Medicare Program; Temporary Exception for Certain Severe Wound Discharges From Certain Long-Term Care Hospitals Required by the Consolidated Appropriations Act, 2016; Modification of Limitations on Redesignation by the Medicare Geographic Classification Review Board, 23428-23438 [2016-09219]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 81, Number 77 (Thursday, April 21, 2016)]
[Rules and Regulations]
[Pages 23428-23438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09219]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1664-IFC]
RIN 0938-AS88


Medicare Program; Temporary Exception for Certain Severe Wound 
Discharges From Certain Long-Term Care Hospitals Required by the 
Consolidated Appropriations Act, 2016; Modification of Limitations on 
Redesignation by the Medicare Geographic Classification Review Board

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period (IFC) implements 
section 231 of the Consolidated Appropriations Act of 2016 (CAA), which 
provides for a temporary exception for certain wound care discharges 
from the application of the site neutral payment rate under the Long-
Term Care Hospital (LTCH) Prospective Payment System (PPS) for certain 
long-term care hospitals. This IFC also amends our current regulations 
to allow hospitals nationwide to reclassify based on their acquired 
rural status, effective with reclassifications beginning with fiscal 
year (FY) 2018. Hospitals with an existing Medicare Geographic 
Classification Review Board (MGCRB) reclassification would also have 
the opportunity to seek rural reclassification for IPPS payment and 
other purposes and keep their existing MGCRB reclassification. We would 
also apply the policy in this IFC when deciding timely appeals before 
the Administrator under our regulations for FY 2017 that were denied by 
the MGCRB due to existing regulations, which do not permit simultaneous 
rural reclassification for IPPS payment and other purposes and MGCRB 
reclassification. These regulatory changes implement the decisions in 
Geisinger Community Medical Center v. Secretary, United States 
Department of Health and Human Services, 794 F.3d 383 (3d Cir. 2015) 
and Lawrence + Memorial Hospital v. Burwell, No. 15-164, 2016 WL 423702 
(2d Cir. Feb. 4, 2015) in a nationally consistent manner.

DATES: Effective date: These regulations are effective on April 21, 
2016.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on June 17, 2016.

ADDRESSES: In commenting, please refer to file code CMS-1664-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed)
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS--1664-IFC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS--1664-IFC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.

[[Page 23429]]

    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Emily Lipkin, (410) 786-3633 for the 
Temporary Exception to Site-Neutral Payments for Certain Long-Term Care 
Hospital Discharges.
    Tehila Lipschutz, (410) 786-1344 or Dan Schroder, (410) 786-7452 
for the Modification of Limitations on Redesignation by the Medicare 
Geographic Classification Review Board.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Long-Term Care Hospital Prospective Payment System

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

[[Page 23430]]

LTCH PPS through the annual update cycles prior to the FY 2014 
rulemaking cycle. In addition, the FY 2016 IPPS/LTCH PPS final rule, we 
implemented the provisions of the Pathway for SGR Reform Act of 2013 
(Pub. L. 113-67), which mandated the application of the ``site 
neutral'' payment rate for discharges in cost reporting periods 
beginning in FY 2016. Section 1886(m)(6)(A) of the Act provides that, 
for cost reporting periods beginning on or after October 1, 2015, 
discharges that do not meet certain statutory criteria are paid the 
site neutral payment rate. Discharges which do meet the statutory 
criteria continue to receive reimbursement at the LTCH PPS standard 
federal payment rate. The application of the site neutral payment rate, 
which resulted in a dual rate payment structure under the LTCH PPS, is 
implemented in the regulations at Sec.  412.522. For more information 
on the statutory requirements of the Pathway for SGR Reform Act of 
2013, refer to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 
through 49623).

B. Wage Index for Acute Care Hospitals Paid Under the Inpatient 
Prospective Payment System (IPPS)

    Under section 1886(d) of the Act hospitals are paid based on 
prospectively set rates. To account for geographic area wage level 
differences, section 1886(d)(3)(E) of the Act requires that the 
Secretary adjust the standardized amounts by a factor (established by 
the Secretary) reflecting the relative hospital wage level in the 
geographic area of the hospital, as compared to the national average 
hospital wage level. We currently define hospital labor market areas 
based on the delineations of statistical areas established by the 
Office of Management and Budget (OMB). The current statistical areas 
(which were implemented beginning with FY 2015) are based on revised 
OMB delineations issued on February 28, 2013, in OMB Bulletin No. 13-
01. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49951 through 49963) for a full discussion of our implementation of the 
new OMB labor market area delineations beginning with the FY 2015 wage 
index.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index of hospitals annually, and to base the update on a 
survey of wages and wage-related costs of short-term, acute care 
hospitals. Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amounts so as to ensure that 
aggregate payments under the IPPS, after implementation of the 
provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of 
the Act, regarding geographic reclassification of hospitals, are equal 
to the aggregate prospective payments that would have been made absent 
these provisions.
    Hospitals may seek to have their geographic designation 
reclassified. Under section 1886(d)(8)(E) of the Act, a qualifying 
prospective payment hospital located in an urban area may apply for 
rural status. Specifically, section 1886(d)(8)(E) of the Act states 
that ``[f]or purposes of this subsection, not later than 60 days after 
the receipt of an application (in a form and manner determined by the 
Secretary) from a subsection (d) hospital described in clause (ii), the 
Secretary shall treat the hospital as being located in the rural area 
(as defined in paragraph (2)(D)) of the state in which the hospital is 
located.'' The regulations governing these geographic redesignations 
are found in Sec.  412.103. We also refer readers to the final rule 
published in the August 1, 2000 Federal Register entitled, ``Medicare 
Program; Provisions of the Balanced Budget Refinement Act of 1999; 
Hospital Inpatient Payments and Rates and Costs of Graduate Medical 
Education'' (65 FR 47029 through 47031) for a discussion of the general 
criteria for reclassifying from urban to rural under this statute. In 
addition, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51596), we 
discussed the effects on the wage index of an urban hospital 
reclassifying to a rural area of its state, if the urban hospital meets 
the requirements under Sec.  412.103. Hospitals that are located in 
states without any geographically rural areas are ineligible to apply 
for rural reclassification in accordance with the provisions of Sec.  
412.103.
    In addition, under section 1886(d)(10) of the Act, the Medicare 
Geographic Classification Review Board (MGCRB) considers applications 
by hospitals for geographic reclassification for purposes of payment 
under the IPPS. Hospitals must apply to the MGCRB to reclassify not 
later than 13 months prior to the start of the fiscal year for which 
reclassification is sought (generally by September 1). Generally, 
hospitals must be proximate to the labor market area to which they are 
seeking reclassification and must demonstrate characteristics similar 
to hospitals located in that area. The MGCRB issues its decisions by 
the end of February for reclassifications that become effective for the 
following fiscal year (beginning October 1). The regulations applicable 
to reclassifications by the MGCRB are located in Sec. Sec.  412.230 
through 412.280. (We refer readers to a discussion in the FY 2002 IPPS 
final rule (66 FR 39874 and 39875) regarding how the MGCRB defines 
mileage for purposes of the proximity requirements.) The general 
policies applicable to reclassifications under the MGCRB process are 
discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final 
wage index (76 FR 51595 and 51596).

II. Provisions of the Interim Final Rule With Comment Period

A. Long Term Care Hospital Prospective Payment System

1. Section 231 of the Consolidated Appropriations Act, 2016
    Section 231 of the Consolidated Appropriations Act, 2016 (CAA) 
(Pub. L. 114-113) amends section 1886(m)(6) of the Act by revising 
subparagraph (A)(i) and adding new subparagraph (E), which establishes 
a temporary exception for certain wound care discharges from the site 
neutral payment rate for certain LTCHs. Specifically, under this 
statutory provision, the exception applies for discharges occurring 
prior to January 1, 2017 from LTCHs ``identified by the amendment made 
by section 4417(a) of the Balanced Budget Act of 1997'' and ``located 
in a rural area (as defined in subsection (d)(2)(D)) or treated as 
being so located pursuant to subsection (d)(8)(E)'' when the individual 
discharged ``has a severe wound''. In this interim final rule with 
comment period (IFC), we are amending Sec.  412.522 to implement this 
provision. Because the statute contained no effective date and required 
rulemaking to implement, we determined that an IFC was the appropriate 
mechanism to use to provide the longest period of relief under the 
statute.
    In implementing the provisions of section 231 of the CAA, we found 
that, in light of the unique nature of LTCHs as a category of Medicare 
provider, some of the terminology in the provision is internally 
inconsistent. Therefore, we were required to interpret the provisions 
in the way we believe reasonably reconciles seemingly inconsistent 
provisions and that results in an application of the provisions that is 
logical and workable. We discuss our interpretations in this section of 
this IFC.
    Section 1886(m)(6)(E)(i)(I)(aa) of the Act, as added by the CAA, 
specifies that the temporary exclusion for certain discharges from the 
site neutral payment rate is applicable to an LTCH that is ``identified 
by the amendment made by section 4417(a) of the Balanced Budget Act of 
1997.'' The phrase

[[Page 23431]]

``identified by the amendment made by section 4417(a) of the Balanced 
Budget Act of 1997'' has been interpreted by CMS in previous 
rulemaking. Section 114 of the Medicare, Medicaid, and SCHIP Extension 
Act (MMSEA) (Pub. L. 110-173) used the phrase to delay the 
implementation of the 25 percent policy at Sec. Sec.  412.534 and 
412.536 for LTCHs ``identified by the amendment made by section 4417(a) 
of the Balanced Budget Act of 1997'' which we interpreted in the May 
22, 2008 interim final rule with comment period (IFC). In that IFC (73 
FR 29703) (finalized in our FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 43980)) we interpreted the phrase to mean hospitals which were 
described in Sec.  412.23(e)(2)(i) that meet the criteria of Sec.  
412.22(f). (We note that we received no comments in response to this 
interpretation). Section 412.22(f) requires that, in order to maintain 
grandfathered status, a hospital-within-hospital (HwH) must continue to 
operate under the same terms and conditions including but not limited 
to number of beds. In revising Sec.  412.22(f) in the FY 2004 IPPS 
final rule (68 FR 45463), we created a ``hold harmless'' provision 
which allowed a grandfathered HwH to increase beds or change terms and 
maintain grandfathered status so long as beds were not increased on or 
after October 1, 2003 (meaning that if a hospital increased beds 
between October 1, 1995 and September 30, 2003 it would maintain its 
grandfathered status). As we have already interpreted this exact phrase 
in previous rulemaking, for purposes of implementing section 231 of the 
CAA we are interpreting the phrase consistent with our implementation 
of MMSEA, meaning that ``identified by the amendment made by section 
4417(a) of the Balanced Budget Act of 1997'' requires that the LTCH 
participated in Medicare as an LTCH and was co-located with another 
hospital as of September 30, 1995, and must currently meet the 
requirements of Sec.  412.22(f).
    Section 4417(a) of the BBA of 1997 permanently exempted certain 
LTCHs from our regulations governing separateness and control 
requirements for HwHs (which we established in the FY 1995 IPPS final 
rule (59 FR 45389)). We implemented section 4417(a) of the BBA in the 
FY 1998 IPPS final rule (62 FR 46012). As finalized, our regulations 
implementing section 4417(a) of the BBA exempted hospitals excluded 
from the hospital inpatient prospective payment system on or before 
September 30, 1995 from our separateness and control HwH requirements. 
An HwH is defined in our regulations at Sec.  412.22(e) as a hospital 
which occupies space in a building also used by another hospital or on 
the campus of another hospital. The provisions governing HwH exemption 
from the separateness and control requirements remained unchanged until 
the FY 2003 rulemaking cycle in which we proposed and finalized 
revisions to Sec.  412.22(f) to specify that, effective with cost 
reporting periods beginning on or after October 1, 2003, a hospital 
operating as an HwH on or before September 30, 1995, would only be 
exempt from the criteria in Sec. Sec.  412.22(e)(1) through (5) if the 
hospital-within-a-hospital continued to operate under the same terms 
and conditions that were in effect as of September 30, 1995 (68 FR 
45463). The intent of this modification to the grandfathering provision 
was to limit the separateness and control exemption to those HwHs that 
continued to operate as they had when the Congress provided for an 
exemption from the requirements. Those HwHs that met this requirement 
would continue to be shielded as the Congress had intended. But, in 
recognition of the need not to allow these facilities undue advantage 
over facilities not benefiting from the exemption, and in recognition 
that some grandfathered HwHs no longer resembled the entities they had 
been in 1995 (for example, by changing the nature of their operations 
such as by adding more beds), we proposed to limit grandfathering to 
those HwHs that continued to operate under the same terms and 
conditions that were in effect as of September 30, 1995, the date 
identified in the BBA.
    Several commenters disagreed with our proposal to limit 
grandfathering to HwH that continue to operate under the same terms and 
conditions that were in place on September 30, 1995. These commenters 
believed that the adoption of this proposal could result in a 
decertification of a number of LTCHs, thus depriving Medicare 
beneficiaries of specialized services and unique programs. They 
asserted that CMS was requiring grandfathered HwHs that had changed the 
terms and conditions under which they operated to either reverse their 
previously approved changes or lose their certification, which would 
retroactively reverse prior governmental approvals of LTCH changes. The 
commenters further asserted that there was no good reason to treat 
these hospitals any differently from other providers participating in 
the Medicare program, a practice that the commenters believed would 
result in inequitable treatment of patients as well as employees. 
Furthermore, the commenters expressed concern that the proposed 
effective date timeframe for implementation (which was 60 days from the 
publication of the final rule) was too short because it would not allow 
adequate time for providers to undo previous changes to the terms and 
conditions under which they operated.
    In response to these comments, in the FY 2003 LTCH PPS final rule, 
we reiterated that, in establishing grandfathering regulations, the 
intent had been to protect existing hospitals from the potentially 
adverse impact of subsequent, specific regulations that they could not 
have foreseen, and, using their existing operational structures, could 
not have abided by. If those entities later proved able to change their 
operational structures, we saw no policy basis for not applying the 
separateness and control provisions that had since proven essential to 
the goals of the Medicare program--after all, the entity benefiting 
from the grandfathering would no longer resemble the entity the 
Congress had grandfathered in statute. That said, we understood 
commenters' concerns about after-the-fact changes, and so we finalized 
a policy that grandfathered any facility that continued to operate as 
it had as of September 30, 1995 (our original proposal), or that 
operated under the terms and conditions that had been put into effect 
no later than October 1, 2003, and codified these provisions in a 
revised Sec.  412.22(f). An LTCH that met these revised grandfathering 
requirements would still need to comply with the general HwH 
requirements set forth in Sec.  412.22(e) (see 68 FR 45463).
    Later, in recognition of requests for modification relating to the 
need to update a hospital's medical equipment, in the FY 2007 IPPS 
proposed rule, we proposed further revisions to the requirements of 
Sec.  412.22(f) to allow grandfathered hospitals to increase square 
footage or decrease the number of beds for cost reporting periods 
beginning on or after October 1, 2006 without a loss of grandfathered 
status. These proposals generated comments requesting further 
amendments to allow a grandfathered hospital to increase beds without 
loss of grandfathered status. As we explained in response to those 
comments in the FY 2007 IPPS final rule (71 FR 48106), grandfathered 
hospitals are generally organized and operated in ways that do not meet 
the separateness and control requirements applicable to non-
grandfathered facilities, so that they effectively function as units of 
their host facilities, an arrangement prohibited by the Act.

[[Page 23432]]

Therefore, although we finalized regulations that allowed grandfathered 
HwHs (and satellite facilities) the ability to increase their square 
footage and retain grandfathered status to allow the hospitals to be 
able to provide care using the most appropriate medical equipment and 
techniques (which may require more space than was required in 1995 and 
2003), we did not allow grandfathered hospitals an increase in the 
number of beds (71 FR 48111).
    As discussed previously, there are several reasons for which an 
LTCH described in Sec.  412.23(e)(2)(i) may not meet the criteria in 
Sec.  412.22(f). For example, the LTCH may have more than one location, 
meaning that each co-located location would be a satellite, not an HwH, 
or the hospital may have increased beds after September 30, 2003 (we 
note that the preceding provides only examples and is not an exhaustive 
list of the reasons an LTCH may not meet the criteria in Sec.  
412.22(f)). Also as previously explained, the requirement that 
grandfathered HwHs meet the criteria in Sec.  412.22(f) was established 
through previous notice-and-comment rulemaking. Therefore, in order to 
identify which LTCHs are grandfathered HwHs, Medicare Administrative 
Contractors (MACs) will be verifying which LTCHs described in Sec.  
412.23(e)(2)(i) meet the criteria in Sec.  412.22(f). Section 
1886(m)(6)(E)(i)(I)(bb) of the Act, as added by the CAA, further limits 
the temporary statutory exclusion for certain discharges from the site 
neutral payment rate to LTCHs that are ``located in a rural area (as 
defined in subsection (d)(2)(D)) or treated as being so located 
pursuant to subsection (d)(8)(E)''. In general, section 1886(d)(2)(D) 
of the Act defines the term ``rural area'' as any area outside an urban 
area, which is an area within a Metropolitan Statistical Area (MSA) (as 
defined by the OMB). This definition of rural area is consistent with 
the existing definition of rural area under the LTCH PPS set forth at 
Sec.  412.503. Therefore, in this IFC, we are establishing that 
``located in a rural area'' in section 1886(m)(6)(E)(i)(I)(bb) refers 
to LTCHs which are currently located in a rural area as defined under 
Sec.  412.503. (For information on the current labor market area 
geographic classifications used under the LTCH PPS, refer to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50180 through 50185).)
    The phrase ``treated as being so located pursuant to subsection 
(d)(8)(E)'' is internally inconsistent given the unique nature of LTCHs 
as a category of Medicare provider. There is currently no mechanism 
which an LTCH may use to be treated as rural pursuant to section 
1886(d)(8)(E) of the Act because that section only applies to 
subsection (d) hospitals, and LTCHs, by definition at section 
1886(b)(1) of the Act are not subsection (d) hospitals.
    For urban subsection (d) hospitals, we implemented the rural 
reclassification provision in the regulations at Sec.  412.103. In 
general, the provisions of Sec.  412.103 provides that a hospital that 
is located in an urban area may be reclassified as a rural hospital if 
it submits an application in accordance with our established criteria 
and meets certain conditions, which include the hospital being located 
in a rural census tract of a MSA as determined under the most recent 
version of the Goldsmith Modification, the Rural-Urban Commuting Area 
(RUCA) codes, as determined by the Office of Rural Health Policy (ORHP) 
of the Health Resources and Services Administration (HRSA), or that the 
hospital is located in an area designated by any law or regulation of 
the state in which it is located as a rural area, or the hospital is 
designated as a rural hospital by state law or regulation. Paragraph 
(b) of Sec.  412.103 sets forth application requirements for a hospital 
seeking reclassification as rural under that section, which includes a 
written application mailed to the Center for Medicare and Medicaid 
Services (CMS) regional office (RO) that contains an explanation of how 
the hospital meets the condition that constitutes the request for 
reclassification, including data and documentation necessary to support 
the request. As provided in paragraphs (c) and (d) of Sec.  412.103, 
the RO reviews the application and notifies the hospital of its 
approval or disapproval of the request within 60 days of the filing 
date (that is, the date the CMS RO receives the application), and a 
hospital (that satisfies any of the criteria set forth Sec.  412.103(a) 
is considered as being located in the rural area of the state in which 
the hospital is located as of that filing date (meaning that the 
hospital would be treated as rural for the purposes of exclusion from 
the site neutral payment rate for severe wound discharges as of the 
filing date). For additional information on our policies for hospitals 
located in urban areas and that apply for reclassification as rural 
under Sec.  412.103, refer to the FY 2001 IPPS/LTCH PPS final rule (65 
FR 47029).
    For the purposes of implementing subparagraph (E) of section 
1886(m)(6) of the Act as provided by the CAA, we are revising our 
regulations to--
     ``Borrow'' the existing rural reclassification process for 
urban subsection (d) hospitals under Sec.  412.103; and
     Allow grandfathered LTCH HwHs (previously defined in this 
IFC) to apply to their RO for treatment as being located in a rural 
area for the sole purpose of qualifying for this temporary exclusion 
from the application of the site neutral payment rate.
    We note that this policy would only allow grandfathered LTCH HwHs 
to apply for this reclassification. The rural treatment would only 
extend to this temporary exception for certain wound care discharges 
from the site neutral payment rate (meaning a grandfathered HwH LTCH 
will not be treated as rural for any other reason including, but not 
limited to, the 25 percent policy and wage index). We also note that 
the any rural treatment under Sec.  412.103 for a grandfathered HwH 
LTCH will expire at the same time as this temporary provision (that is, 
December 31, 2016).
    Section 1886(m)(6)(E)(i)(II) of the Act, as added by the CAA, 
provides that the temporary exclusion for certain discharges from the 
site neutral payment rate for certain LTCHs is applicable when ``the 
individual discharged has a severe wound.'' The use of the present 
tense in ``has'' a severe wound is also internally inconsistent. A 
strictly literal read of the statute would require exception from the 
site neutral payment rate only for an individual who, presently, ``has 
severe a wound'' at the time of their discharge from the LTCH, and thus 
payments for patients whose wounds were either healed or no longer 
severe at the time of their discharge would be made under our existing 
regulations (that is, they would receive payment at the site neutral 
payment rate unless they met the existing exclusion criteria). We do 
not believe that the Congress meant to exclude only discharges where 
the patient, at the time of discharge, still ``has'' a severe wound 
from the site neutral payment rate while making site neutral payment 
rate payments for discharges of patients whose wounds healed during the 
course of their treatment in the LTCH (that is, a patient who ``had'' a 
severe wound as opposed to ``has'' one). Therefore, in order to resolve 
this inconsistency, and in accordance with our interpretation of other 
provisions of the statute, we are implementing this provision of the 
statute so that discharges for patients who received treatment for a 
``severe wound'' at the LTCH (as discussed later in this section will 
meet the criteria for exclusion from the site neutral payment rate 
under section 1886(m)(6)(E)(i)(II) of the Act regardless of whether the 
wound

[[Page 23433]]

was still present and severe at the time of discharge.
    Section 1886(m)(6)(E)(ii) of the Act, as added by the CAA, defines 
a ``severe wound'' as ``a stage 3 wound, stage 4 wound, unstageable 
wound, non-healing surgical wound, infected wound, fistula, 
osteomyelitis or wound with morbid obesity as identified in the claim 
from the long-term care hospital.'' To implement this statutory 
definition, in consultation with our medical officers we are defining a 
wound as: ``an injury, usually involving division of tissue or rupture 
of the integument or mucous membrane with exposure to the external 
environment''. In this IFC, we are also establishing that ``as 
identified in the claim'' means ``identified based on the ICD-10 
diagnosis codes on the claim where--
     The ICD-10 diagnosis codes contain sufficient specificity 
for this purpose; or
     Through the use of a payer-specific condition code where 
the ICD-10 diagnosis codes lack sufficient specificity for this 
purpose''.
    For six of the eight statutory categories included in the 
definition of ``severe wound'' (stage 3 wound, stage 4 wound, 
unstageable wound, non-healing surgical wound, fistula, and 
osteomyelitis), we believe severe wounds can be identified through the 
use of specific ICD-10 codes which are reported in the LTCH claim. The 
list of ICD-10 diagnosis codes that we will to use to identify severe 
wounds for this group of the six statutory categories can be found in 
the table ``Severe Wound Diagnosis Codes by Category for Implementation 
of Section 231 of Public Law 114-113'' posted on the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/ under the regulation ``CMS-1664-
IFC''. Our medical officers compiled this list of codes by reviewing 
ICD-10 diagnosis codes for the statutorily enumerated categories of 
severe wounds and selected those codes for diagnoses which met our 
definition of ``wound'' (previously stated in this IFC). We note that 
under our definition of wound, the ICD-10 diagnosis codes used to 
identify severe wounds in the osteomyelitis category are also part of 
the ICD-10 diagnosis codes used to identify severe wounds in the 
fistula category so no separate identification of ICD-10 codes for 
osteomyelitis is necessary.
    The remaining two statutory categories included in the definition 
of ``severe wound'' (infected wound and wound with morbid obesity) lack 
ICD-10 diagnosis codes with sufficient specificity to identify the 
presence of a ``severe wound''. This is because the number of codes 
which are used to identify wounds and infections are too numerous to 
identify in an exhaustive list. Furthermore, the presence of codes for 
infection (or morbid obesity) and wound on the claim do not in and of 
themselves demonstrate that the discharge was for a ``severe wound.'' 
In other words, the ICD-10 diagnosis codes for infection (or morbid 
obesity) and wound do provide any information on the severity of such 
diagnosis, that is, ICD-10 diagnosis codes do not differentiate between 
such diagnoses that are ``severe'' or ``non-severe'' wounds. Because we 
cannot specify ICD-10 diagnosis codes to identify wounds in these 
categories, for the purposes of this provision we are defining a 
``wound with morbid obesity'' as ``a wound in those with morbid obesity 
that require complex, continuing care including local wound care 
occurring multiple times a day'' and we are defining an ``infected 
wound'' as ``a wound with infection requiring complex, continuing care 
including local wound care occurring multiple times a day.''
    In order to operationalize these definitions in the absence of ICD-
10 diagnosis codes, we will utilize ``payer-only'' condition codes. 
These payer-only condition codes are a type of condition code (which 
are currently reported on claims) issued by the National Uniform 
Billing Committee (NUBC), which is the governing body for forms and 
codes used in medical claims billing for hospitals and other 
institutional providers. In this IFC, we are establishing that if an 
LTCH has a discharge meeting our definition of ``wound with morbid 
obesity'' or ``infected wound'' the LTCH would inform its MAC, and the 
MAC will then place the designated payer-only condition code on the 
claim for processing. The presence of the designated payer-only 
condition code on the claim for qualifying grandfathered HwH LTCHs will 
generate a standard federal payment rate payment for the claim (that 
is, exclusion from the site neutral payment rate) consistent with this 
statutory provision. We intend to issue additional operational 
instructions regarding the use of the designated payer-only condition 
code. We note that while the use of this payer-only condition code is 
the most expedient operational method we have of implementing the 
statutory definition in the time frame allowed, the continued use of a 
payer-only condition code may not be feasible if the scope of this 
provision is expanded. Given the current limitations on the number of 
LTCHs which can qualify for this provision under the statutory criteria 
(that is, grandfathered HwHs that are located in a rural area or 
reclassify as rural, as previously described in this IFC), the ability 
to identify the other statutory categories of severe wounds, and the 
limited timeframe of the exception, we expect the number of claims 
necessitating the use of this payer-only condition code will be 
minimal.

B. Wage Index for Acute Care Hospitals Paid Under the Inpatient 
Prospective Payment System (IPPS): Criteria for an Individual Hospital 
Seeking Redesignation to Another Area (Sec.  412.103)

    Our current policy limits certain redesignations in order to 
preclude hospitals from obtaining urban to rural reclassification under 
Sec.  412.103, and then using that obtained rural status to receive an 
additional reclassification through the MGCRB. We refer readers to 
Sec.  412.230(a)(5)(iii), which states that an urban hospital that has 
been granted redesignation as rural under Sec.  412.103 cannot receive 
an additional reclassification by the MGCRB based on this acquired 
rural status for a year in which such redesignation is in effect. In 
other words, Sec.  412.230(a)(5)(iii) prohibits a hospital from 
simultaneously receiving an urban to rural reclassification under Sec.  
412.103 and a reclassification under the MGCRB.
    On July 23, 2015 the Court of Appeals for the Third Circuit issued 
a decision in Geisinger Community Medical Center v. Secretary, United 
States Department of Health and Human Services, 794 F.3d 383 (3d Cir. 
2015). Geisinger Community Medical Center (``Geisinger''), a hospital 
located in a geographically urban Core-Based Statistical Area (CBSA), 
obtained rural status under Sec.  412.103, but was unable to receive 
additional reclassification through the MGCRB while still maintaining 
its rural status under Sec.  412.230(a)(5)(iii). To receive 
reclassification through the MGCRB under existing regulations, 
Geisinger would have had to first cancel its Sec.  412.103 urban-to-
rural reclassification and use the proximity requirements for an urban 
hospital rather than take advantage of the broader proximity 
requirements for reclassification granted to rural hospitals. (We refer 
readers to Sec.  412.230(b)(1), which states that a hospital 
demonstrates a close proximity with the area to which it seeks 
redesignation if the distance from the hospital to the area is no more 
than 15 miles for an urban hospital and no more than 35 miles for a 
rural hospital.)

[[Page 23434]]

Geisinger challenged as unlawful the regulation at Sec.  
412.230(a)(5)(iii) requiring cancelation of its rural reclassification 
prior to applying for reclassification through the MGCRB. In Geisinger 
Community Medical Center v. Burwell, 73 F. Supp.3d 507 (M.D. Pa. 2014), 
the United States District Court for the Middle District of 
Pennsylvania upheld the regulation at Sec.  412.230(a)(5)(iii) and 
granted summary judgment in favor of CMS. The Court of Appeals for the 
Third Circuit reversed the decision of the District Court, holding that 
the language of section 1886(d)(8)(E)(i) of the Act is unambiguous in 
its plain intent that ``the Secretary shall treat the hospital as being 
located in the rural area,'' inclusive of MGCRB reclassification 
purposes, thus invalidating the regulation at Sec.  412.230(a)(5)(iii). 
On February 4, 2016, the Court of Appeals for the Second Circuit issued 
its decision in Lawrence + Memorial Hospital v. Burwell, No. 15-164, 
2016 WL 423702 (2d Cir. February 4, 2016), essentially following the 
reasoning of the Third Circuit Geisinger decision.
    While these decisions currently apply only to hospitals located 
within the jurisdictions of the Second and Third Circuits, we believe 
that maintaining the regulations at Sec.  412.230(a)(5)(iii) in other 
places nationally would constitute inconsistent application of 
reclassification policy based on jurisdictional regions. In the 
interest of creating a uniform national reclassification policy, we are 
removing the regulation text at Sec.  412.230(a)(5)(iii). We are also 
revising the regulation text at Sec.  412.230(a)(5)(ii) to allow more 
than one reclassification for those hospitals redesignated as rural 
under Sec.  412.103 and--simultaneously seeking reclassification 
through the MGCRB. Specifically, we are revising Sec.  
412.230(a)(5)(ii) to state that a hospital may not be redesignated to 
more than one area, except for an urban hospital that has been granted 
redesignation as rural under Sec.  412.103 and receives an additional 
reclassification by the MGCRB. Therefore, effective for 
reclassification applications due to the MGCRB on September 1, 2016, 
for reclassification first effective for FY 2018, a hospital could 
apply for a reclassification under the MGCRB while still being 
reclassified from urban to rural under Sec.  412.103. Such hospitals 
would be eligible to use distance and average hourly wage criteria 
designated for rural hospitals at Sec.  412.230(b)(1) and (d)(1). In 
addition, effective with the display date of this IFC, a hospital that 
has an active MGCRB reclassification and is then approved for 
reclassification under Sec.  412.103 would not lose its MGCRB 
reclassification; that is, a hospital with an active MGCRB 
reclassification can simultaneously maintain rural status under Sec.  
412.103, and receive a reclassified urban wage index during the years 
of its active MGCRB reclassification and would still be considered 
rural under section 1886(d) of the Act and for other purposes. We would 
also apply the policy in this IFC when deciding timely appeals before 
the Administrator under Sec.  412.278 for FY 2017 that were denied by 
the MGCRB due to existing Sec.  412.230(a)(5)(ii) and (iii), which do 
not permit simultaneous Sec.  412.103 and MGCRB reclassifications.
    Apart from the direct impact on reclassifying hospitals previously 
discussed in this section, we also considered how to treat the wage 
data of hospitals that maintain simultaneous reclassifications under 
both the Sec.  412.103 and MGCRB processes. Under current wage index 
calculation procedures, the wage data for a hospital geographically 
located in an urban area with a Sec.  412.103 reclassification is 
included in the wage index for its home geographic area. It is also 
included in its state rural wage index, if including wage data for 
hospitals with rural reclassification raises the state's rural floor. 
In addition, the wage data for a hospital located in an urban area, and 
that is approved by the MGCRB to reclassify to another urban area (or 
another state's rural area), would be included in its home area wage 
index calculation, and in the calculation for the reclassified 
``attaching'' area. We refer readers to the FY 2012 IPPS final rule (76 
FR 59595 through 59596) for a full discussion of the effect of 
reclassification on wage index calculations. Furthermore, as discussed 
in the FY 2007 IPPS final rule (71 FR 48020 through 48022), hospitals 
currently cannot simultaneously maintain more than one wage index 
status (for example, a hospital cannot simultaneously maintain a Sec.  
412.103 rural reclassification and an MGCRB reclassification, nor can a 
hospital receive an outmigration adjustment while also maintaining 
MGCRB or Lugar status). However, as a consequence of the court 
decisions previously discussed, we are revising our current regulations 
and creating a rule that would apply to all hospitals nationally, 
regarding the treatment of the wage data of hospitals that have both a 
Sec.  412.103 reclassification and an MGCRB reclassification. Under 
this IFC, if a hospital with a Sec.  412.103 reclassification is 
approved for an additional reclassification through the MGCRB process, 
and the hospital accepts its MGCRB reclassification, the CBSA to which 
the hospital is reclassified under the MGCRB prescribes the area wage 
index that the hospital would receive; the hospital would not receive 
the wage index associated with the rural area to which the hospital is 
reclassified under Sec.  412.103. That is, for wage index calculation 
and payment purposes, when there is both a Sec.  412.103 
reclassification and an MGCRB reclassification, the MGCRB 
reclassification would control for wage index calculation and payment 
purposes. Therefore, although we are amending our policy with this IFC 
so that a hospital can simultaneously have a reclassification under the 
MGCRB and an urban to rural reclassification under Sec.  412.103, we 
are separately clarifying that we will exclude hospitals with Sec.  
412.103 reclassifications from the calculation of the reclassified 
rural wage index if they also have an active MGCRB reclassification to 
another area. In these circumstances, we believe it is appropriate to 
rely on the urban MGCRB reclassification to include the hospital's wage 
data in the calculation of the urban CBSA wage index. Further, we 
believe it is appropriate to rely on the urban MGCRB reclassification 
to ensure that the hospital be paid based on its urban MGCRB wage 
index. While rural reclassification confers other rural benefits 
besides the wage index under section 1886(d) of the Act, a hospital 
that chooses to pursue reclassification under the MGCRB (while also 
maintaining a rural reclassification under Sec.  412.103) would do so 
solely for wage index payment purposes.
    As previously stated, for wage index calculation and payment 
purposes, when there is both a Sec.  412.103 reclassification and an 
MGCRB reclassification, the MGCRB reclassification would control for 
wage index calculation and payment purposes. That is, if an application 
for urban reclassification through the MGCRB is approved, and is not 
withdrawn or terminated by the hospital within the established 
timelines, we would consider, as is current practice, the hospital's 
geographic CBSA and the urban CBSA to which the hospital is 
reclassified under the MGCRB for the wage index calculation. The 
hospital's geographic CBSA and reclassified CBSA would be reflected 
accordingly in Tables 2 and 3 of the annual IPPS/LTCH PPS proposed and 
final rules. (We note that these tables are referenced in the

[[Page 23435]]

IPPS/LTCH proposed and final rules and are available only through the 
Internet on the CMS Web site.) However, in the absence of an active 
MGCRB reclassification, if the hospital has an active Sec.  412.103 
reclassification, CMS would treat the hospital as rural under Sec.  
412.103 reclassification for IPPS payment and other purposes, including 
purposes of calculating the wage indices reflected in Tables 2 and 3 of 
the annual IPPS/LTCH PPS proposed and final rules.
    In summary, for reclassifications effective beginning FY 2018, a 
hospital could acquire rural status under Sec.  412.103 and 
subsequently apply for a reclassification under the MGCRB using 
distance and average hourly wage criteria designated for rural 
hospitals. Additionally, effective with the display date of this IFC, a 
hospital with an active MGCRB reclassification could also acquire rural 
status under Sec.  412.103 for IPPS payment and other purposes. We 
would also apply the policy in this IFC when deciding timely appeals 
before the Administrator under Sec.  412.278 for FY 2017 that were 
denied by the MGCRB due to existing Sec.  412.230(a)(5)(ii) and (iii), 
which do not permit simultaneous Sec.  412.103 and MGCRB 
reclassifications. When there is both an MGCRB reclassification and a 
Sec.  412.103 reclassification, the MGCRB reclassification would 
control for wage index calculation and payment purposes. For a 
discussion regarding budget neutrality adjustments for FY 2017 and 
subsequent years for hospitals that have a reclassification under Sec.  
412.103 and an MGCRB reclassification, we refer readers to the FY 2017 
IPPS/LTCH proposed rule. Also, we intend to issue instructions to 
explain the revisions of the regulation text at Sec.  412.230(a)(5)(ii) 
and the removal of the regulation text at Sec.  412.230(a)(5)(iii) to 
ensure that MACs properly update the Provider Specific File (PSF) in 
the instance where a hospital would have a simultaneous 
reclassification to an urban area under the MGCRB and to a rural area 
under Sec.  412.103.

III. Waiver of Proposed Rulemaking and Delay in Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. In addition, in accordance with section 553(d) of the 
APA and section 1871(e)(1)(B)(i) of the Act, we ordinarily provide a 
delay in the effective date of a substantive rule. For substantive 
rules that constitute major rules, in accordance with 5 U.S.C. 801, we 
ordinarily provide a 60-day delay in the effective date. None of the 
processes or effective date requirements apply, however, when the rule 
in question is interpretive, a general statement of policy, or a rule 
of agency organization, procedure, or practice. They also do not apply 
when the statute establishes rules to be applied, leaving no discretion 
or gaps for an agency to fill in through rulemaking. Furthermore, an 
agency may waive notice-and-comment rulemaking, as well as any delay in 
effective date, when the agency finds good cause that a notice and 
public comment on the rule as well the effective date delay are 
impracticable, unnecessary, or contrary to the public interest and 
incorporates a statement of the finding and its reasons in the rule 
issued.
    For the LTCH wound care exception, we find notice-and-comment 
rulemaking and a delay in the effective date to be both unnecessary as 
well as impracticable and contrary to public interest. Section 231 of 
CAA requires the implementation of the LTCH wound care exception, 
limiting any discretion we might otherwise have, thereby making 
procedure unnecessary. In addition, given the statutory expiration of 
the provisions of section 231 of CAA on January 1, 2017 due to a 
congressionally imposed deadline, notice-and-comment and the resulting 
delay would significantly limit the set of discharges to which the 
statute would apply. By implementing the statute through an IFC rather 
than through the normal notice-and-comment rulemaking cycle and waiving 
the 60-day delay of effective date, we are ensuring the period of 
relief granted is consistent with our interpretation of the statute. We 
find, on these bases, that there is good cause to waive notice and 
comment and the delay in effective date that would otherwise be 
required by the provisions previously cited in this section.
    In the case of the portion of this IFC regarding the wage index for 
acute care hospitals paid under the IPPS, we find good cause for 
waiving notice-and-comment rulemaking and a delay in effective date 
given the decisions of the courts of appeals and the public interest in 
consistent application of a Federal policy nationwide. Revising the 
regulation text at Sec.  412.230(a)(5)(ii) and removing the regulation 
text at Sec.  412.230(a)(5)(iii) through an IFC rather than through the 
normal notice-and-comment rulemaking cycle and waiving the 60-day delay 
of effective date will ensure a uniform national reclassification 
policy, since this policy has already been effective as of July 23, 
2015 in the Third Circuit and February 4, 2016 in the Second Circuit. 
Absent such a policy, the wage index for acute care hospitals paid 
under the IPPS will remain confusingly inconsistent across 
jurisdictions. Therefore, we find good cause to waive the notice of 
proposed rulemaking as well as the 60-day delay of effective date and 
to issue this final rule on an interim basis. Even though we are 
waiving notice of proposed rulemaking requirements and are issuing 
these provisions on an interim basis, we are providing a 60-day public 
comment period.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (the PRA), federal 
agencies are required to publish notice in the Federal Register 
concerning each proposed collection of information. Interested persons 
are invited to send comments regarding our burden estimates or any 
other aspect of this collection of information, including any of the 
following subjects: (1) The necessity and utility of the proposed 
information collection for the proper performance of the agency's 
functions; (2) the accuracy of the estimated burden; (3) ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and (4) the use of automated collection techniques or other 
forms of information technology to minimize the information collection 
burden.
    However, we are requesting an emergency review of the information 
collection referenced later in this section. In compliance with the 
requirement of section 3506(c)(2)(A) of the PRA, we have submitted the 
following for emergency review to the Office of Management and Budget 
(OMB). We are requesting an emergency review and approval under 5 CFR 
1320.13(a)(2)(i) of the implementing regulations of the PRA in order to 
implement Section 231 of the CAA as expeditiously as possible. Public 
harm is reasonably likely to ensue if the normal clearance procedures 
are followed since the approval of this information collection is 
essential to ensuring that otherwise qualifying grandfathered urban 
HWHs are not unduly delayed in attempting to obtain the temporary 
exception by applying to be treated as rural before the temporary 
exception expires on December 31, 2016.

[[Page 23436]]

    For the purposes of implementing subparagraph (E) of section 
1886(m)(6) of the Act as provided by the CAA, we are revising our 
regulations at Sec.  412.522(b)(2)(ii)(B)(2) to utilize the same 
administrative mechanisms used in the existing rural reclassification 
process for urban subsection (d) hospitals under Sec.  412.103, 
described later in this section. We also will allow grandfathered LTCH 
HwHs (previously defined in this IFC) to apply to their RO for 
treatment as being located in a rural area for the sole purpose of 
qualifying for this temporary exclusion from the application of the 
site neutral payment rate.
    For urban subsection (d) hospitals, and now temporarily LTCHs, we 
implemented the rural reclassification provision in the regulations at 
Sec.  412.103. In general, the provisions of Sec.  412.103 provides 
that a hospital that is located in an urban area may be reclassified as 
a rural hospital if it submits an application in accordance with our 
established criteria. It must also meet certain conditions which 
include the hospital being located in a rural census tract of a MSA or 
that the hospital is located in an area designated by any law or 
regulation of the state as a rural area or the hospital is designated 
as a rural hospital by state law or regulation. Paragraph (b) of Sec.  
412.103 sets forth application requirements for a hospital seeking 
reclassification as rural under that section, which includes a written 
application mailed to the CMS regional office (RO) that contains an 
explanation of how the hospital meets the condition that constitutes 
the request for reclassification, including data and documentation 
necessary to support the request. As provided in paragraphs (c) and (d) 
of Sec.  412.103, the RO reviews the application and notifies the 
hospital of its approval or disapproval of the request within 60 days 
of the filing date, and a hospital that satisfies any of the criteria 
set forth Sec.  412.103(a) is considered as being located in the rural 
area of the state in which the hospital is located as of that filing 
date.
    We note that this policy would only allow grandfathered LTCH HwHs 
to apply for this reclassification, and the rural treatment would only 
extend to this temporary exception for certain wound care discharges 
from the site neutral payment rate (meaning a grandfathered HwH LTCH 
will not be treated as rural for any other reason including, but not 
limited to, the 25 percent policy and wage index). We also note that 
the any rural treatment under Sec.  412.103 for a grandfathered HwH 
LTCH will expire at the same time as this temporary provision (that is, 
December 31, 2016).
    We estimate that each application will require 2.5 hours of work 
from each LTCH (0.5 hours to fill out the application and 2 hours of 
recordkeeping). Based on the current information we have received from 
the MACs, out of the approximately 120 current LTCHs that existed in 
1995, which is a necessary but not sufficient condition to be a 
grandfathered HWH, there are approximately 5 hospitals that currently 
meet the criteria of being a grandfathered HWH and would not be 
precluded from submitting an application. We note that as the MACs 
continue to update the list of grandfathered HWH that the number of 
potential applicants could increase. Since it is possible that the 
number of applicants could rise to 10 or more, in an abundance of 
caution, we treating this information collection as being subject to 
the PRA. Therefore, we estimate that the aggregate number of hours 
associated with this request across all currently estimated eligible 
hospitals will be 12.5 (2.5 hours per hospital for 5 hospitals). We 
estimate a current, average salary of $29 per hour (based on the ``2015 
Median usual weekly earnings (second quartile), Employed full time, 
Wage and salary workers, Management, professional, and related 
occupations'' from the Current Population Survey, available here https://www.bls.gov/webapps/legacy/cpswktab4.htm) plus 100 percent for fringe 
benefits ($58 per hour). Therefore, we estimate the total one-time 
costs associated with this request will be $725 (12.5 hours x $58 per 
hour).
    Written comments and recommendations from the public will be 
considered for this emergency information collection request if 
received by April 28, 2016. We are requesting OMB review and approval 
of this information collection request by May 5, 2016, with a 180-day 
approval period.
    To obtain copies of a supporting statement and any related forms 
for the proposed collection(s) summarized in this notice, you may make 
your request using one of following:
    1. Access CMS' Web site address at https://www.cms.hhs.gov/PaperworkReductionActof1995.
    2. Email your request, including your address, phone number, OMB 
number, and CMS document identifier, to Paperwork@cms.hhs.gov.
    3. Call the Reports Clearance Office at (410) 786-1326.
    If you comment on these information collection and recordkeeping 
requirements, please submit your comments electronically as specified 
in the ADDRESSES section of this interim final rule with comment 
period.

V. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year). We project that two rural LTCHs would qualify for the 
temporary exception to the site neutral payment rate for certain LTCHs 
for certain discharges provided by section 231 of the CAA, based on the 
best data available at this time. We are not able to determine which, 
if any, LTCHs may be treated as rural in the future by applying and 
being approved for a reclassification as rural under the provisions of 
Sec.  412.103. Given that LTCHs are generally concentrated in more 
densely populated areas, we do not expect any LTCHs to qualify under 
Sec.  412.103. As such, at this time, our projections related to the 
temporary exception to the site neutral payment rate for certain LTCHs 
for certain discharges provided by section 231 of the CAA, are limited 
to LTCHs that are geographically located in a rural area. As such, at 
this time, our projections related to the temporary exception to the 
site neutral payment rate for certain LTCHs for certain discharges 
provided by section 231 of the CAA, are limited to LTCHs that are 
geographically located in a rural area. Based on the most recent data 
for these two LTCHs, including the identification of FY 2014 LTCH 
discharges with a ``severe wound'' we

[[Page 23437]]

estimate the monetary impact of this IFC with respect to that LTCH PPS 
provision is approximately a $5 million increase in aggregate LTCH PPS 
payments had this statutory provision not been enacted. This does not 
reach the economic threshold and this provision does not cause this IFC 
to be considered a major rule.
    For the IPPS wage index portion of this IFC, we did not conduct an 
in-depth impact analysis because our revision to the regulatory text is 
a consequence of court decisions. The Geisinger decision invalidated 
the regulation at Sec.  412.230(a)(5)(iii) effective July 23, 2015 for 
hospitals in states within the Third Circuit's jurisdiction, and the 
Lawrence + Memorial decision invalidated the regulation at Sec.  
412.230(a)(5)(iii) effective February 4, 2016 for hospitals in states 
within the Second Circuit's jurisdiction. That is, we did not have a 
choice to maintain the previously uniform regulations at Sec.  
412.230(a)(5)(iii) for hospitals in states within the Second and Third 
Circuits.
    Furthermore, we do not believe we could necessarily estimate the 
national impact of removing the regulation at Sec.  412.230(a)(5)(iii). 
We note that already in the FY 2017 IPPS/LTCH proposed rule, of the 
3,586 IPPS hospitals listed on wage index Table 2, 867 hospitals have 
an MGCRB reclassification, and 57 hospitals have a reclassification to 
a rural area under Sec.  412.103. (This table is discussed in the FY 
2017 IPPS/LTCH proposed rule and is available on the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/. Click on the link on the left side of the 
screen titled, ``FY 2017 IPPS Proposed Rule Home Page.) We cannot 
estimate how many additional hospitals will elect to apply to the MGCRB 
by September 1, 2016 for reclassification beginning FY 2018, and we 
cannot predict how many hospitals may elect to retain or acquire Sec.  
412.103 urban-to-rural reclassification over and above the hospitals 
that have already reclassified.
    We also note that under Sec.  412.64(e)(1)(ii), (e)(2), and (e)(4), 
increases in the wage index due to reclassification are implemented in 
a budget neutral manner (that is, wage index adjustments are made in a 
manner that ensures that aggregate payments to hospitals are unaffected 
through the application of a wage index budget neutrality adjustment 
described more fully in the FY 2017 IPPS/LTCH proposed rule). 
Therefore, as a result of the Third Circuit's decision in Geisinger, 
even though an urban hospital that may or may not already have a 
reclassification to another urban area under the MGCRB may be able to 
qualify for a reclassification to a more distant urban area with an 
even higher wage index, this would not increase aggregate IPPS payments 
(although the wage index budget neutrality factor applied to IPPS 
hospitals could be larger as a result of additional reclassifications 
occurring to higher wage index areas).
    However, there are other Medicare payment provisions potentially 
impacted by rural status, such as payments to disproportionate share 
hospitals (DSHs), and non-Medicare payment provisions, such as the 340B 
Drug Pricing Program administered by HRSA, under which payments are not 
made in a budget neutral manner. Additional hospitals acquiring rural 
status under Sec.  412.103 could, therefore, potentially increase 
Federal expenditures. Nevertheless, taking all of these factors into 
account, we cannot accurately determine an impact analysis as a result 
of the Third Circuit's decision in Geisinger and the Second Circuit's 
decision in Lawrence + Memorial.
    The RFA also requires agencies to analyze options for regulatory 
relief of small entities if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
governmental jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is used 
in the RFA. The great majority of hospitals and most other health care 
providers and suppliers are small entities, either by being nonprofit 
organizations or by meeting the SBA definition of a small business 
(having revenues of less than $7.5 million to $38.5 million in any 1 
year). (For details on the latest standards for health care providers, 
we refer readers to page 36 of the Table of Small Business Size 
Standards for NAIC 622 found on the SBA Web site at: https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Individuals and states 
are not included in the definition of a small entity. We believe that 
the provisions of this IFC may have an impact on some small entities, 
but for the reasons previously discussed in this IFC, we cannot 
conclusively determine the number of such entities impacted. Because we 
lack data on individual hospital receipts, we cannot determine the 
number of small proprietary LTCHs. Therefore, we are assuming that all 
LTCHs are considered small entities for the purpose of the RFA. MACs 
are not considered to be small entities. Because we acknowledge that 
many of the potentially affected entities are small entities, the 
discussion in this section regarding potentially impacted hospitals 
constitutes our regulatory flexibility analysis.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside a metropolitan 
statistical area and has fewer than 100 beds. Section 601(g) of the 
Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals 
in certain New England counties as belonging to the adjacent urban 
area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to 
classify these hospitals as urban hospitals. For the IPPS portion of 
this IFC, no geographically rural hospitals are directly affected since 
only urban hospitals can reclassify to a rural area under Sec.  
412.103. However, we note that with regard to the wage index budget 
neutrality adjustments applied under Sec.  412.64(e)(1)(ii), (e)(2), 
and (e)(4), rural IPPS hospitals would be affected to the extent that 
the reclassification budget neutrality adjustment increases, but this 
impact is no different than on urban IPPS hospitals, as the same budget 
neutrality factor is applied to all IPPS hospitals.
    The provisions of section 231 of the CAA, which we are implementing 
in this IFC, by definition affect rural LTCHs that qualify, and will 
result in an increase in payment for those qualifying LTCHs' discharges 
that meet the definition of a severe wound. However, as previously 
discussed in this section, based on the data currently available, we 
estimate there are only two LTCHs that currently meet the criteria. 
Therefore, we do not believe the provision of section 231 of the CAA 
will have a significant impact on the operations of a substantial 
number of small rural LTCHs.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2016, that 
threshold is approximately $146 million. This IFC will have no 
consequential effect on state, local, or

[[Page 23438]]

tribal governments, nor will it affect private sector costs.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has Federalism implications. Since 
this rule does not impose any costs on state or local governments, the 
requirements of Executive Order 13132 are not applicable.
    In accordance with the provisions of Executive Order 12866, this 
IFC was reviewed by the Office of Management and Budget.

VI. Response to Comments

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

List of Subjects in 42 CFR Part 412

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

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as follows:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority for part 412 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Pub. L. 113-67, and sec. 112 of Pub. L. 
113-93.


0
2. Section 412.230 is amended by--
0
a. Revising paragraph (a)(5)(ii).
0
b. Removing paragraph (a)(5)(iii).
0
c. Redesignating paragraph (a)(5)(iv) as paragraph (a)(5)(iii).
    The revision reads as follows:


Sec.  412.230  Criteria for an individual hospital seeking 
redesignation to another rural area or an urban area.

    (a) * * *
    (5) * * *
    (ii) A hospital may not be redesignated to more than one area, 
except for an urban hospital that has been granted redesignation as 
rural under Sec.  412.103 and receives an additional reclassification 
by the MGCRB.
* * * * *

0
3. Section 412.522 is amended by--
0
a. Redesignating paragraphs (b)(1) introductory text, (b)(1)(i) and 
(ii), and (b)(2) and (3) as paragraphs (b)(1)(i) introductory text, 
(b)(1)(i)(A) and (B), and (b)(1)(ii) and (iii), respectively.
0
b. Adding a paragraph heading for paragraph (b)(1).
0
c. Revising the paragraph heading for newly redesignated paragraph 
(b)(1)(i) introductory text.
0
d. In newly redesignated paragraph (b)(1)(i)(B), by removing the 
reference ``paragraph (b)(2)'' and adding the reference ``paragraph 
(b)(1)(ii)'' in its place and by removing the reference ``paragraph 
(b)(3)'' and adding the reference ``paragraph (b)(1)(iii)'' in its 
place.
0
d. In newly redesignated paragraph (b)(1)(ii), by removing the 
reference ``paragraph (b)(1)'' and adding the reference ``paragraph 
(b)(1)(i)'' in its place.
0
e. In newly redesignated paragraph (b)(1)(iii), by removing the 
reference ``paragraph (b)(1)'' and adding the reference ``paragraph 
(b)(1)(i)'' in its place.
0
f. Adding paragraph (b)(2).
    The revision and additions read as follows:


Sec.  412.522  Application of site neutral payment rate.

    (b) * * *
    (1) General criteria--(i) Basis and scope. * * *
* * * * *
    (2) Special criteria--(i) Definitions. For purposes of this 
paragraph (b)(2) the following definitions are applicable:
    Severe wound means a wound which is a stage 3 wound, stage 4 wound, 
unstageable wound, non-healing surgical wound, infected wound, fistula, 
osteomyelitis or wound with morbid obesity as identified by the 
applicable code on the claim from the long-term care hospital.
    Wound means an injury, usually involving division of tissue or 
rupture of the integument or mucous membrane with exposure to the 
external environment.
    (ii) Discharges for severe wounds. A discharge that occurs on or 
after April 21, 2016 and before January 1, 2017 for a patient that was 
treated for a severe wound that meets the all of following criteria is 
excluded from the site neutral payment rate specified under this 
section:
    (A) The severe wound meets the definition specified in paragraph 
(b)(2)(i) of this section.
    (B) The discharge is from a long term care hospital that is--
    (1) Described in Sec.  412.23(e)(2)(i) and meets the criteria of 
Sec.  412.22(f); and
    (2) Located in a rural area (as defined at Sec.  412.503) or 
reclassified as rural by meeting the requirements set forth in Sec.  
412.103.
* * * * *

    Dated: April 7, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Dated: April 14, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-09219 Filed 4-18-16; 4:15 pm]
 BILLING CODE 4120-01-P