitutes a substantive versus a nonsubstantive change, we expect to
make this determination on a measure-by-measure basis. Examples of such
nonsubstantive changes might include updated diagnosis or procedure
codes, medication updates for categories of medications, broadening of
age ranges, and changes to exclusions for a measure. The subregulatory
process for nonsubstantive changes will include revision of the LTCHQR
Program Manual and posting of updates on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. Examples of changes that
we might consider to be substantive would be those in which the changes
are so significant that the measure is no longer the same measure, or
when a standard of performance assessed by a measure becomes more
stringent, such as changes in acceptable timing of medication,
procedure/process, test administration, or expansion of the measure to
a new setting.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28260 through
28261), we did not propose any changes to this policy for adopting
changes to LTCHQR Program measures.
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY 2016
Payment Determinations and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through
53636), we retained the application of Percent of Residents with
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF
0678) to the LTCH setting (initially adopted in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51745 through 51750)) for the FY 2015
payment determination and subsequent years, and adopted updated
versions of National Health Safety Network (NHSN) Catheter-Associated
Urinary Tract Infection (CAUTI) Outcome Measure (NQF 0138) and
NHSN Central Line-Associated Blood Stream Infection (CLABSI) Outcome
Measure (NQF 0139), for the FY 2014 payment determination and
subsequent years. We also adopted two new quality measures for the
LTCHQR Program for the FY 2016 payment determination and subsequent
years, in addition to the three previously adopted measures (the CAUTI
measure, CLABSI measure, and Pressure Ulcer measure): (1) Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-

[[Page 50288]]

Stay) (NQF 0680); and (2) Influenza Vaccination Coverage among
Healthcare Personnel (NQF 0431) (77 FR 53624 through 53636).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through
50863), we adopted the NQF-endorsed version of the Pressure Ulcer
measure, Percent of Residents or Patients with Pressure Ulcers That Are
New or Worsened (Short-Stay) (NQF 0678), for the LTCHQR
Program for the FY 2015 payment determination and subsequent years.
Set out below are the quality measures, both previously adopted
measures retained in the LTCHQR Program and measures adopted in FY 2013
and FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016
payment determinations and subsequent years.

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

While we did not propose any changes in the FY 2015 IPPS/LTCH PPS
proposed rule to measure specifications for NQF 0678, Percent
of Residents or Patients with Pressure Ulcers That Are New or Worsened
(Short-Stay), we received input from several commenters on this
measure.
Comment: A few commenters suggested CMS consider adding a ``present
on admission'' (POA) indicator in the LTCH Continuity Assessment Record
and Evaluation (CARE) Data Set. These commenters noted that a POA
indicator is critical to aid in the determination of whether a pressure
ulcer was developed as a result of care provided by an LTCH.
Response: We recognize the importance of determining pressure
ulcers that are ``present on admission'' and taking this into account
when assessing new or worsened pressure ulcers in the LTCH setting. The
quality measure Percent of Residents or Patients with Pressure Ulcers
That Are New or Worsened (Short-Stay) (NQF 0678), is designed
to identify pressure ulcers that are present on admission. Items
M0800A, M0800B, and M0800C on the LTCH CARE Data Set discharge
assessment capture patient-specific data to identify Stage 2, Stage 3,
and Stage 4 pressure ulcers that are ``new'' or ``worsened'' since the
time of admission assessment, thus identifying only those Stage 2,
Stage 3 and Stage 4 pressure ulcers that were not present on the
admission assessment and/or only those Stage 2, Stage 3 and Stage 4
pressure ulcers that were present at a lower stage on the admission
assessment. We refer readers to the measure specifications for the
Pressure Ulcer measure, which are available for download at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/ and at www.qualityforum.org/QPS/0678.
Comment: A commenter recommended that ``behavioral patients'' be
excluded from the Pressure Ulcer measure. The commenter noted that the
inclusion of all inpatients regardless of age and any other criteria
has a significant impact on the reporting burden for LTCHs and that the
exclusion of behavioral patients would lessen burden on LTCHs because
these patients do not significantly contributing to the Pressure Ulcer
measure.
Response: We appreciate the commenter's input on this previously
finalized measure. Pressure ulcers are serious medical conditions that
can lead to serious life threatening infections, can substantially
increase the cost of care, and are an important measure of quality. As
a result, we believe that all patients, regardless of their cognitive
or behavioral health status, should be assessed for pressure ulcer
risk, and appropriate pressure ulcer monitoring, prevention, and
management should be implemented for all patients in an LTCH. We refer
the commenter to the current measure specifications for NQF
0678, including patient exclusions and inclusions, available
at www.qualityforum.org/QPS/0678.
b. Previously Adopted Quality Measures for the FY 2017 and FY 2018
Payment Determinations and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule, we adopted three
additional measures for the FY 2017 payment determination and
subsequent years (78 FR 50863 through 50874) and one additional measure
for the FY 2018 payment determination and subsequent years (78 FR 50874
through 50877). These measures are set out in the table below.

LTCHQR Program Quality Measures Previously Adopted for the FY 2017 and
FY 2018 Payment Determinations and Subsequent Years
------------------------------------------------------------------------
Payment
NQF Measure ID Measure title determination
------------------------------------------------------------------------
NQF 1716............... National FY 2017 and
Healthcare Safety Subsequent Years
Network (NHSN)
Facility-Wide
Inpatient
Hospital-Onset
Methicillin-
Resistant
Staphylococcus
aureus (MRSA)
Bacteremia
Outcome Measure.

[[Page 50289]]

NQF 1717............... National FY 2017 and
Healthcare Safety Subsequent Years
Network (NHSN)
Facility-Wide
Inpatient
Hospital-Onset
Clostridium
difficile
Infection (CDI)
Outcome Measure.
NQF 2512 (Under Review All-Cause FY 2017 and
at NQF*). Unplanned Subsequent Years
Readmission
Measure for 30
Days
Post[dash]Dischar
ge from Long-Term
Care Hospitals.
Application of NQF 0674 Percent of FY 2018 and
Residents Subsequent Years
Experiencing One
or More Falls
with Major Injury
(Long-Stay).
------------------------------------------------------------------------
* Not NQF endorsed, currently under review at NQF, please see: https://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx

While we did not propose any changes in the FY 2015 IPPS/LTCH PPS
proposed rule to measures previously adopted for the FY 2017 payment
determination and subsequent years, we received input from a few
commenters regarding three previously finalized measures: NHSN
Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
1716), NHSN Facility-Wide Inpatient Hospital-Onset Clostridium
difficile Infection (CDI) Outcome Measure (NQF 1717), and All-
Cause Unplanned Readmission Measure for 30 Days Post-Discharge from
Long-Term Care Hospitals (NQF 2512, under review at NQF).
While we greatly appreciate the commenters' views on these previously
finalized measures, we did not make any proposals relating to them in
the FY 2015 IPPS/LTCH PPS proposed rule. Therefore, we will not
summarize and address all of these comments in detail in this final
rule. However, we will consider all of these comments in future
rulemaking and program development.
Comment: A commenter supported the inclusion of the MRSA and CDI
measures in the LTCHQR Program noting that the LTCH patients arrive
after receiving several weeks of therapy for infections that are
difficult to treat and therefore have high levels of exposure to
antibiotics. Another commenter also supported these two measures and
indicated support for the readmission measure. This commenter urged CMS
to adopt outcome measures more quickly and suggested that the three
aforementioned measures finalized for FY 2017 be implemented for FY
2016.
Response: We appreciate the commenter's recommendation to adopt the
measures more quickly than the previously finalized timeline. However,
in order to ensure adequate time to support successful measure
implementation across the LTCHs, we believe the previously finalized
data collection period and submission deadlines are appropriate. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50880
through 50882) for more information.
Comment: A commenter urged CMS to share, on a monthly basis, claims
data with LTCHs for any patients readmitted within 30 days of the LTCH
discharge. The commenter noted that providing these data would (1)
notify LTCHs of readmissions that will affect their quality reporting
data, and (2) enable LTCHs to identify potential systemic problems and
implement corrective action plans focused on improving quality of care
and reducing preventable readmissions.
Response: We appreciate the commenter's support for this previously
finalized quality measure. This commenter recommended a quality
improvement process that is separate from the purpose of the
readmissions measure. The readmissions measure is intended to report
statistically robust estimates of standardized readmission rates over a
particular time, while the commenter recommends an intensive quality
control process with real time data on specific patients. We will
consider these quality improvement process recommendations as we move
forward with the LTCHQR Program and future measure development and
reporting efforts. To facilitate reduction in readmissions, we
encourage all LTCHs to conduct appropriate discharge planning and
follow up with their patients to monitor and ensure high-quality care
and improved outcomes.
6. Revisions to Data Collection Period and Submission Deadlines for
Previously Adopted Quality Measures
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28262 through
28263) we proposed, for the FY 2016 payment determination and
subsequent years, to revise data collection period and submission
deadlines for a measure that we previously adopted for the LTCHQR
Program: Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680). We also proposed, for the FY 2018 payment determination
only, revised data collection period and submission deadlines for the
application of Percent of Residents Experiencing One or More Falls with
Major Injury (Long-Stay) (application of NQF 0674) measure.
For the FY 2019 payment determination and subsequent years, data
collection for this measure would begin on January 1 and continue
through December 31.
a. Revisions to Data Collection Period and Submission Deadlines for
Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short Stay) (NQF 0680)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through
50861), we revised the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short
Stay) (NQF 0680) measure for the FY 2016 payment determination
and subsequent years. Specifically, we finalized that for the FY 2016
payment determination, LTCHs must collect data for any patient admitted
or discharged during the influenza vaccination season, from October 1,
2014, through April 30, 2015, and submit data for these patients by May
15, 2015.
We sought to better align the data collection period and submission
deadlines of the Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF
0680) measure with the data collection period and submission
deadlines of the Percent of Residents or Patients with

[[Page 50290]]

Pressure Ulcers That Are New or Worsened (Short Stay) (NQF
0678) measure because both measures are reported using the
same data collection instrument, the LTCH CARE Data Set. Therefore, for
the FY 2016 payment determination and subsequent years, in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28262), we proposed to revise the
data collection period and submission deadlines for the Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay) (NQF 0680) measure.
Specifically, we proposed that the first data collection period would
take place during the fourth quarter of the CY preceding the applicable
FY (for example, October 2014 through December 2014 for the FY 2016
payment determination), with data submission by February 15, 2015, and
the second data collection period would take place during the first
quarter of the subsequent CY (for example, January 2015 through March
2015 for the FY 2016 payment determination), with data submission by
May 15, 2015.
The changes are illustrated below for the FY 2016 and FY 2017
payment determinations only, but similar collection period and
submission deadlines would also apply to subsequent years. By taking
into account the influenza vaccination season, these changes would
align data collection and submission for this measure (NQF
0680) with the rest of the LTCH CARE Data Set.

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

We noted that these changes would only apply to the Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short Stay) (NQF 0680) for the
LTCHQR Program, and would not be applicable to any other LTCHQR Program
measures, proposed or adopted, unless explicitly stated.
We invited public comments on our proposal to revise the data
collection period and submission deadlines for this patient influenza
vaccination measure (NQF 0680) for the FY 2016 payment
determination and subsequent years. We refer readers to section IX.9.c.
of the preamble of this final rule for our responses to comments on
this proposal, as well as our final policy on this proposal.
b. Revisions to Data Collection Period and Submission Deadlines for the
Application of Percent of Residents Experiencing One or More Falls With
Major Injury (Long-Stay) (NQF 0674)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 through
50877), we adopted the Application of Percent of Residents Experiencing
One or More Falls with Major Injury (Long-Stay) (NQF 0674) for
the FY 2018 payment determination. We further finalized that LTCHs
should begin to collect and submit data on this measure using the LTCH
CARE Data Set starting January 1, 2016.
To ensure the successful implementation of new and updated versions
of LTCH CARE Data Set, in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28262 through 28263), we noted that we will be following an
implementation cycle beginning April 1, 2016, which will allow for a
predictable future release schedule. We believe that adherence to a
predictable future release schedule that takes into account both the
changes that must be made to the LTCH CARE Data Set, as well as
requirements that are managed by LTCHs for such changes, will help
ensure successful implementation. Therefore, we will be adhering to a
date of April 1 of any given year when releasing future iterations of
the LTCH CARE Data Set. This change will effectively delay the
implementation of the January 1, 2016, release by three months,
allowing LTCHs additional time to become familiar with and to
participate in trainings related to the revised LTCH CARE Data Set, as
well as time to incorporate given changes into their existing IT
infrastructure.
Therefore, we proposed that for the FY 2018 payment determination,
data collection for this measure would begin on April 1, 2016. For all
subsequent years, data collection for this measure would begin on
January 1 and continue through December 31. The changes are illustrated
below for the FY 2018 and FY 2019 payment determinations.

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

[[Page 50291]]

We noted that these proposed changes would be applicable only to
the application of Percent of Residents Experiencing One or More Falls
with Major Injury (Long-Stay) (NQF 0674) measure, and not
applicable to any other LTCHQR Program measures, proposed or adopted,
unless specifically proposed for such measures.
We invited public comments on these proposals. We refer readers to
section IX.9.f. of the preamble of this final rule for our responses to
comments on these proposals, as well as our final policy on this
proposal.
7. New LTCHQR Program Quality Measures for the FY 2018 Payment
Determination and Subsequent Years
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28263 through
28268), we proposed three new quality measures for the FY 2018 payment
determination and subsequent years. Two of these are related to
functional status, and one measure is related to ventilator-associated
events (VAE). One of the proposed functional status quality measures is
Percent of Long-Term Care Hospital Patients with an Admission and
Discharge Functional Assessment and a Care Plan That Addresses
Function. The second proposed functional status quality measure is
Functional Outcome Measure: Change in Mobility among Long-Term Care
Hospital Patients Requiring Ventilator Support. The quality measures
are described in more detail below.
a. New LTCHQR Program Functional Status Quality Measures for the FY
2018 Payment Determination and Subsequent Years
Patients in LTCHs present with clinically complex conditions. In
addition to having complex medical care needs for an extended period of
time, LTCH patients often have functional limitations due to the nature
of their conditions, as well as deconditioning due to prolonged bed
rest and treatment requirements (for example, ventilator use). These
patients are therefore at high risk for functional decline during the
LTCH stay that is both condition-related and iatrogenic.
The National Committee on Vital and Health Statistics, Subcommittee
on Health,\131\ noted: ``[i]nformation on functional status is becoming
increasingly essential for fostering healthy people and a healthy
population. Achieving optimal health and well-being for Americans
requires an understanding across the life span of the effects of
people's health conditions on their ability to do basic activities and
participate in life situations, in other words, their functional
status.''
---------------------------------------------------------------------------

\131\ Subcommittee on Health National Committee on Vital and
Health Statistics, ``Classifying and Reporting Functional Status''
(2001).
---------------------------------------------------------------------------

The functional assessment items included in the two functional
status quality measures were originally developed and tested as part of
the Post-Acute Care Payment Reform Demonstration version of the CARE
Tool,\132\ which was designed to standardize assessment of patients'
status across acute and post-acute settings, including LTCHs, inpatient
rehabilitation facilities (IRFs), skilled nursing facilities (SNFs),
and home health agencies (HHAs). The functional status items on the
CARE Tool are daily activities that clinicians typically assess at the
time of admission and/or discharge in order to determine patients'
needs, evaluate patient progress and prepare patients and families for
a transition to home or to another setting.
---------------------------------------------------------------------------

\132\ In the FY 2015 IPPS/LTCH PPS proposed rule, we used the
terms ``CARE Item Set'' and ``CARE Tool'' interchangeably. For the
purpose of consistency and standardization of terminology, we have
revised the language to ``CARE Tool'' throughout this FY 2015 IPPS/
LTCH PPS final rule. However, we have retained the term ``CARE Item
Set'' when citing existing reports.
---------------------------------------------------------------------------

The development of the CARE Tool and a description and rationale
for each item is described in a report entitled ``The Development and
Testing of the Continuity Assessment Record and Evaluation (CARE) Item
Set: Final Report on the Development of the CARE Item Set: Volume 1 of
3.'' \133\ Reliability and validity testing were conducted as part of
CMS' Post-Acute Care Payment Reform Demonstration, and we concluded
that the functional status items have acceptable reliability and
validity. A description of the testing methodology and results are
available in several reports, including the report entitled ``The
Development and Testing of the Continuity Assessment Record And
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume
2 of 3'' \134\ and the report entitled ``The Development and Testing of
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of
3.'' \135\ These reports are available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

\133\ Barbara Gage et al., ``The Development and Testing of the
Continuity Assessment Record and Evaluation (CARE) Item Set: Final
Report on the Development of the CARE Item Set '' (RTI
International, 2012).
\134\ Ibid.
\135\ Ibid.
---------------------------------------------------------------------------

(1) Functional Status Quality Measure: Percent of Long-Term Care
Hospital Patients with an Admission and Discharge Functional Assessment
and a Care Plan That Addresses Function
The first functional status quality measure we proposed for the FY
2018 payment determination and subsequent years is a process quality
measure entitled Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function. This quality measure reports the percent of LTCH
patients with both an admission and a discharge functional assessment
and a care plan that addresses function.
This process measure requires the collection of admission and
discharge functional status data by trained clinicians using
standardized clinical assessment items, or data elements, that assess
specific functional activities (that is, self-care, mobility,
cognition, communication, and bladder continence). The self-care and
mobility function items are coded using a 6-level rating scale that
indicates the patient's level of independence with the activity; higher
scores indicate more independence. The number of available response
options for coding the cognition, communication, and bladder items
ranges from 2 to 7. For this quality measure, inclusion of function in
the patient's care plan is determined based on whether a functional
goal is recorded at admission for at least one of the standardized
self-care or mobility function items using the 6-level rating scale.
An increasing body of reported evidence has supported the safety
and feasibility of early mobilization and rehabilitation of critically
ill but stable patients, with minimal adverse events and risk to the
patient.^{136 137 138 139 140 141}

[[Page 50292]]

Early mobility and rehabilitation in these settings have been
associated with improved patient outcomes. Therefore, this quality
measure addresses the importance of: (1) Conducting a functional
assessment at the time of admission addressing self-care, mobility,
cognition, communication, and bladder continence; (2) incorporating the
functional assessment findings made at the time of admission into the
patients' care plan and setting at least one discharge self-care or
mobility functional status goal; and (3) conducting a functional
assessment at the time of discharge addressing self-care, mobility,
cognition, communication, and bladder continence.
---------------------------------------------------------------------------

\136\ J. Adler and D. Malone, ``Early mobilization in the
intensive care unit: A systematic review,'' Cardiopulm Phys Ther J
23, no. 1 (2012).
\137\ J. P. Kress, ``Clinical trials of early mobilization of
critically ill patients,'' Crit Care Med 37, no. 10 Suppl (2009).
\138\ W. D. Schweickert and J. P. Kress, ``Implementing early
mobilization interventions in mechanically ventilated patients in
the ICU,'' Chest 140, no. 6 (2011).
\139\ W. D. Schweickert et al., ``Early physical and
occupational therapy in mechanically ventilated, critically ill
patients: a randomised controlled trial,'' Lancet 373, no. 9678
(2009).
\140\ J. M. Zanni et al., ``Rehabilitation therapy and outcomes
in acute respiratory failure: an observational pilot project,'' J
Crit Care 25, no. 2 (2010).
\141\ A. Drolet et al., ``Move to improve: the feasibility of
using an early mobility protocol to increase ambulation in the
intensive and intermediate care settings,'' Phys Ther 93, no. 2
(2013).
---------------------------------------------------------------------------

Functional limitations following critical illness are becoming
increasingly prevalent as a result of improving critical care medicine
and survival rates.\142\ Short-term and long-term adverse consequences
among critically ill and chronically, critically ill patients in LTCH
and Intensive Care Unit (ICU) settings include severe
weakness,^{143 144 145 146} muscle atrophy,\147\ connective-
tissue shortening,\148\ loss of bone mass,\149\ increased risk for
blood clots,\150\ increased risk for pressure ulcers,\151\
deconditioning,^{152 153} deficits in self-care and
ambulation,\154\ and functional impairment,\155\ fatigue,\156\ as well
as cognitive impairment, including profound and persistent deficits in
memory, attention/concentration, and executive
function,^{157 158 159} and the inability to return to work one
year after hospital discharge.^{160 161} Cognitive impairment
in survivors of critical illness has been associated with anxiety and
depression, inability to return to work, and inability of older persons
to return home.\162\ To mitigate these adverse consequences,
traditional practices of bed rest and immobility have been challenged
in recent years, and early mobility and rehabilitation have been
increasingly recognized as important to improve patients' long-term
functional outcomes,^{163 164 165} with recovery of function
being described as both desirable and possible.\166\ The lack of early
mobility initiation in ICU settings has also been described as a strong
predictor of patient outcomes.\167\
---------------------------------------------------------------------------

\142\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\143\ Ibid.
\144\ S. L. Dang, ``ABCDEs of ICU: Early mobility,'' Crit Care
Nurs Q 36, no. 2 (2013).
\145\ E. H. Skinner et al., ``Development of a physical function
outcome measure (PFIT) and a pilot exercise training protocol for
use in intensive care,'' Crit Care Resusc 11, no. 2 (2009).
\146\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].'' National
Institute for Health and Clinical Excellence (NICE), https://www.nice.org.uk/nicemedia/live/12137/43564/43564.pdf.
\147\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: an observational pilot project.''
\148\ Ibid.
\149\ Dang, ``ABCDEs of ICU: Early mobility.''
\150\ Ibid.
\151\ Ibid.
\152\ Schweickert and Kress, ``Implementing early mobilization
interventions in mechanically ventilated patients in the ICU.''
\153\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: an observational pilot project.''
\154\ Adler and Malone, ``Early mobilization in the intensive
care unit: a systematic review.''
\155\ Skinner et al., ``Development of a physical function
outcome measure (PFIT) and a pilot exercise training protocol for
use in intensive care.''
\156\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].''
\157\ Ibid.
\158\ M. E. Wilcox et al., ``Cognitive dysfunction in ICU
patients: risk factors, predictors, and rehabilitation
interventions,'' Crit Care Med 41, no. 9 Suppl 1 (2013).
\159\ N. E. Brummel et al., ``A combined early cognitive and
physical rehabilitation program for people who are critically ill:
the activity and cognitive therapy in the intensive care unit (ACT-
ICU) trial,'' Phys Ther 92, no. 12 (2012).
\160\ Dang, ``ABCDEs of ICU: Early mobility.''
\161\ H. J. Engel et al., ``ICU early mobilization: from
recommendation to implementation at three medical centers,'' Crit
Care Med 41, no. 9 Suppl 1 (2013).
\162\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
Risk factors, predictors, and rehabilitation interventions.''
\163\ Drolet et al., ``Move to improve: The feasibility of using
an early mobility protocol to increase ambulation in the intensive
and intermediate care settings.''
\164\ Dang, ``ABCDEs of ICU: Early mobility.''
\165\ Z. Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review,'' Arch Phys Med Rehabil
94, no. 3 (2013).
\166\ C. L. Rochester, ``Rehabilitation in the intensive care
unit,'' Semin Respir Crit Care Med 30, no. 6 (2009).
\167\ Dang, ``ABCDEs of ICU: Early mobility.''
---------------------------------------------------------------------------

The clinical practice guideline Rehabilitation after Critical
Illness \168\ from the National Institute for Health and Clinical
Excellence (NICE) recommends performing clinical assessment to
determine the patient's risk of developing physical and nonphysical
morbidity during the critical care stay as early as clinically
possible, identifying current rehabilitation needs for patients at risk
of morbidity, establishing short-term and medium-term rehabilitation
goals based on the clinical assessment, starting an individualized
structured rehabilitation program as early as possible, and performing
clinical reassessment before discharge.
---------------------------------------------------------------------------

\168\ Centre for Clinical Practice at NICE (UK),
``Rehabilitation after critical illness [Internet].''
---------------------------------------------------------------------------

The importance of standardized functional assessment in LTCH
settings is also supported by the high prevalence of therapy services
provided in this setting, as well as the need for care coordination for
patients returning home and receiving follow-up care in the community
and patients receiving additional institutional healthcare services
after discharge from an LTCH. A study \169\ of 1,419 ventilator-
dependent patients from 23 LTCHs reported that physical, occupational,
and speech therapy were the most commonly provided services among a
comprehensive list of 34 procedures, services, and treatments provided
during the LTCH stay. The high frequency of physical (84.8 percent),
occupational (81.5 percent), and speech (79.7 percent) therapy reflects
use of the rehabilitative model of care adopted by many post-ICU
ventilator weaning programs, which is important in restoration of
function. \170\ This high utilization of therapy services supports the
need for standardized functional assessment at admission to document
functional status, identify the need for therapy, set functional status
goals and assist with discharge planning and care coordination.
---------------------------------------------------------------------------

\169\ D. J. Scheinhorn et al., ``Post-ICU mechanical ventilation
at 23 long-term care hospitals: a multicenter outcomes study,''
Chest 131, no. 1 (2007).
\170\ Ibid.
---------------------------------------------------------------------------

Whether an LTCH patient is discharged home or to another care
setting for continuing health care, functional status is an important
aspect of a person's health status to document at the time of
transition. The study \171\ also reported that 28.8 percent of patients
were discharged directly home or to assisted living, further supporting
the importance of functional assessment and early rehabilitation to
facilitate discharge planning and home discharge, when possible.
---------------------------------------------------------------------------

\171\ Ibid.
---------------------------------------------------------------------------

Reported benefits of early mobility and rehabilitation include: (1)
Improved strength ^{172 173 174} and functional status;
^{175 176 177} (2) earlier achievement

[[Page 50293]]

of mobilization milestones, such as out-of-bed mobilization;
^{178 179} (3) improvement in mobility and self-care function
scores from admission to discharge; ^{180 181} (4) greater
incidence of return to functional baseline in mobility and self-care,
greater unassisted walking and walking distances, and improved self-
reported physical function scores at hospital discharge compared with
persons not participating in early mobility and rehabilitation; \182\
(5) enhanced recovery of functional exercise capacity; \183\ (6)
improved self-perceived functional status; \184\ and (7) reduced
physiological and cognitive complications \185\ and improved cognitive
function.\186\ Early mobility and rehabilitation have also been
associated with reduced ICU and hospital length of stay;
^{187 188 189 190 191 192} reduced incidence of delirium and
improved patient awareness; ^{193 194} increased ventilator-
free days and improved weaning outcomes; ^{195 196 197} greater
incidence of discharge home directly after hospitalization compared
with patients not receiving early mobilization; ^{198 199} and
reduced hospital readmission or death in the year following
hospitalization.^{200 201}
---------------------------------------------------------------------------

\172\ Schweickert and Kress, ``Implementing early mobilization
interventions in mechanically ventilated patients in the ICU.''
\173\ Dang, ``ABCDEs of ICU: Early mobility.''
\174\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
\175\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\176\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: A
randomised controlled trial.''
\177\ Li et al., ``Active mobilization for mechanically
ventilated patients: a systematic review.''
\178\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\179\ P. E. Morris, ``Moving our critically ill patients:
Mobility barriers and benefits,'' Crit Care Clin 23, no. 1 (2007).
\180\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
\181\ Scheinhorn et al., ``Post-ICU mechanical ventilation at 23
long-term care hospitals: A multicenter outcomes study.''
\182\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\183\ Dang, ``ABCDEs of ICU: Early mobility.''
\184\ Ibid.
\185\ Ibid.
\186\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
\187\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\188\ Kress, ``Clinical trials of early mobilization of
critically ill patients.''
\189\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: A
randomised controlled trial.''
\190\ Dang, ``ABCDEs of ICU: Early mobility.''
\191\ Engel et al., ``ICU early mobilization: From
recommendation to implementation at three medical centers.''
\192\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
\193\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\194\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: A
randomised controlled trial.''
\195\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\196\ Dang, ``ABCDEs of ICU: Early mobility.''
\197\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
\198\ Schweickert et al., ``Early physical and occupational
therapy in mechanically ventilated, critically ill patients: A
randomised controlled trial.''
\199\ Engel et al., ``ICU early mobilization: From
recommendation to implementation at three medical centers.''
\200\ Adler and Malone, ``Early mobilization in the intensive
care unit: A systematic review.''
\201\ Li et al., ``Active mobilization for mechanically
ventilated patients: A systematic review.''
---------------------------------------------------------------------------

Short-term and long-term cognitive impairment are very frequent
complications of critical illness, and negatively influence survivors'
abilities to function independently.^{202 203 204} Delirium
during hospitalization is highly prevalent in critically ill patients
and has been associated with longer lengths of stay, increased duration
of mechanical ventilation, and higher risk of death.\205\ A longer
duration of delirium has been associated with worse short- and long-
term cognition and executive function.^{206 207} Given these
adverse consequences, the importance of early assessment of cognitive
function, including possible delirium, and early initiation of
cognitive rehabilitation in critical care settings, is being
increasingly recognized.^{208 209} Also, given the positive
effects of physical exercise on cognitive function in other
populations, the potential positive influence of exercise on cognitive
function in the critically ill population is being examined by
researchers.\210\
---------------------------------------------------------------------------

\202\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
Risk factors, predictors, and rehabilitation interventions.''
\203\ Brummel et al., ``A combined early cognitive and physical
rehabilitation program for people who are critically ill: The
activity and cognitive therapy in the intensive care unit (ACT-ICU)
trial.''
\204\ P. P. Pandharipande, T. D. Girard, and E. W. Ely, ``Long-
term cognitive impairment after critical illness,'' N Engl J Med
370, no. 2 (2014).
\205\ Wilcox et al., ``Cognitive dysfunction in ICU patients:
Risk factors, predictors, and rehabilitation interventions.''
\206\ Ibid.
\207\ Pandharipande, Girard, and Ely, ``Long-term cognitive
impairment after critical illness.''
\208\ Brummel et al., ``A combined early cognitive and physical
rehabilitation program for people who are critically ill: The
activity and cognitive therapy in the intensive care unit (ACT-ICU)
trial.''
\209\ R. S. Miller et al., ``Outcomes of trauma patients who
survive prolonged lengths of stay in the intensive care unit,'' J
Trauma 48, no. 2 (2000).
\210\ Brummel et al., ``A combined early cognitive and physical
rehabilitation program for people who are critically ill: The
activity and cognitive therapy in the intensive care unit (ACT-ICU)
trial.''
---------------------------------------------------------------------------

A technical expert panel (TEP) convened by our measure development
contractor provided input on the technical specifications of this
quality measure, including the items included in the quality measure,
inclusion and exclusion criteria. We also solicited public comment on
the draft specifications of this quality measure on the CMS Quality
Measures Public Comment Page (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html) between February 21, 2014, and March 14,
2014, and received 22 responses from stakeholders with comments and
suggestions. Additional information regarding these comments may be
found on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Based on the evidence discussed above, we proposed to adopt for the
LTCHQR Program for the FY 2018 payment determination and subsequent
years the quality measure entitled Percent of Long-Term Care Hospital
Patients with an Admission and Discharge Functional Assessment and a
Care Plan That Addresses Function. This quality measure was developed
by CMS, and we plan to submit the quality measure to the NQF for
review. The MAP met in December 2013 and January 2014, and provided
input to CMS as required under section 1890A(a)(3) of the Act. In its
January 2014 Pre-Rulemaking Report, the MAP conditionally supported
this measure and stated that the measure concept is promising, but
requires modification or further development, and that functional
status is a critical area of measurement.
Since the time of the MAP meeting, we have continued further
development of the measure with input from technical experts, including
empirical data analysis. Subsequently, we released draft specifications
for the functional status quality measures, and requested public
comment between February 21, 2014 and March 14, 2014. We received 22
responses from stakeholders with comments and suggestions during the
public comment period, and have updated the quality measures
specifications based on these comments and suggestions. The updated
specifications are available for review at the LTCHQR Program Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-
Reporting/. We refer readers to section IX.C.2. of the preamble of this
final rule for more information on the MAP.
In section 1886(m)(5)(D)(ii) of the Act, the exception authority
provides that ``[i]n the case of a specified area or medical topic
determined appropriate

[[Page 50294]]

by the Secretary for which a feasible and practical measure has not
been endorsed by the entity with a contract under section 1890(a) of
the Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.''
We reviewed the NQF's consensus endorsed measures and were unable to
identify any NQF-endorsed quality measures focused on assessment of
function for patients in the LTCH setting. We are unaware of any other
quality measures for functional assessment that have been endorsed or
adopted by another consensus organization for the LTCH setting.
Therefore, we proposed to adopt this functional assessment measure for
use in the LTCHQR Program for the FY 2018 payment determination and
subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
Additional information regarding the quality measure may be found
on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We proposed that data for the quality measure be collected through
the LTCH CARE Data Set, with the submission through the Quality
Improvement and Evaluation System (QIES) Assessment Submission and
Processing (ASAP) system. For more information on LTCHQR Program
reporting using the QIES ASAP system, we refer readers to our Web site
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. We
noted our intention to revise the LTCH CARE Data Set to include new
items that assess functional status, should this measure be adopted.
These items, which assess specific functional activities (that is,
self-care, mobility, cognition, communication, and bladder continence),
would be based on functional items included in the Post-Acute Care
Payment Reform Demonstration version of the CARE Tool. The items have
been carefully developed and tested for reliability and validity.
We invited public comments on our proposal to adopt the quality
measure entitled Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function for the LTCHQR Program, with data collection
starting on April 1, 2016, for the FY 2018 payment determination and
subsequent years. We refer readers to section IX.C.9.c. of the preamble
of this final rule for more information on the data collection period
and submission deadline for this quality measure. Our responses to
public comments on these quality measures are discussed below in this
section of the final rule.
Comment: Several commenters expressed support for the quality
measure entitled Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function because functional improvement is an important
patient-centered outcome. A few commenters noted that such improvements
reduce the likelihood of infection, morbidity, mortality, and cost and
significantly improve quality of life in this vulnerable population. A
commenter emphasized the importance of improved functional status and
improved, earlier mobility for patients who are ventilated. Commenters
agreed that functional status is an important measurement gap for LTCHs
and support CMS for proposing measures that address this measurement
gap area. A commenter noted support for the use of the CARE Tool to
streamline reporting across acute and post-acute care settings.
Response: We appreciate the support for functional status quality
measures in the LTCH setting and the support for the use of cross-
setting standardized assessment items.
Comment: A commenter supported a measure of function in patient
care, but suggested that an outcome measure examining progress toward a
functional goal would be preferable to a process measure. The commenter
also suggested that CMS consider having a process measure that would
address having a plan in place that addresses functional deficits at
discharge.
Response: We thank the commenter for their support. We interpret
the commenter's comment to suggest that we should include an outcome
measure pertaining to the attainment of functional goals. We believe
that patient attainment of functional goals is important and appreciate
the commenter's suggested inclusion of such an outcome measure. We will
consider this measurement concept as we further develop the LTCHQR
Program. We further interpret the commenter's comment to suggest that
we consider adopting a process measure related to functional deficits
at discharge so as to ensure care coordination. We agree that such a
measure concept is important in that the domain of ``care
coordination'' is a priority to CMS. Therefore, we will consider this
concept in future measure development for the LTCHQR Program.
Comment: Many commenters expressed concern that the measure is not
NQF-endorsed. Commenters underscored the importance of the NQF review
process, emphasizing that NQF endorsement provides assurance that the
measure has been tested, can reliably and accurately collect data, is
feasible to implement and is usable. For these reasons, commenters
encouraged CMS to refrain from adopting measures into the LTCHQR
Program until they have been endorsed by NQF for use in the LTCH
setting.
Response: We agree that the NQF-endorsement process is an important
part of measure development, and we have generally adopted NQF-endorsed
measures whenever feasible. However, as discussed above, where such
measures do not exist for the LTCH setting, we may adopt measures that
are not NQF-endorsed under the Secretary's exception authority set out
in section 1886(m)(5)(D)(ii) of the Act.
Comment: A commenter indicated that the quality measure uses the
FIM[supreg] rating scale.
Response: We interpret this commenter to assert that we are using
the FIM[supreg] rating scale. We would like to clarify that we are not
using the FIM[supreg] rating scale, rather we are using a 6-level
rating scale developed and tested as part of the Post-Acute Care
Payment Reform Demonstration (PAC-PRD).
We reviewed the NQF's consensus endorsed measures and were unable
to identify any NQF-endorsed quality measures that focused on
assessment of function for patients in the LTCH setting. We are unaware
of any other quality measures for functional assessment that have been
endorsed or adopted by another consensus organization for the LTCH
setting. Therefore, we proposed to adopt this functional assessment
measure for use in the LTCHQR Program under the Secretary's authority
to select non-NQF-endorsed measures. Further, CMS and its measure
development contractor are planning to submit this measure for NQF
review in the fall of 2014.
Comment: Several commenters agreed with the MAP's recommendation to
adopt functional status measures as part of the LTCHQR Program. While
most commenters agreed this was an important measure area for the LTCH
population and some commenters noted that it addresses a measure area
gap identified by the MAP, many commenters expressed concern that the
measure is not yet fully developed and received only conditional
support from the MAP. The commenters noted the

[[Page 50295]]

MAP's conclusions that while the measure concept is promising, the
measure is not ready for implementation and requires further
modification and development. Commenters encouraged CMS to refrain from
adopting any measures not fully supported by the MAP.
Response: We note that this quality measure has been under
development for more than 3 years. The steps we undertook as part of
the measure development process have included an environmental scan,
technical expert panel review, and posting of specifications to solicit
public input. As part of the environmental scan, we reviewed the NQF's
consensus-endorsed measures and were unable to identify any NQF-
endorsed quality measures that focused on assessment of function for
patients in the LTCH setting. A TEP focused on functional status
quality measures was convened by our measure development contractor and
met in person and by phone in the fall of 2013. A report summarizing
these TEP meetings titled ``Summary of Feedback from TEP on the
Development of Cross-Setting Functional Status Quality Measures'' is
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Since the MAP meeting, we have continued further development of
this measure, including posting of the TEP report. As discussed above,
we also released draft specifications for the functional status quality
measures and solicited public comment between February 21, 2014, and
March 14, 2014. We received 22 responses from stakeholders with
comments and suggestions during this public comment period and, based
on these comments and suggestions, updated the quality measure
specifications, which are available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-Reporting/.
Comment: A commenter was concerned that CMS did not convene a TEP
for any of the new proposed quality measures and noted that TEPs,
``which evaluate . . . quality measures for importance, scientific
soundness, usability, and feasibility,'' are integral to developing
health care setting-appropriate quality measures.
Response: Our measure contractor convened a cross-setting
functional status quality measures TEP after a public call for TEP
nominations. The TEP met in person on September 9, 2013, and then met
via Webinar on October 21, 2013, October 28, 2013, and November 6.
2013. TEP members included experts from LTCHs, as well as IRFs and
SNFs. A report summarizing recent TEP meetings focused on functional
status quality measures titled ``Summary of Feedback from TEP on the
Development of Cross-Setting Functional Status Quality Measures'' is
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. The functional status
quality measure development built on work conducted as part of a
project funded by the Assistant Secretary for Planning and Evaluation,
and that project also included a cross-setting function quality measure
TEP, which was held on August 15, 2012. A report summarizing that
meeting is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/ASPE-Report-Analysis-of-Crosscutting-Medicare-Functional-Status-Quality-Metrics-Using-the-Continuity-and-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report.pdf.
Comment: Some commenters indicated that the measure was
inappropriate for the LTCH patient population. These commenters noted
that many or most LTCH patients are not mobile or functional on
admission, a significant percent are not mobile for the duration of
their stay, and the majority of the functional status assessment items
such as walking, picking up items and car transfers, would not be
applicable to these patients. The commenters also noted that for many
LTCH patients, a transfer from the bed to a chair is not possible.
Response: The development of this quality measure included a review
of published literature, a review of the findings from the PAC-PRD,
discussions with an LTCH expert panel and an opportunity for a public
comment period. As evidenced in the literature review, the PAC-PRD
findings, and through the technical expert panel input we obtained
during the measure development process, we concluded that this measure
is important and appropriate for the LTCH setting, and items selected
during the measure's development were considered applicable.
With respect to comments about the items selected, during their use
in the PAC-PRD, the LTCH staff stated that these items and their
associated response scale are able to capture small changes in patient
improvement, such as the progression from total dependence for task
completion to completing a task with much assistance (that is, more
than half the task was completed by the helper). The ability to capture
this level of change was found to be significant, particularly as it
pertains to the most impaired populations. Further, we made refinements
to the items selected based on input from the expert panels convened by
our measure development contractor and the public comment process,
including those activities, for example, walking, picking up items and
car transfers, which the commenter suggested were not applicable to
this setting.
Comment: Several commenters conveyed their concern regarding the
use of the CARE Tool as the data source for the functional status
quality measures due to limited testing in LTCHs and reliability
testing results. These commenters noted that several self-care and
mobility items have Kappa statistics categorizing inter-rater
reliability as ``fair'' or ``moderate,'' and were based on a small
sample of 46 LTCH patients. These commenters stated that ``fair'' or
``moderate'' reliability, while acceptable for exploratory studies or
internal quality improvement efforts, is insufficient for national use
in the LTCHQR Program. Commenters recommended CMS explain the low Kappa
statistics and/or re-test these items in significantly more LTCHs to
address reliability issues. These commenters noted that measure testing
should be oriented towards the intended setting of use of the measure
and suggested additional testing in the LTCH setting be conducted.
Response: The reliability results mentioned by these commenters
were only one of several reliability analyses conducted to support the
development of this measure as part of the PAC-PRD. In addition to the
inter-rater reliability study mentioned by these commenters, we also
examined: (1) Inter-rater reliability of the CARE items using
videotaped case studies, which included 114 LTCH assessments from 3
LTCHs; (2) internal consistency of the function data, which included
more than 7,700 assessments from 28 LTCHs; and (3) Rasch analyses of
the function data, which included more than 7,700 assessments from 28
LTCHs. The report describing these additional analyses and an
interpretation of the Kappa statistics results is available at: https://
www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/The-
Development-and-Testing-of-the-Continuity-Assessment-Record-and-
Evaluation-CARE-Item-Set-Final-Report-on-Reliability-Testing-Volume-2-
of-

[[Page 50296]]

3.pdf. Therefore, given the totality of the reliability analysis
involved, we believe that the development of this measure included a
sufficient level of analysis, and at a scientifically acceptable level,
such that a quality measure could be derived from these items.
We note that as part of the LTCHQR Program we intend to evaluate
the national-level data for this quality measure submitted by LTCHs to
CMS. These data will inform ongoing measure development and maintenance
efforts, including further analysis of reliability and validity of the
data elements and the quality measure.
Comment: Several commenters expressed concern related to undue
burden associated with data documentation for the functional status
quality measure. Some commenters suggested that several of the
functional status assessment items had low or non-response rates when
used as part of PAC-PRD. These commenters requested that CMS provide
additional information on how the measure has been updated to address
these low response rates. Further, in the event no updates have been
made, the commenters encouraged CMS to further investigate its use of
items having low or high non-response rates and reconsider if all of
these items remain necessary and appropriate for LTCHs.
Response: We appreciate the concerns related to any undue burden,
including documentation, and take such concerns under consideration
when selecting measures for the LTCHQR Program. In the specifications
for the measure, we have included several gateway questions that allow
the clinician to skip questions that are not pertinent, which we
believe helps to reduce undue burden. For example, one item asks if the
patient is or is not walking. If the patient is not walking, then the
items ``Walk 10 feet,'' ``Walk 50 feet with two turns'' and ``Walk 150
feet'' do not require responses and are therefore skipped.
With respect to the comments that some items had low response
rates, we interpreted these comments to refer to the coding responses
for when a patient does not or cannot attempt a daily activity, hence
the activity did not occur, and the assessor reports a code indicating
the reason that the activity was not attempted (for example, ``Medical
Condition'' or ``Patient Refusal''). We interpret the comments
pertaining to non-response as referring to missing data.
In the development of this measure, despite the low or high non-
response rates, inclusion of these items was the result of public input
and expert opinion. However, we agree with the commenters that some of
the self-care and mobility items may not be activities that many LTCH
patients perform, particularly at the time of admission. An analysis of
the PAC-PRD data showed that LTCHs had the highest percentage of codes
for these items indicating the ``Activity Did Not Occur'' as compared
to IRFs, SNFs and HHAs. We also agree that car transfers and picking up
an object are challenging activities for LTCH patients. Due to prior
public input we received via public posting and technical expert
panels, we had included these particular items because these items were
intended to aid in the further development of this measure utilizing
national data. However, if these items are removed, the use of the
measure can be retained without impacting the measure outcome in any
significant manner.
Because commenters expressed concern regarding burden and because
commenters expressed concerns about ``Activity Did Not Occur'' for data
elements that pertain to specific physical activities or functions that
would be assessed and addressed by a care plan, we believe that we
should consider removing assessment items where possible from this
measure's specifications, particularly when the items are duplicative
to items already included, or would often be coded as ``Activity Did
Not Occur'' (that is, when due to medical condition) and would not
specifically be meaningful in a care plan. We have therefore reviewed
our measure and the assessment items needed for addressing all the key
domains of function we proposed (for example, self-care, mobility,
cognition, communication and bladder function). We believe there are
items that could be removed from the self-care and mobility domains
because they potentially overlap with items that we would retain and
also because these items had high ``Activity Did Not Occur'' rates.
Further, these items can be removed from the quality measure without
affecting the measure substantively.
We followed specific rationale in our consideration for the removal
of these items: (1) That these particular items had high ``Activity Did
Not Occur'' or high non-response rates; and/or (2) that the data
elements to be removed were duplicative of the remaining data elements
in the quality measure for the LTCH population. We determined this, for
each item, based on data analysis and public comment, our review of the
item definitions, as well our review of the distribution of scores of
LTCH patients from the PAC-PRD. Lastly, we evaluated our ability to
finalize a modified measure, and we reviewed the modifications to the
measure, through the removal of these items, to ensure that the
modification was not substantive in nature.
The data elements specifically analyzed for removal were:
``Dressing upper body,'' ``Dressing lower body,'' ``Putting on/taking
off footwear,'' ``Shower/bathe self,'' ``Car transfer,'' ``1 step,''
``4 steps,'' ``12 steps,'' ``Walk 10 feet on uneven surfaces'' and
``Pick up object,'' all of which we would remove from the measure
specifications for Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function. Following our analysis, the following items have
been finalized for removal, with the associated rationale:
The item ``Dressing Upper Body'' had high ``Activity Did
Not Occur'' response rates and overlaps with the item ``Wash Upper
Body,'' which we are retaining, in that both items pertain to upper
body movement and the data captured for ``Wash Upper Body'' would
represent the activity. The item ``Dressing Lower Body'' had high
``Activity Did Not Occur'' response rates and overlaps with ``Toileting
Hygiene,'' which we are retaining, in that both items include managing
lower body clothing.
The item ``Putting on/taking off footwear'' had high
``Activity Did Not Occur'' response rates and also overlaps with
``Toileting Hygiene,'' an item which we are retaining, although we are
aware that it had moderately high ``Activity Did Not Occur'' response
rates. We note that, although we are aware that the item ``Toileting
Hygiene'' is associated with moderate ``Activity Did Not Occur''
response rates, we have decided to retain the item ``Toileting
Hygiene'' based on feedback from technical expert panels convened by
the measure contractor, the public comments from stakeholders, and the
relevance of the item for every patient.
The item ``Shower/bathe self'' had high ``Activity Did Not
Occur'' response rates and overlaps with the tasks involved with the
item ``Wash Upper Body,'' which we are retaining.
The mobility items we are removing, ``Walking 10 Feet on
Uneven Surfaces,'' ``Car transfer,'' ``1 step,'' ``4 steps,'' ``12
steps'' and ``Pick up object,'' had high non-response rates and overlap
with items ``Walk 150 Feet'' and ``Walk 50 feet with 2 turns,'' which
we are retaining.
As stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28263)
and the December 1, 2013, MUC List (pp. 39-40, 194-95), this measure
provides

[[Page 50297]]

the percentage of all LTCH patients that receive a functional
assessment on admission and discharge and a care plan that addresses
function. We believe that this measure, as modified in response to
public comment, is consistent with the description of the measure
reviewed by the MAP, which did not specify the various functions
assessed or addressed by a care plan. Moreover, we believe that
modification of the quality measure through the removal of duplicative
assessment items with low or high non-response rates does not
substantively alter this measure's application or its calculation. We
have previously explained that substantive measure changes would
include ``those in which the changes are so significant that the
measure is no longer the same measure, or when a standard of
performance assessed by a measure becomes more stringent (for example:
Changes in acceptable timing of medication, procedure/process, or test
administration)'' or ``where the NQF has extended its endorsement of a
previously endorsed measure to a new setting, such as extending a
measure from the inpatient setting to the LTCH setting.'' (77 FR 53258,
53615 through 53616).
We believe that in this case, the standard of performance assessed
by this measure would become less, not more, stringent due to the
modifications, and the measure is not being extended to a new patient
setting. Moreover, we believe that the modifications to the measure are
not ``so significant that the measure [would no longer be] the same
measure,'' as the measure numerator, denominator, and exclusions are
unchanged. Therefore, we believe that the modified version of Percent
of Long-Term Care Hospital Patients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function would not
be inconsistent with the descriptions of the measure reviewed by the
MAP and that the modifications to the measure are not substantive in
nature.
Thus, in response to public comments, we are modifying the proposed
quality measure, Percent of Long-Term Care Hospital Patients with an
Admission and Discharge Functional Assessment and a Care Plan That
Addresses Function, through removal of the data items noted above.
Specifically, the data elements we are removing for the reasons
discussed above are the following: ``Dressing upper body,'' ``Dressing
lower body,'' ``Putting on/taking off footwear,'' ``Shower/bathe
self,'' ``Car transfer,'' ``1 step,'' ``4 steps,'' ``12 steps,'' ``Walk
10 feet on uneven surfaces,'' and ``Pick up object.''
Comment: Several commenters expressed concerns about the need for
standardized training to ensure inter-rater reliability for the CARE
Tool function items, and noted that this training would add additional
burden to facilities. Several commenters also suggested CMS identify
the types of LTCH personnel who would collect and report measure data.
Response: We have addressed similar concerns in the past with
public outreach including training sessions, training manuals,
Webinars, open door forums, help desk support and a Web site that hosts
training information https://www.youtube.com/user/CMSHHSgov), and we
conduct such activities for the new items. All training materials are
available on the Web site free of charge. Procedures for data
collection, including who may complete functional assessments, are to
follow facility policies, and patient assessments are to be completed
in compliance with facility and applicable State and Federal
requirements. We do not provide guidance on which disciplines may
complete patient assessments.
Comment: Several commenters suggested that patients with program
interruptions (that is, periods of time during which the patient is
transferred from the LTCH to another care setting and subsequently
returned to the same LTCH; see the LTCHQR Program Manual 2.0 for
current definition--Chapter 3-A https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/) be
excluded from the quality measure, because it would be burdensome to
collect data when the patient was transferred and then returned to the
LTCH. A commenter explained that an interrupted stay patient is
``discharged'' from the LTCH and then ``readmitted'' to the LTCH within
a certain fixed period under the 3-day or less interrupted stay policy
and the greater than 3-day interrupted stay policy. Thus, the commenter
felt it would be unnecessary to assess the patient's functional status
at both points of admission and discharge since doing so may result in
an inaccurate assessment of the patient's condition. The commenter also
suggested that if interrupted stay patients are not excluded, then only
the initial admission and the last discharge should be assessed for
measure data collection purposes.
Response: For LTCH patients who experience one or more program
interruptions (3 calendar days or less), completion of the function
items would not be required during the program interruption, that is,
at the time of the transfer to the acute care setting and the return.
Patients with program interruptions are included in the quality
measure, but, as the commenter suggested, assessments would be only be
required for the initial admission assessment and at the time of the
discharge from the LTCH stay.
Comment: A commenter expressed general concern about the difficulty
of assessing cognitive function in the LTCH patient population,
including circumstances such as when any mind-altering medication was
given to the patient. The commenter stated that cognitive assessment
items have no provisions for accounting for such circumstances, nor
could they, since any such mandate would interfere with clinical
practice. Due to such considerations, the commenter questioned whether
it was possible to accurately capture cognitive status via
observational assessment, within two days of admission. The commenter
noted that timely completion of the cognitive assessment items
necessitates a clinician who is familiar with the patient, which in
turn affects whether these items get completed on the admission
assessment.
Another commenter stated that the cognitive function assessment
tool does not adequately measure baseline cognition because of the
variation in LTCH patients' clinical conditions and mental status. LTCH
patients are extremely fragile, and their cognition is affected by
small changes, such as the time of day and the clinical condition of
the patient. The commenter also expressed the opinion that the
cognitive function assessment tool provides a snapshot of a patient at
a given time on a given day, and is not a true reflection of the
patient's cognitive functioning. The commenter added that the expertise
of a clinical psychologist would be required to complete this tool.
Thus, these two commenters felt assessing the patient to collect
data to complete each of the data elements for the measure would
require LTCHs to expend significant time and resources reporting data
whose value in measuring quality of care in the LTCH setting is
questionable.
Response: We acknowledge the complexity of the LTCH patient
population, and potential challenges that can limit certain
assessments, for example, the inability to perform a cognitive
assessment with a ventilator-dependent patient on sedation. We
interpret the commenter to indicate that under such circumstances, it
will not be

[[Page 50298]]

feasible to accurately assess a patient's cognition at the beginning of
the LTCH stay and that it would be an interruption in clinical care to
perform such an assessment. We also interpret the commenter to indicate
that in the assessment there would be no capacity to reflect recent
administration of medications that impact cognitive status, although
assessment of cognition is required for this measure. We agree that at
the time of assessment there is information that cannot be obtained
from certain patients, such as patients who are ventilator-dependent
and on sedation, or in the event the patient is comatose. We agree that
there are circumstances that an assessment cannot be performed, and it
would be inappropriate to do so, and hence, the assessment should allow
for LTCHs to indicate these circumstances when the data could not be
collected.
We will address these circumstances by providing instructions on
when select items can be skipped due to patient conditions and gateway
questions in the LTCH CARE Data Set Version 3.00. In the specifications
for the measure, we have included several gateway questions that allow
the clinician to skip questions that are not pertinent. For example,
one item asks if the patient is or is not walking. If the patient is
not walking, then the items ``Walk 10 feet,'' ``Walk 50 feet with two
turns'' and ``Walk 150 feet'' do not require responses and are
therefore skipped. We agree with the commenter that a clinician
familiar with the patient would provide the most accurate assessment of
the patients' status.
Consistent with the clinical standard of practice, timely admission
assessments are conducted on all patient admissions by a clinician,
typically by a registered nurse who obtains assessment information to
inform care planning so that the care team can become familiar with the
patient and develop and implement sound clinical care and
interventions. Thus, from the time of admission to an LTCH, we believe
that clinical staff should collect health assessment information about
the patient to inform their care. Further, we believe that such
assessment data would be captured by a clinician familiar with the LTCH
patient.
We interpret the second commenter to indicate that the variability
in the LTCH patient cognitive status would make it difficult to obtain
a baseline for use in this measure. We also interpret the commenter's
concern to be related to the importance of capturing causation in
mental status change. Causative factors in cognitive change do not
impact the calculation of the quality measure. The measure requires the
collection of the Confusion Assessment Method (CAM[supreg]) in order to
capture fluctuations of cognitive function. We selected the CAM[supreg]
Instrument after TEP review, and following receipt of several comments
from our initial public comment opportunity in March 2014.
We disagree with the commenter's statement that the expertise of a
clinical psychologist would be needed to collect the cognitive status
assessment, because the CAM[supreg] was collected during the PAC-PRD by
varying levels of staff, with strong inter-rater reliability without it
being performed by a clinical psychologist, and there was no evidence
found during this demonstration to support this concern. Furthermore,
the CAM[supreg] was tested for use by bedside staff for use in the
Minimum Data Set Version 3.0 and was implemented on October 1, 2010.
Both commenters suggest that capturing the assessment data would
necessitate LTCHs to expend significant time and resources to collect
this measure, which they further suggest may not be valuable for this
setting. We disagree with these commenters in that the data collected
for use in these measures is consistent with general clinical care and
the CAM[supreg] itself is a specific assessment that is already
utilized in the healthcare setting.
Comment: Commenters suggested that CMS take into consideration the
addition of a POA indicator in selected portions of the LTCH CARE Data
Set. These commenters noted that a POA indicator would be important for
performing any risk adjustment of functional status measures to allow
for the distinction between complications associated with care at the
LTCH and a patient's preexisting conditions.
Response: The admission functional assessment data collected for
this quality measure would be based on the patient's functional status
at the time of admission, and we would consider the initial assessment
to be ``present on admission.''
In addition to soliciting comments about our proposal to adopt the
functional status measure for the LTCHQR Program, we also invited
public comment on our proposal to use the LTCH CARE Data Set and QIES
ASAP systems for data collection and submission of the functional
status measure. We received no public comments on this proposal.
After consideration of the public comments we received, we are
finalizing the adoption of the measure entitled Percent of Long-Term
Care Hospital Patients with an Admission and Discharge Functional
Assessment and a Care Plan That Addresses Function for use in the
LTCHQR Program, with the modifications noted in our responses to public
comments above.
(2) Functional Status Quality Measure: Functional Outcome Measure:
Change in Mobility Among Long-Term Care Hospital Patients Requiring
Ventilator Support
Section 1206(c) of Division B of Public Law 113-67, the Pathway to
SGR Reform Act of 2013, amended section 1886(m)(5)(D) of the Act to add
a new clause (iv) requiring the Secretary to establish by no later than
October 1, 2015, ``a functional status quality measure for change in
mobility among inpatients requiring ventilator support.'' Accordingly,
the second functional status quality measure that we proposed was an
outcome quality measure entitled the Functional Outcome Measure: Change
in Mobility among Long-Term Care Hospital Patients Requiring Ventilator
Support. This measure estimates the risk-adjusted change in mobility
score between the time of admission and the time of discharge among
LTCH patients requiring ventilator support at the time of admission. As
noted above, LTCH patients often have functional limitations and
receive rehabilitation therapy services so that they can become more
independent when performing functional activities. Functional
improvement is particularly relevant for patients who require
ventilator support because these patients have traditionally had
limited mobility due to cardiovascular and pulmonary instability,
delirium, sedation, lack of rehabilitation therapy staff, and lack of
physician referral.\211\
---------------------------------------------------------------------------

\211\ Zanni et al., ``Rehabilitation therapy and outcomes in
acute respiratory failure: An observational pilot project.''
---------------------------------------------------------------------------

Several studies have examined functional improvement among patients
in the long-term care hospitals. In a sample of 101 patients in LTCHs
(three-quarters were ventilator-dependent), median functional status
scores using the Functional Status Score (FSS)-ICU (rolling, supine-to-
sit transfers, unsupported sitting, sit-to-stand transfers, and
ambulation) improved significantly from admission to discharge, with
significant change in all five functional items.\212\ A separate study
of 103 patients with respiratory

[[Page 50299]]

failure examined functional improvement and found that by the end of
the respiratory ICU stay, 69.4 percent of survivors ambulated more than
100 feet, 8.2 percent ambulated less than 100 feet, 15.3 percent could
sit in a chair, 4.7 percent could sit on the edge of the bed, and 2.4
percent did not accomplish any of these activities.\213\
---------------------------------------------------------------------------

\212\ A. Thrush, M. Rozek, and J.L. Dekerlegand, ``The clinical
utility of the functional status score for the intensive care unit
(FSS-ICU) at a long-term acute care hospital: A prospective cohort
study,'' Phys Ther 92, no. 12 (2012).
\213\ P. Bailey et al., ``Early activity is feasible and safe in
respiratory failure patients,'' Crit Care Med 35, no. 1 (2007).
---------------------------------------------------------------------------

The importance of monitoring improvement in mobility skills among
LTCH patients who require ventilator support at the time of admission
is also supported by the high prevalence of therapy service provision
as part of the treatment plan and the percent of patients discharged
home after an LTCH stay. In a study of 1,419 ventilator-dependent
patients from 23 LTCHs with weaning programs,\214\ physical therapy,
occupational therapy, and speech therapy were the three most commonly
provided services among 34 procedures, services, and treatments
provided during the LTCH admission. The very high frequency of physical
(84.8 percent), occupational (81.5 percent), and speech (79.7 percent)
therapy reflects use of the rehabilitative model of care adopted by
many post-ICU weaning programs, which is important in the restoration
of function.\215\ Improvement in functional status, including mobility
and self-care was noted from admission to discharge. Nearly 30 percent
of all patients discharged alive returned directly home or to assisted
living.\216\
---------------------------------------------------------------------------

\214\ Scheinhorn et al., ``Post-ICU mechanical ventilation at 23
long-term care hospitals: A multicenter outcomes study.''
\215\ Ibid.
\216\ Ibid.
---------------------------------------------------------------------------

A TEP convened by our measure development contractor provided input
on the technical specifications of this quality measure. We also
solicited public comment on the draft specifications of this quality
measure, on the CMS Quality Measures Public Comment Page (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html) between February 21 and
March 14, 2014, and received 22 responses from stakeholder with
comments and suggestions.
Additional information regard the quality measure may be found on
our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We proposed that data for the proposed quality measure be collected
through the LTCH CARE Data Set, with the submission through the QIES
ASAP system. For more information on LTCHQR Program reporting using the
QIES ASAP system, we refer readers to our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. We
intend to revise the LTCH CARE Data Set to include new items that
assess the functional status and the risk adjustors, should this
proposed measure be adopted. These items, which assess specific
functional activities (that is, self-care, mobility, cognition,
communication, and bladder continence), would be based on functional
status items included in the Post-Acute Care Payment Reform
demonstration version of the CARE Tool. The items have been carefully
developed and tested for reliability and validity.
Based on the evidence discussed above, we proposed to adopt for the
LTCHQR Program for the FY 2018 payment determination and subsequent
years the quality measure entitled Functional Outcome Measure: Change
in Mobility among Long-Term Care Hospital Patients Requiring Ventilator
Support. This quality measure is developed by CMS, and we plan to
submit the quality measure to the NQF for review. The MAP met in
December 2013 and January 2014, and the NQF provided the MAP's input to
CMS as required under section 1890A(a)(3) of the Act. In its January
2014 Pre-Rulemaking Report, the MAP conditionally supported this
proposed measure and stated that the measure concept is promising, but
requires modification or further development, and that functional
status is a critical area of measurement. Since the time of the MAP
meeting, we have continued further development of the measure with
input from technical experts, including empirical data analysis.
Subsequently, we have released draft specifications for the function
quality measures, and requested public comment between February 21 and
March 14, 2014. We received 22 responses from stakeholders with
comments and suggestions during the public comment period, and have
updated the quality measures specifications based on these comments and
suggestions. The updated specifications are available for review at the
LTCHQR Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-Reporting/. We refer readers to
section IX.C.2. of the preamble of this final rule for more information
on the MAP.
In section 1886(m)(5)(D)(ii) of the Act, the exception authority
provides that ``[i]n the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a consensus organization
identified by the Secretary.'' We reviewed the NQF's consensus endorsed
measures and were unable to identify any NQF-endorsed quality measures
focused on improvement of function among patients in the LTCH setting.
We are unaware of any other quality measures for functional improvement
that have been endorsed or adopted by another consensus organization
for the LTCH setting. Moreover, as discussed above, the Secretary is
now required to establish such a measure by October 1, 2015. Therefore,
we proposed to adopt this functional improvement measure for use in the
LTCHQR Program for the FY 2018 payment determination and subsequent
years under the Secretary's authority to select non-NQF-endorsed
measures.
We invited public comments on our proposal to adopt the quality
measure entitled Functional Outcome Measure: Change in Mobility among
Patients Requiring Ventilator Support for the LTCHQR Program, with data
collection starting on April 1, 2016, for the FY 2018 payment
determination and subsequent years. We refer readers to section
IX.C.9.c. of the preamble of this final rule for more information on
the proposed data collection and submission timeline for this proposed
quality measure.
Comment: Several commenters expressed support for the quality
measure ``Functional Outcome Measure: Change in Mobility Among Long-
Term Care Hospital Patients Requiring Ventilator Support,'' because
functional improvement is an important patient-centered outcome. A few
commenters noted that such improvements reduce the likelihood of
infection, morbidity, mortality, and cost and significantly improve
quality of life in this vulnerable population. A commenter emphasized
the importance of improved functional status and improved, earlier
mobility by those patients who are ventilated. Several commenters
agreed with the MAP's recommendation to adopt functional status
measures as part of the

[[Page 50300]]

LTCHQR Program. Commenters agreed that functional status is an
important measurement gap for LTCHs and supported CMS for proposing
measures that address this measurement gap area. A commenter noted
support for the use of common functional status items across acute and
post-acute care settings. A commenter noted that this quality measure
is required by public law.
Response: We appreciate the support for the quality measure
entitled Functional Outcome Measure: Change in Mobility among Long-Term
Care Hospital Patients Requiring Ventilator Support in the LTCH
setting, and for the support of use of standardized functional status
items across acute and post-acute care settings.
Comment: Many commenters expressed concern that the measure is not
yet fully developed and is not NQF-endorsed. Several commenters noted a
number of issues that CMS should consider in the development of these
functional status quality measures.
Response: We agree that the NQF endorsement process is an important
part of measure development and we have generally adopted NQF-endorsed
measures whenever feasible. However, where such measures do not exist
for the LTCH setting, as stated in our proposal and noted above, we may
adopt measures that are not NQF-endorsed for the LTCHQR Program under
the Secretary's exception authority set out in section
1886(m)(5)(D)(ii) of the Act.
We reviewed the NQF's consensus endorsed measures and were unable
to identify any NQF-endorsed quality measures that focused on
assessment of function for patients in the LTCH setting. We are unaware
of any other quality measures for functional assessment that have been
endorsed or adopted by another consensus organization for the LTCH
setting. Therefore, we proposed to adopt this functional assessment
measure for use in the LTCHQR Program for the FY 2018 payment
determination and subsequent years under the Secretary's authority to
select non-NQF-endorsed measures. We plan to submit an application for
NQF endorsement in the fall of 2014.
Comment: While most commenters agreed that functional improvement
was an important measure area for the LTCH population and some
commenters noted that it addresses a measure area gap identified by the
MAP, many commenters expressed concern that the measure is not yet
fully developed and had only conditional support from MAP. They noted
the MAP's conclusions that while the measure concept is promising, the
measure is not ready for implementation and requires further
modification and development. Commenters encouraged CMS to refrain from
adopting any measures not fully supported by the MAP.
Response: We note that this function quality measure has been under
development for more than 3 years. The steps we undertook as part of
the measure development process have included an environmental scan,
technical expert panel review, and public posting of specifications
with public input. A report summarizing the TEP meetings titled
``Summary of Feedback from TEP on the Development of Cross-Setting
Functional Status Quality Measures'' is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
Since the time of the MAP meeting, we have continued further
development of the measure, and we posted draft specifications for the
functional status quality measures for public comment between February
21, 2014, and March 14, 2014. As discussed above, we received 22
responses from stakeholders with comments and suggestions during the
public comment period and, based on these comments and suggestions,
have updated the quality measures specifications, which are available
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-
Reporting/.
Comment: A commenter expressed concern that CMS did not convene a
TEP for any of the new proposed quality measures, and noted that TEPs,
``which evaluate . . . quality measures for importance, scientific
soundness, usability, and feasibility,'' are integral to developing
healthcare setting appropriate quality measures.
Response: Our measure contractor convened a cross-setting function
quality measures TEP after a public call for TEP nominations. The TEP
met in person on September 9, 2013, and then by Webinar on October 21,
2013, October 28, 2013, and November 6. 2013. TEP members included
experts from LTCHs as well as IRFs and SNFs. A report summarizing
recent TEP meetings focused on functional status quality measures
titled ``Summary of Feedback from TEP on the Development of Cross-
Setting Functional Status Quality Measures'' is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
The functional status quality measure development builds upon work
conducted as part of a project funded by the Assistant Secretary for
Planning and Evaluation, and that project also included a cross-setting
function TEP, which was held on August 15, 2012. A report summarizing
that meeting is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/ASPE-Report-Analysis-of-Crosscutting-Medicare-Functional-Status-Quality-Metrics-Using-the-Continuity-and-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report.pdf.
Comment: Several commenters conveyed concerns related to undue
burden associated with data documentation for the functional status
quality measure.
Response: In the measure specifications, we included several
gateway questions that allow the clinician to skip questions that are
not pertinent, which we believe helps to reduce undue burden. For
example, one item asks if the patient is or is not walking. If the
patient is not walking, then the items ``Walk 10 feet,'' ``Walk 50 feet
with two turns'' and ``Walk 150 feet'' do not require responses and are
therefore skipped.
Comment: A commenter questioned the value of this measure in the
LTCH setting, given that many ventilator patients have no mobility at
the time of admission. Another commenter noted that for some patients,
the proposed measure may not be meaningful. The commenter added that in
such cases, it may be appropriate to apply certain exclusions. Another
commenter suggested the use of a process measure due to limited
improvement in mobility for ventilator patients.
Response: Our analyses of the PAC-PRD data found that many patients
admitted to LTCHs on a ventilator have very limited mobility skills on
admission, but that many did show some improvement in mobility skills
during the LTCH stay, including bed mobility skills. LTCH clinicians in
the PAC-PRD appreciated that the items used in this measure could
capture even small improvement. We also list exclusion criteria in the
draft measure specifications document, including patients with
tetraplegia complete and locked-in state as well as patients with
incomplete LTCH stays. We appreciate the commenter's suggestion on the
use of a process measure, and we note that we are finalizing such as
process measure that includes this population.
Comment: A commenter stated that in the testing of the CARE Tool,
no analysis was reported of differences in functional scores at
admission and

[[Page 50301]]

discharge, thus calling into question whether there is adequate
variability in change in function scores to result in a meaningful
measure. This commenter stated that the Rasch analysis for assessing
validity was not applied to the sensitivity of the measure for
chronically and critically ill patients. The commenter concluded that
if little difference in functional scores at admission and discharge is
expected, then the meaningfulness of the measure is called into
question.
Response: The change in self-care and mobility function for LTCH
patients was reported in the Post-Acute Care Payment Reform
Demonstration Final Report--Volume 4 available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/PAC-PRD_FinalRpt_Vol4of4.pdf. Specifically, on page
57 of this Report, it is noted that the mean self-care change for all
patients in the post-acute care setting was an improvement of 12.4
units of self-care function. Among patients with nervous system
conditions, LTCH patients and SNF patients achieved very similar
unadjusted change in self-care scores (10.4 and 10.1 units of self-care
functional improvement, respectively). The mean mobility change for all
post-acute care patients was 14.6 units of functional improvement. LTCH
patients improved 11.2 units from admission to discharge, which is
slightly more than the change in mobility observed among home health
patients, which was 10.4 units of change. These results demonstrate
that functional improvement was observed among LTCH patients using the
function items from the CARE Tool. Our measure development analyses
also showed improvement in mobility skills for patients requiring
ventilator support.
Comment: In order to more fully evaluate the proposed functional
outcome measure, a few commenters requested that CMS provide further
details regarding the proposed methodology and expected utilization
approach for the measure. Specifically, a commenter was interested in
learning more about the risk adjustment procedures. A commenter
expressed concern about the lack of a validated model to assess change
in mobility among LTCH inpatients requiring ventilator support.
Commenters suggested that any such tool would also need to include
components for stratification based on comorbidities impacting a
patient's ability to demonstrate functional improvement.
Response: The risk adjustment methodology is described in the draft
quality measures specification document titled ``Draft Specifications
for the Proposed Functional Status Quality Measures for Long-Term Care
Hospitals'' available at the LTCHQR Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting. The risk adjustment analyses are
being conducted by the measure contractor and the regression
coefficients (that is, weights) will be available as part of the NQF
application. Risk adjustment for this measure includes variables that
adjust for several comorbidities, including chronic kidney disease or
dialysis; septicemia or other severe infections; metastatic lung,
colorectal, bladder or other severe cancers; diabetes; paraplegia; and
hemiplegia. We received several suggestions for risk adjustors as part
of the March 2014 public comment process and have tested all suggested
variables.
After consideration of the public comments we received, we are
finalizing the adoption of the quality measure entitled Functional
Outcome Measure: Change in Mobility among Long-Term Care Hospital
Patients Requiring Ventilator Support for use in the LTCHQR Program, as
proposed.
b. Quality Measure: National Healthcare Safety Network (NHSN)
Ventilator-Associated Event (VAE) Outcome Measure
The third quality measure that we proposed was the CDC-developed
National Healthcare Safety Network (NHSN) Ventilator-Associated Event
(VAE) Outcome measure. The term ``Ventilator-Associated Events''
incorporates a range of ventilator-associated events, including
ventilator-associated pneumonia (VAP), pulmonary edema, acute
respiratory distress syndrome, sepsis, and atelectasis.\217\ The NHSN
VAE Outcome measure provides increased measure sensitivity, more
objective definitions for ventilator-associated conditions, and the
potential for automated outcome detection.\218\ The NHSN VAE Outcome
measure is designed for use across multiple inpatient care settings,
including LTCHs. The measure specifications were created and tested in
the acute care setting. During CY 2013, 105 LTCHs submitted VAE data to
CDC's NHSN.\219\
---------------------------------------------------------------------------

\217\ Klompas, M., Y. Khan, et al. (2011). ``Multicenter
Evaluation of a Novel Surveillance Paradigm for Complications of
Mechanical Ventilation.'' PLoS ONE 6(3): e18062.
\218\ Magill, S. S., M. Klompas, et al. (2013). ``Developing a
new, national approach to surveillance for ventilator-associated
events*.'' Crit Care Med 41(11): 2467-2475.
\219\ Data from CMS-CDC correspondence on February 10, 2014.
---------------------------------------------------------------------------

According to the CDC, ``more than 300,000 patients receive
mechanical ventilation in the United States each year.'' \220\ These
patients are at increased risk for infections, such as pneumonia and
sepsis, as well as other serious complications including pulmonary
edema, pulmonary embolism, and death.^{221 222 223} These
complications can lead to longer stays in the ICU and hospital,
increased health care costs and increased risk of disability (or
death).\224\ The estimated mortality rate in patients aged 85 years and
older with acute lung injury on mechanical ventilation is 60
percent.\225\
---------------------------------------------------------------------------

\220\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
\221\ Esteban, A., A. Anzueto, et al. (2002). ``Characteristics
and outcomes in adult patients receiving mechanical ventilation: a
28-day international study.'' JAMA 287(3): 345-355.
\222\ Klompas, M., Y. Khan, et al. (2011). ``Multicenter
Evaluation of a Novel Surveillance Paradigm for Complications of
Mechanical Ventilation.'' PLoS ONE 6(3): e18062.
\223\ Rubenfeld, G. D., E. Caldwell, et al. (2005). ``Incidence
and outcomes of acute lung injury.'' N Engl J Med 353(16): 1685-
1693.
\224\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf,.
\225\ Rubenfeld GD, Caldwell E, Peabody E, et al. Incidence and
outcomes of acute lung injury. N Engl J Med 2005: 353:1685-93.
---------------------------------------------------------------------------

Ventilator-Associated Events represent a high-priority complication
in the LTCH setting, given the older, medically complex population in
LTCHs and the high prevalence of mechanical ventilation in this
setting. A MedPAC analysis of MedPAR data found that 16 percent of LTCH
patients used at least one ventilator-related service in 2012.\226\ In
FY 2012, MS-LTC-DRG 207, a diagnosis-related group that refers to
respiratory diagnosis with ventilator support for 96 or more hours,
represented the most frequently occurring diagnosis among LTCH
patients, at 11.3 percent of all LTCH discharges,\227\ and MS-LTC-DRG-
4, a diagnosis-related group that refers to tracheostomy with
ventilator support for 96 or more hours or primary diagnosis except
face, mouth, and neck without major OR procedure, represented an
additional 1.3 percent of all LTCH discharges. Together, the two
diagnosis-related groups account for a total of nearly 18,000
discharges. Furthermore,

[[Page 50302]]

the number of ventilated patients in LTCHs is increasing--the number of
discharged patients with respiratory diagnosis with ventilator support
for 96 or more hours increased 7.4 percent between 2008 and 2011.\228\
---------------------------------------------------------------------------

\226\ MedPAC ``Report to Congress: Medicare Payment Policy''
Chapter 11 ``Long-term care hospital services.'' March 2014. https://www.medpac.gov/chapters/Mar14_Ch11.pdf.
\227\ Ibid.
\228\ Ibid.
---------------------------------------------------------------------------

Although there are no nationwide or LTCH-specific estimates of the
prevalence of ventilator-associated conditions (VACs) and infection-
related ventilator-associated complications (IVACs), a recent study of
mechanically ventilated patients in ICUs found that approximately 10
percent developed a VAC and 5 percent developed an IVAC.\229\ Adherence
to clinical practice guidelines for the prevention of VAP has been
associated with decreased VAC rates in ICUs.\230\ Because VAP, one type
of VAC, is considered preventable, surveillance and measurement of
infection rates is important to improving quality of care and patient
safety.
---------------------------------------------------------------------------

\229\ Muscedere, J., T. Sinuff, et al. (2013). ``The clinical
impact and preventability of ventilator-associated conditions in
critically ill patients who are mechanically ventilated.'' Chest
144(5): 1453-1460.
\230\ Ibid.
---------------------------------------------------------------------------

The importance of the NHSN VAE Outcome measure in LTCHs was
underscored by the MAP, which stated in its January 2014 Pre-Rulemaking
Report that the measure addresses a National Quality Strategy aim or
priority that is currently not adequately addressed. The MAP supported
the addition of this measure addressing VAEs in the LTCH setting and
stated that ``although this measure is not NQF-endorsed, it provides
useful information for healthcare facilities to help them monitor
ventilator use and identify improvements for preventing
complications.'' \231\
---------------------------------------------------------------------------

\231\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: Public Comment Draft: January 2014.
Available: https://www.qualityforum.org/map/.
---------------------------------------------------------------------------

We reviewed the NQF's consensus endorsed measures and were unable
to identify any NQF-endorsed measures for VAEs in the LTCH setting (or
a related setting). We are unaware of any other measures for VAEs that
have been endorsed or adopted by another consensus organization for the
LTCH setting (or a related setting). Therefore, we proposed to adopt
the NHSN VAE Outcome measure for use in the LTCHQR Program for the FY
2018 payment determination and subsequent years under the Secretary's
authority to select non-NQF-endorsed measures under section
1886(m)(5)(D)(ii) of the Act.
We proposed to use the CDC's NHSN reporting and submission
infrastructure for reporting of the NHSN VAE Outcome measure. Details
related to the procedures for using CDC's NHSN for data submission and
information on definitions, numerator data, denominator data, data
analyses, and measure specifications for the NHSN VAE Outcome measure
can be found at: https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
CDC's NHSN is the data collection and submission framework
currently used for reporting the CAUTI (NQF 0138) and CLABSI
(NQF 0139) measures for the LTCHQR Program. Further, CDC's
NHSN is the data collection and submission framework adopted for data
collection and reporting for the Influenza Vaccination Coverage among
Healthcare Personnel measure (NQF 0431) starting on October 1,
2014, and for the NHSN Facility-Wide Inpatient Hospital-Onset
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome
Measure (NQF 1716) and NHSN Facility-Wide Inpatient Hospital-
Onset Clostridium difficile Infection (CDI) Outcome Measure (NQF
1717) starting on January 1, 2015. By building on the CDC's
NHSN reporting and submission infrastructure, we intend to reduce the
administrative burden related to data collection and submission for
this measure under the LTCHQR Program. We refer readers to section
IX.C.9.d. of the preamble of this final rule for more information on
the data collection and submission timeline for this quality measure.
We invited public comments on our proposal to adopt the NHSN VAE
Outcome measure for the LTCHQR Program, with data collection beginning
on January 1, 2016, for the FY 2018 payment determination and
subsequent years. We also invited public comments on our proposal to
use the CDC's NHSN for data collection and submission for this measure.
Comment: Many commenters agreed that the NHSN VAE Outcome measure
is an appropriate quality measurement area for the general LTCH patient
population. Several commenters agreed with the NQF MAP's recommendation
to adopt HAI measures as part of the LTCHQR Program. Commenters agreed
that HAI measures represent an important measurement gap for LTCHs and
supported CMS' proposal of a measure that addresses this measurement
gap area. A commenter noted that the NHSN VAE Outcome measure is well
aligned with the newly identified chronically critically ill (CCI)
category of patients.
Response: We thank these commenters' for their support of our
effort to implement HAI measures that address important measurement gap
areas identified by the NQF MAP and other stakeholder groups.
Comment: Some commenters fully supported CMS' proposal to implement
the NHSN VAE Outcome measure for the FY 2018 payment year. These
commenters agreed with CMS' rationale that VAEs represent a high-
priority complication in the LTCH setting and appreciated CMS'
consideration for the utility of this measure given that it can be used
across multiple settings.
Some commenters specifically noted that the measure offers a
mechanism for LTCHs of long-term mechanical ventilation to objectively
measure the impact of care improvement initiatives. Furthermore, these
commenters stated that reporting the NHSN VAE Outcome measure would
raise awareness to the medical detriment of extended time on mechanical
ventilation and would encourage facilities to implement strategies to
reduce time on mechanical ventilation. Further, these commenters noted
that the foundational elements for VAE definition (positive-end
expiratory pressure (PEEP), fraction of inspired oxygen (FiO2),
temperature, and white blood cell count (WBC)) are readily available,
objective, rational, and reportable. The commenters stated that
measuring and reporting VAE along with tracking care improvement
initiatives could help to quantify the extent to which VAEs are
preventable.
Response: We appreciate these commenters' support of our proposal
and rationale to implement the NHSN VAE Outcome measure.
Comment: Many commenters expressed concern that the measure is not
NQF-endorsed, though several commenters noted that the measure is
supported by the MAP. Commenters underscored the importance of the NQF
review processes, emphasizing that NQF-endorsement provides assurance
that the measure has been tested, can reliably and accurately collect
data, is feasible to implement, and is usable. For these reasons,
commenters encouraged CMS to refrain from adopting measures into the
LTCHQR Program until they have been endorsed by the NQF for use in the
LTCH setting. Commenters also emphasized the importance of review by
the NQF via the full consensus development process, stating that time-
limited endorsement from the NQF is insufficient to consider a measure
for adoption in the LTCHQR Program. In addition to securing NQF-
endorsement, commenters encouraged CMS to refrain from adopting any
measures not supported by the NQF MAP and a TEP.

[[Page 50303]]

Response: We agree that the NQF-endorsement process is an important
part of measure development and we have generally adopted NQF-endorsed
measures whenever feasible. However, where such measures do not exist
for the LTCH setting, as stated in our proposal, we may adopt measures
that are not NQF-endorsed under the Secretary's exception authority set
out in section 1886(m)(5)(D)(ii) of the Act. As also stated in our
proposal, we reviewed the NQF's consensus endorsed measures for VAEs
and were unable to identify an NQF-endorsed measure for the LTCH
setting. We note that the CDC has conveyed to us that they received
preliminary positive feedback from the NQF on the NHSN VAE Outcome
measure and plans to submit the measure for NQF endorsement in 2015.
In addition, the NQF MAP supported the use of this measure in the
LTCHQR Program and concluded that ``although this measure is not NQF-
endorsed, it provides useful information for healthcare facilities to
help them monitor ventilator use and identify improvements for
preventing complications.'' \232\ Because the NHSN VAE Outcome measure
was developed for use in multiple inpatient settings, including LTCHs,
and because several stakeholder groups have agreed that the measure
provides useful information that can prevent ventilator-associated
events and impact patient outcomes, we believe the measure is
appropriate for implementation in the LTCHQR Program.
---------------------------------------------------------------------------

\232\ National Quality Forum. Measure Applications Partnership
Pre-Rulemaking Report: Final Report January 2014. Available: https://www.qualityforum.org/map/ (page 31).
---------------------------------------------------------------------------

Comment: A commenter questioned the appropriateness of the NHSN VAE
Outcome measure for the LTCH patient population since the primary focus
of care for the LTCH patient may include aggressive ventilator weaning.
This commenter expressed concern that the definitions for VAE
surveillance used in the NHSN VAE Outcome measure are different from
the patient outcomes and clinical indicators of VAEs, such as the VAP,
used in LTCHs. Further, this commenter noted that the surveillance
monitoring approach used by the NHSN VAE Outcome measure does not align
with LTCH patient goals (which often include aggressive ventilator
weaning). Since LTCHs typically use identification of a symptomatic
patient and laboratory culture results to identify VAEs, the commenter
stated that implementing surveillance monitoring (in particular,
ongoing monitoring of positive-end expiratory pressure and fraction of
inspired oxygen) to adhere to the NHSN algorithm would be difficult and
taxing in the LTCH setting and would divert resources away from other,
more valuable monitoring and prevention efforts in the LTCH setting.
Response: Although we recognize that the implementation of this
measure adds burden for LTCHs, the NHSN VAE measure was developed to be
more sensitive to VAEs than other VAE identification measures and is
also more objective than other measures.\233\ The VAE algorithm avoids
the use of chest radiograph and the reliance on specific clinical signs
and symptoms to identify VAP due to their subjectivity and the fact
that they may be poorly or inconsistently documented in the medical
record.\234\ The VAE surveillance definition algorithm used in the NHSN
VAE Outcome measure was developed by a workgroup based on objective,
streamlined, and potentially automatable criteria that will
intentionally identify a broad range of conditions and complications
occurring in mechanically-ventilated adult patients.\235\ The measure
was designed for use across several different healthcare settings,
including LTCHs, and in 2013, 105 LTCHs successfully submitted VAE data
to CDC's NHSN,\236\ indicating that LTCHs were able to implement and
operationalize this measure in their facilities. The NHSN VAE Outcome
measure was also developed to facilitate potential automated outcome
detection, which will contribute to increased objectivity and decreased
burden on LTCHs.
---------------------------------------------------------------------------

\233\ Magill, S. S., M. Klompas, et al. (2013). ``Developing a
new, national approach to surveillance for ventilator-associated
events*.'' Crit Care Med 41(11): 2467-2475.
\234\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/
nhsn/pdfs/pscManual/10-VAE_FINAL.pdf.
\235\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/
nhsn/pdfs/pscManual/10-VAE_FINAL.pdf.
\236\ Data from CMS-CDC correspondence on February 10, 2014.
---------------------------------------------------------------------------

Comment: A commenter expressed concern about the validity of
certain aspects of NHSN VAE Outcome measure. The commenter noted the
NHSN VAE Outcome measure is used as a way to capture ventilator-
associated pneumonia; however, the VAP portion of this measure is no
longer valid or effective.
Response: The NHSN VAE algorithm was developed and carefully tested
to be more sensitive to VAEs (including VAPs) than other VAE measures
and to be more objective than other measures.\237\ The algorithm was
developed based on objective, streamlined, and potentially automatable
criteria \238\ and was developed and tested for a range of healthcare
settings, including LTCHs.
---------------------------------------------------------------------------

\237\ Magill, S. S., M. Klompas, et al. (2013). ``Developing a
new, national approach to surveillance for ventilator-associated
events*.'' Critical Care Medicine 41(11): 2467-2475.
\238\ Centers for Disease Control and Prevention (CDC).
Ventilator-Associated Event (VAE). January 2014. https://www.cdc.gov/
nhsn/pdfs/pscManual/10-VAE_FINAL.pdf.
---------------------------------------------------------------------------

Research indicates the VAE algorithm detects clinical conditions
such as pneumonia, ARDS, atelectasis and pulmonary edema, clinical
conditions that may be preventable. In terms of what is most
appropriate for making comparisons, benchmarking, etc., the overall VAE
rate, which represents all events that met at least the VAC definition,
and the ``IVAC-plus'' rate, which represents all events that met at
least the IVAC definition, would be suitable for these purposes, and
all facilities should be able to detect VACs and IVACs. Rates of
individual events (for example, ``VAC only,'' ``IVAC only,'' and
``especially possible and probable VAP'') could be used by LTCHs as
``internal quality improvement'' measures. ``Possible and probable
VAP'' definitions were developed for internal quality improvement
purposes rather than inter-facility comparisons because practices
within and among facilities with regard to diagnostic testing of
respiratory tract samples vary widely and so are not ideal for
inclusion in surveillance definitions that could potentially be used to
make such comparisons in the future. Using the third tier of VAE
(``possible or probable VAP'') for public reporting and/or for
benchmarking or comparison purposes would therefore not be recommended.
Comment: Several commenters expressed concerns regarding recent
changes in the NHSN VAE Outcome measure algorithm and definitions,
which were updated in January 2013 and July 2013, with additional
modifications made in January 2014. A commenter noted that the updated
algorithm has been in place for a relatively short period of time
(implemented in the NHSN in 2013); thus, the commenter questioned
whether data submitted under the new algorithm has been analyzed and
validated, particularly in the LTCH setting. The commenter encouraged
CMS to exercise caution in adopting the NHSN VAE Outcome measure as
part of the LTCHQR Program since the measure was created and tested in
the acute care

[[Page 50304]]

hospital setting and the updated algorithm is still fairly new.
Another commenter expressed similar concerns, noting that the NHSN
continues to modify the data collection algorithm based on assessment
and user feedback. This commenter mentioned that the NHSN has not yet
provided comparative data to enable facilities to set adequate
benchmarks for targets. Another commenter noted that further experience
is necessary with VAE surveillance in the LTCH setting before moving
forward with the adoption of this as a quality measure. This commenter
provided an example requiring clarification is whether the epidemiology
of VAE differs in a LTCH setting where tracheostomies are largely
predominant.
Another commenter stated the recent change in the NHSN algorithm no
longer uses the Ventilator-Associated Pneumonia bundle. The commenter
also stated that the previously used VAP bundle, referenced in the
proposed rule, was applicable to Intensive Care Units, is outdated, and
is not an appropriate measure for LTCHs.
Response: We agree that comprehensive measure testing is an
important part of measure development. The CDC algorithm was developed
for several healthcare settings and initial testing was conducted in
acute care facilities prior to implementation. As one commenter pointed
out, the CDC continues to test the algorithm and to modify it based on
assessment and end-user feedback. CDC has implemented an ongoing
process to continually improve this measure and ensure it is up to date
and reflects the most recently available testing and user feedback
results. Although more testing and validation is helpful to inform the
use of a measure, based on evidence cited, measure testing conducted to
date, and the fact that 105 LTCHs collected and reported data to the
CDC's NHSN in CY 2013,\239\ we believe the impact this measure could
have on the quality of care and patient outcomes supports our proposal
to implement this measure starting January 1, 2016.
---------------------------------------------------------------------------

\239\ Data from CMS-CDC correspondence on February 10, 2014.
---------------------------------------------------------------------------

We will continue to work closely with CDC to review measure testing
results and feedback on an ongoing basis and continue to assess the
validity of this measure and its impact on the quality of care in
LTCHs. Further, CMS and CDC will develop and provide guidance to LTCHs
to support the implementation of this measure, including clarification
on measure specifications. This guidance will be informed by the
current and ongoing CDC NHSN experience with VAE surveillance in the
LTCH setting.
Finally, we agree with the commenter who states that the former VAP
bundle is out of date; hence, we have not adopted this bundle for
implementation in the LTCHQR Program.
Comment: Commenters requested clarification regarding how CMS
intends to define VAEs in the LTCH setting. These commenters encouraged
CMS to report only the two standardized infection ratios (SIRs) listed
in the NHSN specifications for the measure: VACs and IVACs. The
commenters referred to the proposed rule, which states that VAE
``incorporates a range of ventilator-associated events, including
ventilator-associated pneumonia (VAP), pulmonary edema, acute
respiratory distress syndrome, sepsis, and atelectasis'' (79 FR 28267).
The commenters clarified that according to the current specifications,
VAE is defined not by the five aforementioned clinical conditions, but
instead by quantitative changes in specific pathophysiologic
parameters, including a decline in a patient's oxygenation level after
a period of stability or improvement on the ventilator, evidence of
infection or inflammation (for example, elevated body temperature), and
laboratory evidence of respiratory infection. Commenters noted that the
pathophysiologic changes which define VACs and IVACs could be due to a
variety of clinical conditions including, but not limited to, those
mentioned in the proposed rule. These commenters underscored that, as
suggested by the current specifications, the use of quantitative
parameters is appropriate at this time because available definitions of
specific conditions leading to VAEs are fairly subjective, which could
lead to unreliable or invalid data collection and reporting. Commenters
noted that, as specified by the NHSN, the NHSN VAE Outcome measure
reports two SIRs, VAC and IVAC, which are not intended to be a ``roll-
up'' of the five clinical conditions listed in the proposed rule. The
commenters encouraged CMS to report the measure in a manner consistent
with those specifications.
Response: Our intent for the NHSN VAE Outcome measure as part of
the LTCHQR Program is to collect and report data in alignment with NHSN
measure specifications. Specifically, we will collect and report data
on the two SIRs (VAC and IVAC) in alignment with the NHSN
specifications. The measure would not be reported via a ``roll-up,'' or
combined prevalence or incidence count of the five clinical conditions
mentioned in the comment (ventilator-associated pneumonia (VAP),
pulmonary edema, acute respiratory distress syndrome (ARDS), sepsis,
and atelectasis). In the event that the measure specifications are
revised through ongoing measure development by the CDC, the measure
steward, we will align the data collection and reporting for the
measure with revised measure specifications.
Comment: A commenter expressed concerns about the NHSN VAE Outcome
measure based on recent publications (Klouwenberg et al., 2014 \240\
and Lilly et al., 2014 \241\) and noted that these studies demonstrate
that the new definition of VAE has poor sensitivity for detecting
clinically verified VAP. The commenter expressed concern about the
appropriateness of developing a quality measure based upon a clinical
definition that research has shown to have poor sensitivity. The
commenter encouraged CMS to work with stakeholders to improve the VAE
definition before implementing the NHSN VAE Outcome measure.
---------------------------------------------------------------------------

\240\ Klein Klouwenberg PM, van Mourik MS, Ong DS, Horn J,
Schultz MJ, Cremer OL, Bonten MJ; MARS Consortium. Electronic
Implementation of a Novel Surveillance Paradigm for Ventilator-
associated Events. Feasibility and Validation. Am J Respir Crit Care
Med. 2014 Apr 15;189(8):947-55
\241\ Lilly CM, Landry KE, Sood RN, Dunnington CH, Ellison RT
3rd, Bagley PH, Baker SP, Cody S, Irwin RS; for the UMass Memorial
Critical Care Operations Group. Prevalence and Test Characteristics
of National Health Safety Network Ventilator-Associated Events. Crit
Care Med. 2014 May 7. [Epub ahead of print].
---------------------------------------------------------------------------

Response: We appreciate the commenter's concern regarding the
sensitivity of the measure for detecting clinically verified VAP.
Ultimately, it is a clinical diagnosis that is made by taking into
account several pieces of information at the bedside. There is not a
universally accepted standard approach that all LTCHs can agree on.
With this in mind, the intent of VAE surveillance is not to provide a
new surveillance VAP definition but instead to provide an objective
measure--based on information that should be available for any patient
on mechanical ventilation in any facility--that captures a broad range
of conditions and complications in patients on mechanical ventilation
understanding that infections are not the only potentially preventable
complications of mechanical ventilation. Research indicates the VAE
algorithm detects clinical conditions that may be preventable,
including, but not limited to, pneumonia, ARDS, atelectasis, and
pulmonary edema.
Comment: Several commenters recommended that CMS delay the January
1, 2016, implementation start

[[Page 50305]]

date for this measure. A commenter recommended CMS delay implementation
until data submitted under the new VAE algorithm is reviewed for
reliability and in order to allow time to support adequate training and
resources for VAE data collection. Several commenters expressed a need
for the NHSN VAE Outcome measure to be further tested and refined for
the LTCH setting before it is adopted for use in the LTCHQR Program.
A few commenters expressed a concern that the NHSN VAE Outcome
measure was developed and tested in the acute care setting and
recommended that CMS exercise caution in implementing the measure in
the LTCH setting. A commenter stated there is need for better data on
VAEs and responsiveness to quality improvement programs before the
measure is considered suitable for inter-facility comparisons or pay-
for-performance programs. This commenter asked that the implementation
of NHSN VAE Outcome measure be delayed until the measure can be
validated in the LTCH setting, more is known about what portion of VAE
is preventable, and until risk adjustment strategies for the measure
have been developed. Another commenter expressed similar concerns about
lack of LTCH-specific data currently available under the new VAE
algorithm and stated that implementation of the measure in the LTCHQR
Program would be premature until further data is available and
standards of care are developed for preventing VAEs.
Response: The CDC algorithm was developed for several health care
settings, including LTCHs. While initial testing was conducted in acute
care setting, the CDC continues to test the algorithm and to modify it
based on assessment and end-user feedback. Further, LTCHs are acute
care facilities and hence, while setting-specific testing is important,
based on extensive evidence cited in our proposal, we believe that the
impact this measure could have on the quality of care and patient
outcomes in the LTCH setting justifies the need to implement this
measure beginning January 1, 2016. CMS will continue to work closely
with the CDC to review measure testing results and feedback on an
ongoing basis and continue to assess the validity and reliability of
this measure and its impact on the quality of care in LTCHs.
Comment: A few commenters expressed concern about the resource-
intensive nature for data collection for this measure. A commenter
expressed concern about the limitations of existing resources in LTCHs
and noted that implementation of the measure will divert resources to
NHSN VAE Outcome measure data collection and reporting activities and
away from other valuable prevention activities. A commenter noted that
some LTCHs do not have EHRs to facilitate data collection for this
measure. Another commenter noted the complexity of the measure
algorithm and the variety of patient scenarios that could be implicated
and stated that these represent additional burden in collecting data
for the NHSN VAE Outcome measure.
Response: Based on evidence cited in our proposal, we believe the
impact this measure could have on quality of care and patient outcomes
justifies additional resources needed for measure data collection. We
recognize that the implementation of this measure adds data collection
and reporting burdens for facilities; however, we believe the initial
burden to implement the measure and train staff is necessary to improve
the quality of care for patients in the LTCHs. In addition, in 2013,
approximately 25 percent (n=105) of all currently Medicare-certified
LTCHs reported data on this measure to CDC's NHSN; this is evidence in
support the feasibility of implementation of this measure in the LTCH
setting.\242\ In addition, this measure was developed to facilitate
potential automated outcome detection, which could eventually lead to
decreased burden for LTCH.
---------------------------------------------------------------------------

\242\ Data from CMS-CDC correspondence on February 10, 2014.
---------------------------------------------------------------------------

Further, CMS and CDC will undertake training and stakeholder
communication and outreach efforts in CY 2015 and CY 2016 to support
the implementation of this measure in the LTCHQR Program, similar to
our ongoing efforts since 2012 to support the implementation of
previously adopted measures, including the CLABSI, CAUTI, and
Healthcare Professional Influenza Vaccination measures.
In addition to soliciting comments on our proposal to adopt the
NHSN VAE Outcome measure for the LTCHQR Program, we also invited
comments on our proposal to use the CDC's NHSN system for data
collection and submission for this measure.
We received no comments on the use of the NHSN system for data
collection and submission of the VAE Outcome measure. Therefore we are
finalizing the National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure, as proposed, for FY 2018
payment update determination and subsequent years.
8. LTCHQR Program Quality Measures and Concepts Under Consideration for
Future Years
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28268 through
28269), we stated that we are considering whether to propose one or
more of the quality measures and quality measure topics listed in the
table below for future years in the LTCHQR Program. We invited public
comments on these measures and measure topics. We specifically invited
public comments regarding the clinical importance of these measures and
measure topics in the LTCH setting, feasibility of data collection and
implementation, current use of these measures and measure topics in the
LTCH setting, and the usability of data for these measures and measure
topics to inform future quality improvements in the LTCH setting.

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

------------------------------------------------------------------------
National Quality Strategy Priority:
Patient Safety.
Measures addressing
Ventilator Bundle.
Measures addressing
avoidable injuries secondary
to polypharmacy.
Application of
Hospital-Based Inpatient
Psychiatric Services (HBIPS)-2
Hours of Physical Restraint
Use (NQF 0640).
Application of Percent
of Residents Who Were
Physically Restrained (Long
Stay) (NQF 0687).
National Quality Strategy Priority:
Effective Clinical Processes.
Severe Sepsis and
Septic Shock: Management
Bundle.

[[Page 50306]]

Venous Thromboembolism
Prophylaxis (NQF 0371).
Ventilator Weaning
Rate.
Pain Management.
National Quality Strategy Priority:
Patient- and Caregiver-Centered Care.
Depression Assessment
and Management.
Application of
Hospital Consumer Assessment
of Healthcare Providers and
Systems (HCAHPS) (NQF 0166).
Measures addressing
patients' experience of care.
Measures addressing
pain control--patients'
preference.
National Quality Strategy Priority:
Communication and Coordination of Care.
Application of
Medication Reconciliation (NQF
0097).
Application of
Medication Reconciliation Post-
Discharge (NQF 0554).
Reconciled Medication
List Received by Discharged
Patients (Discharges from an
Inpatient Facility to Home/
Self Care or Any Other Site of
Care) (NQF 0646).
Transition Record with
Specified Elements Received by
Discharged Patients
(Discharges from an Inpatient
Facility to Home/Self Care or
Any Other Site of Care) (NQF
0647).
Timely Transmission of
Transition Record (Discharges
from an Inpatient Facility to
Home/Self Care or Any Other
Site of Care) (NQF 0648).
Measures addressing
care transitions.
------------------------------------------------------------------------

Comment: Commenters supported the addition of patient experience of
care measures for use in the LTCHQR Program. Specifically, a commenter
supported an application of the HCAHPS survey for use in the LTCHQR
Program. The commenter supported the collection of patient and
caregiver experience through surveys that provide feedback that only a
patient or their caregiver can provide. The commenter urged CMS to
undertake the necessary testing to modify the HCAHPS survey to be
appropriate for use within the LTCHQR Program. The commenter suggested
some modifications to the HCAHPS that would be necessary prior to
implementation. These include testing the HCAHPS questions in LTCHs and
the addition of new questions about key topics relevant to the LTCH
patient population. The commenter added that for many patients proxy
respondents would be necessary to achieve a reliable response rate.
Response: We appreciate the commenters' support of the HCAHPS
survey in the LTCHQR Program, and we will take their recommendations
into consideration in our measure development and testing efforts, as
well as in our ongoing efforts to identify and propose appropriate
measures for the LTCHQR Program in the future.
Comment: Commenters noted the ``Severe Sepsis and Septic Shock:
Management Bundle'' was not ready for use in the LTCHQR Program. A
commenter noted that the bundle was endorsed for the acute care
hospital setting and would need refinement and testing for use in the
LTCH setting. Another commenter recommended additional review of
``Severe Sepsis and Septic Shock: Management Bundle'' before proposing
the bundle as a formal measure. The commenter noted that although
sepsis is one of the leading causes of hospitalization and readmissions
and results in significant morbidity, mortality, and increased cost in
health care, the current bundle definition, including central line
placement and central hemodynamic monitoring, may have other unintended
consequences. The commenter underscored the NQF Patient Safety Standing
Committee's recent recommendation that the item requiring measurement
of central venous pressure be removed from this bundle. The commenter
added that this recommendation is based on recent literature published
on sepsis protocols, which found no significant benefit of the mandated
use of central venous catheterization and central hemodynamic
monitoring in all patients.
Response: We appreciate the commenters' acknowledgement of the
significant burden sepsis can cause on health care outcomes and costs.
We will take their comments regarding this measure into consideration
in our measure development efforts, as well as in our ongoing efforts
to identify and propose appropriate measures for the LTCHQR Program in
the future.
Comment: A commenter did not support the inclusion of the
``Institute for Healthcare Improvement Ventilator Bundle,'' as several
components of the bundle (daily sedation reduction and daily weaning of
ventilator settings) may not be applicable to patients who are on a
long-term ventilator and may never be weaned. Another commenter
supported the development of palliative care measures for the LTCHQR
Program. Another commenter recommended CMS consider development and
pilot testing of measure(s) related to antimicrobial stewardship,
citing this measurement area as an important one given the fact that
LTCHs are often at the epicenter of clusters and outbreaks of
multidrug-resistant organisms. Another commenter recommended CMS
consider including The Joint Commission tobacco performance measure set
in the LTCHQR Program since identifying and treating tobacco use is a
cost-effective and medically effective clinical intervention
demonstrated to improve health and reduce costs. Another commenter
supported the addition of care coordination measures in the LTCHQR
Program and noted that since patients in the LTCH setting often receive
services from multiple providers, a care coordination measure would
represent an important opportunity to ensure holistic, high-quality
care for the LTCH population. Finally, a commenter indicated support
and a recommendation to include new quality measures, after the
measures have been fully developed, tested, and endorsed by a multi-
stakeholder consensus organization. The commenter supported quality of
life, functional

[[Page 50307]]

status, and other patient-reported outcomes performance measures.
Response: We appreciate the commenters' recommendations, and we
will take the commenters' suggestions into consideration in our measure
development efforts, as well as in our ongoing efforts to identify and
propose appropriate measures for the LTCHQR Program in the future.
9. Form, Manner, and Timing of Quality Data Submission for the FY 2016
Payment Determination and Subsequent Years
a. Background
Section 1886(m)(5)(C) of the Act requires that, for the FY 2014
payment determination and subsequent years, each LTCH submit to the
Secretary data on quality measures specified by the Secretary and that
such data shall be submitted in a form and manner, and at a time,
specified by the Secretary. As required by section 1886(m)(5)(A)(i) of
the Act, for any LTCH that does not submit data in accordance with
section 1886(m)(5)(C) of the Act with respect to a given rate year, any
annual update to the standard Federal rate for discharges for the
hospital during the rate year must be reduced by two percentage points.
b. Finalized Timeline for Data Submission Under the LTCHQR Program for
the FY 2016 and FY 2017 Payment Determinations (Except NQF
0680 and NQF 0431)
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861
and 50878 through 50881), we finalized the data submission timelines
and submission deadlines for measures for the FY 2016 and FY 2017
payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS
final rule for a more detailed discussion of these timelines and
deadlines. Specifically, we refer readers to the table at 78 FR 50878
of the FY 2014 IPPS/LTCH PPS final rule for the data collection period
and submission deadlines for the FY 2016 payment determination and the
tables at 78 FR 50881 of that final rule for the data collection
timelines and submission deadlines for the FY 2017 payment
determination.
c. Revision to the Previously Adopted Data Collection Period and
Submission Deadlines for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-
Stay) (NQF 0680) for the FY 2016 Payment Determination and
Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50858 through
50861), we revised the Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short
Stay) (NQF 0680) measure for the FY 2016 payment determination
and subsequent years. In that rule (78 FR 50861, 50880 through 50882),
we also revised the data collection period and submission deadlines for
the FY 2016 through FY 2018 payment determinations for this measure.
For the reasons discussed in section IX.C.6.a. of the preamble of
the proposed rule (79 FR 28262), we proposed to change to the data
collection timeframes and submission deadlines for the FY 2016 payment
determination and subsequent years. Specifically, as discussed in
section IX.C.6.a. of the preamble of the proposed rule, for the FY 2016
payment determination, we proposed submission deadlines of February 15,
2015, and May 15, 2015, for this measure for data collection periods
October 1-December 31, 2014, and January 1-March 31, 2015,
respectively, instead of the previously finalized submission deadline
of May 15, 2015, for the data collection period of October 1, 2014-
April 30, 2015. The changes applicable to this measure (NQF
0680) are illustrated below for the FY 2016 payment
determination. Please refer to section IX.C.6 of the preamble of this
final rule for further information regarding this revision.

Data Collection Period and Submission Deadlines of LTCHQR Program
Quality Data for the FY 2016 Payment Determination for Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
------------------------------------------------------------------------
Final submission deadlines for
Data collection period (CY): the LTCHQR program FY 2016
payment determination
------------------------------------------------------------------------
Q4 (October 1--December 31, 2014)...... February 15, 2015.
Q1 (January 1--March 31, 2015)......... May 15, 2015.
------------------------------------------------------------------------

Further, as discussed in section IX.C.6.a. of the preamble of the
proposed rule (79 FR 28262), we proposed similar deadlines for the FY
2017 payment determination and subsequent years for the LTCHQR Program.
The changes applicable to this measure (NQF 0680) are
illustrated below.

Data Collection Period and Submission Deadlines of LTCHQR Program
Quality Data for the FY 2017 Payment Determination and Subsequent Years
for Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
------------------------------------------------------------------------
Final submission deadlines for
Data collection period (CY): the LTCHQR program payment
determination (FY)
------------------------------------------------------------------------
Q4 of the CY two years before the February 15 of the FY preceding
payment determination year (for the payment determination year
example, October 1--December 31, 2015 (for example, February 15,
for the FY 2017 payment determination). 2016 for the FY 2017 payment
determination).
Q1 of the CY one year before the May 15 of the FY preceding the
payment determination year (for payment determination year
example, January 1--March 31, 2016 for (for example, May 15, 2016 for
the FY 2017 payment determination). the FY 2017 payment
determination).
------------------------------------------------------------------------

We invited public comment on our proposal to revise the data
collection timeline for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-
Stay) (NQF

[[Page 50308]]

0680) for the FY 2016 payment determination and subsequent
years.
Comment: A few commenters supported CMS' proposal to revise the
data collection period and submission deadlines for Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (Short-Stay) (NQF 0680) for the FY
2016 payment determination and subsequent years. A commenter also noted
this alignment reflects the influenza season and will reduce data entry
time for LTCH staff.
Response: We greatly appreciate commenters' support of our proposal
to revise the data collection period and submission deadlines for NQF
0680 to better align with the influenza vaccination season.
Comment: A commenter recommended that the NQF 0680 measure
not apply to patients transferred from acute care hospitals since this
would represent a duplicative compliance requirement between the two
care settings.
Response: We did not propose any changes to measure specifications
for NQF 0680. As we stated in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50860), the specifications for NQF 0680 are
written to ensure that ``LTCHs follow current clinical guidelines to
assess whether a patient should receive an influenza vaccine and to
ensure that, when clinically indicated, each patient only receives one
influenza vaccine.'' For patients who did not receive the influenza
vaccine in the LTCH, item O0250 on the LTCH CARE Data Set allows the
LTCH to indicate why the vaccine was not received in the facility,
including selecting an option indicating that the patient received the
vaccine outside of the facility.
In addition, because this measure reports on patients who received
the influenza vaccine either inside or outside the facility/hospital,
for a patient who received the vaccine at another facility prior to
arriving at the LTCH, there is no incentive for the LTCH to over-
vaccinate or provide duplicative vaccination. Facilities will need to
adhere to the principles of proper care coordination and documentation
to avoid over-immunization as well as under-immunization. However, the
measure specifications are designed to encourage facilities to
vaccinate only when the patient has not already received the
vaccination in another setting and only when clinically indicated. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50860) for
more information on this topic.
After consideration of the public comments we received, we are
finalizing the revision to the data collection period and submission
timeline for Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680) for the FY 2016 payment determination and subsequent
years.
d. Data Submission Mechanisms for the FY 2018 Payment Determination and
Subsequent Years for New LTCHQR Program Quality Measures and for
Revisions to Previously Adopted Quality Measures
For the two functional status measures and the application of the
Percent of Residents Experiencing One or More Falls with Major Injury
(Long Stay) (NQF 0674) measure, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28270), we proposed that all LTCHs would be
required to collect data using the LTCH CARE Data Set.\243\ We will
release the technical data submission specifications and update LTCHQR
Program Manual for the LTCH CARE Data Set (Version 3.00) to include
items related to the functional status measures and the application of
the Percent of Residents Experiencing One or More Falls with Major
Injury (Long-Stay) (NQF 0674) measure in CY 2015. The QIES
ASAP system would remain the data submission mechanism for the LTCH
CARE Data Set. Further information on data submission of the LTCH CARE
Data Set for the LTCHQR Program Reporting using the QIES ASAP system is
available at: https://www.qtso.com/ and https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
---------------------------------------------------------------------------

\243\ The LTCH CARE Data Set (Version 2.01) was approved on June
10, 2013, by OMB in accordance with the PRA. The OMB Control Number
is 0938-1163. Expiration Date June 30, 2016. Available on the CMS
Web site at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS1252160.html. CMS will revise the LTCH CARE Data Set and submit
for OMB review for PRA approval to support data collection for the
two functional status measures and the application of the Percent of
Residents Experiencing One or More Falls with Major Injury (Long
Stay) (NQF 0674).
---------------------------------------------------------------------------

For the NHSN VAE Outcome measure, we proposed that LTCHs would be
required to use the CDC's NHSN reporting and submission infrastructure.
Details related to the procedures for using CDC's NHSN for data
submission and information on definitions, numerator data, denominator
data, data analyses, and measure specifications for the NHSN VAE
Outcome Measure can be found at: https://www.cdc.gov/nhsn/PDFs/pscManual/10-VAE_FINAL.pdf.
We invited public comments on these proposals.
Comment: A commenter supported the use of the LTCH CARE Data Set
for the two functional status measures. The commenter appreciated CMS'
use of the LTCH CARE Data Set to streamline reporting across acute and
post-acute settings.
Response: We appreciate the commenter's feedback and support of the
use of the LTCH CARE Data Set for collection of the functional status
measures.
We received no comments on our proposed data submission mechanisms
for the NHSN VAE Outcome measure.
After consideration of the public comments we received, we are
finalizing that all LTCHs would use the LTCH CARE Data Set (Version
3.00) to collect data for the application of Percent of Residents
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF
0674) and the two functional status measures. We are also
finalizing that the QIES ASAP system will remain the data submission
mechanism for the LTCH CARE Data Set. Further, we are finalizing that
for the NHSN VAE Outcome measure, LTCHs would use the CDC's NHSN
reporting and submission infrastructure for the LTCHQR Program.
e. Data Collection Period and Submission Deadlines Under the LTCHQR
Program for the FY 2018 Payment Determination
In sections IX.C.9.c. and f. of the preamble of this final rule, we
discuss our proposal, for the FY 2016 payment determination and
subsequent years, to revise the data collection period and submission
deadlines for the Percent of Residents or Patients Who Were Assessed
and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay)
(NQF 0680) measure and, for the FY 2018 payment determination
and subsequent years, to revise the data collection period and
submission deadlines for the application of the Percent of Residents
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF
0674) measure. In the FY 2014 IPPS/LTCH PPS final rule (78 FR
50882), we adopted the data collection period and submission deadlines
for the remaining quality measures applicable to the FY 2018 payment
determination as listed in the following tables.

[[Page 50309]]

Timeframes for Data Collection of LTCHQR Program Quality Data for the FY
2018 Payment Determination
------------------------------------------------------------------------
NQF measure ID Data collection period
------------------------------------------------------------------------
NQF 0138...................... January 1, 2016-December 31,
2016.
NQF 0139...................... January 1, 2016-December 31,
2016.
NQF 0678...................... January 1, 2016-December 31,
2016.
NQF 0431...................... October 1, 2016 (or when
vaccine becomes available)-
March 31, 2017.
NQF 1716...................... January 1, 2016-December 31,
2016.
NQF 1717...................... January 1, 2016-December 31,
2016.
------------------------------------------------------------------------

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

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

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

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

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

[[Page 50310]]

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

We invited public comments on these data collection timelines and
submission deadlines for the three new quality measures for FY 2018
payment determination.
We received no comments on these proposals. Therefore, we are
finalizing the data collection period and submission deadlines for the
three measures (the two functional measures and the NHSN VAE Outcome
measure), as proposed.

f. Data Collection Timelines and Submission Deadlines for the
Application of Percent of Residents Experiencing One or More Falls with
Major Injury (Long Stay) (NQF 0674) for the FY 2018 Payment
Determination and Subsequent Years

In the FY 2014 IPPS/LTCH PPS final rule, we revised the application
of the Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674) measure for the FY 2018 payment
determination and subsequent years (78 FR 50874 through 50877). In the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28272), we proposed, for the
FY 2018 payment determination only, to move the start date for data
collection of this measure to April 1, 2016, instead of the previously
finalized start date of January 1, 2016. Data collection and submission
of this measure will continue through December 31, 2016, as previously
finalized for the FY 2018 payment determination. This change in the
data collection start date will only affect CY 2016 data collection and
submission for the LTCHQR Program for the FY 2018 payment
determination. For all subsequent years, data collection for this
measure will begin on January 1 and continue through December 31. We
note that these proposed changes will be applicable only to the
application of Percent of Residents Experiencing One or More Falls with
Major Injury (Long Stay) (NQF 0674) measure, and not
applicable to any other LTCHQR Program measures, proposed or adopted,
unless explicitly stated. We refer readers to section IX.C.6. of the
preamble of this final rule for further information and rationale.

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

We invited public comment on the proposed data collection timeline
and quarterly submission deadlines for the application of Percent of
Residents Experiencing One or More Falls with Major Injury (Long Stay)
(NQF 0674) for the FY 2018 payment determination.
Comment: Commenters supported CMS' proposal to delay the start of
data collection for the NQF 0674 measure until April 1, 2016,
for the FY 2018 payment determination.
Response: We appreciate commenters' support of our proposal to
revise the data collection period and quarterly submission deadlines
for the application of NQF 0674 and are finalizing the
proposed revision to the data collection period and quarterly
submission deadlines for this measure for the FY 2018 payment
determination. We reiterate that this change in data collection of this
measure would only apply to the FY 2018 payment determination year
only; for all subsequent years, data collection for this measure would
begin on January 1 and continue through December 31.
After consideration of the public comments we received, we are
finalizing the data collection period and quarterly submission
deadlines for the application of Percent of Residents Experiencing One
or More Falls with Major Injury (Long Stay) (NQF 0674) for the
FY 2018 payment determination, as proposed. For all subsequent years,
data collection for this measure would begin on January 1 and continue
through December 31.
g. Data Collection Timelines and Submission Deadlines Under the LTCHQR
Program for the FY 2019 Payment Determination and Subsequent Years
For the quality measures applicable to the FY 2019 payment
determination and subsequent years, including those that we proposed in
section IX.C.7. of the preamble of the proposed rule, we proposed the
following data collection timelines and submission deadlines.

Data Collection Period and Submission Deadlines of LTCHQR Program
Quality Data for the FY 2019 Payment Determination
------------------------------------------------------------------------
NQF neasure ID or measure name (when
NQF measure ID not available) Data collection period
------------------------------------------------------------------------
National Healthcare Safety Network January 1, 2017-December 31,
(NHSN) Catheter-Associated Urinary 2017.
Tract Infection (CAUTI) Outcome
Measure (NQF 0138).
National Healthcare Safety Network January 1, 2017-December 31,
(NHSN) Central Line-Associated 2017.
Bloodstream Infection (CLABSI) Outcome
Measure (NQF 0139).
Percent of Residents or Patients with January 1, 2017-December 31,
Pressure Ulcers That Are New or 2017.
Worsened (Short-Stay) (NQF 0678).

[[Page 50311]]

Percent of Residents or Patients Who October 1, 2017-March 31, 2018.
Were Assessed and Appropriately Given
the Seasonal Influenza Vaccine (Short-
Stay) (NQF 0680).
Influenza Vaccination Coverage among October 1, 2017-March 31, 2018.
Healthcare Personnel (NQF 0431).
National Healthcare Safety Network January 1, 2017-December 31,
(NHSN) Facility-Wide Inpatient 2017.
Hospital-Onset Methicillin-resistant
Staphylococcus areus (MRSA) Bacteremia
Outcome Measure (NQF 1716).
National Healthcare Safety Network January 1, 2017-December 31,
(NHSN) Facility-Wide Inpatient 2017.
Hospital-Onset Clostridium difficile
Infection (CDI) Outcome Measure (NQF
1717).
Application of Percent of Residents January 1, 2017-December 31,
Experiencing One or More Falls with 2017.
Major Injury (Long-Stay) (NQF 0674).
National Healthcare Safety Network January 1, 2017-December 31,
(NHSN) Ventilator-Associated Event 2017.
(VAE) Outcome Measure.
Functional Outcome Measure: Change in January 1, 2017-December 31,
Mobility among Patients Requiring 2017.
Ventilator Support.
Percent of LTCH Patients with an January 1, 2017-December 31,
Admission and Discharge Functional 2017.
Assessment and a Care Plan That
Addresses Function.
------------------------------------------------------------------------

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

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

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

We invited public comment on these proposals. We received no
comments on these proposals. Therefore, we are finalizing the data
collection period and submission deadlines for the FY 2019 payment
determination and subsequent years, as proposed.
10. LTCHQR Program Data Completion Thresholds for the FY 2016 Payment
Determination and Subsequent Years
a. Overview
Section 1886(m)(5)(C) of the Act requires that, for the FY 2014
payment determination and subsequent years, each LTCH submit to the
Secretary data on quality measures specified by the Secretary in a form
and manner, and at a time, specified by the Secretary. As required by
section 1886(m)(5)(A)(i) of the Act, for any LTCH that does not submit
data in accordance with section 1886(m)(5)(C) of the Act with respect
to a given fiscal year, any annual update to the standard Federal rate
for discharges for the hospital during the rate fiscal year must be
reduced by two percentage points. To date, we have not established a
standard for compliance other than that LTCHs submit all applicable

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required data for all finalized measures, by the previously finalized
quarterly deadlines. In response to input from our stakeholders seeking
additional specificity related to the LTCHQR Program compliance
affecting FY payment update determinations and, due to the importance
of ensuring the integrity of quality data submitted to CMS, in the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28273 through 28275), we
proposed to set specific LTCHQR Program thresholds for completeness of
LTCH quality data beginning with data affecting the FY 2016 payment
determination and subsequent years.
The LTCHQR Program, through the FY 2012, FY 2013, and FY 2014 IPPS/
LTCH PPS final rules, requires LTCHs to submit quality data using two
separate data collection/submission mechanisms: Measures collected
using the LTCH CARE Data Set (LCDS) are submitted through the CMS
Quality Improvement Evaluation System (QIES); and measures stewarded by
the CDC (such as Healthcare-Acquired Infection (HAI) and vaccination
measures), are submitted using the CDC's National Healthcare Safety
Network (NHSN). We have also previously finalized a claims-based
measure (All-Cause Unplanned Readmission Measure for 30 Days Post
Discharge from Long Term Care Hospitals); however, claims-based
measures do not require LTCHs to actually submit quality data to CMS,
as they are calculated using claims data submitted to CMS for payment
purposes. Thus, for claims-based measures, there is no submitted
quality data to which we could apply data completion thresholds.
To ensure that LTCHs are meeting an acceptable standard for
completeness of submitted data, we proposed that for the FY 2016
payment determination and subsequent years, LTCHs meet or exceed two
separate program thresholds: One threshold for completion of quality
measures data collected using the LCDS and submitted through QIES; and
a second threshold for quality measures data collected and submitted
using the CDC's NHSN. We proposed that LTCHs must meet or exceed both
thresholds discussed below, in order to avoid receiving a 2 percentage
point reduction to their annual payment update for a given FY,
beginning with FY 2016.
We proposed to hold LTCHs accountable for different data completion
thresholds for each of the two data submission mechanisms; an 80
percent data completion threshold for data collected using the LCDS and
submitted through the QIES mechanism; and a 100 percent data completion
threshold for data submitted through the CDC's NHSN. We proposed to
hold LTCHs to the higher data completion threshold for the CDC's NHSN
initially, because many LTCHs have been mandated by States to report
infection data using the CDC's NHSN system for surveillance purposes,
prior to the start of the LTCHQR Program on October 1, 2012, and,
therefore, we believe LTCHs are more familiar with the NHSN collection
and submission process.
In contrast, LTCHs had never submitted quality data using a
standardized data collection instrument before October 1, 2012, such as
the LCDS submitted through the QIES mechanism. In addition, we require
the submission of LCDS admission and discharge data through QIES, in
order for LTCHs to meet the proposed data accuracy compliance standard,
which with regard to discharge data, may be more difficult to collect
on patients that are discharged emergently or against medical advice,
in effect making it more difficult to meet a higher level of compliance
initially. Lastly, through the FY 2014 IPPS/LTCH PPS final rule, we
finalized accelerated quarterly deadlines for submission of quality
data, beginning January 2014, of 45 days beyond the end of each CY
quarter, as opposed to the 135 day post-quarterly deadline LTCHs were
previously required to meet. We feel that this is an additional
challenge that LTCHs may face. We invited comment on other obstacles
LTCHs may face in meeting a higher level of compliance with regard to
submission of quality data using the LCDS.
Comment: A few commenters noted that individual LTCHs may have a
higher than average percentage of incomplete data due to emergent
discharges, as well as patients with fecal management systems.
Commenters stated that emergent discharges do not allow for the
collection of complete data, and that CMS guides LTCHs to enter a dash
(-) for item H0400 (Bowel Continence) for those patients that have
fecal management systems in place, rendering any associated admission
assessment incomplete. These commenters suggested that 10 percent to 15
percent of any LTCH's patients may fall under one of the two above
categories, making it difficult to comply with proposed data completion
thresholds. Finally, the commenters suggested that completeness in the
LTCH CARE Data Set Planned Discharge assessments may be a better metric
of a facility's compliance with quality reporting completion
thresholds.
Response: The proposed data completion threshold for data submitted
using the LTCH CARE Data set is 80 percent. We have considered emergent
discharges as one reason that LTCHs may not meet data completion
thresholds approaching 100 percent. While we understand that LTCHs may
not have the opportunity to complete data item H0400 (Bowel Continence)
for those patients with fecal management systems in place, we believe
that LTCHs should be able to meet our currently proposed threshold of
80 percent and can confirm that the majority of LTCHs are meeting this
threshold presently. With respect to the future expansion of our data
completion threshold policy, we will monitor LTCH performance on each
required item and take steps to account for any such low response rate.
If we find that the majority of LTCHs are failing to consistently
respond to any one of our required items, we will either take action to
modify that item on the LTCH CARE Data Set, or we will address the
problem as it relates to data completion threshold compliance in future
rulemaking.
With regard to the commenters' suggestion that we base completion
thresholds on only planned discharge assessment, we respectfully
disagree. We believe that the LTCH CARE Data Set admission assessment
is an important factor in collecting data with regard to risk
adjustment items. However, we will consider the effect of the inclusion
of unplanned discharge data elements in our compliance determinations
based on data completion thresholds, as we monitor this program.
b. LTCHQR Program Data Completion Threshold for the Required LTCH CARE
Data Set (LCDS) Data Items
The LCDS is composed of data collection items designed to inform
quality measure calculations, including risk-adjustment calculations,
as well as internal consistency checks for logical inaccuracies. In the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28274), we proposed that
beginning with quality data affecting the FY 2016 payment determination
and subsequent years, LTCHs must meet or exceed a proposed LCDS data
completion threshold of 80 percent. We proposed to assess the
completeness of submitted data by verifying that for all LCDS
assessments submitted by any given LTCH, at least 80 percent of those
LCDS Assessments must have 100 percent of the required quality data
items completed, where, for the purposes of this rule, ``completed'' is
defined as having provided actual patient data, as opposed to a non-

[[Page 50313]]

informative response, such as a dash (-), that indicates the LTCH was
unable to provide patient data. The proposed threshold of 80 percent is
based on the need for substantially complete records, which allows
appropriate analysis of quality measure data for the purposes of
updating quality measure specifications as they undergo yearly and
triennial measure maintenance reviews with the NQF. In addition,
complete data is needed to understand the validity and reliability of
quality data items, including risk-adjustment models. Finally, we want
to ensure complete quality data from LTCHs, which will ultimately be
reported to the public, allowing our beneficiaries to gain an
understanding of LTCH performance related to these quality metrics, and
helping them to make informed health care choices.
Our data suggest that the majority of current LTCHs are in
compliance with, or exceeding, this proposed threshold already. Our
decision to set this proposed data completion threshold at a lower
level initially, with the intent to raise the proposed 80 percent
threshold in subsequent program years, is based on our understanding
that LTCHs are still new to quality reporting, and that their
experience and understanding, with respect to reporting quality data
using a standardized data collection instrument, and thus their
compliance, will increase over time. However, we invited public comment
on circumstances that might prevent LTCHs from meeting this level of
compliance. All items that we proposed to require under the LTCHQR
Program are identified in Appendix D of the LTCHQR Program Manual
version 2.01, which is available for download on the CMS Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
We also proposed that any LTCH that does not meet the proposed
requirement that 80 percent of all LCDS assessments submitted contain
100 percent of all required quality data items, will be subject to a
reduction of 2 percentage points to the applicable FY annual payment
update beginning with FY 2016. In order to establish this program
threshold, we analyzed all LCDS submissions from January 2013 through
September 2013, and we believe that the majority of LTCHs will be able
to meet the proposed 80 percent data completion threshold. It is our
intent to raise this threshold over the next 2 years, through the
formal notice-and-comment rulemaking process. As stated above, we feel
that as LTCHs continue to submit data using a standardized data
collection instrument, such as the LCDS, and as they continue to take
advantage of the resources we provide to guide LTCHs in their
submission of this data (national trainings, CMS Special Open Door
Forums, LTCHQR Program Manual, and technical trainings available on our
Web site), we feel LTCH performance with respect to data completion
will improve over time. We proposed that this threshold will have to be
met by LTCHs, in addition to the CDC NHSN threshold discussed below, in
order to avoid receiving a 2 percentage point reduction to the
applicable FY annual payment update.
c. LTCHQR Program Data Completion Threshold For Measures Submitted
Using the Centers for Disease Control and Prevention (CDC) National
Healthcare Safety Network (NHSN)
The LTCHQR Program through the FY 2012, FY 2013, and FY 2014 IPPS/
LTCH PPS final rules, requires that LTCHs submit CDC-stewarded quality
measure data using the CDC's NHSN, including data for the previously
finalized CAUTI, CLABSI, and Influenza Vaccination Coverage among
Healthcare Personnel (HCP) quality measures. More specifically, we
require LTCHs follow CDC quality measure protocols, which require the
LTCHs to complete all data fields required for both numerator and
denominator data within NHSN, including the ``no events'' field for any
month during which no infection events were identified. LTCHs are
required to submit this data on a monthly basis (except for the HCP
measure, which is only required to be reported once per year). However,
LTCHs have until the associated quarterly deadline (45 calendar days
beyond the end of each CY quarter) by which to report infection data to
the CDC for each of the three months within any given quarter. For more
information on the LTCHQR Program quarterly deadlines, we refer readers
to section IX.C.9.b. of the preamble of this final rule.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28275), we
proposed that beginning with FY 2016 payment determination and
subsequent years, this previously finalized requirement for monthly
reporting must be met in addition to the proposed LCDS data completion
threshold discussed above in order to avoid a 2 percentage point
reduction to the applicable FY annual payment update. That is, we
proposed that LTCHs must meet a threshold of 100 percent for measures
submitted via the NHSN, achieved by submitting relevant infection,
vaccination, or other required quality measure data for each month of
any given CY, in addition to meeting the above-proposed data item
completion threshold for required quality data items on the LCDS. As
the LTCHQR Program expands, and LTCHs begin reporting measures that
were previously finalized, but not yet implemented, or newly proposed
and finalized measures, we proposed to apply this same threshold.
d. Application of the 2 Percentage Point Reduction for LTCHs That Fail
To Meet the Data Completion Thresholds
As we discussed above, we have proposed that LTCHs must meet two
separate data completion thresholds in order to avoid a 2 percentage
point reduction to their applicable FY annual payment update; a data
completion threshold of 80 percent for those required data elements
collected using the LCDS and submitted through QIES; and a second data
completion threshold of 100 percent for quality measure data submitted
through the CDC's NHSN. In the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28275), we proposed that these data completion thresholds must be
met in addition to the data validation threshold of 75 percent we
discuss below, in order to avoid a 2 percentage point reduction to
their applicable FY annual payment update. While we proposed that LTCHs
must meet both the proposed data completion and data validation
thresholds, LTCHs cannot have their applicable annual payment update
reduced twice. That is, should an LTCH fail to meet either one or both
of the proposed thresholds, it will only receive one reduction of 2
percentage points to its applicable fiscal year annual payment update.
We invited public comment on these proposals.
Comment: A few commenters supported CMS' proposal to establish data
completion thresholds, noting that it is a fundamental step to ensure
the accuracy of the LTCH quality reporting data. A few commenters
stated that CMS' proposed policy will facilitate more accurate public
reporting in the future and agreed with our proposed numeric standards.
Response: We thank the commenters for their support.
Comment: Commenters recommended that CMS apply the data completion
standards no earlier than the FY 2017 payment determination, instead of
FY 2016. These commenters further stated that a significant amount of
data for FY 2016 has already been collected and submitted and that it
would be inappropriate and unfair to apply the data completion
standards to data submitted before the standards were

[[Page 50314]]

even proposed and therefore known to LTCHs.
Response: Currently, the compliance standard applicable to each
LTCH is to timely submit all required quality data, and LTCHs should
already be ensuring that the data that they submit is complete and
accurate. Thus, applying the data completion standards to CY 2014 data
merely ensures that LTCHs are complying with applicable standards and
that payments made to LTCHs are based on complete and accurate quality
data.
Comment: A commenter suggests that LTCHs should not be penalized by
a 2 percentage point reduction to the annual payment update based on
completion thresholds, citing that emergency discharges make it
difficult to complete assessments.
Response: We believe that the number of unplanned discharges in
LTCHs is not so substantial that it will prevent LTCHs from meeting or
exceeding the proposed data completion threshold of 80 percent for data
submitting using the LTCH CARE Data Set. We will continue to monitor
submission patterns and completion thresholds for all data items and
appropriately investigate and address any submission patterns that lead
us to believe that a systematic issue is preventing LTCHs from
complying with our data completion thresholds.
After consideration of the public comments we received, we are
finalizing the LTCHQR Program data completion threshold for the FY 2016
payment determination and subsequent years, as proposed.
11. Data Validation Process for the FY 2016 Payment Determination and
Subsequent Years
a. Data Validation Process
Historically, we have built consistency and internal validation
checks into our data submission specifications to ensure that the basic
elements of the LCDS assessments conform to requirements such as proper
format and facility information. These internal consistency checks are
automated and occur during the LTCH submission process, and help ensure
the integrity of the data submitted by LTCHs by rejecting submissions
or issuing warnings when LTCH data contain logical inconsistencies.
These internal consistency checks are referred to as ``system edits''
and are further outlined in the LTCH Data Submission Specifications
version 1.01, which are available for download on the LTCH Quality
Reporting Technical Information Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
Validation is intended to provide added assurance of the accuracy
of the data that will be reported to the public as required by section
1886(m)(5)(E) of the Act. In the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28275 through 28276) we proposed, for the FY 2016 payment
determination and subsequent years, to validate the data elements
submitted to CMS for quality purposes. Initially, for the FY 2016
payment determination, this data accuracy validation will apply only to
the LCDS items that inform the measures Percent of Patients or
Residents with Pressure Ulcers That are New or Worsened (Short-Stay)
(NQF 0678). We intend to expand this validation process for
quality measures affecting the FY 2017 payment determination and
subsequent years through future notice-and-comment rulemaking.
We proposed to validate the data elements submitted to CMS for
Percent of Residents or Patients with Pressure Ulcers That are New or
Have Worsened (Short-Stay) (NQF 0678) under the LTCHQR Program
by requesting the minimum chart data necessary to confirm a
statistically valid random sample of 260 LTCHs. From the random sample
of 260 LTCHs, 5 LCDS assessments submitted through the National
Assessment Collection Database would be randomly selected by the CMS
validation contractor. In accordance with Sec. 164.512 (d)(1)(iii) of
the HIPAA Privacy Rule, we would request from these LTCHs the specified
portions of the 5 Medicare patient charts that correspond to the
randomly selected assessments, which would need to be copied and
submitted via traceable mail to a CMS contractor for validation. We
proposed that the specific portions of the 5 beneficiary charts would
be identified in the written request, but may include: Admission and
discharge assessments, relevant nursing notes following the admission,
relevant nursing notes preceding the discharge, physician admission
summary and discharge summary, and any Assessment of Pressure Ulcer
Form the facility may utilize. We proposed that the CMS contractor
would utilize the portions of the patient charts to compare that
information with the quality data submitted to CMS. Differences that
would affect measure outcomes or measure rates would be identified and
reported to CMS. These differences could include but are not limited to
unreported worsened pressure ulcers.
We proposed that all data that has been submitted to the National
Assessment Collection Database under the LTCHQR Program would be
subject to the data validation process. Specifically, we proposed that
the contractor would request copies of the randomly selected medical
charts from each LTCH via certified mail (or other traceable methods
that require an LTCH representative to sign for CMS correspondence),
and the LTCH would have 45 days from the date of the request (as
documented on the request letter) to submit the requested records to
the contractor. If the LTCH does not comply within 30 days, the
contractor would send a second certified letter to them, reminding the
LTCH that it must return copies of the requested medical records within
45 calendar days following the date of the initial contractor medical
record request. If the LTCH still does not comply, then the contractor
would assign a ``zero'' score to each measure in each missing record.
If, however, the LTCH does comply, the contractor would review the data
submitted by the LTCH on the LCDS assessments for the required data
elements associated with the Pressure Ulcer measure, until such time
that LTCHs begin to submit additional quality measures that are
collected using the LCDS. Initially, this review would consist solely
of those required data elements that inform the Pressure Ulcer measure
calculation and checks for logical inconsistencies. As LTCHs begin to
report additional finalized measures, we intend to expand this
validation process to quality measures affecting the FY 2017 payment
determination and subsequent years, through future notice-and-comment
rulemaking. The contractor would then calculate the percentage of
matching data elements, which would constitute a validation score.
Because we would not be validating all records, we would need to
calculate a confidence interval that incorporates a potential sampling
error.
To receive the full FY 2016 annual payment update, we proposed that
LTCHs in the random sample must attain at least a 75 percent validation
score, based upon our validation process, which would use charts
requested from patient assessments submitted for CY 2013. We would
calculate a 95 percent confidence interval associated with the observed
validation score. If the upper bound of this confidence interval is
below the 75 percent cutoff point, we would not consider a hospital's
data to be ``validated'' for payment purposes. We

[[Page 50315]]

proposed that LTCHs failing the validation requirements would be
subject to the 2 percent annual payment update reduction, beginning
with their fiscal year annual payment update. In addition, all LTCHs
validated would receive educational feedback, including specific case
details.
Comment: Several commenters believed that the proposed validation
is a fundamental step to ensure the accuracy of the LTCH quality
reporting data.
Response: We thank the commenters for their support for this
proposal.
Comment: Several commenters suggested that CMS begin the validation
standards no earlier than FY 2017. Although the commenters believed
that validation is an important step to ensuring that hospitals are
collecting measure data appropriately, they believed it would be
inappropriate to validate data submitted for FY 2016 payment
determination, as much of those data will be submitted prior to the
effective date of CMS' finalized data accuracy validation policy on
October 1, 2014.
Response: We agree that validation is important not only to ensure
hospitals are collecting data appropriately, but also in providing
feedback to LTCHs regarding possible differences in the findings of our
validation effort. We believe the feedback a facility will receive,
even if they are well above the validation minimum, could be valuable
to both the LTCHs and to CMS. We are confident that most LTCHs have
been submitting data accurately. Although much of the data for FY 2016
has been submitted, the FY 2013 IPPS/LTCH PPS final rule (77 FR 53620)
states that LTCHs are required to submit the subset of data elements
necessary to enable CMS to validate that the pressure ulcer measure
data elements were accurately reported. We believe that we are
operating within our authority to validate quality data. Currently, the
compliance standard applicable to each LTCH is to timely submit all
required quality data, and LTCHs should already be ensuring that the
data that they submit is complete and accurate. Thus, validating CY
2014 data ensures that LTCHs are complying with applicable standards
and that payments made to LTCHs are based on complete and accurate
quality data.
Comment: Several commenters recommended that the CMS make the
validation process as transparent as possible, particularly since it is
new to the LTCHQR Program.
Response: We will use the requested charts to validate the
following data elements: Functional mobility: ``Lying to Sitting on
Side of Bed;'' ``Bowel continence;'' ``Active Diagnosis;'' ``PVD;''
``Active Diagnosis;'' ``Diabetes Mellitus;'' ``Height;'' ``Weight;''
``Worsening stage 2 Pressure Ulcer;'' ``Worsening stage 3 Pressure
Ulcer;'' and, ``Worsening stage 4 Pressure Ulcer.'' We intend to share
our data accuracy validation findings with the randomly selected LTCHs,
so that they may gain an understanding of any discrepancies between the
medical record and the LTCH CARE Data Assessment to which the medical
record is being compared. We will also incorporate examples of our
findings into LTCH training, special open door forums, and LTCH
manuals, ensuring that the greater LTCH community benefits from this
validation effort as well.
b. Application of the 2 Percentage Point Reduction for LTCHs That Fail
To Meet the Data Accuracy Threshold
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28276) we
proposed that LTCHs must meet a data accuracy threshold of 75 percent
in order to avoid receiving a 2 percentage point reduction to their
applicable fiscal year annual payment update. We proposed that this
proposed data accuracy threshold of 75 percent must be met in addition
to the proposed data completion thresholds (80 percent for data
collected using the LTCH CARE Data Set and submitted using QIES, and
100 percent for data submitted using the CDC's NHSN), in order to avoid
receiving a 2 percentage point reduction to their applicable FY annual
payment update. While we proposed that LTCHs must meet both the
proposed data accuracy and data completion thresholds, LTCHs cannot
have their applicable annual payment update reduced twice. That is,
should an LTCH fail to meet either one or both of the proposed
thresholds (data completion and/or data accuracy), it will only receive
one reduction of 2 percentage points to its applicable FY annual
payment update.
We invited public comment on these proposals and suggestions to
improve the utility of the approach or to reduce the burden on LTCHs.
Comment: A commenter noted that 260 LTCHs would represent
approximately 60 percent of the entire industry, which they believed
was excessive.
Response: We thank the commenter for voicing this concern and will
take the proportion into consideration in future rulemaking.
Comment: A commenter asked whether ``IPPS comparable'' cases will
be required to meet LTCHQR Program requirements or those that fall
under ACH reporting requirements.
Response: We presume that the commenter is referring to current
short stay outlier policy, but they could be referencing future
regulation under the SGR Reform Act, where the IPPS comparable amount
is one of the payment options for a ``site neutral'' case. Regardless,
the facility/unit would be subject to the LTCHQR Program, as it is
still an LTCH when it is paid an IPPS comparable amount, and the
payment is a form of LTCH PPS payment.
Comment: A commenter recommended that CMS annually announce which
LTCHs will be subject to validation and disseminate information about
when these LTCHs should expect to begin receiving requests for medical
records.
Response: We recognize the need to communicate with LTCHs whether
or not they will be selected for validation. We will use the LTCHQR
Program Web site, as well as direct communication with LTCHs selected
for validation, to communicate time frames and deadlines regarding the
data accuracy validation effort. In addition, we will use the LTCHQR
Program Web site to announce, and offer access to, a new listserv
specifically for the LTCHQR Program, which we will use to communicate
with the provider community in the near future.
Comment: Commenters expressed concern that the threshold compliance
of 75 percent agreement was too high for this first attempt to validate
the Pressure Ulcer data. Commenters suggested that there would be a
great deal of variability in the reporting of the Pressure Ulcer
measure and that this should be an opportunity for CMS to educate LTCHs
on appropriate documentation and reporting to improve the process.
Commenters suggested that a 60 percent compliance threshold would be
more appropriate validation.
Response: We note that the 75 percent agreement is the single point
estimate of the proportion in agreement; we proposed that the upper
bound of a 95 percent confidence interval be the value that must exceed
the 75 percent compliance threshold. We believe this takes into account
the inherent variability to be found in the pressure ulcer data. In
addition, the 75 percent proportion agreement is consistent with the
other data quality programs currently underway, for example, the
Hospital IQR Program, 42 CFR 412.140(d)(2), and the Hospital OQR
Program, 42 CFR 419.46(e)(2). We feel it is important to promulgate
consistent

[[Page 50316]]

standards when we deal with the various quality data we are collecting.
Comment: A commenter requested CMS promulgate regulations for the
validation process and provide the credentials, inter-rater reliability
and detail the training provided to the contractor performing the
validation.
Response: We will make any future data accuracy validation
regulations known to the LTCH community through future notice-and-
comment rulemaking. All chart reviews will be performed by a licensed
registered nurse trained in medical record review and comparison,
utilizing the quality measure data specifications in the LTCH Quality
Reporting Program Manual. Specified training will be provided before
the actual reviews, which will include ensuring that there is inter-
rater reliability among the reviewers prior to implementation of the
data validation process.
Comment: A few commenters suggested that CMS adopt a two-level data
validation process similar to the process used by the MACs for the IRF
Compliance Percentage Threshold. An initial small sample of charts
would be requested from the facilities randomly selected for
validation. If the facility did not meet the initial threshold for
compliance, a larger, second sample of charts would be requested. The
commenters believed that 5 charts is too small of a sample size and
that if two of the five charts selected for review are perceived to
contain errors the facility would not meet the 75 percent validation
score. Lastly, the commenters suggested that CMS select the LTCHs for
validation from all LTCHs participating in the Medicare program.
Response: We will consider this approach for future years. We
understand the concern regarding a relatively low sample of charts, but
wish to explain that the overall validation score will be determined
based on the aggregate percentage of reported elements (out of all
reportable elements) in all of the sampled charts, not on the
percentage of reported elements in each individual chart. Each chart
will be evaluated on the 9 required data elements. Finally, we would
like to confirm that the sample of randomly selected LTCHs will be
drawn from the universe of all Medicare-certified LTCHs, as suggested
by the commenter.
After consideration of the public comments we received, we have
decided to further explore suggestions from commenters before
finalizing the LTCH data validation process that we proposed.
Therefore, we are not finalizing our LTCH data validation proposal at
this time.
12. Public Display of Quality Measure Data for the LTCHQR Program
Under section 1886(m)(5)(E) of the Act, the Secretary is required
to establish procedures for making data submitted under section
1886(m)(5)(C) of the Act available to the public. Section 1886(m)(5)(E)
of the Act requires that such procedures shall ensure that an LTCH has
the opportunity to review the data that is to be made public with
respect to the LTCH prior to such data being made public. The statute
also requires that the Secretary report quality measures that relate to
services furnished in inpatient settings in LTCHs on our Web site. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53637), we received and
responded to public comments regarding the public reporting of quality
data under the LTCHQR Program.
Currently, we are developing plans regarding the implementation of
these provisions. We appreciate the need for transparency into the
processes and procedures that will be implemented to allow for public
reporting of the LTCHQR Program data and to afford LTCHs the
opportunity to review that data before it is made public. At this time,
we have not established procedures or timelines for public reporting of
data, but we intend to include related proposals in future rulemaking.
We welcomed public comment on what we should consider when
developing future proposals related to public reporting of quality
measures for the LTCHQR Program.
Comment: Several commenters encouraged CMS to work with LTCHs to
ensure an opportunity to review potential displays of quality data and
to provide feedback prior to public reporting.
Response: We thank the commenters for taking the time to express
these views and suggestions regarding public reporting and will take it
into consideration for future public reporting development.
Comment: A commenter noted CMS should develop reports in the CASPER
Reporting Application to indicate patients included in the Pressure
Ulcer measure.
Response: We plan to begin designing and making CASPER reports
accessible for LTCHs in the near future.
We thank the commenters for the responses, and we will consider
them as we develop future proposals related to public reporting of
quality measures for the LTCHQR Program.
13. LTCHQR Program Submission Exception and Extension Requirements for
the FY 2017 Payment Determination and Subsequent Years
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50883 through
50885), we referred to these requirements as submission ``waiver''
requirements. We proposed to instead use the phrase ``exception and
extension'' requirements for purposes of clarity. For the FY 2017
payment determination and subsequent years, in the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28276 through 28277), we proposed to continue
using the LTCHQR Program's requirements that we adopted in the FY 2014
IPPS/LTCH PPS final rule for the FY 2015 payment determination and
subsequent years, although the term ``waiver'' is replaced by
``exception and extension.''
In the FY 2014 IPPS/LTCH PPS final rule, we finalized a process for
LTCHs to request and for us to grant waivers with respect to the
quality data reporting requirements of the LTCHQR Program for one or
more quarters, beginning with the FY 2015 payment determination, when
there are certain extraordinary circumstances beyond the control of the
LTCH. We proposed to continue to use this previously finalized process.
In the event that an LTCH seeks to request a submission exception
or extension for quality reporting purposes, the LTCH must request an
exception or extension within 30 days of the date that the
extraordinary circumstances occurred by submitting a written request to
CMS via email to the LTCH mailbox at
LTCHQRPReconsiderations@cms.hhs.gov. Exception or extension requests
sent to CMS through any other channel will not be considered as a valid
request for an exception or extension from the LTCHQR Program's
reporting requirements for any payment determination. The written
request must contain all of the finalized requirements in the FY 2014
IPPS/LTCH PPS final rule, and on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
When an exception or extension is granted, an LTCH will not incur
payment reduction penalties for failure to comply with the requirements
of the LTCHQR Program, for the timeframe specified by CMS. If an LTCH
is granted an exception, we will not require that the LTCH submit any
quality data for a given period of time. If we grant an

[[Page 50317]]

extension to an LTCH, the LTCH will still remain responsible for
submitting quality data collected during the time frame in question,
although we will specify a revised deadline by which the LTCH must
submit this quality data.
In addition, in the FY 2014 IPPS/LTCH PPS final rule, we finalized
a policy that allowed CMS to grant exceptions or extensions to LTCHs
that have not requested them if it is determined that extraordinary
circumstances affects an entire region or locale. We stated that if
this determination was made, we will communicate this decision through
routine communication channels to LTCHs and vendors, including, but not
limited to, issuing memos, emails, and notices at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. More information on the LTCHQR Program
exception and extension requirements and processes, and all related
announcements may be found at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
For the FY 2017 payment determination and subsequent years, we
proposed that we may grant an exception or extension to LTCHs if we
determine that a systemic problem with one of our data collection
systems directly affected the ability of the LTCH to submit data.
Because we do not anticipate that these types of systemic problems will
happen often, we do not anticipate granting a waiver or extension on
this proposed basis frequently. We proposed that if we make the
determination to grant an exception or extension, we would communicate
this decision through routine communication channels to LTCHs and
vendors, including, but not limited to, issuing memos, emails, and
notices on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
We invited public comment on these proposals.
Comment: A few commenters supported the proposed Exception/
Exemption proposal.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing the LTCHQR Program submission exception and extension
requirements for the FY 2017 payment determination and subsequent
years, as proposed.
14. LTCHQR Program Reconsideration and Appeals Procedures for the FY
2016 Payment Determination and Subsequent Years
a. Previously Finalized LTCHQR Program Reconsideration and Appeals
Procedures for the FY 2014 and FY 2015 Payment Determinations
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50885 through
50887), we finalized a voluntary process that allowed LTCHs the
opportunity to seek reconsideration of our initial noncompliance
decision for the FY 2014 and FY 2015 payment determinations. We refer
readers to that rule for a discussion of this process.
b. LTCHQR Program Reconsideration and Appeals Procedures for the FY
2016 Payment Determination and Subsequent Years
For the FY 2016 payment determination and subsequent years, in the
FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28277 through 28278), we
proposed to adopt an updated process, as described below, that will
enable an LTCH to request a reconsideration of our initial
noncompliance decision in the event that an LTCH believes that it was
incorrectly identified as being subject to the 2-percentage point
reduction to its annual payment due to noncompliance with the LTCHQR
Program reporting requirements for a given reporting period.
For the FY 2016 payment determination, and subsequent years, we
proposed that an LTCH would receive a notification of noncompliance if
we determine that the LTCH did not submit data in accordance with
section 1886(m)(5)(C) of the Act with respect to the applicable fiscal
year and that the LTCH is therefore subject to a 2-percentage point
reduction in the applicable payment determination as required by
section 1886(m)(5)(A)(i) of the Act. We would only consider requests
for reconsideration after an LTCH has been found to be noncompliant and
not before.
An LTCH would have 30 days from the date of the initial
notification of noncompliance to review its payment determination and
submit to us a request for reconsideration. This proposed time frame
would allow us to balance our desire to ensure that LTCHs have the
opportunity to request reconsideration with our need to complete the
process and provide LTCHs with our reconsideration decision in a timely
manner. Notifications of noncompliance and any subsequent notifications
from CMS would be sent via a traceable delivery method, such as
certified U.S. mail or registered U.S. mail. We proposed that an LTCH
may withdraw its request at any time and may file an updated request
within the proposed 30-day deadline. We also proposed that, in very
limited circumstances, we may grant a request by an LTCH to extend the
proposed deadline for reconsideration requests. It would be the
responsibility of an LTCH to request an extension and demonstrate that
extenuating circumstances existed that prevented the filing of the
reconsideration request by the proposed deadline.
We also proposed that as part of the LTCH's request for
reconsideration, the LTCH would be required to submit all supporting
documentation and evidence demonstrating: (1) Full compliance with all
LTCHQR Program reporting requirements during the reporting period; or
(2) extenuating circumstances that affected noncompliance if the LTCH
was not able to comply with the requirements during the reporting
period. We would not review any reconsideration request that fails to
provide the necessary documentation and evidence along with the
request. The documentation and evidence may include copies of any
communications that demonstrate its compliance with the program's
requirements, as well as any other records that support the LTCH's
rationale for seeking reconsideration. A sample list of acceptable
supporting documentation and evidence, as well as instructions for
LTCHs to retrieve copies of the data submitted to CMS for the
appropriate program year can be found on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
We proposed that an LTCH wishing to request a reconsideration of
our initial noncompliance determination would be required to do so by
submitting an email to the following email address:
LTCHQRPReconsiderations@cms.hhs.gov. Any request for reconsideration
submitted to us by an LTCH would be required to follow the guidelines
outlined on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
Following receipt of a request for reconsideration, we will
provide--
An email acknowledgment, using the contact information
provided in the reconsideration request, to the CEO or

[[Page 50318]]

CEO-designated representative that the request has been received; and
Once we have reached a decision regarding the
reconsideration request, an email to the LTCH CEO or CEO-designated
representative, using the contact information provided in the
reconsideration request, regarding our decision.
We proposed to require an LTCH that believes it was incorrectly
identified as being subject to the 2-percentage point reduction to its
annual payment update to submit a timely request for reconsideration
and receive a decision on that request before the LTCH can file an
appeal with the Provider Reimbursement Review Board (PRRB). If the LTCH
is dissatisfied with the decision rendered at the reconsideration
level, the LTCH could appeal the decision with the PRRB under 42 CFR
405.1835. We believe this proposed process is more efficient and less
costly for CMS and for LTCHs because it decreases the number of PRRB
appeals by resolving issues earlier in the process. Additional
information about the reconsideration process including requirements
for submitting a reconsideration request is posted on our Web site at:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
We invited public comment on the proposed procedures for
reconsideration and appeals.
Comment: Several commenters supported the proposal to continue the
reconsideration process for FY 2016.
Response: We thank the commenters for their support.
Comment: A commenter supported the reconsideration process, but
believed that it should be expanded to include data validation.
Response: We believe the current reconsideration process could be
utilized for reconsideration of the validation findings, as long as all
of the documentation used for the request for reconsideration was
submitted at the time of validation. As noted above, we are finalizing
our data completeness proposal, but we are not finalizing our data
validation proposal at this time.
Comment: A commenter stated that CMS should set the reconsideration
process in regulation as has been done in other administrative appeals
processes. In addition, the commenter did not believe that CMS has
demonstrated the ability to manage this level of additional
administrative complexity in a prompt manner. The commenter believed
that CMS should allow LTCHs to appeal to the PRRB without having to go
through CMS first.
Response: We plan to propose regulations for reconsideration in
future rulemaking. We note that while some CMS programs have codified
their reconsideration processes in regulations, not all CMS
reconsideration processes have been codified. We disagree that we have
not demonstrated the ability to manage this level of additional
administrative complexity. The LTCHQR Program completed all
reconsiderations and notified all LTCHs of those reviews within 60 days
in FY 2013. We believe that requiring LTCHs to first submit to the CMS
reconsideration process prior to requesting a hearing at the PRRB will
allow us the opportunity to overturn an erroneous decision when we have
a systematic process and resources in place to do so, and ultimately
decrease any unnecessary burden on the PRRB process.
After consideration of the public comments we received, we are
finalizing the LTCHQR Program reconsideration and appeals procedures
for the FY 2016 payment determination and subsequent years, as
proposed.
15. Electronic Health Records (EHR) and Health Information Exchange
(HIE)
We are also interested in understanding the current state of
electronic health record (EHR) adoption and use of Health Information
Exchange (HIE) in the LTCH community. Therefore, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28278) we solicited feedback and input
from LTCHs and the public on EHR adoption and HIE usage. We noted that
are especially interested in LTCH feedback and input on the following
questions:
Have you adopted an EHR in your LTCH setting?
If your LTCH setting uses EHRs, what functional aspects of
EHRs do you find most important (for example, the ability to send or
receive transfer of care information; the ability to support medication
orders/medication reconciliation)?
Does the EHR system used in your LTCH setting support
interoperable document exchange with other healthcare providers (for
example, acute care hospitals, physician practices, skilled nursing
facilities, etc.)?
In addition to seeking public feedback and input on the feasibility
and desirability of EHR adoption and use of HIE in LTCHs, we stated
that we are also interested in public comment on the need to develop
electronic clinical quality measures, and the benefits and limitations
of implementing these measures for LTCHs.
Comment: Commenters expressed support of the adoption and use of
EHRs, HIEs and electronic prescribing in the LTCH setting. The
commenters suggested that it is a critical step to achieving
efficiencies and improving the quality of care provided by LTCHs, and
that it is important to allow LTCHs to exchange information with other
types of providers to improve care coordination and to participate in
Accountable Care Organizations and other reform efforts.
Response: We thank the commenters for their support.
Comment: Some commenters urged CMS to consider a funding incentive
program for the adoption of EHR technology by LTCHs that includes the
same opportunities afforded to eligible physicians, CAHs, and acute
care hospitals under the HITECH provisions of Public Law 111-5, the
American Recovery and Reinvestment Act of 2009. The commenters noted
that the lack of funding is a significant challenge to EHR adoption in
the LTCH setting and calls into question the feasibility of requiring
EHR use. Another commenter suggested that it is premature to consider
the further development of electronic clinical quality measures for the
LTCH setting until compensation is offered for implementing EHRs.
Response: We believe that these recommendations and concerns are
important considerations related to EHR adoption and HIE usage in the
LTCH setting and help to inform our understanding of these issues.
Comment: Several commenters indicated that their LTCHs have adopted
EHR technology and indicated challenges they have been facing. First,
the amount of information generated by the EHRs can be overwhelming,
and there is a significant challenge associated with utilizing the
information in a timely and meaningful way. Second, the lack of
interoperability between acute care hospitals' and LTCH EHRs make
information exchange difficult. Third, the information currently being
collected by HIEs are rudimentary and does not necessarily meet the
information needs to LTCHs.
A commenter indicated that not all proposed and new LTCH quality
measures utilize EHR information and, therefore, suggested that LTCHs
face the burden of manually reviewing each patient's entire medical
record regardless of whether EHR technology has been adopted.
Response: We thank the commenters for their observations. We
believe that these concerns are important

[[Page 50319]]

considerations related to EHR adoption and HIE usage in the LTCH
setting and help to inform our understanding of these issues.

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

1. Background
The HITECH Act (Title IV of Division B of the ARRA, together with
Title XIII of Division A of the ARRA) authorizes incentive payments
under Medicare and Medicaid for the adoption and meaningful use of
certified electronic health record (EHR) technology (CEHRT). We refer
to this program as the EHR Incentive Program. Eligible hospitals (EHs)
and critical access hospitals (CAHs) may qualify for these incentive
payments under Medicare (as authorized under sections 1886(n) and
1814(l) of the Act, respectively) if they successfully demonstrate
meaningful use of CEHRT, which includes reporting on clinical quality
measures (CQMs) using CEHRT. Sections 1886(b)(3)(B) and 1814(l) of the
Act also establish downward payment adjustments under Medicare,
beginning with fiscal year 2015, for eligible hospitals and CAHs that
are not meaningful users of CEHRT for certain associated reporting
periods. We refer to this part of the EHR Incentive Program as the
Medicare EHR Incentive Program. Sections 1903(a)(3)(F) and 1903(t) of
the Act provide the statutory basis for Medicaid incentive payments.
The set of CQMs from which eligible hospitals and CAHs will report
under the EHR Incentive Program beginning in FY 2014 is listed in Table
10 of the EHR Incentive Program Stage 2 final rule (77 FR 54083 through
54087). We continue to believe there are important synergies with
respect to the Medicare EHR Incentive Program and the Hospital IQR
Program. We believe the financial incentives under the Medicare EHR
Incentive Program for the adoption and meaningful use of CEHRT by EHs
and CAHs will encourage the adoption and use of CEHRT for the
electronic reporting of CQMs under the Hospital IQR Program. We expect
that the electronic submission of quality data from EHRs under the
Medicare EHR Incentive Program will provide a foundation for
establishing the capacity of hospitals to send, and for CMS to receive,
CQMs via CEHRT for certain Hospital IQR Program measures.
2. Alignment of the Medicare EHR Incentive Program Reporting and
Submission Timelines for Clinical Quality Measures With Hospital IQR
Program Reporting and Submission Timelines
We believe it is important to continue our goal of aligning the
Medicare EHR Incentive Program with the Hospital IQR Program because
alignment of these programs will serve to reduce hospital reporting
burden and encourage the adoption and meaningful use of CEHRT by
eligible hospitals and CAHs. Section 1886(n)(3)(B)(iii) of the Act
requires that, in selecting measures and establishing the form and
manner for reporting measures under the Medicare EHR Incentive Program,
the Secretary shall seek to avoid redundant or duplicative reporting
with reporting otherwise required, including reporting under section
1886(b)(3)(B)(viii) of the Act (the Hospital IQR Program). The
reporting and submission timelines for the Medicare EHR Incentive
Program for eligible hospitals and CAHs currently operate on a Federal
fiscal year basis, while the reporting and submission timelines for the
Hospital IQR Program currently operate on a calendar year basis. This
difference may create confusion and additional burden for hospitals
attempting to report data to both programs. To alleviate this possible
confusion, reduce provider burden, and strengthen our commitment to
aligning programs, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28278 through 28279) we proposed to align the reporting and submission
periods for clinical quality measures for the Medicare EHR Incentive
Program with that of the Hospital IQR Program on a calendar year basis
in 2015 and 2016.
We realize that aligning the Medicare EHR Incentive Program to the
calendar year would mean shifting the timeline for reporting and
submission of CQMs such that the submission period would continue
through February of the subsequent calendar year rather than ending in
November as it is currently done, and therefore would delay the
incentive eligibility assessment, and subsequently delay the Medicare
EHR incentive payments under Medicare made to eligible hospitals and
CAHs. In order to ease the transition of the reporting period to the
calendar year, and to prevent the delay of Medicare EHR incentive
payments, we proposed to incrementally shift the Medicare EHR Incentive
Program reporting periods for CQMs. Specifically, for 2015 and 2016, we
proposed for the Medicare EHR Incentive Program to require calendar
year reporting for CQM data that are submitted electronically, but
require that the data be reported only for the first three calendar
quarters (that is, January through March, April through June and July
through September) allowing the reporting period, incentive eligibility
assessment, and incentive payments to remain on their current schedule.
We noted that this proposal would only apply for eligible hospitals
and CAHs submitting CQMs electronically for 2015 and 2016, and that
hospitals demonstrating meaningful use for the first time in 2015 or
2016 would still be required to report CQMs by attestation for a
continuous 90-day period in FY 2015 or 2016, or report CQMs
electronically, by July 1 of the given year to avoid the Medicare
penalty in the subsequent year as finalized in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50903 through 50905). Medicaid-only providers
would continue to report according to State requirements. The proposal
would not change the reporting periods or requirements for the
meaningful use objectives and associated measures under 42 CFR 495.6 or
for CQMs that are reported by attestation via the Registration and
Attestation System. This proposal would allow us to align the CQM
reporting periods for the Medicare EHR Incentive Program with that of
the Hospital IQR Program without delaying payment of the Medicare EHR
incentive payments for 2015 and 2016.
To further align CQM reporting for the two programs, we proposed to
require quarterly reporting of electronically reported CQMs for the
Medicare EHR Incentive Program to align with the currently established
quarterly electronic CQM reporting periods for the Hospital IQR
Program. Additionally, in the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28242 through 28243) the Hospital IQR Program proposed to change its
submission period for electronic CQMs from annual to quarterly
submission. We refer readers to the Hospital IQR Program discussion in
section IX.A.7.h. of the preamble of that proposed rule for more
information about this proposal. Therefore, for the CY 2015 and 2016
reporting periods, we also proposed to align the Medicare EHR Incentive
Program submission period with that being proposed for the Hospital IQR
Program. The table below illustrates the current reporting periods, and
the following table further illustrates our proposals.

[[Page 50320]]

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

----------------------------------------------------------------------------------------------------------------
EHR incentive program CQM reporting
requirements
Hospital IQR program reporting
requirements for FY 2016 payment
determination
----------------------------------------------------------------------------------------------------------------
2014 Reporting Period........... FY 2014 October 1, Report one full Q4 CY 2013........ October 1, 2013-
2013-September year OR. December 31,
30, 2014. 2013. N/A for
2014 Hospital IQR
Program
reporting.
----------------------------------------------------------------------------------------------------------------
Report one three- Q1 CY 2014........ January 1-March
month quarter OR. 31, 2014.
Report any Q2 CY 2014........ April 1-June 30,
continuous 90-day 2014.
period.
Q3 CY 2014........ July 1-September
30, 2014.
-------------------------------------------------------------------------------
Submission Period............... Jan 2, 2014-Nov 30, 2014
October 1, 2013-November 30, 2014.
----------------------------------------------------------------------------------------------------------------

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

We invited public comment on these proposals.
Comment: Many commenters supported CMS' proposed alignment between
the Medicare EHR Incentive Program and Hospital IQR Program. Commenters
appreciated CMS' efforts to align these programs and felt alignment
would reduce overall quality reporting burden. Several commenters
specifically expressed their support of the proposal to align the
reporting and submission timelines of CQMs for the Medicare EHR
Incentive Program with reporting and submission timelines for the
Hospital IQR Program stating that this alignment would reduce confusion
among the programs and reduce reporting burden. A few commenters noted
that the proposal did not address the reporting and submission timeline
for reporting CQMs via attestation, or the reporting and submission
timelines of the meaningful use objectives. Some of these commenters
requested that CMS clarify whether those timelines would also be
affected by this proposal.
Response: We appreciate the comments in support of our alignment
efforts with the Hospital IQR Program, and agree that our proposal to
align timelines for the programs would reduce confusion and reporting
burden. For this reason, we are finalizing our proposal, with the
modifications discussed below, to align the reporting and submission
timelines for CQMs that are reported electronically for the Medicare
EHR Incentive Program with the reporting and submission timelines of
the Hospital IQR Program on the calendar year for 2015. Although it is
still our general goal to continue this alignment on a calendar year
basis for 2016, we are not finalizing the proposals for 2016 at this
time and will address the policy for 2016 in future rulemaking. We will
continue to evaluate our policies for 2016, and maintain our goal of
alignment with the Hospital IQR Program.
We note that we did not propose to change the reporting periods or
requirements for the meaningful use objectives and associated measures
under 42 CFR 495.6 or for CQMs that are reported by attestation via the
Registration and Attestation System, and thus, the policy will remain
the same. We also note that we will consider these comments and
possible alignment of CQMs reported by attestation in future rule
making.
Comment: Many commenters expressed their views regarding CMS'
proposal to require quarterly submission of CQMs reported
electronically for the Medicare EHR Incentive Program. In general,
commenters felt it was premature to require quarterly submission of
CQMs in 2015 for the Medicare EHR Incentive Program given the delays
with certification of EHR technology in 2014 and anticipated

[[Page 50321]]

changes in attestation requirements. Commenters also expressed concerns
over whether EHRs would be ready for quarterly reporting by the first
quarter of 2015, and suggested that CMS consider a pilot program for
quarterly reporting instead of requiring it for 2015.
Response: We refer readers to the Hospital IQR Program discussion
in section IX.A.9.d. of the preamble of this final rule for further
discussion of the comments related to quarterly reporting.
We appreciate and understand the commenters' concerns regarding
quarterly reporting, and understand the feedback we have received from
stakeholders concerning delays in certification of EHR technology. We
additionally acknowledge that our requirement to report the most recent
version of the CQMs as finalized below poses a challenge to eligible
hospitals and CAHs in implementing quarterly reporting as EHR vendors
can be certified to 2014 CEHRT without updating to the most recent
version of CQMs. We note that at this time, we do not plan to offer
quarterly reporting on a pilot basis in 2015.
Based on commenters' concerns, and the additional challenges posed
by requiring the most recent version of the CQMs for 2015 reporting, we
have decided not to finalize our proposal to require quarterly
submission of electronically reported CQMs for the Medicare EHR
Incentive Program in 2015, and instead maintain in 2015 our policy of
one annual submission period to align with the submission period for
CQMs reported electronically under the Hospital IQR Program. This
annual submission period begins on January 2 and ends on November 30
(for example, for the reporting periods in 2015, the submission period
is January 2, 2015 through November 30, 2015).
In addition, and to align with the Hospital IQR Program in 2015, we
are not finalizing our proposal to require three quarters of CQM data
for calendar year 2015. Instead, for CQM data submitted electronically,
we will require one calendar quarter of data for 2015 from either Q1
(January 1, 2015-March 31, 2015), Q2 (April 1, 2015-June 30, 2015), or
Q3 (July 1, 2015-September 30, 2015). As noted above, at this time, we
are not finalizing any proposals related to our reporting and
submission requirements for 2016. We refer readers to the Hospital IQR
Program discussion in section IX.A.9.d. of the preamble of this final
rule for further discussion of the comments related to quarterly
reporting.
We also note that this policy only applies for eligible hospitals
and CAHs submitting CQMs electronically for 2015. Therefore, as
finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50903 through
50905), hospitals demonstrating meaningful use for the first time in
2015 are still required to report CQMs by attestation for a continuous
90-day period in FY 2015, or to report CQMs electronically, by July 1
of the given year to avoid the Medicare penalty in the subsequent year.
Medicaid-only providers will continue to report according to State
requirements. In addition, as stated above, this policy does not change
the reporting periods or requirements for the meaningful use objectives
and associated measures under 42 CFR 495.6 or for CQMs that are
reported by attestation via the Registration and Attestation System.
In summary, after consideration of the public comments we received,
we are finalizing our proposal, with the modifications described above,
to align the reporting and submission timelines of the Medicare EHR
Incentive Program with those of the Hospital IQR Program on the
calendar year for CQMs that are reported electronically in 2015.
We are not finalizing our proposal to require quarterly submission
of CQM data for 2015; instead, we will maintain one annual submission
period. We are also not finalizing our proposal to require three
calendar quarters of CQM data for 2015, but instead, for data submitted
electronically, we will require one calendar quarter of data from Q1,
Q2, or Q3 of 2015. We are not finalizing our proposals for 2016 in this
final rule, and will address the policy for 2016 in future rule making.
3. Quality Reporting Data Architecture Category III (QRDA-III) Option
in 2015
In the EHR Incentive Program Stage 2 final rule (77 FR 54088), we
finalized two options for eligible hospitals and CAHs to electronically
submit CQMs beginning in FY 2014 under the Medicare EHR Incentive
Program. Option 1 was to electronically submit aggregate-level CQM data
using QRDA-III. Option 2 was to electronically submit data using a
method similar to the 2012 and 2013 EHR Incentive Program electronic
reporting pilot for EHs and CAHs, which used QRDA-I (patient-level
data). We also stated in that final rule that, consistent with section
1886(n)(3)(B)(ii) of the Act, in the event the Secretary does not have
the capacity to receive CQM data electronically, eligible hospitals and
CAHs that are beyond their first year of meaningful use may continue to
report aggregate CQM results through attestation.
We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50904
through 50905) that we had determined that the electronic submission of
aggregate-level data using QRDA-III would not be feasible in 2014 for
eligible hospitals and CAHs under the Medicare EHR Incentive Program.
Therefore, for the 2014 reporting period under the Medicare EHR
Incentive Program, eligible hospitals and CAHs would have the option to
continue to report aggregate CQM results through attestation. We stated
that we would reassess this policy for the 2015 and future reporting
periods.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28279 through
28280), we stated that we have determined that the electronic
submission of aggregate-level data using QRDA-III will not be feasible
in 2015 for eligible hospitals and CAHs under the Medicare EHR
Incentive Program. Therefore, for the 2015 reporting period under the
Medicare EHR Incentive Program, eligible hospitals and CAHs would have
the option to continue to report aggregate CQM results through
attestation. We noted that submissions of aggregate CQM data via
attestation would not satisfy the reporting requirements for the
Hospital IQR Program, and consistent with our proposal above regarding
alignment of these programs, attested CQM data would need to be
submitted for one full fiscal year in 2015 via the Registration and
Attestation System, and would not require quarterly submissions.
Hospitals in their first year of demonstrating meaningful use in 2015
would still be required to report CQMs by attestation for a continuous
90-day period in FY 2015, or report CQMs electronically, by July 1,
2015 to avoid the Medicare penalty in FY 2016 as finalized in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50903 through 50905). We also
noted that this policy does not apply to the Medicaid EHR Incentive
Program. Therefore, States may still require the submission of QRDA-III
files to fulfill the CQM reporting requirements for hospitals that
participate in the Medicaid EHR Incentive Program.
In order to remain aligned with the Hospital IQR Program, and
because over 66 percent of hospitals that participate in the Hospital
IQR Program are already meaningful users, we strongly recommended that
hospitals that are eligible to participate in both programs
electronically submit up to 16 electronic clinical quality measures of
the 28 inpatient measures identified by the Hospital IQR Program. We
believe that keeping the two programs aligned will ultimately reduce
reporting burden for

[[Page 50322]]

hospitals. We note again that reporting via attestation would not count
towards the reporting requirements for the Hospital IQR Program.
Comment: Several commenters expressed views related to CMS'
proposal not to accept aggregate-level data using QRDA-III for
reporting in 2015. Most commenters were disappointed to learn that it
was not feasible for CMS' systems to accept QRDA-III files in 2015 and
urged CMS to continue to improve systems such that we would be able to
accept QRDA-III data in the future. Some commenters requested further
discussion of CMS' plan to accept QRDA-III data in the future.
Response: We understand the concerns raised by commenters, and we
expect to continue to review and improve our systems for future years
to be able to accept aggregate level QRDA-III files. We note that our
plans regarding the acceptance of QRDA-III files will be addressed in
future rule making.
Comment: A few commenters suggested that CMS and ONC remove the
requirement for EHR technology designed for the inpatient setting to be
certified to produce QRDA-III formatted files if CMS would not be able
to receive QRDA-III data in the future in order to prevent unnecessary
work related to the development of these files.
Response: We appreciate the commenters' concerns and suggestion. As
we continue to review and improve our systems, we will continue to
evaluate whether QRDA-III is a feasible option for future years and
whether changes to existing policies would be appropriate.
Comment: A few commenters requested additional information about
the storage and maintenance of QRDA-I files.
Response: We note that the storage and maintenance of QRDA-I files
is outside the scope of this final rule.
After consideration of the public comments we received, and for the
reasons set forth above, we are finalizing the policy as proposed. For
the Medicare EHR Incentive Program, eligible hospitals and CAHs may
report their CQMs electronically using QRDA- I (patient-level data) or
via attestation (aggregate-level data). We note again that reporting
via attestation would not count towards the reporting requirements for
the Hospital IQR Program.
4. Electronically Specified Clinical Quality Measures (CQMs) Reporting
for 2015
In the EHR Incentive Program Stage 2 final rule, we finalized the
CQMs that eligible hospitals and CAHs would be required to report for
purposes of meeting the CQM component of meaningful use under the EHR
Incentive Program starting in 2014 (77 FR 54083 through 54087 Table
10). These CQMs are updated routinely to account for changes, including
but not limited to changes in billing and diagnosis codes and changes
in medical practices. The requirements specified in the EHR Incentive
Program Stage 2 final rule allow for the reporting of different
versions of the CQMs. For 2015, it is not technically feasible for CMS
to accept data that is electronically reported according to the
specifications of the older versions of the CQMs, including versions
that may be allowed for reporting under the EHR Incentive Program. We
stated in the EHR Incentive Program Stage 2 final rule that, consistent
with section 1886(n)(3)(B)(ii) of the Act, in the event that the
Secretary does not have the capacity to receive CQM data
electronically, eligible hospitals and CAHs may continue to report
aggregate CQM results through attestation (77 FR 54088). In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR 28280) we proposed that eligible
hospitals and CAHs that seek to report CQMs electronically under the
Medicare EHR Incentive Program must use the most recent version of the
electronic specifications for the CQMs and have CEHRT that is tested
and certified to the most recent version of the electronic
specifications for the CQMs.
Eligible hospitals and CAHs that do not wish to report CQMs
electronically using the most recent version of the electronic
specifications (for example, if their CEHRT has not been certified for
that particular version) would be allowed to report CQM data by
attestation for the Medicare EHR Incentive Program.
We invited public comment on these proposals. We have addressed
several of the public comments received in this section of this final
rule, and we also refer readers to the Hospital IQR Program discussion
in section IX.A.9.d. of the preamble of this final rule for further
discussion of the comments related to CQM versions.
Comment: Commenters expressed concern and requested clarification
regarding the timeframe between publication of the revised
specifications and the quarter in which hospitals must being using the
new version. Commenters stated that the timeline was too short for
adequate development and implementation of the new specifications.
Response: CQMs are updated routinely to account for changes
including, but not limited to, changes in billing and diagnosis codes
and changes in medical practices. In order for CQMs to remain current
and clinically valid, the specifications must be updated on a regular
basis. We note that specifications are posted at least 6 months prior
to the reporting period, and as we align the reporting and submission
timelines of the Medicare EHR Incentive Program with those of the
Hospital IQR Program, we provide an even greater window of time between
the posting of the specifications and the start of the reporting
period.
Comment: Commenters specifically requested clarification regarding
the timing and reporting of the updated specifications with respect to
CMS' proposal to require quarterly reporting of electronically reported
CQMs. Commenters stated that the two proposals would require hospitals
to use an EHR that is certified to one set of specifications and then
re-certified to a different set of specifications within a given
reporting year in order to satisfy the quarterly reporting requirement.
Response: As we discussed above, and in section IX.D.2. of the
preamble of this final rule, we are not finalizing our proposal to
require quarterly submission of electronically reported CQMs for 2015.
For electronic reporting of CQM data for 2015, we will require one
calendar quarter of data from Q1, Q2 or Q3 of 2015 submitted during the
period January 2, 2015-November 30, 2015. We believe this revised
policy will allow additional time for eligible hospitals and CAHs to
implement the updates required to submit the most recent version of the
CQMs in 2015.
Comment: One commenter suggested that CMS accept multiple versions
of CQMs during the reporting year to account for the period of
transition between CQM versions.
Response: We appreciate the commenter's suggestion, but
unfortunately, as noted above, for 2015, it is not technically feasible
for us to accept data that is electronically reported according to the
specifications of the older versions of the CQMs, including versions
that may be allowed for reporting under the EHR Incentive Program. We
note that eligible hospitals and CAHs that do not wish to report CQMs
electronically using the most recent version of the electronic
specifications would be allowed to

[[Page 50323]]

report CQM data by attestation for the Medicare EHR Incentive Program.
Comment: One commenter supported the proposal to require that
eligible hospitals and CAHs ensure that their CEHRT products are tested
and certified to the most recent version of the electronic
specifications for the CQMs, and many others opposed the
recertification requirement siting the additional burden and cost
recertification would impose.
Response: We have received feedback from stakeholders regarding the
difficulty and expense of having to test and recertify CEHRT products
to the most recent version of the electronic specifications for the
CQMs. While we still believe eligible hospitals and CAHs should test
and certify their products to the most recent version of the electronic
specifications for the CQMs when feasible, we understand the burdens
associated with this requirement. Therefore, to avoid this added
burden, we are not finalizing our proposal to require eligible
hospitals and CAHs to ensure that their CEHRT products are recertified
to the most recent version of the electronic specifications for the
CQMs. Please note that, although we are not requiring recertification,
eligible hospitals and CAHs must still report the most recent version
of the electronic specifications for the CQMs.
After consideration of the public comments we received, and for the
reasons set forth above, we are finalizing the policy that eligible
hospitals and CAHs that seek to report CQMs electronically under the
Medicare EHR Incentive Program must use the most recent version of the
electronic specifications for the CQMs, however, we will not require
eligible hospitals and CAHs to ensure that their CEHRT products are
recertified to the most recent version of the electronic specifications
for the CQMs.
5. Clarification Regarding Reporting Zero Denominators
As we stated in the EHR Incentive Program Stage 2 final rule (77 FR
54079) we expect eligible hospitals and CAHs to adopt EHR technology
that includes CQMs relevant to each eligible hospital's or CAH's
patient mix. We understand, however, that there are situations in which
an eligible hospital or CAH does not have data to report on a
particular CQM, and its EHR is not certified to additional CQMs that
can be used to replace that CQM with another for which it has data. For
example, a health system with multiple eligible hospitals or CAHs may
have an EHR certified for 16 CQMs, which is the minimum number of
required CQMs for reporting, but not all of the eligible hospitals or
CAHs in the health system may have cases to report on those particular
16 CQMs. We have received questions on how eligible hospitals and CAHs
should meet their reporting requirements in this situation; therefore,
in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280) we clarified
our policy as set forth below regarding the reporting of a zero
denominator for the purposes of the Medicare EHR Incentive Program and
the Hospital IQR Program.
If the eligible hospital's or CAH's EHR is certified to a CQM, but
the eligible hospital or CAH does not have patients that meet the
denominator criteria of that CQM, the eligible hospital or CAH can
submit a zero in the denominator for that CQM. Submission of a zero in
the denominator for a CQM counts as a successful submission for that
CQM for both the Medicare EHR Incentive Program and the Hospital IQR
Program. For example, if the eligible hospital or CAH within the
previously mentioned health system does not provide maternity services,
but one of the 16 CQMs the health system's EHR is certified to is a
maternity measure, that eligible hospital's or CAH's EHR may render a
zero in the denominator for that CQM. The eligible hospital or CAH
would therefore report a zero denominator for that maternity care CQM,
and this would count toward the 16 required CQMs for the Medicare EHR
Incentive Program and the Hospital IQR Program. Eligible hospitals or
CAHs within that health system for which that maternity CQM does apply
would provide data on that measure.
Comment: Commenters supported and appreciated the clarification
regarding zero denominators. Some commenters requested clarification as
to whether the above stated zero denominator policy would be effective
in CY 2015 or upon publication of this final rule.
Response: The clarification set forth in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28280) and stated above represents our current
policy. The additional information and examples provided in the
proposed rule were intended for clarification only and do not represent
a change to our existing policy.
Comment: One commenter requested clarification as to whether this
policy extends to issues resulting from the maintenance of value sets
specifically related to medications codified in RxNorm required by the
CQM specifications. The commenter stated that these issues often result
in a zero denominator being produced by the Medicare EHR, and went on
to suggest that these issues may be resolved by modifying CQM
specifications to be more in line with how medications are evaluated in
the Hospital IQR Program chart-abstracted measures.
Response: While we cannot explore all the possible explanations and
reasons why an EHR would produce a zero denominator in this final rule,
we hope that the above clarification regarding zero denominators will
provide guidance in these instances.
6. Case Threshold Exemption Policy; Clarification for 2014 and Change
for 2015
In the EHR Incentive Program--Stage 2 final rule (77 FR 54080), we
finalized the policy that eligible hospitals and CAHs that have 5 or
fewer discharges per quarter in the same quarter as their reporting
period in FY 2014, or 20 or fewer discharges per full FY reporting
period beginning in FY 2015, for which data are being electronically
submitted (Medicare and non-Medicare combined) as defined by the
clinical quality measure's denominator population are exempted from
reporting the CQM. To be eligible for the exemption, eligible hospitals
and CAHs must submit their aggregate population and sample size counts
for Medicare and non-Medicare discharges for the CQM for the reporting
period.
In the Health Information Technology: Revisions to the 2014 Edition
Electronic Health Record Certification Criteria; and Medicare and
Medicaid Programs; Revisions to the Electronic Health Record Incentive
Program interim final rule, we revised the case threshold exemption
policy to make it applicable for eligible hospitals and CAHs in all
stages of meaningful use beginning with FY 2013, including those that
are demonstrating meaningful use for the first time and submitting CQMs
by attestation (77 FR 72988 through 72989). Eligible hospitals and CAHs
with 5 or fewer discharges during the relevant EHR reporting period (if
attesting to a 90-day EHR reporting period), or 20 or fewer discharges
during the year (if attesting to a full year EHR reporting period) as
defined by the CQM's denominator population would be exempted from
reporting on that CQM.
We stated in the interim final rule (77 FR 72989) that beginning in
FY 2014, the reporting requirement is to report 16 CQMs covering at
least 3 domains from a list of 29 CQMs. We stated further that in order
to be exempted from reporting fewer than 16 CQMs, the eligible hospital
or CAH would need to qualify for the case threshold exemption for more
than 13 of the 29 CQMs. If the

[[Page 50324]]

eligible hospital or CAH does not meet the criteria for a case
threshold exemption for 13 or more CQMs, the eligible hospital or CAH
would be able to report at least 16 CQMs. Likewise, we stated that if
the CQMs for which the eligible hospital or CAH can meet the case
threshold of discharges do not cover at least 3 domains, the eligible
hospital or CAH would be exempt from the requirement to cover the
remaining domains. For example, if the eligible hospital or CAH does
not meet the case threshold of discharges for 13 clinical quality
measures, and thus could report 16 clinical quality measures, but the
16 clinical quality measures cover only 2 of the 3 domains, the
eligible hospital or CAH would be exempt from covering the third
domain.
For the reporting periods in 2014, our policy requires that an
eligible hospital or CAH that claims a case threshold exemption for one
CQM must choose another CQM on which to submit data, or continue to
invoke the case threshold exemption until it exceeds 13 case threshold
exemptions and may therefore report fewer than the 16 required CQMs.
This policy assumes that the eligible hospital or CAH has an EHR that
is certified to more than the minimum of 16 CQMs, and the eligible
hospital or CAH has other CQMs in its EHR to choose from for reporting.
We realize, however, that there could be many EHRs that are certified
to only the minimum of 16 CQMs required by ONC's regulations at 45 CFR
170.102 (the definition of ``Base EHR''), and for eligible hospitals
and CAHs using those EHRs, this policy may result in the eligible
hospital or CAH needing to submit data on a CQM for which the EHR is
not certified. It was not our intent to have eligible hospitals or CAHs
report on measures for which their EHRs are not certified.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28280 through
28281), beginning with the reporting periods in 2015, we proposed to
change the case threshold exemption policy so that if an eligible
hospital or CAH qualifies for an exemption from reporting on a
particular CQM, the exemption would count toward the 16 required CQMs.
For example, if the eligible hospital's or CAH's EHR is certified to
report 16 CQMs, and for one of those CQMs the eligible hospital or CAH
has 5 or fewer discharges during the relevant EHR reporting period (if
attesting to a 90-day EHR reporting period), or 20 or fewer discharges
during the year (if attesting to a full year EHR reporting period) as
defined by the CQM's denominator population, the eligible hospital or
CAH would report data for the 15 CQMs for which the case threshold
exemption does not apply, and invoke a case threshold exemption for the
one CQM for which the exemption does apply for a total of 16 CQMs.
We expect eligible hospitals and CAHs to adopt EHR technology that
includes CQMs relevant to the eligible hospital's or CAH's case mix,
though we understand that in some cases, the eligible hospital or CAH
may not meet the case threshold of discharges for a particular CQM. We
believe this proposed policy better reflects our intent for eligible
hospitals and CAHs to report on only those measures for which their
EHRs are certified while meeting the reporting requirements for the
Medicare EHR Incentive Program and Hospital IQR Program.
We invited public comment on this proposal.
Comment: Several comments supported the proposed change to CMS'
case threshold exemption policy. Commenters felt that this change in
policy acknowledged that an eligible hospital or CAH should receive
credit for meeting the CQM even though the eligible hospital or CAH may
not meet the case threshold of discharges for that particular CQM.
Response: We appreciate the comments in support of our proposal.
After consideration of the public comments we received, we are
finalizing the policy as proposed. We note that for CQM data reported
by attestation, this policy applies to eligible hospitals or CAHs that
have 5 or fewer discharges during the relevant EHR reporting period (if
attesting to a 90-day EHR reporting period), or 20 or fewer discharges
during the year (if attesting to a full year EHR reporting period), as
defined by the CQM's denominator population. For CQM data submitted
electronically in 2015, this policy applies to eligible hospitals or
CAHs that have 5 or fewer discharges during their chosen reporting
period of one calendar quarter, as defined by the CQM's denominator
population. We note that because there is no option for a full year
reporting period for data submitted electronically in 2015, the
exemption based on 20 or fewer discharges for a full year EHR reporting
period would not apply.

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

A. Background

Section 1853 of the Act requires the Secretary to make payments to
Medicare Advantage (MA) organizations offering local and regional MA
plans with respect to coverage of individuals enrolled under Medicare
Part C. Section 1853(a)(1)(C) of the Act requires the Secretary to
adjust such payments for such risk factors as age, disability status,
gender, institutional status, and such other factors as the Secretary
determines appropriate, including health status. To support these risk
adjustments, section 1853(a)(3)(B) of the Act requires submission of
data by MA organizations regarding the services provided to enrollees
and other information the Secretary deems necessary but does not limit
the Secretary's use of such data or information. Section 1106 of the
Act authorizes the Secretary to adopt regulations governing release of
information gathered in the course of administering programs under the
Act.
Implementing regulations at 42 CFR 422.310 set forth the
requirements for the submission of risk adjustment data that CMS uses
to risk-adjust payments. MA organizations must submit data, in
accordance with CMS instructions, to characterize the context and
purposes of items and services provided to their enrollees by a
provider, supplier, physician, or other practitioner. Section
422.310(d)(1) provides that MA organizations submit risk adjustment
data to CMS as specified by CMS. Risk adjustment data refers to data
submitted in two formats: comprehensive data equivalent to Medicare
fee-for-service claims data (often referred to as encounter data); and
data in abbreviated formats (often referred to as RAPS data). Section
422.310(f) currently specifies CMS' uses of the risk adjustment data.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we
proposed to revise the existing regulation at Sec. 422.310(f) to
broaden the specified uses and disclosures of risk adjustment data in
order to strengthen program management and increase transparency in the
MA program, and to specify the conditions for release of risk
adjustment data to entities outside of CMS.
We received approximately 28 pieces of correspondence from MA
organizations and trade associations, beneficiary advocacy
organizations, hospital systems and trade associations, a government
agency, a research firm, and individuals. Summaries of and our
responses to the public comments on the uses and bases for disclosure
of risk adjustment data (Sec. 422.310(f)(1)) are presented in section
X.B.1 of the preamble of this final rule. Summaries of and responses to
the public comments on the conditions for release of risk adjustment
data outside of CMS

[[Page 50325]]

(Sec. 422.310(f)(2)) are presented in section X.B.2. of the preamble
of this final rule.

B. Proposed and Finalized Regulatory Changes

1. Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data
In the FY 2015 IPPS/LTCHG PPS proposed rule, we first proposed to
revise a reference in existing Sec. 422.310(f) from ``data obtained
under this section'' to ``data described in paragraphs (a) through (d)
of this section'' in both paragraphs (f)(1) and (f)(2); this new text
would indicate that the data used or released under proposed paragraph
(f) would not include the medical records and other data collected
separately under paragraph (e) for the purpose of risk adjustment data
validation (RADV) audits. We stated that we did not intend for the
proposed Sec. 422.310(f) to authorize any additional use or release of
the data described in paragraph (e). We proposed that the data
described in paragraphs (a) through (d) would include those elements
that constitute an encounter data record, including contract, plan, and
provider identifiers, with the exception of disaggregated payment data
as discussed below. In addition, we noted that paragraph (d)(1) also
authorizes the collection of abbreviated data and that the proposed
regulation would apply to both the abbreviated data as well as more
detailed (encounter-level) data collected from MA organizations
pursuant to Sec. 422.310(a) through (d).
Comment: A few commenters stated that, without a specific
exclusion, the data that CMS proposed to release would seem to include
audit data and additional data collected as part of these audits, which
could include price and charge information. These commenters urged CMS
to restrict the inclusion of additional data collected as part of
audits from the data eligible for release.
Response: We did propose a specific exclusion: That medical records
and other data that MA organizations submit to CMS as part of a Risk
Adjustment Data Validation (RADV) audit at Sec. 422.311 are excluded
from the data release provisions of this rulemaking, through the
references at Sec. 422.310(f) to the data described in Sec.
422.310(a) through (d) as the data that would be available under this
rule. This text excludes data collected pursuant to Sec. 422.310(e)
for RADV.
We did not receive any public comments challenging our proposed
exclusion of audit data under paragraph (e) of Sec. 422.310, nor did
we receive any public comments on the application of this rule to
abbreviated data under paragraph (d)(1) of Sec. 422.310. Comments
about additional or fewer protections for encounter data under the
final rule are addressed below. Therefore, we are finalizing the use of
this language limiting the scope of paragraph (f) to data described in
paragraphs (a) through (d) as proposed.
The existing regulation at Sec. 422.310(f) specifies five purposes
for which CMS may use risk adjustment data obtained from MA
organizations. In the proposed rule, we clarified that CMS' uses of
these data may include disclosure to CMS contractors or other agents
that perform activities or analyses on CMS' behalf in connection with
authorized use of the data. The existing specified purposes are: (1) To
determine the risk adjustment factors used to adjust payments, as
required under Sec. Sec. 422.304(a) and (c); (2) to update risk
adjustment models; (3) to calculate Medicare DSH percentages; (4) to
conduct quality review and improvement activities; and (5) for Medicare
coverage purposes. We proposed to restructure paragraph (f) to identify
the purposes for which CMS may use and release risk adjustment data and
to impose certain conditions on any release of that data.
We proposed to revise paragraph (f) to add four purposes, as
paragraphs (f)(1)(vi) through (ix), for which CMS may use risk
adjustment data submitted by MA organizations: (1) To conduct
evaluations and other analysis to support the Medicare program
(including demonstrations) and to support public health initiatives and
other health care-related research; (2) for activities to support the
administration of the Medicare program; (3) for activities conducted to
support program integrity; and (4) for purposes permitted by other
laws. We stated our expectation that, in general, comprehensive risk
adjustment data submitted by MA organizations, which MA organizations
began submitting to CMS effective CY 2012, will enable CMS to generate
improved data analyses that could support Medicare program evaluations,
demonstration designs, and CMS' effective and efficient operational
management of the Medicare program. Risk adjustment data also could be
useful to support public health initiatives by governmental entities
and to advance health care-related research by universities and other
research organizations. We stated that we also believe that risk
adjustment data can support CMS' program integrity activities in the
Medicare program and other Federal health care and related programs.
This general term encompasses audits, investigations, efforts to combat
waste, fraud, and abuse, and any other actions designed to ensure that
the program operates within its authority including audits,
evaluations, and investigations by the Office of the Inspector General
(OIG) as well as CMS' own efforts. In addition, we stated that risk
adjustment data may be useful in supporting Medicare administrative
activities, such as the review of the validity of bid and medical loss
ratio data submitted by MA organizations. Finally, we proposed to
acknowledge that other laws may permit other uses of risk adjustment
data and that this regulation is not intended to supersede such other
laws.
Regarding the use of risk adjustment data outside of CMS, we
proposed at Sec. 422.310(f)(2) that other HHS agencies, other Federal
executive branch agencies, States, and external entities would only be
able to obtain from CMS and use risk adjustment data for one or more of
the purposes listed in proposed paragraph (f)(1). An external entity
may be an individual, group, or organization. In the proposed rule, we
acknowledged our expectation that other HHS agencies and other Federal
executive branch agencies may request these data for the same purposes
CMS proposed to use the data and that we believe such use is
appropriate. Under our proposal, other agencies that evaluate and
analyze the Medicare program, perform health care-related research,
support public health initiatives, perform activities in the
administration of the Medicare program, or conduct activities to
support program integrity in the Medicare program and other Federal
health care and related programs would be able to access and use risk
adjustment data for these purposes. States, while conducting program
integrity activities for Medicaid programs or in the administration of
Medicare-Medicaid demonstrations (for example, refer to the Web site
at: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/FinancialModelstoSupportStatesEffortsinCareCoordination.html), may
access and use risk adjustment data under the proposal. We stated that
we anticipate that nongovernmental external entities would generally
only gain access to risk adjustment data under this proposal in
connection with public health initiatives and health care-related
research, as such external entities appear to have limited, if any,
roles in the other purposes identified in our proposal.

[[Page 50326]]

Regarding the use of risk adjustment data for purposes permitted by
other laws, we noted that, to the extent that a requestor has separate
statutory authority for requiring CMS disclosure of data, our proposed
provisions would not limit or supersede such authority. For example,
some Congressional support agencies may compel release of data under
separate statutory authority, such as 31 U.S.C. 716, 2 U.S.C. 166(d)(1)
and 601(d), and section 1805 of the Act (42 U.S.C. 1395b-6), for the
purposes of conducting Congressional oversight, monitoring, making
recommendations and analysis of the Medicare program. In addition, the
OIG has separate statutory authority under section 1128J of the Act (42
U.S.C. 1320a-7k), coupled with section 6(a) of the Inspector General
Act of 1978 (5 U.S.C. App. 3) authorizing the OIG to access data as
necessary to perform its responsibilities. This regulation will not
limit that authority.
Finally, in the proposed rule, we stated that we are seeking to
balance protection of confidential beneficiary information and the
proprietary interests of MA organizations with the need to effectively
administer Federal health care programs and to encourage research into
better ways to provide health care. We also noted a goal of the
proposal to increase transparency in the administration of the Medicare
program. We sought public comments on the proposed uses and release of
data and how else to achieve the necessary balance. In particular, we
solicited public comment on the extent to which a commercial purpose
underlying a request for risk adjustment data should be a factor in
evaluating whether the request is for one of the purposes that permit a
disclosure under this regulation or if one of the purposes in paragraph
(f)(1) of Sec. 422.310, for which CMS would disclose data under this
section, should address commercial uses of the data. The topic of
commercial purposes is discussed later in section X.B.2. of the
preamble of this final rule as a condition of data release.
Comment: Several commenters supported CMS' proposal for expanding
the use and distribution of MA risk adjustment data to support and
strengthen the Medicare program, as well as supporting public health
initiatives and health care-related research. Commenters stated that
risk adjustment data are valuable to researchers for analyzing health
care trends, public health research initiatives, and improving
management of the Medicare program. These commenters expressed support
of CMS' efforts to move toward greater transparency through the release
of risk adjustment data. One commenter believed that greater data
transparency would not only further public health research but also
might serve to further educate consumer organizations, patient
advocates, and ultimately beneficiaries about the Medicare program.
Generally, commenters supporting the proposals in the proposed rule
simultaneously recognized the importance of balancing these goals with
the importance of protecting the confidentiality of beneficiary
information, and one commenter agreed with CMS' proposal to aggregate
data on negotiated rates paid to providers.
Response: We appreciate the commenters' support.
Comment: A number of commenters generally addressed the proposed
uses of risk adjustment data, characterizing the listed purposes as too
broad and asking CMS to more specifically and narrowly define them. One
commenter stated that the purposes, as stated in the proposed rule, are
so broad as to justify release of these sensitive data for almost any
research activity. Several commenters were concerned that having
permitted uses of risk adjustment data for such broad-based purposes
leaves a large gap in the protection of potentially proprietary
information, especially given the concern about usage of these data by
agencies with limited knowledge or understanding of the data and how to
make accurate interpretations.
Response: Section 1853 of the Act does not limit the uses of risk
adjustment data, and section 1106 of the Act authorizes the adoption of
regulations governing how CMS will disclose data obtained in the course
of CMS' duties. We have reviewed the proposed uses of risk adjustment
data (which are for analytical purposes), and we do not believe that
they are too broad. We reiterate that the list of permissible bases
under this regulation for use and disclosure is exhaustive and that
uses of the risk adjustment data that are outside of the scope of these
nine categories will not be authorized. Accordingly, we see no
compelling reason to further limit uses of this data by eliminating or
narrowing any of the proposed purposes.
Comment: Several commenters expressed concern about CMS' use of
risk adjustment data, under the purpose stated under Sec.
422.310(f)(1)(vii), ``for activities to support the administration of
the Medicare program.'' In particular, commenters requested
clarification and specificity regarding how these data would be used in
the example provided in the preamble, which was to validate the MA
organizations' bid and Medical Loss Ratio (MLR) data. They argued that
the risk adjustment data could not be used to inform bid review or MLR
analyses: The data MA organizations submit to CMS cannot provide a
complete picture of MA organizations' costs because many organizations
have payment arrangements with providers that are not fee-for-service
based, for example, capitation arrangements, bundled pricing, incentive
payments, and multi-year contracting.
Response: In the preamble of the proposed rule, we identified two
examples of using risk adjustment data in support of Medicare
administrative activities: Review of the validity of bid and MLR data
submitted by MA organizations. We anticipate that there will be other
uses in support of Medicare administrative activities, such as the
development of quality measures. Regarding the two examples we provided
in the proposed rule, while we recognize that many MA organizations
have alternative arrangements other than fee-for-service payments, we
believe that encounter data will be useful for understanding patterns
of beneficiary utilization and aspects of MA organizations'
expenditures, as reported in bid and MLR submissions.
Comment: One commenter asked how CMS could use risk adjustment
data, under Sec. 422.310(f)(1)(viii), ``for activities conducted to
support program integrity,'' particularly when the data are incomplete
due to payment arrangements with providers that are not fee-for-service
based.
Response: We believe that risk adjustment data are valuable for
program integrity purposes. For example, encounter data could be used
to compare MA and FFS billing to identify aberrant patterns, which may
inform efforts to combat fraud, waste, and abuse.
Comment: Several commenters expressed concern about CMS' use of
risk adjustment data, under Sec. 422.310(f)(1)(ix), ``for purposes
permitted by other laws.'' Commenters requested CMS to further clarify
this purpose in regulation, for example, to distinguish Federal laws
from State laws and to specify that this provision only applies to
health care laws. Another commenter asked how CMS intends to evaluate
the other laws that permit use or release of these data; for example,
would CMS allow risk adjustment data to be used to evaluate risk
adjustments for insurance exchanges created under the Affordable Care
Act, and, if so, the commenter expressed concern that the data would
not provide a valid or

[[Page 50327]]

accurate comparison, given the unique patient population.
Response: As we noted in the preamble of the proposed rule, we
believe it is important to acknowledge that this regulation is not
intended to supersede other laws that permit other uses of risk
adjustment data. For example, this regulation cannot override separate
statutory authorities that require CMS disclosure of data to other
Federal agencies. We refer readers, for example, to 31 U.S.C. 716; 2
U.S.C. 166(d)(1) and 601(d); and section 1805 of the Act (42 U.S.C.
1395b-6).
Regarding the commenters' request that we further specify in
regulation text the types of laws to which paragraph (f)(1)(ix) applies
(such as Federal laws versus State laws), we do not believe that
detailed specification of laws is necessary because we believe it is
clear that only laws that apply to CMS or to data held by CMS are
within the scope of the provision. However, in response to these
comments, we are finalizing the regulation text at Sec.
422.310(f)(1)(ix) to state ``for purposes authorized by other
applicable laws'' to emphasize that the provisions in other laws must
be applicable to CMS and to MA risk adjustment data.
Finally, we are not sure what the commenter means by evaluating
other laws other than as a request for clarification that this
provision encompasses laws that are applicable to CMS or to data held
by CMS. If the question is about how we would determine the
appropriateness of a research topic and study design that involves both
Medicare and another program enacted under other laws, we do not
believe we can comment on the appropriateness of specific designs in
this preamble. The approval of any research study requesting use of MA
risk adjustment data would be handled through the existing process CMS
uses for data sharing, as described elsewhere in this preamble in the
discussion of paragraph (f)(2)(ii) of Sec. 422.310.
Comment: One commenter stated that it is not appropriate for
external entities to receive the data for uses that are exclusively
within CMS' authority--specifically, that CMS should not release data
to entities outside of CMS for the determination of risk adjustment
factors, updating risk adjustment models, the calculation of Medicare
DHS percentages, or Medicare coverage purposes (Sec. 422.310(f)(1)(i)
and (f)(1)(ii) or (f)(1)(v)). Another commenter asked CMS to expressly
limit, in regulatory text, the bases upon which nongovernmental
external entities receive the data to one purpose: Support of public
health initiatives and other health care-related research. Furthermore,
one commenter stated that neither States nor external entities should
receive the data to conduct quality review and improvement activities,
for activities to support the administration of the Medicare program,
or for activities conducted to support program integrity (Sec.
422.310(f)(1)(iv), (f)(1)(vii), or (f)(1)(viii)) because these are
purposes exclusive to the Federal Medicare program. Another commenter
stated that is it is unclear what uses States would have for these
data, given the Federal administration of the MA program and the
difference in populations enrolled in MA plans and commercial health
insurance coverage, for which States may be administering risk
adjustment or other programs, or Medicaid coverage, for which a State
Medicaid agency would administer benefits, concluding that States
should not receive the MA risk adjustment data.
Response: We have reviewed our proposed purposes and believe that
there may be cases in which researchers, whether external entities or
other governmental agencies, might have well-designed research projects
that meet CMS' stringent requirements, under our longstanding data
sharing procedures, thus warranting use of the data for an approved
project. For example, other Federal governmental agencies may want to
use the data to conduct research on new developments in risk adjustment
models or an external entity may want to propose research on the design
of quality measures that could apply to beneficiaries in both the MA
and FFS programs. Both of these examples illustrate the point that
greater data transparency could improve administration of the Medicare
program and improve public health. As noted in the preamble of the
proposed rule, we also believe that risk adjustment data can support
program integrity activities in the Medicare program and in other
Federal health care and related programs funded in whole or in part by
Federal funds.
Furthermore, we believe that our approach to determining whether to
disclose risk adjustment data, which incorporates the Medicare Part A/B
and Part D minimum necessary data policy, with additional restrictions
to protect beneficiary privacy and commercially sensitive information
of MA organizations, strikes an appropriate balance between the
significant benefits of furthering knowledge through health care
research and concerns regarding the release of risk adjustment data.
Finally, we believe this process has sufficient protections to ensure
compliance with the applicable laws and guard against the potential
misuse of data. External entities requesting access to risk adjustment
data will have to enter into a Data Use Agreement with us that includes
provisions protecting the data from improper release.
Comment: One commenter asked CMS to further define what CMS means
by external entities in paragraphs (f)(1) and (f)(2) of Sec. 422.310.
Response: An external entity may be an individual, group, or
organization that is not a Federal executive -branch agency or a State.
After consideration of the public comments we received, we are
finalizing, as proposed, the four additional permitted uses of risk
adjustment data at Sec. 422.310(f)(1)(vi) through (f)(1)(ix), with the
exception that we are changing the language for the purpose under
paragraph (f)(1)(ix) to read: ``For purposes authorized by other
applicable laws.''
2. Conditions for CMS Release of Data
The existing regulations at Sec. 422.310 do not specify conditions
for release by CMS of risk adjustment data that are submitted by MA
organizations to CMS. In the FY 2015 IPPS/LTCH PPS proposed rule, we
proposed to add a paragraph (2) to Sec. 422.310(f) to address CMS'
release of such data to non-CMS entities. First, as discussed above in
connection with proposed paragraph (f)(1), our proposal was limited to
the risk adjustment data described in Sec. 422.310(a) through (d) and
did not include the medical records and other data collected separately
under paragraph (e) for the purpose of risk adjustment data validation
(RADV) audits. We stated that we did not intend for the proposed
revision to Sec. 422.310(f) to authorize any additional use or release
of the data described in paragraph (e).
Second, we proposed that CMS would release only the minimum data
that CMS determines is necessary to fulfill the analytical or
operational goal for a particular project. In other words, our proposal
provided that CMS could determine that the appropriate data release for
an approved research project is a subset of encounter data records
requested to conduct the proposed inquiry (instead of all encounter
data in CMS' systems for all years and provider types) or is a subset
of the abbreviated data requested.
Third, we proposed that CMS may release data under this authority
to other HHS agencies, other Federal executive branch agencies, States,
and external entities, only for purposes identified in paragraph (f)(1)
(discussed above) and subject to a number of

[[Page 50328]]

additional limitations: (i) Applicable Federal laws; (ii) CMS data
sharing procedures; (iii) protection of beneficiary identifier elements
and beneficiary confidentiality, including: (A) a prohibition against
public disclosure of beneficiary identifying information; (B) release
of beneficiary identifying information to other HHS agencies, other
Federal executive branch agencies, Congressional support agencies, and
States only when such information is needed to accomplish the
purpose(s) of the disclosure; and (C) release of beneficiary
identifying information to external entities only to the extent needed
to link datasets; and (iv) the aggregation of payment data to protect
commercially sensitive data.
These limitations were included at proposed paragraphs (f)(2)(i)
through (f)(2)(iv), respectively, of Sec. 422.310. We solicited public
comment on other conditions or limitations on the release of this data
that will help maintain a balance between protecting confidential and
proprietary information with the need to effectively administer Federal
health care programs and to encourage research into better ways to
provide health care. We also solicited public comments on the extent to
which a commercial purpose underlying a request for risk adjustment
data should be a factor in evaluating whether the request is for one of
the purposes that permit a disclosure under this regulation or if one
of the purposes in paragraph (f)(1) of Sec. 422.310, for which CMS
would disclose data under this section, should address commercial uses
of the data.
Under the provisions at proposed Sec. 422.310(f)(2)(iv), we would
aggregate payment data to protect commercially sensitive information.
We stated our belief that release of payment data at the level of the
encounter record might reveal proprietary negotiated payment rates
between MA plans and providers. Given the commercially sensitive nature
of this information, we did not propose to release payment data at the
level of the encounter record without taking steps to protect the
commercially sensitive information. In the interest of providing as
much transparency as possible, while at the same time protecting
proprietary information related to the payments made by MA
organizations to health care providers, we proposed to authorize
release of aggregate payment information. For example, we could
aggregate the payment data by service category, by plan, by contract,
or across contracts. We sought public comments on these or other
approaches to aggregating payment data for release and whether the
specified options are sufficiently aggregated to protect commercially
sensitive information. In addition, we sought public comment on our
conclusion that releasing payment rates at the level of the encounter
data record would reveal proprietary negotiated payment rates.
Specifically, we requested public comment on what strategies might be
used under which payment data could be released while protecting
commercially sensitive information.
Comment: A number of commenters argued that no risk adjustment data
should be released to protect the proprietary nature of encounter data,
including data on payments, diagnoses, National Provider Identifiers
(NPIs), among other data fields. A few commenters used ``payment data''
when referring to terms such as ``service categories'' and
``diagnoses.''
Response: In reviewing the comments, we observed that several
commenters distinguished payment data from other elements of encounter
data, while other commenters did not make this distinction and instead
used the term ``risk adjustment data'' or ``encounter data'' when
arguing that all data should be aggregated. Therefore, our response
here is intended make clearer the distinction between payment data and
other data elements.
In the proposed rule, we stated at Sec. 422.310(f)(2)(iii) that
beneficiary identifier elements would not be disclosed to protect
beneficiary confidentiality, and we stated at Sec. 422.310(f)(2)(iv)
that payment data would be aggregated as necessary to protect
commercially sensitive data. Our proposed rule thus implied that data
outside of these two protected categories would be released without
redaction or aggregation. In light of some comments we received, we are
concerned that the regulation text should be more detailed in
describing the risk adjustment data that does not fall into the two
protected categories at Sec. 422.310 (f)(2)(iii) and (f)(2)(iv).
Therefore, we are finalizing this rule with two changes to the
regulation text. First, to clarify that the term ``payment data'' means
the dollar amounts reported on an associated encounter data record, we
are finalizing Sec. 422.310(f)(2)(iv) to use the more specific phrase
``dollar amounts reported for the associated encounter'' instead of
``payment data.'' Therefore, in this final rule, we have revised Sec.
422.310(f)(2)(iv) to specify risk adjustment data subject to the
aggregation of dollar amounts reported for the associated encounter to
protect commercially sensitive data. (We note that dollar amounts are
only reported in encounter data records and not in the other type of
risk adjustment data referred to as abbreviated (RAPS) data.)
This rule does not address the release of data that relates to how
much CMS pays MA organizations. In the final rule, CMS-4144-F,
published in the Federal Register on April 15, 2011 (76 FR 21432), we
adopted regulations on that topic.
Second, we are clarifying that risk adjustment data elements that
do not fall into either of the two protected categories (beneficiary
identifiers and dollar amounts) are subject to release without
redaction or aggregation, respectively. Specifically, we are adding
paragraph (f)(2)(v) to clarify that risk adjustment data other than
data described in paragraphs (f)(2)(iii) and (f)(2)(iv) of the section
will be released without the redaction or aggregation described in
paragraphs (f)(2)(iii) and (f)(2)(iv), respectively. (We note that we
use the term ``redaction'' to include deletion, encryption, and
obscuring or changing the form of something for legal or security
purposes.) We discuss in more detail below our analysis of this new
language.
Comment: A number of commenters responded to the request for public
comments on the release of payment data and possible ways they could be
aggregated in order to protect commercially sensitive information. Many
commenters thanked CMS for the opportunity to comment on this issue and
expressed gratitude for CMS' concern to protect proprietary information
on prices negotiated between MA organizations and health care
providers.
Response: We appreciate the commenters' support.
Comment: A number of commenters addressed the aggregation of risk
adjustment payment data for release under this rule. Several commenters
asked that CMS only release payment data that have been aggregated to
the national or regional level. Some commenters were concerned that the
release of such data, even in an aggregated form, has the potential to
provide detailed insight about aspects of MA plan experience under the
MA program (for example, utilization and cost experience) that are
fundamental to bidding and benefit design decisions and, as a result,
release of these data would undermine the integrity of the bidding
process and the competitive structure of the MA marketplace, both in
terms of plan competition for enrollees and competitive negotiations
with providers regarding payments rates. One commenter stated that
public transparency of negotiated rates could

[[Page 50329]]

actually inflate prices by discouraging private negotiations that can
result in lower prices for some buyers. One commenter who requested
regional aggregation expressed concern that if CMS discloses payment
data at a lower level of aggregation, it may be easy for competitors to
identify sensitive business information on smaller plans and on plans
serving targeted populations or providing specific services, such as
SNP plans, which would undermine their market position. Another
commenter requested that CMS not release payment data at all (at the
encounter level or aggregated). Several other commenters asked that
aggregated payment data only be released to government agencies and not
to external entities. One commenter made the general request that CMS
aggregate the data in a manner and at a level that protect the
confidentiality of information and that take into account that an
organization in some instances may be the principal MA plan in a
particular geographic region. Some commenters argued that using
encounter data fields such as contract, plan, and provider identifiers
as categories by which to aggregate payment data could still lead to
exposure of sensitive business strategies (including details about
exclusive contracts, pricing, incentive programs, and other information
that would disadvantage identifiable plans).
A number of commenters provided suggestions for approaches to
aggregation of payment data. One commenter suggested releasing national
per member per month averages, which would protect negotiated rates
while still allowing comparison with other areas of Medicare spending.
Another commenter suggested aggregating risk adjustment payment data at
a county level in areas where there are three or more MA plans, but in
areas with two or less MA plans aggregation should be done across
counties. In addition, this commenter suggested that CMS identify when
area-specific aggregation approaches are needed, such as where a single
MA plan dominates a market and could be identifiable even where there
are multiple plans within one or across several counties. Several
commenters suggested releasing only aggregated data at either service
level categories in the MA bid or at the level of HCCs in the Part C
risk adjustment model. Finally, one commenter suggested that CMS make
available average pricing per relative value unit (RVU) for given
geographies or patient demographic categories, which could provide
helpful information regarding payment levels without exposing
commercially sensitive negotiated rates.
Response: We appreciate all the responses to our request for
comment on ways to aggregate risk adjustment payment data, and we will
take these ideas and concerns into consideration when determining the
appropriate level of aggregation of the dollar amounts associated with
each encounter. We understand the commenters' concerns about the
proprietary nature of the payment data and believe that this rule, as
finalized, provides the flexibility to protect commercially sensitive
data as necessary. It is important to note that, in some instances, the
payment data may not require aggregation to protect commercial
sensitivity; for example, a request could be made for data that are
over 15 years old that is not relevant to current payment amounts. In
this case, we would need to assess the unique circumstance of the
request and determine if the data were or were not commercially
sensitive, and we may decide after consideration to release the data at
the encounter level because the need to protect commercially sensitive
data is not implicated.
We note that we do not agree that only payment data aggregated at
the national level should ever be disclosed for any approved research
project because such a narrow approach would eliminate too many
research questions appropriate to the permitted uses of the data under
Sec. 422.310(f)(1) and would not account for situations where less
than a national level of aggregation is sufficient to protect the
commercial interests of the applicable MA organization(s). In addition,
we are not convinced that the release of aggregated payment data would
have the negative impact on competition and the integrity of the MA
bidding process that is described by a number of commenters. CMS
expects to aggregate the dollar amounts on encounter data records as
necessary to prevent researchers from determining payment amounts to
individual providers, and in this way we would protect competition. As
we noted in the April 15, 2011 final rule, CMS-4144-F (76 FR 21516),
the MA program is not competitive in the way that term is normally
understood. Although MA organizations do compete for members, primarily
through the plan benefits offered and the cost (member cost sharing and
premium) of those benefits, they do not directly compete for the
payments that CMS makes. Rather, we approve all sustainable bids that
are otherwise qualified without preference for the lowest bidder. The
fact that MA-eligible Medicare beneficiaries can, generally, select
from a number of plans offered in their county of residence is evidence
that competition is robust.
Comment: Several commenters were concerned with the release and use
of the payment data included in risk adjustment data, especially to
external entities, even if the data are aggregated for release. These
commenters argued that the MA encounter data are incomplete due to the
nature of MA organizations' financial arrangements with providers and
it is inappropriate to use this data to draw conclusions that may
inform policy or program management. Specifically, these commenters
noted that encounter data cannot provide a complete picture of MA
organizations' costs because many MA organizations have payment
arrangements with providers that are not fee-for-service based and are
instead based on capitation arrangements (for which $0 is reported on
an encounter record), bundled pricing, incentive payments, and multi-
year contracting. One commenter noted that, for some MA plans, most
outpatient services are capitated, except for some referrals and
emergency services, and nonbenefit costs are not reflected in encounter
data, rendering financial analysis and comparisons for these plans
inappropriate and impractical. Another commenter also recommended that
information about the limitations of the data should accompany any
release of risk adjustment data, to reduce misinterpretations of the
data by the end users and to prevent policy development based on
inaccurate analyses of risk adjustment data.
Response: We understand the commenters' concerns that risk
adjustment data may not provide a complete picture of the costs
associated with care of MA plan enrollees due to the alternative
payment arrangements. However, we believe that broader release of risk
adjustment data to external entities can increase the positive
contributions researchers make to the evaluation and function of the MA
program and improve the efficiency of the program and the clinical care
of its beneficiaries, which is in the interest of public health.
Specifically, it is in the interest of the public health to share this
information with entities outside of CMS, as the work of these entities
will assist CMS in evaluating the MA program and assessing related
policies to improve the clinical care of beneficiaries. In addition,
broader release of the data also has the potential to assist in
addressing public health issues of the population in general beyond
just Medicare beneficiaries. Regarding the suggestion to provide

[[Page 50330]]

approved requestors with information on the limitations of encounter
data, we believe this is a good suggestion and will consider what
disclaimers are appropriate to accomplish this.
Comment: A number of commenters also expressed concern about the
proprietary nature of other data elements in the encounter record in
addition to payment data, stating that releasing plan-specific and
provider-specific data such as diagnoses, service categories, Current
Procedural Terminology codes (CPTs), and NPIs has the potential to
provide detailed insight about aspects of MA plan experience under the
MA program that are fundamental to bidding and benefit design decisions
and could undermine the competitive structure of the health care market
in many areas. In contrast, one commenter agreed that proprietary
payment data should be aggregated to protect proprietary information on
negotiated prices, but further emphasized that all other encounter
claims data should be widely available to commercial entities--
including providers, medical societies, ERISA plans and insurers--for
the purposes of improving the value of health care to the consumer
(subject to privacy protections under HIPAA and other statutes).
Response: In the proposed rule, we only raised the issue of
commercial sensitivity with regard to payment data. As noted in an
earlier response, we are clarifying that the term ``payment data''
means the dollar amounts reported on an associated encounter data
record, and that risk adjustment data elements that do not fall into
either of the two protected categories of beneficiary identifiers and
dollar amounts are subject to release without redaction or aggregation,
respectively. We are not persuaded by the argument that data elements
aside from beneficiary identifiers and dollar amounts require
protection because they are relevant to competition that MA
organizations face. We are mirroring the effort within CMS to increase
transparency through broadened release of Parts A and B data. We
routinely make Medicare FFS claim data available to interested parties
for research, and these data include information on procedure codes and
diagnosis codes. Furthermore, on April 9, 2014, CMS released detailed
service use data on nearly 1 million physicians and health care
providers. Thus, as clarified in Sec. 422.310(f)(2)(v), CMS will
release risk adjustment data--other than beneficiary identifier data
described in Sec. 422.310(f)(2)(iii) and dollar amounts reported for
associated encounter described in Sec. 422.310(f)(2)(iv)--without the
redaction or aggregation described in paragraphs (f)(2)(iii) and
(f)(2)(iv), respectively.
Comment: One commenter was concerned that encounter data from
Medicare-Medicaid Plan (MMP) demonstrations would be used for analyses,
such as OIG studies and validation of bids and medical loss ratios, and
believed this would be a mistake because these are new plans and there
remain many operational questions about submission of this encounter
data, including coordinating with States and processing and submitting
claims in a manner seamless to both the member and provider.
Response: Our policy on the use and release of risk adjustment data
in this final rule will apply the same way to the Medicare risk
adjustment data of MMP demonstrations as it does to the risk adjustment
data of MA organizations. We appreciate the comment on the important
distinctions in the encounter data collection process for MMP data
compared to MA data, and we will consider the unique aspects of MMP
data in their ultimate application.
Comment: Several commenters asked CMS to provide a definition of
commercially sensitive.
Response: There is extensive case law under the Trade Secrets Act
(18 U.S.C. 1905) and FOIA Exemption 4 (5 U.S.C. 552(b)(4)) that
addresses the concept of commercially sensitive, and we do not believe
this is an appropriate venue for summarizing the case law. We also
discuss the relationship of this regulation to the Trade Secrets Act
and FOIA below.
We add that two commenters appeared to blur the concepts of
commercially sensitive and commercial purpose; therefore, we are
clarifying here that these are unrelated concepts for the purpose of
this rulemaking. Issues around releasing data for a commercial purpose
pertain to CMS' data sharing procedures and are discussed in a separate
comment and response below.
Comment: Several commenters asserted that even risk adjustment data
aggregated up to the level of contract or parent organization (for
example, service category and diagnosis data) could be considered to
meet the elements required for application of the exemption under FOIA
Exemption 4 (5 U.S.C. 552(b)(4)). The commenters stated that risk
adjustment data submitted by an MA organization are protected by 45 CFR
5.65(b)(1) because: (1) It is supplied by someone outside the
government having a financial interest in the information, namely the
MA organization providing the data; (2) it is ``confidential commercial
or financial information'' and proprietary and confidential; and (3)
disclosure of each MA organization's service category and/or diagnosis
data could result in competitive harm for the MA organization.
Response: In response to comments arguing that the Trade Secrets
Act (18 U.S.C. 1905) or FOIA exemptions prohibit release of this
information on the basis that the information is the confidential
commercial information of the MA organization, we do not believe that
the release of the risk adjustment data under our final rule will
violate either the Trade Secrets Act or FOIA. With respect to the risk
adjustment data described in paragraph Sec. 422.310(f)(2)(iv), the
regulation explicitly provides for aggregation at the level necessary
to protect commercially sensitive data. Under this regulation, when CMS
aggregates, as necessary, the dollar amounts associated with the risk
adjustment data--whether at a regional, contract or other level--any
detailed (encounter-level) data protected by the Trade Secret Act or
FOIA Exemption 4 will be withheld from disclosure. With respect to the
risk adjustment data described at Sec. 422.310(f)(2)(v), we are not
persuaded that data elements aside from beneficiary identifiers and
dollar amounts require protection and, therefore, are adopting a
regulation that directs disclosure of such information (assuming all
other conditions in this rule are met to obtain such a release) without
redaction or aggregation. Section 1106(a) of the Act (42 U.S.C.
1306(a)) provides authority to enact regulations that would enable the
agency to release information filed with this agency. (See Parkridge
Hospital, Inc. v. Califano, 625 F.2d 719, 724-25 (6th Cir. 1980).) We
have engaged in notice-and-comment rulemaking to promulgate regulations
to enable the disclosure of the data described at Sec.
422.310(f)(2)(v). The Trade Secrets Act permits government officials to
release otherwise confidential information when authorized by law. A
substantive regulation issued following notice-and-comment rulemaking,
such as this one, provides the authorization of law required by the
Trade Secrets Act. Because the Trade Secrets Act would allow
disclosure, Exemption 4 (5 U.S.C. 552(b)(4)), which is as coextensive
with the Trade Secrets Act, would also not preclude disclosure with
respect to the information that would be released under this final
rule. We recognize that this conclusion would not apply to the dollar
amounts data described in paragraph Sec. 422.310(f)(2)(iv).
Comment: Several commenters stated that releasing payment data may
trigger

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antitrust concerns within both the health plan and provider
communities, and cited the August 1996 ``Statements of Antitrust
Enforcement Policy'' (https://www.ftc.gov/sites/default/files/documents/reports/revised-federal-trade-commission-justice-department-policy-statements-health-care-antritrust/hlth3s.pdf), where the Federal Trade
Commission and the Department of Justice laid out several conditions
for an antitrust safety zone (pages 44 and 45) related to the
collective release of negotiated provider payment rates, noting that
there would be instances where negotiated rates possibly could be
discerned, such as areas with a dominant private payer.
Response: We are not clear what the ``collective release of
negotiated provider payment rates'' has to do with this rulemaking. We
understand the term ``collective'' in this context to mean more than
one actor releasing its own specific rates. When CMS approves a release
of aggregated payment data under this rule, that release is performed
by one actor and not a collective of some sort. Further, our proposed
policy of aggregating payment data as necessary will protect the
proprietary nature of the payment data. In cases where there is a
dominant private payer in a certain geographic area, we will take this
into account when determining the appropriate level of aggregation. We
understand the Federal Trade Commission and the Department of Justice
guidance to address when health care providers act in concert to share
or release their payment terms and what circumstances those enforcement
agencies believe would ameliorate any collusive intent in such actions.
However, this rulemaking pertains to a single actor (CMS), not to a
collective action; specifically, CMS may release risk adjustment data
for approved research projects, and these are data that were submitted
to CMS by MA organizations on the basis of requirements in statute and
regulation regarding risk adjustment data collection in the MA program.
The underlying negotiation of the payment terms, such as whether the
health care providers collectively negotiated them and the respective
negotiating position of the MA organizations and the parties, are not
part of the information submitted to CMS or disclosed by CMS under
Sec. 422.310.
Comment: A few commenters stated that payment data should not be
collected by CMS as part of encounter data and should not be used by
CMS or released outside of CMS because such data are not relevant to
risk adjustment.
Response: We believe that payment data are useful for all of the
purposes set forth in this regulation, including, but not limited to,
the purpose of risk-adjusting payments to MA organizations. Therefore,
we are finalizing in this rule the release of aggregated payment data
as necessary to protect commercially sensitive data, subject to all the
conditions established in this rule.
Comment: A number of commenters raised issues about the timing for
release of risk adjustment data under the rule. Some commenters
supported release of risk adjustment data to improve transparency; one
commenter stated that there is an urgent need for more reliable
consumer comparison shopping tools due to extreme provider price
variations in local healthcare markets, and Medicare data could be
valuable for this purpose. A few commenters requested that CMS delay
release of encounter data to any governmental agency outside of CMS
and/or delay release to external entities.
A number of other commenters presented requests for two different
types of delay in release of encounter data: (1) A routine delay for
all data releases; and (2) a delay applicable only to the first few
years of encounter data collected by CMS. First, commenters requested
that CMS implement a routine lag in release of encounter data. Some
commenters argued that, before release of the data for any given year,
CMS should ensure that the data are complete and accurate, for example
by validating and identifying any limitations in the data. Other
commenters suggested timeframes of between 4 and 6 years for such
routine lags, arguing that CMS should allow an established number of
years pass before release because utilization, pricing, and similar
data elements remain sensitive for a number of years (and could be used
for trending competitor's patterns), and many MA organizations have
multi-year contracts with their providers (5 or more years), making
data even a few years old still commercially sensitive in a
marketplace.
Second, a few commenters requested that CMS never release encounter
data that was submitted in the initial years of required submission (in
particular, that data for 2012 dates of service--the first year of
submission--never be released). Alternatively, other commenters
suggested that CMS lag release of data from the initial years of
submission because: (1) Implementation of encounter data collection via
CMS' encounter Data System (EDS) has required frequent and ongoing
systems development and modifications on the part of the agency and MA
organizations since the initiative began in January 2012, which has
resulted in challenges in submission and acceptance of encounter data;
and (2) the ICD-10 code set transition likely will result in some
instances in which encounter data are incomplete or inaccurate for the
2015 data year, as providers adjust to the coding differences.
Response: Regarding commenters' requests that CMS implement both
routine multi-year lags in release of encounter data and targeted
delays in the release of encounter data from the initial years of
submission, we believe that such delays in release to any agencies and
entities described in this rule would defeat the goals of improving
transparency in the Medicare program and allowing researchers to use
data in a timely manner to improve the administration of and advance
policy research on the Medicare program. Also, we refer readers to our
response elsewhere in this preamble regarding the impact of such
releases on MA bidding.
However, CMS recognizes that there are circumstances unique to the
process for collecting risk adjustment data that should be addressed in
the timing of releases of such data. CMS allows 13 months after the end
of a risk adjustment data collection year for MA organizations to
update the risk adjustment data submitted under Sec. 422.310; this
period provides MA organizations an opportunity to identify and correct
errors in data they have submitted for that data collection year, and
ensures that the risk adjustment data is complete and accurate. We do
not plan to regularly release risk adjustment data for a data
collection year prior to the completion of this period because of the
possibility that the data may contain errors or be incomplete for the
applicable year. Therefore, to clarify our processes for the purposes
of this rule, we have added paragraph (f)(3) to Sec. 422.310, which
states that risk adjustment data will not be available for release
under paragraph (f) unless:
The risk adjustment reconciliation for the applicable
payment year has been completed;
CMS determines that the data release is necessary under
paragraph (f)(1)(vi) for emergency preparedness purposes before
reconciliation; or
CMS determines that extraordinary circumstances exist to
release the data before reconciliation.
An example of an extraordinary circumstance would be a request by
the Department of Justice for data for a qui tam case under the False
Claims Act.

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We believe these restrictions on the timing of data releases will
address some of the commenters' concerns.
Comment: A few commenters suggested that CMS not release encounter
data until CMS uses it for risk-adjusted payment purposes in place of
RAPS data. One commenter stated that no data should be released until
MA organizations are provided with the MAO-004 encounter data reports
because these reports will allow the MA organizations to validate that
encounter data are complete for risk adjustment purposes.
Response: First, we do not agree with the commenters that CMS'
transition from the use of RAPS data to encounter data for risk-
adjusted payment should be a prerequisite for releasing encounter data
for the purposes under this final rule. The data are valuable for other
purposes besides calibration of the risk adjustment model, as listed in
paragraph (f)(1) of Sec. 422.310, and the release of the data is
important for transparency. Second, the MAO-004 report, also known as a
filtering report, will contain detailed information on which diagnoses
are eligible for risk adjustment purposes and will be part of the
process that CMS will undertake for risk score calculation. The intent
of this report is to assist MA organizations and other encounter data
submitters to understand risk score calculation; it is not intended to
support validation by MA organizations of the encounters that they have
submitted to CMS. Therefore, we do not believe that these filtering
reports should be a prerequisite to releasing encounter data associated
with any payment year.
Comment: A number of commenters responded to our request for public
comment on releasing risk adjustment data for commercial purposes. Many
commenters asked CMS not to release data to external entities for
commercial purposes. Commenters also noted that CMS does not currently
release Part A, Part B, or Part D data for commercial purposes, and
argued that CMS should have a consistent policy for release of data for
commercial purposes across all Medicare programs, including the Part C
Medicare Advantage program; these commenters cited CMS' discussion
about such a consistent policy in a final rule, CMS-4159-F, published
on May 23, 2014 (79 FR 29844).
In contrast, one commenter supported the use of risk adjustment
data by commercial entities to conduct research when the research is
focused on legislative, regulatory, or policy development aimed at
improving the Medicare program, including projects focused on patterns
of care of MA enrollees. This commenter suggested that if CMS moves to
define commercial purpose, it should do so narrowly so that, for
example, firms requesting data releases under the rule for research on
regulatory or policy issues for their clients would not have this type
of work construed as commercial. Another commenter stated that
encounter data should be widely available to commercial entities,
including providers, medical societies, ERISA plans, and insurers, for
purposes of improving the value of health care to the consumer. This
commenter encouraged CMS to put providers and insurers on an equal
footing with each other, with respect to sharing of public data on
safety, quality, volume, and intensity of care. Finally, a number of
commenters requested that CMS define the term ``commercial purposes.''
Response: We appreciate all of the responses to our request for
public comments on releasing risk adjustment data for commercial
purposes. We recognize that some commenters would like risk adjustment
data to be available for commercial purposes, while others are
concerned about external entities having risk adjustment data releases
approved for projects that have commercial purposes and/or for
researchers employed by commercial entities. We consider the issue of
whether or not a request for data has a commercial purpose to be an
issue that would be addressed under CMS' data sharing policies, which
are referenced in Sec. 422.310(f)(2)(ii) of this rule. Regarding
commercial purpose, we refer commenters to page 30674 of the preamble
of the final rule, CMS-4119-F, published on May 28, 2008 (73 FR 30664),
where, for example, there is discussion of research whose primary
purpose is to contribute to general knowledge in the public domain.
We agree with commenters that it is appropriate to have consistent
policies for the release of data across the original Medicare (Parts A
and B) program, the Part D prescription drug program, and the Part C
Medicare Advantage program. Although we are not changing CMS' existing
policy against releasing data for commercial purposes at this time, we
note that, in the event the policy regarding the release of Parts A, B,
and D data for commercial purposes were to change, we also would revise
our Part C risk adjustment data sharing policies to be consistent with
that change. Therefore, if a request for the data under the current
policy is for one of the purposes outlined in paragraph (f)(1)(i)
through (ix) and also for a commercial purpose, we would consider the
commercial purpose as a barrier to the release in the same way here as
in the other Medicare programs.
Comment: A few commenters expressed concern about how CMS will
evaluate requests for risk adjustment data release. One commenter asked
CMS to keep in mind that broad disclosures of data could lead to
creation of non-Federal databases, which could negatively affect the
privacy and security of beneficiary-specific data. Another commenter
cautioned that, in determining what is a minimum dataset necessary for
a particular data request, CMS must not approve release of a subset of
data or variables that omits critical data, resulting in an analysis
with false assumptions about MA encounters. In addition, other
commenters were particularly concerned about requests by external
entities. One commenter stated that, in evaluating requests from
commercial entities, CMS should consider relationships between the
corporate and research arms of the commercial entity, and CMS should
not assume that data released for research purposes will not be made
available to related commercial entities unless specific prohibitions
are put in place, or that published research findings will not be used
for commercial purposes. Another commenter also expressed concern that
external entities may use data released to them for a CMS-approved
research project for purposes that go beyond the initial intent of the
request.
Response: We will release only the minimum data necessary for a
particular study design that CMS has determined meets a use (analytical
purpose) finalized in this final rule and if the research project also
complies with all other conditions established in this final rule. We
believe that CMS' longstanding data sharing procedures (a condition for
data release referenced at Sec. 422.310(f)(2)(ii)) will allow CMS to
determine the appropriateness of a requested data set and will limit
inappropriate use of encounter data. CMS considers all data requests to
ensure that the use of the data will not exploit or negatively impact
Medicare beneficiaries.
In order for a researcher to gain access to CMS data, the
researcher must complete an application process, including submission
of a research protocol. The researcher must receive approval of the
protocol from CMS. In addition, all requestors are required to sign a
Data Use Agreement with the agency that limits the use of the data to
only the approved purposes. The Data Use Agreements that CMS uses have
and will continue to have enforcement mechanisms. For example, one of
CMS'

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Data Use Agreement forms states: ``The User acknowledges that penalties
under Sec. 1106(a) of the Social Security Act [42 U.S.C. 1306(a)],
including possible imprisonment, may apply with respect to any
disclosure of information in the files(s) that is inconsistent with the
terms of the Agreement. The User further acknowledges that criminal
penalties under the Privacy Act [5 U.S.C. 552a(i)(3)] apply if it is
determined that the User, or any individual employed or affiliated
therewith, knowingly and willfully obtained the file(s) under false
pretenses. The User also acknowledges that criminal penalties may be
imposed under 18 U.S.C. 641.''
We believe these restrictions are necessary in order to ensure that
data are only requested in compliance with the requirements of the
regulations and CMS data sharing procedures, and that data shared by
CMS are appropriately protected and are not reused or redisclosed
without the necessary approval. Under our data sharing policies, we
generally require the requester not to disclose the data to third
parties without specific written authorization from us. CMS expects
that researchers who receive a CMS-approved release of risk adjustment
data will abide by the law, policies, and procedures surrounding use of
that data, particularly where the regulation conditions release of the
data on CMS data procedures being followed.
Comment: A few commenters requested that, when CMS is making a
determination about whether to release risk adjustment data to a
requestor, CMS reach out to MA organizations to consult on whether to
approve the request. One commenter stated that plans would appreciate
the opportunity to advise the agency of any specific concerns they have
with respect to release of data for certain purposes and to certain
entities, while another commenter asked CMS to allow plans to deny
certain requests for data. Finally, a few commenters stated that
whenever a stakeholder's data is part of an approved release, that
stakeholder should have access to the entire data release for purposes
of verification, equity, and accuracy.
Response: Under this rulemaking, we will use CMS existing data
sharing procedures (in accordance with Sec. 422.310(f)(2)(ii)) for
responding to requests for risk adjustment data. It is not part of CMS'
data sharing procedures to contact a submitter of data (for example, a
FFS provider, supplier, a Part D sponsor, or an MA organization)
whenever a researcher requests or receives approval for access to a
data set for a study that includes some of that particular submitter's
data (unless the request is made under FOIA). Nor, is it part of the
CMS' data sharing procedures to allow an MA organization or another
entity to have approval rights in regards to the release of data. In
addition, this rule itself sets the standards under which data will be
released. Therefore, CMS will not be notifying MA organizations or
their contracted providers when data requests that may include their
risk adjustment data are received or approved.
Finally, CMS could not simply release a risk adjustment data set to
a stakeholder that had not received approval through CMS data sharing
procedures simply on the grounds that the stakeholder's risk adjustment
data submissions to CMS comprise one part of a data file released to a
researcher for an approved study.
One of the best ways MA organizations can address their concerns
about the accuracy of risk adjustment data available for release is to
continue working with CMS to improve the quality of risk adjustment
data they submit to CMS.
Comment: One commenter opposed the release of beneficiary
identifying information to external entities, including other HHS
agencies, other Federal Executive Branch agencies, Congressional
support agencies, and States. Another commenter encouraged CMS to
establish and impose appropriate penalties for any breach of privacy
related to beneficiary identifiable information by external entities.
Response: We understand the need to protect beneficiary identifying
information. As finalized in Sec. 422.310(f)(2)(iii) of the
regulation, CMS release of risk adjustment data is subject to the
protection of beneficiary identifier elements and beneficiary
confidentiality, including--
A prohibition against public disclosure of beneficiary
identifying information;
Release of beneficiary identifying information to other
HHS agencies, other Federal executive branch agencies, and States only
when such information is needed; and
Release of beneficiary identifying information to external
entities only to the extent needed to link datasets.
Any release of beneficiary-identifiable data must follow the
policies in CMS' data sharing procedures. We intend to protect the
beneficiary data through, for example, encryption, or removal of the
confidential fields when risk adjustment data is released. As we
discussed above and in the final rule, CMS-4159-F, published on May 23,
2014 (79 FR 29844), all users accessing beneficiary identifiable data
are required to sign CMS' Data Use Agreement, which addresses privacy
and security for the data CMS discloses. The Data Use Agreement also
contains provisions regarding access to and storage of CMS data to
ensure that beneficiary identifiable information is stored in a secure
system and handled according to CMS' security policies. CMS has an
established process to evaluate requests for data to ensure that there
are appropriate safeguards in place to protect beneficiary privacy. We
believe this process contains the necessary checks to ensure that the
risks of the disclosure are minimal.
Comment: One commenter requested CMS to release risk adjustment
data by creating an MA encounter data Standard Analytic File (SAF) in
limited data set form (LDS) to extend research that can currently be
done by users of LDS SAFs across sites using fee-for-service Medicare
claims data. A few other commenters argued that these data should be
routinely available through public use files, not just through the
project-specific process set forth in this rule.
Response: We appreciate the suggestions and will take them into
consideration for future additional guidance. With regard to the issue
of Public Use Files, we believe that the nature of data--see the
discussion above--make it appropriate to include the protections
imposed by this rule, including the limits on the purpose of the
disclosure, release of only the minimum necessary data, the
incorporation of CMS data sharing policies and procedures, and
additional protections for certain data elements.
After consideration of the public comments we received, we are
finalizing, as proposed, the policies regarding CMS release of data in
Sec. 422.310(f)(2), with the exception of five changes to the
regulation text. First, we clarify that the paragraph (f)(1)(ix)
purpose permitted by other laws is for ``purposes authorized by other
applicable laws.'' Second, we have deleted the term ``congressional
support agencies'' from paragraph (f)(2)(B) in order to be consistent
with the introductory language at paragraph (f)(2) of this regulation.
Third, to clarify that data aggregation will be of the dollar amounts
reported on an associated encounter data record, we are finalizing
paragraph (f)(2)(iv) to state that subject to the aggregation of dollar
amounts reported for the associated encounter to protect commercially
sensitive data. Fourth, in order to explicitly address the

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risk adjustment data elements that do not fall into either of the two
protected categories (beneficiary identifiers and dollar amounts) and
to clarify that such data are subject to release without redaction or
aggregation, we are finalizing an additional paragraph (f)(2)(v) to
state that risk adjustment data other than data described in paragraphs
(f)(2)(iii) and (f)(2)(iv) of the section will be released without the
redaction or aggregation described in paragraphs (f)(2)(iii) and
(f)(2)(iv) of the section, respectively. Finally, we are adding
paragraph (f)(3) to Sec. 422.310 to clarify when risk adjustment data
will be available for release, to state that risk adjustment data will
not be available for release under paragraph (f) unless--
The risk adjustment reconciliation for the applicable
payment year has been completed;
CMS determines that the data release is necessary under
paragraph (f)(1)(vi) of the section for emergency preparedness purposes
before reconciliation; or
CMS determines that extraordinary circumstances exist to
release the data before reconciliation.
3. Technical Change
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we
proposed to amend Sec. 422.300, which identifies the basis and scope
of the regulations for payments to MA organizations, to add a reference
to section 1106 of the Social Security Act, which governs the release
of information gathered in the course of administering our programs
under the Act.
We did not receive any public comments on this technical change,
and we are finalizing without modification our proposed amendment to
Sec. 422.300, to add a reference to section 1106 of the Social
Security Act, which governs the release of information gathered in the
course of administering our programs under the Act.

XI. Changes to Enforcement Provisions for Organ Transplant Centers

A. Background

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

B. Basis for Proposed and Final Policies

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27977), we
proposed to strengthen, clarify, and provide additional transparency
for the survey, certification, and enforcement procedures under Sec.
488.61 for transplant centers that are requesting initial approval or
re-approval for participation in the Medicare program when the centers
have not met one or more of the CoPs but wish to have certain
mitigating factors taken into consideration.
1. Expansion of Mitigating Factors Based on CMS' Experience
The existing organ transplant enforcement regulation at Sec.
488.61 does not provide detailed information on the factors generally
needed for approval or re-approval of a request based on mitigating
factors that a transplant center may make in order to participate, or
continue to participate, in Medicare. However, since the adoption of
the organ transplant CoPs and corresponding enforcement regulations, we
have expanded our knowledge regarding: (a) The factors and processes
that promote improvement in transplant center outcomes; and (b) other
mitigating factors that merit explicit recognition under CMS
regulations.
Most of the requests that we have approved based on mitigating
factors have been for transplant centers that were out of compliance
with CMS outcomes requirements, but were then able to (a) effect
substantial program improvements and (b) based on meaningful post-
transplant survival data, demonstrate recent and much improved patient
and graft survival subsequent to those program reforms. These
performance improvements occurred after the program was cited for
substandard performance by CMS and was at risk of losing Medicare

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participation, usually while the program was operating during the
mitigating factors review process or under a binding Systems
Improvement Agreement (SIA) with CMS. Under an SIA, CMS agrees to
extend the effective date of a prospectively scheduled termination from
Medicare participation (that is, denial of re-approval) and holds in
temporary abeyance a final review of the transplant center's mitigating
factors request, if the transplant center agrees to engage in a
structured regimen of quality improvement to improve performance during
a specified period of time. At the end of the SIA period (typically 12
months), we review the transplant center's performance and make a final
decision as to whether: (a) The transplant center's patient and graft
survival is within the acceptable limits set forth in the regulations;
or (b) the transplant center qualifies for approval or re-approval
based on mitigating factors.
As of August 2013, CMS had rendered a final determination for 129
requests for approval to operate as a Medicare-approved transplant
center based on mitigating factors. Of those determinations, 48 of the
requests (37.8 percent) were approved based on information provided by
the transplant center on its mitigating factors alone (that is, without
entering into an SIA) because the transplant program had implemented
substantial program improvements during the extended CMS review period,
and CMS concluded that the most recent patient and graft survival data
(taking into consideration the lag time in data inherent in the SRTR
reports) demonstrated current compliance with outcome requirements.
Another 33 requests (25.6 percent) were eventually approved on the
basis of each transplant program's successful SIA completion and much
improved outcome data for the affected program. A total of 24 requests
(18.6 percent) involved transplant programs that were approved (and the
transplant centers were permitted to continue Medicare participation)
because CMS determined that the transplant centers met the outcome
requirements during the time period it took for CMS to review the
mitigating factors request, based on a new SRTR report that because
available during the 210-day mitigating factors review period. Requests
from another 2 programs (1.6 percent) were approved in which the
programs had not enter into an SIA but had made extensive use of
innovative practices involving key factors that were not included in
the SRTR risk-adjustment methodology. An additional 2 requests (1.6
percent) were approved because natural disasters temporarily impacted
the transplant centers. Finally, 20 requests (15.5 percent) were denied
approval based on mitigating factors because the programs failed to
meet the outcome or clinical experience requirements and were not able
to demonstrate improvements and recent outcomes or experience that
would warrant approval based on mitigating factors. These 20 programs
voluntarily withdrew their participation from the Medicare program.
Comment: Commenters supported CMS' efforts to add clarity and
increase transparency, and most commenters conveyed specific
suggestions for further clarity or revision.
Response: We appreciate the thoughtful nature of all comments we
received and the specificity of the suggestions that were made. We
address those specific suggestions below in the context of each
relevant section of our proposed language.
2. Coordination With Efforts of the Organ Procurement and
Transplantation Network (OPTN) and Health Resources and Services
Administration
When we adopted the outcome standards for transplant programs in
2007, we sought to harmonize CMS' outcome standards with standards of
the Organ Procurement and Transplantation Network (OPTN) so that
transplant centers would have a single, consistent set of outcome
expectations on which to focus. We also sought to organize CMS
activities in a manner that would reinforce and continue the OPTN as
the first line of external review and quality improvement for
transplant centers. The OPTN is the unified transplant network
established under the National Organ Transplant Act (NOTA) of 1984. The
NOTA called for the network to be operated by a private, nonprofit
organization under Federal contract. The OPTN is a public-private
partnership that links all of the professionals involved in the
donation and transplantation system. The primary goals of the OPTN are
to: (a) Increase the effectiveness and efficiency of organ-sharing and
equity in the national system of organ allocation; and (b) increase the
supply of donated organs available for transplantation. For more
details about the OPTN, we refer readers to the Web site at: https://optn.transplant.hrsa.gov/optn/profile.asp.
The OPTN and the Health Resources and Services Administration
(HRSA) have been considering adoption of an alternative methodology for
calculating expected transplant outcomes, known as the ``Bayesian''
methodology, and for setting a threshold that would ``flag'' a
transplant center for OPTN review of performance. At its June 2014
meeting, the OPTN determined to adopt the new methodology and begin
using the new methodology in CY 2015. HRSA and the SRTR will continue
to provide the information needed by CMS, and we will work together to
track how transplant programs are rated under the ``Bayesian''
methodology and the CMS outcomes standards. At the present time, CMS
has insufficient experience with the new ``Bayesian'' methodology, and
insufficient data, to determine an appropriate threshold for a Medicare
outcomes deficiency under a ``Bayesian'' methodology. Therefore, in the
FY 2015 IPPS/LTCH PPS proposed rule, we did not propose any changes in
our CoPs regarding this new methodology. However, we wish to continue
to coordinate with the OPTN's efforts. Therefore, we proposed that if a
program has been cited for an outcomes deficiency by CMS, but has not
been flagged for review by the OPTN, CMS would take these facts into
consideration if the transplant program has requested approval based on
mitigating factors. For a perspective on the ``Bayesian'' methodology,
we refer readers to the Web site at: https://www.srtr.org/faqs/16.aspx.
Comment: One commenter stated that an important lesson learned over
the past several years is the need to further coordinate and reconcile
differences between the requirements and processes used by CMS and the
OPTN in regulating the quality of services provided by transplant
centers throughout the country.
Response: We concur with the value of coordinating requirements and
processes to the extent permitted by the different roles played by the
OPTN and CMS. Our desire to coordinate with HRSA and OPTN gave rise to
many of the proposals discussed here. Further, staff from the United
Network for Organ Sharing (UNOS, that is under contract with HRSA) and
CMS developed a cross-walk of the OPTN and CMS requirements, updated
the cross-walk in July 2014, and published it online at: https://www.optn.transplant.hrsa.gov/content/policiesAndBylaws/evaluation_plan.asp. While CMS and OPTN have many mutually-reinforcing
requirements, the two organizations largely cover different aspects of
the transplant universe. The OPTN, for example, excels at the data
reporting and management that CMS does not address, but CMS reinforces
OPTN through a CMS requirement that transplant centers timely and
adequately report data in accordance

[[Page 50336]]

with OPTN requirements. Similarly, there are other areas not covered by
OPTN that CMS addresses (such as the CMS requirement that every
transplant program have an effectively functioning, internal quality
assessment and performance improvement (QAPI) system). CMS, HRSA, and
the OPTN observed both CMS' and OPTN's onsite surveys in the past year,
with the intent to identify areas to reduce the burden on transplant
programs, as well as improve the efficiency of the survey process.
Although the surveys are conducted very differently based on the
distinct roles of the two agencies, the OPTN has now combined the
living donor survey with its regular survey to eliminate the need for
an additional survey. HRSA and CMS also maintain monthly meetings and,
as the need arises, more frequent meetings of workgroups. Another
recent development was the CMS final rule (``Medicare and Medicaid
Programs; Regulatory Provisions to Promote Program Efficiency,
Transparency, and Burden Reduction; Part II; Final Rule'') published in
the Federal Register on May 12, 2014 (79 FR 27106) designed to reduce
regulatory burden and increase efficiency. Among other features, the
rule permits CMS to vary the frequency of onsite transplant center
surveys compared to the earlier and standard CMS 3-year cycle that
applied to all transplant programs. CMS maintains continuous review of
transplant outcomes, responds to complaints at any time, and is
notified by transplant centers when there is a major change in a
center. With these continuous activities, and the added flexibility of
the May 12, 2014 final rule, we expect to extend the average onsite
survey frequency to a range of approximately 3 to 5 years. We expect
some centers will be surveyed more frequently than the average and
other centers less frequently, depending on CMS' assessment of the need
for a survey of a particular program. We expect that this change will
help reduce the extent to which any particular transplant program will
have two different surveys (OPTN and CMS) that occur within a proximate
time of each other. We look forward to continuing to work with HRSA,
UNOS, OPTN, and the transplant community on these and other
coordination issues.

C. Provisions of the Proposed and Final Regulations

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27978), we
proposed to revise the regulations at Sec. 488.61 to include specific
additional provisions describing and expanding the mitigating factors
that CMS may consider when evaluating requests and explain the
conditions under which each factor would apply.
Comment: One commenter recommended that CMS modify Sec. 482.82 of
the regulations to state that a transplant center that does not meet
the data submission, clinical experience, or outcomes requirements
would be considered to be out of compliance at the Condition level only
if CMS determines that a mitigating factors request would not be
approved. In other words, a mitigating factors request would be
processed before citing a center for a deficiency at a Condition level.
Response: We are not adopting this recommendation for a number of
important reasons. First, the mitigating factors provision is intended
to enable CMS to recognize special situations so that we may calibrate
enforcement actions appropriately. The provision is not intended to
remove the possibility of enforcement or the likelihood of enforcement
if appropriate corrections are not made.
Second, we believe the mitigating factors and SIA processes have
been quite successful in promoting improved patient outcomes as a
direct result of the full hospital alignment in support of each
involved transplant center. Based on the past 7 years of experience
with programs that have had substandard outcomes, we believe that
strong whole-institution support has been generated directly in
response to the deficiency citation and accompanied by clear potential
for enforcement action against a program that has had substandard
performance.
We note that most transplant programs maintain excellent outcomes
continuously and are not cited for noncompliance with CMS outcome
expectations. Another group of transplant programs temporarily exceed
the outcomes thresholds based on a single SRTR report, but soon
manifest outcomes within the acceptable tolerance limits in the next
report. Such programs may be cited by CMS at a Standard level, rather
than the Condition level, because the results are evident in only a
single SRTR report. A Standard level citation requires corrective
action but does not require mitigating factors approval because a
Standard level citation by itself does not put the program on a
schedule for termination of Medicare participation. A smaller third
group of transplant programs experience long-term problems and may be
cited by CMS at the Condition level, but engage with the OPTN and soon
recover. These programs may apply for approval based on mitigating
factors, but are more likely than other applicants to be approved
without greater involvement with CMS. An even smaller group of programs
are cited by CMS at the Condition level and are eventually approved
based on mitigating factors, but only after an extended period of time
and a more involved regimen of quality improvement through an SIA. CMS'
policy has been to cite at the Condition level only if the tolerance
limits are exceeded in the most recent SRTR report and in at least one
other SRTR report within the past five SRTR reports. Although the
number and percentages vary depending on the particular SRTR reports
involved, we generally find that approximately 9 to 11 percent of the
programs do not meet the CMS outcome thresholds in any one particular
SRTR report. However, only approximately 3 to 4 percent of the programs
tend to fail to meet the outcomes requirement in the most recent SRTR
report and in at least one other report of the most recent 5 reports.
This number is further reduced during the 210-day period that we permit
for consideration of a mitigating factors request by CMS. The 210-day
period allows sufficient time for a sixth SRTR report to appear and
perhaps show evidence of outcomes that would remove the deficiency and
remove the need for mitigating factors approval.
As a result of the way we implemented the citation and mitigating
factors processes, those programs cited by CMS at the Condition level
tend to be programs that generally have more extensive issues for which
full hospital alignment and support are most needed, or programs that,
for a variety of reasons, have been immune to prior efforts to improve
outcomes. We believe we have structured CMS enforcement actions in a
manner that permits considerable time for a transplant program to take
action on its own, and allows many programs to engage successfully with
the OPTN for timely resolution. However, for the residual, smaller
number of programs that have not been so successful, our experience
indicates that it is questionable whether the hospital alignment and
other actions needed to achieve substantial and sustainable improvement
would have occurred without the clear prospect that Medicare
participation might soon end. The fact that many of the transplant
programs cited at the Condition level had already been engaged with the
OPTN in a peer review process without timely improvement in outcomes,
lends credence to the belief that the clear, and potentially imminent,
ending of

[[Page 50337]]

Medicare participation has been the stimulant that eventually brought
the various departments of the hospital together to finally achieve the
results that had eluded the many dedicated individuals who had
previously labored to achieve better outcomes.
Third, only two situations involved mitigating factors where
approval was based on natural disasters, two situations involved
extensive use of innovative practices, and a small number of situations
involved clinical experience. The remainder, constituting the vast
preponderance of mitigating factors requests we have received, involved
transplant programs whose patient or graft survival outcomes exceeded
the tolerance limits in the CMS regulation for programmatic reasons.
When such cases have been approved, the approval has been based on
recovery and improvement in outcomes during the extended time period
(210 days) that CMS permits for mitigating factors consideration or the
even longer time period that CMS permits under an SIA. We believe that
eventual approval of a mitigating factors request should not be
construed to imply that the substandard outcomes never occurred, or to
obscure the history or facts that led to the recovery efforts. We
regard such history as important matters of public record.
Transplant programs that may be approved based on mitigating
factors due to confirmed innovative practice may be an area for which
the commenter's suggestion has merit, and we will give further
consideration to this area for potential future action. Unlike
mitigating factors approval that is made pursuant to recovery from a
period of substandard outcomes or even natural disaster, approval of
mitigating factors due to innovative practice may indicate the absence
of a deficiency in the first place.
We will be pleased to continue a dialogue with the transplant
community regarding these issues and to consider other approaches to
ensure that a strenuous improvement effort, such as that which is
required in an SIA, is not misinterpreted.
1. Expansion of Mitigating Factors List, Content, and Timeframe
In the FY 2015 IPPS/LTCH PPS proposed rule, we noted that the
regulations at Sec. Sec. 488.61(a)(4) and (c)(4) provide three
specific mitigating factors for review by CMS when determining whether
a transplant center can be approved or re-approved, respectively, based
on mitigating factors. These mitigating factors are: (1) The extent to
which outcome measures are met or exceeded; (2) the availability of
Medicare-approved transplant centers in the area; and (3) extenuating
circumstances that may have a temporary effect on meeting the CoPs. In
the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to move the
listing of mitigating factors from paragraphs (a)(4)(i) through
(a)(4)(iii) and (c)(4)(i) through (c)(4)(iii) to new proposed
paragraphs (f), (g), and (h) under Sec. 488.61, and to include
additional factors under these three new proposed paragraphs that may
be reviewed in addition to the existing three factors. We proposed to
move existing paragraphs (a)(4)(iv) and (c)(4)(iv) to the proposed new
paragraph (g)(2). We also proposed to provide clarification of the
existing three mitigating factors and the conditions under which they
would apply. Finally, we proposed to revise the preexisting paragraphs
(a)(4) and (c)(4) of Sec. 488.61 to include cross-references to the
new proposed paragraphs (f), (g), and (h).
We note that an administrative rule we published as a final rule in
the Federal Register on May 12, 2014 (79 FR 27106) within days of
publication of the FY 2015 IPPS/LTCH PPS proposed rule renumbered the
elements of Sec. 488.61(c) and added Sec. 488.61(c)(3)(v) and made
other amendments to this section. Specifically, the May 12, 2014
administrative rule removed Sec. 488.61(a)(7), revised the
introductory text of paragraphs (c) and (c)(1), and revised paragraph
(c)(1)(ii). In addition, the final administrative rule removed
paragraph (c)(2) and redesignated paragraphs (c)(3), (c)(4), and (c)(5)
as paragraphs (c)(2), (c)(3), and (c)(4), respectively. Finally, the
final administrative rule revised the text of newly designated
paragraphs (c)(2), (c)(3)(i), and (c)(3)(ii), added a new paragraph
(c)(3)(v), and revised paragraph (e). As a result of these changes, in
this final rule, we are replacing the renumbered paragraphs of Sec.
488.61(c)(3)(i) through (c)(3)(iii) of the administrative final rule as
Sec. 488.61(f)(1)(i), (f)(1)(ii), and (f)(1)(iii), respectively. The
renumbered paragraph Sec. 488.61(c)(3)(iv) is moved to the new Sec.
488.61(g)(2). We also are incorporating the new paragraph that was
added in the final administrative rule (Sec. 488.61(c)(3)(v)) as the
new paragraph Sec. 488.61(f)(1)(iv).
We note that in all subsequent references involving Sec.
488.61(c), we use the regulatory citations as revised by the May 12,
2014 final rule (79 FR 217060) and described above. Under proposed new
paragraph Sec. 488.61(f)(1), we proposed to move and relist the three
mitigating factors currently under both paragraphs (a)(4)(i) through
(a)(4)(iii) and paragraphs (c)(3)(i) through (c)(3)(iii). We further
proposed to expand the mitigating factors that CMS may consider by
adding more description to those factors, as well as by adding new
factors that may be reviewed. We also proposed to specify the
procedures and timeframes for transplant centers to request
consideration for approval based on mitigating factors.
Specifically, in proposed new paragraph (f)(1), we proposed to
specify the mitigating factors, except for situations of immediate
jeopardy, as described below.
The extent to which outcome measures are not met or
exceeded (existing paragraphs (a)(4)(i) and (c)(3)(i); proposed
paragraph (f)(1)(i)).
Availability of Medicare-approved transplant centers in
the area (existing paragraphs (a)(4)(ii) and (c)(3)(ii); proposed
paragraph (f)(1)(ii)).
Extenuating circumstances (for example, natural disaster)
that may have a temporary effect on meeting the CoPs (existing
paragraphs (a)(4)(iii) and (c)(3)(iii); proposed paragraph
(f)(1)(iii)).
Program improvements that substantially address root
causes of graft failures or patient deaths and that have been
implemented and institutionalized on a sustainable basis (proposed new
paragraph (f)(1)(iv)).
Recent patient and graft survival data to determine if
there is sufficient clinical experience and survival for CMS to
conclude that the program is in compliance with CMS requirements,
except for the data lag inherent in the reports from the SRTR (proposed
new paragraph (f)(1)(v)).
Extensive use of innovative transplantation practices
relative to other transplant programs, such as a high rate of
transplantation of individuals who are highly sensitized or children
who have undergone the Fontan procedure, where CMS finds that the
innovative practices are supported by evidence-based, published
research or nationally recognized standards or Institutional Review
Board (IRB) approvals, and the SRTR risk-adjustment methodology does
not take the relevant key factors into consideration (proposed new
paragraph (f)(1)(vi)).
The program's performance, based on the OPTN method of
calculating patient and graft survival, is within the OPTN's thresholds
for acceptable performance and does not flag OPTN performance review
under the applicable OPTN policy (proposed new paragraph (f)(1)(vii)).

[[Page 50338]]

Under proposed new paragraph (f)(2), we proposed to include details
for the content of the request for consideration of mitigating factors,
based on examples that have proven to be most useful in considering
successful mitigating factors requests. Specifically, we proposed that
a request for consideration of mitigating factors include sufficient
information to permit an adequate review and understanding of the
transplant program, the factors that have contributed to outcomes,
program improvements or innovations that have been implemented or
planned, and, in the case of natural disasters, the recovery actions
planned. Examples of information to be submitted with each request
could include, but are not limited to, the following:
(i) The name and contact information for the transplant hospital
and the names and roles of key personnel of the transplant program;
(ii) The type of organ transplant program(s) for which approval is
requested;
(iii) The CoPs that the program failed to meet, and with respect to
which the transplant center is requesting CMS' review of mitigating
factors;
(iv) The rationale and relevant supporting evidence for CMS' review
must include, but not be limited to--
[cir] Root Cause Analysis of patient deaths and graft failures,
including factors the program has identified as likely causal or
contributing factors for patient deaths and graft failures;
[cir] Program improvements or innovations (where applicable) that
have been implemented and improvements that are planned;
[cir] Patient and donor/organ selection criteria and evaluation
protocols, including methods for pre-transplant patient evaluation by
cardiologists, hematologists, nephrologists, and psychiatrists or
psychologists, to the extent applicable;
[cir] Organizational chart with full-time equivalent levels, roles,
and structure for reporting to hospital leadership;
[cir] Waitlist management protocols and practices relevant to
outcomes;
[cir] Pre-operative management protocols and practices;
[cir] Immunosuppression/infection prophylaxis protocols;
[cir] Post-transplant monitoring and management protocols and
practices;
[cir] Quality Assessment and Performance Improvement (QAPI) Program
meeting minutes from the most recent four meetings and attendance
rosters from the most recent 12 months;
[cir] Quality dashboard and other performance indicators;
[cir] Recent outcomes data for both patient survival and graft
survival; and
[cir] Documentation of whether the program has engaged with the
OPTN to review program outcomes, the status of any such review, and any
steps taken to address program outcomes in accordance with the OPTN
review.
Under proposed new paragraph (f)(3), we proposed to specify a
timeline for the transplant program to submit a request for mitigating
factors and to make clear that, for requests related to clinical
experience or outcomes, the program has additional time within which to
submit supporting information. Specifically, we proposed that within 10
days after CMS has issued formal written notice of a Condition-level
deficiency to the program, CMS must receive notice of the program's
request to seek consideration of mitigating factors. CMS would require
that all information necessary for consideration be received within 30
days of CMS' initial notification for any deficiency, except a
deficiency based on insufficient clinical experience or outcomes; and
within 120 days of CMS' written notification for a deficiency based on
insufficient clinical experience or outcomes. Failure of a transplant
program to meet these timeframes may be the basis for denial of
requests for consideration based on mitigating factors.
Comment: One commenter stated that mitigating factors consideration
should not be available for either initial applications or for
deficiencies that involve process requirements (as opposed to clinical
experience or outcomes). Examples of process requirements include the
requirement to match donor and recipient blood types, ensure informed
consent, or engage in multi-disciplinary planning. The commenter
suggested that if the mitigating factors provision applied to process
CoPs, CMS should clarify the circumstances under which a program ought
to apply for mitigating factors rather than submit a plan of
correction. The commenter suggested that process CoPs be handled
through plans of correction rather than through mitigating factors.
Response: We agree that all process CoPs should be handled through
the plan of correction process and that only a deficiency involving
data submission, clinical experience, or outcomes should involve both
the required plan of correction and an optional mitigating factors
request. A transplant program cited for a process CoP deficiency (or
any deficiency) would not risk termination of its Medicare
participation without a prior opportunity to submit a plan of
correction and demonstrate that the deficiency has been removed in a
timely manner. Since the time the CMS transplant regulation became
effective in 2007, every instance in which a program was cited for a
process CoP has been successfully remedied by timely action on the part
of the transplant program. As a result, no transplant program has had
its Medicare participation terminated as a result of failure to comply
with a process CoP. We agree that the use of mitigating factors in the
case of process deficiencies is not only unnecessary, but is also
confusing to transplant centers and may interfere with the prompt
remediation of those process deficiencies. In the final regulation, at
Sec. 488.(61)(f)(1) and elsewhere, we therefore limit the mitigating
factors provision to deficiencies cited for noncompliance with the data
submission, clinical experience, or outcomes requirements specified at
Sec. 488.80 and Sec. 488.82.
We also agree with the commenter that, in the case of an initial
application for Medicare certification, every transplant program should
be in full compliance with all process CoPs without needing to rely on
mitigating factors consideration. However, we are retaining the ability
of an initial applicant to request mitigating factors consideration
with respect to the data submission, clinical experience, or outcomes
requirements. We retain such ability because there may be situations
where a transplant program has gone inactive beyond the time period
allowed by CMS and is seeking Medicare reinstatement, or has withdrawn
or lost Medicare participation due to substandard outcomes or lack of
sufficient clinical experience, and is seeking reinstatement. In such
situations, the latest available SRTR report may still show the program
to have substandard outcomes or insufficient clinical experience for
the 2.5 year retrospective period covered in the report, despite the
fact that subsequent program improvements may have enabled greater
clinical experience, or much better patient and graft survival with
more recent data that meets the criteria for CMS approval based on
mitigating factors. With the refinements discussed previously (wherein
the mitigating factors provision will not apply to process CoPs), we
believe that the retention of the mitigating factors provision for
initial applicants is warranted.
Comment: With regard to the expanded list of factors at Sec.
488.61(f)(1) that CMS may consider, one commenter

[[Page 50339]]

suggested that not every request should necessarily be required to
cover all of the factors listed. Instead, the factors covered should be
tailored to the particular circumstances in question.
Response: We agree with the commenter. The intent of Sec.
488.61(f)(1) was not to require every application to address every
possible factor, but to recognize CMS' obligation to consider all of
the listed factors, as applicable. We acknowledge the potential for
confusion on this matter, and therefore, at Sec. 488.61(f)(1) in this
final rule, we have clarified that CMS will consider such mitigating
factors as may be appropriate in light of the nature of the deficiency
and circumstances involved. We would not necessarily expect a program
that requests consideration on the basis of innovative practice, for
example, to detail all the improvements that have been implemented. We
would instead expect such a program to explain its innovative practice,
the extent of such practice, the evidentiary basis that established it
as an innovative practice, the particular cases in the applicable SRTR
report that involved innovative practices, and similar factors
applicable to the use and outcomes of innovative approaches.
Comment: One commenter noted that a final rule published in the
Federal Register on May 12, 2014 (79 FR 21706) made changes to Sec.
488.61(c)(4), renumbering it as Sec. 488.61(c)(3) and adding a factor
at Sec. 488.61(c)(3)(v), and specifying that CMS would consider
program improvements that address root causes of patient deaths or
graft failures if the improvements are supported by recent outcomes
data that permit CMS to conclude that the program is in compliance with
CMS outcomes expectations. In other words, in the May 12, 2014 final
rule, CMS sought to clarify that both program improvements and recent
data showing acceptable outcomes, together, comprise a single critical
factor in our determination as to whether mitigating factors approval
should be granted. CMS also sought to make clear that CMS will examine
data that are more recent than the data in the latest available SRTR
report that covers a retrospective 2.5 year period. The commenter
observed that the subsequent regulation proposed in the FY 2015 IPPS/
LTCH PPS proposed rule would move this provision to the new Sec.
488.61(f)(1)(iv) and (f)(1)(v) as two separate considerations, making
it unclear whether both improved data and substantial improvements are
needed. The commenter asked that CMS clarify whether a program must
demonstrate both substantial improvements and recent improved outcomes
data, or whether program improvements without better outcomes data
would suffice. The commenter expressed the opinion that it should be
sufficient for a program to demonstrate that it had implemented
substantial program improvements on a sustainable basis, without having
to provide recent outcomes data that allow CMS to conclude that the
improvements have resulted in recent observed deaths or graft failures
that are less than 150 percent of the risk-adjusted expected number 1
year after transplant. Several other commenters simply stated that
these parts of the proposed regulation were not entirely clear and
should be clarified.
Response: We believe that program improvements and data showing
improved outcomes subsequent to the program improvements are both
needed and should be considered as a single two-sided but integrated
consideration. We do not agree that mitigating factors should be
approved without recent data that demonstrate actual improvements in
outcomes in the manner described above. In our considerable experience
with more than 129 mitigating factor applications, we have encountered
many situations where program improvements were implemented on a
sustainable basis, but outcomes either did not improve or did not
improve sufficiently to bring the program into compliance within a
reasonable period of time. Often the problem was that the improvements
were well-warranted, but insufficient. Often the improvements did not
address root causes, and the root causes did not become apparent until
a multidisciplinary peer review team (organized under an SIA) conducted
an onsite review and, together with the transplant program staff,
gained new insights into systemic factors that contributed to
substandard outcomes. In other cases, the program implemented
improvements that were within the transplant program's purview, but the
hospital did not alter other aspects of hospital operations that were
instrumental in affecting patient or graft survival. The transplant
programs often were aware of other hospital-wide factors that were
important, but were unable to effect change in those hospital-wide
factors until the hospital agreed to enter into an SIA with CMS.
Examples of hospital-wide factors include, but are not limited to, the
working relationships between the transplant center and the intensive
care unit (ICU), availability of transplant-trained specialty
physicians (such as in cardiology, hepatology, anesthesiology, or
nephrology), adequacy of staffing levels, and information technology
support, among others.
With regard to the requested clarification for the new section
Sec. 488.61(f)(1)(iv) of the regulations, we note that the SRTR data,
upon which the CMS outcomes expectations rely, cover a retrospective
2.5 year period. The data are further dependent on a 1-year post-
transplant period during which patient and graft survival are tracked.
We appreciate that a transplant program may implement improvements and
it will take time for the results of the improvements to become
manifest in the SRTR data. This new section is intended to make clear
that CMS will examine data that are more recent than the data in the
latest available SRTR report. We will make a judgment as to the
usability of those data depending on the number of transplants and the
amount of post-transplant survival time available to be analyzed after
major program improvements have been implemented. For example, a kidney
transplant center may conduct 80 transplants per year, but have only 35
transplants that both occurred after the major program improvements
were implemented and also have a sufficient post-transplant survival
period (1-year post-transplant survival period) to constitute data that
are reasonable to use in evaluating outcomes. It is not likely that the
35 transplant cases would be included in the latest available SRTR
report. Nonetheless, this number of cases with such a post-transplant
tracking period may be sufficient and would be considered by CMS. We
acknowledge that, by looking at a time period shorter than the 2.5 year
period of the SRTR reports and looking only at the observed/expected
ratio, we may approve programs that seem to have improved outcomes d by
chance. However, if there is a combined demonstration of implemented
program changes and an improved survival ratio based on adequate
numbers, we believe the risk is warranted. We also do not mean to imply
that 35 cases is a magic number, but is illustrative for purposes of
clarifying CMS' intention.
Therefore, we are finalizing these provisions at Sec.
488.61(f)(1)(iv) as a combined factor (program improvements plus
improved outcomes data). The final paragraph is consistent with the
final regulation published as Sec. 488.61(c)(3)(v) on May 12, 2014 (79
FR 27106), but now is moved to the new Sec. 488.61(f)(1)(iv).
Paragraph (f)(1)(iv) of Sec. 488.61 in this new final rule now
combines the two factors that were proposed in the FY 2015 IPPS/LTCH
PPS proposed rule as Sec. 488.61(f)(1)(iv) and (f)(1)(v).

[[Page 50340]]

Comment: With regard to the content of mitigating factors requests
described in proposed Sec. 488.61(f)(2), one commenter suggested that
instructions related to specific information that must be included as
part of a mitigating factors request should not be included in
regulations but, instead, in CMS instructions that can be more easily
modified as transplant centers and CMS gain additional experience with
the types of information that may be useful. The commenter also
expressed concern that it appeared that all the information was
required of every request even if certain items were not relevant.
Response: We appreciate the commenter's concern. On the basis of 7
years of experience and review of 129 mitigating factors requests, we
are confident that there are certain items of information that are
almost always important in a mitigating factors request. We agree that
not every item is needed in every request. Therefore, in this final
rule, we reorganized into various categories the informational items
for a mitigating factors request that were originally proposed in the
new Sec. 488.61(f)(2). In this final rule, the first category is
comprised of items required for all requests (new paragraphs (f)(2)(i)
through (f)(2)(iv)). Additional information required for requests
pertaining to data submission, clinical experience, or outcomes is then
described in new paragraph (f)(2)(v), versus additional material
required of requests pertaining to innovative practice (new paragraph
(f)(2)(vi)), versus requests based on natural disasters or emergencies
(new paragraph (f)(2)(vii)). We believe that this reorganization makes
it clear that information not pertinent to the request is not needed,
while continuing to provide additional transparency and continuing to
communicate (in advance of a request) the type of information that a
transplant center should be prepared to provide if it wishes to request
consideration of mitigating factors.
Comment: With regard to the proposed content at Sec. 488.61(f)(2),
one commenter stated that it did not believe CMS has the authority to
require a root cause analysis of patient deaths or graft failures that
is specified by the program as a patient safety work product (PWSP) and
submitted to (or received from) a Patient Safety Organization (PSO).
Further, the commenter stated that to require such disclosure may place
a transplant center in a situation in which it must choose between
foregoing a mitigating factors review, which could keep the center
open, or face fines under the Patient Safety and Quality Improvement
Act of 2005 (PSQIA).
Response: By way of background, the PSQIA amended Title IX of the
Public Health Service Act (PHSA) (42 U.S.C 299 et seq.). Section
921(7)(A) of the PSQIA defines ``patient safety work product'' (PSWP)
as including ``any data, reports, records, memoranda, analyses (such as
root cause analyses) . . . which are assembled or developed by a
provider for reporting to a patient safety organization and are
reported to a patient safety organization.'' Section 921(7)(B) of the
PSQIA clarifies that PSWP does not include certain information, such as
a patient's medical record (section 921(7)(B)(i) of the PSQIA) or
``information that is collected, maintained, or developed separately,
or exists separately, from a patient safety evaluation system . . .''
(section 921(7)(B)(ii) of the PSQIA). Section 921(7)(B)(iii) of the
PSQIA further specifies that ``nothing in this part shall be construed
to limit . . . the reporting of information to a Federal, State, or
local governmental agency for public health surveillance,
investigation, or other public health purposes or health oversight
purposes.'' In addition, section 922(c)(1)(C) of the PSQIA provides for
an exception to the privilege and confidentiality restrictions for
``disclosure of identifiable patient safety work product if authorized
by each provider identified in such work product.''
We appreciate the commenter's concerns. However, after 7 years and
129 mitigating factors reviews, we have not experienced this problem in
relation to organ transplant centers. This may be because adequate root
cause analyses of peri- and post-transplant deaths or graft failures
require such specialized expertise that the more generalized patient
safety expertise of PSOs is less likely than in other areas to be the
resource to which transplant centers turn.
We also note that, in certain other types of providers where the
PSQIA has arisen as an issue, the providers have often taken advantage
of the exceptions in the PSQIA noted previously (such as the exceptions
at section 921(7)(B)(ii) or section 921(7)(B)(iii)) of the PSQIA).
CMS does not require submission of a PSWP, and hospitals have
choices with regard to what to place in a patient safety evaluation
system as a PSWP, to what extent the hospital will use any of the
exceptions provided in the PSQIA as noted above, and to what extent the
hospital will seek to demonstrate compliance with the CoPs through the
provision of other information. With regard to root cause analyses,
rather than being a cause of Medicare termination, we have found root
cause analyses to have been among the most important considerations in
CMS decisions to grant mitigating factors approval that allowed
continued Medicare participation for most of the requests we have
received. In many cases, the analyses demonstrated the program's
definite capability to identify root causes. In other cases, the
analyses demonstrated the program's clear inability to conduct adequate
root cause analyses, but CMS review of the analyses (by clinical and
quality improvement personnel, both in-house and contracted) allowed us
to gain sufficient insights, particularly with respect to areas that
might be further investigated, that we determined an SIA and more time
would be warranted for the transplant program to make improvements.
Rather than constituting an expectation that leads to closure of a
transplant program, our experience of the root cause analyses has been
that they prevented many programs from termination of Medicare
participation and from experiencing risk that such termination might
have led to closure.
Finally, the regulations at Sec. 482.21 and Sec. 482.96 oblige
each hospital and transplant program to maintain an effectively
functioning quality assessment and performance improvement system. A
key expectation is that every adverse event be identified and
investigated and the results of the investigation used to prevent
recurrence. In the case of patient deaths and graft survival, this
means root cause analyses to identify systemic factors that may have
caused or contributed to the adverse events. The ability of a
transplant program to demonstrate that it has adequately conducted such
analyses, used the results to prevent recurrence, and has the
capability to continue to do so is fundamental to the program's
demonstration of compliance required by CMS regulations.
Therefore, we are retaining in this final regulation the language
we originally proposed.
Comment: One commenter objected to the provision at proposed Sec.
488.61(f)(2)(iv)(L) that each program must describe whether it has
engaged with the OPTN to review program outcomes, the status of any
such review, and any steps taken to address program outcomes pursuant
to the OPTN review. The commenter believed that this provision would
unnecessarily mandate disclosure of the institution's involvement with
the peer review function of the OPTN under 42 CFR 121.10(b). The
commenter stated that assurances of confidentiality and protection from
disclosure are the foundations of effective medical peer

[[Page 50341]]

review processes. The commenter suggested that the proposed paragraph
be modified to specify only submission of the steps taken by the
program to address program outcomes. Another commenter suggested that
the proposed language at Sec. 488.61(f)(1) be expanded to include
consideration of whether the Membership and Professional Standards
Committee (MPSC) of the OPTN has reviewed the program's performance and
found it acceptable.
Response: We appreciate the tremendous value of the OPTN peer
review process and its statutory responsibilities under the National
Organ Transplant Act (Pub. L. 98-507). We believe that the MPSC process
of the OPTN may often result in improved outcomes, thereby rendering a
CMS Condition-level deficiency citation unnecessary, or at least
setting the stage for approval of a mitigating factors request during
the extended period of time CMS allows for consideration of such
requests. While we had proposed the regulatory language in order to
further strengthen CMS coordination with the OPTN, we also appreciate
the nature of the peer review process itself, as described by the
commenter. Therefore, in this final rule, we have removed reference to
the OPTN peer review process that was originally proposed at Sec.
488.61(f)(2)(iv)(L). We note that programs may still voluntarily
disclose any engagement with the MPSC of the OPTN. If the program is
entering into an SIA with CMS, the program may also wish to disclose
whether the OPTN has already conducted a recent onsite peer review of
the program so that CMS may consider if an adjustment to the SIA peer
review is warranted, or it may choose to describe any recent onsite
peer review without reference to whether the onsite review was
conducted under OPTN auspices or not.
Comment: With regard to the timelines for submitting information
that we proposed at Sec. 488.61(f)(3), several commenters suggested
that more than the proposed 10 days be permitted for a program to
notify CMS of an intent to apply for mitigating factors consideration,
and 30 days to submit written documentation when the pertinent
deficiencies do not involve citation for clinical experience or
outcomes. These commenters suggested that 20 days and 45 days,
respectively, should be permitted.
Response: With respect to mitigating factors, the 10-day timeline
only obliges programs to notify CMS of the program's intent to request
such consideration, and no information is required beyond a simple
statement of intent. We regard the 10-day timeframe for submission of a
simple notice of intent to be a reasonable expectation. With the
modification in this final discussed above (in which the mitigating
factors provision is limited to deficiencies of data submission,
clinical experience, or outcomes), the 30-day time period is no longer
necessary. We already proposed to permit a longer period of time (120
days) for submission of the application when the deficiency is for data
submission, clinical experience, and outcomes. Therefore, we are
finalizing the rule with the proposed 10-day and 120-day timelines. We
have removed the reference to the 30-day time period. In response to
comments that suggested more time might be needed in some cases, we
also added a provision in this final rule that permits CMS to extend
the timelines for good cause. An example of a good cause would be a
natural disaster, such as the 2013 Hurricane Sandy event, that may
intervene in the middle of the applicable period.
After consideration of the public comments we received, we are
retaining the 10-day timeframe to notify CMS of an intent to apply for
mitigating factors, reorganizing Sec. 488.61(f)(1) and making it clear
that not all factors pertain to every application, retaining the
proposed Sec. 488.61(f)(1)(iv) as a combined factor (program
improvements plus improved outcomes data, consistent with the May 12,
2014 final regulation (79 FR 27106)) but with the paragraph moved to
the new and clarified Sec. 488.61(f)(1)(iv), and retaining the
reorganized content of Sec. 488.61(f)(2) except for the removal of
references to a transplant program's engagement with the OPTN.
2. Results of Mitigating Factors Review
Under proposed new Sec. 488.61(g), we proposed to clarify and
expand on the description of the mitigating factors review process and
results. Under existing regulations, a transplant center seeking
initial approval or re-approval of Medicare participation based on the
presence of mitigating factors is required to submit a formal written
request to the CMS Central Office, as described earlier. If there are
no deficiencies that constitute immediate jeopardy to a patient's
health and safety, in limited circumstances, CMS may approve continued
Medicare participation based on mitigating factors. However, where a
transplant program demonstrates that it is making significant progress
toward correction and program improvement, but does not yet qualify for
approval based on mitigating factors, we believe there may be merit, in
many cases, in temporarily extending the effective date of the
program's Medicare participation termination in exchange for a
hospital's agreement to engage in a significant and directed regimen of
further quality improvement under a Systems Improvement Agreement
(SIA). As we noted above, programs that have entered into SIAs have
demonstrated significant improvements. Therefore, we proposed to
provide an explicit procedure in the regulations at proposed new Sec.
488.61(g)(1)(iii) for CMS to offer an SIA and hold in abeyance a final
decision on the mitigating factors request until the SIA period has
ended. Proposed new paragraphs (g)(1)(i), (g)(1)(ii), and (g)(1)(iii)
outline the three outcomes of CMS mitigating factors decisions: (i)
Initial approval or re-approval of a program's Medicare participation
based upon consideration of mitigating factors; (ii) denial of the
program's request; or (iii) offer of a time-limited SIA when a
transplant program has waived its appeal rights, has committed to
substantial program improvements that address root causes and are
institutionally supported by the hospital's governing body on a
sustainable basis, and has requested more time to design or implement
additional improvements or demonstrate compliance with CMS outcome
requirements. Under the proposed new paragraph (g)(1)(iii), we would
clarify that, during the SIA, CMS holds the mitigating factors request
in abeyance and makes a final decision to approve or deny Medicare
participation when the SIA is ended, based on the results of the
program's performance of the SIA.
Existing regulations state that CMS will not approve any program
with a Condition-level deficiency. However, CMS could approve a program
with a Standard-level deficiency upon receipt of an acceptable plan of
correction. A Condition-level deficiency represents a serious
classification and, unless the deficiency is remedied, precludes a
provider from participating in Medicare. A Standard-level deficiency
represents a less serious deficiency, such as one in which just a small
part of a CoP is found to be out of compliance. We proposed to move
this to the proposed new paragraph Sec. 488.61(g)(2).
We did not receive any public comments on this proposal and,
therefore, are finalizing it as proposed.
3. System Improvement Agreements (SIAs)
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27977), we
proposed to add proposed new paragraph (h) to Sec. 488.61 to set forth
the purpose, intent, and contents of an SIA

[[Page 50342]]

and the timeframes for an approved SIA with CMS.
a. Purpose and Intent of an SIA
Based on information and documentation provided by the transplant
program at the time of its request, CMS may determine that, despite a
deficiency or deficiencies, the transplant center has made substantial
progress, has full support of the hospital governing body, and is on a
quality improvement path that promises to improve prospects for patient
survival. In such cases, we exercise our limited discretion to offer
the transplant program the opportunity to enter into an SIA. In the
absence of a written request for consideration on the basis of
mitigating factors, CMS would otherwise proceed with the proposed date
of termination based on noncompliance with one or more of the CoPs. In
the proposed regulation, we clarified and specified the terms for such
SIAs.
CMS may offer an SIA to a transplant program if the transplant
center can show that it has identified, or is actively improving its
identification of, the root causes of its noncompliance and if the
transplant center has initiated actions to correct those root causes.
However, if we conclude that a transplant center does not qualify for
initial approval or re-approval based on mitigating factors, the
proposed rule would explicitly provide CMS with the option of offering
a time-limited SIA to those transplant centers that have demonstrated
progress in making substantive program improvements to address root
causes of deficient outcomes, agree to undertake a structured regimen
of further quality improvement, and agree to waive their appeal rights.
In some instances, a voluntary period of inactivity of the transplant
center is warranted, or a period of inactivity may be required by CMS
as a condition of an SIA approval, as a requirement of initiating an
SIA for a specified period, or until certain milestones are achieved.
During the SIA period, CMS' oversight and enforcement authority
continue and CMS may conduct routine unannounced surveys, complaint
investigations, and/or terminate the transplant center's participation
in the Medicare program if there is not substantial compliance with
Federal requirements under 42 CFR Part 482 or if the program fails to
follow the terms of the SIA. In consideration for the opportunity to
continue to participate in the Medicare program under an SIA during the
time that structured improvements and corrections are made, despite
having been found to be in noncompliance with the requirements, a
transplant center would be required to waive any appeal rights that it
may have, either administratively or judicially, if CMS ultimately
terminates Medicare participation or denies initial approval of the
transplant center. We proposed that such a waiver applies, regardless
of whether revocation or termination of approval/re-approval occurs due
to a finding that the hospital failed to fulfill the terms of the SIA
or due to the deficiency findings that the SIA was designed to address,
pursuant to CMS' enforcement authority under the regulations.
A transplant center's approval to operate as a Medicare-approved
transplant center does not guarantee any subsequent re-approvals and
may be time-limited. The transplant center must submit a separate
request for consideration of mitigating factors, including updated
supporting documentation each time a CMS review (generally on a 3 to 5
year cycle) or complaint investigation determines that the transplant
center does not meet one or more of the data submission, clinical
experience, and outcomes requirements, or other CoPs. At such time, we
would review any prior mitigating factors approval to determine if the
circumstances that originally warranted approval would still apply.
However, in the case of past mitigating factors approval based on
innovative practice, CMS may seek information in advance of a
recertification survey to determine if the reasons for past approval
still prevail and, in such a case, CMS may consider mitigating factors
concomitantly with the recertification survey.
We did not receive any public comments in this policy and,
therefore, finalizing it as proposed.
b. Description and Contents of an SIA
The SIA is a binding agreement between CMS and the hospital within
which a transplant center operates. A transplant center, in turn, may
have one or more organ-specific programs, such as a heart, kidney,
pancreas, liver, or lung transplant program. Each SIA is focused on a
particular organ transplant program. The SIA is a plan for a series of
actions, activities, and goals that provide opportunities for the
hospital and transplant center to conduct internal improvement analysis
and action, and engage external experts to ensure that the transplant
center is in compliance with evidence-based standards and advances in
the field that would optimize the care provided to patients.
Through an SIA, CMS is able to offer transplant centers additional
time to achieve compliance with the CoPs through a structured and
monitored process. In particular, the use of the formal SIA process
reflects CMS' recognition that it may sometimes require more than the
usual time to correct the 1-year post-transplant patient or graft
survival and have the results of such improvement become manifest in
the tracking data, or to develop and implement a plan to correct low-
volume performance rates. We generally do not expect to use an SIA in
cases of noncompliance with other CoPs, although we do not preclude
such a possibility if highly unusual circumstances are present.
The SIA process (discussed in more detail below) has demonstrated
effectiveness in improving patient and graft survival. An important
measure of outcome is the extent to which observed patient deaths 1
year after transplant compare with the risk-adjusted expected number of
deaths or graft failure for a particular transplant program. The SRTR
risk adjustment methodology (used to calculate the expected numbers)
takes into consideration the organs transplanted and the
characteristics of the donors and recipients (for example, factors that
have a bearing on the risk to patient or graft survival, such as
diabetes, hypertension, advanced age, or cold ischemic time of the
organ to be transplanted, among others). For example, the national
number of expected deaths 1 year after transplant for all transplant
centers in the United States is 1.0. A transplant center that had twice
the expected number of deaths would have a standardized mortality ratio
(SMR) of 2.0. As of August 2013, adult kidney transplant programs cited
by CMS for substandard outcomes and placed on a Medicare enforcement
track, for which there was a 2-year post-CMS survey tracking period
(N=15), improved their average SMR for 1-year post-transplant patient
survival performance rate from 2.05 to 1.17 (close to the 1.0 national
average). The transplant centers under an approved SIA improved their
outcomes from an average SMR ranging from 2.41 before the SIA to 0.76
after the SIA (much better than the national average). Transplant
centers not cited for substandard kidney transplant outcomes improved
outcomes slightly from 0.89 to 0.84.\244\
---------------------------------------------------------------------------

\244\ Hamilton, Thomas E., Regulatory Oversight in
Transplantation: Are Patients Really Better Off, Curr Opin Organ
Transplant 2013, 18:203-209. Available at: at https://www.co-transplantation.com.

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[[Page 50343]]

In proposed new Sec. 488.61(h), we proposed to explicitly
incorporate and specify elements that have been important to the
successful use of the SIA structure. We proposed to define an SIA as a
binding agreement, entered into voluntarily by the hospital and CMS,
through which CMS extends the effective date of a prospectively
scheduled termination of the center's Medicare participation (thereby
permitting the program additional time to achieve compliance with the
CoPs), contingent on the hospital's agreement to participate in a
structured regimen of quality improvement activities and subsequent
demonstration of improved outcomes. In some cases, transplant programs
have entered a period of inactivity--voluntarily, or imposed as a
condition of the SIA.
Under proposed new Sec. 488.61(h)(1)(i) through (h)(1)(x), we
proposed that in the SIA, in exchange for additional time to initiate
or continue activities to achieve compliance with the CoPs, the
transplant center must agree to a regimen of specified activities,
including (but not limited to) all of the following:
Patient notification about the degree and type of
noncompliance by the program, an explanation of what the program
improvement efforts mean for patients, and financial assistance to
defray the out-of-pocket costs of copayments and testing expenses for
any wait-listed individual who wishes to be listed with another program
(proposed paragraph (h)(1)(i)).
An external independent peer review team that conducts an
onsite assessment of program policies, staffing, operations,
relationship to hospital services, and factors that contribute to
program outcomes; that suggests quality improvements the hospital
should consider; that provides both verbal and written feedback to the
hospital; and that provides a verbal debriefing to CMS. Neither the
hospital nor the peer review team is required to provide a written
report to CMS. The peer review team would include a transplant surgeon
with expertise in the relevant organ type(s), a transplant
administrator, an individual with expertise in transplant QAPI systems,
a social worker or psychologist or psychiatrist, and a specialty
physician with expertise in conditions particularly relevant to the
applicable organ types(s) such as a cardiologist, nephrologist, or
hepatologist. Except for the transplant surgeon, CMS may permit
substitution of an individual with one type of expertise for another
individual who has expertise particularly needed for the type of
challenges experienced by the program, such as substitution of an
infection control specialist in lieu of, or in addition to, a social
worker (proposed paragraph (h)(1)(ii)).
An action plan that addresses systemic quality
improvements and is updated after the onsite peer review (proposed
paragraph (h)(1)(iii)).
An onsite consultant whose qualifications are approved by
CMS, and who provides services for 8 days per month on average for the
duration of the agreement, except that CMS may permit a portion of the
time to be spent offsite and may agree to fewer consultant days each
month after the first 3 months of the SIA (proposed paragraph
(h)(1)(iv)).
A comparative effectiveness analysis that compares
policies, procedures, and protocols of the transplant program with
those of other programs in areas of endeavor that are relevant to the
transplant center's current quality improvement needs (proposed
paragraph (h)(1)(v)).
Development of increased proficiency, or demonstration of
current proficiency, with patient-level data from the SRTR and the use
of registry data to analyze outcomes and inform quality improvement
efforts (proposed paragraph (h)(1)(vi)).
A staffing analysis that examines the level, type,
training, and skill of staff in order to inform transplant center
efforts to ensure the engagement and appropriate training and
credentialing of staff (proposed paragraph (h)(1)(vii)).
Activities to strengthen performance of the Quality
Assessment and Performance Improvement (QAPI) Program to ensure full
compliance with the requirements at Sec. 482.96 (proposed paragraph
(h)(1)(viii)).
Monthly (unless otherwise specified) reporting and
conference calls with CMS regarding the status of programmatic
improvements, the results of the actions, data, reports, or other
deliverables specified in the SIA, and regarding the number of
transplants, and the death and graft failures that occur within 1 year
post-transplant (proposed paragraph (h)(1)(ix)).
Additional or alternative requirements specified by CMS,
tailored to the transplant program type and circumstances (proposed
paragraph (h)(1)(x)).
Comment: One commenter suggested that less detail be provided with
regard to the content of an SIA in favor of more flexibility for CMS
and transplant centers. Another commenter observed that the SIA content
was robust and could conceivably constitute a best practice for
transplant centers. The commenter also noted that, despite the high
specificity of the required activities, proposed language at Sec.
488.61(h)(1)(x) allowing CMS to specify alternate requirements,
provides the flexibility needed if there are elements a transplant
program cannot meet due to circumstances beyond its control.
Response: We agree that the requirements are reasonably robust and
specific. The SIA content was developed after early experiences in
2007-2010 with lesser requirements that failed to generate the results
needed for a number of programs to generate and sustain improvement
outcomes. We then entered into a number of SIAs that had additional
requirements which we did not include here, either because they proved
unnecessary in many cases or caused excessive risk avoidance on the
part of some transplant centers. The remaining requirements we proposed
have now been well-tested in 35 SIAs so far, with exceptional success.
We agree with the commenter who observed that the language proposed at
Sec. 488.61 (h)(1)(x) allows CMS with advisable flexibility to tailor
alternate requirements when necessary. In response to the concern of
the first commenter, however, in this final rule, we expanded Sec.
488.61(h)(1)(x) to allow CMS the ability to waive certain enumerated
elements of the SIA (rather than requiring alternates) if the agency
finds that the program has already adequately fulfilled the task.
Comment: Several commenters stated that transplant programs should
not be obliged to waive their appeal rights in order to engage in an
SIA with CMS.
Response: We do not agree. Prior to any SIA, each transplant
program will already have had full opportunity to appeal a
prospectively scheduled termination of Medicare participation. Further,
while a prospective termination deriving from all other CoP
deficiencies must be resolved within 90 days, in the case of clinical
experience or outcomes, CMS sets the prospective Medicare termination
at 210 days and allows for consideration of mitigating factors. We
provide for an SIA for certain programs when a program is making
substantial progress but is not able to demonstrate compliance or
qualify for outright approval of its mitigating factors request within
the 210-day period. Under an SIA, CMS agrees to extend the
prospectively scheduled Medicare termination date for up to another 12
months. Given these considerations, we do not agree that a program
should be able to reach the end of an SIA, fail to demonstrate the
improved outcomes necessary, and then appeal. We believe such an
arrangement would only serve

[[Page 50344]]

to prolong the termination date and reduce incentives to correct
deficiencies and achieve compliance promptly. Further, in our
experience to date, only one transplant program has chosen to appeal a
Medicare termination for any reason. The affected hospital involved
expended considerable legal effort, over the course of a year, and did
not prevail. In the succeeding year, the program applied for
reinstatement and was eventually recertified for Medicare participation
after making further improvements and demonstrating compliance with the
CMS clinical experience and outcomes requirements. In short, in the
case of an SIA, we provide for an exceptional extension of time and
believe it is preferable for the available resources of all parties to
be invested in the process of improving patient care rather than in a
legal contest. If a program wishes to appeal, we suggest the appeal be
made within the 60-day post-notification period permitted by regulation
rather than pursue an SIA (because the SIA would require waiver of
appeal rights).
After consideration of the public comments we received, we are
making a minor change at Sec. 488.61(h)(1)(x) to allow some added
flexibility to the SIA content, and are otherwise finalizing Sec.
488.61(h)(1)(i) through (h)(1)(ix) as proposed.
c. Effective Period for an SIA
Under proposed new Sec. 488.61(h)(2), we proposed to specify that
an SIA will be established for a 12-month period, subject to CMS'
discretion to determine if a shorter time period would suffice. At the
hospital's request and at CMS' discretion, CMS may extend an SIA for up
to one additional 6-month period.
Comment: A number of commenters supported these time periods.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing Sec. 488.61(h)(2) as proposed.

XII. MedPAC Recommendations

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

XIII. Other Required Information

A. Requests for Data From the Public

In order to respond promptly to public requests for data related to
the prospective payment system, we have established a process under
which commenters can gain access to raw data on an expedited basis.
Generally, the data are now available on compact disc (CD) format.
However, many of the files are available on the Internet at: https://
www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/. We listed the data files and the cost for
each file, if applicable, in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28288 through 28289).
Commenters interested in discussing any data used in constructing
the proposed rule and this final rule should contact Nisha Bhat at
(410) 786-5320.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28289 through
28294), we solicited public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs). We discuss and respond to any public comments we
received in the relevant sections.
2. ICRs for Add-On Payments for New Services and Technologies
Section II.I.1. of the preamble of the proposed rule and of this
final rule discuss add-on payments for new services and technologies.
Specifically, this section states that applicants for add-on payments
for new medical services or technologies for FY 2016 must submit a
formal request. A formal request includes a full description of the
clinical applications of the medical service or technology and the
results of any clinical evaluations demonstrating that the new medical
service or technology represents a substantial clinical improvement. In
addition, the request must contain a significant sample of the data to
demonstrate that the medical service or technology meets the high-cost
threshold.
We believe the burden associated with this requirement is exempt
from the PRA under 5 CFR 1320.3(c), which defines the agency collection
of information subject to the requirements of the PRA as information
collection imposed on 10 or more persons within any 12-month period.
This information collection does not impact 10 or more entities in a
12-month period. In FYs 2008, 2009, 2010, 2011, 2012, 2013, FY 2014,
and FY 2015, we received 1, 4, 5, 3, 3, 5, 5, and 7 applications,
respectively.
We did not receive any public comments regarding this information
collection.
3. ICRs for the Occupational Mix Adjustment to the FY 2015 Index
(Hospital Wage Index Occupational Mix Survey)
Section III.F. of the preamble of the proposed rule (79 FR 28066
through 28067) and this final rule discusses the occupational mix
adjustment to the proposed and final FY 2015 wage index, respectively.
While the preamble of these rules does not contain any new ICRs, we
note that there is an OMB approved information collection request
associated with the hospital wage index.
Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E)
of the Act to require CMS to collect data at least once every 3 years
on the occupational mix of employees for each short-term, acute care
hospital participating in the Medicare program in order to construct an
occupational mix adjustment to the wage index. We collect the data via
the occupational mix survey.
The burden associated with this information collection requirement
is

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the time and effort required to collect and submit the data in the
Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned
burden is subject to the PRA; it is currently approved under OCN 0938-
0907.
We did not receive any public comments regarding this information
collection.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
Section III.H.2. of the preambles of the proposed rule (79 FR 28070
through 28075) and of this final rule discuss proposed and final
changes to the wage index based on hospital reclassifications. As
stated in that section, under section 1886(d)(10) of the Act, the MGCRB
has the authority to accept short-term IPPS hospital applications
requesting geographic reclassification for wage index and to issue
decisions on these requests by hospitals for geographic
reclassification for purposes of payment under the IPPS.
The burden associated with this application process is the time and
effort necessary for an IPPS hospital to complete and submit an
application for reclassification to the MGCRB. The burden associated
with this requirement is subject to the PRA. It is currently approved
under OCN 0938-0573.
We did not receive any public comments regarding this information
collection.
5. ICRs for Application for GME Resident Slots
The information collection requirements associated with the
preservation of resident cap positions from closed hospitals, addressed
under section IV.J.3. of the preamble of this final rule, are not
subject to the Paperwork Reduction Act, as stated in section 5506 of
the Affordable Care Act.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
The Hospital IQR Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment (RHQDAPU) Program) was
originally established to implement section 501(b) of the MMA, Public
Law 108-173. This program expanded our voluntary Hospital Quality
Initiative. The Hospital IQR Program originally consisted of a
``starter set'' of 10 quality measures. The collection of information
associated with the original starter set of quality measures was
previously approved under OMB control number 0938-0918. All of the
information collection requirements previously approved under OMB
control number 0938-0918 have been combined with the information
collection request previously approved under OMB control number 0938-
1022. We no longer use OMB control number 0938-0918.
We added additional quality measures to the Hospital IQR Program
and submitted the information collection request to OMB for approval.
This expansion of the Hospital IQR measures was part of our
implementation of section 5001(a) of the DRA. Section
1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the
DRA, requires that the Secretary expand the ``starter set'' of 10
quality measures that were established by the Secretary as of November
1, 2003, to include measures ``that the Secretary determines to be
appropriate for the measurement of the quality of care furnished by
hospitals in inpatient settings.'' The burden associated with these
reporting requirements was previously approved under OMB control number
0938-1022.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53666), we stated
that, for the FY 2016 payment determinations and subsequent years
updates, we sought OMB approval for a revised information collection
request using the same OMB control number (0938-1022). The FY 2014
IPPS/LTCH PPS final rule (78 FR 50955) does not change the method for
information collection requests. In a revised request for the FY 2017
payment determination, we will add the four claims-based measures and
one chart-abstracted measure that we are finalizing in this final rule
as proposed. The claims-based measures are: (1) Hospital 30-day, all-
cause, unplanned, risk-standardized readmission rate (RSRR) following
coronary artery bypass graft (CABG) surgery; (2) Hospital 30-day, all-
cause, risk-standardized mortality rate (RSMR) following coronary
artery bypass graft (CABG) surgery; (3) Hospital-level, risk-
standardized 30-day episode-of-care payment measure for pneumonia; and
(4) Hospital-level, risk-standardized 30-day episode-of-care payment
measure for heart failure. The chart-abstracted measure we are
finalizing in this final rule is: Severe sepsis and septic shock:
management bundle (NQF 0500).
Because claims-based measures can be calculated based on data that
are already reported to the Medicare program for payment purposes, we
believe no additional information collection will be required from the
hospitals for the four finalized claims based measures. However, we
believe that the chart-abstracted measure will cause some additional
burden.
In addition, we believe there will be a reduction in the burden as
a result of removing 19 total measures in this rule.\245\ We note that
we are not removing SCIP-Inf-4 Cardiac Surgery Patients with Controlled
6 a.m. Postoperative Blood Glucose as proposed. The measures we are
removing are: (1) AMI-1 Aspirin at Arrival; (2) AMI-3 ACEI/ARB for left
ventricular systolic dysfunction; (3) AMI-5 Beta-blocker prescribed at
discharge; (4) AMI-8a Timing of Receipt of Primary Percutaneous
Coronary Intervention (PCI); (5) HF-2 Evaluation of left ventricular
systolic function; (6) SCIP-Inf-1 Prophylactic antibiotic received
within 1 hour prior to surgical incision; (7) SCIP-Inf-2 Prophylactic
antibiotic selection for surgical patients; (8) SCIP Inf-3 Prophylactic
antibiotics discontinued within 24 hours after surgery end time (48
hours for cardiac surgery); (9) SCIP Inf-6 Appropriate hair removal;
(10) SCIP-Inf-9 Postoperative urinary catheter removal on post-
operative day 1 or 2 with day of surgery being day zero; (11) SCIP-VTE-
2: Surgery patients who received appropriate VTE prophylaxis within 24
hours pre/post-surgery; (12) SCIP Cardiovascular-2: Surgery Patients on
a Beta Blocker prior to arrival who received a Beta Blocker during the
perioperative period; (13) PN-6 Appropriate initial antibiotic
selection; (14) STK-2 Antithrombotic therapy for ischemic stroke; (15)
STK-3 Anticoagulation therapy for Afib/flutter; (16) STK-5
Antithrombotic therapy by the end of hospital day 2; (17) STK-10
Assessed for rehab; and (18) VTE-4 Patients receiving un-fractionated
Heparin with doses/labs monitored by protocol, and (19) one structural
measure: Participation in a systematic database for cardiac surgery.
---------------------------------------------------------------------------

\245\ We note that some of these measures are being removed as
chart-abstracted measures, but are being retained as electronic
clinical quality measures. We refer readers to section IX.A.2.b. of
the preamble of this final rule for further discussion.
---------------------------------------------------------------------------

The numbers included in our finalized policy more accurately
reflect the burden associated with the Hospital IQR Program than the
estimates provided in our proposal. In the FY 2014 IPPS/LTCH PPS final
rule, we estimated that the burden for the FY 2016 payment
determination was 1,775 hours annually per hospital and 5.86 million
hours across approximately 3,300 hospitals participating in the
Hospital IQR Program (78 FR 50956). These estimates (at 78 FR 50956 for
chart-abstracted measures) were based on the projected numbers of
records to be abstracted for VTE and stroke. Using actual data from the
Hospital IQR Program's clinical data warehouse, we

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have since revised these estimates downward to 1,309 hours per hospital
and 4.3 million hours across all hospitals.
We believe that there will be a reduction in burden for hospitals
due to 14 of the 19 chart-abstracted measures that we are removing: (1)
AMI-8a Timing of Receipt of Primary Percutaneous Coronary Intervention
(PCI); (2) HF-2 Evaluation of left ventricular systolic function; (3)
SCIP-Inf-1 Prophylactic antibiotic received within 1 hour prior to
surgical incision; (4) SCIP-Inf-2 Prophylactic antibiotic selection for
surgical patients; (5) SCIP Inf-3 Prophylactic antibiotics discontinued
within 24 hours after surgery end time (48 hours for cardiac surgery);
(6) SCIP-Inf-9 Postoperative urinary catheter removal on postoperative
day 1 or 2 with day of surgery being day zero; (7) SCIP-VTE-2: Surgery
patients who received appropriate VTE prophylaxis within 24 hours pre/
postsurgery; (8) SCIP Cardiovascular-2: Surgery Patients on a Beta
Blocker prior to arrival who received a Beta Blocker during the
perioperative period; (9) PN-6 Appropriate initial antibiotic
selection; (10) STK-2 Antithrombotic therapy for ischemic stroke; (11)
STK-3 Anticoagulation therapy for Afib/flutter; (12) STK-5
Antithrombotic therapy by the end of hospital day 2; (13) STK-10
Assessed for rehab; and (14) VTE-4 Patients receiving un-fractionated
Heparin with doses/labs monitored by protocol.
The remaining four chart-abstracted measures that we are removing
have been previously suspended from the program; therefore, their
removal will not impact the reporting burden. The structural measure we
are removing, Participation in a Systematic Database for Cardiac
Surgery (NQF 0113), has an estimated burden of nearly zero
hours; therefore, its removal will not result in a significant burden
reduction.
Therefore, for the FY 2017 payment determination, we estimate a net
reduction in burden accounting for both the addition of one chart-
abstracted measure, severe sepsis and septic shock: Management bundle
(NQF 0500), as well as our removal of 19 measures (both chart-
abstracted and structural) to be 160 hours annually per hospital. We
estimate the total reduction in burden for chart abstraction and
structural measures for the approximately 3,300 Hospital IQR Program-
participating hospitals to be 0.5 million hours (please note the stated
number appears to be off by 0.1 due to rounding).
In addition, we intend to enroll up to 100 hospitals in a voluntary
large scale test of validation for electronic clinical quality measures
for the Hospital IQR Program. We estimate a total burden of 16 hours
for each participating hospital. We intend to reimburse hospitals $26
per hour for up to 16 hours for their participation in this test.
Details regarding this reimbursement rate are as follows:
The labor performed can be accomplished by medical records
and health information technology staff, with a mean hourly wage in
general medical and surgical hospitals of $19.24.\246\
---------------------------------------------------------------------------

\246\ In May 2012, the hourly wage was $18.68. Occupational
employment and wages, May 2012, 29-2071 Medical records and health
information technicians. Bureau of Labor Statistics, https://www.bls.gov/oes/2012/may/oes292071.htm, last accessed 3/31/2014. We
increased this wage by 3.0 percent to account for inflation in the
past 24 months. U.S. Inflation Calculator. https://www.usinflationcalculator.com/inflation/current-inflation-rates/,
last accessed 3/31/2014.
---------------------------------------------------------------------------

Applying OMB Circular A-76, we assumed full fringe
benefits of 36.25 percent, for a fully burdened labor rate of $26.25
per hour, rounding to $26 per hour, that accounts for the full cost of
labor. The circular is available at https://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a076/a76_incl_tech_correction.pdf.
For the FY 2017 payment determination, we also are encouraging
hospitals to voluntarily submit up to 16 measures electronically for
the Hospital IQR Program in a manner that would permit eligible
hospitals to partially align Hospital IQR Program requirements with
some requirements under the Medicare EHR Incentive Program. We estimate
that the total burden associated with the electronic clinical quality
measure reporting option will be similar to the burden outlined for
hospitals in the EHR Incentive Program Stage 2 final rule (77 FR 53968
through 54162). As described above for participation in the test of
validation for electronic clinical quality metrics in the Hospital IQR
Program, we believe an individual with commensurate skills will submit
electronic clinical quality measures on behalf of the hospital at a
rate of approximately $26.00 per hour. Therefore, we believe it will
cost a hospital approximately $277.33 ($26.00 x 10 hours and 40
minutes) to report 16 electronic clinical quality measures. Additional
information about the chart abstraction burden is detailed in section
II.K. of Appendix A to this final rule.
Previously, we required hospitals to provide 96 patient charts for
validation per hospital per year, including 36 charts for HAI
validation (with an average page length of 1,500) and 60 charts for
clinical process of care measure validation (with an average page
length of 300) for a total of 72,000 pages per hospital per year. For
the FY 2017 payment determination and subsequent years, we are reducing
this requirement to 72 charts per hospital per year, including 40
charts for HAI validation and 36 charts for clinical process of care
validation, for a total of 70,800 pages per hospital per year--a
decrease of 1,200 pages per hospital per year. We reimburse hospitals
at 12 cents per photocopied page (68 FR 67956 and 70 FR 23667).
Therefore, the reduced burden is $144 per hospital for up to 600
hospitals.
To support validation of four HAI measures for the FY 2017 payment
determination and subsequent years, we estimate an annual burden of
43,200 hours. This estimate is based on up to 600 hospitals completing
HAI Templates averaging 18 hours per quarter over 4 quarters. This
burden is 10,800 hours more than that for the FY 2016 payment
determination as finalized in the FY 2014 IPPPS/LTCH PPS final rule (78
FR 50822 through 50825) of 32,400 hours, because the HAI measures are
to be validated for 4 quarters instead of 3 quarters. However, this
change for the FY 2017 payment determination was previously finalized
(78 FR 50822 through 50825).
Using the estimates above, we estimate an overall reduction in
burden from the FY 2016 estimate. We anticipate the reduction in total
burden for hospitals to be 160 hours per hospital or 0.5 million hours
for the FY 2017 payment determination, as compared to FY 2016, for
reporting chart-abstracted and structural measures, completing forms,
reviewing reports, and submitting validation templates across all
hospitals. This burden estimate includes new, readopted, and previously
finalized measures. The estimate excludes the burden associated with
the NHSN and HCAHPS measures, both of which are submitted under
separate information collection requests and are approved under
separate OMB control numbers.
The table below describes the hospital burden associated with the
previously finalized Hospital IQR Program requirements, and shows how
they changed based upon the policies finalized for the FY 2017 payment
determination. The numbers included in our finalized policy more
accurately reflect the burden associated with the Hospital IQR Program
over the estimates provided in our proposal. The burden estimates in
this final rule are the estimates for which we are requesting OMB
approval.

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Burden Impact of Hospital IQR Program Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per hospital for all
Burden per hospital for requirements finalized in Net change in burden
Hospital IQR program requirement Number of hospitals impacted previously finalized this rule (continuing, per hospital
requirements removed, added)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chart-abstracted and structural 3,300......................... 1,291 hours................... 1,131 hours.................. -160 hours
measures, forms.
Review reports for claims-based 3,300......................... 4 hours....................... 4 hours...................... 0
measures.
Reporting of voluntary Unknown *..................... -385 hours.................... -425 hours................... -40 hours
electronic clinical quality
measures in place of chart-
abstracted measures.
Validation templates............ Up to 600 **.................. 72 hours...................... 72 hours..................... 0
Electronic clinical quality Up to 100 **.................. 0............................. 16 hours..................... 16 hours
measure validation test.
Validation charts photocopying.. Up to 600..................... $8,640........................ $8,496....................... -$144
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This number is unknown at the time this table was prepared because final submission deadlines have not passed. Because the burden associated with
participation is negative, we conservatively assumed the number of participating hospitals to be 0 in summary calculations included in the narrative.
** Maximum numbers were used in summary calculations included in the narrative.

7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
As discussed in section IX.B. of the preamble of the proposed rule
and this final rule, section 1866(k)(1) of the Act requires, for
purposes of FY 2014 and each subsequent fiscal year, that a hospital
described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer
hospital, or a PCH) submit data in accordance with section 1866(k)(2)
of the Act with respect to such fiscal year.
In this final rule, we are finalizing our proposal to adopt one new
clinical effectiveness measure (External Beam Radiotherapy for Bone
Metastases) for the FY 2017 program and subsequent years, which will
increase the total number of measures for the FY 2017 PCHQR measure set
to 19 measures.
We also are finalizing an update to the specifications for the five
previously finalized clinical process/oncology care measures to require
PCHs to report all-patient data for each of these measures, and
adopting a new sampling methodology that PCHs can use to report these
measures, as well as the External Beam Radiotherapy measure.
We believe that requiring PCHs to report the new External Beam
Radiotherapy for Bone Metastases measure, as well as to use the
sampling methodology, will not be burdensome. At least seven PCHs are
currently reporting quality measure data (including population and
sampling data for HCAHPS measures) on a voluntary basis to CMS. PCHs
may also have experience submitting quality and population/sample size
data to other entities, such as State survey agencies and The Joint
Commission. As a result, we believe that the new reporting requirements
we are adopting will not significantly impact PCHs.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50957 through
50959), we included burden estimates for the FY 2015 and FY 2016
programs. We noted in that final rule that those estimates represented
a worst case scenario of estimated burden. We are providing a revised
burden estimate for FY 2016 and a burden estimate for FY 2017 that take
into account our finalized sampling methodologies for all applicable
measures. The anticipated revised burden on PCHs for the FY 2016
program and the anticipated new burden on PCHs for the FY 2017 program
consist of the following: New measure training and measure maintenance,
and the time required for collection, aggregation, and submission of
data for all measures.
We estimate that 11 PCHs will submit quality measure data on
approximately 37,596 cancer cases annually beginning with FY 2016 and
FY 2017.\247\ In addition, we estimate that PCHs will spend 0.5 hours
on chart abstraction and data submission per case/event, 0.5 hours on
training per each new measure, 0.25 hours on measure maintenance per
each existing measure, and a maximum of 5 hours summarizing and
reporting population and sample size counts for the six SCIP measures
and five oncology care measures.
---------------------------------------------------------------------------

\247\ FY 2011 CMS MedPAR file based on Medicare data alone.
---------------------------------------------------------------------------

We are reducing the burden estimates for the HCAHPS Survey, the six
SCIP measures, and the five clinical process/oncology care measures in
this final rule to take into consideration the sampling that PCHs may
use for these measures. As a result, we estimate that the reporting
burden on each PCH for the FY 2016 program will be 18,758 hours. We
estimate that the reporting burden on each PCH for FY 2017 would
increase by 50 hours because PCHs will be required to report an
additional quality measure (External Beam Radiotherapy for Bone
Metastases). Therefore, we estimate the overall burden for all of the
FY 2017 PCHQR Program requirements to be 18,808 hours per PCH. This FY
2017 estimate, which includes an additional finalized measure,
represents a decrease of 33,122 hours \248\ per PCH from the FY 2016
burden estimate of 51,930 hours that we published in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50957 through 50959), or an overall decrease
of 64 percent in the number of hours for each PCH. Coupled with our
estimated salary costs,\249\ this revised estimate results in a net
reduction in estimated cost of $472,362 per PCH. We believe that this
burden estimate more accurately captures the hour and cost impact on
PCHs participating in the PCHQR Program and reflects our efforts to
minimize the burden impact through the proposed adoption of a new
sampling methodology that PCHs can use to report the clinical process/
oncology care measures.
---------------------------------------------------------------------------

\248\ This figure represents the difference between previous
burden estimate (51,930 hours) in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50958) and current burden estimate (18,808 hours).
\249\ We are now estimating an hourly salary of $33 (https://swz.salary.com/salarywizard/Staff-Nurse-RN-Hourly-Salary-Details.aspxper). After accounting for employee benefits and
overhead, this results in a total cost of $66 per labor hour.
---------------------------------------------------------------------------

However, we note that these estimates are based on PCH reporting of
Medicare data only. We intend to update the burden estimate to more
accurately reflect the burden on PCHs for reporting all-patient data in
future years.
Comment: One commenter supported CMS' efforts to reduce the
reporting burden of the PCHQR Program but raised concern about the
variation in estimated burden between the Hospital IQR Program and
PCHQR Program, and the possibility that the large variation in PCH
patient volume may leave some PCHs with a greater burden than is
estimated on average. The commenter

[[Page 50348]]

also noted that the burden estimates provided in the FY 2015 IPPS/LTCH
PPPS proposed rule do not consider the need for PCHs to build a
reporting infrastructure, report non-Medicare data, or make efforts to
ensure consistent application of measure specifications across PCHs.
Response: We thank the commenter for their support and will
consider this feedback for future years. We incorporated a sampling
approach for non-Medicare patients, abstraction, training, computer
edits, and labor hours in our burden estimates. We also note that we
will revise our estimates to account for the burden associated with
reporting patient level data for the six SCIP measures in future years,
once we have data on which submission option PCHs select for SCIP data
submission. Finally, in response to the commenter's concern that our
burden estimates do not account for ensuring consistent application of
measure specifications across PCHs, we note that it is our role to
ensure that PCHs report each measure consistent with the measure
specifications and, therefore, this task does not affect PCH burden.
We will submit a revision of the information collection request
currently approved under OMB 0938-1175 to account for the
aforementioned changes to the PCHQR Program.
8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
In section IV.I. of the preamble of the proposed rule and of this
final rule, we discuss requirements for the Hospital VBP Program.
Specifically, in this final rule, we are adopting three new measures
for the FY 2017 Hospital VBP Program: (1) Methicillin-Resistant
Staphylococcus aureus (MRSA) Bacteremia; (2) Clostridium difficile; and
(3) PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation. The
first two measures are measures of healthcare-associated infections
reported via the CDC's National Healthcare Safety Network, while the
last measure is a chart-abstracted measure.
We also are adopting Hospital-level Risk-Standardized Complication
Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and
Total Knee Arthroplasty (TKA) for the FY 2019 Hospital VBP Program.
As provided for in section 1886(o)(2)(A) of the Act, all of these
additional measures are required for the Hospital IQR Program.
Therefore, their inclusion in the Hospital VBP Program does not result
in any additional burden because the Hospital VBP Program uses data
that are required for the Hospital IQR Program.
9. ICRs for the Long-Term Care Hospital Quality Reporting (LTCHQR)
Program
As discussed in sections IX.C.3. through IX.C.5. of the preamble of
the proposed rule and of this final rule, for the LTCHQR Program, for
the FY 2015 payment determination and subsequent years, we are
retaining the following three quality measures: (1) National Healthcare
Safety Network (NHSN) Catheter-Associated Urinary Tract Infections
(CAUTI) Outcome Measure (NQF 0138); (2) National Healthcare
Safety Network (NHSN) Central Line Catheter-Associated Blood Stream
Infection Event (CLABSI) Outcome Measure (NQF 0139); and (3)
and Percent of Residents or Patients with Pressure Ulcers That Are New
or Worsened (Short-Stay) (NQF 0678). For the FY 2016 payment
determination and subsequent years, we are retaining the following two
measures in addition to the measures finalized for previous years: (1)
Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680);
and (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF
0431). For the FY 2017 payment determination and subsequent
years, we are retaining the following three measures in addition to the
measures finalized for previous years: (1) National Health Safety
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
1716); (2) National Health Safety Network (NHSN) Facility-Wide
Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome
Measure (NQF 1717); and (3) All-Cause Unplanned Readmission
Measure for 30 Days Post-Discharge from Long-Term Care Hospitals. For
the FY 2018 payment determination and subsequent years, we are
retaining the following measure in addition to the measures finalized
for previous years: Application of Percent of Residents Experiencing
One or More Falls with Major Injury (Long Stay) (NQF 0674).
As discussed in section IX.C.7. of the preamble of the proposed
rule and this final rule, we are finalizing three new quality measures
for inclusion in the LTCHQR Program for the FY 2018 payment
determination and subsequent years: (1) Percent of Long-Term Care
Hospital Patients with an Admission and Discharge Functional Assessment
and a Care Plan That Addresses Function; (2) Functional Outcome
Measure: Change in Mobility among Long-Term Care Hospital Patients
Requiring Ventilator Support; and (3) National Healthcare Safety
Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure.
Six of the previously adopted and newly finalized measures will be
collected via the NHSN. The NHSN is a secure, Internet-based
healthcare-associated infection (HAI) tracking system maintained and
managed by the CDC. The NHSN enables health care facilities to collect
and use data about HAIs, adherence to clinical practices known to
prevent HAIs, and other adverse events within their organizations. NHSN
data collection occurs via a Web-based tool hosted by the CDC and
provided free of charge to facilities. We believe that any burden
increase related to complying with the submission of the proposed NHSN
VAE Outcome measure would be minimal because LTCHs have already
completed the initial setup of the NHSN submission process and have
become familiar with reporting data in the NHSN system due to the
requirement to report CAUTI and CLABSI measures. While this requirement
is subject to the PRA, we believe that the associated burden is
approved under OMB control number 0920-0666, for those measures
previously finalized, with an expiration date of November, 31, 2016.
The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Long-Term Care Hospitals is a Medicare claims-based
measure. Because claims-based measures can be calculated based on data
that are already reported to the Medicare program for payment purposes,
we believe that this measure will not add any additional reporting
burden for LTCHs.
The remaining five previously adopted and newly finalized measures
will be collected utilizing the LTCH CARE Data Set. The LTCH CARE Data
Set, in its current form, has been approved under OMB control number
0938-1163. Additions will need to be made to the LTCH CARE Data Set in
order to allow for collection of the two functional status measures we
are finalizing in section IX.C.7.a. of the preamble of this final rule:
(1) Percent of Long-Term Care Hospital Patients with an Admission and
Discharge Functional Assessment and a Care Plan That Addresses
Function; and (2) Functional Outcome Measure: Change in Mobility among
Long-Term Care Hospital Patients Requiring Ventilator Support. The
revised data collection will be resubmitted to OMB for approval. While
this requirement is subject to the PRA, we believe the

[[Page 50349]]

associated burden is either approved under OMB control number 0938-
1163, for those measures previously finalized, with an expiration date
of June 30, 2016, or is contained in this updated information
collection request section.
Assuring data accuracy is vital to public reporting programs.
However, as discussed in section IX.C.11. of the preamble of this final
rule, we are not finalizing our proposal, for the FY 2016 payment
determination and subsequent years, to validate data submitted to CMS
on the LTCH CARE Data Set at this time.
We discuss and respond to public comments we received on these
information collection requirements in the section IX.C. of the
preamble of this final rule.
10. Electronic Health Record (EHR) Incentive Program and Meaningful Use
(MU)
In section IX.D. of the preamble of the proposed rule and of this
final rule, we discuss our proposal to align the Medicare EHR Incentive
Program reporting and submission timelines for clinical quality
measures for eligible hospitals and CAHs with the Hospital IQR
Program's reporting and submission timelines. In addition, we provide
guidance and clarification of certain policies for reporting zero
denominators on clinical quality measures and our policy on case
threshold exemptions. Because these proposals for data collection would
align with the reporting requirements in place for the Hospital IQR
Program, we do not believe there is any additional burden for this
collection of information.
11. ICR Regarding Revision of Regulations Governing Use and Release of
Medicare Advantage (MA) Risk Adjustment Data (Sec. 422.310(f))
Medicare Advantage (MA) organizations are required to submit risk
adjustment data to CMS organizations under current authority at Sec.
422.310(b) through (d). The changes we are finalizing regarding the use
and release of MA risk adjustment data under section X. of the preamble
of this final rule do not change the requirements on MA organizations
for submission of information to CMS, which have been in place for
several years. Therefore, these finalized changes do not impose new
information collection requirements on MA organizations. Consequently,
because there are no new information collection requirements in our
proposal, the proposal does not require a review by OMB under the
authority of the Paperwork Reduction Act of 1995.

C. Waiver of 60-Day Delay in the Effective Date

We ordinarily provide a 60-day delay in the effective date of the
provisions of a rule in accordance with the Administrative Procedure
Act (APA) (5 U.S.C. 553(d), which requires a 30-day delayed effective
date, and the Congressional Review Act (5 U.S.C. 801(a)(3), which
requires a 60-day delayed effective date for major rules. However, we
can waive the delay in the effective date if the Secretary finds, for
good cause, that the delay is impracticable, unnecessary, or contrary
to the public interest, and incorporates a statement of the finding and
the reasons in the rule issued. 5 U.S.C. 553(d)(3); 5 U.S.C. 808(2).
The Hospital Inpatient Prospective Payment Systems for Acute Care
Hospitals and the Long Term Care Hospital Prospective Payment System
are fiscal year payment systems, and we typically issue the final rule
by August 1 of each year to both comply with the requirement to
annually review and update these payment systems and ensure that the
payment policies for these systems are effective, following the
required 60-day delay in the effective date, on October 1, the first
day of the fiscal year to which the policies are intended to apply. If
the agency finds, for good cause, that a 60-day delay is impracticable,
unnecessary, or contrary to the public interest, and the agency
incorporates a statement of the findings and its reasons in the rule
issued, the agency may specify an earlier effective date. The
timeframes for developing annual rules are extremely compressed and
processing issues complicated this year's rule. We believe it would be
contrary to the public interest to delay the effective date of the
payment system portions of this rule. We therefore specify that those
portions of the rule will be effective October 1.

List of Subjects

42 CFR Part 405

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

42 CFR Part 412

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

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.

42 CFR Part 415

Health facilities, Health professions, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 422

Administrative practice and procedure, Health facilities, Health
maintenance, organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.

42 CFR Part 424

Emergency medical services, Health facilities, Health professions,
Medicare.

42 CFR Part 485

Grant programs--health, Health facilities, Medicaid, Medicare,
Reporting and recordkeeping requirements.

42 CFR Part 488

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

For the reasons stated in the preamble of this final rule, the
Centers for Medicare & Medicaid Services is confirming, as final,
interim rules published on October 3, 2013 (78 FR 61191) and March 18,
2014 (79 FR 15022) and is further amending 42 CFR Chapter IV as set
forth below:

Title 42--Public Health

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart R--Provider Reimbursement Determinations and Appeals

0
1. The authority citation for Subpart R continues to read as follows:

Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v),
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C.
405, 1302, 1395f(b), 1395g(a), 1395l, 1395hh, 1395ii, 1395oo, and
1395ww).

0
2. Section 405.1811 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(3).
0
b. Revising paragraph (b) introductory text.
0
c. Redesignating paragraph (c) as paragraph (e).
0
d. Adding new paragraphs (c) and (d).
0
e. Revising newly redesignated paragraph (e).
The revisions and additions read as follows:

Sec. 405.1811 Right to contractor hearing; contents of, and adding
issues to, hearing request.

(a) Right to hearing on final contractor determination. A provider
(but no other

[[Page 50350]]

individual, entity, or party) has a right to a contractor hearing, as a
single provider appeal, for specific items claimed for a cost reporting
period covered by a final contractor or Secretary determination if--
* * * * *
(3) Unless the provider qualifies for a good cause extension under
Sec. 405.1813, the date of receipt by the contractor of the provider's
hearing request is no later than 180 days after the date of receipt by
the provider of the final contractor or Secretary determination.
(b) Contents of request for a contractor hearing on final
contractor determination. The provider's request for a contractor
hearing under paragraph (a) of this section must be submitted in
writing to the contractor, and the request must include the elements
described in paragraphs (b)(1) through (b)(3) of this section. If the
provider submits a hearing request that does not meet the requirements
of paragraph (b)(1), (b)(2), or (b)(3) of this section, the contractor
hearing officer may dismiss with prejudice the appeal or take any other
remedial action he or she considers appropriate.
* * * * *
(c) Right to hearing based on untimely contractor determination.
Notwithstanding the provisions of paragraph (a) of this section, a
provider (but no other individual, entity, or party) has a right to a
contractor hearing, as a single provider appeal, for a cost reporting
period if--
(1) A final contractor determination for the provider's cost
reporting period is not issued (through no fault of the provider)
within 12 months after the date of receipt by the contractor of the
provider's perfected cost report or amended cost report (as specified
in Sec. 413.24(f) of this chapter). The date of receipt by the
contractor of the provider's perfected cost report or amended cost
report is presumed to be the date the contractor stamped ``Received''
on such cost report unless it is shown by a preponderance of the
evidence that the contractor received the cost report on an earlier
date.
(2) Unless the provider qualifies for a good cause extension under
Sec. 405.1813, the date of receipt by the contractor of the provider's
hearing request is no later than 180 days after the expiration of the
12 month period for issuance of the final contractor determination (as
determined in accordance with paragraph (c)(1) of this section); and
(3) The amount in controversy (as determined in accordance with
Sec. 405.1839) is at least $1,000 but less than $10,000.
(d) Contents of request for a contractor hearing based on untimely
contractor determination. The provider's request for a contractor
hearing under paragraph (c) of this section must be submitted in
writing to the contractor, and the request must include the elements
described in paragraphs (d)(1) through (d)(3) of this section. If the
provider submits a hearing request that does not meet the requirements
of paragraph (d)(1), (d)(2), or (d)(3) of this section, the contractor
hearing officer may dismiss with prejudice the appeal or take any other
remedial action he or she considers appropriate.
(1) A demonstration that the provider satisfies the requirements
for a contractor hearing as specified in paragraph (c) of this section.
(2) An explanation (for each specific item at issue) of the
following:
(i) Why the provider believes Medicare payment is incorrect for
each disputed item (or, where applicable, why the provider is unable to
determine whether Medicare payment is correct because it does not have
access to underlying information concerning the calculation of Medicare
payment).
(ii) How and why the provider believes Medicare payment must be
determined differently for each disputed item.
(iii) If the provider self-disallows a specific item, a description
of the nature and amount of each self-disallowed item and the
reimbursement or payment sought for the item.
(3) A copy of any documentary evidence the provider considers
necessary to satisfy the hearing request requirements of paragraphs
(d)(1) and (d)(2) of this section.
(e) Adding issues to the hearing request. After filing a hearing
request in accordance with paragraphs (a) and (b), or paragraphs (c)
and (d), of this section, a provider may add specific Medicare payment
issues to the original hearing request by submitting a written request
to the contractor hearing officer, only if--
(1) The request to add issues complies with the requirements of
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as
to each new issue.
(2) The specific matters at issue raised in the initial hearing
request and the matters identified in subsequent requests to add
issues, when combined, satisfy the amount in controversy requirements
of paragraph (a)(2) or paragraph (c)(3) of this section.
(3) The contractor hearing officer receives the provider's request
to add issues no later than 60 days after the expiration of the
applicable 180-day period prescribed in paragraph (a)(3) or paragraph
(c)(2) of this section.

0
3. Section 405.1835 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(3).
0
b. Revising paragraph (b) introductory text.
0
c. Redesignating paragraph (c) as paragraph (e).
0
d. Adding new paragraphs (c) and (d).
0
e. Revising newly redesignated paragraph (e).
The revisions and additions read as follows:

Sec. 405.1835 Right to Board hearing; contents of, and adding issues
to, hearing request.

(a) Right to hearing on final contractor determination. A provider
(but no other individual, entity, or party) has a right to a Board
hearing, as a single provider appeal, for specific items claimed for a
cost reporting period covered by a final contractor or Secretary
determination if--
* * * * *
(3) Unless the provider qualifies for a good cause extension under
Sec. 405.1836, the date of receipt by the Board of the provider's
hearing request is no later than 180 days after the date of receipt by
the provider of the final contractor or Secretary determination.
(b) Contents of request for a Board hearing on final contractor
determination. The provider's request for a Board hearing under
paragraph (a) of this section must be submitted in writing to the
Board, and the request must include the elements described in
paragraphs (b)(1) through (b)(4) of this section. If the provider
submits a hearing request that does not meet the requirements of
paragraph (b)(1), (b)(2), or (b)(3) of this section, the Board may
dismiss with prejudice the appeal or take any other remedial action it
considers appropriate.
* * * * *
(c) Right to hearing based on untimely contractor determination.
Notwithstanding the provisions of paragraph (a) of this section, a
provider (but no other individual, entity, or party) has a right to a
Board hearing, as a single provider appeal, for specific items claimed
for a cost reporting period if--
(1) A final contractor determination for the provider's cost
reporting period is not issued (through no fault of the provider)
within 12 months after the date of receipt by the contractor of the
provider's perfected cost report or amended cost report (as specified
in Sec. 413.24(f) of this chapter). The date of receipt by the
contractor of the

[[Page 50351]]

provider's perfected cost report or amended cost report is presumed to
be the date the contractor stamped ``Received'' on such cost report
unless it is shown by a preponderance of the evidence that the
contractor received the cost report on an earlier date.
(2) Unless the provider qualifies for a good cause extension under
Sec. 405.1836, the date of receipt by the Board of the provider's
hearing request is no later than 180 days after the expiration of the
12 month period for issuance of the final contractor determination (as
determined in accordance with paragraph (c)(1) of this section); and
(3) The amount in controversy (as determined in accordance with
Sec. 405.1839) is $10,000 or more.
(d) Contents of request for a Board hearing based on untimely
contractor determination. The provider's request for a Board hearing
under paragraph (c) of this section must be submitted in writing to the
Board, and the request must include the elements described in
paragraphs (d)(1) through (d)(4) of this section. If the provider
submits a hearing request that does not meet the requirements of
paragraph (d)(1), (d)(2), or (d)(3) of this section, the Board may
dismiss with prejudice the appeal or take any other remedial action it
considers appropriate.
(1) A demonstration that the provider satisfies the requirements
for a Board hearing as specified in paragraph (c) of this section.
(2) An explanation (for each specific item at issue) of the
following:
(i) Why the provider believes Medicare payment is incorrect for
each disputed item (or, where applicable, why the provider is unable to
determine whether Medicare payment is correct because it does not have
access to underlying information concerning the calculation of Medicare
payment).
(ii) How and why the provider believes Medicare payment must be
determined differently for each disputed item.
(iii) If the provider self-disallows a specific item, a description
of the nature and amount of each self-disallowed item and the
reimbursement or payment sought for the item.
(3) A copy of any documentary evidence the provider considers
necessary to satisfy the hearing request requirements of paragraphs
(d)(1) and (d)(2) of this section.
(4) With respect to a provider under common ownership or control,
the name and address of its parent corporation, and a statement that
meets all of the requirements of paragraphs (b)(4)(i) and (b)(4)(ii) of
this section.
(e) Adding issues to the hearing request. After filing a hearing
request in accordance with paragraphs (a) and (b), or paragraphs (c)
and (d), of this section, a provider may add specific Medicare payment
issues to the original hearing request by submitting a written request
to the Board only if--
(1) The request to add issues complies with the requirements of
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as
to each new issue.
(2) The specific matters at issue raised in the initial hearing
request and the matters identified in subsequent requests to add
issues, when combined, satisfy the amount in controversy requirements
of paragraph (a)(2) or paragraph (c)(3) of this section.
(3) The Board receives the provider's request to add issues no
later than 60 days after the expiration of the applicable 180-day
period prescribed in paragraph (a)(3) or paragraph (c)(2), of this
section.

Nomenclature Changes

Subpart R [Amended]

0
4. Amend Subpart R by removing the term or phrase in the first column
and replace it with the term or phrase in the second column:

Remove Add

an intermediary a contractor
intermediary contractor
intermediaries' contractors'
intermediary's contractor's

Subpart X--Rural Health Clinic and Federally Qualified Health
Center Services

0
5. The authority citation for Subpart X continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

0
6. Section 405.2468 is amended by revising paragraph (f)(1) to read as
follows:

Sec. 405.2468 Allowable costs.

* * * * *
(f) * * *
(1) Effective for portions of cost reporting periods occurring on
or after January 1, 1999, if an RHC or an FQHC incurs ``all or
substantially all'' of the costs for the training program in the
nonhospital setting as defined in Sec. 413.75(b) of this chapter, the
RHC or FQHC may receive direct graduate medical education payment for
those residents. However, in connection with cost reporting periods for
which ``all or substantially all of the costs for the training program
in the nonhospital setting'' is not defined in Sec. 413.75(b) of this
chapter, if an RHC or an FQHC incurs the salaries and fringe benefits
(including travel and lodging where applicable) of residents training
at the RHC or FQHC, the RHC or FQHC may receive direct graduate medical
education payments for those residents.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
7. The authority citation for Part 412 is revised to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat.
1501A-332), sec. 1206 of Pub. L. 113-67, and sec. 112 of Pub. L.
113-93.

0
8. Section 412.23 is amended by--
0
a. Revising paragraphs (e)(6)(i), (e)(6)(ii) introductory text, and
(e)(6)(ii)(B)(2).
0
b. Revising paragraphs (e)(7)(i) and (e)(7)(ii) introductory text.
0
c. Adding new paragraph (e)(7)(iii).
The revisions and additions read as follows:

Sec. 412.23 Excluded hospitals: Classifications.

* * * * *
(e) * * *
(6) * * *
(i) General rule. Except as specified in paragraphs (e)(6)(ii) and
(e)(6)(iii) of this section for the period beginning December 29, 2007
and ending December 28, 2012, and the period beginning April 1, 2014
and ending September 30, 2017, a moratorium applies to the
establishment and classification of a long-term care hospital as
described in paragraphs (e) and (e)(1) through (e)(5) of this section
or a long-term care hospital satellite facility as described in Sec.
412.22(h).
(ii) Exception. The moratorium specified in paragraph (e)(6)(i) of
this section is not applicable to the establishment and classification
of a long-term care hospital that meets the requirements of paragraphs
(e) and (e)(1) through (e)(5) of this section, or a long-term care
hospital satellite facility that meets the requirements of Sec.
412.22(h), if the long-term care hospital or long-term care satellite
facility meets the following criteria on or before December 29, 2007,
or prior to April 1, 2014, as applicable:
* * * * *
(B) * * *
(2)(i) Has expended prior to December 29, 2007, at least 10 percent
(or, if less, $2.5 million) of the estimated cost of the

[[Page 50352]]

project specified in paragraph (e)(6)(ii)(B)(1) of his section; or
(ii) Has expended, before April 1, 2014, at least 10 percent (or,
if less, $2.5 million) of the estimated cost of the project specified
in paragraph (e)(6)(ii)(B)(1) of this section.
* * * * *
(7) * * *
(i) For purposes of this paragraph, an existing long-term care
hospital or long-term care hospital satellite facility means a long-
term care hospital that meets the requirements of paragraph(e) of this
section or a long-term care hospital satellite facility that meets the
requirements of Sec. 412.22(h) that received payment under the
provisions of subpart O of this part prior to the dates noted in the
following moratorium clauses.
(ii) December 29, 2007, through December 28, 2007--
* * * * *
(iii) April 1, 2014 through September 30, 2017--The number of
Medicare-certified beds in an existing long-term care hospital or an
existing long-term care hospital satellite facility must not be
increased beyond the number of Medicare-certified beds prior to April
1, 2014.
* * * * *

0
9. Section 412.64 is amended by--
0
a. Removing paragraph (b)(1)(ii)(D).
0
b. Revising paragraph (b)(3)(i).
0
c. Revising paragraphs (d)(1), (d)(2)(i) introductory text, (d)(2)(ii),
and (d)(3) introductory text.
0
d. In paragraphs (h)(4) introductory text and (h)(4)(vi), removing the
date ``October 1, 2014'' and adding in its place the date ``October 1,
2015''.
The revisions read as follows:

Sec. 412.64 Federal rates for inpatient operating costs for Federal
fiscal year 2005 and subsequent fiscal years.

* * * * *
(b) * * *
(3)(i) For discharges occurring on or after October 1, 2004, a
hospital that is located in a rural county adjacent to one or more
urban areas is deemed to be located in an urban area and receives the
Federal payment amount for the urban area to which the greater number
of workers in the county commute if the rural county would otherwise be
considered part of an urban area, under the standards for designating
MSAs if the commuting rates used in determining outlying counties were
determined on the basis of the aggregate number of resident workers who
commute to (and, if applicable under the standards, from) the central
county or central counties of all adjacent MSAs. Qualifying counties
are determined based upon OMB standards, using the most recent OMB
standards for delineating statistical areas adopted by CMS.
* * * * *
(d) * * *
(1) The applicable percentage change for updating the standardized
amount for all hospitals in all areas is--
(i) For fiscal year 2005 through fiscal year 2009, the percentage
increase in the market basket index (as defined in Sec. 413.40(a)(3)
of this chapter) for prospective payment hospitals, subject to the
provisions of paragraph (d)(2) of this section.
(ii) For fiscal year 2010, for discharges--
(A) On or after October 1, 2009 and before April 1, 2010, the
percentage increase in the market basket index (as defined in Sec.
413.40(a)(3) of this chapter) for prospective payment hospitals,
subject to the provisions of paragraph (d)(2) of this section; and
(B) On or after April 1, 2010 and before October 1, 2010, the
percentage increase in the market basket index (as defined in Sec.
413.40(a)(3) of this chapter) for prospective payment hospitals,
subject to the provisions of paragraph (d)(2) of this section, less
0.25 percentage point.
(iii) For fiscal year 2011, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this subchapter) for
prospective payment hospitals, subject to the provisions of paragraph
(d)(2) of this section, less 0.25 percentage point.
(iv) For fiscal years 2012 and 2013, the percentage increase in the
market basket index (as defined in Sec. 413.40(a)(3) of this chapter)
for prospective payment hospitals, subject to the provisions of
paragraph (d)(2) of this section, less a multifactor productivity
adjustment (as determined by CMS) and less 0.1 percentage point.
(v) For fiscal year 2014, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this chapter) for
prospective payment hospitals, subject to the provisions of paragraph
(d)(2) of this section, less a multifactor productivity adjustment (as
determined by CMS) and less 0.3 percentage point.
(vi) For fiscal year 2015, the percentage increase in the market
basket index (as defined in Sec. 413.40(a)(3) of this chapter) for
prospective payment hospitals, subject to the provisions of paragraphs
(d)(2) and (d)(3) of this section, less a multifactor productivity
adjustment (as determined by CMS) and less 0.2 percentage point.
(2)(i) In the case of a ``subsection (d) hospital,'' as defined
under section 1886(d)(1)(B) of the Act, that does not submit quality
data on a quarterly basis to CMS, in the form and manner specified by
CMS, the percentage increase in the market basket index (as defined in
Sec. 413.40(a)(3) of this chapter) for prospective payment hospitals
is reduced--
* * * * *
(ii) Any reduction pursuant to this paragraph (d)(2) will apply
only to the fiscal year involved and will not be taken into account in
computing the applicable percentage change for a subsequent fiscal
year.
(3) Beginning fiscal year 2015, in the case of a ``subsection (d)
hospital,'' as defined under section 1886(d)(1)(B) of the Act, that is
not a meaningful electronic health record (EHR) user as defined in Part
495 of this chapter for the applicable EHR reporting period and does
not receive an exception, three-fourths of the percentage increase in
the market basket index (as defined in Sec. 413.40(a)(3) of this
chapter) for prospective payment hospitals is reduced--
* * * * *

0
10. Section 412.101 is amended by revising paragraphs (b)(2)(i),
(b)(2)(ii), (c)(1), (c)(2) introductory text, and (d) to read as
follows:

Sec. 412.101 Special treatment: Inpatient hospital payment adjustment
for low-volume hospitals.

* * * * *
(b) * * *
(2) * * *
(i) For FY 2005 through FY 2010 and the portion of FY 2015
beginning on April 1, 2015, and subsequent fiscal years, a hospital
must have fewer than 200 total discharges, which includes Medicare and
non-Medicare discharges, during the fiscal year, based on the
hospital's most recently submitted cost report, and be located more
than 25 road miles (as defined in paragraph (a) of this section) from
the nearest ``subsection (d)'' (section 1886(d) of the Act) hospital.
(ii) For FY 2011 through FY 2014, and the portion of FY 2015 before
April 1, 2015, a hospital must have fewer than 1,600 Medicare
discharges, as defined in paragraph (a) of this section, during the
fiscal year, based on the hospital's Medicare discharges from the most
recently available MedPAR data as determined by CMS, and be located
more than 15 road miles, as defined in paragraph (a) of this section,
from the nearest ``subsection (d)'' (section 1886(d) of the Act)
hospital.
* * * * *

[[Page 50353]]

(c) * * *
(1) For FY 2005 through FY 2010 and the portion of FY 2015
beginning on April 1, 2015 and subsequent fiscal years, the adjustment
is an additional 25 percent for each Medicare discharge.
(2) For FY 2011 through FY 2014 and the portion of FY 2015 before
April 1, 2015, the adjustment is as follows:
* * * * *
(d) Eligibility of new hospitals for the adjustment. For FYs 2005
through 2010 and the portion of FY 2015 beginning on April 1, 2015, and
subsequent fiscal years, a new hospital will be eligible for a low-
volume adjustment under this section once it has submitted a cost
report for a cost reporting period that indicates that it meets
discharge requirements during the applicable fiscal year and has
provided its fiscal intermediary or Medicare administrative contractor
with sufficient evidence that it meets the distance requirement, as
specified under paragraph (b)(2) of this section.

0
11. Section 412.102 is revised to read as follows:

Sec. 412.102 Special treatment: Hospitals located in areas that are
changing from urban to rural as a result of a geographic redesignation.

An urban hospital that was part of an MSA, but was redesignated as
rural as a result of the most recent OMB standards for delineating
statistical areas adopted by CMS, may receive an adjustment to its
rural Federal payment amount for operating costs for 2 successive
fiscal years as provided in paragraphs (a) and (b) of this section.
(a) First year adjustment. (1) Effective on or after October 1,
1983 and before October 1, 2014, the hospital's rural average
standardized amount and disproportionate share payments as described in
Sec. 412.106 are adjusted on the basis of an additional amount that
equals two-thirds of the difference between the urban standardized
amount and disproportionate share payments applicable to the hospital
before its geographic redesignation and the rural standardized amount
and disproportionate share payments otherwise applicable to the Federal
fiscal year for which the adjustment is made.
(2) Effective on or after October 1, 2014, the hospital's rural
disproportionate share payments as described in Sec. 412.106 are
adjusted on the basis of an additional amount that equals two-thirds of
the difference between the disproportionate share payments as an urban
hospital applicable to the hospital before its geographic redesignation
to a rural area as a result of implementation of the most recent OMB
standards for delineating statistical areas adopted by CMS and the
rural disproportionate share payment otherwise applicable to the
Federal fiscal year for which the adjustment is made.
(b) Second year adjustment. (1) Effective on or after October 1,
1983 and before October 1, 2014, if a hospital's status continues to be
rural as a result of geographic redesignation, its rural average
standardized amount and disproportionate share payments are adjusted on
the basis of an additional amount that equals one-third of the
difference between the urban standardized amount and disproportionate
share payments applicable to the hospital before its redesignation and
the rural standardized amounts and disproportionate share payments
otherwise applicable to the Federal fiscal year for which the
adjustment is made.
(2) Effective on or after October 1, 2014, if a hospital's status
continues to be rural as a result of geographic redesignation, its
disproportionate share payments are adjusted on the basis of an
additional amount that equals one-third of the difference between the
disproportionate share payments applicable to the hospital before its
geographic redesignation to a rural area as a result of implementation
of the most recent OMB standards for delineating statistical areas
adopted by CMS and the rural disproportionate share payments otherwise
applicable to the Federal fiscal year for which the adjustment is made.

0
12. Section 412.103 is amended by adding a new paragraph (a)(6) to read
as follows:

Sec. 412.103 Special treatment: Hospitals located in urban areas and
that apply for reclassification as rural.

(a) * * *
(6) For any period on or after October 1, 2014, a CAH in a county
that was not in an urban area as defined by the Office of Management
and Budget (OMB), but was included in an urban area as a result of the
most recent OMB standards for delineating statistical areas adopted by
CMS and the most recent Census Bureau data, may be reclassified as
being located in a rural area for purposes of meeting the rural
location requirement at Sec. 485.610(b) of this chapter for a period
of 2 years, beginning with the date of the implementation of the new
labor market area delineations, if it meets any of the requirements
under paragraph (a)(1), (a)(2), or (a)(3) of this section.
* * * * *

0
13. Section 412.105 is amended by revising paragraphs (a)(1)(ii),
(f)(1)(iv)(D), and (f)(1)(v), to read as follows:

Sec. 412.105 Special treatment: Hospitals that incur indirect costs
for graduate medical education programs.

* * * * *
(a) * * *
(1) * * *
(ii)(A) For new programs started prior to October 1, 2012, the
exception for new programs described in paragraph (f)(1)(vii) of this
section applies to each new program individually for which the full-
time equivalent cap may be adjusted based on the period of years equal
to the minimum accredited length of each new program.
(B) For new programs started on or after October 1, 2012, the
exception for new programs described in paragraph (f)(1)(vii) of this
section applies to each new program individually during the cost
reporting periods prior to the beginning of the applicable hospital's
cost reporting period that coincides with or follows the start of the
sixth program year of the first new program started, for hospitals for
which the full-time equivalent cap may be adjusted in accordance with
Sec. 413.79(e)(1) of this chapter, and prior to the beginning of the
applicable hospital's cost reporting period that coincides with or
follows the start of the sixth program year of the each individual new
program started, for hospitals for which the full-time equivalent cap
may be adjusted in accordance with Sec. 413.79(e)(3) of this chapter.
* * * * *
(f) * * *
(1) * * *
(iv) * * *
(D) A rural hospital redesignated as urban after September 30,
2004, as a result of the most recent census data and implementation of
the new labor market area definitions announced by OMB on June 6, 2003,
may retain the increases to its full-time equivalent resident cap that
it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this
section while it was located in a rural area. Effective October 1,
2014, if a rural hospital is redesignated as urban due to the most
recent OMB standards for delineating statistical areas adopted by CMS,
the redesignated urban hospital may retain any existing increases to
its FTE resident cap that it had received prior to when the
redesignation became effective. Effective October 1, 2014, if a rural
hospital is redesignated as urban due to the most recent OMB standards
for delineating statistical areas adopted by CMS, the redesignated
urban hospital

[[Page 50354]]

may receive an increase to its FTE resident cap for a new program, in
accordance with paragraph (e) of this section, if it received a letter
of accreditation for the new program and/or started training residents
in the new program prior to the redesignation becoming effective.
(v)(A) For a hospital's cost reporting periods beginning on or
after October 1, 1997, and before October 1, 1998, the total number of
full-time equivalent residents for payment purposes is equal to the
average of the actual full-time equivalent resident counts (subject to
the requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of
this section) for that cost reporting period and the preceding cost
reporting period.
(B) For a hospital's cost reporting periods beginning on or after
October 1, 1998, the total number of full-time equivalent residents for
payment purposes is equal to the average of the actual full-time
equivalent resident count (subject to the requirements set forth in
paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this section) for that cost
reporting period and the preceding two cost reporting periods.
(C) For new programs started prior to October 1, 2012, if a
hospital qualified for an adjustment to the limit established under
paragraph (f)(1)(iv) of this section for new medical residency programs
created under paragraph (f)(1)(vii) of this section, the count of
residents participating in new medical residency training programs
above the number included in the hospital's full-time equivalent count
for the cost reporting period ending during calendar year 1996 is added
after applying the averaging rules in paragraph (f)(1)(v)(B) of this
section for a period of years. Residents participating in new medical
residency training programs are included in the hospital's full-time
equivalent count before applying the averaging rules after the period
of years has expired. For purposes of this paragraph, for each new
program started, the period of years equals the minimum accredited
length for each new program. The period of years for each new program
begins when the first resident begins training in each new program.
(D) For new programs started on or after October 1, 2012, for
hospitals for which the full-time equivalent cap may be adjusted in
accordance with Sec. 413.79(e) of this chapter, full-time equivalent
residents participating in new medical residency training programs are
excluded from the hospital's full-time equivalent count before applying
the averaging rules during the cost reporting periods prior to the
beginning of the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of the
first new program started, for hospitals for which the full-time
equivalent cap may be adjusted in accordance with Sec. 413.79(e)(1) of
this chapter, and prior to the beginning of the applicable hospital's
cost reporting period that coincides with or follows the start of the
sixth program year of the each individual new program started, for
hospitals for which the full-time equivalent cap may be adjusted in
accordance with Sec. 413.79(e)(3) of this chapter. Beginning with the
applicable hospital's cost reporting period that coincides with or
follows the start of the sixth program year of the first new program
started for hospitals for which the full-time equivalent cap may be
adjusted in accordance with Sec. 413.79(e)(1) of this chapter, and
beginning with the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of each
individual new program started for hospitals for which the full-time
equivalent cap may be adjusted in accordance with Sec. 413.79(e)(3) of
this chapter, full-time equivalent residents participating in new
medical residency training programs are included in the hospital's
full-time equivalent count before applying the averaging rules in
paragraph (f)(1)(v)(B) of this section.
(E) Subject to the provisions of paragraph (f)(1)(ix) of this
section, full-time equivalent residents that are displaced by the
closure of either another hospital or another hospital's program are
added to the full-time equivalent count after applying the averaging
rules in paragraph (f)(1)(v)(B) of this section for the receiving
hospital for the duration of time that the displaced residents are
training at the receiving hospital.
(F) Subject to the provisions of paragraph (f)(1)(x) of this
section, effective for cost reporting periods beginning on or after
April 1, 2000, full-time equivalent residents at an urban hospital in a
rural track program are included in the urban hospital's rolling
average calculation described in this paragraph (f)(1)(v)(B).
* * * * *

0
14. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to
read as follows:

Sec. 412.106 Special treatment: Hospitals that serve a
disproportionate share of low-income patients.

* * * * *
(g) * * *
(1) * * *
(iii) * * *
(C) For fiscal year 2014 and for fiscal year 2015, CMS will base
its estimates of the amount of hospital uncompensated care on the most
recent available data on utilization for Medicaid and Medicare SSI
patients, as determined by CMS in accordance with paragraphs (b)(2)(i)
and (b)(4) of this section.
* * * * *

Sec. 412.108 [Amended]

0
15. In Sec. 412.108, paragraph (a)(1) introductory text and paragraph
(c)(2)(iii) introductory text, remove the date ``April 1, 2014'' and
add in its place the date ``April 1, 2015''.

0
16. Section 412.140 is amended by revising paragraph (c)(2) to read as
follows:

Sec. 412.140 Participation, data submission, and validation
requirements under the Hospital Inpatient Quality Reporting (IQR)
Program.

* * * * *
(c) * * *
(2) Exception. Upon request by a hospital, CMS may grant an
extension or exemption of one or more data submission deadlines in the
event of extraordinary circumstances beyond the control of the
hospital. Specific requirements for submission of a request for an
extension or exemption are available on QualityNet.org.
* * * * *

0
17. Section 412.152 is amended by revising the definition of
``Applicable hospital'' to read as follows:

Sec. 412.152 Definitions for the Hospital Readmissions Reduction
Program.

* * * * *
Applicable hospital is a hospital described in section
1886(d)(1)(B) of the Act.
* * * * *

Sec. 412.154 [Amended]

0
18. Section 412.154 is amended by removing and reserving paragraph (d).

0
19. Section 412.160 is amended by revising the definitions of ``Base
operating DRG payment amount'' and ``Performance standards'' to read as
follows:

Sec. 412.160 Definitions for the Hospital Value-Based Purchasing
(VBP) Program.

* * * * *
Base operating DRG payment amount means the following:
(1) With respect to a subsection (d) hospital (as defined in
section 1886(d)(1)(B) of the Act), the wage-adjusted DRG operating
payment plus

[[Page 50355]]

any applicable new technology add-on payments under subpart F of this
part. This amount is determined without regard to any payment
adjustments under the Hospital Readmissions Reduction Program, as
specified under Sec. 412.154. This amount does not include any
additional payments for indirect medical education under Sec. 412.105,
the treatment of a disproportionate share of low-income patients under
Sec. 412.106, outliers under subpart F of this part, or a low volume
of discharges under Sec. 412.101.
(2) With respect to a Medicare-dependent, small rural hospital that
receives payments under Sec. 412.108(c) or a sole community hospital
that receives payments under Sec. 412.92(d), the wage-adjusted DRG
operating payment plus any applicable new technology add-on payments
under subpart F of this part. This amount does not include any
additional payments for indirect medical education under Sec. 412.105,
the treatment of a disproportionate share of low-income patients under
Sec. 412.106, outliers under subpart F of this part, or a low volume
of discharges under Sec. 412.101. With respect to a Medicare-
dependent, small rural hospital that receives payments under Sec.
412.108(c) (for discharges occurring in FY 2013) or a sole community
hospital that receives payments under Sec. 412.92(d), this amount also
does not include the difference between the hospital-specific payment
rate and the Federal payment rate determined under subpart D of this
part.
* * * * *
Performance standards are the levels of performance that hospitals
must meet or exceed in order to earn points under the Hospital VBP
Program, and are calculated with respect to a measure for a fiscal year
no later than 60 days prior to the start of the performance period for
that measure for that fiscal year. The performance standards for a
measure may be updated as follows:
(1) To make a single correction to correct a calculation error,
data issue, or other problem that would significantly change the
performance standards; or
(2) To incorporate nonsubstantive technical updates made to the
measure between the time that CMS first displays the performance
standards for that measure for a fiscal year and the time that CMS
calculates hospital performance on that measure at the conclusion of
the performance period for that measure for a fiscal year.
* * * * *

0
20. Section 412.161 is revised to read as follows:

Sec. 412.161 Applicability of the Hospital Value-Based Purchasing
(VBP) Program

The Hospital VBP Program applies to hospitals, as that term is
defined in Sec. 412.160.

Sec. 412.172 [Amended]

0
21. Section 412.172 is amended by removing and reserving paragraph (c).

0
22. Section 412.232 is amended by revising paragraph (b)(2) to read as
follows:

Sec. 412.232 Criteria for all hospitals in a rural county seeking
urban redesignation.

* * * * *
(b) * * *
(2) For fiscal years beginning with FY 2005, the group of hospitals
must demonstrate that the county in which the hospitals are located
meets the standards for redesignation to an MSA as an outlying county
using the most recent OMB standards for delineating statistical areas
adopted by CMS and the most recent Census Bureau data.
* * * * *

0
23. Section 412.234 is amended by revising paragraph (a)(3)(iv) to read
as follows:

Sec. 412.234 Criteria for all hospitals in an urban county seeking
redesignation to another urban area.

(a) * * *
(3) * * *
(iv) For Federal fiscal year 2008 and thereafter, hospitals located
in counties that are in the same Combined Statistical Area (CSA) or
Core-Based Statistical Area (CBSA) (under the most recent OMB standards
for delineating statistical areas adopted by CMS and the most recent
Census Bureau data) as the urban area to which they seek redesignation
qualify as meeting the proximity requirement for reclassification to
the urban area to which they seek redesignation.
* * * * *

0
24. Section 412.500 is amended by adding paragraphs (a)(4), (a)(5), and
(a)(6) to read as follows:

Sec. 412.500 Basis and scope of subpart.

(a) * * *
(4) Section 4302(a) of Public Law 111-5, which amended sections
114(c) and (d) of Public Law 110-173 relating to several moratoria on
the establishment of new long-term care hospitals and satellite
facilities and on the increase in the number of beds in existing long-
term care hospitals and satellite facilities under the long-term care
hospital prospective payment system.
(5) Sections 3106(a) and 10312(a) of Public Law 111-148, which
extended certain payment rules and moratoria under the long-term care
hospital prospective payment system by further amending sections 114(c)
and (d) of Public Law 110-173.
(6) Section 1206 of Public Law 113-67, which further extended
certain payment rules and moratoria under the long-term care hospital
prospective payment system by amending sections 114(c) and (d) of
Public Law 110-173, and which:
(i) Added a new section 1886(m)(6) to the Act to establish a site
neutral payment amount for long-term care hospital discharges that fail
to meet the applicable criteria in cost reporting periods beginning on
or after October 1, 2015; and
(ii) Requires the Secretary's review of the payment rates and
regulations governing long-term care hospitals established under
section 1886(d)(1)(B)(iv)(II) of the Act and application of payment
adjustments based on that review.
* * * * *

0
25. Section 412.521 is amended by revising paragraph (a)(2) to read as
follows:

Sec. 412.521 Basis for payment.

(a) * * *
(2) Except as provided for in Sec. 412.526, the amount of payment
under the prospective payment system is based on the Federal payment
rate established in accordance with Sec. 412.523, including
adjustments described in Sec. 412.525, and, if applicable during a
transition period, on a blend of the Federal payment rate and the cost-
based reimbursement rate described in Sec. 412.533.
* * * * *

0
26. Section 412.523 is amended by adding a new paragraph (c)(3)(xi) to
read as follows:

Sec. 412.523 Methodology for calculating the Federal prospective
payment rates.

* * * * *
(c) * * *
(3) * * *
(xi) For long-term care hospital prospective payment system fiscal
year beginning October 1, 2014, and ending September 30, 2015. The
standard Federal rate for the long-term care hospital prospective
payment system beginning October 1, 2014, and ending September 30,
2015, is the standard Federal rate for the previous long-term care
hospital prospective payment system fiscal year updated by 2.2 percent,
and further adjusted, as appropriate, as described in paragraph (d) of
this section.
* * * * *

[[Page 50356]]

Sec. 412.525 [Amended]

0
27. Section 412.525 is amended by removing and reserving paragraph
(d)(3).

0
28. A new Sec. 412.526 is added to read as follows:

Sec. 412.526 Payment provisions for a ``subclause (II)'' long-term
care hospital.

(a) Definition. A ``subclause (II)'' long-term care hospital is a
hospital that qualifies as an LTCH under section 1886(d)(1)(B)(iv)(II)
of the Act.
(b) Method of payment. (1) For cost reporting periods beginning on
or after October 1, 2003 and before September 30, 2014, payment to a
``subclause (II)'' long-term care hospital is made under the
prospective payment system specified in Sec. 412.1(a)(4) and Subpart O
of this part.
(2) For cost reporting periods beginning on or after October 1,
2014, payment to a ``subclause (II)'' long-term care hospital is made
under the prospective payment system specified in Sec. 412.1(a)(4) and
under Subpart O of this part, as adjusted. The adjusted payment amount
is determined based on reasonable cost, as described at Sec.
412.526(c).
(c) Determining the adjusted payment for Medicare inpatient
operating and capital-related costs under the reasonable cost-based
reimbursement rules. Medicare inpatient operating costs are paid based
on reasonable cost, subject to a ceiling. The ceiling is the aggregate
upper limit on the amount of a hospital's net Medicare inpatient
operating costs that the program will recognize for payment purposes,
as determined under paragraph (c)(1) of this section.
(1) Ceiling. For each cost reporting period, the ceiling is
determined by multiplying the updated target amount, as defined in
paragraph (c)(2) of this section, for that period by the number of
Medicare discharges paid under this subpart during that period.
(2) Target amounts. (i) For cost reporting periods beginning during
Federal fiscal year 2015, the target amount equals the hospital's
target amount determined under Sec. 413.40(c)(4) for its cost
reporting period beginning during Federal fiscal year 2000, updated by
the applicable annual rate-of-increase percentages specified in Sec.
413.40(c)(3) to the subject period.
(ii) For subsequent cost reporting periods, the target amount
equals the hospital's target amount for the previous cost reporting
period updated by the applicable annual rate-of-increase percentage
specified in Sec. 413.40(c)(3) for the subject cost reporting period.
(3) Payment for inpatient operating costs. For cost reporting
periods subject to this section, the hospital's Medicare allowable net
inpatient operating costs for that period (as defined at Sec.
413.40(a)(3)) are paid on a reasonable cost basis, subject to that
hospital's ceiling (as determined under paragraph (c)(1) of this
section) for that period.
(4) Payment for inpatient capital-related costs. Medicare allowable
net inpatient capital costs are paid on a reasonable cost basis, in
accordance with the regulations under Part 413 of this chapter.
(5) Adjustments for extraordinary circumstances--(i) General rules.
(A) CMS may adjust the ceiling determined under paragraph (c)(1) of
this section for one or more cost reporting periods when unusual
inpatient operating costs have resulted in the hospital exceeding its
ceiling imposed under this section due to extraordinary circumstances
beyond the hospital's control. These circumstances include, but are not
limited to, strikes, fire, earthquakes, floods, or similar unusual
occurrences with substantial cost effects.
(B) When the hospital requests an adjustment, CMS makes an
adjustment only to the extent that the hospital's operating costs are
reasonable, attributable to the circumstances specified separately,
identified by the hospital, and verified by the Medicare administrative
contractor.
(ii) Process for adjustment requests. The provisions of Sec. Sec.
413.40(e)(1) through (e)(5) of this subchapter are applicable to
extraordinary circumstances adjustment requests under this section.

Sec. 412.532 [Removed]

0
29. Section 412.532 is removed.
0
30. Section 412.534 is amended by--
0
a. Revising paragraphs (c)(1) introductory text and (c)(1)(i).
0
b. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraph (c)(1) and (c)(2) paragraph heading.
0
c. Revising paragraph (c)(3).
0
d. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraphs (d)(1) paragraph heading, (d)(1)(i), and (d)(2) paragraph
heading.
0
e. Revising paragraph (d)(3).
0
f. Removing the year ``2013'' and adding in its place the year ``2016''
in paragraphs (e)(1) paragraph heading, (e)(1)(i), and (e)(2) paragraph
heading.
0
g. Revising paragraph (e)(3).
0
h. Revising paragraphs (h) introductory text, (h)(4), and (h)(5).
0
i. Removing paragraph (h)(6).
The revisions read as follows:

Sec. 412.534 Special payment provisions for long-term care hospitals
within hospitals and satellites of long-term care hospitals.

* * * * *
(c) * * *
(1) For cost reporting periods beginning on or after October 1,
2004 and before October 1, 2007 and for cost reporting periods
beginning on or after October 1, 2016. (i) Except as provided in
paragraphs (c)(3), (g), and (h) of this section, for any cost reporting
period beginning on or after October 1, 2004 and before October 1,
2007, and for cost reporting periods beginning on or after October 1,
2016 in which the long-term care hospital or its satellite facility has
a discharged Medicare inpatient population of whom no more than 25
percent were admitted to the hospital or its satellite facility from
the co-located hospital, payments are made under the rules at
Sec. Sec. 412.500 through 412.541 with no adjustment under this
section.
* * * * *
(3) For a long-term care hospital satellite facility described in
Sec. 412.22(h)(3)(i), for cost reporting periods beginning on or after
July 1, 2007 and before July 1, 2016, payments will be determined using
the methodology specified in paragraph (c)(1) of this section, except
that the applicable percentage threshold for Medicare discharges is 50
percent.
(d) * * *
(3) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, payment for a long-term care hospital
satellite facility described in Sec. 412.22(h)(3)(i) will be
determined using the methodology specified in paragraph (c)(1) of this
section, except that the applicable percentage threshold for Medicare
discharges is 75 percent.
(e) * * *
(3) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, payments for a long-term care hospital
satellite facility described in Sec. 412.22(h)(3)(i) will be
determined using the methodology specified in paragraph (c)(1) of this
section, except that the applicable percentage threshold for Medicare
discharges is 75 percent.
* * * * *
(h) Effective date of policies in this section for certain co-
located long-term care hospitals and satellite facilities of long-term
care hospitals. Except as specified in paragraph (h)(4) of this
section, the policies set forth in this paragraph (h) apply to Medicare
patient discharges that were admitted from a hospital located in the
same building or on the same campus as a long-term care

[[Page 50357]]

hospital described in Sec. 412.23(e)(2)(i) that meets the criteria in
Sec. 412.22(f) and a satellite facility of a long-term care hospital
as described under Sec. 412.22(h)(3)(i) for discharges occurring in
cost reporting periods beginning on or after July 1, 2007.
* * * * *
(4) For a long-term care hospital described in Sec.
412.23(e)(2)(i) that meets the criteria in Sec. 412.22(f), the
policies set forth in this paragraph (h) and in Sec. 412.536 do not
apply for discharges occurring in cost reporting periods beginning on
or after July 1, 2007.
(5) For a long-term care hospital or a satellite facility that, as
of December 29, 2007, was co-located with an entity that is a provider-
based, off-campus location of a subsection (d) hospital which did not
provide services payable under section 1886(d) of the Act at the off-
campus location, the policies set forth in this paragraph (h) and in
Sec. 412.536 do not apply for discharges occurring in cost reporting
periods beginning on or after July 1, 2007 and before July 1, 2016.

0
31. Section 412.536 is amended by--
0
a. Removing and reserving paragraph (a)(1)(iii).
0
b. Revising paragraph (a)(2) introductory text.
0
c. Removing and reserving paragraph (a)(2)(ii).
0
d. Removing paragraph (a)(3).
The revisions read as follows:

Sec. 412.536 Special payment provisions for long-term care hospitals
and satellites of long-term care hospitals that discharged Medicare
patients admitted from a hospital not located in the same building or
on the same campus as the long-term care hospital or satellite of the
long-term care hospital.

(a) * * *
(1) * * *
(iii) [Reserved].
* * * * *
(2) For cost reporting periods beginning on or after July 1, 2007
and before July 1, 2016, the policies set forth in this section are not
applicable to discharges from:
* * * * *
(ii) [Reserved].
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
32. The authority for Part 413 continues to read as follows:

Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Nomenclature Changes

PART 413--[AMENDED]

0
33. Amend Part 413 by removing the term or phrase in the first column
and replace it with the term or phrase in the second column:

------------------------------------------------------------------------
Remove Add
------------------------------------------------------------------------
an intermediary's...................... a contractor's
fiscal intermediary.................... contractor
fiscal intermediary's.................. contractor's
intermediary........................... contractor
intermediaries......................... contractors
intermediary's......................... contractor's
------------------------------------------------------------------------

0
34. Section 413.75(b)(5) is amended by revising the definition of
``Rural track FTE limitation'' to read as follows:

Sec. 413.75 Direct GME payments: General requirements.

* * * * *
(b) * * *
(5) * * *
Rural track FTE limitation means the maximum number of residents
(as specified in Sec. 413.79(k)) training in a rural track residency
program that an urban hospital may include in its FTE count and that is
in addition to the number of FTE residents already included in the
hospital's FTE cap.
* * * * *

0
35. Section 413.78 is amended by revising paragraph (g)(6) to read as
follows:

Sec. 413.78 Direct GME payment: Determination of the total number of
FTE residents.

* * * * *
(g) * * *
(6) The provisions of paragraphs (g)(1)(ii), (g)(2), (g)(3), and
(g)(5) of this section shall not be applied in a manner that requires
reopening of any settled cost reports as to which there is not a
jurisdictionally proper appeal pending as of March 23, 2010, on direct
GME or IME payments. Cost reporting periods beginning before July 1,
2010 are not governed by paragraph (g) of this section.
* * * * *

0
36. Section 413.79 is amended by revising paragraphs (c)(6), (d)(5),
and (k)(7), to read as follows:

Sec. 413.79 Direct GME payments: Determination of the weighted number
of FTE residents.

* * * * *
(c) * * *
(6) FTE resident caps for rural hospitals that are redesignated as
urban. A rural hospital redesignated as urban after September 30, 2004,
as a result of the most recent census data and implementation of the
new MSA definitions announced by OMB on June 6, 2003, may retain the
increases to its FTE resident cap that it received under paragraphs
(c)(2)(i), (e)(1)(iii), and (e)(3) of this section while it was located
in a rural area. Effective October 1, 2014, if a rural hospital is
redesignated as urban due to the most recent OMB standards for
delineating statistical areas adopted by CMS, the redesignated urban
hospital may retain any existing increases to its FTE resident cap that
it had received prior to when the redesignation became effective.
Effective October 1, 2014, if a rural hospital is redesignated as urban
due to the most recent OMB standards for delineating statistical areas
adopted by CMS, the redesignated urban hospital may receive an increase
to its FTE resident cap for a new program, in accordance with paragraph
(e) of this section, if it received a letter of accreditation for the
new program and/or started training residents in the new program prior
to the redesignation becoming effective.
(d) * * *
(5) (i) For new programs started prior to October 1, 2012, if a
hospital qualifies for an adjustment to the limit established under
paragraph (c)(2) of this section for new medical residency programs
created under paragraph (e) of this section, the count of the residents
participating in new medical residency training programs above the
number included in the hospital's FTE count for the cost reporting
period ending during calendar year 1996 is added after applying the
averaging rules in this paragraph (d), for a period of years. Residents
participating in new medical residency training programs are included
in the hospital's FTE count before applying the averaging rules after
the period of years has expired. For purposes of this paragraph (d),
for each new program started, the period of years equals the minimum
accredited length for each new program. The period of years begins when
the first resident begins training in each new program.
(ii) For new programs started on or after October 1, 2012, for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e), FTE residents participating in new medical residency
training programs are excluded from the hospital's FTE count before
applying the averaging rules during the cost reporting periods prior to
the beginning of the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of the
first new

[[Page 50358]]

program started, for hospitals for which the FTE may be adjusted in
accordance with Sec. 413.79(e)(1), and prior to the beginning of the
applicable hospital's cost reporting period that coincides with or
follows the start of the sixth program year of the each individual new
program started, for hospitals for which the FTE cap may be adjusted in
accordance with Sec. 413.79(e)(3). Beginning with the applicable
hospital's cost reporting period that coincides with or follows the
start of the sixth program year of the first new program started for
hospitals for which the FTE cap may be adjusted in accordance with
Sec. 413.79(e)(1), and beginning with the applicable hospital's cost
reporting period that coincides with or follows the start of the sixth
program year of the each individual new program started for hospitals
for which the FTE cap may be adjusted in accordance with Sec.
413.79(e)(3), FTE residents participating in new medical residency
training programs are included in the hospital's FTE count before
applying the averaging rules.
* * * * *
(k) * * *
(7)(i) Effective prior to October 1, 2014, if an urban hospital had
established a rural track training program under the provisions of this
paragraph (k) with a hospital located in a rural area and that rural
area subsequently becomes an urban area due to the most recent census
data and implementation of the new labor market area definitions
announced by OMB on June 6, 2003, the urban hospital may continue to
adjust its FTE resident limit in accordance with this paragraph (k) for
the rural track programs established prior to the adoption of such new
labor market area definitions. In order to receive an adjustment to its
FTE resident cap for a new rural track residency program, the urban
hospital must establish a rural track program with hospitals that are
designated rural based on the most recent geographical location
delineations adopted by CMS.
(ii) Effective October 1, 2014, if an urban hospital started a
rural track training program under the provisions of this paragraph (k)
with a hospital located in a rural area and, during the 3-year period
that is used to calculate the urban hospital's rural track FTE limit,
that rural area subsequently becomes an urban area due to the most
recent OMB standards for delineating statistical areas adopted by CMS
and the most recent Census Bureau data, the urban hospital may continue
to adjust its FTE resident limit in accordance with this paragraph (k)
and subject to paragraph (k)(7)(iii) of this section for the rural
track programs started prior to the adoption of such new OMB standards
for delineating statistical areas.
(iii) Effective October 1, 2014, if an urban hospital started a
rural track training program under the provisions of this paragraph (k)
with a hospital located in a rural area and that rural area
subsequently becomes an urban area due to the most recent OMB standards
for delineating statistical areas adopted by CMS and the most recent
Census Bureau data, regardless of whether the redesignation of the
rural hospital occurs during the 3-year period that is used to
calculate the urban hospital's rural track FTE limit, or after the 3-
year period used to calculate the urban hospital's rural track FTE
limit, the urban hospital may continue to adjust its FTE resident limit
in accordance with this paragraph (k) based on the rural track programs
started prior to the change in the hospital's geographic designation.
In order for the urban hospital to receive or use the adjustment to its
FTE resident cap for training FTE residents in the rural track
residency program that was started prior to the most recent OMB
standards for delineating statistical areas adopted by CMS, one of the
following two conditions must be met by the end of a period that begins
when the most recent OMB standards for delineating statistical areas
are adopted by CMS and continues through the end of the second
residency training year following the date the most recent OMB
delineations are adopted by CMS: the hospital that has been
redesignated from rural to urban must reclassify as rural under Sec.
412.103 of this chapter, for purposes of IME only; or the urban
hospital must find a new site that is geographically rural consistent
with the most recent geographical location delineations adopted by CMS.
In order to receive an adjustment to its FTE resident cap for an
additional new rural track residency program, the urban hospital must
participate in a rural track program with sites that are geographically
rural based on the most recent geographical location delineations
adopted by CMS.
* * * * *

PART 415--SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS,
SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN
CERTAIN SETTINGS

0
37. The authority citation for Part 415 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), and sec. 124 of Pub. L. 106-113 (113 Stat.
1501A-332).

0
38. Section 415.70 is amended by revising paragraph (b) to read as
follows:

Sec. 415.70 Limits on compensation for physician services in
providers.

* * * * *
(b) Methodology for establishing limits. (1) For cost reporting
periods beginning before January 1, 2015. CMS establishes a methodology
for determining annual reasonable compensation equivalency limits and,
to the extent possible, considers average physician incomes by
specialty and type of location using the best available data.
(2) For cost reporting periods beginning on or after January 1,
2015. CMS establishes a methodology for determining annual reasonable
compensation equivalency limits and, to the extent possible, considers
average physician incomes by specialty using the best available data.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

0
39. The authority citation for Part 422 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

0
40. Section 422.300 is revised to read as follows:

Sec. 422.300 Basis and scope.

This subpart is based on sections 1106, 1128J(d), 1853, 1854, and
1858 of the Act. It sets forth the rules for making payments to
Medicare Advantage (MA) organizations offering local and regional MA
plans, including calculation of MA capitation rates and benchmarks,
conditions under which payment is based on plan bids, adjustments to
capitation rates (including risk adjustment), collection of risk
adjustment data, conditions for use and disclosure of risk adjustment
data, and other payment rules. See Sec. 422.458 in subpart J for rules
on risk sharing payments to MA regional organizations.

0
41. Section 422.310 is amended by revising paragraph (f) to read as
follows:

Sec. 422.310 Risk adjustment data.

* * * * *
(f) Use and release of data.
(1) CMS use of data. CMS may use the data described in paragraphs
(a) through (d) of this section for the following purposes:

[[Page 50359]]

(i) To determine the risk adjustment factors used to adjust
payments, as required under Sec. Sec. 422.304(a) and (c);
(ii) To update risk adjustment models;
(iii) To calculate Medicare DSH percentages;
(iv) To conduct quality review and improvement activities;
(v) For Medicare coverage purposes;
(vi) To conduct evaluations and other analysis to support the
Medicare program (including demonstrations) and to support public
health initiatives and other health care-related research;
(vii) For activities to support the administration of the Medicare
program;
(viii) For activities conducted to support program integrity; and
(ix) For purposes authorized by other applicable laws.
(2) CMS release of data. Regarding data described in paragraphs (a)
through (d) of this section, CMS may release the minimum data it
determines is necessary for one or more of the purposes listed in
paragraph (f)(1) of this section to other HHS agencies, other Federal
executive branch agencies, States, and external entities in accordance
with the following:
(i) Applicable Federal laws;
(ii) CMS data sharing procedures;
(iii) Subject to the protection of beneficiary identifier elements
and beneficiary confidentiality, including--
(A) A prohibition against public disclosure of beneficiary
identifying information;
(B) Release of beneficiary identifying information to other HHS
agencies, other Federal executive branch agencies, and States only when
such information is needed; and
(C) Release of beneficiary identifying information to external
entities only to the extent needed to link datasets.
(iv) Subject to the aggregation of dollar amounts reported for the
associated encounter to protect commercially sensitive data.
(v) Risk adjustment data other than data described in paragraphs
(f)(2)(iii) and (f)(2)(iv) of this section will be released without the
redaction or aggregation described in paragraphs (f)(2)(iii) and
(f)(2)(iv) of this section, respectively.
(3) Risk adjustment data will not become available for release
under this paragraph (f) unless--
(i) The risk adjustment reconciliation for the applicable payment
year has been completed;
(ii) CMS determines that data release is necessary under paragraph
(f)(1)(vi) of this section for emergency preparedness purposes before
reconciliation; or
(iii) CMS determines that extraordinary circumstances exist to
release the data before reconciliation.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
42. The authority citation for Part 424 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
43. Section 424.11 is amended by revising paragraph (d)(5) to read as
follows:

Sec. 424.11 General procedures.

* * * * *
(d) * * *
(5) For all inpatient hospital services, including inpatient
psychiatric facility services, a delayed certification may not extend
past discharge.
* * * * *

0
44. Section 424.15 is amended by revising paragraph (b) to read as
follows:

Sec. 424.15 Requirements for inpatient CAH services.

* * * * *
(b) Certification begins with the order for inpatient admission.
All certification requirements must be completed, signed, and
documented in the medical record no later than 1 day before the date on
which the claim for payment for the inpatient CAH service is submitted.
* * * * *

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
45. The authority citation for Part 485 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395(hh)).

0
46. Section 485.610 is amended by revising paragraph (b) introductory
text and adding a new paragraph (b)(5) to read as follows:

Sec. 485.610 Conditions of participation: Status and location.

* * * * *
(b) Standard: Location in a rural area or treatment as rural. The
CAH meets the requirements of either paragraph (b)(1) or (b)(2) of this
section or the requirements of paragraph (b)(3), (b)(4), or (b)(5) of
this section.
* * * * *
(5) Effective on or after October 1, 2014, for a period of 2 years
beginning with the effective date of the most recent Office of
Management and Budget (OMB) standards for delineating statistical areas
adopted by CMS, the CAH no longer meets the location requirements in
either paragraph (b)(1) or (b)(2) of this section and is located in a
county that, prior to the most recent OMB standards for delineating
statistical areas adopted by CMS and the most recent Census Bureau
data, was located in a rural area as defined by OMB, but under the most
recent OMB standards for delineating statistical areas adopted by CMS
and the most recent Census Bureau data, is located in an urban area.
* * * * *

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
47. The authority citation for Part 488 continues to read as follows:

Authority: Secs. 1102, 1128I, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1320a-7j, and 1395(hh)); Pub. L. 110-149, 121
Stat. 1819.

0
48. Section 488.61 is amended by--
0
a. Revising paragraphs (a)(4) and (c)(3).
0
b. Adding new paragraphs (f), (g), and (h).
The revisions and additions read as follows:

Sec. 488.61 Special procedures for approval and re-approval of organ
transplant centers.

* * * * *
(a) * * *
(4) CMS will consider mitigating factors in accordance with
paragraphs (f), (g), and (h) of this section.
* * * * *
(c) * * *
(3) CMS will consider mitigating factors in accordance with
paragraphs (f), (g), and (h) of this section.
* * * * *
(f) Consideration of mitigating factors in initial approval and re-
approval survey, certification, and enforcement actions for transplant
centers.
(1) Factors. Except for situations of immediate jeopardy or
deficiencies other than failure to meet requirements of Sec. 488.80 or
Sec. 488.82, CMS will consider such mitigating factors as may be
appropriate in light of the nature of the deficiency and circumstances,
including (but not limited to) the following, in making a decision of
initial and re-approval of a transplant center that does not meet the
data submission, clinical experience, or outcome requirements:
(i) The extent to which outcome measures are not met or exceeded;
(ii) Availability of Medicare-approved transplant centers in the
area;

[[Page 50360]]

(iii) Extenuating circumstances (for example, natural disaster)
that have a temporary effect on meeting the conditions of
participation;
(iv) Program improvements that substantially address root causes of
graft failures or patient deaths, that have been implemented and
institutionalized on a sustainable basis, and that are supported by
outcomes more recent than the latest available SRTR report, for which
there is a sufficient post-transplant patient and graft survival period
and a sufficient number of transplants such that CMS finds that the
program demonstrates present-day compliance with the requirements at
Sec. 482.80(c)(2)(ii)(C) or Sec. 482.82(c)(2)(ii)(C) of this chapter;
(v) Whether the program has made extensive use of innovative
transplantation practices relative to other transplant programs, such
as a high rate of transplantation of individuals who are highly
sensitized or children who have undergone a Fontan procedure compared
to most other transplant programs, where CMS finds that the innovative
practices are supported by evidence-based published research literature
or nationally recognized standards or Institution Review Board (IRB)
approvals, and the SRTR risk-adjustment methodology does not take the
relevant key factors into consideration; and
(vi) Whether the program's performance, based on the OPTN method of
calculating patient and graft survival, is within the OPTN's thresholds
for acceptable performance and does not flag OPTN performance review
under the applicable OPTN policy.
(2) Content. A request for consideration of mitigating factors must
include sufficient information to permit an adequate review and
understanding of the transplant program, the factors that have
contributed to outcomes, program improvements or innovations that have
been implemented or planned, and in the case of natural disasters, the
recovery actions planned. Examples of information to be submitted with
each request include (but are not limited to) the following:
(i) The name and contact information for the transplant hospital
and the names and roles of key personnel of the transplant program;
(ii) The type of organ transplant program(s) for which approval is
requested;
(iii) The conditions of participation that the program does not
meet for which the transplant center is requesting CMS' review for
mitigating factors;
(iv) The program's organizational chart with full-time equivalent
levels, roles, and structure for reporting to hospital leadership;
(v) For applications involving substandard patient or graft
survival, the rationale and supporting evidence for CMS' review
includes, but is not limited to--
(A) Root Cause Analysis for patient deaths and graft failures,
including factors the program has identified as likely causal or
contributing factors for patient deaths and graft failures;
(B) Program improvements that have been implemented and
improvements that are planned;
(C) Patient and donor/organ selection criteria and evaluation
protocols, including methods for pre-transplant patient evaluation by
cardiologists, hematologists, nephrologists, and psychiatrists or
psychologists to the extent applicable;
(D) Waitlist management protocols and practices relevant to
outcomes;
(E) Pre-operative management protocols and practices;
(F) Immunosuppression/infection prophylaxis protocols;
(G) Post-transplant monitoring and management protocols and
practices;
(H) Quality Assessment and Performance Improvement (QAPI) Program
meeting minutes from the most recent four meetings and attendance
rosters from the most recent 12 months;
(I) Quality dashboard and other performance indicators; and
(J) The most recent data regarding transplants that have been made
and for outcomes in terms of both patient survival and graft survival;
(vi) For mitigating factors requests based on innovative practice:
(A) A description of the innovations that have been implemented and
identification of the specific cases for which the innovative practices
are relevant so as to enable the patient and graft survival data for
such cases to be compared with all other transplants for at least the
period covered by the latest available SRTR report.
(B) The literature, research, or other evidentiary basis that
supports consideration of the practice(s) as innovative.
(vii) For requests based on natural disasters or public health
emergency:
(A) A description of the disaster or emergency, the specific impact
on the program, the time periods of the event(s) and of its immediate
recovery aftermath;
(B) Identification of the transplants that occurred during the
period for which the request is being made; and
(C) The approximate date when the program believes it substantially
recovered from the event(s), or believes it will recover if substantial
recovery has not been accomplished at the time of the request.
(3) Timing. Within 10 days after CMS has issued formal written
notice of a condition-level deficiency to the program, CMS must receive
notification of the program's intent to seek mitigating factors
approval or re-approval, and receive all information for consideration
of mitigating factors within 120 days of the CMS written notification
for a deficiency due to data submission, clinical experience or
outcomes at Sec. 482.80 or Sec. 482.82 of this chapter. Failure to
meet these timeframes may be the basis for denial of mitigating
factors. However, CMS may permit an extension of the timeline for good
cause, such as a declared public health emergency.
(g) Results of mitigating factors review.
(1) Actions. Upon review of the request to consider mitigating
factors, CMS may take the following actions:
(i) Approve initial approval or re-approval of a program's Medicare
participation based upon approval of mitigating factors;
(ii) Deny the program's request for Medicare approval or re-
approval based on mitigating factors.
(iii) Offer a time-limited Systems Improvement Agreement, in
accordance with paragraph (h) of this section, when a transplant
program has waived its appeal rights, has implemented substantial
program improvements that address root causes and are institutionally
supported by the hospital's governing body on a sustainable basis, and
has requested more time to design or implement additional improvements
or demonstrate compliance with CMS outcome requirements. Upon
completion of the Systems Improvement Agreement or a CMS finding that
the hospital has failed to meet the terms of the Agreement, CMS makes a
final determination of whether to approve or deny a program's request
for Medicare approval or re-approval based on mitigating factors. A
Systems Improvement Agreement follows the process specified in
paragraph (h) of this section.
(2) Limitation. CMS will not approve any program with a condition-
level deficiency. However, CMS may approve a program with a standard-
level deficiency upon receipt of an acceptable plan of correction.
(h) Transplant Systems Improvement Agreement. A Systems Improvement
Agreement is a binding agreement, entered into voluntarily by the
hospital

[[Page 50361]]

and CMS, through which CMS extends a prospective Medicare termination
date and offers the program additional time to achieve compliance with
the conditions of participation, contingent on the hospital's agreement
to participate in a structured regimen of quality improvement
activities, demonstrate improved outcomes, and waive the right to
appeal termination based on the identified deficiency or deficiencies
(that led to the Agreement) in consideration for more time to
demonstrate compliance. In some cases, transplant programs may enter a
period of inactivity--voluntarily, or imposed as a condition of the
Systems Improvement Agreement.
(1) Content. In exchange for the additional time to initiate or
continue activities to achieve compliance with the conditions of
participation, the hospital must agree to a regimen of specified
activities, including (but not limited to) all of the following:
(i) Patient notification about the degree and type of noncompliance
by the program, an explanation of what the program improvement efforts
mean for patients, and financial assistance to defray the out-of-pocket
costs of copayments and testing expenses for any wait-listed individual
who wishes to be listed with another program;
(ii) An external independent peer review team that conducts an
onsite assessment of the program. The peer review must include--
(A) Review of policies, staffing, operations, relationship to
hospital services, and factors that contribute to program outcomes;
(B) Suggestions for quality improvements the hospital should
consider;
(C) Both verbal and written feedback provided directly to the
hospital;
(D) Verbal debriefing provided directly to CMS; neither the
hospital nor the peer review team is required to provide a written
report to CMS; and
(E) Onsite review by a multidisciplinary team that includes a
transplant surgeon with expertise in the relevant organ type(s), a
transplant administrator, an individual with expertise in transplant
QAPI systems, a social worker or psychologist or psychiatrist, and a
specialty physician with expertise in conditions particularly relevant
to the applicable organ types(s) such as a cardiologist, nephrologist,
or hepatologist. Except for the transplant surgeon, CMS may permit
substitution of one type of expertise for another individual who has
expertise particularly needed for the type of challenges experienced by
the program, such as substitution of an infection control specialist in
lieu of, or in addition to, a social worker;
(iii) An action plan that addresses systemic quality improvements
and is updated after the onsite peer review;
(iv) An onsite consultant whose qualifications are approved by CMS,
and who provides services for 8 days per month on average for the
duration of the agreement, except that CMS may permit a portion of the
time to be spent offsite and may agree to fewer consultant days each
month after the first 3 months of the Systems Improvement Agreement;
(v) A comparative effectiveness analysis that compares policies,
procedures, and protocols of the transplant program with those of other
programs in areas of endeavor that are relevant to the center's current
quality improvement needs;
(vi) Development of increased proficiency, or demonstration of
current proficiency, with patient-level data from the Scientific
Registry of Transplant Recipients and the use of registry data to
analyze outcomes and inform quality improvement efforts;
(vii) A staffing analysis that examines the level, type, training,
and skill of staff in order to inform transplant center efforts to
ensure the engagement and appropriate training and credentialing of
staff;
(viii) Activities to strengthen performance of the Quality
Assessment and Performance Improvement Program to ensure full
compliance with the requirements of Sec. 482.96 and Sec. 482.21 of
this chapter;
(ix) Monthly (unless otherwise specified) reporting and conference
calls with CMS regarding the status of programmatic improvements,
results of the deliverables in the Systems Improvement Agreement, and
the number of transplants, deaths, and graft failures that occur within
1 year post-transplant; and
(x) Additional or alternative requirements specified by CMS,
tailored to the transplant program type and circumstances. CMS may
waive the content elements at paragraphs (h)(1)(v), (h)(1)(vi),
(h)(1)(vii), or (h)(1)(viii) of this section if it finds that the
program has already adequately conducted the activity, the program is
already proficient in the function, or the activity is clearly
inapplicable to the deficiencies that led to the Agreement.
(2) Timeframe. A Systems Improvement Agreement will be established
for up to a 12-month period, subject to CMS' discretion to determine if
a shorter timeframe may suffice. At the hospital's request, CMS may
extend the agreement for up to an additional 6-month period.

Dated: July 24, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: July 29, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.

Note: The following Addendum and Appendixes will not appear in
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective with Cost Reporting Periods Beginning on
or after October 1, 2014, and Payment Rates for LTCHs Effective for
Discharges Occurring on or after October 1, 2014

I. Summary and Background

In this Addendum, we are setting forth a description of the methods
and data we used to determine the prospective payment rates for
Medicare hospital inpatient operating costs and Medicare hospital
inpatient capital-related costs for FY 2015 for acute care hospitals.
We also are setting forth the rate-of-increase percentages for updating
the target amounts for certain hospitals excluded from the IPPS for FY
2015. We note that, because certain hospitals excluded from the IPPS
are paid on a reasonable cost basis subject to a rate-of-increase
ceiling (and not by the IPPS), these hospitals are not affected by the
figures for the standardized amounts, offsets, and budget neutrality
factors. Therefore, in this final rule, we are establishing the rate-
of-increase percentages for updating the target amounts for certain
hospitals excluded from the IPPS that are effective for cost reporting
periods beginning on or after October 1, 2014.
In addition, we are setting forth a description of the methods and
data we used to determine the standard Federal rate that will be
applicable to Medicare LTCHs for FY 2015.
In general, except for SCHs, MDHs and hospitals located in Puerto
Rico, for FY 2015, each hospital's payment per discharge under the IPPS
is based on 100 percent of the Federal national rate, also known as the
national adjusted standardized amount. This amount reflects the
national average hospital cost per case from a base year, updated for
inflation.
SCHs are paid based on whichever of the following rates yields the
greatest aggregate payment: the Federal national rate (including, as
discussed in section IV.F. of the preamble of this final rule,

[[Page 50362]]

uncompensated care payments under section 1886(r)(2) of the Act); the
updated hospital-specific rate based on FY 1982 costs per discharge;
the updated hospital-specific rate based on FY 1987 costs per
discharge; the updated hospital-specific rate based on FY 1996 costs
per discharge; or the updated hospital-specific rate based on FY 2006
costs per discharge.
We note that, as discussed in section IV.G. of the preamble of this
final rule, section 1106 of Public Law 113-67, enacted on December 26,
2013, extended the MDH program from the end of FY 2013 (that is, for
discharges occurring after September 30, 2013) through the first half
of FY 2014 (that is, for discharges occurring before April 1, 2014).
Subsequently, section 106 of Public Law 113-93, enacted on April 1,
2014, further extended the MDH program through the first half of FY
2015 (that is, for discharges occurring before April 1, 2015). Prior to
the enactment of Public Law 113-67, the MDH program was only to be in
effect through the end of FY 2013. Under current law, the MDH program
will expire for discharges on or after April 1, 2015.
Under section 1886(d)(5)(G) of the Act, MDHs historically have been
paid based on the Federal national rate or, if higher, the Federal
national rate plus 50 percent of the difference between the Federal
national rate and the updated hospital-specific rate based on FY 1982,
FY 1987, or FY 2002 costs per discharge, whichever was higher. Section
5003(c) of Public Law 109-171 further required that MDHs be paid based
on the Federal national rate or, if higher, the Federal national rate
plus 75 percent of the difference between the Federal national rate and
the updated hospital-specific rate. Further, based on the provisions of
section 5003(d) of Public Law 109-171, MDHs are no longer subject to
the 12-percent cap on their DSH payment adjustment factor.
For hospitals located in Puerto Rico, the payment per discharge is
based on the sum of 25 percent of an updated Puerto Rico-specific rate
based on average costs per case of Puerto Rico hospitals for the base
year and 75 percent of the Federal national rate. (We refer readers to
section II.D.2. of this Addendum for a complete description.)
As discussed below in section II. of this Addendum, we are making
changes in the determination of the prospective payment rates for
Medicare inpatient operating costs for acute care hospitals for FY
2015. In section III. of this Addendum, we discuss our policy changes
for determining the prospective payment rates for Medicare inpatient
capital-related costs for FY 2015. In section IV. of this Addendum, we
are setting forth our changes for determining the rate-of-increase
limits for certain hospitals excluded from the IPPS for FY 2015. In
section V. of this Addendum, we discuss policy changes for determining
the standard Federal rate for LTCHs paid under the LTCH PPS for FY
2015. The tables to which we refer in the preamble of this final rule
are listed in section VI. of this Addendum and are available via the
Internet on the CMS Web site.

II. Changes to Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2015

The basic methodology for determining prospective payment rates for
hospital inpatient operating costs for acute care hospitals for FY 2005
and subsequent fiscal years is set forth under Sec. 412.64. The basic
methodology for determining the prospective payment rates for hospital
inpatient operating costs for hospitals located in Puerto Rico for FY
2005 and subsequent fiscal years is set forth under Sec. Sec. 412.211
and 412.212. Below we discuss the factors we are using for determining
the prospective payment rates for FY 2015.
In summary, the standardized amounts set forth in Tables 1A, 1B,
and 1C that are listed and published in section VI. of this Addendum
(and available via the Internet) reflect--
Equalization of the standardized amounts for urban and
other areas at the level computed for large urban hospitals during FY
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of
the Act.
The labor-related share that is applied to the
standardized amounts and Puerto Rico-specific standardized amounts to
give the hospital the highest payment, as provided for under sections
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2015, depending
on whether a hospital submits quality data under the rules established
in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter
referred to as a hospital that submits quality data) and is a
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
there are four possible applicable percentage increases that can be
applied to the national standardized amount. We refer readers to
section IV.B. of the preamble of this final rule for a complete
discussion on the FY 2015 inpatient hospital update. Below is a table
with these four options:

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2015 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
User User User User
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........ 2.9 2.9 2.9 2.9
Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.725 -0.725
under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR 0.0 -0.725 0.0 -0.725
User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi) -0.5 -0.5 -0.5 -0.5
of the Act.....................................
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to 2.2 1.475 1.475 0.75
Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

An update of 2.2 percent to the Puerto Rico-specific
standardized amount (that is, the FY 2015 estimate of the market basket
rate-of-increase of 2.9 percent less an adjustment of 0.5 percentage
point for MFP and less 0.2 percentage point), in accordance with
section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of
Public Law 108-173, which sets the update to the Puerto Rico-specific
standardized amount equal to the applicable percentage increase set
forth under section 1886(b)(3)(B)(i) of the Act.
An adjustment to the standardized amount to ensure budget
neutrality for DRG recalibration and reclassification, as provided for
under section 1886(d)(4)(C)(iii) of the Act.
An adjustment to ensure the wage index changes are budget
neutral, as

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provided for under section 1886(d)(3)(E)(i) of the Act. We note that
section 1886(d)(3)(E)(i) of the Act requires that when we compute such
budget neutrality, we assume that the provisions of section
1886(d)(3)(E)(ii) of the Act (requiring a 62 percent labor-related
share in certain circumstances) had not been enacted.
An adjustment to ensure the effects of geographic
reclassification are budget neutral, as provided for under section
1886(d)(8)(D) of the Act, by removing the FY 2014 budget neutrality
factor and applying a revised factor.
As discussed below and in section III. of the preamble of
this final rule, an adjustment to offset the cost of the transitional
wage index provisions provided by CMS as a result of the adoption of
the new OMB labor market area delineations.
An adjustment to ensure the effects of the rural community
hospital demonstration program required under section 410A of Public
Law 108-173, as amended by sections 3123 and 10313 of Public Law 111-
148, which extended the demonstration program for an additional 5
years, are budget neutral as required under section 410A(c)(2) of
Public Law 108-173.
An adjustment to remove the FY 2014 outlier offset and
apply an offset for FY 2015, as provided for under section
1886(d)(3)(B) of the Act.
As discussed below and in section II.D. of the preamble of
this final rule, a recoupment to meet the requirements of section 631
of ATRA to adjust the standardized amount to offset the estimated
amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013.
Beginning in FY 2008, we applied the budget neutrality adjustment
for the rural floor to the hospital wage indexes rather than the
standardized amount. As we did for FY 2014, for FY 2015, consistent
with current law, we are continuing to apply the rural floor budget
neutrality adjustment to hospital wage indexes rather than the
standardized amount. Also, consistent with section 3141 of the
Affordable Care Act, instead of applying a State level rural floor
budget neutrality adjustment to the wage index, we are applying a
uniform, national budget neutrality adjustment to the FY 2015 wage
index for the rural floor. We note that, in section III.G.2.b. of the
preamble to this final rule, we are extending the imputed floor policy
(both the original methodology and alternative methodology) for another
year, through September 30, 2015.
Therefore, for FY 2015, in this final rule, we are continuing to
include the imputed floor (calculated under the original and
alternative methodologies) in calculating the uniform, national rural
floor budget neutrality adjustment, which will be reflected in the FY
2015 wage index.

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts
In general, the national standardized amount is based on per
discharge averages of adjusted hospital costs from a base period
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in
accordance with the provisions of section 1886(d) of the Act. For
Puerto Rico hospitals, the Puerto Rico-specific standardized amount is
based on per discharge averages of adjusted target amounts from a base
period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise
adjusted in accordance with the provisions of section 1886(d)(9) of the
Act. The September 1, 1983 interim final rule (48 FR 39763) contained a
detailed explanation of how base-year cost data (from cost reporting
periods ending during FY 1981) were established for urban and rural
hospitals in the initial development of standardized amounts for the
IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains
a detailed explanation of how the target amounts were determined and
how they are used in computing the Puerto Rico rates.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to
update base-year per discharge costs for FY 1984 and then standardize
the cost data in order to remove the effects of certain sources of cost
variations among hospitals. These effects include case-mix, differences
in area wage levels, cost-of-living adjustments for Alaska and Hawaii,
IME costs, and costs to hospitals serving a disproportionate share of
low-income patients.
In accordance with section 1886(d)(3)(E) of the Act, the Secretary
estimates, from time-to-time, the proportion of hospitals' costs that
are attributable to wages and wage-related costs. In general, the
standardized amount is divided into labor-related and nonlabor-related
amounts; only the proportion considered to be the labor-related amount
is adjusted by the wage index. Section 1886(d)(3)(E) of the Act
requires that 62 percent of the standardized amount be adjusted by the
wage index, unless doing so would result in lower payments to a
hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II)
of the Act extends this provision to the labor-related share for
hospitals located in Puerto Rico.)
For FY 2015, we are using the national and Puerto Rico-specific
labor-related and nonlabor-related shares established for FY 2014,
using the FY 2010-based hospital market basket. Specifically, under
section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to
time, the proportion of payments that are labor-related: ``[T]he
Secretary shall adjust the proportion, (as estimated by the Secretary
from time to time) of hospitals' costs which are attributable to wages
and wage-related costs, of the DRG prospective payment rates . . . .''
We refer to the proportion of hospitals' costs that are attributable to
wages and wage-related costs as the ``labor-related share.'' For FY
2015, as discussed in section III. of the preamble of this final rule,
we are continuing to use a labor-related share of 69.6 percent for the
national standardized amounts, and 63.2 percent for the Puerto Rico-
specific standardized amount, if the hospital has a wage index value
that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of
the Act, we are applying the wage index to a labor-related share of 62
percent of the national standardized amount for all IPPS hospitals
whose wage index values are less than or equal to 1.0000. For all IPPS
hospitals whose wage indexes are greater than 1.0000, we are applying
the wage index to a labor-related share of 69.6 percent of the national
standardized amount.
For FY 2015, all Puerto Rico hospitals have a wage index value that
is less than 1.0000 because the average hourly rate of every hospital
in Puerto Rico divided by the national average hourly rate (the sum of
all salaries and hours for all hospitals in the 50 United States and
Puerto Rico) results in a wage index that is below 1.0000. However,
when we divide the average hourly rate of every hospital located in
Puerto Rico by the Puerto Rico-specific national average hourly rate
(the sum of all salaries and hours for all hospitals located only in
Puerto Rico), we determine a Puerto Rico-specific wage index value for
some hospitals that is either above, or below 1.0000, depending on the
hospital's location within Puerto Rico. Therefore, for hospitals
located in Puerto Rico, we are applying a labor-related share of 63.2
percent if its Puerto Rico-specific wage index is greater than 1.0000.
For hospitals located in Puerto Rico whose Puerto Rico-specific wage
index values are less than or equal to 1.0000, we are applying a labor
share of 62 percent.

[[Page 50364]]

The standardized amounts for operating costs appear in Tables 1A,
1B, and 1C that are listed and published in section VI. of the Addendum
to this final rule and are available via the Internet on the CMS Web
site.
2. Computing the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning
with FY 2004 and thereafter, an equal standardized amount be computed
for all hospitals at the level computed for large urban hospitals
during FY 2003, updated by the applicable percentage update. Section
1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific
urban and rural area rates. Accordingly, we are calculating the FY 2015
national average standardized amount and Puerto Rico-specific
standardized amount irrespective of whether a hospital is located in an
urban or rural location.
3. Updating the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
Section 1886(b)(3)(B) of the Act specifies the applicable
percentage increase used to update the standardized amount for payment
for inpatient hospital operating costs. We note that, in compliance
with section 404 of the MMA, in this final rule, we are using the
revised and rebased FY 2010-based IPPS operating and capital market
baskets for FY 2015 (which replaced the FY 2006-based IPPS operating
and capital market baskets in FY 2014). As discussed in section IV.B.
of the preamble of this final rule, in accordance with section
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the
Affordable Care Act, we are reducing the FY 2015 applicable percentage
increase (which is based on IHS Global Insight, Inc.'s (IGI's) second
quarter 2014 forecast of the FY 2010-based IPPS market basket) by the
MFP adjustment (the 10-year moving average of MFP for the period ending
FY 2015) of 0.5 percentage point, which is calculated based on IGI's
second quarter 2014 forecast.
In addition, in accordance with section 1886(b)(3)(B)(i) of the
Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care
Act, we are further updating the standardized amount for FY 2015 by the
estimated market basket percentage increase less 0.2 percentage point
for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of the
Act, as added and amended by sections 3401(a) and 10319(a) of the
Affordable Care Act, further state that these adjustments may result in
the applicable percentage increase being less than zero. The percentage
increase in the market basket reflects the average change in the price
of goods and services comprising routine, ancillary, and special care
unit hospital inpatient services.
Based on IGI's 2014 second quarter forecast of the hospital market
basket increase (as discussed in Appendix B of this final rule), the
most recent forecast of the hospital market basket increase for FY 2015
is 2.9 percent. As discussed above, for FY 2015, depending on whether a
hospital submits quality data under the rules established in accordance
with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR
user under section 1886(b)(3)(B)(ix) of the Act, there are four
possible applicable percentage increases that could be applied to the
standardized amount. We refer readers to section IV. of the preamble of
this final rule for a complete discussion on the FY 2015 inpatient
hospital update to the standardized amount. We also refer readers to
the table above for the four possible applicable percentage increases
that would be applied to update the national standardized amount. The
standardized amounts shown in Tables 1A through 1C that are published
in section VI. of this Addendum and that are available via the Internet
on the CMS Web site reflect these differential amounts.
Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges occurring
in a fiscal year (beginning with FY 2004), the Secretary shall compute
an average standardized amount for hospitals located in any area of
Puerto Rico that is equal to the average standardized amount computed
under subclause (I) for FY 2003 for hospitals in a large urban area
(or, beginning with FY 2005, for all hospitals in the previous fiscal
year) increased by the applicable percentage increase under subsection
(b)(3)(B) for the fiscal year involved. Therefore, the update to the
Puerto Rico-specific operating standardized amount is subject to the
applicable percentage increase set forth under section 1886(b)(3)(B)(i)
of the Act, as amended by sections 3401(a) and 10319(a) of the
Affordable Care Act (that is, the same update factor as for all other
hospitals subject to the IPPS). Accordingly, we are establishing an
applicable percentage increase to the Puerto Rico-specific standardized
amount of 2.2 percent for FY 2015.
Although the update factors for FY 2015 are set by law, we are
required by section 1886(e)(4) of the Act to recommend, taking into
account MedPAC's recommendations, appropriate update factors for FY
2015 for both IPPS hospitals and hospitals and hospital units excluded
from the IPPS. Section 1886(e)(5)(A) of the Act requires that we
publish our proposed recommendations in the Federal Register for public
comment. Our recommendation on the update factors is set forth in
Appendix B of this final rule.
4. Other Adjustments to the Average Standardized Amount
As in the past, we are adjusting the FY 2015 standardized amount to
remove the effects of the FY 2014 geographic reclassifications and
outlier payments before applying the FY 2015 updates. We then apply
budget neutrality offsets for outliers and geographic reclassifications
to the standardized amount based on FY 2015 payment policies.
We do not remove the prior year's budget neutrality adjustments for
reclassification and recalibration of the DRG relative weights and for
updated wage data because, in accordance with sections
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate
payments after updates in the DRG relative weights and wage index
should equal estimated aggregate payments prior to the changes. If we
removed the prior year's adjustment, we would not satisfy these
conditions.
Budget neutrality is determined by comparing aggregate IPPS
payments before and after making changes that are required to be budget
neutral (for example, changes to MS-DRG classifications, recalibration
of the MS-DRG relative weights, updates to the wage index, and
different geographic reclassifications). We include outlier payments in
the simulations because they may be affected by changes in these
parameters.
In order to appropriately estimate aggregate payments in our
modeling, we make several inclusions and exclusions so that the
appropriate universe of claims and charges are included. We discuss IME
Medicare Advantage payment amounts, fee-for-service only claims, and
charges for anti-hemophilic blood factor and organ acquisition below.
Consistent with our methodology established in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare
Advantage payments are made to IPPS hospitals under section 1886(d) of
the Act, we believe these payments must be part of these budget
neutrality calculations. However, we note that it is

[[Page 50365]]

not necessary to include Medicare Advantage IME payments in the outlier
threshold calculation or the outlier offset to the standardized amount
because the statute requires that outlier payments be not less than 5
percent nor more than 6 percent of total ``operating DRG payments,''
which does not include IME and DSH payments. We refer readers to the FY
2011 IPPS/LTCH PPS final rule for a complete discussion on our
methodology of identifying and adding the total Medicare Advantage IME
payment amount to the budget neutrality adjustments.
In addition, consistent with the methodology in the FY 2012 IPPS/
LTCH PPS final rule, in order to ensure that we capture only fee-for-
service claims, we are only including claims with a ``Claim Type'' of
60 (which is a field on the MedPAR file that indicates a claim is a
fee-for-service claim).
Finally, consistent with our methodology established in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the
MedPAR file and removed pharmacy charges for anti-hemophilic blood
factor (which are paid separately under the IPPS) with an indicator of
``3'' for blood clotting with a revenue code of ``0636'' from the
covered charge field for the budget neutrality adjustments. We also
removed organ acquisition charges from the covered charge field for the
budget neutrality adjustments because organ acquisition is a pass-
through payment not paid under the IPPS.
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS Center
for Medicare and Medicaid Innovation's Web site at: https://innovation.cms.gov/initiatives/Bundled-Payments/.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through
53343), for FY 2013 and subsequent fiscal years, we finalized a
methodology to treat hospitals that participate in the BPCI initiative
the same as prior fiscal years for the IPPS payment modeling and
ratesetting process (which includes recalibration of the MS-DRG
relative weights, ratesetting, calculation of the budget neutrality
factors, and the impact analysis) without regard to a hospital's
participation within these bundled payment models (that is, as if they
are not participating in those models under the BPCI initiative).
Therefore, for FY 2015, as discussed in section II.H.4. of the preamble
to this final rule, as we proposed, we are continuing to include all
applicable data from subsection (d) hospitals participating in BPCI
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals in the BPCI initiative in our ratesetting process.
The Affordable Care Act established the Hospital Readmissions
Reduction Program and the Hospital VBP Program which adjust payments to
certain IPPS hospitals beginning with discharges on or after October 1,
2012. Because the adjustments made under these programs affect the
estimation of aggregate IPPS payments, in this final rule, consistent
with our methodology established in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53687 through 53688), we believe that it is appropriate to
include adjustments for these programs within our budget neutrality
calculations. We discuss the treatment of these two programs in the
context of budget neutrality adjustments below.
Section 1886(q) of the Act establishes the ``Hospital Readmissions
Reduction Program'' effective for discharges from an ``applicable
hospital'' beginning on or after October 1, 2012, under which payments
to those hospitals under section 1886(d) of the Act are reduced to
account for certain excess readmissions. Under the Hospital
Readmissions Reduction Program, for discharges beginning on October 1,
2012 discharges from an ``applicable hospital'' are paid at an amount
equal to the product of the ``base operating DRG payment amount'' and
an ``adjustment factor'' that accounts for excess readmissions for the
hospital for the fiscal year plus any applicable add-on payments. We
refer readers to section IV.H. of the preamble of this final rule for
full details of our implementation of and FY 2015 policy changes to the
Hospital Readmissions Reduction Program. We also note that the Hospital
Readmissions Reduction Program provided for under section 1886(q) of
the Act is not budget neutral.
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which, for discharges beginning on October
1, 2012, value-based incentive payments are made in a fiscal year to
eligible subsection (d) hospitals that meet performance standards
established for a performance period for that fiscal year. As specified
under section 1886(o)(7)(B)(i) of the Act, these value-based incentive
payments are funded by a reduction applied to each eligible hospital's
base-operating DRG payment amount, for each discharge occurring in the
fiscal year. As required by section 1886(o)(7)(A) of the Act, the total
amount of allocated funds available for value-based incentive payments
with respect to a fiscal year is equal to the total amount of base-
operating DRG payment reductions, as estimated by the Secretary. In a
given fiscal year, hospitals may earn a value-based incentive payment
amount for a fiscal year that is greater than, equal to, or less than
the reduction amount, based on their performance on quality measures
under the Hospital VBP Program. Thus, the Hospital VBP Program is
estimated to have no net effect on overall payments. We refer readers
to section IV.I. of the preamble of this final rule for full details
regarding the Hospital VBP Program.
Both the hospital readmissions payment adjustment (reduction) and
the hospital VBP payment adjustment (redistribution) are applied on a
claim-by-claim basis by adjusting, as applicable, the base-operating
DRG payment amount for individual subsection (d) hospitals, which
affects the overall sum of aggregate payments on each side of the
comparison within the budget neutrality calculations. For example, when
we calculate the budget neutrality factor for MS-DRG reclassification
and recalibration of the relative weights, we compare aggregate
payments estimated using the prior year's GROUPER and relative weights
to estimated payments using the new GROUPER and relative weights. (We
refer readers to section II.A.4.a. of this Addendum for full details.)
Other factors, such as the DSH and IME payment adjustments, are the
same on both sides of the comparison because we are only seeking to
ensure that aggregate payments do not increase or decrease as a result
of the changes of MS-DRG reclassification and recalibration.
In order to properly determine aggregate payments on each side of
the comparison, as we did for FY 2014, for FY 2015 and subsequent
years, we are continuing to apply the hospital readmissions payment
adjustment and the hospital VBP payment adjustment on each side of the
comparison, consistent with the methodology that

[[Page 50366]]

we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through
53688). That is, we are applying the readmissions payment adjustment
factor and the hospital VBP payment adjustment factor on both sides of
our comparison of aggregate payments when determining all budget
neutrality factors described in section II.A.4. of this Addendum.
For the purpose of calculating the FY 2015 readmissions payment
adjustment factors, we are using excess readmission ratios and
aggregate payments for excess readmissions based on admissions from the
prior fiscal year's applicable period because hospitals have had the
opportunity to review and correct these data before the data were made
public under the policy we adopted regarding the reporting of hospital-
specific readmission rates, consistent with section 1886(q)(6) of the
Act. For FY 2015, in this final rule, we are calculating the
readmissions payment adjustment factors using excess readmission ratios
and aggregate payments for excess readmissions based on admissions from
the finalized applicable period for FY 2015 as hospitals have had the
opportunity to review and correct these data under our policy regarding
the reporting of hospital-specific readmission rates consistent with
section 1886(q)(6) of the Act. We discuss our policy regarding the
reporting of hospital-specific readmission rates for FY 2015 in section
IV.H.3.f. of the preamble of this final rule. (For additional
information on our general policy for the reporting of hospital-
specific readmission rates, consistent with section 1886(q)(6) of the
Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53399 through 53400).)
In addition, for FY 2015, in this final rule, for the purpose of
modeling aggregate payments when determining all budget neutrality
factors, we are using proxy hospital VBP payment adjustment factors for
FY 2015 that are based on data from a historical period because
hospitals have not yet had an opportunity to review and submit
corrections for their data from the FY 2015 performance period. (For
additional information on our policy regarding the review and
correction of hospital-specific measure rates under the Hospital VBP
Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578
through 53581), the CY 2012 OPPS/ASC final rule with comment period (76
FR 74544 through 74547), and the Hospital Inpatient VBP final rule (76
FR 26534 through 26536).)
The Affordable Care Act also established section 1886(r) of the
Act, which modifies the methodology for computing the Medicare DSH
payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS
hospitals receiving Medicare DSH payment adjustments will receive an
empirically justified Medicare DSH payment equal to 25 percent of the
amount that would previously have been received under the current
statutory formula set forth under section 1886(d)(5)(F) of the Act
governing the Medicare DSH payment adjustment. In accordance with
section 1886(r)(2) of the Act, the remaining amount, equal to an
estimate of 75 percent of what otherwise would have been paid as
Medicare DSH payments, reduced to reflect changes in the percentage of
individuals under age 65 who are uninsured, will be available to make
additional payments to Medicare DSH hospitals based on their share of
the total amount of uncompensated care reported by Medicare DSH
hospitals for a given time period. In order to properly determine
aggregate payments on each side of the comparison for budget
neutrality, prior to FY 2014, we included estimated Medicare DSH
payments on both sides of our comparison of aggregate payments when
determining all budget neutrality factors described in section II.A.4.
of this Addendum.
To do this for FY 2015 and subsequent years (as we did for FY
2014), we are including estimated empirically justified Medicare DSH
payments that will be paid in accordance with section 1886(r)(1) of the
Act and estimates of the additional uncompensated care payments made to
hospitals receiving Medicare DSH payment adjustments as described by
section 1886(r)(2) of the Act. That is, we are considering estimated
empirically justified Medicare DSH payments at 25 percent of what would
otherwise have been paid, and also the estimated additional
uncompensated care payments for hospitals receiving Medicare DSH
payment adjustments on both sides of our comparison of aggregate
payments when determining all budget neutrality factors described in
section II.A.4. of this Addendum.
We note that, when calculating total payments for budget
neutrality, to determine total payments for SCHs we model total
hospital-specific rate payments and total Federal rate payments and
then include whichever one of the total payments is greater. As
discussed in section IV.F. of the preamble to this final rule and
below, we are continuing the FY 2014 finalized methodology under which
we will take into consideration uncompensated care payments in the
comparison of payments under the Federal rate and the hospital-specific
rate for SCHs. Therefore, we are including estimated uncompensated care
payments in this comparison.
Similarly, for MDHs, as discussed in section IV. of the preamble to
this final rule, when computing payments under the Federal national
rate plus 75 percent of the difference between the payments under the
Federal national rate and the payments under the updated hospital-
specific rate, we are continuing to take into consideration
uncompensated care payments in the computation of payments under the
Federal rate and the hospital-specific rate for MDHs.
Also, for FY 2015, as of the time of development of this final
rule, CMS has yet to finalize a list of hospitals that are not
meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.
Therefore, we are not including this adjustment to the standardized
amount (for those hospitals that are not meaningful EHR users) in our
modeling of aggregate payments for budget neutrality for FY 2015. CMS
intends to release a final list of hospitals that are not meaningful
EHR users in September 2014. Hospitals identified on this list will be
paid based on the applicable standardized amount in Tables 1A and 1B
for discharges occurring in FY 2015.
We finally note that the wage index value is calculated and
assigned to a hospital based on the hospital's labor market area. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by the Office of Management and Budget (OMB). The
current statistical areas used in FY 2014 are based on OMB standards
published on December 27, 2000 (65 FR 82228) and Census 2000 data and
Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No.
10-02). For purposes of determining all of the FY 2014 budget
neutrality factors, we determined aggregate payments on each side of
the comparison for our budget neutrality calculations using wage
indexes based on the current CBSAs.
As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552)
and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB
Bulletin No. 13-01, which established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas, and provided guidance on the use of the
delineations of these statistical areas. In order to implement these
changes for the IPPS, it was necessary to identify the

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new OMB labor market area delineation for each county and hospital in
the country. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), we
stated that we intended to propose changes to the wage index policy
based on the new OMB delineations in the FY 2015 IPPS/LTCH PPS proposed
rule. As discussed in section III. of the preamble of this final rule,
as we proposed, we are adopting the new OMB labor market area
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective for the FY 2015 IPPS wage index.
Consistent with our policy to adopt the new OMB delineations, in
order to properly determine aggregate payments on each side of the
comparison for our budget neutrality calculations, we are using wage
indexes based on the new OMB delineations in the determination of all
of the budget neutrality factors discussed below (with the exception of
the transitional budget neutrality factor and outlier threshold as
explained below). We also note that, consistent with past practice as
finalized in the FY 2005 IPPS final rule (69 FR 49034), we are not
adopting the new OMB delineations themselves in a budget neutral
manner. We continue to believe that the revision to the labor market
areas in and of itself does not constitute an ``adjustment or update''
to the adjustment for area wage differences, as provided under section
1886(d)(3)(E) of the Act.
a. Recalibration of MS-DRG Relative Weights and Updated Wage Index--
Budget Neutrality Adjustment
Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in
FY 1991, the annual DRG reclassification and recalibration of the
relative weights must be made in a manner that ensures that aggregate
payments to hospitals are not affected. As discussed in section II.H.
of the preamble of this final rule, we normalized the recalibrated MS-
DRG relative weights by an adjustment factor so that the average case
relative weight after recalibration is equal to the average case
relative weight prior to recalibration. However, equating the average
case relative weight after recalibration to the average case relative
weight before recalibration does not necessarily achieve budget
neutrality with respect to aggregate payments to hospitals because
payments to hospitals are affected by factors other than average case
relative weight. Therefore, as we have done in past years, we are
making a budget neutrality adjustment to ensure that the requirement of
section 1886(d)(4)(C)(iii) of the Act is met.
Section 1886(d)(3)(E)(i) of the Act requires us to update the
hospital wage index on an annual basis beginning October 1, 1993. This
provision also requires us to make any updates or adjustments to the
wage index in a manner that ensures that aggregate payments to
hospitals are not affected by the change in the wage index. Section
1886(d)(3)(E)(i) of the Act requires that we implement the wage index
adjustment in a budget neutral manner. However, section
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent
for hospitals with a wage index less than or equal to 1.0000, and
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall
calculate the budget neutrality adjustment for the adjustments or
updates made under that provision as if section 1886(d)(3)(E)(ii) of
the Act had not been enacted. In other words, this section of the
statute requires that we implement the updates to the wage index in a
budget neutral manner, but that our budget neutrality adjustment should
not take into account the requirement that we set the labor-related
share for hospitals with wage indexes less than or equal to 1.0000 at
the more advantageous level of 62 percent. Therefore, for purposes of
this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act
prohibits us from taking into account the fact that hospitals with a
wage index less than or equal to 1.0000 are paid using a labor-related
share of 62 percent. Consistent with current policy, for FY 2015, we
are adjusting 100 percent of the wage index factor for occupational
mix. We describe the occupational mix adjustment in section III.F. of
the preamble of this final rule.
For FY 2015, to comply with the requirement that MS-DRG
reclassification and recalibration of the relative weights be budget
neutral for the Puerto Rico standardized amount and the hospital-
specific rates, we used FY 2013 discharge data to simulate payments and
compared the following:
Aggregate payments using the FY 2014 labor-related share
percentages, the new OMB labor market area delineations for FY 2015,
the FY 2014 relative weights, and the FY 2014 pre-reclassified wage
data, and applied the FY 2015 hospital readmissions payment adjustments
and estimated FY 2015 hospital VBP payment adjustments; and
Aggregate payments using the FY 2014 labor-related share
percentages, the new OMB labor market area delineations for FY 2015,
the FY 2015 relative weights, and the FY 2014 pre-reclassified wage
data, and applied the same hospital readmissions payment adjustments
and estimated hospital VBP payment adjustments applied above.
Based on this comparison, we computed a budget neutrality
adjustment factor equal to 0.997543. As discussed in section IV. of
this Addendum, we also are applying the MS-DRG reclassification and
recalibration budget neutrality factor of 0.997543 to the hospital-
specific rates that are effective for cost reporting periods beginning
on or after October 1, 2014.
Comment: Several commenters stated that CMS miscalculated the MS-
DRG reclassification and recalibration budget neutrality adjustment
factor presented in the proposed rule. The commenters noted that the
budget neutrality adjustment factor of 0.992938 presented in the
proposed rule was much lower than historical levels. The commenters
also noted that, for the last 5 years, the budget neutrality adjustment
factor has been between 0.996731 (FY 2011) and 0.998431 (FY 2013). In
addition, the commenters informed CMS that they attempted to replicate
the calculation of this budget neutrality adjustment factor, but were
unable to do so. The commenters added that in May of 2014, CMS posted a
revised set of MS-DRG relative weights on the CMS Web site via the
Internet because a number of postacute care transfer-adjusted cases for
certain MS-DRGs presented in the FY 2015 IPPS/LTCH PPS proposed rule
were inadvertently miscalculated. However, the commenters stated that
they were still not able to verify the budget neutrality adjustment
factor using the updated MS-DRG relative weights. The commenters stated
that, by using the revised MS-DRGs, they calculated a revised budget
neutrality adjustment factor of 1.000301. The commenters recommended
that CMS examine the calculation of the budget neutrality adjustment
factor and, if necessary, revise the budget neutrality adjustment
factor for the FY 2015 IPPS/LTCH PPS final rule.
One commenter recommended that CMS perform an analysis to confirm
whether the proposed MS-DRG reclassification and recalibration budget
neutrality adjustment factor is accurate and correct. The commenter
also recommended that CMS discuss the results of its analysis in the
final rule and afford interested parties a further opportunity to
review and comment on the final budget neutrality adjustment factor
before it becomes effective on October 1, 2014.
Response: We appreciate the commenters' input. As the commenters
requested, we examined the calculation of the budget neutrality
adjustment

[[Page 50368]]

factor presented in the proposed rule. We agree with the commenters
that the MS-DRG reclassification and recalibration budget neutrality
adjustment factor was calculated incorrectly during the development of
the proposed rule due to the inadvertent miscalculation of a number of
postacute care transfer-adjusted cases for certain MS-DRGs. Using the
updated MS-DRG relative weights, we calculated a revised proposed
budget neutrality adjustment factor similar to the factor calculated by
the commenters. For FY 2015, in this final rule, using accurate
postacute care transfer-adjusted cases for these MS-DRGs, we have
calculated a MS-DRG reclassification and recalibration budget
neutrality factor of 0.997543, which is consistent with historical
levels.
In response to the commenters' concerns regarding verifying the
accuracy of the budget neutrality adjustment factor, we announced
through information posted via the Internet on the CMS Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2015-IPPS-Proposed-Rule-Home-Page-Items/FY2015-IPPS-Proposed-Rule-Data-Files.html that there was an inadvertent
miscalculation of a number of postacute care transfer-adjusted cases
for certain MS-DRGs. Therefore, after the publication of the FY 2015
IPPS/LTCH PPS proposed rule, we also posted via the Internet on the CMS
Web site a revised table of the proposed MS-DRG relative weights for FY
2015. It is our goal to strive for accuracy in regard to our adjustment
factor calculations, and we appreciate the commenters' recognition of
the mistake and for pointing out the effects of the miscalculation
during the comment period. However, we believe that the 60-day comment
period affords the public an appropriate opportunity to review and
comment on all of the proposals presented throughout the entire FY 2015
IPPS/LTCH PPS proposed rule. We are not changing our proposed policy in
calculating this budget neutrality adjustment, but rather are using
corrected information. Therefore, we do not believe that an additional
opportunity for comment necessary.
Comment: The commenter also noted that CMS did not explicitly state
which labor-related share percentages were used in the calculation of
the MS-DRG reclassification and recalibration budget neutrality
adjustment factor. In addition, the commenter did not believe that it
was appropriate to use the new OMB delineations in the calculation of
the MS-DRG reclassification and recalibration budget neutrality
adjustment factor. The commenter requested that CMS address why it is
appropriate to apply the new OMB delineations in the MS-DRG
reclassification and recalibration budget neutrality adjustment factor
and how and whether the new OMB delineations impact the calculation of
the final budget neutrality adjustment factor. The commenter also
requested that CMS identify which labor-related share percentages were
in each component of the payment simulation model used to calculate the
final budget neutrality adjustment factor.
Response: As discussed in section III.B.(2)(e)(6) of the preamble
of this final rule and consistent with past practice (69 FR 49034), we
are not adopting the new OMB delineations, in and of themselves, in a
budget neutral manner. However, we are adopting the transitional
policies we have effectuated in a budget neutral manner as we describe
below. We do not believe that the revision to the labor market areas in
and of itself constitutes an ``adjustment or update'' to the adjustment
for area wage differences, as provided under section 1886(d)(3)(E) of
the Act. Therefore, the new OMB delineations did not impact the
calculation of the final budget neutrality adjustment factor. Also, as
stated in the FY 2015 IPPS/LTCH PPS proposed rule and above, consistent
with our policy to adopt the new OMB delineations, in order to properly
determine aggregate payments on each side of the comparison for our
budget neutrality adjustment factor calculations, we are using wage
indexes based on the new OMB delineations in the determination of all
of the budget neutrality adjustment factors discussed below (with the
exception of the transitional budget neutrality factor and outlier
fixed-loss threshold as explained below).
We also did not include the labor-related share percentages used in
the calculation of the proposed MS-DRG reclassification and
recalibration budget neutrality adjustment factor presented in the
proposed rule. For FY 2015, in this final rule, as requested by the
commenters, we present the labor-related share percentages used in the
calculation of the budget neutrality adjustment factor in response to
public comments we received in the discussion above, which are the same
labor-related share percentages used for the proposed rule.
In order to meet the statutory requirements that we do not take
into account the labor-related share of 62 percent when computing wage
index budget neutrality adjustment factor, it was necessary to use a
three-step process to comply with the requirements that MS-DRG
reclassification and recalibration of the relative weights and the
updated wage index and labor-related share have no effect on aggregate
payments for IPPS hospitals. Under the first step, we determined an MS-
DRG reclassification and recalibration budget neutrality adjustment
factor of 0.997543 (by using the same methodology described above to
determine the MS-DRG reclassification and recalibration budget
neutrality factor for the Puerto Rico standardized amount and hospital-
specific rates). Under the second step, to compute a budget neutrality
adjustment factor for wage index and labor-related share percentage
changes we used FY 2013 discharge data to simulate payments and
compared the following:
Aggregate payments using the new OMB labor market area
delineations for FY 2015, FY 2015 relative weights and the FY 2014 pre-
reclassified wage indexes, applied the FY 2014 labor-related share of
69.6 percent to all hospitals (regardless of whether the hospital's
wage index was above or below 1.0000), and applied the FY 2015 hospital
readmissions payment adjustment and the FY 2015 estimated hospital VBP
payment adjustment; and
Aggregate payments using the new OMB labor market area
delineations for FY 2015, FY 2015 relative weights and the FY 2015 pre-
reclassified wage indexes, applied the labor-related share for FY 2015
of 69.6 percent to all hospitals (regardless of whether the hospital's
wage index was above or below 1.0000), and applied the same FY 2015
hospital readmissions payment adjustments and estimated FY 2015
hospital VBP payment adjustments applied above.
In addition, we applied the MS-DRG reclassification and
recalibration budget neutrality adjustment factor (derived in the first
step) to the payment rates that were used to simulate payments for this
comparison of aggregate payments from FY 2014 to FY 2015. By applying
this methodology, we determined a budget neutrality adjustment factor
of 1.001443 for changes to the wage index. Finally, we multiplied the
MS-DRG reclassification and recalibration budget neutrality adjustment
factor of 0.997543 (derived in the first step) by the budget neutrality
adjustment factor of 1.001443 for changes to the wage index (derived in
the second step) to determine the MS-DRG reclassification and
recalibration and updated wage index budget neutrality adjustment
factor of 0.998982.

[[Page 50369]]

b. Reclassified Hospitals--Budget Neutrality Adjustment
Section 1886(d)(8)(B) of the Act provides that certain rural
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act
provides for the reclassification of hospitals based on determinations
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be
reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is required
to adjust the standardized amount to ensure that aggregate payments
under the IPPS after implementation of the provisions of sections
1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the
aggregate prospective payments that would have been made absent these
provisions. We note that the wage index adjustments provided for under
section 1886(d)(13) of the Act are not budget neutral. Section
1886(d)(13)(H) of the Act provides that any increase in a wage index
under section 1886(d)(13) shall not be taken into account in ``applying
any budget neutrality adjustment with respect to such index'' under
section 1886(d)(8)(D) of the Act. To calculate the budget neutrality
adjustment factor for FY 2015, we used FY 2013 discharge data to
simulate payments and compared the following:
Aggregate payments using the FY 2014 labor-related share
percentages, the new OMB labor market area delineations for FY 2015, FY
2015 relative weights, and FY 2015 wage data prior to any
reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10)
of the Act, and applied the FY 2015 hospital readmissions payment
adjustments and the estimated FY 2015 hospital VBP payment adjustments;
and
Aggregate payments using the FY 2014 labor-related share
percentages, the new OMB labor market area delineations for FY 2015, FY
2015 relative weights, and FY 2015 wage data after such
reclassifications, and applied the same hospital readmissions payment
adjustments and the estimated hospital VBP payment adjustments applied
above.
We note that the reclassifications applied under the second
simulation and comparison are those listed in Tables 9A2 and 9C2, which
are posted on the CMS Web site. These tables reflect reclassification
crosswalks based on the new OMB labor market area delineations for FY
2015, and apply the policies explained in section III. of the preamble
to this final rule. Based on these simulations, we calculated a budget
neutrality adjustment factor of 0.990406 to ensure that the effects of
these provisions are budget neutral, consistent with the statute.
The FY 2015 budget neutrality adjustment factor was applied to the
standardized amount after removing the effects of the FY 2014 budget
neutrality adjustment factor. We note that the FY 2015 budget
neutrality adjustment reflects FY 2015 wage index reclassifications
approved by the MGCRB or the Administrator.
c. Rural Floor Budget Neutrality Adjustment
Under Sec. 412.64(e)(4), we make an adjustment to the wage index
to ensure that aggregate payments after implementation of the rural
floor under section 4410 of the BBA (Pub. L. 105-33) and the imputed
floor under Sec. 412.64(h)(4) are equal to the aggregate prospective
payments that would have been made in the absence of such provisions.
Consistent with section 3141 of the Affordable Care Act and as
discussed in section III.G. of the preamble of this final rule and
codified at Sec. 412.64(e)(4)(ii), the budget neutrality adjustment
for the rural and imputed floor is a national adjustment to the wage
index.
As noted above and as discussed in section III.G.2.b. of the
preamble of this final rule, in the FY 2012 IPPS/LTCH PPS final rule,
we extended the imputed floor calculated under the original methodology
through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH PPS final rule,
we established an alternative methodology for calculating the imputed
floor and established a policy that the minimum wage index value for an
all-urban state would be the higher of the value determined under the
original methodology or the value computed using the alternative
methodology (77 FR 53368 through 53369). Consistent with the
methodology for treating the imputed floor, similar to the methodology
we used in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), we included this alternative methodology for computing the
imputed floor index in the calculation of the uniform, national rural
floor budget neutrality adjustment for FY 2014. For FY 2015, as
discussed in section III.G.2.b. of the preamble of this final rule, we
are extending the imputed floor using the higher of the value
determined under the original methodology or the alternative
methodology for FY 2015. Therefore, in order to ensure that aggregate
payments to hospitals are not affected, similar to prior years, we will
follow our policy of including the imputed floor in the rural floor
budget neutrality adjustment to the wage index.
As discussed above, for FY 2015, we are implementing the new OMB
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective for the FY 2015 IPPS wage index. Therefore, the budget
neutrality adjustment for the rural floor and imputed floor will be
calculated using the new OMB delineations.
Under the OMB delineations used for FY 2014, the imputed floor
(both the original methodology and alternative methodology) was applied
to New Jersey and Rhode Island because these were the only two all-
urban States. Under OMB's 2010 revised delineations based on Census
2010 data, in addition to New Jersey and Rhode Island, Delaware will
become an all-urban state. Therefore, for FY 2015, the imputed floor
will be applied to the wage index for hospitals located in New Jersey,
Rhode Island, and Delaware.
Similar to our calculation in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51593 and 51788), the FY 2013 IPPS/LTCH PPS final rule (77 FR
53689), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50975 through
50976), for FY 2015, we are calculating a national rural Puerto Rico
wage index (used to adjust the labor-related share of the national
standardized amount for hospitals located in Puerto Rico which receive
75 percent of the national standardized amount) and a rural Puerto
Rico-specific wage index (which is used to adjust the labor-related
share of the Puerto Rico-specific standardized amount for hospitals
located in Puerto Rico that receive 25 percent of the Puerto Rico-
specific standardized amount). Because there are no rural Puerto Rico
hospitals with established wage data, our calculation of the FY 2015
rural Puerto Rico wage index is based on the policy adopted in the FY
2008 IPPS final rule with comment period (72 FR 47323). That is, we
will use the unweighted average of the wage indexes from all CBSAs
(urban areas) that are contiguous (share a border with) to the rural
counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under
the new OMB labor market area delineations, except for Arecibo, Puerto
Rico (CBSA 11640), all other Puerto Rico urban areas are contiguous to
a rural area. Therefore, based on our existing policy, the FY 2015
rural Puerto Rico wage index is calculated based on the average of the
FY 2015 wage indexes for the following urban areas: Aguadilla-Isabela,
PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420);
Ponce, PR (CBSA 38660), San German, PR (CBSA 41900) and San Juan-
Carolina-Caguas, PR (CBSA 41980).

[[Page 50370]]

To calculate the national rural floor and imputed floor budget
neutrality adjustment factors and the Puerto Rico-specific rural floor
budget neutrality adjustment factor, we used FY 2013 discharge data to
simulate payments, the FY 2015 new OMB labor market area delineations,
and post-reclassified national and Puerto Rico-specific wage indexes
and compared the following:
The national and Puerto Rico-specific simulated payments
without the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied; and
The national and Puerto Rico-specific simulated payments
with the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied.
Based on this comparison, we determined a national rural budget
neutrality adjustment factor of 0.989507 and the Puerto Rico-specific
budget neutrality adjustment factor of 0.991291. The national
adjustment was applied to the national wage indexes to produce a
national rural floor budget neutral wage index and the Puerto Rico-
specific adjustment was applied to the Puerto Rico-specific wage
indexes to produce a Puerto Rico-specific rural floor budget neutral
wage index.
Comment: Many commenters opposed the continued application of a
nationwide rural floor budget neutrality adjustment. Some commenters
noted that under the current rural floor policy, all hospitals located
in Massachusetts are eligible for the rural floor wage index as a
result of one rural hospital, which resulted in an approximate 4.9
percent increase in payments for hospitals located in Massachusetts and
creates a disparity when considering the wage index of other hospitals
around the country. The commenters also noted that under the rural
floor policy, hospitals located in California will also receive an
increase in payments of approximately $196 million as a result of the
application of the rural floor policy. The commenters stated that the
adverse consequences of applying a nationwide rural floor budget
neutrality adjustment have been recognized by CMS, MedPAC, and many
others over the past several years. The commenters believed that the
Medicare wage index system cannot accomplish its objective of ensuring
that payments for the wage component of labor accurately reflect actual
wage costs until this policy is corrected. Other commenters recommended
that CMS consider applying the rural floor budget neutrality adjustment
through a State-specific budget neutrality adjustment factor, as CMS
has previously applied.
Response: We appreciate the commenters' input and for informing us
of their concerns. Section 3141 of Public Law 111-148 requires that a
national budget neutrality adjustment be applied in implementing the
rural floor policy. Therefore, absent a legislative change enacted by
Congress, we are unable to change the rural floor budget neutrality
adjustment from a national to a State-specific adjustment.
Comment: Some commenters recommended that CMS consider implementing
a policy under the IPPS and the OPPS that would result in only
hospitals located in rural areas being included in the statewide rural
floor wage index used for urban hospitals located in areas with wage
indexes that are lower than the statewide rural wage index. The
commenters believed that such a policy would prevent urban hospitals
from reclassifying to rural status simply to improve the rural wage
index, which might be used as a floor for urban hospitals located in
areas of a State that have lower wage index values. The commenters
added that they believed that CMS has the regulatory authority to make
such a policy change without the enactment of Congressional
legislation.
Another commenter recommended that, for FY 2015, CMS require States
to have at least 5 percent of their PPS hospitals physically located in
rural areas as a prerequisite for establishing a rural floor wage index
for each State. The commenter believed that this would ensure the
original intent of the rural floor policy, which is to serve as an
equalizer, and would protect the policy from being used as a
manipulation tool that allows a handful of hospitals in one isolated
area of the State to dictate the wage index for a major Metropolitan
area.
In addition, the same commenter urged CMS to create a national
hospital wage index floor of 0.91. The commenter explained that this
would reduce current disparities between hospitals. The commenter also
stated that the purpose of the hospital area wage index is to fairly
account for labor costs incurred by providers, and not to reward
``winners'' or punish ``losers'' as a result of reclassifications and a
proliferation of other modifications. The commenter further noted that
it recognized that there is growing interest from MedPAC and others
regarding revising the hospital area wage index system, but
acknowledged that such revisions take time. Therefore, the commenter
believed that a hospital rural floor wage index is appropriate until
CMS creates a system that better reflects the realities of today's
healthcare system and levels the playing field for all Medicare
providers.
Response: We appreciate the commenters' input. We did not make any
proposals to change the rural floor wage index policy. Any changes to
this policy would first need to be proposed through rulemaking.
Consequently, we are not making any changes to address the commenters'
concerns at this time. With respect to the commenter who recommended
that CMS establish a national hospital wage index floor of 0.91, we do
not believe that there is any statistical basis to support this
calculation. In addition, we are unclear how such a wage index floor
policy could be implemented nor do we believe that this suggestion
meets the requirement of the statute. With respect to the other
commenters' suggestions, we first need to determine if the revised
policy that the commenters suggested would be inconsistent with any
longstanding policy or statutory requirement. We will consider the
commenters' suggestions in future rulemaking.
Comment: One commenter requested that CMS provide an updated,
detailed, State-specific analysis of the effect of a nationwide rural
floor budget neutrality adjustment. The commenter specifically noted
the estimated ``windfall'' expected to be received by hospitals located
in Massachusetts as a result of the rural floor policy, and requested
that CMS provide data and additional analysis of the impacts of a
national rural floor budget neutrality adjustment. In addition,
commenters questioned whether the addition of one rural hospital
located in Franklin County, Massachusetts reduced the impact of the
Massachusetts rural floor wage index from FY 2014 to FY 2015.
Response: We have provided an updated State-specific analysis of
the effect of the rural floor budget neutrality adjustment in Appendix
A of the Addendum to this final rule. We also discuss in Appendix A to
this final rule the increase in payments the hospitals in Massachusetts
are expected to receive as a result of the rural floor wage index
policy.
We discuss below the reduced impact of the rural floor wage index
policy for hospitals located in Massachusetts from FY 2014 to FY 2015.
In FY 2014, CMS calculated that 60 hospitals would benefit from the
Massachusetts rural floor wage index, resulting in an estimated $167.6
million being received by hospitals located in Massachusetts as a
result of the national rural floor budget neutrality adjustment. In FY
2015, fewer hospitals located in Massachusetts (51) have been
identified as benefitting from

[[Page 50371]]

the rural floor wage index, and the fiscal impact of rural floor budget
neutrality adjustment has been reduced. Below we explain why nine
providers (60 minus 51) received the Massachusetts rural floor wage
index in FY 2014, but not in FY 2015.
The commenters are correct that the addition of one rural hospital
located in Franklin County, Massachusetts reduced the impact of the
rural floor wage index in FY 2015, as compared to the impact of the
rural floor wage index in FY 2014. To further clarify, in FY 2014,
there was only one geographically located rural hospital in
Massachusetts (located in Nantucket County). Therefore, the
Massachusetts pre- and post- reclassified rural wage index in the
calculation of the reclassification budget neutrality adjustment, and
the application of the rural floor budget neutrality adjustment, was
established based on wage data from that one hospital located in
Nantucket County, Massachusetts. For FY 2015, another hospital, which
is defined as ``urban'' under the current delineations, is now
considered to be ``rural'' under the new OMB delineations.
Specifically, this hospital is located in Franklin County,
Massachusetts, which is no longer considered to be part of CBSA 44140
(Springfield, MA) under the new OMB delineations, and is now considered
to be geographically located in a rural area. However, under the new
OMB delineations, Franklin County meets the requirements under section
1886(d)(8)(B) of the Act for reclassification. Therefore, in FY 2015,
any hospital located within Franklin County is deemed an ``urban''
labor market (that is, the hospitals are considered ``Lugar''
hospitals). The calculation of the FY 2015 Massachusetts pre-
reclassified rural wage index, which is used in the calculation of
reclassification budget neutrality adjustment, is calculated based on
the two geographically located rural hospitals (one from Franklin
County and one from Nantucket County). The average hourly wage of the
Franklin County hospital is lower than the average hourly wage of the
Nantucket County hospital, lowering the pre-reclassified rural wage
index for FY 2015 relative to FY 2014.
With respect to budget neutrality, as described earlier in this
Addendum, we first calculate and apply the MS-DRG and wage index budget
neutrality adjustment, then the reclassification budget neutrality
adjustment, and then the rural floor budget neutrality adjustment. This
analysis focuses on the reclassification and rural floor budget
neutrality adjustments and applies the requirement of section
1886(d)(8)(C)(iii) of the Act, which specifies that an area's post-
reclassified wage index (without application of the rural floor budget
neutrality adjustment) may not be reduced below the State's post-
reclassified rural wage index value (without application of the rural
floor budget neutrality adjustment), as a result of reclassification.
As stated in the FY 1992 IPPS final rule (56 FR 43220 through 43221),
if reclassification (either to or from an area) would lower an area's
post-reclassified wage index (without application of the rural floor
budget neutrality adjustment) below the State's post-reclassified rural
wage index (without application of the rural floor budget neutrality
adjustment), CMS assigns those areas the post-reclassified rural wage
index value for that State (without application of the rural floor
budget neutrality adjustment). For this to occur, the area's pre-
reclassified wage index value must be greater than or equal to the
State's pre-reclassified rural wage index value prior to calculating
the effects of the reclassification budget neutrality adjustment.
As discussed above in section II.A.4.b. of this Addendum regarding
the reclassification budget neutrality adjustment, to ensure that the
effects of applying sections 1886(d)(8)(B) and (C) and 1886(d)(10) of
the Act are budget neutral, we compare FY 2015 wage data prior to any
reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10)
of the Act (that is, pre-reclassified wage data) to FY 2015 wage data
after such reclassifications (that is, the post-reclassified wage
data). Specifically, we compared the Massachusetts pre-reclassified
rural wage index (Column C in the table below) to the pre-reclassified
area wage index (Column B in the table below). (We note that the
Massachusetts pre-reclassified rural wage index is comprised from the
wage data of two rural hospitals, one located in Franklin County,
Massachusetts and one located in Nantucket County, Massachusetts.) If a
hospital's pre-reclassified area wage index (Column B in the table
below) is greater than or equal to the Massachusetts pre-reclassified
rural wage index (Column C in the table below), then we compare the
Massachusetts post-reclassified rural wage index (Column F in the table
below, which is based only on the wage data from one rural hospital in
Nantucket County, and does not include the hospital located in Franklin
County because it has been reclassified as an urban Lugar hospital) to
the post-reclassified area wage index (Column E in the table below).
For hospitals that receive reclassification in FY 2015, if the
hospital's post-reclassified area wage index (Column E in the table
below) is less than the Massachusetts post-reclassified rural wage
index (Column F in the table below, which is based on the wage data
from one rural hospital located in Nantucket County), then we assign
the hospital the Massachusetts post-reclassified rural wage index
(Column F in the table below) prior to application of the rural floor
budget neutrality adjustment. The nine hospitals were reclassified for
FY 2015, and their post-reclassified area wage index (Column E in the
table below) is less than the Massachusetts post-reclassified rural
wage index (Column F in the table below). Therefore, although there are
other hospitals located in Massachusetts that also have been
reclassified, only the nine hospitals meet both conditions and are
being assigned the Massachusetts post-reclassified rural wage index
(without application of the rural floor budget neutrality adjustment).
Specifically, when we compared the Massachusetts pre-reclassified
wage index to Massachusetts post-reclassified wage index in the
calculation of the reclassification budget neutrality adjustment, the
area's pre-reclassified wage index value for the nine hospitals is
greater than or equal to the Massachusetts pre-reclassified rural wage
index value of 1.1447 (which is calculated based on the wage data from
the two rural hospitals). After application of the reclassifications,
the area's post-reclassified wage index value for these nine hospitals
is lower than the Massachusetts post-reclassified rural wage index
value of 1.3477 (which only includes wage data from one rural hospital
located in Nantucket County, Massachusetts). Therefore, in accordance
with our reclassification hold-harmless methodology, these nine
hospitals are assigned the Massachusetts post-reclassified rural wage
index value of 1.3477 within the calculation of the reclassification
budget neutrality adjustment, prior to the calculation and application
of the rural floor budget neutrality adjustment. The impact of this
increase in payments (Column B compared to Column F for the nine
hospitals) is factored into the reclassification budget neutrality
adjustment factor, which is applied to standardized amount. The table
below illustrates the various wage indexes in each step of the process
described above and why these nine hospitals were assigned the
Massachusetts post-

[[Page 50372]]

reclassified rural wage index prior to the application of the rural
floor budget neutrality adjustment.

--------------------------------------------------------------------------------------------------------------------------------------------------------
(F)
(A) Pre- (B) Area pre- (C) (D) Post- (E) Area post- Massachusetts
Provider reclassified reclassified Massachusetts reclassified reclassified post-
CBSA wage index pre-reclassified CBSA wage index reclassified
rural wage index rural wage index
--------------------------------------------------------------------------------------------------------------------------------------------------------
220001...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220016...................................... 22 1.1447 1.1447 44140 1.0379 1.3477
220019...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220058...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220062...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220090...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220095...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220163...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
220176...................................... 49340 1.1728 1.1447 14454 1.2318 1.3477
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All wage indexes in this table do not include application of the rural floor budget neutrality adjustment.

The next step in the sequence of our calculation of the budget
neutrality adjustment factor is to calculate the rural floor budget
neutrality adjustment, which is applied to the wage index. For the 51
hospitals located in Massachusetts, their post-reclassified area wage
index is compared to the Massachusetts rural floor wage index
(consisting of the one rural hospital located in Nantucket County).
Because their post-reclassified area wage index value is lower than the
Massachusetts rural floor wage index value, the hospitals are assigned
the Massachusetts rural floor wage index value of 1.3477. Therefore, a
rural floor budget neutrality adjustment factor is applied to the wage
indexes of the 51 hospitals to account for the increase in payments as
a result of the application of the rural floor wage index policy.
However, with regard to the nine reclassified hospitals, they have
already been assigned a post-reclassified wage index value of 1.3477,
which is equal to the Massachusetts rural wage index. Accordingly,
there is no need to make any further adjustments to ensure budget
neutrality. As a result, the nine hospitals are excluded from and have
no effect on the rural floor budget neutrality adjustment for FY 2015,
and the impact of the FY 2015 rural floor budget neutrality adjustment
for Massachusetts is lower than that of the FY 2014 rural floor budget
neutrality adjustment. While the overall impact of the rural floor
budget neutrality adjustment has decreased for hospitals located in
Massachusetts in FY 2015, this explains why the same number of
hospitals (60) will still receive the Massachusetts rural wage index in
FY 2015 (determined by using the wage data from one rural hospital
located in Nantucket County, Massachusetts) based on two different
policies.
d. Wage Index Transition Budget Neutrality
As discussed in section III. of the preamble of this final rule, in
the past, we have provided for transition periods when adopting changes
that have significant payment implications, particularly large negative
impacts.
Similar to FY 2005, for FY 2015, we have determined that the
transition to using the new OMB delineations will have the largest
impact on hospitals that are currently located in an urban county that
became rural under the new OMB delineations. To alleviate the decreased
payments associated with having a rural wage index, in calculating the
area wage index, similar to the transition provided in the FY 2005 IPPS
final rule, we are finalizing, as we proposed, a policy to generally
assign these counties the urban wage index value of the CBSA to which
they are physically located in for FY 2014 for FYs 2015, 2016, and
2017.
In addition to the 3-year transition period for hospitals being
transitioned from urban to rural status as discussed above, we are
finalizing, as we proposed, a 1-year blended wage index transitional
policy for all hospitals that will experience any decrease in their
wage index value (that is, a hospital's actual wage index value used
for payment, which accounts for all applicable effects of
reclassification and redesignation) exclusively as a result of the
implementation of the new OMB delineations. Similar to the policy
adopted in the FY 2005 IPPS final rule (69 FR 49033), a post-
reclassified wage index with the rural and imputed floor applied is
computed based on the hospital's FY 2014 CBSA (that is, using all of
its FY 2014 constituent county/ies), and another post-reclassified wage
index with the rural and imputed floor applied will be computed based
on the hospital's new FY 2015 CBSA (that is, the FY 2015 constituent
county/ies). We compared these two wage indexes. If the FY 2015 wage
index using the FY 2015 CBSAs is lower than the FY 2015 wage index
using the FY 2014 CBSAs, we are computing a blended wage index
consisting of 50 percent of each of the two wage indexes added
together. This blended wage index is the hospital's wage index for FY
2015. Hospitals that benefit from the adoption of the new OMB
delineations are assigned their new wage index based on the new OMB
delineations. We refer readers to section III. of the preamble of this
final rule for a complete discussion on the transitional wage index
policy.
In the past, CMS has budget neutralized transitional wage indexes.
Because we are establishing a policy that allows for the application of
a transitional wage index only when it benefits the hospital, we
believe that it would be appropriate to ensure that such a transitional
policy does not increase aggregate Medicare payments beyond the
payments that would be made had we simply adopted the new OMB
delineations without any transitional provisions. Therefore, for FY
2015, we proposed to use our exceptions and adjustments authority under
section 1886(d)(5)(I)(i) of the Act to make an adjustment to the
national and Puerto Rico-specific standardized amounts to ensure that
total payments, including the effect of the transitional wage index
provisions, will equal what payments would have been if we had fully
adopted the new OMB delineations without any transitional provisions.
We did not receive any public comments on this proposal and are
finalizing our proposal to make this adjustment under section
1886(d)(5)(I)(i) of the Act.
Also, because we did not receive any public comments on this
proposal we are finalizing our proposal to use the same methodology
presented in the proposed rule in this final rule to calculate the
transitional wage index

[[Page 50373]]

budget neutrality adjustment factor. We discuss the calculation of this
adjustment factor below.
As stated above, the 50/50 blended wage indexes use post-
reclassified wage index data with the rural and imputed floor applied
computed based on FY 2014 CBSAs. Because the 50/50 blended methodology
uses data based on FY 2014 CBSAs, in order to properly calculate the
transitional budget neutrality factor, it was first necessary to
calculate the following budget neutrality factors based on the FY 2014
CBSAs: An MS-DRG and wage index budget neutrality, a reclassification
budget neutrality, and a rural floor budget neutrality. It was
necessary to compute the first three budget neutrality factors of MS-
DRG, wage index, and reclassification budget neutrality (which are
applied to the standardized amount) to ensure that the calculation of
the rural and imputed floor budget neutrality factor applied to the
wage index based on FY 2014 CBSAs is accurate. We calculated these four
budget neutrality factors using the same methodology stated above, but
used the FY 2014 CBSAs instead of the FY 2015 CBSAs on both sides of
the comparison.
After calculating all of the budget neutrality factors using FY
2014 and FY 2015 CBSAs, to calculate the transitional wage index budget
neutrality factor for FY 2015, we used FY 2013 discharge data to
simulate payments and compared the following:
Aggregate payments using new OMB delineations for FY 2015,
the FY 2015 relative weights, FY 2015 wage data after such
reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10)
of the Act (using the new OMB delineations), applied the rural floor
budget neutrality adjustment factor to the wage index (using the new
OMB delineations), and applied the FY 2015 hospital readmissions
payment adjustments and the estimated FY 2015 hospital VBP payment
adjustments; and
Aggregate payments using FY 2015 relative weights, FY 2015
wage data after applying the transitional wage indexes, and applied the
same hospital readmissions payment adjustments and the estimated
hospital VBP payment adjustments applied above. We note that hospitals
that did not receive the transitional 50/50 blended wage index were
assigned the post-reclassified wage index values with the rural floor
budget neutrality adjustment based on the FY 2015 new OMB delineations.
Based on these simulations, we calculated a budget neutrality
adjustment factor of 0.998859. Therefore, for FY 2015, we are applying
a transitional wage index budget neutrality adjustment factor of
0.998859 to the national average and Puerto Rico-specific standardized
amounts to ensure that the effects of these transitional wage indexes
are budget neutral.
We note that the budget neutrality adjustment factor calculated
above is based on the increase in payments in FY 2015 that would result
from the transitional wage indexes. Therefore, we are applying this
budget neutrality adjustment factor as a one-time adjustment to the FY
2015 national and Puerto Rico-specific standardized amounts in order to
offset the increase in payments in FY 2015 as a result of these
transitional wage indexes. For subsequent fiscal years, we will not
take into consideration the adjustment factor applied to the national
and Puerto Rico-specific standardized amounts in the previous fiscal
year's update when calculating the current fiscal year transitional
wage index budget neutrality adjustment factor (that is, this
adjustment will not be applied cumulatively). Because we are
establishing a 3-year transitional wage index policy for urban
hospitals that became rural as a result of the adoption of the new OMB
delineations, we intend to establish transitional wage index budget
neutrality adjustment factors to apply to the FY 2016 and FY 2017
national and Puerto Rico-specific standardized amounts during those
respective rulemaking cycles. Similar to the policy for FY 2015, we
intend to propose that the FYs 2016 and 2017 adjustments would be
applied as ``one-time'' adjustments and not cumulative adjustments
applied each fiscal year.
e. Case-Mix Budget Neutrality Adjustment
(1) Background
Below we summarize the recoupment adjustment to the FY 2015 payment
rates, as required by section 631 of ATRA, to account for the increase
in aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. We refer readers to section II.D. of the preamble of
this final rule for a complete discussion regarding our policies for FY
2015 in this final rule and previously finalized policies (including
our historical adjustments to the payment rates) relating to the effect
of changes in documentation and coding that do not reflect real changes
in case-mix.
(2) Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA) to the National
Standardized Amount
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment
totaling $11 billion by FY 2017. Our actuaries estimated that if CMS
were to fully account for the $11 billion recoupment required by
section 631 of ATRA in FY 2014, a one-time -9.3 percent adjustment to
the standardized amount would be necessary. It is often our practice to
delay or phase-in payment rate adjustments over more than 1 year, in
order to moderate the effect on payment rates in any 1 year. Therefore,
consistent with the policies that we have adopted in many similar
cases, for FY 2014, we applied a -0.8 percent adjustment to the
standardized amount. In this final rule, as we proposed, we are
applying an additional -0.8 percent adjustment to the standardized
amount for FY 2015. We note that, as section 631 of the ATRA instructs
the Secretary to make a recoupment adjustment only to the standardized
amount, this adjustment would not apply to the Puerto Rico-specific
standardized amount and hospital-specific payment rates.
f. Rural Community Hospital Demonstration Program Adjustment
As discussed in section IV.L. of the preamble of this final rule,
section 410A of Public Law 108-173 originally required the Secretary to
establish a demonstration program that modifies reimbursement for
inpatient services for up to 15 small rural hospitals. Section
410A(c)(2) of Public Law 108-173 requires that ``[i]n conducting the
demonstration program under this section, the Secretary shall ensure
that the aggregate payments made by the Secretary do not exceed the
amount which the Secretary would have paid if the demonstration program
under this section was not implemented.''
Sections 3123 and 10313 of the Affordable Care Act extended the
demonstration program for an additional 5-year period, and allowed up
to 30 hospitals to participate in 20 States with low population
densities determined by the Secretary. (In determining which States to
include in the expansion, the Secretary is required to use the same
criteria and data that the Secretary used to determine the States for
purposes of the initial 5-year period.) In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53449 through 53453), in

[[Page 50374]]

order to achieve budget neutrality, we adjusted the national IPPS
payment rates by an amount sufficient to account for the added costs of
this demonstration program as described in section IV.K. of that final
rule. In other words, we applied budget neutrality across the payment
system as a whole rather than merely across the participants of this
demonstration program, consistent with past practice. We stated that we
believe the language of the statutory budget neutrality requirement
permits the agency to implement the budget neutrality provision in this
manner. The statutory language requires that ``aggregate payments made
by the Secretary do not exceed the amount which the Secretary would
have paid if the demonstration . . . was not implemented,'' but does
not identify the range across which aggregate payments must be held
equal.
As we did for FY 2014, for FY 2015, we are adjusting the national
IPPS payment rates according to the same methodology that we used for
FY 2013, as set forth in section IV.L. of the preamble of this final
rule, to account for the estimated additional costs of the
demonstration program for FY 2015. For FY 2015, in this final rule, the
estimated amount of this budget neutrality adjustment factor applied to
the national IPPS payment rates for FY 2015 is $54,177,144. In
addition, similar to previous years, we are including in the budget
neutrality offset amount the amount by which the actual demonstration
costs corresponding to an earlier given year (which would be determined
once we have finalized cost reports for that year) exceeded the budget
neutrality offset amount finalized in the corresponding year's IPPS
final rule. For this FY 2015 IPPS/LTCH PPS final rule, we have
calculated the amount by which the actual costs of the demonstration in
FY 2008 (that is, the costs of the demonstration for the 10 hospitals
that participated in FY 2008, as shown in these hospitals' finalized
cost reports for the cost report period beginning in that calendar
year), exceeded the amount that was finalized in the FY 2008 IPPS final
rule. For FY 2015, in this final rule, we are establishing a budget
neutrality offset amount of $10,389,771 for FY 2008.
We also are currently working with the MACs that service the
hospitals participating in the demonstration to obtain finalized cost
reports for FYs 2009, 2010, 2011, and 2012). These data were
unavailable for this final rule. However, depending on our progress in
obtaining these cost reports, we may include in the FY 2016 IPPS final
rule the difference between the demonstration costs for one or more of
these years and the amounts that were finalized in the respective
fiscal years' final rules.
Therefore, the final total budget neutrality offset amount that we
are applying to the FY 2015 IPPS payment rates is $64,566,915. This
amount is the sum of two separate components: (1) the difference
between the total estimated FY 2014 reasonable cost amount to be paid
under the demonstration to the 22 participating hospitals participating
in the demonstration program for covered inpatient services, and the
total estimated amount that would otherwise be paid to the
participating hospitals in FY 2014 without the demonstration
($54,177,144); and (2) the amount by which the actual costs of the
demonstration for FY 2008, which are calculated in accordance with the
finalized cost reports for the hospitals that participated in the
demonstration during FY 2008, exceed the budget neutrality offset
amount that was finalized in the FY 2008 IPPS final rule ($10,389,771).
Accordingly, using the most recent data available to account for
the estimated costs of the demonstration program, for FY 2015, we
computed a factor of 0.99931 for the rural community hospital
demonstration program budget neutrality adjustment that will be applied
to the IPPS standard Federal payment rate.
g. Outlier Payments
Section 1886(d)(5)(A) of the Act provides for payments in addition
to the basic prospective payments for ``outlier'' cases involving
extraordinarily high costs. To qualify for outlier payments, a case
must have costs greater than the sum of the prospective payment rate
for the DRG, any IME and DSH payments, any new technology add-on
payments, and the ``outlier threshold'' or ``fixed-loss'' amount (a
dollar amount by which the costs of a case must exceed payments in
order to qualify for an outlier payment). We refer to the sum of the
prospective payment rate for the DRG, any IME and DSH payments, any new
technology add-on payments, and the outlier threshold as the outlier
``fixed-loss cost threshold.'' To determine whether the costs of a case
exceed the fixed-loss cost threshold, a hospital's CCR is applied to
the total covered charges for the case to convert the charges to
estimated costs. Payments for eligible cases are then made based on a
marginal cost factor, which is a percentage of the estimated costs
above the fixed-loss cost threshold. The marginal cost factor for FY
2015 is 80 percent, the same marginal cost factor we have used since FY
1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier
payments for any year are projected to be not less than 5 percent nor
more than 6 percent of total operating DRG payments (which does not
include IME and DSH payments) plus outlier payments. When setting the
outlier threshold, we compute the 5.1 percent target by dividing the
total operating outlier payments by the total operating DRG payments
plus outlier payments. We do not include any other payments such as IME
and DSH within the outlier target amount. Therefore, it is not
necessary to include Medicare Advantage IME payments in the outlier
threshold calculation. Section 1886(d)(3)(B) of the Act requires the
Secretary to reduce the average standardized amount by a factor to
account for the estimated proportion of total DRG payments made to
outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires
the Secretary to reduce the average standardized amount applicable to
hospitals located in Puerto Rico to account for the estimated
proportion of total DRG payments made to outlier cases. More
information on outlier payments may be found on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.htm.
(1) FY 2015 Outlier Fixed-Loss Cost Threshold
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977-50983), in
response to public comments on the FY 2013 IPPS/LTCH PPS proposed rule,
we made changes to our methodology for projecting the outlier fixed-
loss cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/
LTCH PPS final rule for detailed discussion of the changes.
For FY 2015, we proposed to continue to use the same methodology
that we used in FY 2014. As we have done in the past, to calculate the
proposed FY 2015 outlier threshold, we simulated payments by applying
proposed FY 2015 payment rates and policies using cases from the FY
2013 MedPAR file. Therefore, in order to determine the proposed FY 2015
outlier threshold, we inflated the charges on the MedPAR claims by 2
years, from FY 2013 to FY 2015. As discussed in the FY 2014 IPPS/LTCH
PPS final rule, we believe a methodology that is based on 1-year of
charge data will provide a more stable measure to project the average
charge per case because our prior methodology

[[Page 50375]]

used a 6-month measure, which inherently uses fewer claims than a 1-
year measure and makes it more susceptible to fluctuations in the
average charge per case as a result of any significant charge increases
or decreases by hospitals. Under this new methodology, to compute the
1-year average annualized rate-of-change in charges per case for FY
2015, we proposed to compare the second quarter of FY 2012 through the
first quarter of FY 2013 (January 1, 2012, through December 31, 2012)
to the second quarter of FY 2013 through the first quarter of FY 2014
(January 1, 2013, through December 31, 2013). This rate-of-change is
5.6 percent (1.055736) or 11.5 percent (1.114579) over 2 years.
Comment: Commenters were concerned that they were unable to
replicate the calculation of the charge inflation factor that CMS used
in the proposed rule. The commenters stated that the first quarter of
the FY 2014 MedPAR claims were not released to the public. The
commenters requested that CMS release the claims data used to calculate
the charge inflation factor used in the proposed rule. One commenter, a
provider, requested that CMS reevaluate the calculation of the
inflation factor because it far exceeds the inflation factors used in
labor markets that the provider operates within.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed
to adopt a new methodology to compare periods of 1-year of the most
recent charge data in order to inflate charges. Commenters supported
this proposal and it was adopted for FY 2014 and future years in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50978). We note that we did not
provide additional data for the first quarter of FY 2013, which was
used to inflate charges in the FY 2014 IPPS/LTCH PPS proposed rule, nor
was it requested during the comment period for the FY 2014 IPPS/LTCH
PPS proposed rule. We further note that our charge inflation policy
from FY 2005 through FY 2013 also compared the most recent period of
charge data using a 6-month comparison instead of a 1 year comparison.
Similar to above, we did no provide additional data for the first
quarter of the applicable fiscal year, nor was it requested during the
comment period for those years.
Consistent with this policy, for FY 2015, we proposed to compare
the most recent charge data from the second quarter of FY 2012 through
the first quarter of FY 2013 (January 1, 2012, through December 31,
2012) to the second quarter of FY 2013 through the first quarter of FY
2014 (January 1, 2013, through December 31, 2013).
In response to the commenters who requested a restructuring of the
limited data set files for the FY 2015 IPPS/LTCH PPS proposed and final
rule to provide an additional quarter of MedPAR claims data, we did not
have sufficient time to restructure the files as the commenters
requested prior to the publication of the proposed and this final rule.
Consistent with our longstanding policy since FY 2005, we continue to
believe that it is optimal to use the most recent period of charge data
available to measure charge inflation. We will consider how best to
provide additional information on the charge inflation factor for
future years.
With respect to the commenter requesting that CMS reevaluate the
calculation of the inflation factor, we believe that our measure of
charge inflation accurately reflects the national charge inflation. Our
charge inflation factor represents the average percentage increase in
charge inflation for all hospitals. We recognize that charge inflation
may vary geographically, and we do not believe that it is appropriate
to base the charge inflation factor on selective labor markets because
we apply this charge inflation factor to all claims for all hospitals.
As we have done in the past, in the FY 2015 IPPS/LTCH PPS proposed
rule we proposed to establish the FY 2015 outlier threshold using
hospital CCRs from the December 2013 update to the Provider-Specific
File (PSF)--the most recent available data at the time of the proposed
rule. We also proposed that if more recent data became available would
we use that data to calculate the final FY 2015 outlier threshold. For
FY 2015, we also proposed to continue to apply an adjustment factor to
the CCRs to account for cost and charge inflation (as explained below).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a
new methodology to adjust the CCRs. Specifically, we finalized a policy
to compare the national average case-weighted operating and capital CCR
from the most recent update of the PSF to the national average case-
weighted operating and capital CCR from the same period of the prior
year.
Therefore, as we did for FY 2014, for FY 2015, we proposed to
adjust the CCRs from the December 2013 update of the PSF by comparing
the percentage change in the national average case-weighted operating
CCR and capital CCR from the December 2012 update of the PSF to the
national average case-weighted operating CCR and capital CCR from the
December 2013 update of the PSF. We note that in the proposed rule we
used total transfer-adjusted cases from FY 2013 to determine the
national average case-weighted CCRs for both sides of the comparison.
As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we
believe that it is appropriate to use the same case count on both sides
of the comparison because this will produce the true percentage change
in the average case-weighted operating and capital CCR from one year to
the next without any effect from a change in case count on different
sides of the comparison.
Using the proposed methodology above, for the proposed rule we
calculated a December 2012 operating national average case-weighted CCR
of 0.295101 and a December 2013 operating national average case-
weighted CCR of 0.289587. We then calculated the percentage change
between the two national operating case-weighted CCRs by subtracting
the December 2012 operating national average case-weighted CCR from the
December 2013 operating national average case-weighted CCR and then
dividing the result by the December 2012 national operating average
case-weighted CCR. This resulted in a proposed national operating CCR
adjustment factor of 0.981315.
We used the same methodology proposed above to adjust the capital
CCRs. Specifically, for the proposed rule we calculated a December 2012
capital national average case-weighted CCR of 0.025079 and a December
2013 capital national average case-weighted CCR of 0.024868. We then
calculated the percentage change between the two national capital case-
weighted CCRs by subtracting the December 2012 capital national average
case-weighted CCR from the December 2013 capital national average case-
weighted CCR and then dividing the result by the December 2012 capital
national average case-weighted CCR. This resulted in a proposed
national capital CCR adjustment factor of 0.991587.
Consistent with our methodology used in the past and as stated in
the FY 2009 IPPS final rule (73 FR 48763), we continue to believe that
it is appropriate to apply only a 1-year adjustment factor to the CCRs.
On average, it takes approximately 9 months for a fiscal intermediary
or MAC to tentatively settle a cost report from the fiscal year end of
a hospital's cost reporting period. The average ``age'' of hospitals'
CCRs from the time the fiscal intermediary or the MAC inserts the CCR
in the PSF until the beginning of FY 2015 is approximately 1 year.
Therefore, as stated above, we believe a 1-year adjustment factor to
the CCRs is appropriate.

[[Page 50376]]

Comment: One commenter matched the CCRs used for the proposed rule
impact file to the December 2013 PSF and found that 126 providers' CCRs
did not match. The commenter noted that although an extremely high
percentage of providers' CCRs matched the data in the December 2013
update, the average percent difference for those CCRs that did not
match is much higher than any other comparison from prior years. The
commenter stated that this difference could lead to differences in the
calculated fixed-loss threshold. The commenter further stated that the
data demonstrated that CMS used significantly outdated CCRs to make
projections for the FY 2015 fixed-loss threshold. The commenter
recommended that this error be rectified in the final rule, which would
result in a substantially reduced threshold. In addition, the commenter
recommended that CMS use the most recently updated PSF file for the
final rule.
Response: With regard to the commenter's finding of 126 providers
with CCRs from the proposed rule impact file that did not match the
data in the December 2013 PSF, as stated in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50979), we apply the following edits to providers'
CCRs in the PSF. We believe these edits are appropriate in order to
accurately model the outlier threshold. We first search for Indian
Health Service providers and those providers assigned the statewide
average CCR from the current fiscal year. We then replace these CCRs
with the statewide average CCR for the upcoming fiscal year. We also
assign the statewide average CCR (for the upcoming fiscal year) to
those providers that have no value in the CCR field in the PSF. We
believe that the edits above are the reason why the commenter found
that 126 providers had CCRs in the impact file that did not match the
CCRs in the December 2013 PSF, and contributed to the average
percentage difference for those CCRs that did not match. We also
believe that we have accurately calculated and applied these statewide
average CCRs and will continue to monitor any large variances in the
future. With regard to using the most recently updated PSF file for the
final rule, we responded to a similar comment below.
As stated above, for FY 2015, we applied the proposed FY 2015
payment rates and policies using cases from the FY 2013 MedPAR files in
calculating the outlier threshold.
As discussed above, for FY 2015, we are applying transitional wage
indexes because of the adoption of the new OMB labor market area
delineations. Also, as discussed in section III.B.3. of the preamble to
the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in
section III.G.3. of the preamble of this final rule, in accordance with
section 10324(a) of the Affordable Care Act, beginning in FY 2011, we
created a wage index floor of 1.0000 for all hospitals located in
States determined to be frontier States. We noted that the frontier
State floor adjustments will be calculated and applied after rural and
imputed floor budget neutrality adjustments are calculated for all
labor market areas, in order to ensure that no hospital in a frontier
State will receive a wage index less than 1.0000 due to the rural and
imputed floor adjustment. In accordance with section 10324(a) of the
Affordable Care Act, the frontier State adjustment will not be subject
to budget neutrality, and will only be extended to hospitals
geographically located within a frontier State. However, for purposes
of estimating the proposed outlier threshold for FY 2015, it was
necessary to apply the transitional wage indexes and adjust the wage
index of those eligible hospitals in a frontier State when calculating
the outlier threshold that results in outlier payments being 5.1
percent of total payments for FY 2015. If we did not take the above
into account, our estimate of total FY 2015 payments would be too low,
and, as a result, our proposed outlier threshold would be too high,
such that estimated outlier payments would be less than our projected
5.1 percent of total payments.
As we did in establishing the FY 2009 outlier threshold (73 FR
57891), in our projection of FY 2015 outlier payments, we proposed not
to make any adjustments for the possibility that hospitals' CCRs and
outlier payments may be reconciled upon cost report settlement. We
stated that we continue to believe that, due to the policy implemented
in the June 9, 2003 Outlier final rule (68 FR 34494), CCRs will no
longer fluctuate significantly and, therefore, few hospitals will
actually have these ratios reconciled upon cost report settlement. In
addition, it is difficult to predict the specific hospitals that will
have CCRs and outlier payments reconciled in any given year. We also
note that, in accordance with our reconciliation criteria,
reconciliation occurs in instances where a hospital's actual CCR for
the cost reporting period fluctuates plus or minus 10 percentage points
compared to the interim CCR used to calculate outlier payments when a
bill is processed. Our simulations assume that CCRs accurately measure
hospital costs based on information available to us at the time we set
the outlier threshold. For these reasons, we proposed not to make any
assumptions regarding the effects of reconciliation on the outlier
threshold calculation.
Comment: One commenter expressed concern that CMS did not consider
outlier reconciliation in the development of the outlier threshold. The
commenter stated that CMS did not provide any objective data concerning
the number of hospitals that have been subject to outlier
reconciliation and the amounts recovered. The commenter further stated
that, in February 2003, the Secretary signed what the commenter
described as an emergency interim final rule that would have corrected
the outlier threshold and included outlier reconciliation payments (in
the calculation of the outlier threshold), but that rule was not issued
because of objections from the Office of Management and Budget. The
commenter asserted that if it was possible to account for outlier
reconciliation payments at the initial implementation of the outlier
reconciliation policy in the calculation of the threshold, it should be
possible to do so 10 years later. The commenter also searched cost
reports from the HCRIS database for the years 2003 through 2010 (Form
CMS-2552-96 and CMS-2552-10) and, based on these data, provided its
estimate that the annual amounts recovered by CMS through
reconciliation totaled $108,934,425. The commenter believed that these
data can be used to provide a baseline and trend information to assess
whether outlier reconciliation is a significant factor to be considered
in the development of the outlier threshold. The commenter noted that
it was unable to extract outlier reconciliation payment information
from cost reports filed under Form CMS-2552-10. The commenter was
unsure why this data was not being captured. Therefore, the commenter
requested that CMS disclose in the final rule and future rulemaking the
amount CMS has recovered through reconciliation by year.
Another commenter cited a report issued by the Office of Inspector
General (OIG) on June 28, 2012, entitled ``The Centers for Medicare &
Medicaid Services Did Not Reconcile Medicare Outlier Payments in
Accordance With Federal Regulations and Guidance'' (A-07-10-02764),
which reviewed the reconciliation process for outlier payments under
the IPPS. The commenter stated that the 2012 OIG Report identified
approximately $664 million in unreconciled outlier payments, which is a
material amount

[[Page 50377]]

in relation to total outlier payments. Moreover, the commenter further
stated that CMS now has approximately 10 full fiscal years of
experience with reconciliation from which to project the impact of its
reconciliation in the upcoming fiscal year. As such, the commenter
asserted that CMS' policy of refusing to account for the impact of
reconciliation in setting the FY 2015 outlier fixed-loss cost threshold
is neither reasonable nor consistent with the outlier provisions of the
statute.
The same commenter cited the OIG report issued on November 13,
2013, entitled ``Medicare Hospital Outlier Payments Warrant Increased
Scrutiny'' (OEI-06-10-00520). The commenter stated that the proposed
outlier fixed-loss cost threshold appears improperly inflated and,
therefore, overstated because CMS does not report, and has not taken
any actions to report, any steps to account for ``high-outlier''
payments identified in the report. The commenter further stated that it
is neither consistent with the outlier provisions of the statute nor
reasonable for CMS, in modeling outlier payments for the upcoming
fiscal year, to include outlier payments that were based on excessively
high charges for particular MS-DRGs and not based on truly unusually
high costs. The commenter concluded that such payments will presumably
be recouped by CMS following audit and reconciliation. However, CMS has
not disclosed or discussed what, if anything, it has done to address
this issue in setting the outlier fixed-loss cost threshold for FY
2015.
Response: A similar comment was received in response to the
policies presented in last year's rule. We appreciate the commenter's
input and for informing us of its concern regarding our policy of not
including outlier reconciliation within the development of the outlier
fixed-loss cost threshold. The commenter provided data from HCRIS that
demonstrated total outlier reconciliation payments from 2003 through
2010 were $108,934,425, which equates to approximately $13,616,803
annually. Assuming that the totals provided by the commenter are
correct, we do not believe that this relatively small annual amount
would have an impact on the outlier threshold because total outlier
payments are approximately $4.3 billion. Further, with regard to the
draft final rule referenced by the commenter, that draft document was
never finalized or published in the Federal Register (neither on a
proposed or interim basis), or implemented in any way. We also disagree
with the commenter's characterization of the draft interim final rule.
That draft rule would not have adjusted the outlier threshold by
accounting for payment changes as a result of outlier reconciliation,
as the commenter suggested. Rather, the draft interim final rule merely
would have calculated a new fixed-loss threshold to be applied for the
remainder of Federal fiscal year 2003 using the same data that
originally had been used for that purpose, but excluding data from 123
hospitals whose percentage of outlier payments relative to total DRG
payments increased by at least 5 percentage points between FY 1999 and
FY 2001, and whose case-mix (the average DRG relative weight value for
all of a hospital's Medicare cases) adjusted charges increased at a
rate at or above the 95th percentile rate of charge increase for all
hospitals (46.63 percent) over the same period. As previously stated,
this draft rule was never finalized or published in the Federal
Register. Therefore, that document has little, if any, relevance to the
current discussion. With respect to the commenter citing the 2012 OIG
Report which identified approximately $664 million in unreconciled
outlier payments, we cannot substantiate this amount until all of the
outlier reconciliations are performed. As the MACs continue to perform
these outlier reconciliations, they record these amounts on the cost
report, which are then publicly available through the HCRIS database.
Also, CMS has requested that the MACs submit to CMS the reconciled
outlier amounts. We will continue to track these outlier
reconciliations as stated in our response to the OIG report.
As stated in prior final rules, we continue to believe that, as a
result of the policy implemented in the June 9, 2003 outlier final rule
(68 FR 34494), CCRs will no longer fluctuate significantly and,
therefore, few hospitals will actually have these ratios reconciled
upon cost report settlement as demonstrated by the total outlier
payments provided by the commenter. In addition, it is difficult to
predict the specific hospitals that will have CCRs and outlier payments
reconciled in any given year. We also note that, in accordance with our
outlier reconciliation criteria, reconciliation occurs in instances
where a hospital's actual CCR for the cost reporting period fluctuates
plus or minus 10 percentage points compared to the interim CCR used to
calculate outlier payments when a bill is processed. Our simulations
assume that CCRs accurately measure hospital costs based on information
available to us at the time we set the outlier threshold. For these
reasons, as we proposed, we are finalizing our proposal not to make any
assumptions regarding the effects of reconciliation on the outlier
threshold calculation.
Also, outlier reconciliation is a function of the cost report and
MACs record the outlier reconciliation amount on each provider's cost
report (and are not required to report these data to CMS outside of the
cost report settlement process). Therefore, the outlier reconciliation
data that the commenter requested should be publicly available through
the cost report. With regard to the commenter not being able to
retrieve the data for outlier reconciliation payments from cost reports
filed under Form CMS-2552-10, we received a similar comment in response
to last year's proposed rule, as summarized in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50980). We will continue to follow up with our
information systems team to ensure this information is readily
available to the public. Since the effective date of Change Request
7192 on April 1, 2011, we have approved the reconciliation of outlier
payments for some hospitals. Other hospitals that were flagged for
outlier reconciliation are still under review for approval. In
addition, some hospitals flagged for outlier reconciliation may
experience a delay in reconciling their outlier payments due to
circumstances that prevent the MACs from finalizing the hospital's cost
report (such as other payments that may need to be reconciled aside
from outlier payments).
We disagree with the commenter that stated that we should not
include outlier payments that were based on excessively high charges
for particular MS-DRGs and not based on truly unusually high costs
because such payments will presumably be recouped by CMS following
audit and reconciliation. The purpose of the CCR is to measure a
hospital's costs and charges. We believe that the CCRs will reflect
these low costs and high charges that the commenter referred to, and
when applied to the charges on the claim will result in less outlier
payments for such cases because the costs of the case will be lower
when compared to the total MS-DRG payments excluding outlier payments.
Also, the commenter appears to assume that providers with high charges
will be eligible for outlier reconciliation and CMS will recoup these
funds at a later time. We disagree with the commenter. If a hospital's
interim CCR is consistent with its charges on the claim then no matter
how high or low a hospital's

[[Page 50378]]

charges, the hospital probably will not meet the outlier reconciliation
criteria.
As described in sections IV.H. and IV.I., respectively, of the
preamble of this final rule, sections 1886(q) and 1886(o) of the Act
establish the Hospital Readmissions Reduction Program and the Hospital
VBP Program, respectively. We do not believe that it is appropriate to
include the hospital VBP payment adjustments and the hospital
readmissions payment adjustments in the outlier threshold calculation
or the outlier offset to the standardized amount. Specifically,
consistent with our definition of the base operating DRG payment amount
for the Hospital Readmissions Reduction Program under Sec. 412.152 and
the Hospital VBP Program under Sec. 412.160, outlier payments under
section 1886(d)(5)(A) of the Act are not affected by these payment
adjustments. Therefore, outlier payments will continue to be calculated
based on the unadjusted base DRG payment amount (as opposed to using
the base-operating DRG payment amount adjusted by the hospital
readmissions payment adjustment and the hospital VBP payment
adjustment). Consequently, we proposed to exclude the hospital VBP
payment adjustments and the hospital readmissions payment adjustments
from the calculation of the outlier fixed-loss cost threshold.
We noted that, to the extent section 1886(r) of the Act modifies
the existing DSH payment methodology under section 1886(d)(5)(F), the
new uncompensated care payment under section 1886(r)(2), like the
empirically justified Medicare DSH payment under section 1886(r)(1),
may be considered an amount payable under section 1886(d)(5)(F) of the
Act such that it would be reasonable to include the payment in the
outlier determination under section 1886(d)(5)(A). As we did for FY
2014, for FY 2015, we stated that we also are proposing to allocate an
estimated per-discharge uncompensated care payment amount to all cases
for the hospitals eligible to receive the uncompensated care payment
amount in the calculation of the outlier fixed-loss cost threshold
methodology. We stated that we continue to believe that allocating an
eligible hospital's estimated uncompensated care payment to all cases
equally in the calculation of the outlier fixed-loss cost threshold
would best approximate the amount we would pay in uncompensated care
payments during the year because, when we make claim payments to a
hospital eligible for such payments, we would be making estimated per-
discharge uncompensated care payments to all cases equally.
Furthermore, we stated that we continue to believe that using the
estimated per-claim uncompensated care payment amount to determine
outlier estimates provides predictability as to the amount of
uncompensated care payments included in the calculation of outlier
payments. Therefore, consistent with the methodology used in FY 2014 to
calculate the outlier fixed-loss cost threshold, for FY 2015, we stated
that we are proposing to include estimated FY 2015 uncompensated care
payments in the computation of the proposed outlier fixed-loss cost
threshold. Specifically, we stated we are proposing to use the
estimated per-discharge uncompensated care payments to hospitals
eligible for the uncompensated care payment for all cases in the
calculation of the outlier fixed-loss cost threshold methodology.
Using this methodology, we proposed an outlier fixed-loss cost
threshold for FY 2015 equal to the prospective payment rate for the MS-
DRG, plus any IME, empirically justified Medicare DSH payments,
estimated uncompensated care payment, and any add-on payments for new
technology, plus $25,799.
In the proposed rule we noted that the proposed FY 2015 fixed-loss
cost threshold is higher than the FY 2014 final outlier fixed-loss cost
threshold of $21,748. We stated that we believe that the increase in
the charge inflation factor (compared to the FY 2014 charge inflation
factor) contributed to a higher proposed outlier fixed-loss threshold
for FY 2015. As charges increase, so do outlier payments. As a result,
it was necessary for us to raise the proposed outlier fixed-loss cost
threshold to decrease the amount of outlier payments expended in order
to reach the 5.1 percent target.
Comment: Some commenters were surprised by the magnitude of the
increase of the outlier threshold in the proposed rule compared to the
threshold of $21,748 for FY 2014. The commenters explained that, for FY
2013, CMS currently estimates that outliers are 4.81 percent of total
MS-DRG payments. The commenters asserted that, given that the threshold
for FY 2013 of $21,821 was similar to the outlier threshold for FY
2014, they find little justification for a dramatic increase in the
threshold for FY 2015.
The commenters also stated that it is important that CMS is aware
of the magnitude of inaccuracies when estimating the actual outlier
payout for prior years or calculating the current outlier threshold.
The commenters noted that, in prior years, CMS has estimated outlier
payments for a FY in one year and then the next year revises the
estimate at a much lower number than the initial estimate. The
commenters cited the FY 2013 outlier estimate as an example where CMS
estimated total outlier payments for FY 2013 in the FY 2014 IPPS/LTCH
PPS proposed rule as 5.17 percent and then revised this number in the
FY 2015 IPPS/LTCH PPS proposed rule to 4.81 percent.
The commenters also noted that with each rulemaking the final
outlier threshold established by CMS is always lower than the threshold
set forth in the proposed rule. One commenter speculated that this is
most likely as result of the use of updated CCRs or other data in
calculating the final outlier threshold. As a result, the commenter
emphasized the need for CMS to use the most recent data available when
calculating the outlier threshold. The commenter stated that, with
regard to the current rulemaking, CMS used data from the December 2013
PSF in the proposed rule, when the March 2014 PSF was available at the
time the proposed rule was issued. Using the March 2014 PSF, the
commenter calculated an outlier threshold of $25,375 (compared to the
threshold presented in the proposed rule of $25,799, which used the
December 2013 PSF).
Response: When we conduct our modeling to determine the outlier
threshold, we factor in all payments and policies that would affect
actual payments for the current year in order to estimate that outlier
payments are 5.1 percent of total MS-DRG payments. While we recognize
that outlier payments have been below the 5.1 percent target in prior
fiscal years, we do not believe that these lower payouts are relevant
to the current fiscal year because they do not lend greater accuracy to
the estimate of payments that are 5.1 percent of total MS-DRG payments
for FY 2015. We also note that in response to commenters' concerns,
last year we modified our outlier threshold calculation by changing the
way we adjust the CCRs. We also changed the measure of inflation from
using 6 months of claims data to 1 year of claims data. CMS shares the
commenters' belief that outlier payments in every fiscal year meet the
5.1 percent target, and we made these changes to improve our
methodology for calculating the outlier threshold. As in prior years,
CMS will continue to consider any suggestions made by the commenters to
improve the accuracy of the calculation of the outlier threshold.
CMS' historical policy is to use the best available data when
setting the

[[Page 50379]]

payment rates and factors in both the proposed and final rules.
Sometimes there are variables that change between the proposed and
final rule as result of the availability of more recent data, such as
the charge inflation factor and the CCR adjustment factors that can
cause fluctuations in the threshold amount. Other factors such as
changes to the wage indexes and market basket increase can also cause
the outlier fixed-loss cost threshold to fluctuate between the proposed
rule and the final rule each year. We use the latest data that is
available at the time of the development of the proposed and final
rules, such as the most recent update of MedPAR claims data and CCRs
from the most recent update of the PSF. With regard to the commenter
noting the availability of the March 2014 PSF at the time the proposed
rule was issued, this file was not available when we calculated the
proposed outlier fixed-loss cost threshold as part of the development
of the proposed rule. Therefore, for the proposed rule, we used the
latest update available, which was the December 2013 PSF. If we were to
wait for the March 2014 PSF to become available, this would cause
further delay of publication of the proposed rule, leading to a
possible further delay of issuance of the final rule in a timely
fashion.
Comment: One commenter stated that as a result of the large
increase in the proposed outlier threshold it suspected that CMS is
duplicating its charge increases through the use of the charge
inflation factor. The commenter believed that this duplication is
compounded by the fact that the CCRs would also reflect high charges.
The commenter believed that these two issues are artificially inflating
the threshold while hospitals have lower costs. The commenter offered
an alternative threshold of $24,340, by measuring the change in outlier
percentage payments of 5.1 percent for FY 2015 compared to the FY 2014
outlier estimate of 5.79 percent (5.1 percent minus 5.79 percent = -
0.69 percent divided by 5.79 percent = 11.92 percent). The commenter
recommended using a forecast correction of 100 plus 11.92 percent based
on their calculation above.
Response: We disagree with the commenter. We believe that our
measure and application of the charge inflation factor is accurate and
appropriate as explained in the proposed rule. As discussed, we apply a
2-year charge inflation factor because we use claims from FY 2013 for
FY 2015. Also, the CCRs we use come directly from the PSF, which comes
directly from hospitals' cost reports. We believe that these CCRs are
accurate. We also are unsure what ``high charges'' to which the
commenter referred. Further, as noted above, section 1886(d)(5)(A)(iv)
of the Act requires outlier payments to be not less than 5 percent nor
more than 6 percent of total estimated or projected payments in that
year. Therefore, we cannot adopt the commenter's suggestion to use a
forecast correction to compute the outlier threshold. When we calculate
the threshold, we use the latest data that are available at the time of
the proposed and final rules in order to estimate that outlier payments
are 5.1 percent of total payments.
Comment: One commenter noted that CMS did not indicate if it has
made any additional changes to its methodology to exclude the charges
for hemophilia clotting factors from the calculation of the fixed-loss
outlier threshold. The commenter noted that CMS provides a methodology
for excluding such charges from MedPAR data for the budget neutrality
calculation. The commenter wanted to ensure that such efforts also
resulted in the exclusion of such charges from MedPAR data used for the
calculation of the fixed-loss threshold as well.
Response: We appreciate the commenter's input and for seeking
clarification on the calculation of the fixed-loss outlier threshold.
Similar to what is done in the budget neutrality calculation, CMS
excludes the charges for hemophilia clotting factors from the
calculation of the fixed-loss outlier threshold.
Comment: One commenter stated that in its public comment submitted
in response to the FY 2014 IPPS/LTCH PPS proposed rule regarding
outliers, it explained why uncompensated care payments should be
included as part of the fixed-loss threshold calculation. The commenter
noted that it is clear why CMS considered this in the FY 2015 IPPS/LTCH
PPS proposed rule. The commenter wanted to ensure that updates to the
uncompensated care payment calculation are also considered in the final
rule.
Response: As discussed above, we included updates to the
uncompensated care payment calculation as part of the fixed-loss
outlier threshold calculation in this final rule.
After consideration of the public comments we received, we are not
making any changes to our methodology in this final rule for FY 2015.
Therefore, we are using the same methodology we proposed to calculate
the final outlier threshold.
As we have done in the past, to calculate the final FY 2015 outlier
threshold, we simulated payments by applying FY 2015 payment rates and
policies using cases from the FY 2013 MedPAR file. Therefore, in order
to determine the final FY 2015 outlier threshold, we inflated the
charges on the MedPAR claims by 2 years, from FY 2013 to FY 2015. As
discussed in the FY 2014 IPPS/LTCH PPS final rule, we believe that a
methodology that is based on 1-year of charge data will provide a more
stable measure to project the average charge per case. To compute the
1-year average annualized rate-of-change in charges per case for FY
2015, we compared the third quarter of FY 2012 through the second
quarter of FY 2013 (April 1, 2012, through March 31, 2013) to the third
quarter of FY 2013 through the second quarter of FY 2014 (April 1,
2013, through March 31, 2014). This rate-of-change is 5.1 percent
(1.050917) or 10.4 percent (1.104427) over 2 years.
As we have done in the past, we are establishing the FY 2015
outlier threshold using hospital CCRs from the March 2014 update to the
Provider-Specific File (PSF)--the most recent available data at the
time of development of this final rule. For FY 2015, we also are
continuing to apply an adjustment factor to the CCRs to account for
cost and charge inflation (as explained below). In the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50979), we adopted a new methodology to
adjust the CCRs. Specifically, we finalized a policy to compare the
national average case-weighted operating and capital CCR from the most
recent update of the PSF to the national average case-weighted
operating and capital CCR from the same period of the prior year.
Therefore, as we did for FY 2014, for FY 2015, we are adjusting the
CCRs from the March 2014 update of the PSF by comparing the percentage
change in the national average case-weighted operating CCR and capital
CCR from the March 2013 update of the PSF to the national average case-
weighted operating CCR and capital CCR from the March 2014 update of
the PSF. We note that we used total transfer-adjusted cases from FY
2013 to determine the national average case-weighted CCRs for both
sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50979), we believe that it is appropriate to use the same
case count on both sides of the comparison as this will produce the
true percentage change in the average case-weighted operating and
capital CCR from one year to the next without any effect from a change
in case count on different sides of the comparison.

[[Page 50380]]

Using the methodology above, we calculated a March 2013 operating
national average case-weighted CCR of 0.292377 and a March 2014
operating national average case-weighted CCR of 0.28714. We then
calculated the percentage change between the two national operating
case-weighted CCRs by subtracting the March 2013 operating national
average case-weighted CCR from the March 2014 operating national
average case-weighted CCR and then dividing the result by the March
2013 national operating average case-weighted CCR. This resulted in a
national operating CCR adjustment factor of 0.982088.
We also used the same methodology above to adjust the capital CCRs.
Specifically, we calculated a March 2013 capital national average case-
weighted CCR of 0.025143 and a March 2014 capital national average
case-weighted CCR of 0.024849. We then calculated the percentage change
between the two national capital case-weighted CCRs by subtracting the
March 2013 capital national average case-weighted CCR from the March
2014 capital national average case-weighted CCR and then dividing the
result by the March 2013 capital national average case-weighted CCR.
This resulted in a national capital CCR adjustment factor of 0.988307.
Consistent with our methodology in the past and as stated in the FY
2009 IPPS final rule (73 FR 48763), we continue to believe that it is
appropriate to apply only a 1-year adjustment factor to the CCRs. On
average, it takes approximately 9 months for a fiscal intermediary or
MAC to tentatively settle a cost report from the fiscal year end of a
hospital's cost reporting period. The average ``age'' of hospitals'
CCRs from the time the fiscal intermediary or the MAC inserts the CCR
in the PSF until the beginning of FY 2015 is approximately 1 year.
Therefore, as stated above, we believe a 1-year adjustment factor to
the CCRs is appropriate.
As stated above, for FY 2015, we applied the FY 2015 payment rates
and policies using cases from the FY 2013 MedPAR files in calculating
the outlier threshold.
As discussed above, for FY 2015, we are applying transitional wage
indexes because of the adoption of the new OMB labor market area
delineations. Also, as discussed in section III.B.3. of the preamble to
the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in
section III.G.3. of the preamble of this final rule, in accordance with
section 10324(a) of the Affordable Care Act, beginning in FY 2011, we
created a wage index floor of 1.0000 for all hospitals located in
States determined to be frontier States. We note that the frontier
State floor adjustments are calculated and applied after rural and
imputed floor budget neutrality adjustments are calculated for all
labor market areas, in order to ensure that no hospital in a frontier
State receives a wage index less than 1.0000 due to the rural and
imputed floor adjustment. In accordance with section 10324(a) of the
Affordable Care Act, the frontier State adjustment is not subject to
budget neutrality, and is only extended to hospitals geographically
located within a frontier State. However, for purposes of estimating
the outlier threshold for FY 2015, it was necessary to apply the
transitional wage indexes and adjust the wage index of those eligible
hospitals in a frontier State when calculating the outlier threshold
that results in outlier payments being 5.1 percent of total payments
for FY 2015. If we did not take the above into account, our estimate of
total FY 2015 payments would be too low, and, as a result, our outlier
threshold would be too high, such that estimated outlier payments would
be less than our projected 5.1 percent of total payments.
As we did in establishing the FY 2009 outlier threshold (73 FR
57891), as we proposed and for the reasons discussed above, in our
projection of FY 2015 outlier payments, we are not making any
adjustments for the possibility that hospitals' CCRs and outlier
payments may be reconciled upon cost report settlement.
As described in sections IV.H. and IV.I., respectively, of the
preamble of this final rule, sections 1886(q) and 1886(o) of the Act
establish the Hospital Readmissions Reduction Program and the Hospital
VBP Program, respectively. We do not believe that it is appropriate to
include the hospital VBP payment adjustments and the hospital
readmissions payment adjustments in the outlier threshold calculation
or the outlier offset to the standardized amount. Specifically,
consistent with our definition of the base operating DRG payment amount
for the Hospital Readmissions Reduction Program under Sec. 412.152 and
the Hospital VBP Program under Sec. 412.160, outlier payments under
section 1886(d)(5)(A) of the Act are not affected by these payment
adjustments. Therefore, outlier payments will continue to be calculated
based on the unadjusted base DRG payment amount (as opposed to using
the base-operating DRG payment amount adjusted by the hospital
readmissions payment adjustment and the hospital VBP payment
adjustment). Consequently, we are excluding the hospital VBP payment
adjustments and the hospital readmissions payment adjustments from the
calculation of the outlier fixed-loss cost threshold.
We note that, to the extent section 1886(r) of the Act modifies the
existing DSH payment methodology under section 1886(d)(5)(F), the new
uncompensated care payment under section 1886(r)(2), like the
empirically justified Medicare DSH payment under section 1886(r)(1),
may be considered an amount payable under section 1886(d)(5)(F) of the
Act such that it would be reasonable to include the payment in the
outlier determination under section 1886(d)(5)(A). As we did for FY
2014, for FY 2015, for the reasons discussed above, we also are
allocating an estimated per-discharge uncompensated care payment amount
to all cases for the hospitals eligible to receive the uncompensated
care payment amount in the calculation of the outlier fixed-loss cost
threshold methodology. Specifically, we are using the estimated per-
discharge uncompensated care payments to hospitals eligible for the
uncompensated care payment for all cases in the calculation of the
outlier fixed-loss cost threshold methodology.
Using this methodology, we calculated a final outlier fixed-loss
cost threshold for FY 2015 equal to the prospective payment rate for
the MS-DRG, plus any IME, empirically justified Medicare DSH payments,
estimated uncompensated care payment, and any add-on payments for new
technology, plus $24,758.
We note that the final FY 2015 fixed-loss cost threshold is higher
than the FY 2014 final outlier fixed-loss cost threshold of $21,748. We
believe that the increase in the charge inflation factor (compared to
the FY 2014 charge inflation factor) contributed to a higher outlier
fixed-loss threshold for FY 2015. As charges increase, so do outlier
payments. As a result, it was necessary for us to raise the outlier
fixed-loss cost threshold to decrease the amount of outlier payments
expended in order to reach the 5.1 percent target.
Also, the final FY 2015 fixed-loss cost threshold is lower than the
FY 2015 proposed outlier fixed-loss cost threshold of $25,799. As
discussed above, the proposed MS-DRG reclassification and recalibration
budget neutrality factor was calculated incorrectly in the proposed
rule as a result of the inadvertent miscalculation of a number of
postacute care transfer-adjusted cases for certain MS-DRGs. We believe
that the corrected factor, which offsets less money from the

[[Page 50381]]

standardized amount, results in less outlier payments. Therefore, it
was necessary to lower the outlier threshold from the proposed rule in
the final rule in order to reach the 5.1 percent target.
(2) Other Changes Concerning Outliers
As stated in the FY 1994 IPPS final rule (58 FR 46348), we
establish an outlier threshold that is applicable to both hospital
inpatient operating costs and hospital inpatient capital-related costs.
When we modeled the combined operating and capital outlier payments, we
found that using a common threshold resulted in a lower percentage of
outlier payments for capital-related costs than for operating costs. We
project that the thresholds for FY 2015 will result in outlier payments
that will equal 5.1 percent of operating DRG payments and 6.27 percent
of capital payments based on the Federal rate.
In accordance with section 1886(d)(3)(B) of the Act, we are
reducing the FY 2015 standardized amount by the same percentage to
account for the projected proportion of payments paid as outliers.
The outlier adjustment factors that will be applied to the
standardized amount based on the FY 2015 outlier threshold are as
follows:

------------------------------------------------------------------------
Operating Capital
standardized federal
amounts rate
------------------------------------------------------------------------
National..................................... 0.948998 0.937327
Puerto Rico.................................. 0.926575 0.915412
------------------------------------------------------------------------

We are applying the outlier adjustment factors to the FY 2015
payment rates after removing the effects of the FY 2014 outlier
adjustment factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we
apply hospital-specific CCRs to the total covered charges for the case.
Estimated operating and capital costs for the case are calculated
separately by applying separate operating and capital CCRs. These costs
are then combined and compared with the outlier fixed-loss cost
threshold.
Under our current policy at Sec. 412.84, we calculate operating
and capital CCR ceilings and assign a statewide average CCR for
hospitals whose CCRs exceed 3.0 standard deviations from the mean of
the log distribution of CCRs for all hospitals. Based on this
calculation, for hospitals for which the fiscal intermediary or MAC
computes operating CCRs greater than 1.23 or capital CCRs greater than
0.172, or hospitals for which the fiscal intermediary or MAC is unable
to calculate a CCR (as described under Sec. 412.84(i)(3) of our
regulations), statewide average CCRs are used to determine whether a
hospital qualifies for outlier payments. Table 8A listed in section VI.
of this Addendum (and available only via the Internet on the CMS Web
site) contains the statewide average operating CCRs for urban hospitals
and for rural hospitals for which the fiscal intermediary or MAC is
unable to compute a hospital-specific CCR within the above range.
Effective for discharges occurring on or after October 1, 2014, these
statewide average ratios will replace the ratios posted on our Web site
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Tables.html. Table 8B listed in section VI. of
this Addendum (and available via the Internet on the CMS Web site)
contains the comparable statewide average capital CCRs. As previously
stated, the CCRs in Tables 8A and 8B will be used during FY 2015 when
hospital-specific CCRs based on the latest settled cost report are
either not available, or are outside the range noted above. Table 8C
listed in section VI. of this Addendum (and available via the Internet
on the CMS Web site) contains the statewide average total CCRs used
under the LTCH PPS as discussed in section V. of this Addendum.
We finally note that we published a manual update (Change Request
3966) to our outlier policy on October 12, 2005, which updated Chapter
3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual
update covered an array of topics, including CCRs, reconciliation, and
the time value of money. We encourage hospitals that are assigned the
statewide average operating and/or capital CCRs to work with their
fiscal intermediary or MAC on a possible alternative operating and/or
capital CCR as explained in Change Request 3966. Use of an alternative
CCR developed by the hospital in conjunction with the fiscal
intermediary or MAC can avoid possible overpayments or underpayments at
cost report settlement, thereby ensuring better accuracy when making
outlier payments and negating the need for outlier reconciliation. We
also note that a hospital may request an alternative operating or
capital CCR ratio at any time as long as the guidelines of Change
Request 3966 are followed. In addition, as mentioned above, we
published an additional manual update (Change Request 7192) to our
outlier policy on December 3, 2010, which also updated Chapter 3,
Section 20.1.2 of the Medicare Claims Processing Manual. The manual
update outlines the outlier reconciliation process for hospitals and
Medicare contractors. To download and view the manual instructions on
outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.
(3) FY 2013 and FY 2014 Outlier Payments
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50983 through
50984), we stated that, based on available data, we estimated that
actual FY 2013 outlier payments would be approximately 4.77 percent of
actual total MS-DRG payments. This estimate was computed based on
simulations using the FY 2012 MedPAR file (discharge data for FY 2012
claims). That is, the estimate of actual outlier payments did not
reflect actual FY 2013 claims, but instead reflected the application of
FY 2013 payment rates and policies to available FY 2012 claims.
Our current estimate, using available FY 2013 claims data, is that
actual outlier payments for FY 2013 were approximately 4.86 percent of
actual total MS-DRG payments. Therefore, the data indicate that, for FY
2013, the percentage of actual outlier payments relative to actual
total payments is lower than we projected for FY 2013. Consistent with
the policy and statutory interpretation we have maintained since the
inception of the IPPS, we do not make retroactive adjustments to
outlier payments to ensure that total outlier payments for FY 2013 are
equal to 5.1 percent of total MS-DRG payments.
We currently estimate that, using the latest CCRs from the March
2014 update of the PSF, actual outlier payments for FY 2014 will be
approximately 5.71 percent of actual total MS-DRG payments,
approximately 0.61 percentage point higher than the 5.1 percent we
projected when setting the outlier policies for FY 2014. This estimate
of 5.71 percent is based on simulations using the FY 2013 MedPAR file
(discharge data for FY 2013 claims).
5. FY 2015 Standardized Amount
The adjusted standardized amount is divided into labor-related and
nonlabor-related portions. Tables 1A and 1B listed and published in
section VI. of this Addendum (and available via the Internet) contain
the national standardized amounts that we are applying to all
hospitals, except hospitals located in Puerto Rico, for FY 2015. The
Puerto Rico-specific amounts are shown in Table 1C listed and published
in section VI. of this

[[Page 50382]]

Addendum (and available via the Internet on the CMS Web site). The
amounts shown in Tables 1A and 1B differ only in that the labor-related
share applied to the standardized amounts in Table 1A is 69.6 percent,
and the labor-related share applied to the standardized amounts in
Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share of
62 percent, unless application of that percentage would result in lower
payments to a hospital than would otherwise be made. In effect, the
statutory provision means that we will apply a labor-related share of
62 percent for all hospitals whose wage indexes are less than or equal
to 1.0000.
In addition, Tables 1A and 1B include the standardized amounts
reflecting the applicable percentage increases for FY 2015.
Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of
the Puerto Rico payment rate is based on the discharge-weighted average
of the national large urban standardized amount (this amount is set
forth in Table 1A). The labor-related and nonlabor-related portions of
the national average standardized amounts for Puerto Rico hospitals for
FY 2015 are set forth in Table 1C listed and published in section VI.
of this Addendum (and available via the Internet on the CMS Web site).
This table also includes the Puerto Rico-specific standardized amounts.
The labor-related share applied to the Puerto Rico-specific
standardized amount is the labor-related share of 63.2 percent, or 62
percent, depending on which provides higher payments to the hospital.
(Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of
Public Law 108-173, provides that the labor-related share for hospitals
located in Puerto Rico be 62 percent, unless the application of that
percentage would result in lower payments to the hospital.)
The following table illustrates the changes from the FY 2014
national standardized amount. The second through fifth columns display
the changes from the FY 2014 standardized amounts for each applicable
FY 2015 standardized amount. The first row of the table shows the
updated (through FY 2014) average standardized amount after restoring
the FY 2014 offsets for outlier payments, demonstration budget
neutrality, the geographic reclassification budget neutrality, and the
retrospective documentation and coding adjustment under section
7(b)(1)(B) of Public Law 110-90. The MS-DRG reclassification and
recalibration and wage index budget neutrality adjustment factors are
cumulative. Therefore, those FY 2014 adjustment factors are not removed
from this table.

Comparison of FY 2014 Standardized Amounts to the FY 2015 Standardized Amounts
----------------------------------------------------------------------------------------------------------------
Hospital submitted Hospital did NOT Hospital did NOT
Hospital submitted quality data and submit quality submit quality
quality data and is NOT a sata and is a data and is NOT a
is a meaningful meaningful EHR meaningful EHR meaningful EHR
EHR user user user user
----------------------------------------------------------------------------------------------------------------
FY 2014 Base Rate after If Wage Index is If Wage Index is If Wage Index is If Wage Index is
removing: Greater Than Greater Than Greater Than Greater Than
1. FY 2014 Geographic 1.0000: Labor 1.0000: Labor 1.0000: Labor 1.0000: Labor
Reclassification Budget (69.6%): (69.6%): (69.6%): (69.6%):
Neutrality (0.990718) $4,230.38. $4,230.38. $4,230.38. $4,230.38.
2. FY 2014 Rural Community Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%):
Hospital Demonstration Program $1,847.75. $1,847.75. $1,847.75. $1,847.75.
Budget Neutrality (0.999415)
3. Cumulative Factor: FY If Wage Index is If Wage Index is If Wage Index is If Wage Index is
2008, FY 2009, FY 2012, FY less Than or less Than or less Than or less Than or
2013, and FY 2014 Equal to 1.0000: Equal to 1.0000: Equal to 1.0000: Equal to 1.0000:
Documentation and Coding Labor (62%): Labor (62%): Labor (62%): Labor (62%):
Adjustment as Required $3,768.45. $3,768.45. $3,768.45. $3,768.45.
under Sections 7(b)(1)(A) Nonlabor (38%): Nonlabor (38%): Nonlabor (38%): Nonlabor (38%):
and 7(b)(1)(B) of Pub. L. $2,309.70. $2,309.70. $2,309.70. $2,309.70.
110-90 and Documentation
and Coding Recoupment
Adjustment as required
under Section 631 of the
American Taxpayer Relief
Act of 2012 (0.9403).
4. FY 2014 Operating Outlier
Offset (0.948995)
FY 2015 Update Factor........... 1.022............. 1.01475........... 1.01475........... 1.0075.
FY 2015 MS[dash]DRG 0.998982.......... 0.998982.......... 0.998982.......... 0.998982.
Recalibration and Wage Index
Budget Neutrality Factor.
FY 2015 Reclassification Budget 0.990406.......... 0.990406.......... 0.990406.......... 0.990406.
Neutrality Factor.
FY 2015 Rural Community 0.99931........... 0.99931........... 0.99931........... 0.99931.
Demonstration Program Budget
Neutrality Factor.
FY 2015 Operating Outlier Factor 0.948998.......... 0.948998.......... 0.948998.......... 0.948998.
Cumulative Factor: FY 2008, FY 0.9329............ 0.9329............ 0.9329............ 0.9329.
2009, FY 2012, FY 2013, FY 2014
and FY 2015 Documentation and
Coding Adjustment as Required
under Sections 7(b)(1)(A) and
7(b)(1)(B) of Pub. L. 110-90
and Documentation and Coding
Recoupment Adjustment as
required under Section 631 of
the American Taxpayer Relief
Act of 2012.
FY 2015 New Labor Market 0.998859.......... 0.998859.......... 0.998859.......... 0.998859.
Delineation Wage Index
Transition Budget Neutrality
Factor.

[[Page 50383]]

National Standardized Amount for Labor: $3,780.13. Labor: $3,753.31. Labor: $3,753.31. Labor: $3,726.50.
FY 2015 if Wage Index is Nonlabor: Nonlabor: Nonlabor: Nonlabor:
Greater Than 1.0000; Labor/Non- $1,651.09. $1,639.38. $1,639.38. $1,627.66.
Labor Share Percentage (69.6/
30.4).
National Standardized Amount for Labor: $3,367.36. Labor: $3,343.47. Labor: $3,343.47. Labor: $3,319.58.
FY 2015 if Wage Index is less Nonlabor: Nonlabor: Nonlabor: Nonlabor:
Than or Equal to 1.0000; Labor/ $2,063.86. $2,049.22. $2,049.22. $2,034.58.
Non-Labor Share Percentage (62/
38).
----------------------------------------------------------------------------------------------------------------

The following table illustrates the changes from the FY 2014 Puerto
Rico-specific payment rate for hospitals located in Puerto Rico. The
second column shows the changes from the FY 2014 Puerto Rico specific
payment rate for hospitals with a Puerto Rico-specific wage index
greater than 1.0000. The third column shows the changes from the FY
2014 Puerto Rico specific payment rate for hospitals with a Puerto
Rico-specific wage index less than or equal to 1.0000. The first row of
the table shows the updated (through FY 2014) Puerto Rico-specific
payment rate after restoring the FY 2014 offsets for Puerto Rico-
specific outlier payments, rural community hospital demonstration
program budget neutrality, and the geographic reclassification budget
neutrality. The MS-DRG recalibration budget neutrality adjustment
factor is cumulative and is not removed from this table.

Comparison of FY 2014 Puerto Rico-Specific Payment Rate to the FY 2015
Puerto Rico-Specific Payment Rate
------------------------------------------------------------------------
Update (2.2 Update (2.2
percent); wage percent); wage
index is greater index is less than
than 1.0000; labor/ or equal to
Non-labor share 1.0000; labor/Non-
percentage (63.2/ labor share
36.8) percentage (62/38)
------------------------------------------------------------------------
FY 2014 Puerto Rico Base Rate,
after removing:.
1. FY 2014 Geographic
Reclassification Budget
Neutrality (0.990718).
2. FY 2014 Rural Community
Hospital Demonstration Program
Budget Neutrality (0.999415).
3. FY 2014 Puerto Rico Operating Labor: $1,722.31.. Labor: $1,689.61
Outlier Offset (0.943455). Nonlabor: Nonlabor:
$1,002.86. $1,035.56
FY 2015 Update Factor........... 1.022............. 1.022
FY 2015 MS[dash]DRG 0.997543.......... 0.997543
Recalibration Budget Neutrality
Factor.
FY 2015 Reclassification Budget 0.990406.......... 0.990406
Neutrality Factor.
FY 2015 Rural Community Hospital 0.99931........... 0.99931
Demonstration Program Budget
Neutrality Factor.
FY 2015 New Labor Market 0.998859.......... 0.998859
Delineation Wage Index
Transition Budget Neutrality
Factor.
FY 2015 Puerto Rico Operating 0.926575.......... 0.926575
Outlier Factor.
Puerto Rico[dash]Specific Labor: $1,608.39.. Labor: $1,577.86
Payment Rate for FY 2015. Nonlabor: $936.54. Nonlabor: $967.07
------------------------------------------------------------------------

B. Adjustments for Area Wage Levels and Cost-of-Living

Tables 1A through 1C, as published in section VI. of this Addendum
(and available via the Internet), contain the labor-related and
nonlabor-related shares that we used to calculate the prospective
payment rates for hospitals located in the 50 States, the District of
Columbia, and Puerto Rico for FY 2015. This section addresses two types
of adjustments to the standardized amounts that are made in determining
the prospective payment rates as described in this Addendum.
1. Adjustment for Area Wage Levels
Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require
that we make an adjustment to the labor-related portion of the national
and Puerto Rico prospective payment rates, respectively, to account for
area differences in hospital wage levels. This adjustment is made by
multiplying the labor-related portion of the adjusted standardized
amounts by the appropriate wage index for the area in which the
hospital is located. In section III. of the preamble of this final
rule, we discuss the data and methodology for the FY 2015 wage index.
2. Adjustment for Cost-of-Living in Alaska and Hawaii
Section 1886(d)(5)(H) of the Act provides discretionary authority
to the Secretary to make ``such adjustments . . . as the Secretary
deems appropriate to take into account the unique circumstances of
hospitals located in Alaska and Hawaii.'' Higher labor-related costs
for these two States are taken into account in the adjustment for area
wages described above. To account for higher nonlabor-related costs for
these two States, we multiply the nonlabor-related portion of the
standardized amount for hospitals

[[Page 50384]]

located in Alaska and Hawaii by an adjustment factor.
In the FY 2013 IPPS/LTCH PPS final rule, we established a
methodology to update the COLA factors for Alaska and Hawaii that were
published by the U.S. Office of Personnel Management (OPM) every 4
years (at the same time as the update to the labor-related share of the
IPPS market basket), beginning in FY 2014. We refer readers to the FY
2013 IPPS/LTCH PPS proposed and final rules for additional background
and a detailed description of this methodology (77 FR 28145 through
28146 and 77 FR 53700 through 53701, respectively).
For FY 2014, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50985
through 50987), we updated the COLA factors published by OPM for 2009
(as these are the last COLA factors OPM published prior to
transitioning from COLAs to locality pay) using the methodology that we
finalized in the FY 2013 IPPS/LTCH PPS final rule.
Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, we are using the same COLA factors established in FY 2014 for FY
2015 to adjust the nonlabor-related portion of the standardized amount
for hospitals located in Alaska and Hawaii. Below is a table listing
the COLA factors for FY 2015.

Final FY 2015 Cost-of-Living Adjustment Factors: Alaska and Hawaii
Hospitals
------------------------------------------------------------------------
Cost of
living
Area adjustment
factor
------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by 1.23
road.....................................................
City of Fairbanks and 80-kilometer (50-mile) radius by 1.23
road.....................................................
City of Juneau and 80-kilometer (50-mile) radius by road.. 1.23
Rest of Alaska............................................ 1.25
Hawaii:
City and County of Honolulu............................... 1.25
County of Hawaii.......................................... 1.19
County of Kauai........................................... 1.25
County of Maui and County of Kalawao...................... 1.25
------------------------------------------------------------------------

Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, the next update to the COLA factors for Alaska and Hawaii would
occur in FY 2018.

C. Calculation of the Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY
2015
In general, the operating prospective payment rate for all
hospitals paid under the IPPS located outside of Puerto Rico, except
SCHs and MDHs, for FY 2015 equals the Federal rate (which includes
uncompensated care payments).
We note that, as discussed in section IV.G. of the preamble of this
final rule, section 1106 of Public Law 113-67, enacted on December 26,
2013, extended the MDH program from the end of FY 2013 through the
first half of FY 2014 (that is, for discharges occurring before April
1, 2014). Subsequently, section 106 of Public Law 113-93, enacted on
April 1, 2014, further extended the MDH program through the first half
of FY 2015 (that is, for discharges occurring before April 1, 2015).
Prior to the enactment of Public Law 113-67, the MDH program was only
to be in effect through the end of FY 2013. Under current law, the MDH
program will expire for discharges beginning on April 1, 2015.
SCHs are paid based on whichever of the following rates yields the
greatest aggregate payment: The Federal national rate (which, as
discussed in section IV.F. of the preamble of this final rule, includes
uncompensated care payments); the updated hospital-specific rate based
on FY 1982 costs per discharge; the updated hospital-specific rate
based on FY 1987 costs per discharge; the updated hospital-specific
rate based on FY 1996 costs per discharge; or the updated hospital-
specific rate based on FY 2006 costs per discharge to determine the
rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2015 equals the higher
of the applicable Federal rate, or the hospital-specific rate as
described below.
The prospective payment rate for MDHs for FY 2015 discharges
occurring before April 1, 2015 equals the higher of the Federal rate or
the Federal rate plus 75 percent of the difference between the Federal
rate and the hospital-specific rate as described below. For MDHs, the
updated hospital-specific rate is based on FY 1982, FY 1987 or FY 2002
costs per discharge, whichever yields the greatest aggregate payment.
The prospective payment rate for hospitals located in Puerto Rico
for FY 2015 equals 25 percent of the Puerto Rico-specific payment rate
plus 75 percent of the applicable national rate.
1. Federal Rate
The Federal rate is determined as follows:
Step 1--Select the applicable average standardized amount depending
on whether the hospital submitted qualifying quality data and is a
meaningful EHR user, as described above.
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable wage index for the geographic area in which
the hospital is located or the area to which the hospital is
reclassified.
Step 3--For hospitals located in Alaska and Hawaii, multiply the
nonlabor-related portion of the standardized amount by the applicable
cost-of-living adjustment factor.
Step 4--Add the amount from Step 2 and the nonlabor-related portion
of the standardized amount (adjusted, if applicable, under Step 3).
Step 5--Multiply the final amount from Step 4 by the relative
weight corresponding to the applicable MS-DRG (Table 5 listed in
section VI. of this Addendum and available via the Internet).
The Federal payment rate as determined in Step 5 may then be
further adjusted if the hospital qualifies for either the IME or DSH
adjustment. In addition, for hospitals that qualify for a low-volume
payment adjustment under section 1886(d)(12) of the Act and 42 CFR
412.101(b), the payment in Step 5 would be increased by the formula
described in section IV.D. of the preamble of this final rule. The
base-operating DRG payment amount may be further adjusted by the
hospital readmissions payment adjustment and the hospital VBP payment
adjustment as described under sections 1886(q) and 1886(o) of the Act,
respectively. Finally, we add the uncompensated care payment to the
total claim payment amount. We note that, as discussed above, we take
uncompensated care payments into consideration when calculating outlier
payments.
2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
Section 1886(b)(3)(C) of the Act provides that SCHs are paid based
on whichever of the following rates yields the greatest aggregate
payment: The Federal rate (which, as discussed in section IV.F. of the
preamble of this final rule, includes uncompensated care payments); the
updated hospital-specific rate based on FY 1982 costs per discharge;
the updated hospital-specific rate based on FY 1987 costs per

[[Page 50385]]

discharge; the updated hospital-specific rate based on FY 1996 costs
per discharge; or the updated hospital-specific rate based on FY 2006
costs per discharge to determine the rate that yields the greatest
aggregate payment.
As discussed previously, currently MDHs are paid based on the
Federal national rate or, if higher, the Federal national rate plus 75
percent of the difference between the Federal national rate and the
greater of the updated hospital-specific rates based on either FY 1982,
FY 1987, or FY 2002 costs per discharge.
For a more detailed discussion of the calculation of the hospital-
specific rates, we refer readers to the FY 1984 IPPS interim final rule
(48 FR 39772); the April 20, 1990 final rule with comment period (55 FR
15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS
final rule (65 FR 47082). We also refer readers to section IV.F. of the
preamble of this final rule for a complete discussion on empirically
justified Medicare DSH and uncompensated care payments.
b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific
Rate for FY 2015
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase applicable to the hospital-specific rates for SCHs
and MDHs equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all
other hospitals subject to the IPPS). Because the Act sets the update
factor for SCHs and MDHs equal to the update factor for all other IPPS
hospitals, the update to the hospital-specific rates for SCHs and MDHs
is subject to the amendments to section 1886(b)(3)(B) of the Act made
by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, the applicable percentage increases to the hospital-
specific rates applicable to SCHs and MDHs are the following:

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did not Hospital did not
submitted submitted quality submit quality submit quality
FY 2015 quality data and data and is not a data and is a data and is not a
is a meaningful meaningful EHR meaningful EHR meaningful EHR
EHR user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket 2.9 2.9 2.9 2.9
Rate[dash]of[dash]Increase..........
Adjustment for Failure to Submit 0.0 0.0 -0.725 -0.725
Quality Data under Section
1886(b)(3)(B)(viii) of the Act......
Adjustment for Failure to be a 0.0 -0.725 0.0 -0.725
Meaningful EHR User under Section
1886(b)(3)(B)(ix) of the Act........
MFP Adjustment under Section -0.5 -0.5 -0.5 -0.5
1886(b)(3)(B)(xi) of the Act........
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act.......
Applicable Percentage Increase 2.2 1.475 1.475 0.75
Applied to Hospital-Specific Rate...
----------------------------------------------------------------------------------------------------------------

For a complete discussion of the applicable percentage increase
applied to the hospital-specific rates for SCHs and MDHs, we refer
readers to section IV.B. of the preamble of this final rule.
In addition, because SCHs and MDHs use the same MS-DRGs as other
hospitals when they are paid based in whole or in part on the hospital-
specific rate, the hospital-specific rate is adjusted by a budget
neutrality factor to ensure that changes to the MS-DRG classifications
and the recalibration of the MS-DRG relative weights are made in a
manner so that aggregate IPPS payments are unaffected. Therefore, a
SCH's and MDH's hospital-specific rate is adjusted by the MS-DRG
reclassification and recalibration budget neutrality factor of
0.997543, as discussed in section III. of this Addendum. The resulting
rate is used in determining the payment rate that an SCH will receive
for its discharges beginning on or after October 1, 2014, and the
payment rate that an MDH will receive for its discharges beginning on
or after October 1, 2014, and before April 1, 2015. We note that, in
this final rule, for FY 2015, we are not making a documentation and
coding adjustment to the hospital-specific rate. We refer readers to
section II.D. of the preamble of this final rule for a complete
discussion regarding our policies and previously finalized policies
(including our historical adjustments to the payment rates) relating to
the effect of changes in documentation and coding that do not reflect
real changes in case-mix.
3. General Formula for Calculation of Prospective Payment Rates for
Hospitals Located in Puerto Rico Beginning on or After October 1, 2014,
and Before October 1, 2015
Section 1886(d)(9)(E)(iv) of the Act provides that, effective for
discharges occurring on or after October 1, 2004, hospitals located in
Puerto Rico are paid based on a blend of 75 percent of the national
prospective payment rate and 25 percent of the Puerto Rico-specific
rate.
a. Puerto Rico-Specific Rate
The Puerto Rico-specific prospective payment rate is determined as
follows:
Step 1--Select the applicable average standardized amount
considering the applicable wage index (obtained from Table 1C published
in section VI. of this Addendum and available via the Internet).
Step 2--Multiply the labor-related portion of the standardized
amount by the applicable Puerto Rico-specific wage index.
Step 3--Add the amount from Step 2 and the nonlabor-related portion
of the standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet).
Step 5--Multiply the result in Step 4 by 25 percent.
b. National Prospective Payment Rate
The national prospective payment rate is determined as follows:
Step 1--Select the applicable national average standardized amount.
Step 2--Multiply the labor-related portion of the national average
standardized amount by the applicable wage index for the geographic
area in which the hospital is located or the area to which the hospital
is reclassified.
Step 3--Add the amount from Step 2 and the nonlabor-related portion
of the national average standardized amount.
Step 4--Multiply the amount from Step 3 by the applicable MS-DRG
relative weight (obtained from Table 5 listed in section VI. of this
Addendum and available via the Internet on the CMS Web site).

[[Page 50386]]

Step 5--Multiply the result in Step 4 by 75 percent.
The sum of the Puerto Rico-specific rate and the national
prospective payment rate computed above equals the prospective payment
rate for a given discharge for a hospital located in Puerto Rico. This
payment rate is then further adjusted if the hospital qualifies for
either the IME or DSH adjustment.
Finally, we add the uncompensated care payment to the total claim
payment amount. We note that, as discussed above, we take uncompensated
care payments into consideration when calculating outlier payments.

III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2015

The PPS for acute care hospital inpatient capital-related costs was
implemented for cost reporting periods beginning on or after October 1,
1991. Effective with that cost reporting period, over a 10-year
transition period (which extended through FY 2001) the payment
methodology for Medicare acute care hospital inpatient capital-related
costs changed from a reasonable cost-based methodology to a prospective
methodology (based fully on the Federal rate).
The basic methodology for determining Federal capital prospective
rates is set forth in the regulations at 42 CFR 412.308 through
412.352. Below we discuss the factors that we used to determine the
capital Federal rate for FY 2015, which is effective for discharges
occurring on or after October 1, 2014.
The 10-year transition period ended with hospital cost reporting
periods beginning on or after October 1, 2001 (FY 2002). Therefore, for
cost reporting periods beginning in FY 2002, all hospitals (except
``new'' hospitals under Sec. 412.304(c)(2)) are paid based on the
capital Federal rate. For FY 1992, we computed the standard Federal
payment rate for capital-related costs under the IPPS by updating the
FY 1989 Medicare inpatient capital cost per case by an actuarial
estimate of the increase in Medicare inpatient capital costs per case.
Each year after FY 1992, we update the capital standard Federal rate,
as provided at Sec. 412.308(c)(1), to account for capital input price
increases and other factors. The regulations at Sec. 412.308(c)(2)
also provide that the capital Federal rate be adjusted annually by a
factor equal to the estimated proportion of outlier payments under the
capital Federal rate to total capital payments under the capital
Federal rate. In addition, Sec. 412.308(c)(3) requires that the
capital Federal rate be reduced by an adjustment factor equal to the
estimated proportion of payments for exceptions under Sec. 412.348.
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53705), there is generally no longer a need for an exceptions
payment adjustment factor.) However, in limited circumstances, an
additional payment exception for extraordinary circumstances is
provided for under Sec. 412.348(f) for qualifying hospitals.
Therefore, in accordance with Sec. 412.308(c)(3), an exceptions
payment adjustment factor may need to be applied if such payments are
made. Section 412.308(c)(4)(ii) requires that the capital standard
Federal rate be adjusted so that the effects of the annual DRG
reclassification and the recalibration of DRG weights and changes in
the geographic adjustment factor (GAF) are budget neutral.
Section 412.374 provides for blended payments to hospitals located
in Puerto Rico under the IPPS for acute care hospital inpatient
capital-related costs. Accordingly, under the capital PPS, we compute a
separate payment rate specific to hospitals located in Puerto Rico
using the same methodology used to compute the national Federal rate
for capital-related costs. In accordance with section 1886(d)(9)(A) of
the Act, under the IPPS for acute care hospital operating costs,
hospitals located in Puerto Rico are paid for operating costs under a
special payment formula. Effective October 1, 2004, in accordance with
section 504 of Public Law 108-173, the methodology for operating
payments made to hospitals located in Puerto Rico under the IPPS was
revised to make payments based on a blend of 25 percent of the
applicable standardized amount specific to Puerto Rico hospitals and 75
percent of the applicable national average standardized amount. In
conjunction with this change to the operating blend percentage,
effective with discharges occurring on or after October 1, 2004, we
also revised the methodology for computing capital payments made to
hospitals located in Puerto Rico to be based on a blend of 25 percent
of the Puerto Rico capital rate and 75 percent of the national capital
Federal rate (69 FR 49185).

A. Determination of the Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update

In the discussion that follows, we explain the factors that we used
to determine the capital Federal rate for FY 2015. In particular, we
explain why the FY 2015 capital Federal rate increases approximately
1.2 percent, compared to the FY 2014 capital Federal rate. As discussed
in the impact analysis in Appendix A to this final rule, we estimate
that capital payments per discharge will increase approximately 1.5
percent during that same period. Because capital payments constitute
about 10 percent of hospital payments, a percent change in the capital
Federal rate yields only about a 0.1 percent change in actual payments
to hospitals.
1. Projected Capital Standard Federal Rate Update
a. Description of the Update Framework
Under Sec. 412.308(c)(1), the capital standard Federal rate is
updated on the basis of an analytical framework that takes into account
changes in a capital input price index (CIPI) and several other policy
adjustment factors. Specifically, we adjust the projected CIPI rate-of-
increase as appropriate each year for case-mix index-related changes,
for intensity, and for errors in previous CIPI forecasts. The update
factor for FY 2015 under that framework is 1.5 percent based on the
best data available at this time. The update factor under that
framework is based on a projected 1.5 percent increase in the FY 2010-
based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0
percentage point adjustment for case-mix, a 0.0 percentage point
adjustment for the FY 2013 DRG reclassification and recalibration, and
a forecast error correction of 0.0 percentage point. As discussed below
in section III.C. of this Addendum, we continue to believe that the
CIPI is the most appropriate input price index for capital costs to
measure capital price changes in a given year. We also explain the
basis for the FY 2015 CIPI projection in that same section of this
Addendum. Below we describe the policy adjustments that we are applying
in the update framework for FY 2015.
The case-mix index is the measure of the average DRG weight for
cases paid under the IPPS. Because the DRG weight determines the
prospective payment for each case, any percentage increase in the case-
mix index corresponds to an equal percentage increase in hospital
payments.
The case-mix index can change for any of several reasons:
The average resource use of Medicare patients changes
(``real'' case-mix change);
Changes in hospital documentation and coding of patient
records result in higher-weighted DRG assignments (``coding effects'');
and
The annual DRG reclassification and recalibration changes
may not be budget neutral (``reclassification effect'').
We define real case-mix change as actual changes in the mix (and
resource

[[Page 50387]]

requirements) of Medicare patients as opposed to changes in
documentation and coding behavior that result in assignment of cases to
higher-weighted DRGs, but do not reflect higher resource requirements.
The capital update framework includes the same case-mix index
adjustment used in the former operating IPPS update framework (as
discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR
28816)). (We no longer use an update framework to make a recommendation
for updating the operating IPPS standardized amounts as discussed in
section II. of Appendix B to the FY 2006 IPPS final rule (70 FR
47707).)
For FY 2015, we are projecting a 0.5 percent total increase in the
case-mix index. We estimated that the real case-mix increase will also
equal 0.5 percent for FY 2015. The net adjustment for change in case-
mix is the difference between the projected real increase in case-mix
and the projected total increase in case-mix. Therefore, as we
proposed, the net adjustment for case-mix change in FY 2015 is 0.0
percentage point.
The capital update framework also contains an adjustment for the
effects of DRG reclassification and recalibration. This adjustment is
intended to remove the effect on total payments of prior year's changes
to the DRG classifications and relative weights, in order to retain
budget neutrality for all case-mix index-related changes other than
those due to patient severity of illness. Due to the lag time in the
availability of data, there is a 2-year lag in data used to determine
the adjustment for the effects of DRG reclassification and
recalibration. For example, we have data available to evaluate the
effects of the FY 2013 DRG reclassification and recalibration as part
of our update for FY 2015. We estimate that FY 2013 DRG
reclassification and recalibration resulted in no change in the case-
mix when compared with the case-mix index that would have resulted if
we had not made the reclassification and recalibration changes to the
DRGs. Therefore, as we proposed, we are making a 0.0 percentage point
adjustment for reclassification and recalibration in the update
framework for FY 2015.
The capital update framework also contains an adjustment for
forecast error. The input price index forecast is based on historical
trends and relationships ascertainable at the time the update factor is
established for the upcoming year. In any given year, there may be
unanticipated price fluctuations that may result in differences between
the actual increase in prices and the forecast used in calculating the
update factors. In setting a prospective payment rate under the
framework, we make an adjustment for forecast error only if our
estimate of the change in the capital input price index for any year is
off by 0.25 percentage point or more. There is a 2-year lag between the
forecast and the availability of data to develop a measurement of the
forecast error. A forecast error of 0.0 percentage point was calculated
for the FY 2015 update. Historically, when forecast error of the CIPI
is greater than 0.25 percentage point in absolute terms, it is
reflected in the update recommended under this framework. Current
historical data indicate that the forecasted FY 2013 rate-of-increase
of the FY 2006-based CIPI (1.2 percent) used in calculating the FY 2013
update factor slightly understated the actual realized FY 2013 price
increases of the FY 2006-based CIPI (1.3 percent) by 0.1 percentage
point because the prices associated with both the depreciation and
other capital-related cost categories grew more quickly than
anticipated. Because this forecast error does not exceed the 0.25
percentage point threshold, as we proposed, we are making a 0.0
percentage point adjustment for forecast error in the update for FY
2015.
Under the capital IPPS update framework, we also make an adjustment
for changes in intensity. Historically, we calculated this adjustment
using the same methodology and data that were used in the past under
the framework for operating IPPS. The intensity factor for the
operating update framework reflected how hospital services are utilized
to produce the final product, that is, the discharge. This component
accounts for changes in the use of quality-enhancing services, for
changes within DRG severity, and for expected modification of practice
patterns to remove noncost-effective services. Our intensity measure is
based on a 5-year average.
We calculate case-mix constant intensity as the change in total
cost per discharge, adjusted for price level changes (the CIPI for
hospital and related services) and changes in real case-mix. Without
reliable estimates of the proportions of the overall annual intensity
increases that are due, respectively, to ineffective practice patterns
and the combination of quality-enhancing new technologies and
complexity within the DRG system, we assume that one-half of the annual
increase is due to each of these factors. The capital update framework
thus provides an add-on to the input price index rate of increase of
one-half of the estimated annual increase in intensity, to allow for
increases within DRG severity and the adoption of quality-enhancing
technology.
In this final rule, we are continuing to use a Medicare-specific
intensity measure that is based on a 5-year adjusted average of cost
per discharge for FY 2015 (we refer readers to the FY 2011 IPPS/LTCH
PPS final rule (75 FR 50436) for a full description of our Medicare-
specific intensity measure). Specifically, for FY 2015, we are using an
intensity measure that is based on an average of cost per discharge
data from the 5-year period beginning with FY 2007 and extending
through FY 2012. Based on these data, we estimated that case-mix
constant intensity declined during FYs 2007 through 2012. In the past,
when we found intensity to be declining, we believed a zero (rather
than a negative) intensity adjustment was appropriate. Consistent with
this approach, because we estimate that intensity declined during that
5-year period, we believe it is appropriate to continue to apply a zero
intensity adjustment for FY 2015. Therefore, as we proposed, we are
making a 0.0 percentage point adjustment for intensity in the update
for FY 2015.
Above, we described the basis of the components used to develop the
1.5 percent capital update factor under the capital update framework
for FY 2015 as shown in the table below.

CMS FY 2015 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------

------------------------------------------------------------------------
Capital Input Price Index*............................ 1.5
Intensity: 0.0
Case-Mix Adjustment Factors:
Real Across DRG Change............................ -0.5
Projected Case-Mix Change......................... 0.5
------------------------------------------------------------------------
Subtotal...................................... 1.5
Effect of FY 2013 Reclassification and Recalibration.. 0.0
Forecast Error Correction............................. 0.0
------------------------------------------------------------------------
Total Update.................................. 1.5
------------------------------------------------------------------------
*The capital input price index is based on the FY 2010-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation
In its March 2014 Report to Congress, MedPAC did not make a
specific update recommendation for capital IPPS payments for FY 2015.
(We refer readers to MedPAC's Report to the Congress: Medicare Payment
Policy, March 2014, Chapter 3.)

[[Page 50388]]

2. Outlier Payment Adjustment Factor
Section 412.312(c) establishes a unified outlier payment
methodology for inpatient operating and inpatient capital-related
costs. A single set of thresholds is used to identify outlier cases for
both inpatient operating and inpatient capital-related payments.
Section 412.308(c)(2) provides that the standard Federal rate for
inpatient capital-related costs be reduced by an adjustment factor
equal to the estimated proportion of capital-related outlier payments
to total inpatient capital-related PPS payments. The outlier thresholds
are set so that operating outlier payments are projected to be 5.1
percent of total operating IPPS DRG payments.
For FY 2014, we estimated that outlier payments for capital will
equal 6.07 percent of inpatient capital-related payments based on the
capital Federal rate in FY 2014. Based on the thresholds as set forth
in section II.A. of this Addendum, we estimate that outlier payments
for capital-related costs will equal 6.27 percent for inpatient
capital-related payments based on the capital Federal rate in FY 2015.
Therefore, we are applying an outlier adjustment factor of 0.9373 in
determining the capital Federal rate for FY 2015. Thus, we estimate
that the percentage of capital outlier payments to total capital
Federal rate payments for FY 2015 will be slightly higher than the
percentage for FY 2014.
The outlier reduction factors are not built permanently into the
capital rates; that is, they are not applied cumulatively in
determining the capital Federal rate. The FY 2015 outlier adjustment of
0.9373 is a -0.21 percent change from the FY 2014 outlier adjustment of
0.9393. Therefore, the net change in the outlier adjustment to the
capital Federal rate for FY 2015 is 0.9979 (0.9373/0.9393). Thus, the
outlier adjustment will decrease the FY 2015 capital Federal rate by
0.21 percent compared to the FY 2014 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF
Section 412.308(c)(4)(ii) requires that the capital Federal rate be
adjusted so that aggregate payments for the fiscal year based on the
capital Federal rate after any changes resulting from the annual DRG
reclassification and recalibration and changes in the GAF are projected
to equal aggregate payments that would have been made on the basis of
the capital Federal rate without such changes. Because we implemented a
separate GAF for Puerto Rico, we apply separate budget neutrality
adjustments for the national GAF and the Puerto Rico GAF. We apply the
same budget neutrality factor for DRG reclassifications and
recalibration nationally and for Puerto Rico. Separate adjustments were
unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was
implemented in FY 1998.
To determine the factors for FY 2015, we compared (separately for
the national capital rate and the Puerto Rico capital rate) estimated
aggregate capital Federal rate payments based on the FY 2014 MS-DRG
classifications and relative weights and the FY 2014 GAF to estimated
aggregate capital Federal rate payments based on the FY 2014 MS-DRG
classifications and relative weights and the FY 2015 GAFs. To achieve
budget neutrality for the changes in the national GAFs, based on
calculations using updated data, we are applying an incremental budget
neutrality adjustment factor of 0.9999 for FY 2015 to the previous
cumulative FY 2014 adjustment factor of 0.9891, yielding an adjustment
factor of 0.9890 through FY 2015. For the Puerto Rico GAFs, we are
applying an incremental budget neutrality adjustment factor of 1.0012
for FY 2015 to the previous cumulative FY 2014 adjustment factor of
1.0076, yielding a cumulative adjustment factor of 1.0088 through FY
2015.
We then compared estimated aggregate capital Federal rate payments
based on the FY 2014 MS-DRG relative weights and the FY 2015 GAFs to
estimated aggregate capital Federal rate payments based on the
cumulative effects of the FY 2015 MS-DRG classifications and relative
weights and the FY 2015 GAFs. The incremental adjustment factor for DRG
classifications and changes in relative weights is 0.9987 both
nationally and for Puerto Rico. The cumulative adjustment factors for
MS-DRG classifications and changes in relative weights and for changes
in the GAFs through FY 2015 are 0.9877 nationally and 1.0075 for Puerto
Rico. (We note that all the values are calculated with unrounded
numbers.) The GAF/DRG budget neutrality adjustment factors are built
permanently into the capital rates; that is, they are applied
cumulatively in determining the capital Federal rate. This follows the
requirement under Sec. 412.308(c)(4)(ii) that estimated aggregate
payments each year be no more or less than they would have been in the
absence of the annual DRG reclassification and recalibration and
changes in the GAFs.
The methodology used to determine the recalibration and geographic
adjustment factor (GAF/DRG) budget neutrality adjustment is similar to
the methodology used in establishing budget neutrality adjustments
under the IPPS for operating costs. One difference is that, under the
operating IPPS, the budget neutrality adjustments for the effect of
geographic reclassifications are determined separately from the effects
of other changes in the hospital wage index and the MS-DRG relative
weights. Under the capital IPPS, there is a single GAF/DRG budget
neutrality adjustment factor (the national capital rate and the Puerto
Rico capital rate are determined separately) for changes in the GAF
(including geographic reclassification) and the MS-DRG relative
weights. In addition, there is no adjustment for the effects that
geographic reclassification has on the other payment parameters, such
as the payments for DSH or IME.
The cumulative adjustment factor accounts for the MS-DRG
reclassifications and recalibration and for changes in the GAFs. It
also incorporates the effects on the GAFs of FY 2015 geographic
reclassification decisions made by the MGCRB compared to FY 2014
decisions. However, it does not account for changes in payments due to
changes in the DSH and IME adjustment factors.
4. Capital Federal Rate for FY 2015
For FY 2014, we established a capital Federal rate of $429.31 (78
FR 50990). We are establishing an update of 1.5 percent in determining
the FY 2015 capital Federal rate for all hospitals. As a result of this
update and the budget neutrality factors discussed above, we are
establishing a national capital Federal rate of $434.26 for FY 2015.
The national capital Federal rate for FY 2015 was calculated as
follows:
The FY 2015 update factor is 1.015, that is, the update is
1.5 percent.
The FY 2015 budget neutrality adjustment factor that is
applied to the capital Federal rate for changes in the MS-DRG
classifications and relative weights and changes in the GAFs is 0.9986.
The FY 2015 outlier adjustment factor is 0.9373.
(We note that, as discussed in section VI.C. of the preamble of
this final rule, we are not making an additional MS-DRG documentation
and coding adjustment to the capital IPPS Federal rates for FY 2015.)
Because the FY 2015 capital Federal rate has already been adjusted
for differences in case-mix, wages, cost-of-living, indirect medical
education costs, and payments to hospitals serving a

[[Page 50389]]

disproportionate share of low-income patients, we are not making
additional adjustments in the capital Federal rate for these factors,
other than the budget neutrality factor for changes in the MS-DRG
classifications and relative weights and for changes in the GAFs.
We are providing the following chart that shows how each of the
factors and adjustments for FY 2015 affects the computation of the FY
2015 national capital Federal rate in comparison to the FY 2014
national capital Federal rate. The FY 2015 update factor has the effect
of increasing the capital Federal rate by 1.5 percent compared to the
FY 2014 capital Federal rate. The GAF/DRG budget neutrality adjustment
factor has the effect of decreasing the capital Federal rate by 0.14
percent. The FY 2015 outlier adjustment factor has the effect of
decreasing the capital Federal rate by 0.21 percent compared to the FY
2014 capital Federal rate. The combined effect of all the changes will
increase the national capital Federal rate by 1.15 percent compared to
the FY 2014 national capital Federal rate.

Comparison of Factors and Adjustments: FY 2014 Capital Federal Rate and FY 2015 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
FY 2014 FY 2015 Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\....................... 1.0090 1.0150 1.0150 1.50
GAF/DRG Adjustment Factor \1\........... 0.9987 0.9986 0.9986 -0.14
Outlier Adjustment Factor \2\........... 0.9393 0.9373 0.9979 -0.21
Capital Federal Rate.................... 429.31 434.26 1.0115 1.15
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the
capital Federal rates. Thus, for example, the incremental change from FY 2014 to FY 2015 resulting from the
application of the 0.9986 GAF/DRG budget neutrality adjustment factor for FY 2015 is a net change of 0.9986
(or -0.14 percent).
\2\ The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is
not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting
from the application of the FY 2015 outlier adjustment factor is 0.9373/0.9393, or 0.9979 (or -0.21 percent).

In this final rule, we also are providing the following chart that
shows how the final FY 2015 capital Federal rate differs from the
proposed FY 2015 capital Federal rate as presented in the FY 2015 IPPS/
LTCH PPS proposed rule.

Comparison of Factors and Adjustments: Proposed FY 2015 Capital Federal Rate and Final FY 2015 Capital Federal
Rate
----------------------------------------------------------------------------------------------------------------
Proposed Final Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor........................... 1.0150 1.0150 1.0000 0.00
GAF/DRG Adjustment Factor............... 0.9957 0.9986 1.0030 0.30
Outlier Adjustment Factor............... 0.9374 0.9373 0.9999 -0.01
Capital Federal Rate.................... 433.01 434.26 1.0029 1.29
----------------------------------------------------------------------------------------------------------------

5. Special Capital Rate for Puerto Rico Hospitals
Section 412.374 provides for the use of a blended payment system
for payments made to hospitals located in Puerto Rico under the PPS for
acute care hospital inpatient capital-related costs. Accordingly, under
the capital PPS, we compute a separate payment rate specific to
hospitals located in Puerto Rico using the same methodology used to
compute the national Federal rate for capital-related costs. Under the
broad authority of section 1886(g) of the Act, beginning with
discharges occurring on or after October 1, 2004, capital payments made
to hospitals located in Puerto Rico are based on a blend of 25 percent
of the Puerto Rico capital rate and 75 percent of the capital Federal
rate. The Puerto Rico capital rate is derived from the costs of Puerto
Rico hospitals only, while the capital Federal rate is derived from the
costs of all acute care hospitals participating in the IPPS (including
Puerto Rico).
To adjust hospitals' capital payments for geographic variations in
capital costs, we apply a GAF to both portions of the blended capital
rate. The GAF is calculated using the operating IPPS wage index, and
varies depending on the labor market area or rural area in which the
hospital is located. We use the Puerto Rico wage index to determine the
GAF for the Puerto Rico part of the capital-blended rate and the
national wage index to determine the GAF for the national part of the
blended capital rate.
Because we implemented a separate GAF for Puerto Rico in FY 1998,
we also apply separate budget neutrality adjustment factors for the
national GAF and for the Puerto Rico GAF. However, we apply the same
budget neutrality adjustment factor for MS-DRG reclassifications and
recalibration nationally and for Puerto Rico. The budget neutrality
adjustment factors for the national GAF and for the Puerto Rico GAF and
the budget neutrality factor for MS-DRG reclassifications and
recalibration (which is the same nationally and for Puerto Rico) are
discussed in section III.A.3. of this Addendum.
In computing the payment for a particular Puerto Rico hospital, the
Puerto Rico portion of the capital rate (25 percent) is multiplied by
the Puerto Rico-specific GAF for the labor market area in which the
hospital is located, and the national portion of the capital rate (75
percent) is multiplied by the national GAF for the labor market area in
which the hospital is located (which is computed from national data for
all hospitals in the United States and Puerto Rico).
For FY 2014, the special capital rate for hospitals located in
Puerto Rico was $209.82 (78 FR 50991). With the changes we are making
to the factors used to determine the capital Federal rate, the FY 2015
special capital rate for hospitals in Puerto Rico is $209.10.
Comment: One commenter noted that the proposed capital standard
Federal rate for Puerto Rico is approximately less than half of the
proposed national capital standard Federal rate. The commenter asserted
that this

[[Page 50390]]

``disparity'' is ``not consistent with the basic reality of Puerto
Rico'' because average capital costs in Puerto Rico are not that
dissimilar from those in the United States.
Response: We appreciate the commenter's attention to the proposed
capital Federal rates for Puerto Rico hospitals. While it is not clear
what the commenter was specifically requesting, we believe the
commenter may have been suggesting that CMS increase the Puerto Rico
specific capital Federal rate to reduce the difference between it and
the national capital Federal rate. The commenter is correct that the
proposed Puerto Rico capital standard Federal rate is approximately
half of the proposed national capital standard Federal rate, which has
consistently been the difference since those rates were established.
The Puerto Rico capital rate is derived from the costs of Puerto Rico
hospitals only, while the national capital Federal rate is derived from
the costs of all acute care hospitals participating in the IPPS,
including Puerto Rico. The commenter did not provide any empirical data
to demonstrate that the capital-related costs in Puerto Rico are
similar to those in the United States, nor that the blended payment
methodology for capital-related costs to hospitals located in Puerto
Rico at Sec. 412.374 (that is, 25 percent of the Puerto Rico capital
rate and 75 percent of the national capital Federal rate) does not
result in appropriate capital IPPS payments for Puerto Rico hospitals.
Consequently, we are unable to assess and directly respond to the
statements included in the comment. Therefore, in this final rule, we
have determined that the Puerto Rico capital Federal rate for FY 2015
is consistent with our current policy.

B. Calculation of the Inpatient Capital-Related Prospective Payments
for FY 2015

For purposes of calculating payments for each discharge during FY
2015, the capital Federal rate is adjusted as follows: (Standard
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located in
Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment
Factor, if applicable). The result is the adjusted capital Federal
rate.
Hospitals also may receive outlier payments for those cases that
qualify under the thresholds established for each fiscal year. Section
412.312(c) provides for a single set of thresholds to identify outlier
cases for both inpatient operating and inpatient capital-related
payments. The outlier thresholds for FY 2015 are in section II.A. of
this Addendum. For FY 2015, a case would qualify as a cost outlier if
the cost for the case plus the (operating) IME and DSH payments
(including both the empirically justified Medicare DSH payment and the
estimated uncompensated care payment, as discussed in section
II.A.4.g.(1) of this Addendum) is greater than the prospective payment
rate for the MS-DRG plus the fixed-loss amount of $24,758.
Currently, as provided under Sec. 412.304(c)(2), we pay a new
hospital 85 percent of its reasonable costs during the first 2 years of
operation unless it elects to receive payment based on 100 percent of
the capital Federal rate. Effective with the third year of operation,
we pay the hospital based on 100 percent of the capital Federal rate
(that is, the same methodology used to pay all other hospitals subject
to the capital PPS).

C. Capital Input Price Index

1. Background
Like the operating input price index, the capital input price index
(CIPI) is a fixed-weight price index that measures the price changes
associated with capital costs during a given year. The CIPI differs
from the operating input price index in one important aspect--the CIPI
reflects the vintage nature of capital, which is the acquisition and
use of capital over time. Capital expenses in any given year are
determined by the stock of capital in that year (that is, capital that
remains on hand from all current and prior capital acquisitions). An
index measuring capital price changes needs to reflect this vintage
nature of capital. Therefore, the CIPI was developed to capture the
vintage nature of capital by using a weighted-average of past capital
purchase prices up to and including the current year.
We periodically update the base year for the operating and capital
input price indexes to reflect the changing composition of inputs for
operating and capital expenses. In the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50603 through 50607), we rebased and revised the CIPI to a FY
2010 base year to reflect the more current structure of capital costs
in hospitals. For a complete discussion of this rebasing, we refer
readers to the FY 2014 IPPS/LTCH PPS final rule.
2. Forecast of the CIPI for FY 2015
Based on the latest forecast by IHS Global Insight, Inc. (second
quarter of 2014), we are forecasting the FY 2010-based CIPI to increase
1.5 percent in FY 2015. This reflects a projected 2.0 percent increase
in vintage-weighted depreciation prices (building and fixed equipment,
and movable equipment), and a projected 2.7 percent increase in other
capital expense prices in FY 2015, partially offset by a projected 1.1
percent decline in vintage-weighted interest expenses in FY 2015. The
weighted average of these three factors produces the forecasted 1.5
percent increase for the FY 2010-based CIPI as a whole in FY 2015.

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase
Percentages for FY 2015

Payments for services furnished in children's hospitals, 11 cancer
hospitals, and hospitals located outside the 50 States, the District of
Columbia and Puerto Rico (that is, short-term acute care hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa) that are excluded from the IPPS are made on the
basis of reasonable costs based on the hospital's own historical cost
experience, subject to a rate-of-increase ceiling. A per discharge
limit (the target amount as defined in Sec. 413.40(a) of the
regulations) is set for each hospital based on the hospital's own cost
experience in its base year, and updated annually by a rate-of-increase
percentage. (We note that, in accordance with Sec. 403.752(a), RNHCIs
are also subject to the rate-of-increase limits established under Sec.
413.40 of the regulations.)
In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed that the FY
2015 rate-of-increase percentage for updating the target amounts for
the 11 cancer hospitals, children's hospitals, and the short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa, as well as RNHCIs would be the
estimated percentage increase in the FY 2015 IPPS operating market
basket, in accordance with applicable regulations at Sec. 413.40. As
we did in FY 2014, we proposed to use the percentage increase in the FY
2010-based IPPS operating market basket to update these target amounts.
Based on IHS Global Insight, Inc.'s 2014 first quarter forecast, we
estimated that the FY 2010-based IPPS operating market basket update
for FY 2015 was 2.7 percent (that is, the estimate of the market basket
rate-of-increase). However, we proposed that if more recent data become
available for the final rule, we would use them to calculate the IPPS
operating market basket update for FY 2015.

[[Page 50391]]

We did not receive any public comments on our proposals.
Based on updated data from IHS Global Insight, Inc.'s 2014 second
quarter forecast, we estimate that the final FY 2010-based IPPS
operating market basket update for FY 2015 is 2.9 percent (that is, the
estimate of the market basket rate-of-increase).
The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We
refer readers to section VII. of the preamble of this final rule and
section V. of the Addendum to this final rule for the update changes to
the Federal payment rates for LTCHs under the LTCH PPS for FY 2015. The
annual updates for the IRF PPS and the IPF PPS are issued by the agency
in separate Federal Register documents.

V. Updates to the Payment Rates for the LTCH PPS for FY 2015

A. LTCH PPS Standard Federal Rate for FY 2015

1. Background
In section VII. of the preamble of this final rule, we discuss our
updates to the payment rates, factors, and specific policies under the
LTCH PPS for FY 2015.
Under Sec. 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate
years beginning RY 2004 through RY 2006, we updated the standard
Federal rate annually by a factor to adjust for the most recent
estimate of the increases in prices of an appropriate market basket of
goods and services for LTCHs. We established this policy of annually
updating the standard Federal rate because, at that time, we believed
that was the most appropriate method for updating the LTCH PPS standard
Federal rate for years after the initial implementation of the LTCH PPS
in FY 2003. Therefore, under Sec. 412.523(c)(3)(ii), for RYs 2004
through 2006, the annual update to the LTCH PPS standard Federal rate
was equal to the previous rate year's Federal rate updated by the most
recent estimate of increases in the appropriate market basket of goods
and services included in covered inpatient LTCH services.
In determining the annual update to the standard Federal rate for
RY 2007, based on our ongoing monitoring activity, we believed that,
rather than solely using the most recent estimate of the LTCH PPS
market basket update as the basis of the annual update factor, it was
appropriate to adjust the standard Federal rate to account for the
effect of documentation and coding in a prior period that was unrelated
to patients' severity of illness (71 FR 27818). Accordingly, we
established under Sec. 412.523(c)(3)(iii) that the annual update to
the standard Federal rate for RY 2007 was zero percent based on the
most recent estimate of the LTCH PPS market basket at that time, offset
by an adjustment to account for changes in case-mix in prior periods
due to the effect of documentation and coding that were unrelated to
patients' severity of illness. For RY 2008 through FY 2011, we also
made an adjustment for the effect of documentation and coding that was
unrelated to patients' severity of illness in establishing the annual
update to the standard Federal rate as set forth in the regulations at
Sec. Sec. 412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012, 2013,
and 2014, we updated the standard Federal rate by the most recent
estimate of the LTCH PPS market basket at that time, including
additional statutory adjustments required by section 1886(m)(3)(A) of
the Act as set forth in the regulations at Sec. Sec.
412.523(c)(3)(viii) through (c)(3)(ix).
Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of
the Affordable Care Act, specifies that, for rate year 2010 and each
subsequent rate year, any annual update to the standard Federal rate
shall be reduced:
For rate year 2010 through 2019, by the other adjustment
specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and
For rate year 2012 and each subsequent year, by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act (which we refer to as ``the multifactor productivity (MFP)
adjustment'') as discussed in section VII.C.2. of the preamble of this
final rule.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year. (As noted in section VII.C.2.a. of the preamble of
this final rule, the annual update to the LTCH PPS occurs on October 1
and we have adopted the term ``fiscal year'' (FY) rather than ``rate
year'' (RY) under the LTCH PPS beginning October 1, 2010. Therefore,
for purposes of clarity, when discussing the annual update for the LTCH
PPS, including the provisions of the Affordable Care Act, we use the
term ``fiscal year'' rather than ``rate year'' for 2011 and subsequent
years.)
For FY 2014, consistent with our historical practice, we
established an update to the LTCH PPS standard Federal rate based on
the full estimated LTCH PPS market basket increase of 2.5 percent and
the 0.8 percentage point reductions required by sections
1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(C) of the Act.
Accordingly, at Sec. 412.523(c)(3)(x) of the regulations, we
established an annual update of 1.7 percent to the standard Federal
rate for FY 2014 (78 FR 50761 through 50763).
For FY 2015, as discussed in greater detail in section VII.C.2. of
the preamble of this final rule, consistent with our proposal, we are
establishing an annual update to the LTCH PPS standard Federal rate
based on the full estimated increase in the LTCH PPS market basket,
less the MFP adjustment consistent with section 1886(m)(3)(A)(i) of the
Act, and less the 0.2 percentage point required by sections
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In addition, as discussed
in greater detail in section VII.C.2. of the preamble of this final
rule, beginning in FY 2014, the annual update will be further reduced
by 2.0 percentage points for LTCHs that fail to submit quality
reporting data in accordance with the requirements of the LTCHQR
Program under section 1886(m)(5) of the Act.
Specifically, in this final rule, based on the best available data,
we are establishing an annual update to the standard Federal rate of
2.2 percent, which is based on the full estimated increase in the LTCH
PPS market basket of 2.9 percent, less the MFP adjustment of 0.5
percentage point consistent with section 1886(m)(3)(A)(i) of the Act,
and less the 0.2 percentage point required by sections
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. As discussed in greater
detail in section VII.C.2.c. of the preamble of this final rule, for
LTCHs that fail to submit the required quality reporting data for FY
2015 in accordance with the LTCHQR Program, the annual update is
further reduced by 2.0 percentage points as required by section
1886(m)(5) of the Act. Accordingly, we are establishing an annual
update to the LTCH PPS standard Federal rate of 0.2 percent for LTCHs
that fail to submit the required quality reporting data for FY 2015.
This 0.2 percent update is calculated based on the full estimated
increase in the LTCH PPS market basket of 2.9 percent, less a MFP
adjustment of 0.5 percentage point, less an additional adjustment of
0.2 percentage point required by the statute, and less 2.0 percentage
points for failure to submit quality reporting data as required by
section 1886(m)(5) of the Act.
2. Development of the FY 2015 LTCH PPS Standard Federal Rate
We continue to believe that the annual update to the LTCH PPS
standard Federal rate should be based

[[Page 50392]]

on the most recent estimate of the increase in the LTCH PPS market
basket, including any statutory adjustments. Consistent with our
historical practice and as we proposed, for FY 2015, we are applying
the annual update to the LTCH PPS standard Federal rate from the
previous year. Furthermore, in determining the standard Federal rate
for FY 2015, consistent with our proposal, we also are making certain
regulatory adjustments. Specifically, we are applying an adjustment
factor for the final year of the 3-year phase-in of the one-time
prospective adjustment to the standard Federal rate under Sec.
412.523(d)(3), as discussed in greater detail in section VII.C.3. of
the preamble of this final rule. In addition, in determining the FY
2015 standard Federal rate, we are applying a budget neutrality
adjustment factor for the changes related to the area wage adjustment
(that is, changes to the wage data, including the policy to adopt the
new OMB delineations, and labor-related share) in accordance with Sec.
412.523(d)(4).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50993and 50993), we
established an annual update to the LTCH PPS standard Federal rate of
1.7 percent for FY 2014 based on the full estimated LTCH PPS market
basket increase of 2.5 percent, less the MFP adjustment of 0.5
percentage point consistent with section 1886(m)(3)(A)(i) of the Act
and less the 0.3 percentage point required by sections
1886(m)(3)(A)(ii) and (m)(4)(C) of the Act. Accordingly, at Sec.
412.523(c)(3)(x), we established an annual update to the standard
Federal rate for FY 2014 of 1.7 percent. That is, we applied an update
factor of 1.017 to the FY 2013 Federal rate of $40,607.31 to determine
the FY 2014 standard Federal rate. We also adjusted the standard
Federal rate for FY 2014 by the one-time prospective adjustment factor
for FY 2014 of 0.98734 under Sec. 412.523(d)(3)(ii). Furthermore, for
FY 2014, we applied an area wage level budget neutrality factor of
1.0010531 to the standard Federal rate to ensure that any changes to
the area wage level adjustment (that is, the annual update of the wage
index values and labor-related share) would not result in any change
(increase or decrease) in estimated aggregate LTCH PPS payments.
Consequently, we established a standard Federal rate for FY 2014 of
$40,607.31 (calculated as $40,397.96 x 1.017 x 0.98734 x 1.0010531).
In this final rule, we are establishing an annual update to the
LTCH PPS standard Federal rate of 2.2 percent (that is, an update
factor of 1.022) for FY 2015, based on the full estimated increase in
the LTCH PPS market basket of 2.9 percent, less the MFP adjustment of
0.5 percentage point, consistent with section 1886(m)(3)(A)(i) of the
Act, and less the 0.2 percentage point required by sections
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. Therefore, consistent with
our proposal, under Sec. 412.523(c)(3)(xi), we are applying a factor
of 1.022 to the FY 2014 standard Federal rate of $40,607.31 to
determine the FY 2015 standard Federal rate. These factors are based on
IGI's second quarter 2014 forecast, which are the best available data
at this time. For LTCHs that fail to submit quality reporting data for
FY 2015 under the LTCHQR Program, consistent with our proposal, under
Sec. 412.523(c)(3)(xi) in conjunction with Sec. 412.523(c)(4), we are
reducing the annual update to the LTCH PPS standard Federal rate by an
additional 2.0 percentage points consistent with section 1886(m)(5) of
the Act. Therefore, we are establishing an annual update to the LTCH
PPS standard Federal rate of 0.2 percent (that is, 2.2 percent minus
2.0 percentage points, or an update factor of 1.002) for FY 2015 for
LTCHs that fail to submit the required quality reporting data for FY
2015 under the LTCHQR Program. We also are establishing that the
standard Federal rate for FY 2015 will be further adjusted by an
adjustment factor of 0.98734 for FY 2015 under the final year of the 3-
year phase-in of the one-time prospective adjustment at Sec.
412.523(d)(3)(ii). In addition, for FY 2015, we are applying an area
wage level budget neutrality factor of 1.0016703 to the standard
Federal rate to ensure that any changes to the area wage level
adjustment (that is, the annual update of the wage index values and
labor-related share) will not result in any change (increase or
decrease) in estimated aggregate LTCH PPS payments. Accordingly, we are
establishing a standard Federal rate of $41,043.71 (calculated as
$40,607.31 x 1.022 x 0.98734 x 1.0016703) for FY 2015. The standard
Federal rate of $41,043.71 will apply in determining the payments for
FY 2015 discharges from LTCHs that submit quality reporting data for FY
2015 in accordance with the requirements of the LTCHQR Program under
section 1886(m)(5) of the Act. For LTCHs that fail to submit quality
reporting data for FY 2015 in accordance with the requirements of the
LTCHQR Program under section 1886(m)(5) of the Act, we are establishing
a standard Federal of $40,240.51 (calculated as $40,607.31 x 1.002 x
0.98734 x 1.0016703) for FY 2015.

B. Adjustment for Area Wage Levels under the LTCH PPS for FY 2015

1. Background
Under the authority of section 123 of the BBRA, as amended by
section 307(b) of the BIPA, we established an adjustment to the LTCH
PPS standard Federal rate to account for differences in LTCH area wage
levels under Sec. 412.525(c). The labor-related share of the LTCH PPS
standard Federal rate is adjusted to account for geographic differences
in area wage levels by applying the applicable LTCH PPS wage index. The
applicable LTCH PPS wage index is computed using wage data from
inpatient acute care hospitals without regard to reclassification under
section 1886(d)(8) or section 1886(d)(10) of the Act.
When we implemented the LTCH PPS, we established a 5-year
transition to the full area wage level adjustment. The area wage level
adjustment was completely phased-in for cost reporting periods
beginning in FY 2007. Therefore, for cost reporting periods beginning
on or after October 1, 2006, the applicable LTCH area wage index values
are the full LTCH PPS area wage index values calculated based on acute
care hospital inpatient wage index data without taking into account
geographic reclassification under section 1886(d)(8) and section
1886(d)(10) of the Act. For additional information on the phase-in of
the area wage level adjustment under the LTCH PPS, we refer readers to
the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and
the RY 2008 LTCH PPS final rule (72 FR 26891).
2. Geographic Classifications (Labor Market Areas) Based on the New OMB
Delineations
In adjusting for the differences in area wage levels under the LTCH
PPS, the labor-related portion of an LTCH's Federal prospective payment
is adjusted by using an appropriate area wage index based on the
geographic classification (labor market area) in which the LTCH is
located. Specifically, the application of the LTCH PPS area wage level
adjustment under existing Sec. 412.525(c) is made based on the
location of the LTCH--either in an ``urban area,'' or a ``rural area,''
as defined in Sec. 412.503. Under Sec. 412.503, an ``urban area'' is
defined as a Metropolitan Statistical Area (MSAs) (which includes a
Metropolitan division, where applicable), as defined by the Executive

[[Page 50393]]

OMB and a ``rural area'' is defined as any area outside of an urban
area.
The CBSA-based geographic classification (labor market area)
definitions currently used under the LTCH PPS, effective for discharges
occurring on or after July 1, 2005, are based on the OMB's CBSA
definitions that were developed based on 2000 U.S. Census data. As
discussed in greater detail in section VII.D. of the preamble of this
final rule, OMB announced revisions to the statistical boundaries of
its labor market areas for MSAs, Micropolitan Statistical Areas, and
Combined Statistical Areas, and provided guidance on the uses of the
delineations of these areas in OMB Bulletin No. 13-01, issued on
February 28, 2013 (referred hereinafter as the ``new OMB
delineations''). As previously stated, at that time, the FY 2014 IPPS/
LTCH PPS proposed rule was in the advanced stages of development, and
the proposed FY 2014 LTCH PPS area wage indexes had already been
developed based on the previous OMB CBSA-based labor market area
definitions that are currently used to define CBSA-based labor market
areas (referred hereinafter as ``CBSA designations'') under the LTCH
PPS. Therefore, we did not implement changes to the CBSA designations
under the LTCH PPS for FY 2014 based on the new OMB labor market areas
delineations that were developed based on 2010 Decennial Census data.
Rather, to allow for sufficient time to assess the new changes and
their ramifications, we stated that we intended to propose to adopt the
new OMB delineations, and the corresponding changes to the area wage
index values based on those delineations, under the LTCH PPS for FY
2015 through notice and comment rulemaking. This approach was
consistent with the approach used under the IPPS. (We refer readers to
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50994 through 50995).)
As discussed in section VII.D. of the preamble of this final rule,
under the authority of section 123 of the BBRA, as amended by section
307(b) of the BIPA, we are adopting the new OMB delineations beginning
in FY 2015. We believe that these new OMB delineations are based on the
best available data that reflect the local economies and area wage
levels of the hospitals that are currently located in these geographic
areas. We also believe that the new OMB delineations will ensure that
the LTCH PPS area wage level adjustment most appropriately accounts for
and reflects the relative hospital wage levels in the geographic area
of the hospital as compared to the national average hospital wage
level. We note that this policy is consistent with the IPPS policy
discussed in section III.B. of the preamble of this final rule. For
additional details on our policy to adopt the new OMB delineations, we
refer readers to section VII.D. of the preamble of this final rule.
3. LTCH PPS Labor-Related Share
Under the payment adjustment for the differences in area wage
levels under Sec. 412.525(c), the labor-related share of an LTCH's PPS
Federal prospective payment is adjusted by the applicable wage index
for the labor market area in which the LTCH is located. The LTCH PPS
labor-related share currently represents the sum of the labor-related
portion of operating costs (Wages and Salaries; Employee Benefits;
Professional Fees Labor-Related, Administrative and Business Support
Services; and All-Other: Labor-Related Services) and a labor-related
portion of capital costs using the applicable LTCH PPS market basket.
Additional background information on the historical development of the
labor-related share under the LTCH PPS and the development of the RPL
market basket can be found in the RY 2007 LTCH PPS final rule (71 FR
27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51766 through 51769 and 51808).
For FY 2013, we revised and rebased the market basket used under
the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific
market basket. In addition, we determined the labor-related share for
FY 2013 as the sum of the FY 2013 relative importance of each labor-
related cost category of the FY 2009-based LTCH-specific market basket.
For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53477 through 53479).
Consistent with our historical practice, in the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50995 through 50996), we determined the LTCH PPS
labor-related share for FY 2014 based on the FY 2014 relative
importance of each labor-related cost category, which reflected the
different rates of price change for these cost categories between the
base year (FY 2009) and FY 2014. Specifically, based on IGI's second
quarter 2013 forecast of the FY 2009-based LTCH-specific market basket,
we established a labor-related share under the LTCH PPS for FY 2014 of
62.537 percent.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28335), we
proposed to establish a labor-related share under the LTCH PPS for FY
2015 of 62.571 percent based on IGI's first quarter 2014 forecast of
the FY 2009-based LTCH-specific market basket. Consistent with our
historical practice, we also proposed that if more recent data became
available, we would use that data to determine the final FY 2015 labor-
related share under the LTCH PPS. We did not receive any public
comments on this proposal. Therefore, we are adopting the policy as
final without modification.
For FY 2015, in this final rule, we are establishing a labor-
related share under the LTCH PPS of 62.306 percent based on IGI's
second quarter 2014 forecast of the FY 2009-based LTCH-specific market
basket. The table below shows the FY 2015 labor-related share relative
importance using IGI's second quarter 2014 forecast of the FY 2009-
based LTCH-specific market basket. The sum of the relative importance
for FY 2015 for operating costs (Wages and Salaries; Employee Benefits;
Professional Fees Labor-Related, Administrative and Business Support
Services; and All Other: Labor-Related Services) is 58.116 percent. We
are establishing that the portion of capital-related costs that is
influenced by the local labor market will continue to be estimated to
be 46 percent. Because the relative importance for capital-related
costs will be 9.109 percent of the FY 2009-based LTCH-specific market
basket in FY 2015, we are taking 46 percent of 9.109 percent to
determine the labor-related share of capital-related costs for FY 2015,
which will result in 4.190 percent (0.46 x 9.109). We then added that
4.190 percent for the capital-related cost amount to the 58.116 percent
for the operating cost amount to determine the total labor-related
share for FY 2015. Therefore, under the broad authority of section 123
of the BBRA, as amended by section 307(b) of BIPA, to determine
appropriate payment adjustments under the LTCH PPS, we are establishing
a labor-related share under the LTCH PPS for FY 2015 of 62.306 percent.
This labor-related share is determined using the same methodology as
used in calculating all previous fiscal years LTCH labor-related
shares.

[[Page 50394]]

FY 2015 Labor-Related Share Relative Importance Based on the FY 2009-
Based LTCH-Specific Market Basket
------------------------------------------------------------------------
FY 2015 labor-
related share
relative
importance
------------------------------------------------------------------------
Wages and Salaries.................................... 44.865
Employee Benefits..................................... 8.072
Professional Fees: Labor-Related...................... 2.198
Administrative and Business Support Services.......... 0.500
All Other: Labor-Related Services..................... 2.481
------------------------------------------------------------------------
Subtotal.......................................... 58.116
Proposed Labor-Related Portion of Capital Costs (46%). 4.190
------------------------------------------------------------------------
Total Labor-Related Share..................... 62.306
------------------------------------------------------------------------

4. LTCH PPS Wage Index for FY 2015
Historically, we have established LTCH PPS area wage index values
calculated from acute care IPPS hospital wage data without taking into
account geographic reclassification under sections 1886(d)(8) and
1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment
established under the LTCH PPS is based on an LTCH's actual location
without regard to the ``urban'' or ``rural'' designation of any related
or affiliated provider.
In the FY 2014 LTCH PPS final rule (78 FR 50996 through 50997), we
calculated the FY 2014 LTCH PPS area wage index values using the same
data used for the FY 2014 acute care hospital IPPS (that is, data from
cost reporting periods beginning during FY 2010), without taking into
account geographic reclassification under sections 1886(d)(8) and
1886(d)(10) of the Act, as these were the most recent complete data
available at that time. In that same final rule, we indicated that we
computed the FY 2014 LTCH PPS area wage index values consistent with
the urban and rural geographic classifications (labor market areas)
that were in place at that time, and consistent with the pre-
reclassified IPPS wage index policy (that is, our historical policy of
not taking into account IPPS geographic reclassifications in
determining payments under the LTCH PPS). As with the IPPS wage index,
wage data for multicampus hospitals with campuses located in different
labor market areas (CBSAs) are apportioned to each CBSA where the
campus (or campuses) are located. We also continued to use our existing
policy for determining area wage index values for areas where there are
no IPPS wage data.
Consistent with our historical methodology, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28336 through 28337), to determine the
applicable area wage index values under the LTCH PPS for FY 2015, under
the broad authority of section 123 of the BBRA, as amended by section
307(b) of the BIPA, to determine appropriate payment adjustments under
the LTCH PPS, we proposed to use wage data collected from cost reports
submitted by IPPS hospitals for cost reporting periods beginning during
FY 2011, without taking into account geographic reclassification under
sections 1886(d)(8) and 1886(d)(10) of the Act. We proposed to use FY
2011 wage data because these data are the most recent complete data
available. We also noted that these are the same data used to compute
the proposed FY 2015 acute care hospital inpatient wage index, as
discussed in section III. of the preamble of that proposed rule. We
proposed to compute the FY 2015 LTCH PPS area wage index values
consistent with the proposed ``urban'' and ``rural'' geographic
classifications (that is, using the proposed new OMB labor market area
delineations), and consistent with our historical policy of not taking
into account IPPS geographic reclassifications under sections
1886(d)(8) and 1886(d)(10) of the Act in determining payments under the
LTCH PPS. We also proposed to continue to apportion wage data for
multicampus hospitals with campuses located in different labor market
areas to each CBSA where the campus or campuses are located, consistent
with the IPPS policy. Lastly, under our proposed methodology for
determining the FY 2015 LTCH PPS area wage index values, we proposed to
continue to use our existing policy for determining area wage index
values for areas where there are no IPPS wage data. (We refer readers
to section V.B.4. of the Addendum to the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28336 through 28337) for additional details regarding our
proposals pertaining to the development of the LTCH PPS wage index
values for FY 2015, which we are adopting as final without modification
in this final rule, as discussed below.)
Comment: One commenter provided information received from a
procured contractor that attempted to replicate the proposed FY 2015
LTCH wage index values using the IPPS wage index data from the FY 2011
cost report data that CMS made available on its Web site. As part of
that analysis, the contractor also explored the variance between the FY
2014 LTCH PPS wage index values and the proposed FY 2015 LTCH PPS wage
index values for certain LTCHs that were projected to experience a
relatively significant change in their wage index. In particular, the
analysis prepared by the commenter's contractor focused on specific
CBSAs (particularly CBSA 23540 and CBSA 34740) that were projected to
experience ``a significant decline'' in their wage index values for FY
2015 when compared to FY 2014, although there has been no change in the
constituent of hospitals used to compute the wage index values for
these areas. The commenter requested that CMS reexamine the wage data
used to calculate the FY 2015 LTCH PPS wage index values for CBSAs that
would experience a decrease in their wage index values for FY 2015 when
compared to the FY 2014 LTCH PPS wage index values for these CBSAs, and
to explain the cause for those decreases.
Response: As requested by the commenter, we reexamined the IPPS
wage data used to calculate the FY 2015 LTCH PPS wage index values for
CBSAs that were projected to experience a decrease in their wage index
values for FY 2015 when compared to the FY 2014 LTCH PPS wage index
values for these CBSAs, focusing our attention on the CBSAs referenced
by the commenter. We found no issues with the IPPS hospital wage data
from the FY 2011 cost reports, or with the calculation of

[[Page 50395]]

the FY 2015 LTCH PPS wage index values. In exploring the cause for the
decrease in the wage index values for CBSAs projected to experience ``a
significant decline'' in their FY 2015 wage index values when compared
to the FY 2014 LTCH PPS wage index values for these CBSAs, we found
that many of these CBSAs were comprised of three or less hospitals. A
labor market area's wage index value is calculated as the ratio of the
labor market area's average hourly wage to the national average hourly
wage. Labor market areas (CBSAs) with fewer providers are generally
subject to less stability in year-to-year wage index values because
there is less of an averaging effect, wherein even relatively minor
changes in one provider's wage data can produce a relatively
``significant'' effect on the wage index value for that area. This is
because such a change in one provider's wage data has a relatively
greater effect on the CBSA's average hourly wage (based solely on the
limited number of hospitals in that area) when compared to the effect
that such a change has on the national average hourly wage (which is
based on wage data from all hospitals). We note that there also are
CBSAs that were projected to experience a ``significant increase'' in
their wage index values for the same reason. We believe that these wage
index changes are appropriate because these values are based on the
most recent data available that reflect the relative hospital wage
level in a geographic area (CBSA) in comparison to the national average
hospital wage level.
After consideration of the public comments we received, in this
final rule, we are finalizing our proposals pertaining to the
development of the LTCH PPS wage index values for FY 2015, without
modification. Therefore, consistent with our historical methodology, to
determine the applicable area wage index values under the LTCH PPS for
FY 2015, under the broad authority of section 123 of the BBRA, as
amended by section 307(b) of the BIPA, to determine appropriate payment
adjustments under the LTCH PPS, we are using wage data collected from
cost reports submitted by IPPS hospitals for cost reporting periods
beginning during FY 2011, without taking into account geographic
reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act.
We are using FY 2011 wage data because these data are the most recent
complete data available. These are the same data used to compute the FY
2015 acute care hospital inpatient wage index values, as discussed in
section III. of the preamble of this final rule. (For our rationale for
using IPPS hospital wage data as a proxy for determining the area wage
index values used under the LTCH PPS, we refer readers to the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 44024 through 44025).) The FY
2015 LTCH PPS area wage index values were computed consistent with the
``urban'' and ``rural'' geographic classifications (that is, using the
new OMB labor market area delineations), as discussed in section VII.D.
of the preamble of this final rule, and consistent with the pre-
reclassified IPPS wage index policy (that is, our historical policy of
not taking into account IPPS geographic reclassifications under
sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments
under the LTCH PPS). As with the IPPS wage index, we are continuing to
apportion wage data for multicampus hospitals with campuses located in
different labor market areas to each CBSA where the campus or campuses
are located, as discussed in section III.G. of the preamble of this
final rule. Furthermore, in determining the FY 2015 LTCH PPS area wage
index values, we are continuing to use our existing policy for
determining area wage index values for areas where there are no IPPS
wage data using the methodology we established in the RY 2009 LTCH PPS
final rule. For more information about this methodology, including an
explanation of and rationale for our policy for determining LTCH PPS
wage index values for areas that have no IPPS wage data, we refer
readers to the RY 2009 LTCH PPS final rule (73 FR 26817 through 26818).
There are currently no LTCHs located in labor market areas without
IPPS hospital wage data (or IPPS hospitals). However, as discussed in
the proposed rule, if an LTCH were to open in one of these labor market
areas, LTCH PPS wage index values for such an area would be calculated
using our established methodology. Under our existing methodology, the
LTCH PPS wage index value for urban CBSAs with no IPPS wage data is
determined by using an average of all of the urban areas within the
State, and the LTCH PPS wage index value for rural areas with no IPPS
wage data is determined by using the unweighted average of the wage
indices from all of the CBSAs that are contiguous to the rural counties
of the State.
Based on the FY 2011 IPPS wage data that we are using to determine
the FY 2015 LTCH PPS area wage index values in this final rule, there
are no IPPS wage data for the urban area Hinesville, GA (CBSA 25980).
Consistent with the methodology discussed above, we calculated the FY
2015 wage index value for CBSA 25980 as the average of the wage index
values for all of the other urban areas within the State of Georgia
(that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140,
23580, 31420, 40660, 42340, 46660 and 47580), as shown in Table 12A,
which is listed in section VI. of the Addendum to this final rule and
available via the Internet on the CMS Web site). We note that, as IPPS
wage data are dynamic, it is possible that urban areas without IPPS
wage data will vary in the future.
Based on FY 2011 IPPS wage data that we are using to determine the
FY 2015 LTCH PPS area wage index values in this final rule, there are
no rural areas without IPPS hospital wage data. Therefore, as discussed
in the proposed rule, it is not necessary to use our established
methodology to calculate an LTCH PPS wage index value for proposed
rural areas with no IPPS wage data for FY 2015. We note that, as IPPS
wage data are dynamic, it is possible that rural areas without IPPS
wage data will vary in the future.
For FY 2015, we are adopting the new OMB delineations under the
LTCH PPS, as discussed in greater detail in section VII.D. of the
preamble of this final rule. Under this policy, there will be some
changes to the current CBSA compositions as a result of the new OMB
delineations, which will result in the creation of new CBSAs, ``urban''
counties that are now ``rural,'' ``rural'' counties that are now
``urban,'' and existing CBSAs that are divided into separate
boundaries. Under existing Sec. 412.503, an ``urban area'' is defined
as a Metropolitan Statistical Area as defined by the Executive OMB, and
a ``rural area'' is defined as any area outside of an urban area. We
are not making any changes to the current definitions of ``urban area''
and ``rural area'' because our policy to use the new OMB delineations
under the LTCH PPS is consistent with the definitions in existing Sec.
412.503.
As discussed in section VII.D.2.e. of the preamble of this final
rule, overall we believe that using the new OMB delineations will
result in LTCH PPS area wage index values being more representative of
the actual costs of labor in a given area. However, we also recognize
that, as a result of our policy to adopt the new OMB delineations, some
LTCHs will experience decreases in area wage index values, while other
LTCHs will experience increases in area wage index values. Therefore,
to mitigate any short-term instability in

[[Page 50396]]

LTCH PPS payments that could result from our policy to adopt the new
OMB delineations, in section VII.D.2.e. of the preamble of this final
rule, we are finalizing our proposed transitional wage index policy.
Under our transitional wage index policy, any LTCH that will experience
a decrease in its area wage index solely as a result of the policy to
adopt the new OMB delineations under the LTCH PPS will receive a
blended area wage index for FY 2015. That is, for purposes of
determining an LTCH's area wage index for FY 2015, we are computing
LTCH PPS area wage index values using the area wage data discussed
above under both the current (FY 2014) CBSA designations and the new
OMB delineations. If the area wage index value under the new OMB
delineations is lower than the area wage index value under the FY 2014
CBSA designations, the LTCH will be paid based on a blended area wage
index for FY 2015, which will be computed as the sum of 50 percent of
each wage index value (referred to as the 50/50 blended wage index), as
described below.
Specifically, under the transitional wage index policy that we are
establishing in this final rule, to determine the applicable area wage
index value for each LTCH that will be effective for discharges
occurring on or after October 1, 2014, through September 30, 2015, we
computed the following two area wage index values: (1) the wage index
values calculated using the new OMB delineations; and (2) the wage
index values calculated using the current (FY 2014) CBSA designations.
The FY 2015 LTCH area wage index values calculated using the new OMB
delineations are presented in Table 12A (for urban areas) and Table 12B
(for rural areas) associated with this final rule, which are available
via the Internet on the CMS Web site. The FY 2015 LTCH area wage index
values calculated using the current (FY 2014) CBSA designations are
presented in Table 12C (for urban areas) and Table 12D (for rural
areas) associated with this final rule, which are available via the
Internet on the CMS Web site. Where applicable, the wage index values
in Tables 12C and 12D will be used to calculate a LTCH's 50/50 blended
wage index value under the transitional wage index policy. Under our
transitional wage index policy, an LTCH will only receive the 50/50
blended area wage index value for FY 2015 if the LTCH's area wage index
value under the new OMB delineations (shown in Table 12A or 12B) is
lower than the area wage index value under the FY 2014 CBSA
designations (shown in Tables 12C or 12D). If an LTCH's area wage index
under the new OMB delineations (shown in Tables 12A or 12B) is higher
than the wage index under the FY 2014 CBSA designations (shown in
Tables 12C or 12D), we will pay the LTCH based on 100 percent of the
area wage index under the new OMB delineations shown in Tables 12A or
12B (as such the LTCH will not receive the 50/50 blended area wage
index). Furthermore, as discussed below and in section VII.D.2.e. of
the preamble of this final rule, we are applying this transitional wage
index policy in a budget neutral manner. Each LTCH's labor market area
under the new OMB delineations and the current (FY 2014) CBSA-based
labor market area designation can be found in the LTCH PPS impact file
for this final rule, which is available via the Internet on the CMS Web
site.
5. Budget Neutrality Adjustment for Changes to the Area Wage Level
Adjustment
Historically, the LTCH PPS wage index and labor-related share are
updated annually based on the latest available data. Under Sec.
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that
estimated aggregate LTCH PPS payments are unaffected; that is, will be
neither greater than nor less than estimated aggregate LTCH PPS
payments without such changes to the area wage level adjustment. Under
this policy, we determine an area wage-level adjustment budget
neutrality factor that will be applied to the standard Federal rate to
ensure that any changes to the area wage level adjustments are budget
neutral such that any changes to the area wage index values or labor-
related share would not result in any change (increase or decrease) in
estimated aggregate LTCH PPS payments. Accordingly, under Sec.
412.523(d)(4), we apply an area wage level adjustment budget neutrality
factor in determining the standard Federal rate, and we also
established a methodology for calculating an area wage level adjustment
budget neutrality factor. (For additional information on the
establishment of our budget neutrality policy for changes to the area
wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51771 through 51773 and 51809).)
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28337 through
28338), in accordance with Sec. 412.523(d)(4), we proposed to apply an
area wage level adjustment budget neutrality factor to adjust the
standard Federal rate to account for the estimated effect of the
adjustments or updates to the area wage level adjustment under Sec.
412.525(c)(1) on estimated aggregate LTCH PPS payments using our
existing methodology. In determining the area wage level adjustment
budget neutrality factor for FY 2015 under Sec. 412.523(d)(4), we also
proposed to include the proposed transitional wage index policy under
the proposed adoption of the new OMB delineations (that is, the
proposed 50/50 blended area wage index values for LTCHs that would
experience a decrease in the their wage index solely as a result of the
proposed adoption of the new OMB delineations under the LTCH PPS) to
ensure that the proposed changes to the area wage level adjustments
would be budget neutral. We did not receive any public comments on our
proposals pertaining to the FY 2015 budget neutrality adjustment for
changes to the area wage level adjustment. Therefore, in this final
rule, we are adopting our proposal as final without modification.
In this final rule, for FY 2015, in accordance with Sec.
412.523(d)(4), we are applying an area wage level adjustment budget
neutrality factor to adjust the standard Federal rate to account for
the estimated effect of the adjustments or updates to the area wage
level adjustment under Sec. 412.525(c)(1) on estimated aggregate LTCH
PPS payments using a methodology that is consistent with the
methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51773). In addition to the updates for FY 2015 to the area wage
index data and labor-related share discussed above, as discussed above
and in section VII.D.2.e. of the preamble of this final rule, we are
establishing a transitional wage index policy to mitigate the impacts
of adopting changes to the LTCH PPS labor market areas (CBSAs) based on
the new OMB delineations. Because our transitional wage index policy
for LTCHs that will experience a decrease in their area wage index
solely as a result of the adoption of the new OMB delineations under
the LTCH PPS will result in an increase in estimated aggregate LTCH PPS
payments without such changes, we are including the 50/50 blended area
wage index when determining the area wage level adjustment budget
neutrality factor that we are applying to the standard Federal rate
under Sec. 412.523(d)(4) to ensure that any changes to the area wage-
level adjustments are budget neutral.
For this final rule, using the steps in the methodology described
in section VII.D.2.e. of this preamble, we determined a FY 2015 area
wage level

[[Page 50397]]

adjustment budget neutrality factor of 1.0016703. Accordingly, in
section V.A.2. of the Addendum to this final rule, to determine the FY
2015 LTCH PPS standard Federal rate, we are applying an area wage level
adjustment budget neutrality factor of 1.0016703, in accordance with
Sec. 412.523(d)(4). The FY 2015 LTCH PPS standard Federal rate shown
in Table 1E of the Addendum to this final rule reflects this adjustment
factor.

C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in
Alaska and Hawaii

Under Sec. 412.525(b), a cost-of-living adjustment (COLA) is
provided for LTCHs located in Alaska and Hawaii to account for the
higher costs incurred in those States. Specifically, we apply a COLA to
payments to LTCHs located in Alaska and Hawaii by multiplying the
nonlabor-related portion of the standard Federal payment rate by the
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into
account in the adjustment for area wage levels described above.
Prior to FY 2014, we used the most recent updated COLA factors
obtained from the U.S. Office of Personnel Management (OPM) Web site at
https://www.opm.gov/oca/cola/rates.asp to adjust the LTCH PPS payments
for LTCHs located in Alaska and Hawaii. Statutory changes have
transitioned the Alaska and Hawaii COLAs to locality pay (phased in
over a 3-year period beginning in January 2010, with COLA rates being
frozen as of October 28, 2009, and then proportionately reduced to
reflect the phase-in of locality pay). For FY 2013, we believed that it
was appropriate to use ``frozen'' COLA factors to adjust payments,
while we explored alternatives for updating the COLA factors in the
future, and we continued to use the same ``frozen'' COLA factors used
in FY 2012 to adjust the nonlabor-related portion of the standard
Federal rate for LTCHs located in Alaska and Hawaii in FY 2013 under
Sec. 412.525(b). We also established a methodology to update the COLA
factors for Alaska and Hawaii every 4 years (at the same time as the
update to the labor-related share of the IPPS market basket), beginning
in FY 2014 (77 FR 53712 through 53713). The methodology we established
to update the COLA factors is based on a comparison of the growth in
the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the
growth in the CPI for the average U.S. city as published by the Bureau
of Labor Statistics (BLS). It also incorporates a 25-percent cap on the
CPI-updated COLA factors, which is consistent with a statutorily
mandated 25-percent cap that was applied to OPM's published COLA
factors. We believe that determining updated COLA factors using this
methodology would appropriately adjust the nonlabor-related portion of
the standard Federal rate for LTCHs located in Alaska and Hawaii. (For
additional details on the methodology we established in the FY 2013
IPPS/LTCH PPS final rule to update the COLA factors for Alaska and
Hawaii beginning in FY 2014, we refer readers to section VII.D.3. of
the preamble of that final rule (77 FR 53481 through 53482).)
For FY 2014, we updated the COLA factors published for Alaska and
Hawaii by OPM for 2009 (as these are the last COLA factors OPM
published prior to transitioning from COLAs to locality pay) using the
methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule.
Under our finalized methodology, we used COLA factors for FY 2014 for
the three specified urban areas of Alaska (Anchorage, Fairbanks and
Juneau) of 1.23; for the City and County of Honolulu, the County of
Kauai, the County of Maui, the County of Kalawao, and ``All other''
areas of Alaska of 1.25; and for the County of Hawaii of 1.19. For
additional details on our policy, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50997 through 50998).
Under our finalized policy, we update the COLA factors using the
methodology described above every 4 years; the first year began in FY
2014 (77 FR 53482). Therefore, in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28338), for FY 2015, under the broad authority conferred
upon the Secretary by section 123 of the BBRA, as amended by section
307(b) of the BIPA, to determine appropriate payment adjustments under
the LTCH PPS, we proposed to continue to use the COLA factors based on
the 2009 OPM COLA factors updated through 2012 by the comparison of the
growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii,
relative to the growth in the CPI for the average U.S. city as
established in the FY 2014 IPPS/LTCH PPS final rule. We did not receive
any public comments on this proposal. Therefore, in this final rule, we
are adopting the policy as final without modification.
Accordingly, in this final rule, for FY 2015, under the broad
authority conferred upon the Secretary by section 123 of the BBRA, as
amended by section 307(b) of the BIPA, to determine appropriate payment
adjustments under the LTCH PPS, we are continuing to use the COLA
factors established in the FY 2014 IPPS/LTCH PPS final rule, which were
based on the 2009 OPM COLA factors updated through 2012 by the
comparison of the growth in the CPIs for Anchorage, Alaska, and
Honolulu, Hawaii, relative to the growth in the CPI for the average
U.S. city. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50998) for a discussion of the FY 2014 COLA factors.) Consistent
with our historical practice, we are establishing that the COLA factors
shown in the table below will be used to adjust the nonlabor-related
portion of the standard Federal rate for LTCHs located in Alaska and
Hawaii under Sec. 412.525(b).

Cost-of-Living Adjustment Factors for Alaska and Hawaii Hospitals Under
the LTCH PPS for FY 2015
------------------------------------------------------------------------

------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
City of Fairbanks and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
City of Juneau and 80-kilometer (50[dash]mile) 1.23
radius by road.....................................
All other areas of Alaska........................... 1.25
Hawaii:
City and County of Honolulu..................... 1.25
County of Hawaii................................ 1.19
County of Kauai................................. 1.25
County of Maui and County of Kalawao............ 1.25
------------------------------------------------------------------------

[[Page 50398]]

D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. Background
Under the broad authority conferred upon the Secretary by section
123 of the BBRA as amended by section 307(b) of the BIPA, in the
regulations at Sec. 412.525(a), we established an adjustment for
additional payments for outlier cases that have extraordinarily high
costs relative to the costs of most discharges. We refer to these cases
as high cost outliers (HCOs). Providing additional payments for
outliers strongly improves the accuracy of the LTCH PPS in determining
resource costs at the patient and hospital level. These additional
payments reduce the financial losses that would otherwise be incurred
when treating patients who require more costly care and, therefore,
reduce the incentives to underserve these patients. We set the outlier
threshold before the beginning of the applicable rate year so that
total estimated outlier payments are projected to equal 8 percent of
total estimated payments under the LTCH PPS.
Under Sec. 412.525(a) in the regulations (in conjunction with
Sec. 412.503), we make outlier payments for any discharges if the
estimated cost of a case exceeds the adjusted LTCH PPS payment for the
MS-LTC-DRG plus a fixed-loss amount. Specifically, in accordance with
Sec. 412.525(a)(3) (in conjunction with Sec. 412.503), we make an
additional payment for an HCO case that is equal to 80 percent of the
difference between the estimated cost of the patient case and the
outlier threshold, which is the sum of the adjusted Federal prospective
payment for the MS-LTC-DRG and the fixed-loss amount. The fixed-loss
amount is the amount used to limit the loss that a hospital will incur
under the outlier policy for a case with unusually high costs. This
results in Medicare and the LTCH sharing financial risk in the
treatment of extraordinarily costly cases. Under the LTCH PPS HCO
policy, the LTCH's loss is limited to the fixed-loss amount and a fixed
percentage of costs above the outlier threshold (adjusted MS-LTC-DRG
payment plus the fixed-loss amount). The fixed percentage of costs is
called the marginal cost factor. We calculate the estimated cost of a
case by multiplying the Medicare allowable covered charge by the
hospital's overall hospital cost-to-charge ratio (CCR).
Under the LTCH PPS HCO policy at Sec. 412.525(a), we determine a
fixed-loss amount, that is, the maximum loss that an LTCH can incur
under the LTCH PPS for a case with unusually high costs before the LTCH
will receive any additional payments. We calculate the fixed-loss
amount by estimating aggregate payments with and without an outlier
policy. The fixed-loss amount results in estimated total outlier
payments being projected to be equal to 8 percent of projected total
LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data
from the most recent Provider-Specific File (PSF) (or from the
applicable statewide average CCR if an LTCH's CCR data are faulty or
unavailable) are used to establish a fixed-loss threshold amount under
the LTCH PPS.
2. Determining LTCH CCRs Under the LTCH PPS
a. Background
The following is a discussion of CCRs that are used in determining
payments for HCO and SSO cases under the LTCH PPS, at Sec. 412.525(a)
and Sec. 412.529, respectively. Although this section is specific to
HCO cases, because CCRs and the policies and methodologies pertaining
to them are used in determining payments for both HCO and SSO cases (to
determine the estimated cost of the case at Sec. 412.529(d)(2)), we
are discussing the determination of CCRs under the LTCH PPS for both of
these types of cases simultaneously.
In determining both HCO payments (at Sec. 412.525(a)) and SSO
payments (at Sec. 412.529), we calculate the estimated cost of the
case by multiplying the LTCH's overall CCR by the Medicare allowable
charges for the case. In general, we use the LTCH's overall CCR, which
is computed based on either the most recently settled cost report or
the most recent tentatively settled cost report, whichever is from the
latest cost reporting period, in accordance with Sec.
412.525(a)(4)(iv)(B) and Sec. 412.529(f)(4)(ii) for HCOs and SSOs,
respectively. (We note that, in some instances, we use an alternative
CCR, such as the statewide average CCR in accordance with the
regulations at Sec. 412.525(a)(4)(iv)(C) and Sec. 412.529(f)(4)(iii),
or a CCR that is specified by CMS or that is requested by the hospital
under the provisions of the regulations at Sec. 412.525(a)(4)(iv)(A)
and Sec. 412.529(f)(4)(i).) Under the LTCH PPS, a single prospective
payment per discharge is made for both inpatient operating and capital-
related costs. Therefore, we compute a single ``overall'' or ``total''
LTCH-specific CCR based on the sum of LTCH operating and capital costs
(as described in Section 150.24, Chapter 3, of the Medicare Claims
Processing Manual (Pub. 100-4)) as compared to total charges.
Specifically, an LTCH's CCR is calculated by dividing an LTCH's total
Medicare costs (that is, the sum of its operating and capital inpatient
routine and ancillary costs) by its total Medicare charges (that is,
the sum of its operating and capital inpatient routine and ancillary
charges).
b. LTCH Total CCR Ceiling
Generally, an LTCH is assigned the applicable statewide average CCR
if, among other things, an LTCH's CCR is found to be in excess of the
applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This
is because CCRs above this threshold are most likely due to faulty data
reporting or entry, and CCRs based on erroneous data should not be used
to identify and make payments for outlier cases. Therefore, under our
established policy, generally, if an LTCH's calculated CCR is above the
applicable ceiling, the applicable LTCH PPS statewide average CCR is
assigned to the LTCH instead of the CCR computed from its most recent
(settled or tentatively settled) cost report data.
In this final rule, using our established methodology for
determining the LTCH total CCR ceiling (described above), based on IPPS
total CCR data from the March 2014 update of the PSF, consistent with
our proposal, we are establishing a total CCR ceiling of 1.346 under
the LTCH PPS for FY 2015 in accordance with Sec.
412.525(a)(4)(iv)(C)(2) for HCOs and Sec. 412.529(f)(4)(iii)(B) for
SSOs.
c. LTCH Statewide Average CCRs
Our general methodology established for determining the statewide
average CCRs used under the LTCH PPS is similar to our established
methodology for determining the LTCH total CCR ceiling (described
above) because it is based on ``total'' IPPS CCR data. Under the LTCH
PPS HCO policy at Sec. 412.525(a)(4)(iv)(C) and the SSO policy at
Sec. 412.529(f)(4)(iii), the MAC may use a statewide average CCR,
which is established annually by CMS, if it is unable to determine an
accurate CCR for an LTCH in one of the following circumstances: (1) new
LTCHs that have not yet submitted their first Medicare cost report (for
this purpose, consistent with current policy, a new LTCH is defined as
an entity that has not accepted assignment of an existing hospital's
provider agreement in accordance with Sec. 489.18); (2) LTCHs whose
CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom
data with which to calculate a CCR are not available (for example,

[[Page 50399]]

missing or faulty data). (Other sources of data that the MAC may
consider in determining an LTCH's CCR include data from a different
cost reporting period for the LTCH, data from the cost reporting period
preceding the period in which the hospital began to be paid as an LTCH
(that is, the period of at least 6 months that it was paid as a short-
term, acute care hospital), or data from other comparable LTCHs, such
as LTCHs in the same chain or in the same region.)
Consistent with our historical practice of using the best available
data, in this final rule, using our established methodology for
determining the LTCH statewide average CCRs, based on the most recent
complete IPPS ``total CCR'' data from the March 2014 update of the PSF,
consistent with our proposal, we are establishing LTCH PPS statewide
average total CCRs for urban and rural hospitals that would be
effective for discharges occurring on or after October 1, 2014 through
September 20, 2015, in Table 8C listed in section VI. of the Addendum
to this final rule (and available via the Internet).
Under the changes to the LTCH PPS labor market areas based on the
new OMB delineations, all areas in Delaware, the District of Columbia,
New Jersey, and Rhode Island would be classified as urban. Therefore,
there are no rural statewide average total CCRs listed for those
jurisdictions in Table 8C. This policy is consistent with the policy
that we established when we revised our methodology for determining the
applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule
(71 FR 48119 through 48121) and is the same as the policy applied under
the IPPS. In addition, although Connecticut and Massachusetts have
areas that are designated as rural, there are no short-term, acute care
IPPS hospitals or LTCHs located in those areas as of March 2014.
Therefore, consistent with our existing methodology, we are using the
national average total CCR for rural IPPS hospitals for rural
Connecticut and Massachusetts in Table 8C listed in section VI. of the
Addendum to this final rule (and available via the Internet).
In addition, consistent with our existing methodology, in
determining the urban and rural statewide average total CCRs for
Maryland LTCHs paid under the LTCH PPS, consistent with our proposal,
we are continuing to use, as a proxy, the national average total CCR
for urban IPPS hospitals and the national average total CCR for rural
IPPS hospitals, respectively. We are using this proxy because we
believe that the CCR data in the PSF for Maryland hospitals may not be
entirely accurate (as discussed in greater detail in the FY 2007 IPPS
final rule (71 FR 48120)).
d. Reconciliation of LTCH HCO and SSO Payments
We note that under the LTCH PPS HCO policy at Sec.
412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at Sec.
412.529(f)(4)(iv), the payments for HCO and SSO cases, respectively,
are subject to reconciliation. Specifically, any reconciliation of
outlier payments is based on the CCR that is calculated based on a
ratio of cost-to-charge data computed from the relevant cost report
determined at the time the cost report coinciding with the discharge is
settled. For additional information, we refer readers to sections
150.26 through 150.28 of the Medicare Claims Processing Manual (Pub.
100-4) as added by Change Request 7192 (Transmittal 2111; December 3,
2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821).
3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2015
When we implemented the LTCH PPS, as discussed in the August 30,
2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad
authority of section 123 of the BBRA as amended by section 307(b) of
BIPA, we established a fixed-loss amount so that total estimated
outlier payments are projected to equal 8 percent of total estimated
payments under the LTCH PPS. To determine the fixed-loss amount, we
estimate outlier payments and total LTCH PPS payments for each case
using claims data from the MedPAR files. Specifically, to determine the
outlier payment for each case, we estimate the cost of the case by
multiplying the Medicare covered charges from the claim by the LTCH's
CCR. Under Sec. 412.525(a)(3) (in conjunction with Sec. 412.503), if
the estimated cost of the case exceeds the outlier threshold, we make
an outlier payment equal to 80 percent of the difference between the
estimated cost of the case and the outlier threshold (that is, the sum
of the adjusted Federal prospective payment for the MS-LTC-DRG and the
fixed-loss amount).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 53715), we presented
our policies regarding the methodology and data we used to establish
the fixed-loss amount of $13,314 for FY 2014, which was calculated
using our existing methodology to calculate the fixed-loss amount for
FY 2014 (based on the data and the rates and policies presented in that
final rule) in order to maintain estimated HCO payments at the
projected 8 percent of total estimated LTCH PPS payments. Consistent
with our historical practice of using the best data available, in
determining the fixed-loss amount for FY 2014, we used the most recent
available LTCH claims data and CCR data, that is, LTCH claims data from
the March 2013 update of the FY 2012 MedPAR file and CCRs from the
March 2013 update of the PSF, as these data were the most recent
complete LTCH data available at that time.
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321), we
proposed to continue to use our existing methodology to calculate a
fixed-loss amount for FY 2015 using the best available data that would
maintain estimated HCO payments at the projected 8 percent of total
estimated LTCH PPS payments (based on the rates and policies presented
in this proposed rule). Specifically, based on the most recent complete
LTCH data available at that time (that is, LTCH claims data from the
March 2014 update of the FY 2013 MedPAR file and CCRs from the March
2014 update of the PSF), we proposed to determine a fixed-loss amount
for FY 2015 that would result in estimated outlier payments projected
to be equal to 8 percent of total estimated payments in FY 2015. Under
the broad authority of section 123(a)(1) of the BBRA and section
307(b)(1) of the BIPA, we proposed a fixed-loss amount of $15,730 for
FY 2015, and also proposed to make an additional payment for an HCO
case that is equal to 80 percent of the difference between the
estimated cost of the case and the outlier threshold (the sum of the
adjusted Federal LTCH payment for the MS-LTC-DRG and the proposed
fixed-loss amount of $15,730).
Comment: One commenter expressed support for the proposed fixed-
loss amount, and stated that the proposed increase for FY 2015 is
justified. That same commenter also requested that CMS provide its most
recent estimate of the percentage payout of high-cost outlier payments
for the current fiscal year. Another commenter expressed concern that
the proposed increase in the fixed-loss amount would result in
significant financial losses for hospitals that treat a comparatively
high volume of outlier cases, and recommended that the increase be
transitioned in over 2 years to reduce the impact of this increase in
the fixed-loss amount.
Response: We appreciate the commenter's support for the proposed
fixed-loss amount, and agree that the increase is necessary to maintain
estimated HCO payments at the projected 8 percent of total estimated
LTCH PPS payments (as explained in

[[Page 50400]]

the proposed rule). In section I.K. of the regulatory impact analysis
in the Appendix to this final rule, we state that we currently estimate
that HCO payments will be approximately 7.9 percent of the estimated
total LTCH PPS payments in FY 2014 based on the most recent data
available.
While we understand the commenter's concern regarding the financial
impact an increase in the fixed-loss amount may have on the outlier
payments to some LTCH's, we do not believe that the increase should be
phased-in over 2 years. The intent of the HCO policy is to provide an
additional payment to LTCH cases that have unusually high costs while
at the same time balancing an incentive for LTCHs to treat expensive
patients and provide cost efficient care. (We refer readers to the FY
2003 LTCH PPS final rule (67 FR 56025) for further details regarding
the intent of this policy.) Under our historical HCO policy, this
balance is achieved by making outlier payments that are intended to
approximate the marginal cost of providing care above the fixed-loss
threshold. We believe that phasing-in the increase to the fixed-loss
amount would be inconsistent with the intent of the LTCH PPS HCO policy
because such a policy would reduce the incentive to provide cost
efficient care by resulting in estimated outlier payments that are in
excess of 8 percent of total estimated payments in FY 2015. (For
additional detail on the rationale for setting the HCO payment
``target'' at 8 percent of total estimated LTCH PPS payments, we refer
readers to the FY 2003 LTCH PPS final rule (67 FR 56022 through
56024).) Furthermore, any auxiliary adjustment to the fixed-loss
amount, such as a transition, would result in making outlier payments
that would not be directly related to the cost of providing care to
unusually costly cases in FY 2015. When we determine the annual fixed-
loss amount, we include all payments and policies that would affect
actual payments for the current fiscal year in order to ensure the most
accurate determination of a fixed-loss amount that would result in
estimated outlier payments equaling 8 percent of total estimated for
the fiscal year. Including an auxiliary adjustment, such as a
transition, that is not relative to the current fiscal year does not
lend greater accuracy to the determination of a fixed-loss amount that
would result in estimated outlier payments equaling 8 percent of total
estimated payments in FY 2015. For these reasons, we continue to
believe that our policies are consistent with the original intent of
the HCO policy under the LTCH PPS and, therefore, we are not adopting
the commenter's suggestion to phase-in the increase to the fixed-loss
amount for FY 2015.
In this final rule, after consideration of the public comments we
received, we are adopting our proposals related to the calculation of
the fixed-loss amount for FY 2015 as final without modification. For FY
2015, consistent with our proposal, we are continuing to use our
existing methodology to calculate a fixed-loss amount for FY 2015 using
the best available data that would maintain estimated HCO payments at
the projected 8 percent of total estimated LTCH PPS payments (based on
the rates and policies presented in this final rule). Specifically, for
this final rule, we used LTCH claims data from the March 2014 update of
the FY 2013 MedPAR file and CCRs from the March 2014 update of the PSF
to determine a fixed-loss amount that will result in estimated outlier
payments projected to be equal to 8 percent of total estimated payments
in FY 2015 because these data are the most recent complete LTCH data
available at this time. Under the broad authority of section 123(a)(1)
of the BBRA and section 307(b)(1) of BIPA, we are establishing a fixed-
loss amount of $14,972 for FY 2015. Therefore, we are making an
additional payment for an HCO case that is equal to 80 percent of the
difference between the estimated cost of the case and the outlier
threshold (the sum of the adjusted Federal LTCH payment for the MS-LTC-
DRG and the fixed-loss amount of $14,972).
We note that the fixed-loss amount of $14,792 for FY 2015 is lower
than the proposed FY 2015 fixed-loss amount of $15,730. This decrease
is primarily a result of updated data used to calculate the fixed-loss
amount in this final rule, such as the most recent available LTCH
claims data in the MedPAR file, CCRs in the PSF, and the estimate of
the LTCH PPS market basket update factors. We also note that the fixed-
loss amount of $14,972 for FY 2015 is slightly higher than the FY 2014
fixed-loss amount of $13,314. Based on our payment simulations using
the most recent available data at this time, the final increase in the
fixed-loss amount for FY 2015 is necessary to maintain the existing
requirement that estimated outlier payments equal 8 percent of
estimated total LTCH PPS payments. Maintaining the fixed-loss amount at
the current level would result in HCO payments that are more than the
current regulatory 8-percent requirement because a lower fixed-loss
amount would result in more cases qualifying as outlier cases, as well
as higher outlier payments for qualifying HCO cases because the maximum
loss that an LTCH must incur before receiving an HCO payment (that is,
the fixed-loss amount) would be smaller. For these reasons, we believe
that raising the fixed-loss amount is appropriate and necessary to
maintain that estimated outlier payments would equal 8 percent of
estimated total LTCH PPS payments as required under Sec. 412.525(a).
(As noted above, for further information on the existing 8 percent HCO
``target'' requirement, we refer readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56022 through 56024).)
4. Application of the Outlier Policy to SSO Cases
As we discussed in the August 30, 2002 final rule (67 FR 56026),
under some rare circumstances, an LTCH discharge could qualify as an
SSO case (as defined in the regulations at Sec. 412.529 in conjunction
with Sec. 412.503) and also as an HCO case. In this scenario, a
patient could be hospitalized for less than five-sixths of the
geometric average length of stay for the specific MS-LTC-DRG, and yet
incur extraordinarily high treatment costs. If the estimated costs
exceeded the HCO threshold (that is, the SSO payment plus the fixed-
loss amount), the discharge is eligible for payment as an HCO.
Therefore, for an SSO case in FY 2015, the HCO payment would be 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the fixed-loss amount of $14,972 and
the amount paid under the SSO policy as specified in Sec. 412.529).

E. Update to the IPPS Comparable/Equivalent Amounts To Reflect the
Statutory Changes to the IPPS DSH Payment Adjustment Methodology

In the FY 2014 IPPS/LTCH PPS final rule, we established a policy
for reflecting the changes to the Medicare IPPS DSH payment adjustment
methodology provided for by section 3133 of the Affordable Care Act in
the calculation of the ``IPPS comparable amount'' under the SSO policy
at Sec. 412.529 and the ``IPPS equivalent amount'' under the 25-
percent threshold payment adjustment policy at Sec. 412.534 and Sec.
412.536. Historically, the determination of both the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' includes an amount for
inpatient operating costs ``for the costs of serving a disproportionate
share of low-income patients.'' Under the statutory changes to the
Medicare DSH payment adjustment methodology that began in FY 2014, in
general, eligible IPPS hospitals receive an empirically justified
Medicare DSH payment equal

[[Page 50401]]

to 25 percent of the amount they otherwise would have received under
the statutory formula for Medicare DSH payments prior to the amendments
made by the Affordable Care Act. The remaining amount, equal to an
estimate of 75 percent of the amount that otherwise would have been
paid as Medicare DSH payments, reduced to reflect changes in the
percentage of individuals under the age of 65 who are uninsured, is
made available to make additional payments to each hospital that
qualifies for Medicare DSH payments and that has uncompensated care.
The additional uncompensated care payments are based on the hospital's
amount of uncompensated care for a given time period relative to the
total amount of uncompensated care for that same time period reported
by all IPPS hospitals that receive Medicare DSH payments.
To reflect the statutory changes to the Medicare DSH payment
adjustment methodology in the calculation of the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we
stated that we will include a reduced Medicare DSH payment amount that
reflects the projected percentage of the payment amount calculated
based on the statutory Medicare DSH payment formula prior to the
amendments made by the Affordable Care Act that will be paid to
eligible IPPS hospitals as empirically justified Medicare DSH payments
and uncompensated care payments in that year (that is, a percentage of
the operating DSH payment amount that has historically been reflected
in the LTCH PPS payments that is based on IPPS rates). We also stated
that the projected percentage will be updated annually, consistent with
the annual determination of the amount of uncompensated care payments
that will be made to eligible IPPS hospitals. As explained in the FY
2014 IPPS/LTCH PPS final rule (79 FR 50766 through 50767), we believe
that this approach results in appropriate payments under the LTCH PPS
and is consistent with our intention that the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS closely
resemble what an IPPS payment would have been for the same episode of
care, while recognizing that some features of the IPPS cannot be
translated directly into the LTCH PPS.
For FY 2014, aggregate Medicare IPPS operating DSH payments are
projected to be reduced to 95.7 percent of the amount that would
otherwise have been paid under the statutory Medicare DSH payment
formula prior to the amendments made by the Affordable Care Act.
Accordingly, for FY 2014, the calculation of the ``IPPS comparable
amount'' under Sec. 412.529 and the ``IPPS equivalent amount'' under
Sec. 412.534 and Sec. 412.536 includes an applicable operating
Medicare DSH payment amount that is equal to 95.7 percent of the
operating Medicare DSH payment amount based the current statutory
Medicare DSH payment formula (that is, the operating Medicare DSH
payment amount historically included in those calculations). (We refer
readers the FY 2012 IPPS/LTCH PPS final rule (76 FR 50766).)
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28341 through
28342), we discussed that, for FY 2015, based on the latest data
available, we project that the reduction in the amount of Medicare DSH
payments pursuant to section 1886(r)(1) of the Act, along with the
proposed payments for uncompensated care under section 1886(r)(2) of
the Act, would result in overall Medicare DSH payments equaling 85.26
percent of the amount of Medicare DSH payments that would otherwise
have been made in the absence of amendments made by the Affordable Care
Act. Therefore, we proposed that the calculation of the ``IPPS
comparable amount'' under Sec. 412.529 and the ``IPPS equivalent
amount'' under Sec. 412.534 and Sec. 412.536 for FY 2015 includes an
applicable operating Medicare DSH payment amount that would be equal to
85.26 percent of the operating Medicare DSH payment amount based on the
statutory Medicare DSH payment formula prior to the amendments made by
the Affordable Care Act. We also proposed that, consistent with our
historical practice of using the most recent data available, if more
recent data became available for the final rule, we would use that data
to determine the percentage of the operating Medicare DSH payment
amount based on the statutory Medicare DSH payment formula prior to the
amendments made by the Affordable Care Act used in the calculation of
the ``IPPS comparable amount'' under Sec. 412.529 and the ``IPPS
equivalent amount'' under Sec. 412.534 and Sec. 412.536 for FY 2015.
As discussed in greater detail in section IV.F.3.d.(2) of the
preamble of this final rule, based on the most recent data available,
our estimate of 75 percent of the amount that would otherwise have been
paid as Medicare DSH payments (under the methodology outlined in
section 1886(r)(2) of the Act) will be adjusted to 76.19 percent of
that amount to reflect the change in the percentage of individuals that
are uninsured. The resulting amount will then be used to determine the
amount of uncompensated care payments that will be made to eligible
IPPS hospitals in FY 2015. In other words, Medicare DSH payments prior
to the amendments made by the Affordable Care Act are adjusted to 57.14
percent (the product of 75 percent and 76.19 percent) and the resulting
amount will be used to calculate the uncompensated care payments to
eligible hospitals. As a result, for FY 2015, we project that the
reduction in the amount of Medicare DSH payments pursuant to section
1886(r)(1) of the Act, along with the payments for uncompensated care
under section 1886(r)(2) of the Act, will result in overall Medicare
DSH payments of 82.14 percent of the amount of Medicare DSH payments
that would otherwise have been made in the absence of amendments made
by the Affordable Care Act (that is, 25 percent + 57.14 percent = 82.14
percent).
We did not receive any public comments on this proposal and
therefore we are adopting the policy as final without modification. In
this final rule, for FY 2015, we are establishing that the calculation
of the ``IPPS comparable amount'' under Sec. 412.529 and the ``IPPS
equivalent amount'' under Sec. 412.534 and Sec. 412.536 will include
an applicable operating Medicare DSH payment amount that will be equal
to 82.14 percent of the operating Medicare DSH payment amount based on
the statutory Medicare DSH payment formula prior to the amendments made
by the Affordable Care Act.

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY
2015

Section 412.525 sets forth the adjustments to the LTCH PPS standard
Federal rate. Under Sec. 412.525(c), the standard Federal rate is
adjusted to account for differences in area wages by multiplying the
labor-related share of the standard Federal rate by the applicable LTCH
PPS wage index (FY 2015 values are shown in Tables 12A through 12D
listed in section VI. of the Addendum of this final rule and are
available via the Internet). The standard Federal rate is also adjusted
to account for the higher costs of LTCHs located in Alaska and Hawaii
by the applicable COLA factors (the FY 2015 factors are shown in the
chart in section V.C. of this Addendum) in accordance with Sec.
412.525(b). In this final rule, we are establishing a standard Federal
rate for FY 2015 of $41,043.71 (applicable to discharges from LTCHs
that submit the required quality reporting data for FY

[[Page 50402]]

2015 in accordance with the LTCHQR Program under section 1886(m)(5) of
the Act), as discussed above in section V.A.2. of the Addendum to this
final rule. We illustrate the methodology to adjust the LTCH PPS
Federal standard rate for FY 2015 in the following example:
Example:
During FY 2015, a Medicare patient is in an LTCH located in
Chicago, Illinois (CBSA 16974). The FY 2015 LTCH PPS wage index value
for CBSA 16974 is 1.0419 (obtained from Table 12A listed in section VI.
of the Addendum of this final rule and available via the Internet on
the CMS Web site). The Medicare patient is classified into MS-LTC-DRG
189 (Pulmonary Edema & Respiratory Failure), which has a relative
weight for FY 2015 of 0.9098 (obtained from Table 11 listed in section
VI. of the Addendum of this final rule and available via the Internet
on the CMS Web site). The LTCH submitted quality reporting data for FY
2015 in accordance with the LTCHQR Program under section 1886(m)(5) of
the Act.
To calculate the LTCH's total adjusted Federal prospective payment
for this Medicare patient in FY 2015, we computed the wage-adjusted
Federal prospective payment amount by multiplying the unadjusted FY
2015 standard Federal rate ($41,043.71) by the labor-related share
(62.306 percent) and the wage index value (1.0419). This wage-adjusted
amount was then added to the nonlabor-related portion of the unadjusted
standard Federal rate (37.694 percent; adjusted for cost of living, if
applicable) to determine the adjusted Federal rate, which is then
multiplied by the MS-LTC-DRG relative weight (0.9098) to calculate the
total adjusted Federal LTCH PPS prospective payment for FY 2015 ($38,
316.42). The table below illustrates the components of the calculations
in this example.

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

------------------------------------------------------------------------
Standard Federal Prospective Payment Rate \*\......... $41,043.71
Labor-Related Share................................... x 0.62306
Labor-Related Portion of the Federal Rate............. = $ 25,572.69
Wage Index (CBSA 16974)............................... x 1.0419
Wage-Adjusted Labor Share of Federal Rate............. = $ 26,644.19
Nonlabor-Related Portion of the Federal Rate + $ 15,471.02
($41,043.71 x 0.37694)...............................
Adjusted Federal Rate Amount.......................... = $ 42,115.21
MS-LTC-DRG 189 Relative Weight........................ x 0.9098
Total Adjusted Federal Prospective Payment............ = $ 38, 316.42
------------------------------------------------------------------------
* LTCH PPS standard Federal rate applicable to discharges from LTCHs
that submit the required quality data in accordance with the LTCHQR
Program under section 1886(m)(5) of the Act).

VI. Tables Referenced in This Final Rule and Available Only Through the
Internet on the CMS Web site
This section lists the tables referred to throughout the preamble
of this final rule and in this Addendum. In the past, a majority of
these tables were published in the Federal Register as part of the
annual proposed and final rules. However, similar to FYs 2012 through
2014, for the FY 2015 rulemaking cycle, the IPPS and LTCH tables will
not be published in the Federal Register in the annual IPPS/LTCH PPS
proposed and final rules and will be available only through the
Internet. Specifically, all IPPS Tables listed below with the exception
of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E will be
available only through the Internet. IPPS Tables 1A, 1B, 1C, and 1D,
and LTCH PPS Table 1E are displayed at the end of this section and will
continue to be published in the Federal Register as part of the annual
proposed and final rules.
As discussed in sections II.G.11. and 13. of the preamble of this
final rule, Tables 6A through 6F will not be issued with this FY 2015
final rule because there are no new, revised, or deleted diagnosis or
procedure codes for FY 2015. As discussed in section IV.D. of this
final rule, section 106 of the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93), enacted on April 1, 2014, extended, through the
first half of FY 2015 (that is, for discharges occurring before April
1, 2015), the temporary changes in the low-volume hospital definition
and methodology for determining the payment adjustment originally made
by the Affordable Care Act (and extended by subsequent legislation). We
refer the reader to section IV.D. of the preamble of this final rule
for complete details on the low-volume hospital payment adjustment.
Therefore, Table 14 associated with this final rule lists the FY 2015
low-volume payment adjustments for potentially eligible hospitals that
also meet the distance criterion for low-volume hospital status. As
discussed in section IV.H.11. of the preamble of this final rule, we
are providing proxy FY 2015 readmission payment adjustment factors in
Table 15A issued with this final rule. After the completion of the
review and corrections process, we will publish the final FY 2015
readmissions payment adjustment factors in Table 15B on the CMS IPPS
Web site. In addition, under the HAC Reduction Program established by
section 3008 of the Affordable Care Act, a hospital's total payment may
be reduced by 1 percent if it is in the lowest HAC performance
quartile. However, as discussed in section IV.J. of the preamble of
this final rule, we are not providing the hospital-level data (such as
a proxy list of providers subject to the HAC Reduction Program in FY
2015 in Table 17) in conjunction with this final rule. Finally, a
hospital's Factor 3 is the proportion of the uncompensated care amount
that a DSH will receive under section 3133 of the Affordable Care Act.
Factor 3 is the hospital's estimated number of Medicaid days and
Medicare SSI days relative to the estimate of all DSHs' Medicaid days
and Medicare SSI days. Therefore, Table 18 contains the FY 2015
Medicare DSH uncompensated care payment Factor 3 for all hospitals and
identifies whether or not a hospital is projected to receive DSH and,
therefore, eligible to receive the additional payment for uncompensated
care for FY 2015.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified below should contact
Michael Treitel at (410) 786-4552.
The following IPPS tables for this FY 2015 final rule are available
only through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/.
Click on the link on the left side of the screen titled, ``FY 2015 IPPS
Final Rule Home Page'' or ``Acute Inpatient--Files for Download''.
Table 2-1.--Hospital Average Hourly Wages for Federal Fiscal Years
2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015 (2011 Wage
Data); and 3-Year Average of Hospital Average Hourly Wages; Based on
CBSA Delineations used in FY 2014

[[Page 50403]]

Table 2-2.--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2012; Hospital Wage Indexes for
Federal Fiscal Year 2015; Hospital Average Hourly Wages for Federal
Fiscal Years 2013 (2009 Wage Data), 2014 (2010 Wage Data), and 2015
(2011 Wage Data; Based on FY 2015 CBSA Delineations); and 3-Year
Average of Hospital Average Hourly Wages
Table 3A-1.--FY 2015 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY
2014
Table 3A-2.--FY 2015 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA; Based on CBSA Delineations Used in FY
2015
Table 3B-1.--FY 2015 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY
2014
Table 3B-2.--FY 2015 and 3-Year* Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA; Based on CBSA Delineations Used in FY
2015
Table 4A-1.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State--FY
2015; Based on CBSA Delineations Used in FY 2014.
Table 4A-2.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State--FY
2015; Based on CBSA Delineations Used in FY 2015.
Table 4B-1.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--FY
2015; Based on CBSA Delineations Used in FY 2014.
Table 4B-2.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--FY
2015; Based on CBSA Delineations Used in FY 2015.
Table 4C-1.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2014.
Table 4C-2.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2015; Based on CBSA Delineations Used in FY 2015.
Table 4D-1.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage Index;
Urban Areas with Acute Care Hospitals Receiving the Statewide Rural
Floor or Imputed Floor Wage Index--FY 2015; Based on CBSA Delineations
Used in FY 2014.
Table 4D-2.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage Index;
Urban Areas with Acute Care Hospitals Receiving the Statewide Rural
Floor or Imputed Floor Wage Index--FY 2015; Based on CBSA Delineations
Used in FY 2015.
Table 4E-1.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2015; Based on CBSA Delineations Used in FY 2014.
Table 4E--2.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2015; Based on CBSA Delineations Used in FY 2015.
Table 4F-1.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2015;
Based on CBSA Delineations Used in FY 2014.
Table 4F-2.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2015;
Based on CBSA Delineations Used in FY 2015.
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2015
Table 5.--List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean
Length of Stay--FY 2015
Table 6I.--Major CC List--FY 2015
Table 6J.--Complete CC List--FY 2015
Table 6K.--Complete List of CC Exclusions--FY 2015
Table 7A.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2013 MedPAR Update--March 2014 GROUPER V31.0 MS-
DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2013 MedPAR Update--March 2014 GROUPER V32.0 MS-
DRGs
Table 8A.--FY 2015 Statewide Average Operating Cost-to-Charge
Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--FY 2015 Statewide Average Capital Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals
Table 9A-1.--Hospital Reclassifications and Redesignations--FY
2015; Based on CBSA Delineations Used in FY 2014.
Table 9A-2.--Hospital Reclassifications and Redesignations--FY
2015; Based on CBSA Delineations Used in FY 2015.
Table 9C-1.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2015; Based on CBSA Delineations Used in
FY 2014.
Table 9C-2.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2015; Based on CBSA Delineations Used in
FY 2015.
Table 10.--New Technology Add-On Payment Thresholds \1,2\ for
Applications for FY 2016
Table 14.--List of Hospitals with Fewer than 1,600 Medicare
Discharges Based on the March 2014 Update of the FY 2013 MedPAR File
and Potentially Eligible Hospitals' FY 2015 Low-Volume Payment
Adjustment for Discharges Occurring Before April 1, 2015 (Eligibility
for the low-volume payment adjustment is also dependent upon meeting
the mileage criteria specified at Sec. 412.101(b)(2)(ii) of the
regulations.)
Table 15A.--FY 2015 Proxy Readmissions Adjustment Factors
Table 16.--Updated Proxy Hospital Inpatient Value-Based Purchasing
(VBP) Program Adjustment Factors for FY 2015
Table 18.--FY 2015 Medicare DSH Uncompensated Care Payment Factor 3
The following LTCH PPS tables for this FY 2015 final rule are
available only through the Internet on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the list item for Regulation
Number CMS-1607-F.
Table 8C.--FY 2015 Statewide Average Total Cost-to-Charge Ratios
(CCRs) for LTCHs (Urban and Rural)
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average Length
of Stay, Short-Stay Outlier (SSO) Threshold, and ``IPPS Comparable
Threshold'' for Discharges Occurring from October 1, 2014 through
September 30, 2015 under the LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas under the New OMB
CBSA Delineations for Discharges Occurring From October 1, 2014 through
September 30, 2015
Table 12B.--LTCH PPS Wage Index for Rural Areas under the New OMB
CBSA Delineations for Discharges Occurring from October 1, 2014 through
September 30, 2015
Table 12C.--LTCH PPS Wage Index for Urban Areas under the Current
CBSA Designations for Discharges Occurring from October 1, 2014 through
September 30, 2015
Table 12D.--LTCH PPS Wage Index for Rural Areas under the Current
CBSA Designations for Discharges Occurring from October 1, 2014 through
September 30, 2015
Table 13A.--Composition of Low-Volume Quintiles for MS-LTC-DRGs--FY
2015

[[Page 50404]]

Table 13B.--No-Volume MS-LTC-DRG Crosswalk for FY 2015

Table 1A--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.6 Percent Labor Share/30.4 Percent Nonlabor Share if Wage Index is
Greater Than 1)--FY 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital submitted quality data and is Hospital did NOT submit quality data Hospital submitted quality data and Hospital did NOT submit quality data
a meaningful EHR user (Update = 2.2 and is a meaningful EHR user (update is NOT a meaningful EHR user (update and is NOT a meaningful EHR user
percent) = 1.475 percent) = 1.475 percent) (update = 0.75 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$3,780.13 $1,651.09 $3,753.31 $1,639.38 $3,753.31 $1,639.38 $3,726.50 $1,627.66
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 1B--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share if Wage Index is Less Than
or Equal to 1)--FY 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital submitted quality data and is Hospital did NOT submit quality data Hospital submitted quality data and Hospital did NOT submit quality data
a meaningful EHR user (Update = 2.2 and is a meaningful EHR user (Update is NOT a meaningful EHR user (Update and is NOT a meaningful EHR user
percent) = 1.475 percent) = 1.475 percent) (Update = 0.75 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$3,367.36 $2,063.86 $3,343.47 $2,049.22 $3,343.47 $2,049.22 $3,319.58 $2,034.58
--------------------------------------------------------------------------------------------------------------------------------------------------------

TABLE 1C--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor (National: 62 Percent Labor
Share/38 Percent Nonlabor Share Because Wage Index is Less Than or Equal to 1; Puerto Rico: 63.2 Percent Labor
Share/36.8 Percent Nonlabor Share if Wage Index is Greater Than 1 or 62 Percent Labor Share/38 Percent Nonlabor
Share if Wage Index is Less Than or Equal to 1--FY 2015
----------------------------------------------------------------------------------------------------------------
Rates if wage index is greater than 1 Rates if wage index is
------------------------------------------------ less than or equal to 1
Standardized --------------------------
Amount Labor Nonlabor Labor Nonlabor
-------------------------------------------------------------------------------------------------------- ----------
National \1\............................ Not Applicable Not Applicable $3,367.36 $2,063.86
Puerto Rico............................. $1,608.39 $936.54 $1,577.86 $967.07
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2015, there are no CBSAs in Puerto Rico with a national wage index greater than 1.

Table 1D--Capital Standard Federal Payment Rate--FY 2015
------------------------------------------------------------------------
Rate
------------------------------------------------------------------------
National................................................ $434.26
Puerto Rico............................................. $209.10
------------------------------------------------------------------------

Table 1E--LTCH Standard Federal Prospective Payment Rate--FY 2015
------------------------------------------------------------------------
Reduced
Full Update Update* (0.2
(2.2 Percent) Percent)
------------------------------------------------------------------------
Standard Federal Rate................... $41,043.71 $40,240.51
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2015 in
accordance with the LTCH Quality Reporting (LTCHQR) Program, the
annual update is reduced by 2.0 percentage points as required by
section 1886(m)(5) of the Act.

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

We have examined the impacts of this final rule as required by
Executive Order 12866 on Regulatory Planning and Review (September
30, 1993), Executive Order 13563 on Improving Regulation and
Regulatory Review (February 2, 2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the
Social Security Act, section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5
U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. A regulatory impact analysis (RIA) must be
prepared for major rules with economically

[[Page 50405]]

significant effects ($100 million or more in any 1 year).
We have determined that this final rule is a major rule as
defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2015
acute care hospital operating and capital payments will redistribute
amounts in excess of $100 million to acute care hospitals. The
applicable percentage increase to the IPPS rates required by the
statute, in conjunction with other payment changes in this final
rule, will result in an estimated $654 million decrease in FY 2015
operating payments (or -0.6 percent change) and an estimated $132
million increase in FY 2015 capital payments (or 1.6 percent
change). These changes are relative to payments made in FY 2014. The
impact analysis of the capital payments can be found in section I.J.
of this Appendix. In addition, as described in section I.K. of this
Appendix, LTCHs are expected to experience an increase in payments
by $62 million in FY 2015 relative to FY 2014.
Our operating impact estimate includes the -0.8 percent
documentation and coding adjustment applied to the IPPS standardized
amount, which represents part of the recoupment required under
section 631 of the ATRA. In addition, our operating payment impact
estimate includes the 2.2 percent hospital update to the
standardized amount (which includes the estimated 2.9 percent market
basket update less 0.5 percentage point for the multifactor
productivity adjustment and less 0.2 percentage point required under
the Affordable Care Act). The estimates of IPPS operating payments
to acute care hospitals do not reflect any changes in hospital
admissions or real case-mix intensity, which will also affect
overall payment changes.
The analysis in this Appendix, in conjunction with the remainder
of this document, demonstrates that this final rule is consistent
with the regulatory philosophy and principles identified in
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of
the Act. This final rule will affect payments to a substantial
number of small rural hospitals, as well as other classes of
hospitals, and the effects on some hospitals may be significant.
Finally, in accordance with the provisions of Executive Order 12866,
the Executive Office of Management and Budget has reviewed this
final rule.

B. Statement of Need

This final rule is necessary in order to make payment and policy
changes under the Medicare IPPS for Medicare acute care hospital
inpatient services for operating and capital-related costs as well
as for certain hospitals and hospital units excluded from the IPPS.
This final rule also is necessary to make payment and policy changes
for Medicare hospitals under the LTCH PPS payment system.

C. Objectives of the IPPS

The primary objective of the IPPS is to create incentives for
hospitals to operate efficiently and minimize unnecessary costs
while at the same time ensuring that payments are sufficient to
adequately compensate hospitals for their legitimate costs in
delivering necessary care to Medicare beneficiaries. In addition, we
share national goals of preserving the Medicare Hospital Insurance
Trust Fund.
We believe that the changes in this final rule will further each
of these goals while maintaining the financial viability of the
hospital industry and ensuring access to high quality health care
for Medicare beneficiaries. We expect that these changes will ensure
that the outcomes of the prospective payment systems are reasonable
and equitable while avoiding or minimizing unintended adverse
consequences.

D. Limitations of Our Analysis

The following quantitative analysis presents the projected
effects of our policy changes, as well as statutory changes
effective for FY 2015, on various hospital groups. We estimate the
effects of individual policy changes by estimating payments per case
while holding all other payment policies constant. We use the best
data available, but, generally, we do not attempt to make
adjustments for future changes in such variables as admissions,
lengths of stay, or case-mix.

E. Hospitals Included in and Excluded From the IPPS

The prospective payment systems for hospital inpatient operating
and capital-related costs of acute care hospitals encompass most
general short-term, acute care hospitals that participate in the
Medicare program. There were 32 Indian Health Service hospitals in
our database, which we excluded from the analysis due to the special
characteristics of the prospective payment methodology for these
hospitals. Among other short-term, acute care hospitals, hospitals
in Maryland are paid in accordance with the Maryland All-Payer
Model, and hospitals located outside the 50 States, the District of
Columbia, and Puerto Rico (that is, 5 short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa) receive payment for inpatient
hospital services they furnish on the basis of reasonable costs,
subject to a rate-of-increase ceiling.
As of March 2014, there were 3,396 IPPS acute care hospitals
included in our analysis. This represents approximately 56 percent
of all Medicare-participating hospitals. The majority of this impact
analysis focuses on this set of hospitals. There also are
approximately 1,326 CAHs. These small, limited service hospitals are
paid on the basis of reasonable costs rather than under the IPPS.
IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs,
children's hospitals, 11 cancer hospitals, and 5 short-term acute
care hospitals located in the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa, which are paid under separate
payment systems. Changes in the prospective payment systems for IPFs
and IRFs are made through separate rulemaking. Payment impacts for
these IPPS-excluded hospitals and units are not included in this
final rule. The impact of the update and policy changes to the LTCH
PPS for FY 2015 is discussed in section I.L. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

As of March 2014, there were 98 children's hospitals, 11 cancer
hospitals, 5 short-term acute care hospitals located in the Virgin
Islands, Guam, the Northern Mariana Islands and American Samoa, and
18 RNHCIs being paid on a reasonable cost basis subject to the rate-
of-increase ceiling under Sec. 413.40. (In accordance with Sec.
403.752(a) of the regulation, RNHCIs are paid under Sec. 413.40.)
Among the remaining providers, 245 rehabilitation hospitals and 897
rehabilitation units, and 431 LTCHs, are paid the Federal
prospective per discharge rate under the IRF PPS and the LTCH PPS,
respectively, and 490 psychiatric hospitals and 1,136 psychiatric
units are paid the Federal per diem amount under the IPF PPS. As
stated above, IRFs and IPFs are not affected by the rate updates
discussed in this final rule. The impacts of the changes on LTCHs
are discussed in section I.K. of this Appendix.
For children's hospitals, the 11 cancer hospitals, the 5 short-
term acute care hospitals located in the Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa, and RNHCIs, the update
of the rate-of-increase limit (or target amount) is the estimated FY
2015 percentage increase in the IPPS operating market basket,
consistent with section 1886(b)(3)(B)(ii) of the Act, and Sec. Sec.
403.752(a) and 413.40 of the regulations. As discussed in section
IV. of the preamble of the FY 2014 IPPS/LTCH PPS final rule, we
rebased the IPPS operating market basket to a FY 2010 base year.
Therefore, we are using the percentage increase in the FY 2010-based
IPPS operating market basket to update the target amounts for FY
2015 and subsequent fiscal years for children's hospitals, the 11
cancer hospitals, the 5 short-term acute care hospitals located in
the Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa, and RNHCIs that are paid based on reasonable costs subject to
the rate-of-increase limits. Consistent with current law, based on
IHS Global Insight, Inc.'s second quarter 2014 forecast of the FY
2010-based market basket increase, we are estimating that the FY
2015 update based on the IPPS operating market basket is 2.9 percent
(that is, the current estimate of the market basket rate-of-
increase). However, the Affordable Care Act requires an adjustment
for multifactor productivity (currently estimated to be 0.5
percentage point for FY 2015) and a 0.2 percentage point reduction
to the market basket update resulting in a 2.2 percent applicable
percentage increase for IPPS hospitals that submit quality data and
are meaningful EHR users, as discussed in section IV.B. of the
preamble of this final rule. Children's hospitals, the 11 cancer
hospitals, the 5 short-term acute care hospitals located in the
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa, and RNCHIs that continue to be paid based on reasonable costs
subject to rate-of-increase limits under Sec. 413.40 of the
regulations are not subject to the reductions in the applicable
percentage increase required under the Affordable Care Act.
Therefore, for those hospitals paid under Sec. 413.40 of the
regulations, the update is the

[[Page 50406]]

percentage increase in the FY 2015 IPPS operating market basket,
estimated at 2.9 percent, without the reductions required under the
Affordable Care Act.
The impact of the update in the rate-of-increase limit on those
excluded hospitals depends on the cumulative cost increases
experienced by each excluded hospital since its applicable base
period. For excluded hospitals that have maintained their cost
increases at a level below the rate-of-increase limits since their
base period, the major effect is on the level of incentive payments
these excluded hospitals receive. Conversely, for excluded hospitals
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that
will not be paid.
We note that, under Sec. 413.40(d)(3), an excluded hospital
that continues to be paid under the TEFRA system and whose costs
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its
reasonable costs in excess of 110 percent of the limit, or (2) 10
percent of its limit. In addition, under the various provisions set
forth in Sec. 413.40, hospitals can obtain payment adjustments for
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs

1. Basis and Methodology of Estimates

In this final rule, we are announcing policy changes and payment
rate updates for the IPPS for FY 2015 for operating costs of acute
care hospitals. The FY 2015 updates to the capital payments to acute
care hospitals are discussed in section I.J. of this Appendix.
Based on the overall percentage change in payments per case
estimated using our payment simulation model, we estimate that total
FY 2015 operating payments will decrease by 0.6 percent compared to
FY 2014. In addition to the applicable percentage increase, this
amount reflects the FY 2015 recoupment adjustment for documentation
and coding described in section II.D. of the preamble of this final
rule of -0.8 percent to the IPPS national standardized amounts. The
impacts do not reflect changes in the number of hospital admissions
or real case-mix intensity, which will also affect overall payment
changes.
We have prepared separate impact analyses of the changes to each
system. This section deals with the changes to the operating
inpatient prospective payment system for acute care hospitals. Our
payment simulation model relies on the most recent available data to
enable us to estimate the impacts on payments per case of certain
changes in this final rule. However, there are other changes for
which we do not have data available that will allow us to estimate
the payment impacts using this model. For those changes, we have
attempted to predict the payment impacts based upon our experience
and other more limited data.
The data used in developing the quantitative analyses of changes
in payments per case presented below are taken from the FY 2013
MedPAR file and the most current Provider-Specific File (PSF) that
is used for payment purposes. Although the analyses of the changes
to the operating PPS do not incorporate cost data, data from the
most recently available hospital cost reports were used to
categorize hospitals. Our analysis has several qualifications.
First, in this analysis, we do not make adjustments for future
changes in such variables as admissions, lengths of stay, or
underlying growth in real case-mix. Second, due to the
interdependent nature of the IPPS payment components, it is very
difficult to precisely quantify the impact associated with each
change. Third, we use various data sources to categorize hospitals
in the tables. In some cases, particularly the number of beds, there
is a fair degree of variation in the data from the different
sources. We have attempted to construct these variables with the
best available source overall. However, for individual hospitals,
some miscategorizations are possible.
Using cases from the FY 2013 MedPAR file, we simulated payments
under the operating IPPS given various combinations of payment
parameters. As described above, Indian Health Service hospitals and
hospitals in Maryland were excluded from the simulations. The impact
of payments under the capital IPPS, or the impact of payments for
costs other than inpatient operating costs, are not analyzed in this
section. Estimated payment impacts of the capital IPPS for FY 2015
are discussed in section I.J. of this Appendix.
We discuss the following changes below:
The effects of the application of the documentation and
coding adjustment and the applicable percentage increase (including
the market basket update, the multifactor productivity adjustment
and the applicable percentage reduction in accordance with the
Affordable Care Act) to the standardized amount and hospital-
specific rates.
The effects of the changes to the relative weights and
MS-DRG grouper.
The effects of the changes in hospitals' wage index
values reflecting updated wage data from hospitals' cost reporting
periods beginning during FY 2011, compared to the FY 2010 wage data,
and the adoption of the new OMB delineations to calculate the FY
2015 wage index.
The combined effects of the recalibration of the MS-DRG
relative weights as required by section 1886(d)(4)(C) of the Act and
the wage index (including the updated wage data and the adoption of
new OMB labor market area delineations), including the wage and
recalibration budget neutrality factors.
The effects of the geographic reclassifications by the
MGCRB (as of publication of this final rule) and the effects of the
adoption of new OMB labor market area delineations on these
reclassifications, that will be effective for FY 2015.
The effects of the rural floor and imputed floor with
the application of the national budget neutrality factor applied to
the wage index where the rural floor and imputed floor wage index
are calculated based on the adoption of the new OMB labor market
area delineations.
The effects of the adoption of the new labor market
area delineations announced by OMB in February 2013 on hospital
redesignations.
The effects of the 3-year transition for urban
hospitals becoming rural under the new OMB delineations and the 1-
year transitional blended wage index for hospitals whose FY 2015
wage indexes decrease solely as a result of adopting the new OMB
delineations.
The effects of the frontier State wage index adjustment
under the statutory provision that requires that hospitals located
in States that qualify as frontier States to not have a wage index
less than 1.0. This provision is not budget neutral.
The effects of the implementation of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a
threshold percentage of residents of the county where the hospital
is located commute to work at hospitals in counties with higher wage
indexes.
The effects of the policies for implementation of the
Hospital Readmissions Reduction Program under section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act, that
adjusts a hospital's base operating DRG amount by an adjustment
factor to account for a hospital's excess readmissions.
The effects of the policies for continued
implementation of section 3133 of the Affordable Care Act that
reduces Medicare DSH payments to 25 percent of what hospitals had
been previously paid under section 1886(d)(5)(F) of the Act and
establishes an additional payment to be made to hospitals that
receive DSH payments for their relative share of the total amount of
uncompensated care.
The total estimated change in payments based on the FY
2015 policies relative to payments based on FY 2014 policies that
include the applicable percentage increase of 2.2 percent (or 2.9
percent market basket update with a reduction of 0.5 percentage
point for the multifactor productivity adjustment, and a 0.2
percentage point reduction, as required under the Affordable Care
Act). The total estimated change in payments for FY 2015 reflects
the extension of MDH payment status for the first 6 months of FY
2015, in accordance with the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93) enacted on April 1, 2014.
We note that in the FY 2015 IPPS/LTCH PPS proposed rule we
provided the effects of section 1886(o) of the Act, as added by
section 3008 of the Affordable Care Act, which establishes payment
reductions under the HAC Reduction Program. Hospitals ranked in the
lowest 25 percent of performance on HACs are subject to a 1-percent
reduction in total IPPS payments. We are finalizing policies related
to the HAC Reduction Program in this final rule, but as described
earlier in this final rule, because the HAC scores are currently
undergoing 30-day review and correction by the hospitals, we are not
providing hospital-level data or a hospital-level payment impact in
conjunction with the FY 2015 IPPS Final Rule. We do provide an
estimate of the overall payment impact in section I.H.8. of this
Appendix A along with a discussion of the impact of these changes.
To illustrate the impact of the FY 2015 changes, our analysis
begins with a FY 2014 baseline simulation model using: the FY

[[Page 50407]]

2015 applicable percentage increase of 2.2 percent and the
documentation and coding recoupment adjustment of 0.8 percent to the
Federal standardized amount; the FY 2014 MS-DRG GROUPER (Version
31.0); the current FY 2014 CBSA designations for hospitals based on
the OMB definitions; the FY 2014 wage index; and no MGCRB
reclassifications. Outlier payments are set at 5.1 percent of total
operating MS-DRG and outlier payments for modeling purposes.
Section 1886(b)(3)(B)(viii) of the Act, as added by section
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A)
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007
and each subsequent year through FY 2014, the update factor will
include a reduction of 2.0 percentage points for any subsection (d)
hospital that does not submit data on measures in a form and manner
and at a time specified by the Secretary. Beginning in FY 2015, the
reduction is one-quarter of such applicable percentage increase
determined without regard to section 1886(b)(3)(B)(ix), (xi), or
(xii) of the Act, or one-quarter of the market basket update.
Therefore, for FY 2015, we are establishing that hospitals that do
not submit quality information under rules established by the
Secretary and that are meaningful EHR users under section
1886(b)(3)(B)(ix) of the Act will receive an applicable percentage
increase of 1.475 percent. At the time that this impact was
prepared, 56 hospitals did not receive the full market basket rate-
of-increase for FY 2014 because they failed the quality data
submission process or did not choose to participate. For purposes of
the simulations shown below, we modeled the payment changes for FY
2015 using a reduced update for these 56 hospitals. However, we do
not have enough information at this time to determine which
hospitals will not receive the full update factor for FY 2015.
Beginning in FY 2015, in accordance with section
1886(b)(3)(B)(ix) of the Act, a hospital that has been identified as
not an meaningful EHR user will be subject to a reduction of one-
quarter of such applicable percentage increase determined without
regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or
one-quarter of the market basket update. Therefore, for FY 2015, we
are establishing that hospitals that are identified as not
meaningful EHR users and do submit quality information under section
1886(b)(3)(B)(viii) of the Act will receive an applicable percentage
increase of 1.475 percent. Hospitals that are identified as not
meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act and
also do not submit quality data under section 1886(b)(3)(B)(viii) of
the Act will receive an applicable percentage increase of 0.75
percent, which reflects a one-quarter reduction of the market basket
update for failure to submit quality data and a one-quarter
reduction of the market basket update for being identified as not a
meaningful EHR user. For FY 2015, we have yet to finalize a list of
hospitals that are not meaningful EHR users under section
1886(b)(3)(B)(ix) of the Act. Therefore, we are not including this
adjustment to the standardized amount (for those hospitals that are
not meaningful EHR users) in our modeling of aggregate payments for
FY 2015. We intend to release a final list of hospitals that are not
meaningful EHR users in September 2014. Hospitals identified on this
list will be paid based on the applicable standardized amount in
Table 1A and Table 1B for discharges occurring in FY 2015.
Each policy change, statutory or otherwise, is then added
incrementally to this baseline, finally arriving at an FY 2015 model
incorporating all of the changes. This simulation allows us to
isolate the effects of each change.
Our final comparison illustrates the percent change in payments
per case from FY 2014 to FY 2015. Three factors not discussed
separately have significant impacts here. The first factor is the
update to the standardized amount. In accordance with section
1886(b)(3)(B)(i) of the Act, we are updating the standardized
amounts for FY 2015 using an applicable percentage increase of 2.2
percent. This includes our forecasted IPPS operating hospital market
basket increase of 2.9 percent with a reduction of 0.5 percentage
point for the multifactor productivity adjustment and a 0.2
percentage point reduction as required under the Affordable Care
Act. (Hospitals that fail to comply with the quality data submission
requirements and are meaningful EHR users would receive an update of
1.475 percent. This update includes a reduction of one-quarter of
the market basket update for failure to submit these data). We note
that hospitals that do comply with the quality data submission
requirements but are not meaningful EHR users would receive an
update of 1.475 percent, which includes a reduction of one-quarter
of the market basket update. Furthermore, hospitals that do not
comply with the quality data submission requirements and also are
not meaningful EHR users would receive an update of 0.75 percent.
However, as discussed earlier, we do not have a list of hospitals
that are not meaningful EHR users and have not included this
adjustment to the standardized amount (for those hospitals that are
not meaningful EHR users) in our modeling of aggregate payments for
FY 2015. Under section 1886(b)(3)(B)(iv) of the Act, the updates to
the hospital-specific amounts for SCHs and MDHs also are equal to
the applicable percentage increase, or 2.2 percent if the hospital
submits quality data and is a meaningful EHR user. In addition, we
are updating the Puerto Rico-specific amount by an applicable
percentage increase of 2.2 percent.
A second significant factor that affects the changes in
hospitals' payments per case from FY 2014 to FY 2015 is the change
in hospitals' geographic reclassification status from one year to
the next. That is, payments may be reduced for hospitals
reclassified in FY 2014 that are no longer reclassified in FY 2015.
Conversely, payments may increase for hospitals not reclassified in
FY 2014 that are reclassified in FY 2015.
A third significant factor is that we currently estimate that
actual outlier payments during FY 2014 will be 5.71 percent of total
MS-DRG payments. When the FY 2014 IPPS/LTCH PPS final rule was
published, we projected FY 2014 outlier payments would be 5.1
percent of total MS-DRG plus outlier payments; the average
standardized amounts were offset correspondingly. The effects of the
higher than expected outlier payments during FY 2014 (as discussed
in the Addendum to this final rule) are reflected in the analyses
below comparing our current estimates of FY 2014 payments per case
to estimated FY 2015 payments per case (with outlier payments
projected to equal 5.1 percent of total MS-DRG payments).

2. Analysis of Table I

Table I displays the results of our analysis of the changes for
FY 2015. The table categorizes hospitals by various geographic and
special payment consideration groups to illustrate the varying
impacts on different types of hospitals. The top row of the table
shows the overall impact on the 3,396 acute care hospitals included
in the analysis.
The next four rows of Table I contain hospitals categorized
according to their geographic location: all urban, which is further
divided into large urban and other urban; and rural. There are 2,549
hospitals located in urban areas included in our analysis. Among
these, there are 1,401 hospitals located in large urban areas
(populations over 1 million), and 1,148 hospitals in other urban
areas (populations of 1 million or fewer). In addition, there are
847 hospitals in rural areas. The next two groupings are by bed-size
categories, shown separately for urban and rural hospitals. The
final groupings by geographic location are by census divisions, also
shown separately for urban and rural hospitals.
The second part of Table I shows hospital groups based on
hospitals' FY 2015 payment classifications, including any
reclassifications under section 1886(d)(10) of the Act. For example,
the rows labeled urban, large urban, other urban, and rural show
that the numbers of hospitals paid based on these categorizations
after consideration of geographic reclassifications (including
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of
the Act that have implications for capital payments) are 2,563;
1,413; 1,150; and 833, respectively.
The next three groupings examine the impacts of the changes on
hospitals grouped by whether or not they have GME residency programs
(teaching hospitals that receive an IME adjustment) or receive
Medicare DSH payments, or some combination of these two adjustments.
There are 2,357 nonteaching hospitals in our analysis, 795 teaching
hospitals with fewer than 100 residents, and 244 teaching hospitals
with 100 or more residents.
In the DSH categories, hospitals are grouped according to their
DSH payment status, and whether they are considered urban or rural
for DSH purposes. The next category groups together hospitals
considered urban or rural, in terms of whether they receive the IME
adjustment, the DSH adjustment, both, or neither.
The next five rows examine the impacts of the changes on rural
hospitals by special payment groups (SCHs, RRCs, and MDHs). There
were 193 RRCs, 325 SCHs, and 162

[[Page 50408]]

MDHs (MDH status is extended through March 31, 2015 only under Pub.
L. 113-93), 124 hospitals that are both SCHs and RRCs, and 15
hospitals that are MDHs and RRCs (MDH status is extended through
March 31, 2015 only under Pub. L. 113-93).
The next series of groupings are based on the type of ownership
and the hospital's Medicare utilization expressed as a percent of
total patient days. These data were taken from the FY 2012 or FY
2011 Medicare cost reports.
The next two groupings concern the geographic reclassification
status of hospitals. The first grouping displays all urban hospitals
that were reclassified by the MGCRB for FY 2015. The second grouping
shows the MGCRB rural reclassifications. The final category shows
the impact of the policy changes on the 15 cardiac hospitals.
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a. Effects of the Hospital Update and Documentation and Coding
Adjustment (Column 2)

As discussed in section II.D. of the preamble of this final
rule, this column includes the hospital update, including the 2.9
percent market basket update, the reduction of 0.5 percentage point
for the multifactor productivity adjustment, and the 0.2 percentage
point reduction in accordance with the Affordable Care Act. In
addition, this column includes the FY 2015 documentation and coding
recoupment adjustment of -0.8 percent on the national standardized
amount as part of the recoupment required by section 631 of the
ATRA. As a result, we are making a 1.4 percent update to the
national standardized amount. This column also includes the 2.2
percent update to the hospital-specific rates which also includes
the 2.9 percent market basket update, the reduction of 0.5
percentage point for the multifactor productivity adjustment, and
the 0.2 percentage point reduction in accordance with the Affordable
Care Act.
Overall, hospitals will experience a 1.5 percent increase in
payments primarily due to the combined effects of the hospital
update and documentation and coding adjustment on the national
standardized amount and the hospital update to the hospital-specific
rate. Hospitals that are paid under the hospital-specific rate,
namely SCHs, will experience a 2.2 percent increase in payments;
therefore, hospital categories with SCHs paid under the hospital-
specific rate will experience increases in payments of more than 1.4
percent.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative
Cost-Based Weights With Recalibration Budget Neutrality (Column 3)

Column 3 shows the effects of the changes to the MS-DRGs and
relative weights with the application of the recalibration budget
neutrality factor to the standardized amounts. Section
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate
classification changes in order to reflect changes in treatment
patterns, technology, and any other factors that may change the
relative use of hospital resources. Consistent with section
1886(d)(4)(C)(iii) of the Act, we calculated a recalibration budget
neutrality factor to account for the changes in MS-DRGs and relative
weights to ensure that the overall payment impact is budget neutral.
As discussed in section II.E. of the preamble of this final
rule, the FY 2015 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2015, the MS-DRGs are
calculated using the FY 2013 MedPAR data grouped to the Version 32.0
(FY 2015) MS-DRGs. The methodology to calculate the relative weights
and the reclassification changes to the GROUPER are described in
more detail in section II.H. of the preamble of this final rule.
The ``All Hospitals'' line in Column 3 indicates that changes
due to the MS-DRGs and relative weights will result in a 0.0 percent
change in payments with the application of the recalibration budget
neutrality factor of 0.997543 on to the standardized amount.
Hospital categories that generally treat more surgical cases than
medical cases will experience increases in their payments due to the
changes to the relative weight methodology. Rural hospitals will
experience a 0.3 percent decrease in payments because rural
hospitals tend to treat fewer surgical cases than medical cases,
while teaching hospitals with more than 100 residents will
experience an increase in payments by 0.2 percent as those hospitals
treat more surgical cases than medical cases.

c. Effects of the Wage Index Changes (Column 4)

Column 4 shows the impact of updated wage data using FY 2011
cost report data and the new OMB labor market area delineations,
with the application of the wage budget neutrality factor. The wage
index is calculated and assigned to hospitals on the basis of the
labor market area in which the hospital is located. Under section
1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on the Core Based Statistical
Areas (CBSAs) established by OMB. The current statistical areas used
in FY 2014 were based on OMB standards published on December 27,
2000 (65 FR 82228) and Census 2000 data and Census Bureau population
estimates for 2007 and 2008 (OMB Bulletin No. 10-02).
As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27552) and final rule (78 FR 50586), on February 28, 2013, OMB
issued OMB Bulletin No. 13-01, which established revised
delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas.
In order to implement these changes for the IPPS, it is necessary to
identify the new labor market area delineation for each county and
hospital in the country. However, because the bulletin was not
issued until February 28, 2013, with supporting data not available
until later, and because the changes made by the bulletin and their
ramifications needed to be extensively reviewed and verified, we
were unable to undertake such a lengthy process before publication
of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not
implement changes to the wage index for FY 2014 based on these new
OMB delineations. In the FY 2014 IPPS/LTCH PPS final rule (78 FR
50586), we stated that we intended to propose changes to the wage
index based on the new OMB delineations in this FY 2015 proposed
rule. As discussed below, in this final rule, we are implementing
the new OMB delineations as described in the February 28, 2013 OMB
Bulletin No. 13-01, effective beginning with the FY 2015 IPPS wage
index.
Section 1886(d)(3)(E) of the Act requires that, beginning
October 1, 1993, we annually update the wage data used to calculate
the wage index. In accordance with this requirement, the wage index
for acute care hospitals for FY 2015 is based on data submitted for
hospital cost reporting periods beginning on or after October 1,
2010 and before October 1, 2011. The estimated impact of the updated
wage data using the FY 2011 cost report data and the new OMB labor
market area delineations on hospital payments is isolated in Column
4 by holding the other payment parameters constant in this
simulation. That is, Column 4 shows the percentage change in
payments when going from a model using the FY 2014 wage index, based
on FY 2010 wage data, the labor-related share of 69.6 percent, under
the new OMB delineations and having a 100-percent occupational mix
adjustment applied, to a model using the FY 2015 pre-
reclassification wage index based on FY 2011 wage data with the
labor-related share of 69.6 percent, under the new OMB delineations,
also having a 100-percent occupational mix adjustment applied, while
holding other payment parameters such as use of the Version 32.0 MS-
DRG GROUPER constant). The FY 2015 occupational mix adjustment is
based on the CY 2010 occupational mix survey.
In addition, the column shows the impact of the application of
the wage budget neutrality to the national standardized amount. In
FY 2010, we began calculating separate wage budget neutrality and
recalibration budget neutrality factors, in accordance with section
1886(d)(3)(E) of the Act, which specifies that budget neutrality to
account for wage index changes or updates made under that
subparagraph must be made without regard to the 62 percent labor-
related share guaranteed under section 1886(d)(3)(E)(ii) of the Act.
Therefore, for FY 2015, we calculated the wage budget neutrality
factor to ensure that payments under updated wage data and the
labor-related share of 69.6 percent are budget neutral without
regard to the lower labor-related share of 62 percent applied to
hospitals with a wage index less than or equal to 1.0. In other
words, the wage budget neutrality is calculated under the assumption
that all hospitals receive the higher labor-related share of the
standardized amount. The wage budget neutrality factor is 1.001443,
and the overall payment change is zero percent.
Column 4 shows the impacts of updating the wage data using FY
2011 cost reports. Overall, the new wage data and the labor-related
share, combined with the wage budget neutrality adjustment, will
lead to a 0.0 percent change for all hospitals as shown in Column 4.
In looking at the wage data itself, the national average hourly
wage increased 1.02 percent compared to FY 2014. Therefore, the only
manner in which to maintain or exceed the previous year's wage index
was to match or exceed the national 1.02 percent increase in average
hourly wage. Of the 3,387 hospitals with wage data for both FYs 2014
and 2015, 1,572 or 46.4 percent will experience an average hourly
wage increase of 1.02 percent or more.
The following chart compares the shifts in wage index values for
hospitals due to changes in the average hourly wage data for FY 2015
relative to FY 2014. Among urban hospitals, 4 will experience a
decrease of more than 10 percent, with 2 urban hospital experiencing
an increase of more than 10 percent. Seventy-six urban hospitals
will experience an increase or decrease of at least 5 percent or
more but less than or equal to 10 percent. Among rural hospitals,
none will

[[Page 50421]]

experience a decrease of more than 5 percent, but 5 rural hospitals
will experience an increase of greater than 5 percent but less than
or equal to 10 percent. However, 841 rural hospitals will experience
increases or decreases of less than or equal to 5 percent, while
2,220 urban hospitals will experience increases or decreases of less
than or equal to 5 percent. Two hundred thirty-nine urban and no
rural hospitals will not experience a change in their wage index.
These figures reflect changes in the ``pre-reclassified,
occupational mix-adjusted wage index,'' that is, the wage index
before the application of geographic reclassification, the rural and
imputed floors, the out-migration adjustment, and other wage index
exceptions and adjustments. We note that this analysis was performed
by applying the new OMB labor market area delineations to the FY
2015 wage data and also by recomputing the FY 2014 final wage data
to reflect the new OMB delineations. (We refer readers to sections
III.G.2. through III.I. of the preamble of this final rule for a
complete discussion of the exceptions and adjustments to the wage
index.) We note that the ``post-reclassified wage index'' or
``payment wage index,'' the wage index that includes all such
exceptions and adjustments (as reflected in Tables 2, 4A, 4B, 4C,
and 4F of the Addendum to this final rule, which are available via
the Internet on the CMS Web site) is used to adjust the labor-
related share of a hospital's standardized amount, either 69.6
percent or 62 percent, depending upon whether a hospital's wage
index is greater than 1.0 or less than or equal to 1.0. Therefore,
the pre-reclassified wage index figures in the chart below may
illustrate a somewhat larger or smaller change than will occur in a
hospital's payment wage index and total payment.
The following chart shows the projected impact of changes in the
area wage index values for urban and rural hospitals.

------------------------------------------------------------------------
Number of hospitals
Percentage change in area wage index -------------------------------
values Urban Rural
------------------------------------------------------------------------
Increase more than 10 percent........... 2 0
Increase more than 5 percent and less 18 5
than or equal to 10 percent............
Increase or decrease less than or equal 2,220 841
to 5 percent...........................
Decrease more than 5 percent and less 58 0
than or equal to 10 percent............
Decrease more than 10 percent........... 4 0
Unchanged............................... 239 0
------------------------------------------------------------------------

d. Combined Effects of the MS-DRG and Wage Index Changes (Column 5)

Section 1886(d)(4)(C)(iii) of the Act requires that changes to
MS-DRG reclassifications and the relative weights cannot increase or
decrease aggregate payments. In addition, section 1886(d)(3)(E) of
the Act specifies that any updates or adjustments to the wage index
are to be budget neutral. We computed a wage budget neutrality
factor of 1.001443 and a recalibration budget neutrality factor of
0.997543 (which is applied to the Puerto Rico-specific standardized
amount and the hospital-specific rates). The product of the two
budget neutrality factors is the cumulative wage and recalibration
budget neutrality factor. The cumulative wage and recalibration
budget neutrality adjustment is 0.998982, or approximately 0.10
percent, which is applied to the national standardized amounts.
Because the wage budget neutrality and the recalibration budget
neutrality are calculated under different methodologies according to
the statute, when the two budget neutralities are combined and
applied to the standardized amount, the overall payment impact is
not necessarily budget neutral. However, in this final rule, we are
estimating that the changes in the MS-DRG relative weights and
updated wage data with wage and budget neutrality applied will
result in a 0.0 percent change in payments.

e. Effects of MGCRB Reclassifications (Column 6)

Our impact analysis to this point has assumed acute care
hospitals are paid on the basis of their actual geographic location
(with the exception of ongoing policies that provide that certain
hospitals receive payments on other bases than where they are
geographically located). The changes in Column 6 reflect the per
case payment impact of moving from this baseline to a simulation
incorporating the MGCRB decisions for FY 2015 and the effects of the
adoption of the new OMB labor market area delineations on these
reclassifications which affect hospitals' wage index area
assignments.
By spring of each year, the MGCRB makes reclassification
determinations that will be effective for the next fiscal year,
which begins on October 1. The MGCRB may approve a hospital's
reclassification request for the purpose of using another area's
wage index value. Hospitals may appeal denials of MGCRB decisions to
the CMS Administrator. Further, hospitals had 45 days from
publication of the IPPS proposed rule in the Federal Register to
decide whether to withdraw or terminate an approved geographic
reclassification for the following year.
The overall effect of geographic reclassification is required by
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore,
for purposes of this impact analysis, we are applying an adjustment
of 0.990406 to ensure that the effects of the reclassifications
under section 1886(d)(10) of the Act are budget neutral (section
II.A. of the Addendum to this final rule). Geographic
reclassification generally benefits hospitals in rural areas. We
estimate that the geographic reclassification will increase payments
to rural hospitals by an average of 1.5 percent. By region, all the
rural hospital categories will experience increases in payments due
to MGCRB reclassifications.
Table 9A listed in section VI. of the Addendum to this final
rule and available via the Internet on the CMS Web site reflects the
reclassifications for FY 2015.

f. Effects of the Rural and Imputed Floor, Including Application of
National Budget Neutrality (Column 7)

As discussed in section III.B. of the preamble of the FY 2009
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the
FYs 2011, 2012, 2013 and 2014 IPPS/LTCH PPS final rules, and this
final rule, section 4410 of Public Law 105-33 established the rural
floor by requiring that the wage index for a hospital in any urban
area cannot be less than the wage index received by rural hospitals
in the same State. We apply a uniform budget neutrality adjustment
to the wage index. The imputed floor, which is also included in the
calculation of the budget neutrality adjustment to the wage index,
was extended in FY 2012 for 2 additional years. In the past, only
urban hospitals in New Jersey received the imputed floor. As
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53369), we
established an alternative temporary methodology for the imputed
floor, which resulted in an imputed floor for Rhode Island for FY
2013. For FY 2014, we extended the imputed rural floor, as
calculated under the original methodology and the alternative
methodology. For FY 2015, we are extending the imputed rural floor
for one year, as calculated under the original methodology and the
alternative methodology. As a result, New Jersey, Rhode Island, and
Delaware are able to receive an imputed floor. In New Jersey, 15 out
of 64 hospitals will receive the imputed floor, and 4 out of 11
hospitals in Rhode Island will receive the imputed floor for FY
2015. In the FY 2015 IPPS/LTCH PPS proposed rule (78 FR 28356), we
stated that one out of six hospitals in Delaware would benefit from
the imputed floor. However, in this final rule, no hospitals are
benefitting from the imputed floor in Delaware because the CBSA wage
index for each CBSA in Delaware under the new OMB delineations is
equal to or higher than the imputed rural floor.
The Affordable Care Act requires that we apply one rural floor
budget neutrality factor to the wage index nationally, and the
imputed floor is part of the rural floor budget neutrality factor
applied to the wage index nationally. We have calculated an FY 2015
rural floor budget neutrality factor to be applied to the wage index
of 0.989507, which reduces wage indexes by 1.0 percent.
Column 7 shows the projected impact of the rural floor and
imputed floor with the

[[Page 50422]]

national rural floor budget neutrality factor applied to the wage
index based on the new OMB labor market area delineations. The
column compares the post-reclassification FY 2015 wage index of
providers before the rural floor and imputed floor adjustment and
the post-reclassification FY 2015 wage index of providers with the
rural floor and imputed floor adjustment based on the new OMB labor
market area delineations. Only urban hospitals can benefit from the
rural and imputed floors. Because the provision is budget neutral,
all other hospitals (that is, all rural hospitals and those urban
hospitals to which the adjustment is not made) will experience a
decrease in payments due to the budget neutrality adjustment that is
applied nationally to their wage index.
We estimate that 422 hospitals will benefit from the rural and
imputed floors in FY 2015, while the remaining 2,974 IPPS hospitals
in our model have their wage index reduced by the rural floor budget
neutrality adjustment of 0.989507 (or 1.0 percent). We project that,
in aggregate, rural hospitals will experience a 0.3 percent decrease
in payments as a result of the application of the rural floor budget
neutrality because the rural hospitals do not benefit from the rural
floor, but have their wage indexes downwardly adjusted to ensure
that the application of the rural floor is budget neutral overall.
We project hospitals located in urban areas will experience no
change in payments because increases in payments by hospitals
benefitting from the rural floor offset decreases in payments by
nonrural floor urban hospitals whose wage index is downwardly
adjusted by the rural floor budget neutrality factor. Urban
hospitals in the New England region can expect a 2.8 percent
increase in payments primarily due to the application of the rural
floor in Massachusetts. Fifty-one urban providers in Massachusetts
are expected to receive the rural floor wage index value, including
the rural floor budget neutrality of 1.3336, increasing payments
overall to Massachusetts by an estimated $156 million. During most
past years, there have been no IPPS hospitals located in rural areas
in Massachusetts. There was one urban IPPS hospital that was
reclassified to rural Massachusetts (under section 1886(d)(8)(E) of
the Act) which established the Massachusetts rural floor, but the
wage index resulting from that hospital's data was not high enough
for any urban hospital to benefit from the rural floor policy.
However, for the FY 2012 wage index, the rural floor for
Massachusetts was established by a hospital that converted from a
CAH to an IPPS hospital that is geographically located in rural
Massachusetts. The rural floor in Massachusetts continues to be set
by the wage index of the hospital in rural Massachusetts that
converted from CAH to IPPS status. We estimate that Massachusetts
hospitals will receive approximately a 4.9 percent increase in IPPS
payments due to the application of the rural floor in FY 2015.
We wish to make note of a situation that occurred in the rural
floor impact calculation for Massachusetts. In FY 2014, CMS
calculated that 60 hospitals would benefit from the Massachusetts
rural floor, resulting in an estimated $167.6 million being received
by Massachusetts hospitals via the national rural floor budget
neutrality adjustment. In FY 2015, fewer Massachusetts hospitals, 51
hospitals, have been identified as benefitting from the rural floor,
and the fiscal impact of national budget neutrality has been
reduced. We have received inquiries from commenters regarding this
reduction, speculating whether the addition of one rural hospital in
Franklin County, MA reduced the impact of the Massachusetts rural
floor. The commenters are correct that the addition of one rural
hospital in Massachusetts reduced the impact of the rural floor in
FY 2015 as compared to the impact of the rural floor in FY 2014. We
refer readers to section II.A.4.(c) of the Addendum to this final
rule for a complere discussion on this issue.
Urban Puerto Rico hospitals are expected to experience a 0.0
percent change in payments as a result of the application of a
Puerto Rico rural floor with the application of the Puerto Rico
rural floor budget neutrality adjustment. We are applying a rural
floor budget neutrality factor to the Puerto Rico-specific wage
index of 0.991291 or -0.87 percent. The Puerto Rico-specific wage
index adjusts the Puerto Rico-specific standardized amount, which
represents 25 percent of payments to Puerto Rico hospitals. The
increases in payments experienced by the urban Puerto Rico hospitals
that benefit from a rural floor are offset by the decreases in
payments by the urban Puerto Rico hospitals that do not benefit from
the rural floor that have their wage indexes downwardly adjusted by
the rural floor budget neutrality adjustment. As a result, overall,
urban Puerto Rico hospitals will experience a 0.0 percent change in
payments due to the application of the rural floor with rural floor
budget neutrality.
There are 15 hospitals out of the 64 hospitals in New Jersey
that benefit from the extension of the imputed floor and will
receive the imputed floor wage index value under the new OMB labor
market area delineations, including the rural floor budget
neutrality of 1.121 which we estimate will increase payments to
those imputed floor hospitals by $24 million (overall, the State
will see an increase in payments of approximately $2.7 million due
to the other hospitals in the State experiencing decreases in
payments due to the rural floor budget neutrality adjustment). Four
Rhode Island hospitals will benefit from the imputed rural floor
calculated under the alternative methodology and receive an
additional $3.7 million (overall, the State will receive an
additional $1.9 million). As mentioned earlier, in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28356), we stated that one hospital in
Delaware would benefit from the imputed floor. However, in this
final rule, no hospitals are benefitting from the imputed floor in
Delaware because the CBSA wage index for each CBSA in Delaware under
the new OMB delineations is equal to or higher than the imputed
rural floor.
In response to a public comment addressed in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51593), we are providing the payment
impact of the rural floor and imputed floor with budget neutrality
at the State level. Column 1 of the table below displays the number
of IPPS hospitals located in each State. Column 2 displays the
number of hospitals in each State that will receive the rural floor
or imputed floor wage index for FY 2015 based on the new OMB labor
market area delineations. Column 3 displays the percentage of total
payments each State will receive or contribute to fund the rural
floor and imputed floor with national budget neutrality based on the
new OMB labor market area delineations. The column compares the
post-reclassification FY 2015 wage index of providers before the
rural floor and imputed floor adjustment and the post-
reclassification FY 2015 wage index of providers with the rural
floor and imputed floor adjustment with the wage indexes calculated
based on the new OMB labor market area delineations. Column 4
displays the estimated payment amount that each State will gain or
lose due to the application of the rural floor and imputed floor
with national budget neutrality.
Comment: Some commenters requested that CMS include in the FY
2015 IPPS/LTCH PPS final rule an updated detailed State-specific
analysis of the effects of nationwide rural floor budget neutrality.
In addition, the commenters requested that CMS publish a table
showing the cumulative State-specific and aggregate inpatient and
outpatient payment impact of the nationwide rural floor with budget
neutrality and project the estimated 10-year State-specific effects
of continuing the current policy.
Response: We appreciate the commenters' request for additional
analysis on the impact of the rural floor on inpatient and
outpatient payments. Commenters may request to view the OPPS impacts
of the rural floor policy through the public comment period for the
CY 2015 OPPS/ASC proposed rule that closes on September 2, 2014. In
addition, we are unable to provide a State-by-State impact with a
10-year projection of the rural floor because the rural floor is
based on wage data that are updated annually. Therefore, we believe
it would be difficult to accurately portray the rural floor in 10-
year projections. We have updated our State-by-State rural floor
budget neutrality impact analysis for this FY 2015 IPPS/LTCH PPS
final rule.

[[Page 50423]]

FY 2015 IPPS Estimated Payments Due to Rural Floor and Imputed Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
Percent change
in payments due
Number of to application
Number of hospitals that of rural floor Difference (in
State hospitals will receive and imputed millions)
the rural floor floor with
or imputed floor budget
neutrality
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
Alabama.................................. 91 2 -0.5 -$8.4
Alaska................................... 6 4 1.5 2.2
Arizona.................................. 57 9 -0.1 -1.9
Arkansas................................. 45 0 -0.5 -5.3
California............................... 309 200 1.9 188.8
Colorado................................. 47 6 0.2 2.3
Connecticut.............................. 31 8 -0.4 -6.5
Delaware................................. 6 0 -0.6 -2.4
Washington, D.C.......................... 7 0 -0.6 -2.6
Florida.................................. 169 25 -0.3 -18.6
Georgia.................................. 106 0 -0.5 -13.3
Hawaii................................... 12 0 -0.4 -1.3
Idaho.................................... 14 0 -0.4 -1.2
Illinois................................. 127 0 -0.6 -28.1
Indiana.................................. 91 0 -0.6 -13.2
Iowa..................................... 34 0 -0.5 -4.5
Kansas................................... 53 0 -0.4 -3.8
Kentucky................................. 65 1 -0.5 -7.9
Louisiana................................ 100 0 -0.5 -7.0
Maine.................................... 20 0 -0.5 -2.5
Massachusetts............................ 61 51 4.9 155.6
Michigan................................. 95 0 -0.5 -22.9
Minnesota................................ 51 0 -0.5 -10.0
Mississippi.............................. 64 0 -0.5 -5.3
Missouri................................. 78 0 -0.5 -11.2
Montana.................................. 12 4 -0.3 -0.8
Nebraska................................. 23 0 -0.4 -2.6
Nevada................................... 24 6 0.7 4.6
New Hampshire............................ 13 9 2.2 10.5
New Jersey............................... 64 15 0.1 2.7
New Mexico............................... 25 2 -0.2 -0.7
New York................................. 163 0 -0.6 -47.4
North Carolina........................... 87 0 -0.5 -15.8
North Dakota............................. 6 1 -0.3 -0.9
Ohio..................................... 135 10 -0.4 -16.9
Oklahoma................................. 86 2 -0.5 -5.7
Oregon................................... 33 0 -0.5 -4.7
Pennsylvania............................. 154 10 -0.5 -23.3
Puerto Rico.............................. 52 11 0 -0.1
Rhode Island............................. 11 4 0.5 1.9
South Carolina........................... 55 7 -0.3 -5.0
South Dakota............................. 19 0 -0.3 -1.1
Tennessee................................ 98 16 -0.2 -5.6
Texas.................................... 324 6 -0.5 -30.3
Utah..................................... 33 2 -0.4 -2.2
Vermont.................................. 6 0 -0.3 -0.7
Virginia................................. 79 1 -0.5 -12.0
Washington............................... 49 8 -0.2 -3.0
West Virginia............................ 30 2 -0.4 -3.1
Wisconsin................................ 65 0 -0.5 -8.6
Wyoming.................................. 11 0 -0.2 -0.3
----------------------------------------------------------------------------------------------------------------

g. Impact of the New OMB Delineations (Column 8)

Column 8 shows the effects of the adoption of the new OMB labor
market area delineations. This column compares the payments under
the rural and imputed floor wage index with rural floor budget
neutrality calculated under the new OMB delineations and the
payments under the rural and imputed floor wage index with budget
neutrality calculated under the current OMB delineations. It does
not reflect the 3-year transition for hospitals that are currently
located in urban counties that become rural under the new OMB
delineations and the 1-year transition to the new OMB delineations
where the wage indexes are blended such that hospitals receive 50
percent of their wage index based on the new OMB delineations, and
50 percent of their wage index based on their current labor market
area. Rather, it shows the impact of the new OMB delineations fully
implemented for FY 2015. Approximately 609 hospitals have their wage
index impacted due to the new OMB delineations. Urban New England
and rural Middle Atlantic hospitals will experience the largest
decreases in payments due to the new OMB delineations being fully
implemented

[[Page 50424]]

for FY 2015, with payment decreases of 0.5 and 0.2 percent,
respectively. Urban non-DSH hospitals, nonteaching and non-DSH
hospitals, and Lugar hospitals will experience the largest increases
in payments due to the new OMB delineations being fully implemented
for FY 2015, each with payment increases of 0.2 percent.

h. Application of the CBSA Transition Wage Index With Budget Neutrality
(Column 9)

As discussed earlier in this final rule, for FY 2015, we are
using the most recent labor market area delineations issued by OMB
but we established a transition period in certain circumstances.
Specifically, we established a 3-year transition for hospitals that
are currently located in an urban county that becomes rural under
the new OMB labor market area delineations under which such
hospitals will be assigned the urban wage index value of the CBSA in
which they are physically located for FY 2014 for a period of 3
fiscal years (that is, for FYs 2015, 2016, and 2017). We also are
establishing a 1-year blended wage index for all hospitals that
experience any decrease in their actual payment wage index (that is,
a hospital's actual wage index used for payment, which accounts for
all applicable effects of reclassification and redesignation)
exclusively due to the implementation of the new OMB labor market
area delineations. We are providing that a post-reclassified wage
index with the rural and imputed floor applied be computed based on
the hospital's FY 2014 CBSA (that is, using all of its FY 2014
constituent county/ies), and another post-reclassified wage index
with the rural and imputed floor applied be computed based on the
hospital's new FY 2015 CBSA (that is, the FY 2015 constituent
county/ies). We compared these two wage indexes. If the FY 2015 wage
index with FY 2015 CBSAs was lower than the FY 2015 wage index with
FY 2014 CBSAs, we computed a blended wage index, consisting of 50
percent of each of the two wage indexes added together. This blended
wage index is the hospital's wage index for FY 2015. This adjustment
only applies to hospitals that will experience a decrease in their
actual payment wage index exclusively due to the implementation of
the new OMB labor market area delineations. Hospitals that benefit
from the new OMB labor market area delineations receive their new
wage index based on the new OMB labor market area delineations. We
refer readers to section III.B. of the preamble to this final rule
for a complete discussion on the transition wage indexes. Lastly, we
are applying both the 3-year transition and 50/50 blended wage index
adjustments in a budget neutral manner. We are making an adjustment
to the standardized amount to ensure that the total payments,
including the effect of the transition provisions, equal what
payments would have been if we had not provided for these
transitional wage indexes.
Column 9 shows the effects of the adoption of the new OMB labor
market area delineations, including the 3-year hold harmless
provision for hospitals that are currently located in an urban
county that becomes rural under the new OMB delineations and the 1-
year transition to the new OMB delineations where the wage indexes
are blended such that hospitals receive 50 percent of their wage
index based on the new OMB delineations and 50 percent of their wage
index based on their current labor market area. For FY 2015, we are
applying both the 3-year transition and 50/50 blended wage index
adjustments in a budget neutral manner, with a budget neutrality
factor of 0.998859 (or -0.1 percent) applied to the standardized
amount to ensure that the total payments, including the effect of
the transition provisions, equal what payments would have been if we
had not provided for these transitional wage indexes. This column
shows the payment impact of the transitional wage index. For columns
1 through 8, the payment impacts and budget neutrality factors have
been calculated under the new OMB delineations. Under the 1-year
transition to the new OMB delineations, hospitals that would have
experienced a decrease in payments due to the new OMB delineations
being fully implemented this year now have those decreases
alleviated due to the transition. Urban New England hospitals and
Middle Atlantic hospitals will experience a 0.2 percent and 0.3
percent increase respectively in payments due to the application of
the transitional wage index with budget neutrality, while urban
South Atlantic, East North Central, East South Central, West North
Central, West South Central, Mountain and Pacific hospitals will
experience a -0.1 percent change in payments due to the transitional
budget neutrality adjustment of -0.1 percent applied to the standard
Federal rate.

i. Effects of the Application of the Frontier State Wage Index and Out-
Migration Adjustment (Column 10)

This column shows the combined effects of the application of
section 10324(a) of the Affordable Care Act, which requires that we
establish a minimum post-reclassified wage-index of 1.00 for all
hospitals located in ``frontier States,'' and the effects of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals
located in certain counties that have a relatively high percentage
of hospital employees who reside in the county, but work in a
different area with a higher wage index. These two wage index
provisions are not budget neutral and increase payments overall by
0.1 percent compared to the provisions not being in effect.
The term ``frontier States'' is defined in the statute as States
in which at least 50 percent of counties have a population density
less than 6 persons per square mile. Based on these criteria, four
States (Montana, North Dakota, South Dakota, and Wyoming) are
considered frontier States and 46 hospitals located in those States
will receive a frontier wage index of 1.0000. Nevada is also, by
definition, a frontier State and was assigned a frontier floor value
of 1.0000 for FY 2012, but since then and including in this final
rule, its rural floor value has been greater than 1.0000 so it has
not been subject to the frontier wage index. Overall, this provision
is not budget neutral and is estimated to increase IPPS operating
payments by approximately $67 million or approximately 0.1 percent.
Rural hospitals located in the Mountain region and urban hospitals
located in the West North Central region will experience an increase
in payments by 0.6 and 0.8 percent, respectively, because many of
the hospitals located in this region are frontier State hospitals.
In addition, section 1886(d)(13) of the Act, as added by section
505 of Public Law 108-173, provides for an increase in the wage
index for hospitals located in certain counties that have a
relatively high percentage of hospital employees who reside in the
county, but work in a different area with a higher wage index.
Hospitals located in counties that qualify for the payment
adjustment are to receive an increase in the wage index that is
equal to a weighted average of the difference between the wage index
of the resident county, post-reclassification and the higher wage
index work area(s), weighted by the overall percentage of workers
who are employed in an area with a higher wage index. There are an
estimated 273 providers that will receive the out-migration wage
adjustment in FY 2015. Rural hospitals generally qualify for the
adjustment, resulting in a 0.1 percent increase in payments. This
provision appears to benefit Section 401 hospitals and RRCs in that
they will experience a 2.0 percent and 0.6 percent increase in
payments, respectively. This out-migration wage adjustment also is
not budget neutral, and we estimate the impact of these providers
receiving the out-migration increase to be approximately $53
million.

j. Effects of the Reductions Under the Hospital Readmissions Reduction
Program (Column 11)

Column 11 shows our estimates of the effects of the policies for
reductions in payments under the Hospital Readmissions Reduction
Program, which was established under section 3025 of the Affordable
Care Act. The Hospital Readmissions Reduction Program requires a
reduction to a hospital's base operating DRG payments to account for
excess readmissions, which for FY 2015, is based on a hospital's
risk-adjusted readmission rate during a 3-year period for five
applicable conditions: acute myocardial infarction, heart failure,
pneumonia, total hip and total knee arthroplasty and chronic
obstructive pulmonary disease. This provision is not budget neutral.
A hospital's readmission adjustment is the higher of a ratio of the
hospital's aggregate payments for excess readmissions to their
aggregate payments for all discharges, or a floor, which has been
defined in the statute as 0.97 (or a 3.0 percent reduction) for FY
2015. A hospital's base operating DRG payment (that is, wage-
adjusted DRG payment amount, as discussed in section IV.G. of the
preamble of this final rule) is the portion of the IPPS payment
subject to the readmissions payment adjustment (DSH, IME, outliers
and low-volume add-on payments are not subject to the readmissions
adjustment). For FY 2015, we have revised the definition of base
operating DRG payment for MDHs to include the hospital-specific add-
on amount, as discussed earlier in this final rule such that the
this hospital-specific add-on amount is also subject to the
readmissions payment

[[Page 50425]]

adjustment. In this final rule, we estimate that 2,638 hospitals
will have their base operating DRG payments reduced by their
hospital-specific readmissions adjustment, an increase from FY 2014,
due to the addition of new readmissions measures in the program. As
a result, we estimate that the Hospital Readmissions Reduction
Program will result in a 0.2 percent decrease in payments relative
to FY 2014. We estimate that the Hospital Readmissions Reduction
Program will result in a 0.4 percent decrease in payments relative
to no provision (or a decrease of $424 million).
Teaching non-DSH hospitals experience a decrease in payments of
0.3 percent relative to last year, while teaching DSH hospitals
experience a 0-1 percent decrease in payments relative to last year.
Puerto Rico hospitals will show a 0.0 percent change in payments
because they are exempt from the provision.

k. Effects of the Changes to Medicare DSH Payments (Column 12)

Column 12 shows the effects of the adjustments to Medicare DSH
payments made under section 3133 of the Affordable Care Act. Under
section 3133, hospitals that are eligible to receive Medicare DSH
payments will receive 25 percent of the amount they previously would
have received under the former statutory formula for Medicare DSH
payments. The remainder, equal to an estimate of 75 percent of what
otherwise formerly would have been paid as Medicare DSH payments,
reduced to reflect changes in the percentage of individuals under
age 65 who are uninsured and additional statutory adjustments, is
available to make additional payments to each hospital that
qualifies for Medicare DSH payments. Each Medicare DSH hospital will
receive an additional payment based on its estimated share of the
total amount of uncompensated care for all Medicare DSH hospitals.
The reduction to Medicare DSH payments is not budget neutral.
For FY 2015, we are establishing that the amount to be
distributed on the basis of uncompensated care, which is 75 percent
of our estimate of what otherwise would have been paid in Medicare
DSH payments (that is, Factor 1), be adjusted to 76.19 percent of
that amount to reflect changes in the percentage of individuals
under age 65 who are uninsured and additional statutory adjustments
(that is, Factor 1 multiplied by Factor 2). In the FY 2015 IPPS/LTCH
PPS proposed rule the uncompensated care payment was 75 percent of
what otherwise would have been paid for Medicare DSH payment
adjustments adjusted by a Factor 2 of 80.36 percent and for FY 2014,
the uncompensated care payment was 75 percent of what otherwise
would have been paid for Medicare DSH payment adjustments adjusted
by a Factor 2 of 94.3 percent. Assuming DSH payments are constant,
the FY 2015 uncompensated care amount is approximately 14 percentage
points less than the uncompensated care amount that we distributed
for FY 2014. As a result, we project that, compared to the
empirically justified DSH payments and the uncompensated care
payments made last year, payments for FY 2015 will be reduced
overall by 1.3 percent as compared to Medicare DSH payments made
last year under the first year of the implementation of section 3133
of the Affordable Care Act. The uncompensated care payment
methodology has redistributive effects based on a Medicare DSH
hospital's low income insured patient days (sum of Medicaid patient
days and Medicare SSI patient days) relative to the Medicaid patient
days and Medicare SSI patient days for Medicare DSH hospitals, and
the final payment amount is not tied to a hospital's discharges.
Rural West South Central and Rural Pacific will experience a 0.3
percent change in DSH and uncompensated care payments. Hospitals
with low Medicare utilization (Medicare days are less than 25
percent of total inpatient days) will experience the largest
decreases in payments of 3.0 percent.

l. Effects of All FY 2015 Changes (Column 13)

Column 13 shows our estimate of the changes in payments per
discharge from FY 2014 and FY 2015, resulting from all changes
reflected in this final rule for FY 2015. It includes combined
effects of the previous columns in the table.
The average decrease in payments under the IPPS for all
hospitals is approximately 0.6 percent for FY 2015 relative to FY
2014. As discussed in section II.D. of the preamble of this final
rule, this column includes the FY 2015 documentation and coding
recoupment adjustment of -0.8 percent on the national standardized
amount as part of the recoupment required under section 631 of the
ATRA. In addition, this column includes the annual hospital update
of 2.2 percent to the national standardized amount. This annual
hospital update includes the 2.9 percent market basket update, the
reduction of 0.5 percentage point for the multifactor productivity
adjustment, and the 0.2 percentage point reduction under section
3401 of the Affordable Care Act. Hospitals paid under the hospital-
specific rate will receive a 2.2 percent hospital update described
above. As described in Column 2, the annual hospital update with the
documentation and coding recoupment adjustment for hospitals paid
under the national standardized amount combined with the annual
hospital update for hospitals paid under the hospital-specific rate
will result in a 1.5 percent increase in payments in FY 2015
relative to FY 2014. Column 11 shows the estimated 0.2 percent
decrease in payments due to the reductions in payments under the
Hospital Readmissions Reduction Program relative to FY 2014. Column
12 shows the estimated 1.3 percent decrease in Medicare DSH payments
due to the changes made under section 3133 of the Affordable Care
Act, which reduces Medicare DSH payments by 75 percent and
redistributes the remainder, equal to an estimate of 75 percent of
what otherwise would have been paid as Medicare DSH payments,
reduced to reflect changes in the percentage of individuals under
age 65 who are uninsured and an additional statutory adjustment, to
each hospital that qualifies for Medicare DSH payments as an
uncompensated care payment based on the hospital's relative share of
the total amount of uncompensated care. The impact of moving from
our estimate of FY 2014 outlier payments, 5.71 percent, to the
estimate of FY 2015 outlier payments, 5.1 percent, will result in a
decrease of 0.6 percent in FY 2015 payments relative to FY 2014.
Lastly, this column reflects the extension of MDH payment status for
the first half of FY 2015, under Public Law 113-93, enacted on April
1, 2014. There also might be interactive effects among the various
factors comprising the payment system that we are not able to
isolate. For these reasons, the values in Column 13 may not equal
the sum of the estimated percentage changes described above. (We
note that in the FY 2015 IPPS/LTCH PPS proposed rule we provided the
effects of section 1886(o) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes payment reductions under
the HAC Reduction Program. Hospitals ranked in the lowest 25 percent
of performance on HACs are subject to a 1-percent reduction in total
IPPS payments. We are finalizing policies related to the HAC
Reduction Program in this final rule, but as described earlier in
this final rule, because the HAC scores are currently undergoing 30-
day review and correction by the hospitals, we are not providing
hospital-level data or a hospital-level payment impact in
conjunction with the FY 2015 IPPS Final Rule. We do provide an
estimate of the overall payment impact in section I.H.8. of this
Appendix A along with a discussion of the impact of these changes.)
Overall payments to hospitals paid under the IPPS are estimated
to decrease by 0.6 percent for FY 2015. Much of the payment changes
among the hospital categories is attributed to the reduction in
Medicare DSH payments and the redistribution of a portion of the
Medicare DSH payments as an additional payment for hospitals'
relative uncompensated care amounts. Hospitals in urban areas will
experience a 0.6 percent decrease in payments per discharge in FY
2015 compared to FY 2014. Hospital payments per discharge in rural
areas are estimated to decrease by 0.7 percent in FY 2015.

3. Impact Analysis of Table II

Table II presents the projected impact of the changes for FY
2015 for urban and rural hospitals and for the different categories
of hospitals shown in Table I. It compares the estimated average
payments per discharge for FY 2014 with the estimated average
payments per discharge for FY 2015, as calculated under our models.
Therefore, this table presents, in terms of the average dollar
amounts paid per discharge, the combined effects of the changes
presented in Table I. The estimated percentage changes shown in the
last column of Table II equal the estimated percentage changes in
average payments per discharge from Column 13 of Table I.

[[Page 50426]]

Table II--Impact Analysis of Changes for FY 2015 Acute Care Hospital Operating Prospective Payment System
[Payments per discharge]
----------------------------------------------------------------------------------------------------------------
Estimated Estimated
Number of average FY 2014 average FY 2015 All FY 2015
hospitals payment per payment per changes
discharge discharge
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals.......................... 3,396 11,197 11,129 -0.6
By Geographic Location:
Urban hospitals.................... 2,549 11,566 11,496 -0.6
Large urban areas.................. 1,401 12,296 12,226 -0.6
Other urban areas.................. 1,148 10,677 10,608 -0.6
Rural hospitals.................... 847 8,238 8,184 -0.7
Bed Size (Urban):
0-99 beds.......................... 666 9,085 9,054 -0.3
100-199 beds....................... 787 9,730 9,661 -0.7
200-299 beds....................... 455 10,470 10,448 -0.2
300-499 beds....................... 429 11,892 11,814 -0.7
500 or more beds................... 212 14,185 14,075 -0.8
Bed Size (Rural):
0-49 beds.......................... 328 6,778 6,695 -1.2
50-99 beds......................... 305 7,803 7,686 -1.5
100-149 beds....................... 125 8,112 8,099 -0.2
150-199 beds....................... 50 8,856 8,808 -0.5
200 or more beds................... 39 9,979 10,008 0.3
Urban by Region:
New England........................ 120 12,688 12,684 0
Middle Atlantic.................... 324 12,762 12,752 -0.1
South Atlantic..................... 407 10,423 10,327 -0.9
East North Central................. 397 10,795 10,733 -0.6
East South Central................. 153 10,044 9,911 -1.3
West North Central................. 162 11,316 11,275 -0.4
West South Central................. 387 10,674 10,492 -1.7
Mountain........................... 162 11,895 11,793 -0.9
Pacific............................ 385 14,626 14,638 0.1
Puerto Rico........................ 52 8,149 7,543 -7.4
Rural by Region:
New England........................ 22 11,180 11,080 -0.9
Middle Atlantic.................... 57 8,289 8,216 -0.9
South Atlantic..................... 132 7,834 7,764 -0.9
East North Central................. 116 8,474 8,484 0.1
East South Central................. 165 7,513 7,404 -1.4
West North Central................. 102 8,914 8,925 0.1
West South Central................. 168 7,108 6,974 -1.9
Mountain........................... 61 9,454 9,503 0.5
Pacific............................ 24 11,083 11,207 1.1
By Payment Classification:
Urban hospitals.................... 2,563 11,551 11,480 -0.6
Large urban areas.................. 1,413 12,286 12,214 -0.6
Other urban areas.................. 1,150 10,645 10,576 -0.6
Rural areas........................ 833 8,454 8,401 -0.6
Teaching Status:
Nonteaching........................ 2,357 9,343 9,296 -0.5
Fewer than 100 residents........... 795 10,941 10,879 -0.6
100 or more residents.............. 244 16,321 16,187 -0.8
Urban DSH:
Non-DSH............................ 679 9,801 9,863 0.6
100 or more beds................... 1,588 11,990 11,893 -0.8
Less than 100 beds................. 383 8,431 8,366 -0.8
Rural DSH:
SCH................................ 373 7,907 7,858 -0.6
RRC................................ 212 9,190 9,162 -0.3
100 or more beds................... 24 7,390 7,297 -1.3
Less than 100 beds................. 137 6,328 6,247 -1.3
Urban teaching and DSH:
Both teaching and DSH.............. 842 13,175 13,063 -0.9
Teaching and no DSH................ 133 11,027 11,125 0.9
No teaching and DSH................ 1,129 9,781 9,709 -0.7
No teaching and no DSH............. 459 9,223 9,288 0.7
Special Hospital Types:
RRC................................ 193 9,372 9,316 -0.6

[[Page 50427]]

SCH................................ 325 9,570 9,636 0.7
MDH................................ 162 7,073 6,700 -5.3
SCH and RRC........................ 124 10,289 10,394 1
MDH and RRC........................ 15 9,195 8,450 -8.1
Type of Ownership:
Voluntary.......................... 1,935 11,319 11,274 -0.4
Proprietary........................ 892 9,986 9,900 -0.9
Government......................... 542 12,214 12,038 -1.4
Medicare Utilization as a Percent of
Inpatient Days:
0-25............................... 501 14,705 14,357 -2.4
25-50.............................. 2,081 11,311 11,261 -0.4
50-65.............................. 601 9,137 9,131 -0.1
Over 65............................ 93 8,406 8,349 -0.7
FY 2015 Reclassifications by the
Medicare Geographic Classification
Review Board:
All Reclassified Hospitals......... 719 10,791 10,771 -0.2
Non-Reclassified Hospitals......... 2,677 11,327 11,243 -0.7
Urban Hospitals Reclassified....... 450 11,446 11,429 -0.1
Urban Nonreclassified Hospitals, FY 2,054 11,618 11,535 -0.7
2015..............................
All Rural Hospitals Reclassified FY 269 8,732 8,702 -0.4
2015..............................
Rural Nonreclassified Hospitals FY 514 7,665 7,597 -0.9
2015..............................
All Section 401 Reclassified 50 10,130 10,012 -1.2
Hospitals.........................
Other Reclassified Hospitals 64 7,812 7,658 -2
(Section 1886(d)(8)(B))...........
Specialty Hospitals:
Cardiac Specialty Hospitals........ 15 12,303 12,567 2.1
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Policy Changes

In addition to those policy changes discussed above that we are
able to model using our IPPS payment simulation model, we are making
various other changes in this final rule. Generally, we have limited
or no specific data available with which to estimate the impacts of
these changes. Our estimates of the likely impacts associated with
these other changes are discussed below.

1. Effects of Policy on MS-DRGs for Preventable HACs, Including
Infections

In section II.F. of the preamble of this final rule, we discuss
our implementation of section 1886(d)(4)(D) of the Act, which
requires the Secretary to identify conditions that are: (1) high
cost, high volume, or both; (2) result in the assignment of a case
to an MS-DRG that has a higher payment when present as a secondary
diagnosis; and (3) could reasonably have been prevented through
application of evidence-based guidelines. For discharges occurring
on or after October 1, 2008, hospitals will not receive additional
payment for cases in which one of the selected conditions was not
present on admission, unless, based on data and clinical judgment,
it cannot be determined at the time of admission whether a condition
is present. That is, the case will be paid as though the secondary
diagnosis were not present. However, the statute also requires the
Secretary to continue counting the condition as a secondary
diagnosis that results in a higher IPPS payment when doing the
budget neutrality calculations for MS-DRG reclassifications and
recalibration. Therefore, we will perform our budget neutrality
calculations as though the payment provision did not apply, but
Medicare will make a lower payment to the hospital for the specific
case that includes the secondary diagnosis. Thus, the provision
results in cost savings to the Medicare program.
We note that the provision will only apply when one or more of
the selected conditions are the only secondary diagnosis or
diagnoses present on the claim that will lead to higher payment.
Medicare beneficiaries will generally have multiple secondary
diagnoses during a hospital stay, such that beneficiaries having one
MCC or CC will frequently have additional conditions that also will
generate higher payment. Only a small percentage of the cases will
have only one secondary diagnosis that would lead to a higher
payment. Therefore, if at least one nonselected secondary diagnosis
that leads to higher payment is on the claim, the case will continue
to be assigned to the higher paying MS-DRG and there will be no
Medicare savings from that case. In addition, as discussed in
section II.F.3. of the preamble of this final rule, it is possible
to have two severity levels where the HAC does not affect the MS-DRG
assignment or for an MS-DRG not to have severity levels. In either
of these circumstances, the case will continue to be assigned to the
higher paying MS-DRG and there will be no Medicare savings from that
case.
The HAC payment provision went into effect on October 1, 2008.
Our savings estimates for the next 5 fiscal years are shown below:

------------------------------------------------------------------------
Savings (in
Year millions)
------------------------------------------------------------------------
FY 2015................................................. $27
FY 2016................................................. 29
FY 2017................................................. 31
FY 2018................................................. 34
FY 2019................................................. 36
------------------------------------------------------------------------

In section IV.J. of the preamble of this final rule, we are
making changes to the HAC Reduction Program for FY 2015. We refer
readers to section I.H.6. of this Appendix A for a discussion of the
impact of these changes.

2. Effects of Policy Relating to New Medical Service and Technology
Add-On Payments

In section II.I. of the preamble to this final rule, we discuss
five applications (Dalbavancin, Heli-FX^TM EndoAnchor
System, CardioMEMS^TM HF (Heart Failure) Monitoring
System, MitraClip[supreg] System, and Responsive Neurostimulator
(RNS[supreg]) System) for add-on payments for new medical services
and technologies for FY 2015, as well as the status of the new
technologies that were approved to receive new technology add-on
payments in FY 2014. We

[[Page 50428]]

note that one of the applications (for the Watchman[supreg] System)
discussed in the proposed rule withdrew its application prior to the
publication of this final rule.
As explained in the preamble to this final rule, add-on payments
for new medical services and technologies under section
1886(d)(5)(K) of the Act are not required to be budget neutral. As
discussed in section II.I.4. of the preamble of this final rule, we
are approving three of the five applications
(CardioMEMS^TM HF Monitoring System, MitraClip[supreg]
System, and RNS[supreg] System) for new technology add-on payments
for FY 2015. As we proposed, in this final rule, we also are
continuing to make new technology add-on payments in FY 2015 for
Kcentra^TM, Argus[supreg] II Retinal Prosthesis System,
the Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent,
Voraxaze[supreg], and the Zenith[supreg] F. Graft (because all of
these technologies are still within the 3-year anniversary of the
product's entry onto the market). We note that new technology add-on
payments per case are limited to the lesser of: (1) 50 percent of
the costs of the new technology; or (2) 50 percent of the amount by
which the costs of the case exceed the standard MS-DRG payment for
the case. Because it is difficult to predict the actual new
technology add-on payment for each case, our estimates below are
based on the increase in add-on payments for FY 2015 as if every
claim that would qualify for a new technology add-on payment would
receive the maximum add-on payment. Based on the applicant's
estimate from FY 2013, we currently estimate that new technology
add-on payments for Voraxaze[supreg] will increase overall FY 2015
payments by $6,300,000. Based on the applicant's estimate from FY
2013, we currently estimate that new technology add-on payments for
the Zenith[supreg] F. Graft will increase overall FY 2015 payments
by $4,085,750. Based on the applicant's estimate for FY 2014, we
currently estimate that new technology add-on payments for
Kcentra^TM will increase overall FY 2015 payments by
$5,449,888. Based on the applicant's estimate for FY 2014, we
currently estimate that new technology add-on payments for the
Argus[supreg] II Retinal Prosthesis System will increase overall FY
2015 payments by $3,601,437. Based on the applicant's estimate for
FY 2014, we currently estimate that new technology add-on payments
for the Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
will increase overall FY 2015 payments by $20,463,000. Based on the
applicant's estimate for FY 2015, we currently estimate that new
technology add-on payments for the CardioMEMS^TM HF
Monitoring System will increase overall FY 2015 payments by
$11,315,625 (maximum add-on payment of $8,875 * 1,275 patients).
Based on the applicant's estimate for FY 2015, we currently estimate
that new technology add-on payments for the MitraClip[supreg] System
will increase overall FY 2015 payments by $27,000,000 (maximum add-
on payment of $15,000 * 1,800 patients). Based on the applicant's
estimate for FY 2015, we currently estimate that new technology add-
on payments for the RNS[supreg] System will increase overall FY 2015
payments by $12,932,500 (maximum add-on payment of $18,475 * 700
patients).

3. Effects of Changes to List of MS-DRGs Subject to Postacute Care
Transfer and DRG Special Pay Policy

In section IV.A. of the preamble of this final rule, we discuss
changes to the list of MS-DRGs subject to the postacute care
transfer and DRG special payment policies. As reflected in Table 5
listed in section VI. of the Addendum to this final rule and
available via the Internet on the CMS Web site, using criteria set
forth in regulation at Sec. 412.4, we evaluated MS-DRG charge,
discharge, and transfer data to determine which MS-DRGs qualify for
the postacute care transfer and DRG special pay policies. We note
that we are making no change to these payment policies in this FY
2015 final rule. We are changing the status of certain MS-DRGs as a
result of revisions to the MS-DRGs for FY 2015. We are changing the
status of five MS-DRGs to qualify for the postacute care transfer
policy in FY 2015. One additional MS-DRG that qualified under the
policy in FY 2014 does not qualify in FY 2015, and we are changing
the status accordingly. Finally, five MS-DRGs now qualify for the
MS-DRG special pay policy in FY 2015 after not qualifying in FY
2014, and we are adding them to the list of qualifying MS-DRGs.
Column 4 of Table I in this Appendix A shows the effects of the
changes to the MS-DRGs and relative payment weights with the
application of the recalibration budget neutrality factor to the
standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires
us annually to make appropriate classification changes in order to
reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources. The
analysis and methods determining the changes due to the MS-DRGs and
relative payment weights accounts for and includes changes in MS-DRG
postacute care transfer and special pay policy statuses. We refer
readers to section I.G. of this Appendix for a more detailed
discussion of payment impacts due to MS-DRG reclassification
policies.

4. Effects of the Payment Adjustment for Low-Volume Hospitals for FY
2015

In section V.D. of the preamble of this final rule, we discuss
the provisions of the Protecting Access to Medicare Act of 2014
(Pub. L.113-93) that extend for an additional year, through March
31, 2015, the temporary changes to the low-volume hospital
definition and the methodology for determining the payment
adjustment made by the Affordable Care Act for FYs 2011 and 2012,
and extended through FY 2013 by the ATRA, and the first half of FY
2014 by the Pathway for SGR Reform Act (Pub. L. 113-67). Therefore,
to qualify for the low-volume hospital payment adjustment for FY
2015 discharges occurring before April 1, 2015, under section
1886(d)(12) of the Act, a hospital must have less than 1,600
Medicare discharges and be located more than 15 miles from other
IPPS hospitals The payment adjustment for eligible low-volume
hospital FY 2015 discharges occurring before April 1, 2015, is a
continuous, linear sliding scale adjustment ranging from an
additional 25 percent payment adjustment to qualifying hospitals
with 200 or fewer Medicare discharges to no additional payment to
hospitals with 1,600 or more Medicare discharges.
Beginning with FY 2015 discharges occurring on or after April 1,
2015, in accordance with section 1886(d)(12) of the Act, the low-
volume hospital definition and payment adjustment methodology revert
back to the statutory requirements that were in effect prior to the
amendments made by the Affordable Care Act as amended by subsequent
legislation. Therefore, effective for FY 2015 discharges occurring
on or after April 1, 2015 and subsequent years, in order to qualify
as a low-volume hospital, a subsection (d) hospital must be more
than 25 road miles from another subsection (d) hospital and have
less than 200 discharges (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges) during the
fiscal year.
Based on the latest available data, we estimate that
approximately 593 hospitals will qualify as a low-volume hospital in
FY 2014 and in FY 2015 for discharges occurring before April 1,
2015. With the statutory changes to the low-volume hospital payment
adjustment, we estimate only approximately five hospitals will
continue to qualify as a low-volume hospital for FY 2015 discharges
occurring on or after April 1, 2015. We project that the expiration
of the temporary changes to the low-volume hospital definition and
the payment adjustment methodology originally made by the Affordable
Care Act and extended by subsequent legislation will result in a
decrease in payments of approximately $152 million in FY 2015 as
compared to the low-volume hospital payments in FY 2014. This
estimate accounts for our projection of the five IPPS low-volume
hospitals in FY 2014 that are expected to continue to receive a low-
volume hospital payment adjustment of an additional 25 percent for
FY 2015 discharges occurring on or after April 1, 2015.

5. Effects of Policies Related to IME Medicare Part C Add-On Payments
to SCHs Paid According to Their Hospital-Specific Rates

In section IV.E.2. of the preamble of this final rule, we
discuss our finalized policy related to IME add-on payments for
Medicare Part C patients to SCHs that are paid according to their
hospital-specific rates. Payments based on the Federal rate are
based on the IPPS standardized amount and include all applicable
IPPS add-on payments, such as outliers, DSH, and IME, while payments
based on the hospital-specific rate include no add-on payments. The
hospital-specific rate generally reflects the additional costs
incurred by a teaching hospital for its Medicare Part A patients.
However, the hospital-specific rate does not reflect the costs
associated with Medicare Part C patients and there is currently no
payment mechanism for SCHs paid based on their hospital-specific
rate to receive the IME add-on payment for Medicare Part C patients.
Accordingly, we are providing all SCHs that are subsection (d)
teaching hospitals, IME add-on payments for applicable discharges of
Medicare Part C patients in accordance with section 1886(d)(11) of
the Act, regardless of

[[Page 50429]]

whether the SCH is paid based on the Federal rate or its hospital-
specific rate. In addition, we also are establishing that for
purposes of the comparison of payments based on the Federal rate and
payments based on the hospital-specific rate, IME payments under
section 1886(d)(11) of the Act for Medicare Part C patients will no
longer be included as part of the Federal rate payment. Because the
IPPS Federal rate used in the MDH payment methodology is the same
IPPS Federal rate that is used in the SCH payment methodology, this
change to the comparison of payments based on the Federal rate and
payments based on the hospital-specific rate also applies to the
Federal rate payment amount used to determine payment to MDHs that
are teaching hospitals (that is, in the determination of the payment
amount in addition to the Federal rate payment that is equal to 75
percent of the amount by which the hospital-specific rate payment
exceeds the Federal rate payment), as discussed in section IV.E.2.
of the preamble of this final rule.
We estimate that the policy at section IV.E.2. of the preamble
of this final rule will result in an increase in payments to
approximately 45 hospitals that are both SCHs or MDHs and teaching
hospitals of approximately $5.3 million in FY 2015.

6. Effects of the Extension of the MDH Program for the First Half of FY
2015

In section V.G. of the preamble of this final rule, we briefly
discuss the statutory extension of the MDH program through March 31,
2015, that is, through the first half of FY 2015, by section 106 of
the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93).
Hospitals that qualify as MDHs receive the higher of operating IPPS
payments made under the Federal standardized amount or the payments
made under the Federal standardized amount plus 75 percent of the
amount by which the hospital-specific rate (a hospital-specific
cost-based rate) exceeds the Federal standardized amount. Based on
the latest available data we have for 177 MDHs, we project that 166
MDHs will receive the blended payment (that is, the Federal
standardized amount plus 75 percent of the amount by which the
hospital-specific rate exceeds the Federal standardized amount) for
the first half of FY 2015 (that is, for discharges occurring through
March 31, 2015). We estimate that those hospitals will experience an
overall increase in payments of approximately $70.7 million as
compared to our previous estimates of payments to these hospitals
for FY 2015 prior to the extension of the MDH program through March
31, 2015, by section 106 of Public Law 113-93.

7. Effects of Changes Under the FY 2015 Hospital Value-Based Purchasing
(VBP) Program

Section 1886(o)(1)(B) of the Act directs the Secretary to make
value-based incentive payments under the Hospital VBP Program to
hospitals that meet performance standards during the performance
period for discharges occurring on or after October 1, 2012. These
incentive payments will be funded for FY 2015 through a reduction to
the FY 2015 base operating DRG payment for each discharge of 1.50
percent, as required by section 1886(o)(7)(B) of the Act. The
applicable percentage for FY 2016 is 1.75 percent and for FY 2017
and subsequent years, it is 2 percent. We are required to ensure
that the total amount available for value-based incentive payments
is equal to the total amount of reduced payments for all hospitals
for the fiscal year, as estimated by the Secretary.
We refer readers to the Hospital Inpatient VBP Program final
rule (76 FR 26490 through 26547), the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74527 through 74547), the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53567 through 53614), the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50677 through 50707), and the CY 2014
OPPS/ASC final rule with comment period (78 FR 75120 through 75121)
for further explanation of the details of the Hospital VBP Program.
We specifically refer readers to the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53582 through 53592) and the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50678 through 50679), for discussions of the measures
and other policies that we adopted for the FY 2015 and FY 2016
Hospital VBP Programs.
In section IV.I. of the preamble of this final rule, we estimate
the available pool of funds for value-based incentive payments in
the FY 2015 Hospital VBP Program, which, in accordance with section
1886(o)(7)(C)(iii) of the Act, will be 1.50 percent of base
operating DRG payments, or a total of approximately $1.4 billion.
This estimated available pool for FY 2015 is based on the historical
pool of hospitals that were eligible to participate in the FY 2014
Hospital VBP Program and the payment information from the March 2014
update to the FY 2013 MedPAR file.
The estimated impacts of the FY 2015 Hospital VBP Program by
hospital characteristic, found in the table below, are based on
historical TPSs. We used the FY 2014 Hospital VBP Program TPSs to
calculate the proxy adjustment factors used for this impact
analysis. These are the most recently available scores that
hospitals were given an opportunity to review and correct. The proxy
adjustment factors use estimated annual base operating DRG payment
amounts derived from the March 2014 update to the FY 2013 MedPAR
file. The proxy adjustment factors can be found in Table 16
associated with this final rule (available via the Internet on the
CMS Web site).
The impact analysis shows that, for the FY 2015 Hospital VBP
Program, the number of hospitals that will receive an increase in
base operating DRG payment amount is slightly lower than the number
of hospitals that will receive a decrease. Among urban hospitals,
those in the New England, South Atlantic, East North Central, West
North Central, and West South Central regions will have an increase,
on average, in base operating DRG payment amount, and among rural
hospitals, those in the New England and East North Central regions
will have an increase, on average, in base operating DRG payment
amounts.
Both urban and rural hospitals in the Middle Atlantic, East
South Central, Mountain, and Pacific regions and rural hospitals in
the South Atlantic, West North Central, and West South Central
regions will receive an average decrease in base operating DRG
payment amount. As the percent of DSH payments increases, we see a
decrease in base operating DRG payment amount, while as the Medicare
utilization (MCR) percent increases, we see an increase in base
operating DRG payment amount.
Nonteaching and teaching hospitals will have an average decrease
in base operating DRG payment amount.

Impact Analysis of Base Operating DRG Payment Amount Changes Resulting
From the FY 2015 Hospital VBP Program
------------------------------------------------------------------------
Number of Average
hospitals (percent)
------------------------------------------------------------------------
By Geographic Location:
All Hospitals....................... 2,728 -0.038
Large Urban..................... 1,113 -0.021
Other Urban..................... 910 -0.030
Rural Area...................... 705 -0.074
Urban hospitals..................... 2,023 -0.025
0-99 beds....................... 307 0.025
100-199 beds.................... 677 -0.043
200-299 beds.................... 431 -0.032
300-499 beds.................... 401 -0.033
500 or more beds................ 207 -0.010
Rural hospitals..................... 705 -0.074
0-49 beds....................... 161 -0.042
50-99 beds...................... 296 -0.088

[[Page 50430]]

100-149 beds.................... 148 -0.074
150-199 beds.................... 55 -0.106
200 or more beds................ 45 -0.067
By Region:
Urban By Region..................... 2,023 -0.025
New England..................... 112 0.058
Middle Atlantic................. 279 -0.076
South Atlantic.................. 346 0.002
East North Central.............. 350 0.052
East South Central.............. 121 -0.043
West North Central.............. 134 0.054
West South Central.............. 248 0.003
Mountain........................ 130 -0.086
Pacific......................... 303 -0.155
Rural By Region..................... 705 -0.074
New England..................... 21 0.044
Middle Atlantic................. 64 -0.150
South Atlantic.................. 136 -0.024
East North Central.............. 114 0.036
East South Central.............. 114 -0.019
West North Central.............. 82 -0.052
West South Central.............. 101 -0.178
Mountain........................ 45 -0.299
Pacific......................... 28 -0.247
By MCR Percent:
0-25................................ 260 -0.119
25-50............................... 1,788 -0.034
50-65............................... 605 -0.016
Over 65............................. 46 0.003
By DSH Percent:
0-25................................ 1,253 0.013
25-50............................... 1,220 -0.064
50-65............................... 141 -0.121
Over 65............................. 114 -0.222
By Teaching Status:
Teaching............................ 933 -0.041
Non-Teaching........................ 1,795 -0.036
------------------------------------------------------------------------

Actual FY 2015 Hospital VBP Program TPSs will not be reviewed
and corrected by hospitals until after this FY 2015 IPPS/LTCH PPS
final rule has been published. Therefore, the same historical
universe of eligible hospitals and corresponding TPSs from the FY
2014 Hospital VBP Program are used for this updated impact analysis.

8. Effects of Changes to the HAC Reduction Program for FY 2015

In section IV.J. of the preamble of this final rule, we are
establishing measures, scoring, and a risk adjustment methodology to
implement the FY 2015 payment reduction under the HAC Reduction
Program. Section 1886(p) of the Act, as added under section 3008(a)
of the Affordable Care Act, establishes an adjustment to hospital
payments for HACs, or a HAC Reduction program, under which payments
to applicable hospitals are adjusted to provide an incentive to
reduce HACs, effective for discharges occurring on October 1, 2014
and for subsequent program years.
We note that hospitals will have a payment impact for the first
time in FY 2015. For FY 2015, we are presenting the overall impact
of the HAC Reduction Program provision along with other IPPS payment
provision impacts in section I.G. of this Appendix A. The table and
analyses that we are presenting below show the distributional effect
of the measures and scoring system for the HAC Reduction Program
included in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707
through 50729).
For FY 2015, we note that we finalized a Total HAC Score
methodology in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707
through 50729) that assigns weights for Domain 1 and Domain 2 at 35
percent and 65 percent, respectively. Based on this methodology, the
table below presents data on the proportion of hospitals, by
structural characteristic, in the worst performing quartile based on
the 35/65 weighting scheme.
The data for this simulation are derived from the AHRQ PSI
results based on Medicare FFS discharges from July 2011 through June
2013, using version 4.5a of the AHRQ software, and CDC measure
results were used based on Standard Infection Ratios (SIRs)
calculated with data reported to the National Healthcare Safety
Network for infections occurring between January 2012 and December
2013. To analyze the results by hospital characteristic, the FY 2015
proposed rule impact file were used. Of the 3,352 hospitals included
in this analysis, 3,310 hospitals were included for geographic
location, bed size, region, DSH percent, and teaching status; 3,270
for ownership; and 3,196 for MCR percent. These differences in
denominator are due to the source of the hospital characteristic
data. This analysis does not include Maryland hospitals as Maryland
hospitals are exempt by waiver from the HAC Reduction Program in FY
2015.
The percentage of hospitals for each characteristic (column 3)
indicates the percent of hospitals in each level of characteristic.
For example, with regard to geographic region, 40.4 percent of
hospitals (or 1,338 hospitals) are characterized as large urban;
33.8 percent of hospitals (or 1,119 hospitals) are characterized as
other urban; and 25.8 percent of hospitals (or 853 hospitals) are
characterized as rural. The percentage of hospitals in the worst
performing quartile (column 5) indicates the proportion of hospitals
for each characteristic that would be penalized. For example, in
regards to geographic location, 26.6 percent of hospitals (or 356
hospitals) characterized as large urban will be subject to a payment
adjustment; 23.0 percent of hospitals (or 257 hospitals)
characterized as other urban will be subject to a payment
adjustment; and 13.2

[[Page 50431]]

percent of hospitals (or 113 hospitals) characterized as rural will
be subject to a payment adjustment.
With regard to geographic location of urban hospitals by bed
size, 15.7 percent of hospitals (or 98 hospitals) characterized as
urban hospitals with bed size of 0-99 beds will be subject to a
payment adjustment; 20.7 percent of hospitals (or 155 hospitals)
characterized as urban hospitals with bed size of 100-199 beds will
be subject to a payment adjustment; 29.7 percent of hospitals (or
136 hospitals) characterized as urban hospitals with bed size of
200-299 beds will be subject to a payment adjustment; 27.7 percent
of hospitals (or 72 hospitals) characterized as urban hospitals with
bed size of 300-399 beds will be subject to a payment adjustment;
41.2 percent of hospitals (or 63 hospitals) characterized as urban
hospitals with bed size of 400-499 beds will be subject to a payment
adjustment; and 42.0 percent of hospitals (or 89 hospitals)
characterized as urban hospitals with bed size of 500 or more beds
will be subject to a payment adjustment.
With regard to geographical location of rural hospitals by bed
size, 11.7 percent of hospitals (or 39 hospitals) characterized as
rural hospitals with bed size of 0-49 beds will be subject to a
payment adjustment; 12.5 percent of hospitals (or 37 hospitals)
characterized as rural hospitals with bed size of 50-99 beds will be
subject to a payment adjustment; 12.6 percent of hospitals (or 17
hospitals) characterized as rural hospitals with bed size of 100-149
beds will be subject to a payment adjustment; 18.0 percent of
hospitals (or 9 hospitals) characterized as rural hospitals with bed
size of 150-199 beds will be subject to a payment adjustment; and
29.7 percent of hospitals (or 11 hospitals) characterized as rural
hospitals with bed size of 200 or more beds will be subject to a
payment adjustment.
With regard to region of urban hospitals, 30.3 percent of
hospitals (or 36 hospitals) characterized as urban in the New
England region will be subject to a payment adjustment; 30.2 percent
of hospitals (or 96 hospitals) characterized as urban in the Mid-
Atlantic region will be subject to a payment adjustment; 24.3
percent of hospitals (or 98 hospitals) characterized as urban in the
South Atlantic region will be subject to a payment adjustment; 22.5
percent of hospitals (or 88 hospitals) characterized as urban in the
East North Central region will be subject to a payment adjustment;
22.1 percent of hospitals (or 33 hospitals) characterized as urban
in the West South Central region will be subject to a payment
adjustment; 26.1 percent of hospitals (or 42 hospitals)
characterized as urban in the East North Central region will be
subject to a payment adjustment; 15.9 percent of hospitals (or 60
hospitals) characterized as urban in the West South Central region
will be subject to a payment adjustment; 33.3 percent of hospitals
(or 54 hospitals) characterized as urban in the Mountain region will
be subject to a payment adjustment; and 28.2 percent of hospitals
(or 106 hospitals) characterized as urban in the Pacific region will
be subject to a payment adjustment.
With regard to region of rural hospitals, 18.2 percent of
hospitals (or 4 hospitals) characterized as rural in the New England
region will be subject to a payment adjustment; 12.5 percent of
hospitals (or 7 hospitals) characterized as rural in the Mid-
Atlantic region will be subject to a payment adjustment; 16.9
percent of hospitals (or 22 hospitals) characterized as rural in the
South Atlantic region will be subject to a payment adjustment; 12.2
percent of hospitals (or 14 hospitals) characterized as rural in the
East North Central region will be subject to a payment adjustment;
8.8 percent of hospitals (or 14 hospitals) characterized as rural in
the West South Central region will be subject to a payment
adjustment; 15.0 percent of hospitals (or 16 hospitals) in the East
North Central region will be subject to a payment adjustment; 9.6
percent of hospitals (or 16 hospitals) in the West South Central
region will be subject to a payment adjustment; 26.8 percent of
hospitals (or 19 hospitals) in the Mountain region will be subject
to a payment adjustment; and 3.8 percent of hospitals (or 1
hospitals) in the Pacific region will be subject to a payment
adjustment.
With regard to the DSH percent characteristic, 19.4 percent of
hospitals (or 309 hospitals) characterized in the 0-24 DSH percent
will be subject to a payment adjustment; 22.0 percent of hospitals
(or 304 hospitals) characterized in the 25-49 DSH percent will be
subject to a payment adjustment; 38.1 percent of hospitals (or 67
hospitals) characterized in the 50-64 DSH percent will be subject to
a payment adjustment; and 28.9 percent of hospitals (or 46
hospitals) characterized in the 65 and over DSH percent will be
subject to a payment adjustment.
With regard to the teaching status characteristic, 17.0 percent
of hospitals (or 391 hospitals) characterized as nonteaching will be
subject to a payment adjustment; 25.7 percent of hospitals (or 198
hospitals) characterized as fewer than 100 residents will be subject
to a payment adjustment; and 56.4 percent of hospitals (or 137
hospitals) characterized as 100 or more residents will be subject to
a payment adjustment.
With regard to the urban teaching and DSH characteristic, 35.6
percent of hospitals (or 294 hospitals) characterized as teaching
and DSH will be subject to a payment adjustment; 25.0 percent of
hospitals (or 32 hospitals) characterized as teaching and no DSH
will be subject to a payment adjustment; 19.5 percent of hospitals
(or 207 hospitals) characterized as no teaching and DSH will be
subject to a payment adjustment; 18.2 percent of hospitals (or 80
hospitals) characterized as no teaching and no DSH will be subject
to a payment adjustment; and 13.2 percent of hospitals (or 113
hospitals) characterized as nonurban will be subject to a payment
adjustment.
With regard to the type of ownership characteristic, 22.7
percent of hospitals (or 429 hospitals) characterized as voluntary
will be subject to a payment adjustment; 18.7 percent of hospitals
(or 160 hospitals) characterized as proprietary will be subject to a
payment adjustment; and 25.0 percent of hospitals (or 131 hospitals)
characterized as government will be subject to a payment adjustment.
With regard to the MCR percent characteristic, 37.4 percent of
hospitals (or 145 hospitals) characterized in the 0-24 MCR percent
will be subject to a payment adjustment; 22.6 percent of hospitals
(or 447 hospitals) characterized in the 25-49 MCR percent will be
subject to a payment adjustment; 14.4 percent of hospitals (or 101
hospitals) characterized in the 50-64 MCR percent will be subject to
a payment adjustment; and 9.4 percent of hospitals (or 12 hospitals)
characterized in the 65 and over MCR percent will be subject to a
payment adjustment.

Proportion of Hospitals in the Worst Performing Quartile (>75th Percentile) of the Total HAC Score by Hospital
Characteristic for the FY 2015 HAC Reduction Program
----------------------------------------------------------------------------------------------------------------
Hospital characteristics Hospitals in the worst
--------------------------------------------------------------------------------- performing quartile
-------------------------------
Number of Percent within
Characteristic hospitals \a\ Percent \b\ Number of characteristic
hospitals \c\
----------------------------------------------------------------------------------------------------------------
Total \d\....................................... 3,352 100.0 726 21.7
By geographic location:
All hospitals:
Large urban \e\......................... 1,338 40.4 356 26.6
Other urban............................. 1,119 33.8 257 23.0
Rural................................... 853 25.8 113 13.2
Urban hospitals:
0-99 beds............................... 626 25.5 98 15.7
100-199 beds............................ 748 30.4 155 20.7
200-299 beds............................ 458 18.6 136 29.7

[[Page 50432]]

300-399 beds............................ 260 10.6 72 27.7
400-499................................. 153 6.2 63 41.2
500 or more beds........................ 212 8.6 89 42.0
Rural hospitals:
0-49 beds............................... 334 39.2 39 11.7
50-99 beds.............................. 297 34.8 37 12.5
100-149 beds............................ 135 15.8 17 12.6
150-199 beds............................ 50 5.9 9 18.0
200 or more beds........................ 37 4.3 11 29.7
By region:
Urban by region:
New England............................. 119 4.8 36 30.3
Mid-Atlantic............................ 318 12.9 96 30.2
South Atlantic.......................... 404 16.4 98 24.3
East North Central...................... 391 15.9 88 22.5
West South Central...................... 149 6.1 33 22.1
East North Central...................... 161 6.6 42 26.1
West South Central...................... 377 15.3 60 15.9
Mountain................................ 162 6.6 54 33.3
Pacific................................. 376 15.3 106 28.2
Rural by region:
New England............................. 22 2.6 4 18.2
Mid-Atlantic............................ 56 6.6 7 12.5
South Atlantic.......................... 130 15.2 22 16.9
East North Central...................... 115 13.5 14 12.2
West South Central...................... 159 18.6 14 8.8
East North Central...................... 107 12.5 16 15.0
West South Central...................... 167 19.6 16 9.6
Mountain................................ 71 8.3 19 26.8
Pacific................................. 26 3.0 1 3.8
By DSH percent:
0-24........................................ 1,592 48.1 309 19.4
25-49....................................... 1,383 41.8 304 22.0
50-64....................................... 176 5.3 67 38.1
65 and over................................. 159 4.8 46 28.9
By teaching status:
Non-teaching................................ 2,297 69.4 391 17.0
Fewer than 100 residents.................... 770 23.3 198 25.7
100 or more residents....................... 243 7.3 137 56.4
By urban teaching and DSH: \f\
Teaching and DSH............................ 827 25.0 294 35.6
Teaching and no DSH......................... 128 3.9 32 25.0
No teaching and DSH......................... 1,062 32.1 207 19.5
No teaching and no DSH...................... 440 13.3 80 18.2
Non-urban................................... 853 25.8 113 13.2
By type of ownership:
Voluntary................................... 1,890 57.8 429 22.7
Proprietary................................. 857 26.2 160 18.7
Government.................................. 523 16.0 131 25.0
By MCR percent:
0-24........................................ 388 12.1 145 37.4
25-49....................................... 1,977 61.9 447 22.6
50-64....................................... 703 22.0 101 14.4
65 and over................................. 128 4.0 12 9.4
----------------------------------------------------------------------------------------------------------------
Source: FY 2015 HAC Reduction Program Final Rule Results provided by R&A contract. Scores are based on AHRQ PSI
90 data from July 2011 through June 2013 and CLABSI and CAUTI results from January 2012 to December 2013.
Hospital Characteristics are based on FY 2015 Proposed Rule Impact File released May 20, 2014.
\a\ The total number of hospitals with hospital characteristic data (3,310 for geographic location, bed size,
region, DSH percent and teaching status; 3,270 for type of ownership; and 3,196 for MCR) do not add up to the
total number of hospitals eligible for the HAC Reduction program (3,352) because 42 hospitals are not included
in the FY 2015 impact file and not all hospitals have data for all characteristics.
\b\ This column is the percent of all hospitals with each characteristic that were eligible for the program and
included in the FY 15 impact file. Percents may not sum to 100 due to rounding.
\c\ This column is the percent of hospitals within each characteristic that are in the worse performing
quartile.
\d\ Total excludes the 46 Maryland hospitals.
\e\ Large Urban hospitals are hospitals located in large urban areas (populations over 1 million).
\f\ A hospital is considered a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP)
greater than zero and is considered a DSH hospital if it has a DSH patient percentage greater than zero.

[[Page 50433]]

9. Effects of Policy Changes Relating to Payments for Direct GME and
IME

Under section IV.K.2. of the preamble of this final rule, we
discuss our revisions to simplify and streamline the timing of CMS's
policies related to when the FTE resident caps, the 3-year rolling
average, and the IRB ratio cap would become effective for new
teaching hospitals, by stating that the FTE resident caps, rolling
average, and IRB ratio cap will be effective simultaneously,
beginning with the applicable hospital's cost reporting period that
coincides with or follows the start of the sixth program year of the
first new program started. We are specifying that this policy
regarding the effective dates of the FTE residency caps, rolling
average, and IRB ratio cap for FTE residents in new programs is
consistent with the methodology for calculation of the FTE resident
caps as described in the FY 2013 IPPS/LTCH PPS final rule, and
implemented at 42 CFR 413.79(e)(1) and (3). That is, this policy is
effective for urban hospitals that have not yet had FTE resident
caps established under Sec. 413.79(e)(1), and for rural hospitals,
on or after October 1, 2012. This policy will increase the amount of
time that the new programs will be exempt from the FTE resident caps
by several months, depending on the cost reporting period of the new
teaching hospital. The estimate of possible cost of this policy is
less than $5 million a year and, therefore, is negligible.
In section IV.K.3.a. of the preamble of this final rule, we
discuss our policies related to the effect of new OMB labor market
area delineations on certain teaching hospitals training residents
in rural areas. Under existing regulations a new teaching hospital
has 5 years from when it first begins training residents in its
first new program to grow its cap. If the teaching hospital is a
rural teaching hospital, it can continue to receive permanent cap
adjustments even after the initial 5-year cap-building period ends
if it trains residents in a new program. As a result of the
implementation of the new OMB delineations, some teaching hospitals
may be redesignated from being located in a rural area to an urban
area, thereby losing their ability to increase their caps again
after their initial 5-year cap-building period. Effective October 1,
2014, if a rural hospital has received a letter of accreditation for
a new program and/or started training residents in the new program
prior to being redesignated as urban, it can continue growing that
program for the remainder of the cap-building period and receive a
permanent cap adjustment for that new program. Once the cap-building
period for the new program that was started while the hospital was
still rural expires, the teaching hospital that has been
redesignated as urban will no longer be able to receive any
additional permanent cap adjustments.
In section IV.K.3.b. of the preamble of this final rule, we
discuss our policy change related to a redesignated hospital's
participation in a rural track program. Under existing regulations,
if an urban hospital rotates residents to a separately accredited
rural track program at a rural site(s) for more than one-half of the
duration of the program, the urban hospital may receive an
adjustment to its cap for training those FTE residents, referred to
as the rural track FTE limitation. We are providing that, effective
October 1, 2014, if a rural hospital participating in a rural track
is in an area redesignated by OMB as urban after residents started
training in the rural track and during the period that is used to
calculate the urban hospital's rural track FTE limitation, the urban
hospital may still receive a cap adjustment for that rural track. We
also are providing that, effective October 1, 2014, if the rural
hospital participating in the rural track is in an area redesignated
as urban, the redesignated urban hospital can continue to be
considered a rural hospital for purposes of the rural track for a
transition period that would begin effective with the implementation
date of the new OMB delineations and last through the end of the
second residency training year following implementation of the new
OMB delineations. However, during that transition period, either the
rural hospital that has been redesignated as urban must reclassify
as rural under Sec. 412.103 for purposes of IME payment only, or
the urban hospital must find a new geographically rural site to
participate as the rural site for purposes of the rural track, in
order for the urban hospital to receive payment under Sec.
413.79(k)(1) or (k)(2) for the rural track program after the
transition period ends.
We estimate that these policies discussed under IV.K.3.a. and b.
of the preamble of this final rule will have a very minimal, if any,
impact on Medicare expenditures. These policies will only be applied
to, at the most, very few hospitals (if any at all) and will only
apply once every 10 years as a result of OMB changes in labor market
area delineations due to a recent Census.
In sections IV.K.5.a. and b. of the preamble of this final rule,
we are making some changes to the current application process for
and awarding of cap slots from closed hospitals under section 5506
of the Affordable Care Act that will be effective for hospital
closures announced on or after October 1, 2014. We are providing an
alternative interpretation of the statutory provision at section
5506(d) of the Affordable Care Act, which provides that the
Secretary give consideration to the effect of the permanent awarding
of slots under section 5506 of the Affordable Care Act to any
temporary cap adjustments to a hospital received under Sec.
413.79(h) of the regulations to ensure that there be no duplication
of FTE cap slots. In this final rule, we are interpreting the
statutory language at section 5506(d) in a manner that will permit
us to apply the concept of ensuring no duplication of FTE resident
slots on a hospital-by-hospital basis, such that if a hospital is
both receiving a temporary cap adjustment under Sec. 413.79(h) and
is applying under section 5506 for permanent cap slots, it will not
be able to receive a permanent cap adjustment until an equivalent
amount of displaced residents graduate. However, if a hospital is
applying under section 5506 for permanent cap slots and did not
receive a temporary cap adjustment under Sec. 413.79(h), that
hospital will not have to wait until displaced residents that are
training at another hospital graduate to be awarded any permanent
cap slots under section 5506. We estimate that this revised policy
could result in a slight increase in Medicare expenditures in a rare
event a section 5506 cap adjustment may be provided to one hospital
before a temporary cap adjustment expires at another hospital.
However, we are unable to estimate whether this will occur with any
future hospital closures where section 5506 is applied because we do
not know how many, if any, residents will be displaced. Furthermore,
we believe that any temporary duplicate payment will be a rare
occurrence as most hospitals that are receiving a temporary cap
adjustment under Sec. 413.79(h) will also receive a permanent cap
adjustment under section 5506. In this instance the hospital will
only be able to receive the permanent cap adjustment once the
temporary cap adjustment for an equivalent number of FTE residents
expires, in which case there would be no duplication of FTE resident
slots.
In addition, under section IV.K.5.c. of the preamble of this
final rule, we are revising the ranking criteria used to award slots
under section 5506. First, we are no longer allowing hospitals to
apply for cap relief, which is included under current Ranking
Criterion Eight. This change means that hospitals will be awarded
slots under section 5506 for taking over a closed hospital's
residency training program, having participated with a closed
hospital in a Medicare GME affiliated group, taking over part of a
closed hospital's program, expanding or starting a new geriatrics
program, expanding or starting a new primary care or general surgery
program, and expanding or starting a new nonprimary care or
nongeneral surgery program. Second, Ranking Criterion One currently
applies to hospitals that are assuming (or have assumed) an entire
program from the hospital that closed. We are revising this Ranking
Criterion to provide priority to a hospital whose FTE resident caps
were erroneously reduced by CMS under section 5503 of the Affordable
Care Act, contrary to the specific statutory exception at section
1886(h)(8)(A)(ii)(I) of the Act, and the CMS Central Office was made
aware of the error prior to the posting of the FY 2015 proposed
rule. We do not believe there is any cost associated with these
policies. We will continue assigning all of the closed hospital's
slots; only the specific hospitals awarded the slots may change.

10. Effects of Implementation of Rural Community Hospital Demonstration
Program

In section IV.L. of the preamble of this final rule, we discuss
our implementation of section 410A of Public Law 108-173, as
amended, which requires the Secretary to conduct a demonstration
that would modify reimbursement for inpatient services for up to 30
rural community hospitals. Section 410A(c)(2) requires that ``[i]n
conducting the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration program under this section was not
implemented.'' As discussed in section IV.L. of the preamble of this
final rule, in the IPPS final rules for each of the previous 10
fiscal years, we have estimated the additional

[[Page 50434]]

payments made by the program for each of the participating hospitals
as a result of the demonstration. In order to achieve budget
neutrality, we are adjusting the national IPPS rates by an amount
sufficient to account for the added costs of this demonstration. In
other words, we are applying budget neutrality across the payment
system as a whole rather than across the participants of this
demonstration. The language of the statutory budget neutrality
requirement permits the agency to implement the budget neutrality
provision in this manner. The statutory language requires that
``aggregate payments made by the Secretary do not exceed the amount
which the Secretary would have paid if the demonstration . . . was
not implemented'' but does not identify the range across which
aggregate payments must be held equal.
We are adjusting the national IPPS rates according to the
methodology set forth elsewhere in this final rule. The adjustment
to the national IPPS rates to account for estimated demonstration
cost for FY 2014 for the 7 ``pre-expansion'' participating hospitals
that are currently participating in the demonstration and the 15
additional hospitals participating as a result of the expansion of
the demonstration under the Affordable Care Act is $54,177,144. In
addition, in this final rule, we are adding to the adjustment of the
national IPPS rates the amount by which the actual costs of the
demonstration for FY 2008 (as shown in the finalized cost reports
for cost reporting periods beginning in FY 2008 for the hospitals
that participated in the demonstration during FY 2008) exceed the
budget neutrality offset amount that was finalized in the FY 2008
IPPS final rule ($10,389,771). Thus, the resulting total
($64,566,915) is the amount for which an adjustment to inpatient
rates for FY 2015 is calculated.

11. Effects of Changes Related to Reclassification as Rural for CAHs

In section VI.D.2. of the preamble of this final rule, we
discuss our policies relating to reclassifications of CAHs as a
result of the adoption of the new OMB labor market area
delineations. A facility is eligible for designation as a CAH only
if it is either physically located in a rural area or has been
reclassified as rural under 42 CFR 412.103. CAHs can be affected by
the recent OMB labor market area delineations because facilities
that are currently participating as CAHs that were previously
located in rural areas may now be located in urban areas as a result
of the new delineations. Previously, in both in the FY 2005 IPPS
final rule and the FY 2010 IPPS/LTCH PPS final rule, we revised the
regulations to give currently participating CAHs 2 years, from the
effective date of the earlier OMB designations, to reclassify as
rural facilities. However, these regulation changes were specific to
a particular timeframe. As we are implementing the latest OMB labor
market area delineations in this final rule, we are providing that,
effective October 1, 2014, currently participating CAHs that are
located in an area that has been redesignated from rural to urban
under the new delineations will again be treated as rural for 2
years from the date the new OMB delineations are implemented. An
affected CAH will have 2 years from the date the redesignation
becomes effective to reclassify as rural and thereby retain its CAH
status. If a CAH fails to reclassify within those 2 years, it can no
longer participate in Medicare as a CAH. However, unlike in previous
years when the regulation changes were specific to a particular
timeframe, the change that we are making to the regulations is not
specific to a particular timeframe but will also apply to future OMB
labor market area delineations. We estimate that this policy will
have little or no impact on Medicare expenditures because we expect
that virtually all of the affected CAHs will be granted rural status
by the State in which they are located and, therefore, will be able
to apply for reclassification as rural under Sec. 412.103 in order
to retain their CAH status.

12. Effects of Revision of the Requirements for Physician Certification
of CAH Inpatient Services

In section VI.D.3. of the preamble of this final rule, we
discuss the statutory requirement for physician certification of CAH
inpatient services. For inpatient CAH services to be payable under
Medicare Part A, section 1814(a)(8) of the Act requires that a
physician certify that the individual may reasonably be expected to
be discharged or transferred to a hospital within 96 hours after
admission to the CAH. These statutory requirements are addressed in
the regulations at 42 CFR 424.15. In order to provide CAHs with
additional flexibility in meeting certification requirements, we are
amending the regulation text at Sec. 424.11(d)(5) to remove the
phrase ``or critical access hospital inpatient''. In addition, we
are revising the regulations at Sec. 424.15(b) to read as follows:
``Certification begins with the order for inpatient admission. All
certification requirements must be completed, signed, and documented
in the medical record no later than 1 day before the date on which
the claim for the inpatient CAH service is submitted.'' We do not
believe there is any significant impact on Medicare expenditures
associated with these changes because we are simply providing CAHs
with additional flexibility in meeting the statutory requirement for
physician certification of CAH inpatient services. The underlying
statutory requirement itself is unchanged.

13. Effects of Changes Relating to Technical Correction to
Administrative Appeals by Providers and Judicial Review

In section VIII. of the preamble to this final rule, we discuss
the technical correction to the regulations to eliminate provider
dissatisfaction as a requirement for PRRB jurisdiction over appeals
based on untimely contractor determinations as well as the change in
terminology in Part 405 and Part 413 from ``intermediary'' or
``fiscal intermediary'' to ``contractor''. There is no impact to the
provider resulting from these provisions.

I. Effects of Update to the Reasonable Compensation Equivalent
(RCE) Limits for Compensation for Physician Services Provided in
Providers

In section VI.B. of the preamble of this final rule, we discuss
our finalized policy to update and revise the methodology used to
calculate the reasonable compensation equivalent (RCE) limits for
compensation for physician services provided in providers, in
accordance with our regulations at 42 CFR 415.70(f)(2). For CY 2015,
we estimate that 59 cancer and children's hospitals and 46 IPPS
teaching hospitals will be subject to the RCE limits. We estimate
the costs associated with the updated RCE limits for CY 2015 to be
approximately $40 million. We do not expect this RCE limit update to
impact a significant number of small, rural entities; therefore, a
full impact analysis is not required.

J. Effects of Changes in the Capital IPPS

1. General Considerations

For the impact analysis presented below, we used data from the
March 2014 update of the FY 2013 MedPAR file and the March 2014
update of the Provider-Specific File (PSF) that is used for payment
purposes. Although the analyses of the changes to the capital
prospective payment system do not incorporate cost data, we used the
March 2014 update of the most recently available hospital cost
report data (FYs 2011 and 2012) to categorize hospitals. Our
analysis has several qualifications. We use the best data available
and make assumptions about case-mix and beneficiary enrollment as
described below.
Due to the interdependent nature of the IPPS, it is very
difficult to precisely quantify the impact associated with each
change. In addition, we draw upon various sources for the data used
to categorize hospitals in the tables. In some cases (for instance,
the number of beds), there is a fair degree of variation in the data
from different sources. We have attempted to construct these
variables with the best available sources overall. However, it is
possible that some individual hospitals are placed in the wrong
category.
Using cases from the March 2014 update of the FY 2013 MedPAR
file, we simulated payments under the capital IPPS for FY 2014 and
FY 2015 for a comparison of total payments per case. Any short-term,
acute care hospitals not paid under the general IPPS (for example,
Indian Health Service hospitals and hospitals in Maryland) are
excluded from the simulations.
The methodology for determining a capital IPPS payment is set
forth at Sec. 412.312. The basic methodology for calculating
capital IPPS payments in FY 2015 is as follows:
(Standard Federal Rate) x (DRG weight) x (GAF) x (COLA for
hospitals located in Alaska and Hawaii) x (1 + DSH Adjustment Factor
+ IME adjustment factor, if applicable).
In addition to the other adjustments, hospitals may also receive
outlier payments for those cases that qualify under the threshold
established for each fiscal year. We modeled payments for each
hospital by multiplying the capital Federal rate by the GAF and the
hospital's case-mix. We then

[[Page 50435]]

added estimated payments for indirect medical education,
disproportionate share, and outliers, if applicable. For purposes of
this impact analysis, the model includes the following assumptions:
We estimate that the Medicare case-mix index will
increase by 0.5 percent in both FYs 2014 and 2015.
We estimate that Medicare discharges will be
approximately 11.6 million in FY 2014 and 11.7 million in FY 2015.
The capital Federal rate was updated beginning in FY
1996 by an analytical framework that considers changes in the prices
associated with capital-related costs and adjustments to account for
forecast error, changes in the case-mix index, allowable changes in
intensity, and other factors. As discussed in section III.A.1.a. of
the Addendum to this final rule, the update is 1.5 percent for FY
2015.
In addition to the FY 2015 update factor, the FY 2015
capital Federal rate was calculated based on a GAF/DRG budget
neutrality adjustment factor of 0.9986 and an outlier adjustment
factor of 0.9373. As discussed in section VI.C. of the preamble of
this final rule, we are not making an additional MS-DRG
documentation and coding adjustment to the capital IPPS Federal
rates for FY 2015.

2. Results

We used the actuarial model described above to estimate the
potential impact of our changes for FY 2015 on total capital
payments per case, using a universe of 3,396 hospitals. As described
above, the individual hospital payment parameters are taken from the
best available data, including the March 2014 update of the FY 2013
MedPAR file, the March 2014 update to the PSF, and the most recent
cost report data from the March 2014 update of HCRIS. In Table III,
we present a comparison of estimated total payments per case for FY
2014 and estimated total payments per case for FY 2015 based on the
FY 2015 payment policies. Column 2 shows estimates of payments per
case under our model for FY 2014. Column 3 shows estimates of
payments per case under our model for FY 2015. Column 4 shows the
total percentage change in payments from FY 2014 to FY 2015. The
change represented in Column 4 includes the 1.5 percent update to
the capital Federal rate and other changes in the adjustments to the
capital Federal rate. The comparisons are provided by: (1)
Geographic location; (2) region; and (3) payment classification.
The simulation results show that, on average, capital payments
per case in FY 2015 are expected to increase as compared to capital
payments per case in FY 2014. This expected increase is due
primarily to the approximately 1.2 percent increase in the capital
Federal rate for FY 2015 as compared to the FY 2014 capital Federal
rate. (For a discussion of the determination of the capital Federal
rate, we refer readers to section III.A. of the Addendum to this
final rule.) Overall, across all hospitals, the changes to the GAFs
are expected to have no net effect on capital payments. However,
regionally, the effects of the changes to the GAFs on capital
payments are consistent with the projected changes in payments due
to changes in the wage index (and policies affecting the wage index)
as shown in Table I in section I.G. of this Appendix.
Overall, there is an increase in capital payments per case due
to the effects of changes to the MS-DRG reclassifications and
recalibrations, with more of this increase expected for urban
hospitals. However, this increase is offset by projected changes in
outlier payments for both urban and rural hospitals. Rural areas are
expected to experience an offset to the projected increase in
capital payments per case due to the effects of changes to the GAFs.
The net impact of these changes is an estimated 1.5 percent
change in capital payments per case from FY 2014 to FY 2015 for all
hospitals (as shown below in Table III).
The geographic comparison shows that, on average, all hospitals
are expected to experience an increase in capital IPPS payments per
case in FY 2015 as compared to FY 2014. As we stated above, these
expected increases are primarily due to the increase in the capital
Federal rate. Capital IPPS payments per case for hospitals in
``large urban areas'' are expected to have an estimated increase of
1.7 percent, while hospitals in rural areas, on average, are
expected to experience a 1.0 percent increase in capital payments
per case from FY 2014 to FY 2015. Capital IPPS payments per case for
``other urban hospitals'' are estimated to increase 1.4 percent. The
primary factor contributing to the difference in the projected
increase in capital IPPS payments per case for urban hospitals as
compared to rural hospitals is the increase in capital payments to
urban hospitals due to changes to the MS-DRG relative weights and
the effect of changes in the GAFs. The increase in capital payments
due to changes to the MS-DRG relative weights is slightly lower for
rural hospitals than it is for urban hospitals. In addition, rural
hospitals are expected to experience a slight decrease in capital
payments due to the effect of changes in the GAFs, while urban
hospitals are expected to experience a slight increase in capital
payments due to the effect of changes in the GAFs.
The comparisons by region show that the estimated increases in
capital payments per case from FY 2014 to FY 2015 in urban areas
range from a 2.4 percent increase for the Pacific urban region to a
0.9 percent increase for the West South Central urban region. For
rural regions, the Pacific rural region is expected to experience
the largest increase in capital IPPS payments per case of 2.4
percent, while the Mountain rural region is projected to have the
smallest increase in capital payments per case of 0.5 percent,
compared to FY 2014 payments per case. Unlike most other urban and
rural regions where changes in the GAFs either contribute to a
projected decrease in capital payments or only a small increase in
capital payments, the changes in the GAFs are a primary contributor
to the expected increase in capital IPPS payments per case for the
Pacific urban and rural regions. A larger than average decrease in
capital payments per case for the Mountain rural area due to the
change in outliers offsets the projected increases to that area's
capital payments per case in FY 2015 compared to FY 2014.
Hospitals of all types of ownership (that is, voluntary
hospitals, government hospitals, and proprietary hospitals) are
estimated to experience an increase in capital payments per case
from FY 2014 to FY 2015. The increase in capital payments for
voluntary hospitals is estimated at 1.6 percent, and for proprietary
and government hospitals the increase is estimated to be 1.4
percent.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals
may apply for reclassification for purposes of the wage index for FY
2015. Reclassification for wage index purposes also affects the GAFs
because that factor is constructed from the hospital wage index. To
present the effects of the hospitals being reclassified as of the
publication of this final rule for FY 2015, we show the average
capital payments per case for reclassified hospitals for FY 2015.
Urban reclassified hospitals are expected to experience an increase
in capital payments of 2.1 percent, whereas for urban
nonreclassified hospitals, the expected increase is 1.4 percent. The
estimated percentage increase for rural reclassified hospitals is
1.0 percent, and for rural nonreclassified hospitals, the estimated
percentage increase is 0.7 percent. Other reclassified hospitals
(that is, hospitals reclassified under section 1886(d)(8)(B) of the
Act) are expected to experience the largest increase (2.2 percent)
in capital payments from FY 2014 to FY 2015.

Table III--Comparison of Total Payments per Case
[FY 2014 payments compared to FY 2015 payments]
----------------------------------------------------------------------------------------------------------------
Number of Average FY 2014 Average FY 2015
hospitals payments/case payments/case Change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
All hospitals................... 3,396 856 869 1.5
Large urban areas 1,401 944 960 1.7
(populations over 1
million)...................
Other urban areas 1,148 824 835 1.4
(populations of 1 million
of fewer)..................

[[Page 50436]]

Rural areas................. 847 583 588 1.0
Urban hospitals................. 2,549 890 903 1.6
0-99 beds................... 666 733 739 0.9
100-199 beds................ 787 772 783 1.4
200-299 beds................ 455 812 826 1.7
300-499 beds................ 429 908 922 1.6
500 or more beds............ 212 1,066 1,082 1.6
Rural hospitals................. 847 583 588 1.0
0-49 beds................... 328 474 479 1.1
50-99 beds.................. 305 542 546 0.7
100-149 beds................ 125 582 588 1.0
150-199 beds................ 50 636 643 1.0
200 or more beds............ 39 709 717 1.1
By Region:
Urban by Region................. 2,549 890 903 1.6
New England................. 120 984 1,001 1.7
Middle Atlantic............. 324 958 978 2.0
South Atlantic.............. 407 802 812 1.3
East North Central.......... 397 856 868 1.4
East South Central.......... 153 764 772 1.0
West North Central.......... 162 880 892 1.3
West South Central.......... 387 823 830 0.9
Mountain.................... 162 907 918 1.2
Pacific..................... 385 1,120 1,148 2.4
Puerto Rico................. 52 408 412 1.1
Rural by Region................. 847 583 588 1.0
New England................. 22 812 823 1.4
Middle Atlantic............. 57 566 575 1.6
South Atlantic.............. 132 555 559 0.7
East North Central.......... 116 607 613 1.0
East South Central.......... 165 534 538 0.9
West North Central.......... 102 619 624 0.8
West South Central.......... 168 515 518 0.7
Mountain.................... 61 653 657 0.5
Pacific..................... 24 749 767 2.4
[There are no rural ................. ................. ................. .................
hospitals in Puerto Rico]
By Payment Classification:
All hospitals................... 3,396 856 869 1.5
Large urban areas (populations 1,413 943 959 1.7
over 1 million)................
Other urban areas (populations 1,150 823 835 1.4
of 1 million of fewer).........
Rural areas..................... 833 594 599 0.8
Teaching Status:
Non-teaching................ 2,357 728 738 1.4
Fewer than 100 Residents.... 795 837 850 1.5
100 or more Residents....... 244 1,210 1,231 1.7
Urban DSH:
100 or more beds........ 1,588 911 925 1.6
Less than 100 beds...... 383 649 656 1.0
Rural DSH:
Sole Community (SCH/ 373 530 535 1.0
EACH)..................
Referral Center (RRC/ 212 656 661 0.8
EACH)..................
Other Rural:
100 or more beds.... 24 552 552 0.0
Less than 100 beds.. 137 465 469 0.8
Urban teaching and DSH:
Both teaching and DSH....... 842 990 1,005 1.6
Teaching and no DSH......... 133 891 907 1.8
No teaching and DSH......... 1,129 762 774 1.6
No teaching and no DSH...... 459 788 799 1.4
Rural Hospital Types:
Non special status hospitals 2,575 890 904 1.5
RRC/EACH.................... 193 717 730 1.8
SCH/EACH.................... 325 652 659 1.1
SCH, RRC and EACH........... 124 711 720 1.3
Hospitals Reclassified by the
Medicare Geographic Classification
Review Board:
FY2015 Reclassifications:
All Urban Reclassified...... 450 886 904 2.1
All Urban Non-Reclassified.. 2,054 893 906 1.4
All Rural Reclassified...... 269 621 628 1.0

[[Page 50437]]

All Rural Non-Reclassified.. 514 533 536 0.7
Other Reclassified Hospitals 59 581 594 2.2
(Section 1886(d)(8)(B))....
Type of Ownership:
Voluntary................... 1,935 868 882 1.6
Proprietary................. 892 776 787 1.4
Government.................. 542 895 908 1.4
Medicare Utilization as a
Percent of Inpatient Days:
0-25........................ 501 1,023 1,038 1.5
25-50....................... 2,081 871 884 1.5
50-65....................... 601 717 728 1.5
Over 65..................... 93 648 654 1.0
----------------------------------------------------------------------------------------------------------------

K. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS

1. Introduction and General Considerations

In section VII. of the preamble of this final rule and section
V. of the Addendum to this final rule, we set forth the annual
update to the payment rates for the LTCH PPS for FY 2015. In the
preamble of this final rule, we specify the statutory authority for
the provisions that are presented, identify those policies, and
present rationales for our decisions as well as alternatives that
were considered. In this section of Appendix A to this final rule,
we discuss the impact of the changes to the payment rate, factors,
and other payment rate policies related to the LTCH PPS that are
presented in the preamble of this final rule in terms of their
estimated fiscal impact on the Medicare budget and on LTCHs.
Currently, there are 422 LTCHs included in this impacts
analysis, which includes data for 80 nonprofit (voluntary ownership
control) LTCHs, 330 proprietary LTCHs, and 12 LTCHs that are
government-owned and operated. (We note that, although there are
currently approximately 430 LTCHs, for purposes of this impact
analysis, we excluded the data of all inclusive rate providers and
the LTCHs that are paid in accordance with demonstration projects,
consistent with the development of the FY 2015 MS-LTC-DRG relative
weights (discussed in section VII.B.3.c. of the preamble of this
final rule)). In the impact analysis, we used the payment rate,
factors, and policies presented in this final rule, including the
2.2 percent annual update for LTCHs that submit quality data in
accordance with section 1886(m)(5)(C) of the Act, which is based on
the full estimated increase of the LTCH PPS market basket and the
reductions required by sections 1886(m)(3) and (m)(4) of the Act,
the final year of the phase-in of a one-time prospective adjustment
factor of 0.98734 (approximately -1.3 percent), the update to the
MS-LTC-DRG classifications and relative weights, the update to the
wage index values, including the implementation of the new OMB
delineations, and labor-related share, and the best available claims
and CCR data to estimate the change in payments for FY 2015. (As
discussed in section VII.C. of the preamble of this final rule, in
accordance with section 1886(m)(5)(C) of the Act, for LTCHs that
fail to submit quality data, the annual update to the LTCH PPS
standard Federal rate is reduced by 2.0 percentage points in FY
2015.)
The standard Federal rate for FY 2014 is $40,607.31 for LTCHs
that submit quality data in accordance with the requirements of
section 1886(m)(5)(C) of the Act. For FY 2015, we are establishing a
standard Federal rate of $41,043.71 (for LTCHs that submit quality
data in accordance with the requirements of section 1886(m)(5)(C) of
the Act, which reflects the 2.2 percent annual update to the
standard Federal rate, and the area wage budget neutrality factor of
1.0016703 to ensure that the changes in the wage index, including
the implementation of the new OMB delineations, and labor-related
share do not influence aggregate payments, and the final year of the
phase-in of a one-time prospective adjustment factor of 0.98734. For
LTCHs that fail to submit data for the LTCHQR Program, in accordance
with section 1886(m)(5)(C) of the Act, we are establishing a
standard Federal rate of $40,240.51. This reduced standard Federal
rate reflects the updates described above as well as the required
2.0 percentage point reduction to the annual update for failure to
submit data to the LTCHQR Program. We note that the factors
described above to determine the FY 2015 standard Federal rate are
applied to the FY 2014 Federal standard rate set forth under Sec.
412.523(c)(3)(ix)(A) (that is, $40,607.31).
Based on the best available data for the 422 LTCHs in our
database, we estimate that the annual update to the standard Federal
rate for FY 2015, the update to the MS-LTC-DRG classifications
relative weights for FY 2015 (discussed in section VII.B. of the
preamble to this final rule), and the changes to the area wage
adjustment for FY 2015 (discussed in section V.B. of the Addendum to
this final rule), in addition to an estimated increase in HCO
payments will result in an increase in estimated payments from FY
2014 of approximately $62 million. Based on the 422 LTCHs in our
database, we estimate that the FY 2015 LTCH PPS payments would be
approximately $5.614 billion, as compared to estimated FY 2014 LTCH
PPS payments of approximately $5.552 billion. Because the combined
distributional effects and estimated changes to the Medicare program
payments are over approximately $100 million, this final rule is
considered a major economic rule, as defined in this section. We
note that the approximate $62 million for the projected increase in
estimated aggregate LTCH PPS payments from FY 2014 to FY 2015 does
not reflect changes in LTCH admissions or case-mix intensity in
estimated LTCH PPS payments, which also will affect overall payment
changes. In addition, it does not reflect the estimated change in
aggregate LTCH PPS payments due the projected impact of certain
other LTCH PPS policy changes, which are discussed below in section
I.K.3.b. of this Appendix.
The projected 1.1 percent increase in estimated payments per
discharge from FY 2014 to FY 2015 is attributable to several
factors, including the 2.2 percent annual update to the standard
Federal rate (or 0.2 percent annual update for LTCHs that failed to
submit data under the requirements of the LTCHQR Program), a one-
time prospective adjustment factor for FY 2015 of 0.98734
(approximately -1.3 percent), and projected increases in estimated
HCO payments. Although the net effect of the 2.2 percent annual
update and the approximate -1.3 percent one-time prospective
adjustment factor is approximately 0.9 percent (that is, 2.2
percent-1.3 percent = 0.9 percent), Table IV (column 6) shows the
estimated change attributable solely to the annual update to the
standard Federal rate (2.2 percent for LTCHs that submit quality
data under the requirements of the LTCHQR Program and 0.2 percent
for LTCHs that failed submit quality data under the requirements of
the LTCHQR Program), including a one-time prospective adjustment
factor for FY 2015 under the final year of the phase-in
(approximately-1.3 percent), is projected to result in an increase
of 0.8 percent in payments per discharge from FY 2014 to FY 2015, on
average, for all LTCHs. In addition to the 2.2 percent annual update
for FY 2015, and a -1.3 percent one-time prospective adjustment
factor for FY 2015, this estimated increase in aggregate LTCH PPS
payments of 0.8 percent shown in column 6 of Table IV also includes
estimated payments for SSO cases that are paid using special
methodologies that are not affected by the annual update to the
standard Federal rate. Therefore, for all hospital categories, the
projected increase in payments based on the standard Federal rate is
slightly less than the

[[Page 50438]]

net effect of the 2.2 percent annual update and the approximate -1.3
percent one-time prospective adjustment factor (or 0.9 percent) for
FY 2015. Because we are applying an area wage level budget
neutrality factor to the standard Federal rate, the annual update to
the wage data, including the implementation of the new OMB
delineations, and labor-related share does not impact the increase
in aggregate payments.
As discussed in section V.B. of the Addendum to this final rule,
we are updating the wage index values for FY 2015 based on the most
recent available data and the adoption of the new OMB labor market
area delineations. Under our adoption of the new OMB delineations,
we are establishing and applying a transitional blended wage index
for FY 2015 for LTCHs that will have a lower wage index value under
those delineations, as discussed in section VII.D.2. of the preamble
of this final rule. Therefore, this column reflects the blended wage
index that is calculated as a 50/50 blend of the wage index under
the current CBSA designations and the wage index under the new OMB
delineations under our transitional wage index policy. In addition,
we are slightly lowering the labor-related share from 62.537 percent
to 62.306 percent under the LTCH PPS for FY 2015, based on the most
recent available data on the relative importance of the labor-
related share of operating and capital costs based on the FY 2009-
based LTCH-specific market basket. We also are applying an area wage
level budget neutrality factor of 1.0016703, which increases the
standard Federal rate by approximately 0.17 percent. Therefore, the
changes to the wage data, including the adoption of the new OMB
delineations, and labor-related share do not result in a change in
estimated aggregate LTCH PPS payments.
Table IV below shows the impact of the payment rate and the
policy changes on LTCH PPS payments for FY 2015 presented in this
final rule by comparing estimated FY 2014 payments to estimated FY
2015 payments. The projected increase in payments from FY 2014 to FY
2015 of 1.1 percent is attributable to the impacts of the change to
the standard Federal rate (0.9 percent in Column 6) and the effect
of the estimated slight increase in payments for HCO cases (0.1
percent) and an estimated increase in payments for SSO cases (0.2
percent). We currently estimate total HCO payments are projected to
increase slightly from FY 2014 to FY 2015 in order to ensure that
the estimated HCO payments will be 8 percent of the total estimated
LTCH PPS payments in FY 2015. An analysis of the most recent
available LTCH PPS claims data (that is, FY 2013 claims data from
the March 2014 update of the MedPAR file) indicates that the FY 2014
HCO threshold of $13,314 (as established in the FY 2014 IPPS/LTCH
PPS final rule) may-result in HCO payments in FY 2015 that are
slightly below the estimated 8 percent. Specifically, we currently
estimate that HCO payments will be approximately 7.9 percent of the
estimated total LTCH PPS payments in FY 2014. We estimate that the
impact of the slight increase in HCO payments will result in
approximately a 0.1 percent increase in estimated payments from FY
2014 to FY 2015, on average, for all LTCHs. Furthermore, in
calculating the estimated HCO payments for FYs 2014 and 2015, we
increased estimated costs by the applicable market basket percentage
increase as projected by our actuaries. This increase in estimated
costs also results in a projected increase in SSO payments of
approximately 0.2 percent relative to last year. The net result of
these projected changes in HCO and SSO payments in FY 2015 is an
estimated change in aggregate payments of 0.3 percent. We note that
estimated payments for all SSO cases comprise approximately 12
percent of the estimated total LTCH PPS payments, and estimated
payments for HCO cases comprise approximately 8 percent of the
estimated total FY 2015 LTCH PPS payments. Payments for HCO cases
are based on 80 percent of the estimated cost of the case above the
HCO threshold, while the majority of the payments for SSO cases
(approximately 60 percent) are based on the estimated cost of the
case.
In addition to the projected increase in LTCH PPS payments per
discharge of approximately $62 million (1.1 percent) from FY 2014 to
FY 2015, as shown in Table IV below, we also estimate that the net
effect of the projected impact of certain other LTCH PPS policy
changes (that is, the reinstatement of the moratorium on the full
implementation of the ``25-percent policy'' payment adjustment; the
reinstatement of the moratorium on the development of new LTCHs and
LTCH satellite facilities and additional LTCH beds; the revocation
of onsite discharges and readmissions policy; and the payment
adjustment for ``subclause (II)'' LTCHs) will result in a $116
million increase in aggregate LTCH PPS payments in FY 2015. The
individual impact of these policy changes are discussed in greater
detail below in section I.K.3.b. of this Appendix.
As we discuss in detail throughout this final rule, based on the
most recent available data, we believe that the provisions of this
final rule relating to the LTCH PPS will result in an increase in
estimated aggregate LTCH PPS payments and that the resulting LTCH
PPS payment amounts will result in appropriate Medicare payments.

2. Impact on Rural Hospitals

For purposes of section 1102(b) of the Act, we define a small
rural hospital as a hospital that is located outside of an urban
area and has fewer than 100 beds. As shown in Table IV, we are
projecting a 1.2 percent increase in estimated payments per
discharge for FY 2015 as compared to FY 2014 for rural LTCHs that
will result from the changes presented in this final rule, as well
as the effect of estimated changes to HCO and SSO payments. This
estimated impact is based on the data for the 22 rural LTCHs in our
database (out of 422 LTCHs) for which complete data were available.
The estimated increase in LTCH PPS payments from FY 2014 to FY
2015 for rural LTCHs (1.2 percent) is slightly greater than the
national average increase (1.1 percent). The estimated increase in
LTCH PPS payments from FY 2014 to FY 2015 for rural LTCHs is
primarily due to the increase to the standard Federal rate.

3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy
Changes

a. Budgetary Impact

Section 123(a)(1) of the BBRA requires that the PPS developed
for LTCHs ``maintain budget neutrality.'' We believe that the
statute's mandate for budget neutrality applies only to the first
year of the implementation of the LTCH PPS (that is, FY 2003).
Therefore, in calculating the FY 2003 standard Federal rate under
Sec. 412.523(d)(2), we set total estimated payments for FY 2003
under the LTCH PPS so that estimated aggregate payments under the
LTCH PPS were estimated to equal the amount that would have been
paid if the LTCH PPS had not been implemented.
As discussed above in section I.K.1. of this Appendix, we
project an increase in aggregate LTCH PPS payments per discharge in
FY 2015 relative to FY 2014 of approximately $62 million based on
the 422 LTCHs in our database. In addition, as discussed below in
section I.K.3.b. of this Appendix, we also estimate that the net
effect of the projected impact of certain other LTCH PPS policy
changes will result in a $116 million increase in aggregate LTCH PPS
payments in FY 2015.

b. Impact of Certain LTCH PPS Policy Changes

(1) Reinstatement of the Moratorium on the Full Implementation
of the ``25-Percent Policy'' Payment Adjustment (Sec. 412.534 and
Sec. 412.536) and Reinstatement of the Moratorium on the
Development of New LTCHs and LTCH Satellites and Additional LTCH
beds (Sec. 412.23(e) and Sec. Sec. 412.23(e)(6) and (7))
Section 1206(b) of Public Law 113-67 provides for the
retroactive reinstatement and extension, for an additional 4 years,
of the moratorium on the full implementation of the 25-percent
threshold payment adjustment (referred to as the ``25-percent
policy'' payment adjustment) established under section 114(c) of the
MMSEA, as amended by section 4302(a) of the ARRA and sections
3106(c) and 10312(a) of the Affordable Care Act. As discussed in
section VII.E. of the preamble of this final rule, we are
reinstating this payment adjustment retroactively for LTCH cost
reporting periods beginning on or after July 1, 2013 or October 1,
2013, as applicable under the regulations at Sec. 412.534 and Sec.
412.536.
Section 1206(b)(2) of Public Law 113-67, as amended by section
112(b) of the Protecting Access to Medicare Act of 2-14 (Pub. L.
113-93), provides for moratoria on the establishment of new LTCHs
and LTCH satellite facilities and on bed increases in LTCHs
effective for the period beginning April 1, 2014, and ending
September 30, 2017. This statutory provision also provides specific
exceptions to the moratorium on the establishment of new LTCHs and
LTCH satellites. We are implementing this policy under the
regulations at Sec. 412.23(e) and Sec. Sec. 412.23(e)(6) and (7),
respectively. For additional details, refer to section VII.G. of the
preamble of this final rule.
Our Office of the Actuary projects that the reinstatement of
``25-percent policy'' adjustment policy will result in

[[Page 50439]]

approximately a $120 million increase in aggregate LTCH PPS payments
in FY 2015. In addition, our Office of the Actuary projects that the
portion of the moratoria on the establishment of new LTCHs and LTCH
satellite facilities and additional LTCH beds that will occur during
FY 2015 is estimated to result in approximately a $30 million
reduction in aggregate LTCH PPS payments in FY 2015. Therefore, we
project our implementation of both of these statutory provisions
will result in approximately a $90 million increase in aggregate
LTCH PPS payments in FY 2015.

(2) Revocation of On-Site Discharges and Readmissions Policy (Sec.
412.532)

As discussed in section VII.F. of the preamble of this final
rule, we are removing the discharge and readmission requirement
specified in the regulations under Sec. 412.532 (referred to as the
``5-percent payment threshold''). Under the ``5-percent payment
threshold'' policy, if an LTCH (or a LTCH satellite facility)
directly readmits more than 5 percent of its total Medicare
inpatients discharged from an ``on-site facility'' (for example, a
co-located acute care hospital, an IRF, or a SNF, or in the case of
a LTCH satellite facility, that is co-located with an LTCH), all
such discharges to the co-located ``on-site facility'' and the
readmissions to the LTCH are treated as one discharge for that cost
reporting period, and, as such, one LTCH PPS payment is made on the
basis of each patient's initial principal diagnosis. We estimate
that the discontinuation of the ``5-percent payment threshold''
policy will result in an increase of approximately $20 million in
aggregate LTCH PPS payments in FY 2015. (We note, as also discussed
in section VII.F. of the preamble of this final rule, after
consideration of public comments, we are not finalizing the proposed
revision the fixed-day thresholds under the greater than 3-day
interruption of stay policy under Sec. 412.531.)

(3) Payment Adjustment for ``Subclause (II)'' LTCHs (Sec. 412.526)

Section 1206(d) of Public Law 113-67 requires the Secretary to
evaluate payments and regulations governing ``hospitals which are
classified under subclause (II) of subsection (d)(1)(B)(iv)''. In
addition, based on the result of such evaluations, the statute
authorizes the Secretary to adjust the payment rates for this type
of hospital and to adjust regulations governing a subclause (II)
LTCH that otherwise apply to subclause (I) LTCHs. As discussed in
section VII.H. of the preamble of this final rule, under new Sec.
412.526, we are applying a payment adjustment under the LTCH PPS to
a subclause (II) LTCH beginning in FY 2015 that will result in
payments to this type of LTCH resembling those under the reasonable
cost TEFRA payment system model. Our Office of the Actuary projects
that the payment adjustment for ``subclause (II)'' LTCHs will
increase aggregate LTCH PPS payments in FY 2015 by approximately $6
million.

c. Impact on Providers

The basic methodology for determining a per discharge LTCH PPS
payment is set forth under Sec. 412.515 through Sec. 412.536. In
addition to the basic MS-LTC-DRG payment (the standard Federal rate
multiplied by the MS-LTC-DRG relative weight), we make adjustments
for differences in area wage levels, a COLA for LTCHs located in
Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO
payments for those cases that qualify based on the threshold
established each year.
To understand the impact of the changes to the LTCH PPS payments
presented in this final rule on different categories of LTCHs for FY
2015, it is necessary to estimate payments per discharge for FY 2014
using the rates, factors (including the FY 2014 GROUPER (Version
31.0), and relative weights and the policies established in the FY
2014 IPPS/LTCH PPS final rule (78 FR 50753 through 50760 and 51002).
It is also necessary to estimate the payments per discharge that
will be made under the LTCH PPS rates and factors, and GROUPER
(Version 32.0) for FY 2015 (as discussed in section VII. of the
preamble of this final rule and section V. of the Addendum to this
final rule). These estimates of FY 2014 and FY 2015 LTCH PPS
payments are based on the best available LTCH claims data and other
factors, such as the application of inflation factors to estimate
costs for SSO and HCO cases in each year. We also evaluated the
change in estimated FY 2014 payments to estimated FY 2015 payments
(on a per discharge basis) for each category of LTCHs. We are
establishing a standard Federal rate for FY 2015 of $41,043.71 (for
LTCHs that submit quality data under the requirements of the LTCHQR
Program), which includes the 2.2 percent annual update, the area
wage budget neutrality factor of 1.0016703, and a one-time
prospective adjustment to the standard Federal rate for FY 2015 of
0.98734 (approximately -1.3 percent). For LTCHs that fail to submit
data to the LTCH Quality Reporting Program, we are establishing a
standard Federal rate for FY 2015 of $40,240.51 that includes a 2.0
percentage point reduction applied to the annual update under the
requirements of section 1886(m)(5)(C) of the Act in addition to the
other adjustments noted above.
Hospital groups were based on characteristics provided in the
OSCAR data, FY 2010 through FY 2012 cost report data in HCRIS, and
PSF data. Hospital groups included the following:
Location: large urban/other urban/rural.
Participation date.
Ownership control.
Census region.
Bed size.
To estimate the impacts of the payment rates and policy changes
among the various categories of existing providers, we used LTCH
cases from the FY 2013 MedPAR file to estimate payments for FY 2014
and to estimate payments for FY 2015 for 422 LTCHs. We believe that
the discharges based on the FY 2013 MedPAR data for the 422 LTCHs in
our database, which includes 330 proprietary LTCHs, provide
sufficient representation in the MS-LTC-DRGs containing discharges
for patients who received LTCH care for the most commonly treated
LTCH patients' diagnoses.

d. Calculation of Prospective Payments

For purposes of this impact analysis, to estimate per discharge
payments under the LTCH PPS, we simulated payments on a case-by-case
basis using LTCH claims from the FY 2013 MedPAR files. For modeling
estimated LTCH PPS payments for FY 2014, we used the FY 2014
standard Federal rate (that is, $40,607.31 for LTCHs that submit
quality data under the requirements of the LTCHQR Program and
$39,808.74 for LTCHs that failed to submit quality data under the
requirements of the LTCHQR Program) used to make payments for LTCH
discharges occurring on or after October 1, 2013 through September
30, 2014).
For modeling estimated LTCH PPS payments for FY 2015, we used
the FY 2015 standard Federal rate of $41,043.71 (for LTCHs that
submit quality data under the requirements of the LTCHQR Program),
which includes a one-time prospective adjustment of 0.98734 for FY
2015 for the final year of the 3-year phase-in. For LTCHs that we
project to have failed to submit the requisite quality data for FY
2015 under the LTCH Quality Reporting Program, we used the FY 2015
standard Federal rate of $40,240.51, which reflects the 2.0
percentage points reduction required by section 1886(m)(5)(C) of the
Act. The FY 2015 standard Federal rates also include the application
of an area wage level budget neutrality factor of 1.0016703 (as
discussed in section V.B.5. of the Addendum to this final rule).
Furthermore, in modeling estimated LTCH PPS payments for both FY
2014 and FY 2015 in this impact analysis, we applied the FY 2014 and
the FY 2015 adjustments for area wage levels and the COLA for LTCHs
located in Alaska and Hawaii. Specifically, we adjusted for
differences in area wage levels in determining estimated FY 2014
payments using the current LTCH PPS labor-related share of 62.537
percent (78 FR 50995 through 50996) and the wage index values
established in the Tables 12A and 12B listed in the Addendum to the
FY 2014 IPPS/LTCH PPS final rule (which are available via the
Internet on the CMS Web site. We also applied the FY 2014 COLA
factors shown in the table in section V.C. of the Addendum to that
final rule (78 FR 50997 through 50998) to adjust the FY 2014
nonlabor-related share (37.463 percent) for LTCHs located in Alaska
and Hawaii. Similarly, we adjusted for differences in area wage
levels in determining the estimated FY 2015 payments using the FY
2015 LTCH PPS labor-related share of 62.306 percent and the FY 2015
wage index values, including the 50/50 blended wage index,
determined from the wage index values presented in Tables 12A
through 12D listed in section VI. of the Addendum to this final rule
(and available via the Internet). We also applied the FY 2015 COLA
factors shown in the table in section V.C. of the Addendum to this
final rule to the FY 2015 nonlabor-related share (37.694 percent)
for LTCHs located in Alaska and Hawaii.
As discussed above, our impact analysis reflects an estimated
change in payments for SSO cases, as well as an estimated increase
in payments for HCO cases (as described in

[[Page 50440]]

section V.D. of the Addendum to this final rule). In modeling
payments for SSO and HCO cases in FY 2015, we applied an inflation
factor of 5.0 percent (determined by OACT) to estimate the costs of
each case using the charges reported on the claims in the FY 2013
MedPAR files and the best available CCRs from the March 2014 update
of the PSF. Furthermore, in modeling estimated LTCH PPS payments for
FY 2015 in this impact analysis, we used the FY 2015 fixed-loss
amount of $14,972 (as discussed in section V.D. of the Addendum to
this final rule).
These impacts reflect the estimated ``losses'' or ``gains''
among the various classifications of LTCHs from FY 2014 to FY 2015
based on the payment rates and policy changes presented in this
final rule. Table IV illustrates the estimated aggregate impact of
the LTCH PPS among various classifications of LTCHs.
The first column, LTCH Classification, identifies the
type of LTCH.
The second column lists the number of LTCHs of each
classification type.
The third column identifies the number of LTCH cases.
The fourth column shows the estimated payment per
discharge for FY 2014 (as described above).
The fifth column shows the estimated payment per
discharge for FY 2015 (as described above).
The sixth column shows the percentage change in
estimated payments per discharge from FY 2014 to FY 2015 due to the
annual update to the standard Federal rate (as discussed in section
V.A.2. of the Addendum to this final rule, including the 2.0
percentage point reduction to the update to the standard Federal
rate for LTCHs that fail to submit data to the LTCHQR Program) and
the final year of the phase-in of a one-time prospective adjustment
factor for FY 2015.
The seventh column shows the percentage change in
estimated payments per discharge from FY 2014 to FY 2015 for changes
to the area wage level adjustment (that is, the wage indexes,
including the implementation of the new OMB delineations, and the
labor-related share), including the application of an area wage
level budget neutrality factor (as discussed in section V.B. of the
Addendum to this final rule. This column includes the wage index
calculated as a 50/50 blend of the wage index under the current CBSA
designations and the wage index under the new OMB delineations under
our transitional wage index policy for the implementation of the new
OMB delineations.
The eighth column shows the percentage change in
estimated payments per discharge from FY 2014 (Column 4) to FY 2015
(Column 5) for all changes (and includes the effect of estimated
changes to HCO and SSO payments).

Table IV--Impact of Payment Rate and Policy Changes to LTCH PPS Payments for FY 2015
[Estimated FY 2014 payments compared to estimated FY 2015 payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent change
in estimated
Percent change payments per
in estimated discharge from Percent change
Average FY Average FY payments per FY 2014 to FY in payments
Number of Number of LTCH 2014 LTCH PPS 2015 LTCH PPS discharge from 2015 for per discharge
LTCH Classification LTCHs PPS cases payment per payment per FY 2014 to FY changes to the from FY 2014
case case \1\ 2015 for the area wage to FY 2015 for
annual update level all changes
to the federal adjustment \4\
rate \2\ with budget
neutrality \3\
(1) (2) (3) (4) (5) (6) (7) (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS........................... 422 138,281 40,149 40,600 0.8 0.0 1.1
BY LOCATION:
RURAL............................... 22 5,695 35,361 35,770 0.8 -0.1 1.2
URBAN............................... 400 132,586 40,355 40,808 0.8 0.0 1.1
LARGE........................... 200 76,559 42,561 43,060 0.8 0.1 1.2
OTHER........................... 200 56,027 37,341 37,730 0.8 -0.1 1.0
BY PARTICIPATION DATE:
BEFORE OCT. 1983.................... 16 5,209 37,151 38,039 0.8 0.9 2.4
OCT. 1983-SEPT. 1993................ 44 16,841 43,306 43,778 0.8 -0.1 1.1
OCT. 1993-SEPT. 2002................ 181 62,870 39,354 39,754 0.8 -0.1 1.0
OCTOBER 2002 and AFTER.............. 181 53,361 40,383 40,845 0.8 0.0 1.1
BY OWNERSHIP TYPE:
VOLUNTARY........................... 80 18,696 41,099 41,674 0.8 0.2 1.4
PROPRIETARY......................... 330 117,767 39,916 40,350 0.8 0.0 1.1
GOVERNMENT.......................... 12 1,818 45,491 45,750 0.8 -0.4 0.6
BY REGION:
NEW ENGLAND......................... 14 6,959 36,468 37,339 0.8 1.0 2.4
MIDDLE ATLANTIC..................... 29 8,545 42,861 43,626 0.8 0.9 1.8
SOUTH ATLANTIC...................... 61 18,609 42,491 42,848 0.8 -0.2 0.8
EAST NORTH CENTRAL.................. 70 20,160 41,699 42,165 0.8 0.2 1.1
EAST SOUTH CENTRAL.................. 31 8,962 39,380 39,745 0.8 -0.4 0.9
WEST NORTH CENTRAL.................. 26 6,473 39,500 39,986 0.8 0.1 1.2
WEST SOUTH CENTRAL.................. 134 48,290 35,668 35,968 0.8 -0.4 0.8

[[Page 50441]]

MOUNTAIN............................ 32 6,809 43,154 43,692 0.8 0.1 1.2
PACIFIC............................. 25 13,474 50,143 50,825 0.8 0.2 1.4
BY BED SIZE:
BEDS: 0-24.......................... 24 2,591 35,097 35,370 0.9 -0.3 0.8
BEDS: 25-49......................... 200 47,301 39,156 39,565 0.8 -0.1 1.0
BEDS: 50-74......................... 117 37,621 40,747 41,258 0.8 0.1 1.3
BEDS: 75-124........................ 45 22,107 41,907 42,416 0.8 0.2 1.2
BEDS: 125-199....................... 22 15,387 39,065 39,492 0.8 -0.1 1.1
BEDS: 200 +......................... 14 13,274 41,312 41,708 0.8 -0.2 1.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2015 LTCH PPS payments based on the payment rate and factor changes presented in the preamble of and the Addendum to this final rule.
\2\ Percent change in estimated payments per discharge from FY 2014 to FY 2015 for the annual update to the standard Federal rate and the one-time
prospective adjustment factor for FY 2015 as discussed in section V.A.2. of the Addendum to this final rule.
\3\ Percent change in estimated payments per discharge from FY 2014 to FY 2015 for changes to the area wage level adjustment under Sec. 412.525(c) (as
discussed in section V.B. of the Addendum to this final rule).
\4\ Percent change in estimated payments per discharge from FY 2014 LTCH PPS (shown in Column 4) to FY 2015 LTCH PPS (shown in Column 5), including all
of the changes to the rates and factors presented in the preamble of and the Addendum to this final rule. Note, this column, which shows the percent
change in estimated payments per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge for the
annual update to the standard Federal rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the
effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in
this impact analysis), as well as other interactive effects that cannot be isolated.

e. Results

Based on the most recent available data for 422 LTCHs, we have
prepared the following summary of the impact (as shown above in
Table IV) of the LTCH PPS payment rate and policy changes presented
in this final rule. The impact analysis in Table IV shows that
estimated payments per discharge are expected to increase 1.1
percent, on average, for all LTCHs from FY 2014 to FY 2015 as a
result of the payment rate and policy changes presented in this
final rule, including an estimated slight increase in HCO payments.
This estimated 1.1 percent increase in LTCH PPS payments per
discharge from the FY 2014 to FY 2015 for all LTCHs (as shown in
Table IV) was determined by comparing estimated FY 2015 LTCH PPS
payments (using the payment rates and factors discussed in this
final rule) to estimated FY 2014 LTCH PPS payments (as described in
section I.K.3.d. of this Appendix).
We are establishing a standard Federal rate of $41,043.71 (or a
standard Federal rate of $40,240.51 for LTCHs that failed to submit
data under the requirements of the LTCHQR Program) for FY 2015.
Specifically, we are updating the standard Federal rate for FY 2015
by 2.2 percent, which is based on the latest estimate of the LTCH
PPS market basket increase (2.9 percent), the reduction of 0.5
percentage point for the MFP adjustment, and the 0.2 percentage
point reduction consistent with sections 1886(m)(3) and (m)(4) of
the Act. For LTCHs that fail to submit quality data under the
requirements of the LTCHQR Program, as required by section
1886(m)(5)(C) of the Act, a 2.0 percentage point reduction is
applied to the annual update to the standard Federal rate. In
addition, we are applying a one-time prospective adjustment factor
for FY 2015 of 0.98734 (approximately -1.3 percent) to the standard
Federal rate for the final year of the 3-year phase-in.
We noted earlier in this section that, for most categories of
LTCHs, as shown in Table IV (Column 6), the payment increase due to
the 2.2 percent annual update to the standard Federal rate and the
application of a one-time prospective adjustment for FY 2015 of
approximately -1.3 percent for the final year of the 3-year phase-in
is projected to result in approximately a 0.8 percent increase in
estimated payments per discharge for all LTCHs from FY 2014 to FY
2015.
In addition, our estimate of the changes in payments due to the
update to the standard Federal rate also reflects estimated payments
for SSO cases that are paid using special methodologies that are not
affected by the update to the standard Federal rate. For these
reasons, we estimate that payments may increase by less than 0.9
percent for certain hospital categories due to the annual update to
the standard Federal rate and the application of the final phase of
the one-time prospective adjustment for FY 2015.

(1) Location

Based on the most recent available data, the vast majority of
LTCHs are located in urban areas. Only approximately 5 percent of
the LTCHs are identified as being located in a rural area, and
approximately 4 percent of all LTCH cases are treated in these rural
hospitals. The impact analysis presented in Table IV shows that the
average percent increase in estimated payments per discharge from FY
2014 to FY 2015 for all hospitals is 1.1 percent for all changes.
For rural LTCHs, the percent change for all changes is estimated to
be a 1.2 percent increase, while for urban LTCHs, we estimate the
increase will be 1.1 percent. Large urban LTCHs are projected to
experience an increase of 1.2 percent in estimated payments per
discharge from FY 2014 to FY 2015, while other urban LTCHs are
projected to experience an increase of 1.0 percent in estimated
payments per discharge from FY 2014 to FY 2015, as shown in Table
IV.

(2) Participation Date

LTCHs are grouped by participation date into four categories:
(1) Before October 1983; (2) between October 1983 and September
1993; (3) between October 1993 and September 2002; and (4) October
2002 and after. Based on the most recent available data, the
categories of LTCHs with the largest percentage of LTCH cases
(approximately 45 percent) are in hospitals that began participating
in the Medicare program

[[Page 50442]]

between October 1993 and September 2002, and they are projected to
experience a 1.0 percent increase in estimated payments per
discharge from FY 2014 to FY 2015, as shown in Table IV.
Approximately 4 percent of LTCHs began participating in the
Medicare program before October 1983, and these LTCHs are projected
to experience a higher than average percent increase (2.4 percent)
in estimated payments per discharge from FY 2014 to FY 2015, as
shown in Table IV. Approximately 10 percent of LTCHs began
participating in the Medicare program between October 1983 and
September 1993. These LTCHs are projected to experience a 1.1
percent increase in estimated payments from FY 2014 to FY 2015.
LTCHs that began participating in the Medicare program after October
1, 2002, which treat approximately 39 percent of all LTCH cases, are
projected to experience a 1.1 percent increase in estimated payments
from FY 2014 to FY 2015.

(3) Ownership Control

LTCHs are grouped into three categories based on ownership
control type: voluntary, proprietary, and government. Based on the
most recent available data, approximately 19 percent of LTCHs are
identified as voluntary (Table IV). The majority (nearly 78 percent)
of LTCHs are identified as proprietary while government-owned and
operated LTCHs represent about 3 percent of LTCHs. Based on
ownership type, voluntary LTCHs are expected to experience an above
average increase in payments of 1.4 percent; proprietary LTCHs are
expected to experience an increase of 1.1 percent in payments, while
government-owned and operating LTCHs are expected to experience an
increase in payments that is less than the national average of 0.6
percent from FY 2014 to FY 2015.

(4) Census Region

Estimated payments per discharge for FY 2015 are projected to
increase for LTCHs located in all regions in comparison to FY 2014.
Of the 9 census regions, we project that the increase in estimated
payments per discharge will have the largest positive impact on
LTCHs in the New England and Middle Atlantic regions (2.4 percent
and 1.8 percent, respectively as shown in Table IV). The estimated
percent increase in payments per discharge from FY 2014 to FY 2015
for those regions is largely attributable to the changes in the area
wage level adjustment.
In contrast, LTCHs located in the South Atlantic and West South
Central regions are projected to experience the smallest increase in
estimated payments per discharge from FY 2014 to FY 2015. The lower
than national average estimated increase in payments of 0.8 percent
is primarily due to estimated decreases in payments associated with
the changes to the area wage level adjustment.

(5) Bed Size

LTCHs are grouped into six categories based on bed size: 0-24
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater
than 200 beds. Most bed size categories are projected to receive
either a slightly higher or slightly lower than average increase in
estimated payments per discharge from FY 2014 to FY 2015. We project
that small LTCHs (0-24 beds) will experience a 0.8 percent increase
in payments, which is less than the nation average mostly due to
decreases in the area wage level adjustment, while large LTCHs (200+
beds) will experience a 1.0 percent increase in payments. LTCHs with
between 75 and 124 beds are expected to experience an above average
increase in payments per discharge from FY 2014 to FY 2015 (1.2
percent).

4. Effect on the Medicare Program

As noted previously, we project that the provisions of this
final rule will result in an increase in estimated aggregate LTCH
PPS payments in FY 2015 relative to FY 2014 of approximately $62
million (or approximately 1.1 percent) for the 422 LTCHs in our
database.

5. Effect on Medicare Beneficiaries

Under the LTCH PPS, hospitals receive payment based on the
average resources consumed by patients for each diagnosis. We do not
expect any changes in the quality of care or access to services for
Medicare beneficiaries under the LTCH PPS, but we continue to expect
that paying prospectively for LTCH services will enhance the
efficiency of the Medicare program.

L. Effects of Requirements for the Hospital Inpatient Quality
Reporting (IQR) Program

In section IX.A. of the preamble of this final rule, we discuss
our requirements for hospitals to report quality data under the
Hospital IQR Program in order to receive the full annual percentage
increase for the FY 2017 payment determination. We are removing a
total of 19 measures from the Hospital IQR Program for the FY 2017
payment determination and subsequent years, which begins in the CY
2015 reporting period. The first five measures are: (1) AMI-1
Aspirin at arrival (NQF 0132); (2) AMI-3 ACEI/ARB for left
ventricular systolic dysfunction (NQF 0137); (3) AMI-5
Beta-blocker prescribed at discharge (NQF 0160); (4) SCIP
INF-6 Appropriate Hair Removal; and (5) Participation in a
systematic database for cardiac surgery (NQF 0113). Of
these five measures, the first four are currently suspended. The
fifth measure was recommended by the MAP for removal because it is
``topped-out.'' We believe that an additional 14 chart-abstracted
measures are ``topped out,'' based on the previously adopted
criteria, and we are removing them from the FY 2017 payment
determination and subsequent years measure set. However, we are
retaining the electronic clinical quality measure version of 10 of
these chart-abstracted measures for Hospital IQR Program reporting
as discussed in section IX.A.7.f. of the preamble of this final
rule.
We also are adding one chart-abstracted measure for the FY 2017
payment determination and subsequent years in this final rule:
Severe sepsis and septic shock: management bundle (NQF
0500).
We are incorporating refinements for several measures for the FY
2017 payment determination and subsequent years that were previously
adopted in the Hospital IQR Program. These refinements have either
arisen out of the NQF endorsement maintenance process, or during our
internal efforts to harmonize measure approaches. The measure
refinements include the following: (1) Refining the planned
readmission algorithm for all seven readmission measures included in
the Hospital IQR Program; (2) modifying the hip/knee readmission and
complication measure cohorts to exclude index admissions with a
secondary fracture diagnosis; and (3) modifying the hip/knee
complication measure to not count as complications coded as
``present on admission'' (POA) during the index admission. We do not
anticipate any hospital burden associated with these revisions, as
each is based on claims submitted by hospitals for payment purposes.
Information is not available to determine the precise number of
hospitals that would not meet the requirements to receive the full
annual percentage increase for the FY 2017 payment determination.
Historically, an average of 100 hospitals that participate in the
Hospital IQR Program do not receive the full annual percentage
increase in any fiscal year. We anticipate that because of the new
requirements we are finalizing for reporting for the FY 2017 payment
determination, the number of hospitals not receiving the full annual
percentage increase may be higher than average. The highest number
of hospitals failing to meet program requirements was approximately
200 after the introduction of new NHSN reporting requirements. If
the number of hospitals failing does increase because of new
requirements, we anticipate that over the long run, this number will
decline as hospitals gain more experience with these requirements.
In the FY 2014 IPPS/LTCH PPS final rule, we estimated that the
burden for the FY 2016 payment determination was 1,775 hours
annually per hospital and 5.86 million hours across all 3,300
hospitals participating in the Hospital IQR Program (78 FR 50956).
However, we have re-estimated the total number of hours associated
with the requirements finalized for the FY 2016 payment
determination to be 1,309 hours per hospital or a total of 4.3
million hours for all hospitals using more recent information from
the clinical data warehouse than was available in August 2013.
As discussed in section XIII.B.6. of the preamble of this final
rule, we estimate that our proposals for the adoption and removal of
measures will result in an overall reduction in the total burden for
hospitals for the FY 2017 payment determination for reporting chart-
abstracted and structural measures, completing forms, reviewing
reports, and submitting validation templates of 160 hours per
hospital or 0.5 million hours across all hospitals compared to the
total burden for participating hospitals in the Hospital IQR Program
for the FY 2016 payment determination. The numbers included in our
finalized policy more accurately reflect the burden associated with
our program than the estimates provided in our proposal. As a
result, the total burden for approximately 3,300 hospitals for the
FY 2017 payment determination will be 1,149 hours per hospital or
3.8 million hours across all hospitals. This burden estimate
includes

[[Page 50443]]

both the newly finalized measures and the measures we are
continuing. The burden estimates in this final rule are the
estimates for which we are requesting OMB approval.
The table below describes the hospital burden associated with
the Hospital IQR Program requirements.

Burden Impact of Hospital IQR Program Requirements for FY 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per hospital for Burden per hospital for all
Hospital IQR Program Requirement Number of hospitals impacted previously finalized requirements as finalized Net change in burden
requirements (continuing, removed, added) per hospital
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chart-abstracted and structural 3,300......................... 1,291 hours................... 1,131 hours.................. -160 hours.
measures, forms.
Review reports for claims-based 3,300......................... 4 hours....................... 4 hours...................... 0.
measures.
Reporting of voluntary Unknown*...................... -385 hours.................... -425 hours................... -40 hours.
electronic clinical quality
measures in place of chart-
abstracted measures.
Validation templates............ Up to 600**................... 72 hours...................... 72 hours..................... 0.
Electronic clinical quality Up to 100**................... 0............................. 16 hours..................... 16 hours.
measure validation test.
Validation charts photocopying.. Up to 600..................... $8,640........................ $8,496....................... $-144.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This number is unknown at the time this table was prepared because final submission deadlines have not passed. Because the burden associated with
participation is negative, we assumed this number to be 0 in summary calculations included in the narrative.
** Maximum numbers were used in summary calculations included in the narrative.

We estimate that the total burden associated with the voluntary
electronic clinical quality measure reporting option will be similar
to the burden outlined for hospitals in the Medicare EHR Incentive
Program Stage 2 final rule (77 FR 53968 through 54162). In this
rule, we finalize a policy allowing hospitals to submit data for a
maximum of 16 measures that can be used to satisfy partial
requirements for both programs. We estimate that each hospital that
participates in the voluntary electronic quality measure reporting
option could realize a maximum reduction in burden of up to
approximately 425 hours by submitting data for all 12 required
chart-abstracted measures that are also electronically specified.

M. Effects of Requirements for the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program for FY 2017

In section IX.B. of the preamble of this final rule, we discuss
our policies for the quality data reporting program for PPS-exempt
cancer hospitals (PCHs), which we refer to as the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program. The PCHQR Program is
authorized under section 1866(k) of the Act, which was added by
section 3005 of the Affordable Care Act. In this final rule, we are
requiring that PCHs submit data on one additional measure beginning
with the FY 2017 program which will increase the total number of
measures in the FY 2017 PCHQR measure set to 19 measures. We also
are updating the specifications for the five previously finalized
clinical process/oncology care measures to require PCHs to report
all-patient data for each of these measures, and to adopt a new
sampling methodology that PCHs can use to report these measures, as
well as the newly finalized EBRT for bone metastases measure. We
also are providing PCHs with two reporting options to report the
clinical process/oncology care, SCIP, and clinical process/cancer
specific treatment measures.
The impact of the new requirements for the PCHQR Program is
expected to be minimal overall because some PCHs are already
submitting previously adopted quality measure data to CMS. As a
result, these PCHs are familiar with our IT infrastructure and
programmatic operations. In addition to fostering transparency and
facilitating public reporting, we believe our requirements uphold
our goals in improving quality of care and achieving better health
outcomes, which outweighs burden.
One expected effect of the PCHQR Program is to keep the public
informed of the quality of care provided by PCHs. We will publicly
display quality measure data collected under the PCHQR Program as
required under the Act. These data will be displayed on the Hospital
Compare Web site. The goals of making these data available to the
public in a user-friendly and relevant format, include, but are not
limited to: (1) Allowing the public to compare PCHs in order to make
informed health care decisions regarding care setting; and (2)
providing information about current trends in health care.
Furthermore, PCHs can use their own health care quality data for
many purposes such as in risk management programs, healthcare
associated infection prevention programs, and research and
development activities, among others.

N. Effects of Requirements for the Long-Term Care Hospital Quality
Reporting (LTCHQR) Program for FY 2015 Through FY 2018

In section IX.C. of the preamble of this final rule, we discuss
the implementation of section 1886(m)(5) of the Act, which was added
by section 3004(a) of the Affordable Care Act. Section 1886(m)(5) of
the Act provides that, for rate year 2014 and each subsequent year,
any LTCH that does not submit data to the Secretary in accordance
with section 1886(m)(5)(C) of the Act shall receive a 2-percentage
point reduction to the annual update to the standard Federal rate
for discharges for the hospital during the applicable fiscal year.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51839 through 51840),
we estimated that only a few LTCHs would not receive the full annual
percentage increase in any fiscal year as a result of failure to
submit data under the LTCHQR Program. Information is not available
to determine the precise number of LTCHs that would not meet the
requirements to receive the full annual percentage increase for the
FY 2016 payment determination. At the time that this analysis was
prepared, 8 of the 442 active Medicare-certified LTCHs did not
receive the full annual percentage increase for the FY 2014 payment
determination. We believe that a majority of LTCHs will continue to
collect and submit data for the FY 2015 payment determination and
subsequent years because they will continue to view the LTCHQR
Program as an important step in improving the quality of care
patients receive in the LTCHs. We believe that the burden associated
with the LTCHQR Program is the time and effort associated with data
collection. There are approximately 442 LTCHs currently reporting
quality data to CMS.
In this final rule, we are retaining seven previously finalized
measures, revising two previously finalized measures, and are
finalizing three additional quality measures for inclusion in the
LTCHQR Program. In section IX.C.7. of the preamble of this final
rule, we are finalizing three new quality measures for inclusion in
the LTCHQR Program affecting the FY 2018 payment determination and
subsequent years: (1) Percent of Long-Term Care Hospital Patients
with an Admission and Discharge Functional Assessment and a Care
Plan That Addresses Function; (2) Functional Outcome Measure: Change
in Mobility among Long-Term Care Hospital Patients Requiring
Ventilator Support; and (3) National Healthcare Safety Network
(NHSN) Ventilator-Associated Event (VAE) Outcome Measure.
Six of the previously adopted and newly finalized measures will
be collected via the NHSN. In section IX.C.7.b. of the preamble of
this final rule, we are finalizing our proposal to collect the NHSN
VAE Outcome Measure. Normally, we would only discuss the burden
associated with those measures that were proposed or finalized in
any given rule. Because we have access to information that now
indicates our previous calculations for the CAUTI, CLABSI, MRSA, and
CDI were incorrect (we estimated in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50959 through 50964) that LTCHs would submit six
infection events per month for each of these measures), we offer
below the recalculation of the associated burden. Based on
submissions to the NHSN, we now estimate

[[Page 50444]]

that each LTCH will make approximately 7 NHSN submissions per month:
1 MRSA event; 1 CDI event; 2 CLABSI events; 3 CAUTI events (84
events per LTCH annually). This equates to a total of approximately
37,128 submissions of events to the NHSN from all LTCHs per year
(includes CAUTI, CLABSI, MRSA, and CDI). The CDC estimated the
public reporting burden of the collection of information for each
measure to include the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed,
and completing and reviewing the collection of information. MRSA and
CDI events are estimated to require an average of 15 minutes per
response (10 minutes of clinical (RN) time, and 5 minutes of
clerical (Medical Record or Healthcare Information Technician)).
CAUTI is estimated to require an average of 29 minutes per response,
and CLABSI events are estimated to require an average of 32 minutes
per response. In addition, each LTCH must also complete a Patient
Safety Monthly Reporting Plan estimated at 35 minutes per Plan and a
Denominator for Specialty Care Area, which is estimated at 5 hours
per month. Based on this estimate, we expect each LTCH will expend
8.6 hours per month for each LTCH, 103.2 hours annually for each
LTCH or 45,614.4 hours annually for all LTCHs reporting to the NHSN.
In addition, each LTCH must submit the Influenza Vaccination
Coverage among Healthcare Personnel (NQF 0431), which the
CDC estimates will take 10 minutes annually per LTCH, or an
additional 73.66 hours for all LTCHs annually. In total, the burden
we have recalculated for all previously finalized measures
(including CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety Monthly
Reporting plan, and Denominator for Specialty Care Area) will equal
103.4 hours annually per LTCH or 45,072.8 hours for all LTCHs
annually.
For the newly finalized VAE measure, which will also be reported
by LTCHs through the CDC's NHSN, the CDC estimates that each LTCH
will submit 1 VAE per month, which will require approximately 22
minutes of clinical time per response. This equates to 22 minutes
per LTCH monthly, 4.4 hours per LTCH annually, and 1,944.8 hours for
all LTCHs annually. According to the US Bureau of Labor and
Statistics, the mean hourly wage for a registered nurse (RN) is
$33.13 \250\; the mean hourly wage for a medical records and health
information technician is $16.81. However, in order to account for
overhead and fringe benefits, we have doubled the mean hourly wage,
making it $66.26 for an RN and $33.62 for a Medical Record or Health
Information Technician. We estimate that the annual cost per each
LTCH for the previously finalized measures, for which we have
recalculated burden (including CAUTI, CLABSI, MRSA, CDI, HCP,
Patient Safety Monthly Reporting plan, and Denominator for Specialty
Care Area) to be $6,770.10 and that the total yearly cost to all
LTCHs for the submission of data to NHSN will be $2,992,384.20. We
estimate that the total cost for the newly finalized VAE measure
will be $291.54 per LTCH annually, or $128,860.68 for all LTCHs
annually.
---------------------------------------------------------------------------

\250\ According to the U.S. Bureau of Labor Statistics, the mean
hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/healthcare/registered-nurses.htm. Fringe benefits
are calculated at a rate of 36.25 percent in accordance with OMB
Circular A-76, Attachment C, Table C.1. After adding the fringe
benefits, the total hourly cost for an RN is $42.89.
---------------------------------------------------------------------------

The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Long-Term Care Hospitals is a Medicare claims-based
measure; because claims-based measures can be calculated based on
data that are already reported to the Medicare program for payment
purposes, we believe there will be no additional impact.
The remaining five measures will be collected utilizing the LTCH
CARE Data Set. The burden estimates associated with OMB control
number 0938-1163 estimate that each LTCH has an impact data
collection burden of 243.24 hours or $6,755.84 associated with
collection of the LTCH CARE Data Set, which includes the following
three measures: Percent of Residents or Patients with Pressure
Ulcers That Are New or Worsened (NQF 0678); Percent of
Residents or Patients Who Were Assessed and Appropriately Given the
Seasonal Influenza Vaccine (NQF 0680); and the Application
of Percent of Residents Experiencing One or More Falls with Major
Injury (Long Stay) (NQF 0674).
We are also finalizing our proposal to use the LTCH CARE Data
Set to report the two additional newly finalized measures--
Functional Outcome Measure: Change in Mobility among Long-Term Care
Hospital Patients Requiring Ventilator Support; and Percent of Long-
Term Care Hospital Patients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function--for
the FY 2018 payment determination and subsequent years. In addition,
the LTCH CARE Data Set will be used to report the previously
finalized measure. We estimate the additional elements for two newly
finalized measures will take 13.5 minutes of nursing/clinical staff
time to report data for Admission assessment and 13 minutes of
nursing/clinical staff time to report data for Discharge assessment,
for a total of 26.5 minutes. In accordance with OMB control number
0920-0666, we estimate 202,050 discharges from all LTCHs annually,
with an additional burden of 26.5 minutes. This would equate to
89,238.75 total hours or 201.9 hours per LTCH. We believe this work
will be completed by RN staff. As previously noted, per the US
Bureau of Labor and Statistics, the mean hourly wage for a
registered nurse (RN) is $33.13.\251\ However, in order to account
for overhead and fringe benefits, we have doubled the mean hourly
wage, making it $66.26 for an RN. The total cost related to the two
newly finalized functional status measures referenced above is
estimated at $13,377.89 per LTCH annually, or $5,913,027.38 for all
LTCHs annually.
---------------------------------------------------------------------------

\251\ According to the U.S. Bureau of Labor Statistics, the mean
hourly wage for a Registered Nurse is $31.48. See: https://www.bls.gov/ooh/healthcare/registered-nurses.htm. Fringe benefits
are calculated at a rate of 36.25 percent in accordance with OMB
Circular A-76, Attachment C, Table C.1. After adding the fringe
benefits, the total hourly cost for an RN is $42.89.
---------------------------------------------------------------------------

As discussed in section IX.C.7.a.1 of the preamble of this final
rule, in response to several public comments concerned that the
proposed functional status measures are excessively burdensome and
that some of the included data items used to collect the data for
the measures had ``low response rates'' during demonstration
testing, we have decided to reduce the number of LTCH CARE Data Set
data items required for the measure Percent of Long-Term Care
Hospital Patients with an Admission and Discharge Functional
Assessment and a Care Plan That Addresses Function. We have reduced
the number of data items for this quality measure from the
originally proposed 45 to 35. We estimate that this reduction
effectively reduces the annual cost per LTCH from the originally
estimated $13,377.89 to $10,348.82 annually, and reduces the annual
cost for all LTCHs from the originally estimated $5,913,027.38 to
$4,574,178.44. This equates to a reduction of $3,029.07 per LTCH
annually, and $1,338,851.38 for all LTCHs annually.
Lastly, as discussed in section IX.C.11. of the preamble of this
final rule, in response to public comments, we are not finalizing
our proposal to validate the accuracy of LTCH data at this time.
In summary, the total cost for all previously finalized HAI and
vaccination measures (CAUTI, CLABSI, MRSA, CDI, HCP, Patient Safety
Monthly Reporting plan, and Denominator for Specialty Care Area)
reported through the CDC's NHSN, that we have recalculated based on
new information regarding the number of infection events reported by
LTCHs per month, is $6,770.10 per LTCH annually, or $2,992,384.20
for all LTCHs annually. The total cost per LTCH for the three newly
finalized measures in this final rule (Functional Outcome Measure:
Change in Mobility among Inpatients requiring Ventilator Support,
Percent of LTCH Inpatients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function, and
Ventilator-Associated Events) is $10,640.36 per LTCH annually, or
$4,703,039.12 for all LTCHs annually.
Comment: Several commenters expressed concern over the burden
associated with collection the two functional status measures we
proposed.
Response: For a full discussion of the public comments, our
responses, and our associated analysis of the reduction in required
data items for the measure Patients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function, we
refer readers to the comment and response portion of section
IX.C.7.a.1 of the preamble of this final rule. As we discuss above,
as a result of our response, we have reduced our estimate of the
burden for these measures, as we are finalizing them, by
$1,338,851.38.
Comment: One commenter expressed concern over the burden with
which the LTCH program is growing year to year, noting that there
has been a 300 percent increase in burden each year, and that
hospitals cannot endure such increases. This commenter further noted
that the total cost for the

[[Page 50445]]

LTCHQR Program to all LTCHs, with the inclusion of the three
additional finalized measures in this rule is close to $12 million,
while the initially estimated cost for the LTCHQR Program in the FY
2012 IPPS/LTCH PPS final rule was $750,000.
Response: We believe that the commenter's reference to $750,000
is a reference to our estimate in section IX.b.6 the FY 2012 IPPS/
LTCH PPS final rule of the costs of submitting the CAUTI and CLABSI
data to NHSN (76 FR 51780 through 51781). Our estimate of the
effects of the LTCHQR Program in that final rule (76 FR 51839) was
$1,128,440. Our original estimate in the FY 2012 IPPS/LTCH PPS final
rule was based on projected costs for the program, as we had no data
related to the rate of submission of our proposed measures.
While the commenter is correct that the estimates in the
proposed FY 2015 IPPS/LTCH PPS proposed rule, as well as this final
rule, equal approximately $12 million, we would like to take this
opportunity to explain the increase. Our original estimate in the FY
2012 IPPS/LTCH PPS final rule was based on projected costs for the
program, as we had no data related to the rate of submission of our
proposed measures.
In subsequent years, as we added measures to the LTCHQR Program
and as we have obtained a better understanding of the rate at which
LTCHs would submit HAI data to the NHSN, we calculated and
recalculated these costs in order to provide a more accurate
representation of the program costs. As we have done in past rules,
based on new information from the CDC, we have again recalculated
the program costs related to previously finalized quality measures
and required data submission. The estimates contained within this
final rule resulted from actual CDC data regarding the rate of
submission of all quality measures submitted via the CDC's NHSN, as
well as from OMB-approved burden estimates for each of these
measures. In addition, we accounted for actual burden, such as the
Patient Safety Reporting Plan and Denominator for Specialty Care
Area, which together, added an additional 64.2 hours per year per
provider or 28,248 hours for all LTCHs. Finally, in the FY 2015
IPPS/LTCH PPS proposed rule, as well as this final rule, we
accounted for overhead and fringe benefits, which effectively
doubled many of our earlier cost estimates. Our inclusion of these
costs (overhead and fringe), which we have not included in the past,
is a substantial factor associated with the increase in burden.
We believe that this cost estimate cannot be compared to the
cost estimate in the FY 2014 and previous IPPS/LTCH PPS final rules,
without recognition of the factors discussed above. However, we are
mindful of the burden of LTCHQR Program requirements and we have
attempted to balance the need for a robust LTCHQR Program with this
burden. For example, we have authorized sampling for certain measure
reporting. In addition, as discussed in section IX.C.7.a.(1) of the
preamble of this final rule, in response to commenters' specific
concerns regarding burden, we are not adopting the reporting of
several proposed new items in the LTCH CARE Tool, which overlap
other items we are retaining, had high ``Activity Did Not Occur''
rates, and can be removed from the quality measure without affecting
the measure substantively. As noted above, these modifications
reduce our burden estimate by $1,333,851.38.

O. Effects of Regarding Electronic Health Record (EHR) Incentive
Program and Hospital IQR Program

In sections IX.D. of the preamble of this final rule, we discuss
requirements for the EHR Incentive Program. We are aligning the
Medicare EHR Incentive Program reporting and submission timelines
for clinical quality measures for eligible hospitals and CAHs with
the Hospital IQR Program's reporting and submission timelines.
However we are not finalizing our proposal to require quarterly
submission of electronic clinical quality measure data.
We have determined that the electronic submission of aggregate-
level data using QRDA-III will not be feasible in 2015 for eligible
hospitals and CAHs under the Medicare EHR Incentive Program. We are
finalizing our proposal to continue, for FY 2015, the policy we
adopted for FY 2014 for eligible hospitals and CAHs submitting
electronic clinical quality measures under the Medicare EHR
Incentive Program. For FY 2015, eligible hospitals and CAHs will be
able to electronically submit using a method similar to the 2012 and
2013 EHR Incentive Program electronic reporting pilot for eligible
hospitals and CAHs, which used QRDA-I (patient-level data). Eligible
hospitals and CAHs that are beyond their first year of meaningful
use may continue to report aggregate electronic clinical quality
measure results through attestation. We also are clarifying our
policy on zero denominators and the case threshold exemption for
clinical quality measures.
We do not believe that our newly finalized proposals to align
the Medicare EHR Incentive program reporting and submission
timelines for clinical quality measures with the Hospital IQR
Program's reporting and submission timelines and to allow the
electronic submission of QRDA-I (patient-level data) for eligible
hospitals and CAHs to electronic submit electronic clinical quality
measures under the Medicare EHR Incentive Program will have a
significant impact.

P. Effects of Revision of Regulations Governing Use and Release of
Medicare Advantage Risk Adjustment Data

Under section X. of the preamble of this final rule, we are
revising the existing regulations at Sec. 422.310(f) to broaden the
specified uses of Medicare Advantage (MA) risk adjustment data in
order to strengthen program management and increase transparency in
the MA program and to specify the conditions for release of risk
adjustment data to entities outside of CMS. We are revising the
regulations to specify four additional purposes for which CMS may
use or release risk adjustment data submitted by MA organizations:
(1) To conduct evaluations and other analysis to support the
Medicare program (including demonstrations) and to support public
health initiatives and other health care-related research; (2) for
activities to support the administration of the Medicare program;
(3) for activities conducted to support program integrity; and (4)
for purposes authorized by other applicable laws. In addition, the
existing regulations do not specify conditions for release by CMS of
risk adjustment data submitted by MA organizations. Therefore, we
are adding regulatory language to address CMS' release of such data
to non-CMS entities.
We have determined that the regulatory amendments do not impose
any mandatory costs on entities that may choose, under this newly
finalized policy, to request data files from CMS for their research
analyses or other purposes listed in the proposal. Requesting data
from CMS is at the discretion of the requester. Therefore, we have
determined that there are not any economically significant effects
of the provisions. We also have determined that the regulatory
amendments will not impose a burden on the entity requesting data
files.

Q. Effects of Changes to Enforcement Provisions for Organ
Transplant Centers

Under section XI. of the preamble of this final rule, we are
finalizing our proposals to expand and clarify the current organ
transplant regulation as it relates to a transplant program's
ability to request approval for participation in Medicare based on
mitigating factors, the timelines for such review, and potential
System Improvement Agreements that may allow a transplant program to
improve outcomes and avert Medicare termination when outcomes have
not met CMS requirements. Our finalized policies also will allow for
consideration of factors such as innovative practice in the field of
organ transplantation, and for potential mitigating factors
consideration of a transplant program's outcomes using Bayesian
methodology for calculating outcomes for patient death and graft
failure.
These finalized policies will not have a significant effect on
Medicare and Medicaid programs as it will allow organ transplant
programs to continue to participate in Medicare if approved based on
mitigating factors or during the time established in the Systems
Improvement Agreement. There is an added benefit to patients who
receive transplants, and to the Medicare program, when a transplant
program improves patient and graft survival through completion of a
system Improvement Agreement. However, sufficient data are not
currently available to quantify the added benefit of System
Improvement Agreements or innovative practices. Therefore, we
project only that the cost impact of the policies to the Medicare
and Medicaid programs will be negligible.
Historical data reflect that between the date the transplant
regulation was codified in 2007 and August 2013, CMS rendered a
final determination for 129 organ transplant programs that applied
for Medicare approval based on mitigating factors. Of the 129
transplant programs, 20 terminated Medicare participation. An
additional 33 transplant programs averted Medicare termination by
successful completion of a Systems Improvement Agreement and
resulting substantial improvement in patient and graft

[[Page 50446]]

survival. The remaining programs were approved for mitigating
factors based on improved outcomes (without needing a System
Improvement Agreement), special circumstances, or came into
compliance with CMS requirements during the mitigating factors
review period. We estimate the cost associated with the application
for mitigating factors at $10,000. This is based on the salary for
the transplant administrator to prepare the documents for the
application during the 30-day timeframe allotted. The cost does not
represent any increase from what is anticipated in the existing
transplant regulation related to mitigating factors. For transplant
programs that enter into a Systems Improvement Agreement, the
estimated cost to the transplant program is $200,000 to $250,000
based on reports from programs that have completed such Agreements
in the past. Both a mitigating factors review and completion of a
System Improvement Agreement are voluntary acts on the part of a
hospital that maintains a transplant program. Since the 2007
effective date of the CMS regulation, only one hospital has elected
not to file a mitigating factors review after being cited by CMS for
a condition-level deficiency for patient outcomes or clinical
experience, and few hospitals have declined a CMS offer to complete
a System Improvement Agreement. Therefore, we conclude that the
costs involved in these activities are much lower for the hospital
compared with other alternatives, such as filing an appeal and
incurring the legal costs of that appeal.
Our finalized policies will not have a significant impact on a
substantial number of small businesses or other small entities. Nor
will they have a significant impact on small rural hospitals.

II. Alternatives Considered

This final rule contains a range of policies. It also provides
descriptions of the statutory provisions that are addressed,
identifies the finalized policies, and presents rationales for our
decisions and, where relevant, alternatives that were considered.

III. Overall Conclusion

1. Acute Care Hospitals

Table I of section I.G. of this Appendix demonstrates the
estimated distributional impact of the IPPS budget neutrality
requirements for the MS-DRG and wage index changes, and for the wage
index reclassifications under the MGCRB. Table I also shows an
overall decrease of 0.6 percent in operating payments. As discussed
in section I.G. of this Appendix, we estimate that operating
payments will decrease by approximately $654 million in FY 2015
relative to FY 2014. However, when we account for the impact of the
changes in Medicare DSH payments and the impact of the new
additional payments based on uncompensated care in accordance with
section 3133 of the Affordable Care Act, based on estimates provided
by the CMS Office of the Actuary, consistent with our policy
discussed in section IV.F. of the preamble of this final rule, we
estimate that operating payments will decrease by approximately $457
million relative to FY 2014. In addition, we estimate a savings of
$27 million associated with the HACs policies in FY 2015, which is
an additional $1 million in savings as compared to FY 2014. We
estimate the implementation of the HAC Reduction Program, under
section 3008 of the Affordable Care Act, will reduce payments by
$369 million in FY 2015. We estimate that the expiration of the
expansion of low-volume hospital payments for discharges beginning
on April 1, 2015, under the Protecting Access to Medicare Act of
2014 (Pub. L. 113-93) will result in a decrease in payments of
approximately $152 million relative to FY 2014. We estimate that the
new technology add-on payments for FY 2015 will increase spending by
approximately $91 million. Finally, we estimate that the policies
related to validation, including submission of and payment for
secure electronic versions of medical information for validation for
the FY 2017 payment determination and subsequent years, as described
in the ICRs for the Hospital IQR Program in section XII.B.6. of the
preamble of this final rule, will result in no change in payments
for CMS for FY 2015. These estimates, combined with our estimated
decrease in FY 2015 operating payment of -$457 million, result in an
estimated decrease of approximately $888 million for FY 2015. We
estimate that hospitals will experience a 1.5 percent increase in
capital payments per case, as shown in Table III of section I.I. of
this Appendix. We project that there will be a $132 million increase
in capital payments in FY 2015 compared to FY 2014. The cumulative
operating and capital payments would result in a net decrease of
approximately $756 million to IPPS providers. The discussions
presented in the previous pages, in combination with the rest of
this final rule, constitute a regulatory impact analysis.

2. LTCHs

Overall, LTCHs are projected to experience an increase in
estimated payments per discharge in FY 2015. In the impact analysis,
we are using the rates, factors, and policies presented in this
final rule, including updated wage index values and relative
weights, and the best available claims and CCR data to estimate the
change in payments under the LTCH PPS for FY 2015. Accordingly,
based on the best available data for the 422 LTCHs in our database,
we estimate that FY 2015 LTCH PPS payments will increase
approximately $62 million relative to FY 2014 as a result of the
payment rates and factors presented in this final rule. In addition,
we estimate that net effect of the projected impact of certain other
LTCH PPS policy changes (that is, the reinstatement of the
moratorium on the full implementation of the ``25 percent
threshold'' payment adjustment as discussed in section VII.E. of the
preamble of this final rule; the reinstatement of the moratorium on
the development of new LTCHs and LTCH satellite facilities and
additional LTCH beds as discussed in section VII.G. of the preamble
of this final rule; the revocation of onsite discharges and
readmissions policy as discussed in section VII.F. of the preamble
of this final rule; and the payment adjustment for ``subclause
(II)'' LTCHs as discussed in section VII.H. of the preamble of this
final rule) is estimated to result in an increase in LTCH PPS
payments of approximately $116 million. The impact analysis of the
payment rates and factors presented in this final rule under the
LTCH PPS, in conjunction with the estimated payment impacts of
certain other LTCH PPS policy changes, will result in a net increase
of $178 million to LTCH providers. Additionally, costs to LTCHs
associated with the completion of the data for the LTCHQR Program
are increasing by $4.7 million for FY 2015.

IV. Accounting Statements and Tables

A. Acute Care Hospitals

As required by OMB Circular A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table V below, we
have prepared an accounting statement showing the classification of
the expenditures associated with the provisions of this final rule
as they relate to acute care hospitals. This table provides our best
estimate of the change in Medicare payments to providers as a result
of the changes to the IPPS presented in this final rule. All
expenditures are classified as transfers to Medicare providers.
The savings to the Federal Government associated with the
policies in this final rule are estimated at $756 million.

Table V--Accounting Statement: Classification of Estimated Expenditures
Under the IPPS From FY 2014 to FY 2015
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... -$756 million.
From Whom to Whom...................... Federal Government to IPPS
Medicare Providers.
------------------------------------------------------------------------

[[Page 50447]]

B. LTCHs

As discussed in section I.L. of this Appendix, the impact
analysis of the payment rates and factors presented in this final
rule under the LTCH PPS, As discussed in section I.L. of this
Appendix, the impact analysis of the payment rates and factors
presented in this final rule under the LTCH PPS, in conjunction with
the estimated payment impacts of certain other LTCH PPS policy
changes (that is, the reinstatement of the moratorium on the full
implementation of the ``25-percent threshold'' payment adjustment;
the reinstatement of the moratorium on the development of new LTCHs
and LTCH satellite facilities and increase in the number of LTCH
beds; the revocation of onsite discharges and readmissions policy;
and the payment adjustment for ``subclause (II)'' LTCHs), is
projected to result in an increase in estimated aggregate LTCH PPS
payments in FY 2015 relative to FY 2014 of approximately $178
million based on the data for 422 LTCHs in our database that are
subject to payment under the LTCH PPS. Therefore, as required by OMB
Circular A-4 (available at https://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table VI below, we have prepared an accounting
statement showing the classification of the expenditures associated
with the provisions of this final rule as they relate to the changes
to the LTCH PPS. Table VI provides our best estimate of the
estimated increase in Medicare payments under the LTCH PPS as a
result of the payment rates and factors and other provisions
presented in this final rule based on the data for the 422 LTCHs in
our database. All expenditures are classified as transfers to
Medicare providers (that is, LTCHs). Lastly, we present the costs to
LTCHs associated with the completion of the data for the LTCHQR
Program at $4.7 million than in FY 2014.
The cost to the Federal Government associated with the policies
for LTCHs in this final rule is estimated at $178 million.

Table VI--Accounting Statement: Classification of Estimated Expenditures
From the FY 2014 LTCH PPS to the FY 2015 LTCH PPS
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... $178 million.
From Whom to Whom...................... Federal Government to LTCH
Medicare Providers.
------------------------------------------------------------------------
Category Costs
------------------------------------------------------------------------
Annualized Monetized Costs for LTCHs to $4.7 million.
Submit Quality Data.
------------------------------------------------------------------------

V. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory
relief of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
government jurisdictions. We estimate that most hospitals and most
other providers and suppliers are small entities as that term is
used in the RFA. The great majority of hospitals and most other
health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $7.0 million to $35.5
million in any 1 year). (For details on the latest standards for
health care providers, we refer readers to page 36 of the Table of
Small Business Size Standards for NAIC 622 found on the SBA Web site
at: https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
For purposes of the RFA, all hospitals and other providers and
suppliers are considered to be small entities. Individuals and
States are not included in the definition of a small entity. We
believe that the provisions of this final rule relating to acute
care hospitals would have a significant impact on small entities as
explained in this Appendix. Because we lack data on individual
hospital receipts, we cannot determine the number of small
proprietary LTCHs. Therefore, we are assuming that all LTCHs are
considered small entities for the purpose of the analysis in section
I.L. of this Appendix. MACs are not considered to be small entities.
Because we acknowledge that many of the affected entities are small
entities, the analysis discussed throughout the preamble of this
final rule constitutes our regulatory flexibility analysis. In FY
2015 IPPS/LTCH PPS proposed rule, we solicited public comments on
our estimates and analysis of the impact of our proposals on those
small entities. Any public comments that we received and our
responses are presented throughout this final rule.

VI. Impact on Small Rural Hospitals

Section 1102(b) of the Social Security Act requires us to
prepare a regulatory impact analysis for any proposed or final rule
that may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must
conform to the provisions of section 603 of the RFA. With the
exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of an urban area and
has fewer than 100 beds. Section 601(g) of the Social Security
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain
New England counties as belonging to the adjacent urban area. Thus,
for purposes of the IPPS and the LTCH PPS, we continue to classify
these hospitals as urban hospitals. (We refer readers to Table I in
section I.G. of this Appendix for the quantitative effects of the
policy changes under the IPPS for operating costs.)

VII. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule whose mandates require spending in
any 1 year of $100 million in 1995 dollars, updated annually for
inflation. In 2014, that threshold level is approximately $141
million. This final rule will not mandate any requirements for
State, local, or tribal governments, nor will it affect private
sector costs.

VIII. Executive Order 12866

In accordance with the provisions of Executive Order 12866, the
Executive Office of Management and Budget reviewed this final rule.

Appendix B: Recommendation of Update Factors for Operating Cost Rates
of Payment for Inpatient Hospital Services

I. Background

Section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Under section 1886(e)(5) of the Act, we are required
to publish update factors recommended by the Secretary in the
proposed and final IPPS rules, respectively. Accordingly, this
Appendix provides the recommendations for the update factors for the
IPPS national standardized amount, the Puerto Rico-specific
standardized amount, the hospital-specific rate for SCHs and MDHs,
and the rate-of-increase limits for certain hospitals excluded from
the IPPS, as well as LTCHs. In prior years, we have made a
recommendation in the IPPS proposed rule and final rule for the
update factors for the payment rates for IRFs and IPFs. However, for
FY 2015, we plan to include the Secretary's recommendation for the
update factors for IRFs and IPFs in separate Federal Register
documents at the time that we announce the annual updates for IRFs
and IPFs. We also discuss our response to MedPAC's recommended
update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2015

A. FY 2015 Inpatient Hospital Update

As discussed in section IV.B. of the preamble to this final
rule, for FY 2015,

[[Page 50448]]

consistent with section 1886(b)(3)(B) of the Act, as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act, we are
setting the applicable percentage increase by applying the following
adjustments in the following sequence. Specifically, the applicable
percentage increase under the IPPS is equal to the rate-of-increase
in the hospital market basket for IPPS hospitals in all areas,
subject to a reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments;
also referred to as the market basket update or rate-of-increase
(with no adjustments)) for hospitals that fail to submit quality
information under rules established by the Secretary in accordance
with section 1886(b)(3)(B)(viii) of the Act and a 33 1/3 percent
reduction to three-fourths of the applicable percentage increase
(prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals not considered to be meaningful
electronic health record (EHR) users in accordance with section
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment
based on changes in economy-wide productivity (the multifactor
productivity (MFP) adjustment), and an additional reduction of 0.2
percentage point as required by section 1886(b)(3)(B)(xii) of the
Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as
added by section 3401(a) of the Affordable Care Act, state that
application of the MFP adjustment and the additional FY 2015
adjustment of 0.2 percentage point may result in the applicable
percentage increase being less than zero.
In the FY 2015 IPPS/LTCH PPS proposed rule, based on the most
recent data available at that time, in accordance with section
1886(b)(3)(B) of the Act, we proposed to establish the FY 2015
market basket update used to determine the applicable percentage
increase for the IPPS based on IHS Global Insight, Inc.'s (IGI's)
first quarter 2014 forecast of the FY 2010-based IPPS market basket
rate-of-increase with historical data through fourth quarter 2013,
which was estimated to be 2.7 percent. Based on the most recent data
available for this FY 2015 final rule, in accordance with section
1886(b)(3)(B) of the Act, we are establishing the FY 2015 market
basket update used to determine the applicable percentage increase
for the IPPS based on IHS Global Insight, Inc.'s (IGI's) second
quarter 2014 forecast of the FY 2010-based IPPS market basket rate-
of-increase, which is estimated to be 2.9 percent.
In accordance with section 1886(b)(3)(B) of the Act, as amended
by section 3401(a) of the Affordable Care Act, in section IV.B.1. of
the preamble of the FY 2015 IPPS/LTCH PPS proposed rule (79 FR
28087), we proposed a multifactor productivity (MFP) adjustment (the
10-year moving average of MFP for the period ending FY 2015) of 0.4
percent. Therefore, based on IGI's first quarter 2014 forecast of
the FY 2010-based IPPS market basket, depending on whether a
hospital submits quality data under the rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter
referred to as a hospital that submits quality data) and is a
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
we presented in the proposed rule four possible applicable
percentage increases that could be applied to the standardized
amount. Based on the most recent data available for this FY 2015
IPPS/LTCH PPS final rule, in accordance with section 1886(b)(3)(B)
of the Act, as amended by section 3401(a) of the Affordable Care
Act, in section IV.B.1. of the preamble of this final rule, we are
establishing a MFP adjustment (the 10-year moving average of MFP for
the period ending FY 2015) of 0.5 percent.
In accordance with section 1886(b)(3)(B) of the Act, as amended
by section 3401(a) of the Affordable Care Act, as discussed in
section IV.B.1. of the preamble of this final rule, we are
establishing the applicable percentages increases for the FY 2015
updates based on IGI's second quarter 2014 forecast of the FY 2010-
based IPPS market basket, depending on whether a hospital submits
quality data under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under
section 1886(b)(3)(B)(ix) of the Act, as outlined in the table
below.

----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2015 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........ 2.9 2.9 2.9 2.9
Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.725 -0.725
under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR 0.0 -0.725 0.0 -0.725
User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi) -0.5 -0.5 -0.5 -0.5
of the Act.....................................
Statutory Adjustment under Section -0.2 -0.2 -0.2 -0.2
1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to 2.2 1.475 1.475 0.75
Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

B. Update for SCHs and MDHs for FY 2015

Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2015
applicable percentage increase in the hospital-specific rate for
SCHs and MDHs equals the applicable percentage increase set forth in
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor
as for all other hospitals subject to the IPPS).
As discussed in section IV.G. of the preamble of this final
rule, section 1106 of the Pathway for SGR Reform Act of 2013 (Pub.
L. 113-67), enacted on December 26, 2013, extended the MDH program
from the end of FY 2013 through the first half of FY 2014 (that is,
for discharges occurring before April 1, 2014). Subsequently,
section 106 of the Protecting Access to Medicare Act of 2014 (Pub.
L. 113-93), enacted on April 1, 2014, further extended the MDH
program through the first half of FY 2015 (that is, for discharges
occurring before April 1, 2015). Prior to the enactment of Public
Law 113-67, the MDH program was to be in effect through the end of
FY 2013 only. The MDH program expires for discharges beginning on
April 1, 2015, under current law. Accordingly, the update of the
hospital-specific rates for FY 2015 for MDHs will apply in
determining payments for FY 2015 discharges occurring before April
1, 2015.
As mentioned above, the update to the hospital specific rate for
SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as
amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, depending on whether a hospital submits quality data
and is a meaningful EHR user, we are establishing the same four
applicable percentage increases in the table above for the hospital-
specific rate applicable to SCHs and MDHs.

C. FY 2015 Puerto Rico Hospital Update

Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act and states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located
in any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for FY 2003 for hospitals in a
large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount is subject to the applicable percentage increase
set forth in section 1886(b)(3)(B)(i) of the Act as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act (that is,
the same update factor as for all other hospitals subject

[[Page 50449]]

to the IPPS). Accordingly, we are making an applicable percentage
increase to the Puerto Rico-specific standardized amount of 2.2
percent.

D. Update for Hospitals Excluded From the IPPS for FY 2015

Section 1886(b)(3)(B)(ii) of the Act is used for purposes of
determining the percentage increase in the rate-of-increase limits
for children's hospitals, cancer hospitals, and hospitals located
outside the 50 States, the District of Columbia, and Puerto Rico
(that is, short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and America Samoa).
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in
the rate-of-increase limits equal to the market basket percentage
increase. In accordance with Sec. 403.752(a) of the regulations,
RNHCIs are paid under the provisions of Sec. 413.40, which also use
section 1886(b)(3)(B)(ii) of the Act to update the percentage
increase in the rate-of-increase limits.
Currently, children's hospitals, PPS-excluded cancer hospitals,
RNHCIs, and short-term acute care hospitals located in the U.S.
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa are among the remaining types of hospitals still paid under
the reasonable cost methodology, subject to the rate-of-increase
limits. We are applying the FY 2015 percentage increase in the IPPS
operating market basket to the target amount for children's
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term
acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa. For this final rule,
the current estimate of the FY 2015 IPPS operating market basket
percentage increase is 2.9 percent.

E. Update for LTCHs for FY 2015

Section 123 of Public Law 106-113, as amended by section 307(b)
of Public Law 106-554 (and codified at section 1886(m)(1) of the
Act), provides the statutory authority for updating payment rates
under the LTCH PPS.
As discussed in section V.A. of the Addendum to this final rule,
we are establishing an update to the LTCH PPS standard Federal rate
for FY 2015 based on the full LTCH PPS market basket increase
estimate (for this final rule, estimated to be 2.9 percent), subject
to an adjustment based on changes in economy-wide productivity and
an additional reduction required by sections 1886(m)(3)(A)(ii) and
(m)(4)(E) of the Act. In accordance with the LTCHQR Program under
section 1886(m)(5) of the Act, we are reducing the annual update to
the LTCH PPS standard Federal rate by 2.0 percentage points for
failure of a LTCH to submit the required quality data. The MFP
adjustment described in section 1886(b)(3)(B)(xi)(ii) of the Act is
currently estimated to be 0.5 percent for FY 2015. In addition,
section 1886(m)(3)(A)(ii) of the Act requires that any annual update
for FY 2015 be reduced by the ``other adjustment'' at section
1886(m)(4)(E) of the Act, which is 0.2 percentage point. Therefore,
based on IGI's second quarter 2014 forecast of the FY 2015 LTCH PPS
market basket increase, we are establishing an annual update to the
LTCH PPS standard Federal rate of 2.2 percent (that is, the current
FY 2015 estimate of the market basket rate-of-increase of 2.9
percent less an adjustment of 0.5 percentage point for MFP and less
0.2 percentage point). Accordingly, we are applying an update factor
of 1.022 in determining the LTCH PPS standard Federal rate for FY
2015. For LTCHs that fail to submit quality data for FY 2015, we are
applying an annual update to the LTCH PPS standard Federal rate of
0.2 percent (that is, the final annual update for FY 2015 of 2.2
percent less 2.0 percentage points for failure to submit the
required quality data in accordance with section 1886(m)(5)(C) of
the Act and our rules) by applying an update factor of 1.002 in
determining the LTCH PPS standard Federal rate for FY 2015.
Furthermore, we are making an adjustment for the final year of the
3-year phase-in of the one-time prospective adjustment to the
standard Federal rate under Sec. 412.523(d)(3) by applying a factor
of 0.97834 (or approximately -1.3 percent) in FY 2015, consistent
with current law.

III. Secretary's Recommendations

MedPAC is recommending an inpatient hospital update equal to
3.25 percent for FY 2015. MedPAC's rationale for this update
recommendation is described in more detail below. As mentioned
above, section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Consistent with current law, depending on whether a
hospital submits quality data and is a meaningful EHR user, we are
recommending the four applicable percentage increases to the
standardized amount listed in the table under section II. of this
Appendix B. We are recommending that the same applicable percentage
increases apply to SCHs and MDHs. For the Puerto Rico-specific
standardized amount, we are recommending an update of 2.2 percent.
In addition to making a recommendation for IPPS hospitals, in
accordance with section 1886(e)(4)(A) of the Act, we are
recommending update factors for certain other types of hospitals
excluded from the IPPS. Consistent with our policies for these
facilities, we are recommending an update to the target amounts for
children's hospitals, cancer hospitals, RNHCIs, and short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa of 2.9 percent.
For FY 2015, consistent with policy set forth in section VII. of
the preamble of this final rule, we are recommending an update of
2.2 percent (that is, the current FY 2015 estimate of the LTCH PPS
market basket rate-of-increase of 2.9 percent less an adjustment of
0.5 percentage point for MFP and less 0.2 percentage point) to the
LTCH PPS standard Federal rate.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating
Payments in Traditional Medicare

In its March 2014 Report to Congress, MedPAC assessed the
adequacy of current payments and costs, and the relationship between
payments and an appropriate cost base. MedPAC recommended an update
to the hospital inpatient rates equal to 3.25 percent concurrent
with changes to the outpatient prospective payment system and with
initiating change to the LTCH PPS. We refer the reader to the March
2014 MedPAC report, which is available for download at
www.medpac.gov for a complete discussion on this recommendation.
MedPAC expects Medicare margins to remain low in 2014. At the same
time, MedPAC's analysis finds that efficient hospitals have been
able to maintain positive Medicare margins while maintaining a
relatively high quality of care.
Response: With regard to MedPAC's recommendation of an update to
the hospital inpatient rates equal to 3.25 percent, for FY 2015, as
discussed above, sections 3401(a) and 10319(a) of the Affordable
Care Act amended section 1886(b)(3)(B) of the Act. Section
1886(b)(3)(B) of the Act, as amended by these sections, sets the
requirements for the FY 2015 applicable percentage increase.
Therefore, we are establishing an applicable percentage increase for
FY 2015 of 2.2 percent, provided the hospital submits quality data
and is a meaningful EHR user, consistent with these statutory
requirements.
We note that, because the operating and capital prospective
payment systems remain separate, we are continuing to use separate
updates for operating and capital payments. The update to the
capital rate is discussed in section III. of the Addendum to this
final rule.

[FR Doc. 2014-18545 Filed 8-4-14; 4:15 pm]
BILLING CODE 4120-01-P

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